Case Study - Club Med

Financial Report
Fiscal Year 2007
FINANCIAL REPORT
62 MANAGEMENT REPORT 62 Consolidated financial results 73 Risk factors 77 2008 financial calendar 79 General information 80 General information about Club Mditerrane 83 General information about the companys capital 88 General information about Club Mditerrane securities 90 Corporate governance 102 Chairmans report on the practices and procedures of the board of directors and internal control procedures 113 Statutory Auditors report on internal control 114 Fees paid to the Statutory Auditors 115 CONSOLIDATED FINANCIAL STATEMENTS 116 Consolidated statements of income 117 Consolidated balance sheets 118 Consolidated cash flow statement 118 Change in consolidated net debt 119 Consolidated statement of changes in equity (Note 12) 120 Notes to the consolidated financial statements 120 Note 1 - General information 120 Note 2 - Summary of significant accounting policies, scope of consolidation 128 Note 3 - Changes in scope of consolidation 128 Note 4 - Segment information 131 Note 5 - Goodwill and business combinations 132 Note 6 - Intangible assets 133 Note 7 - Property, plant and equipment 134 Note 8 - Non-current financial assets 135 Note 9 - Assets held for sale 136 Note 10 - Other receivables 136 Note 11 - Cash and cash equivalents 136 Note 12 - Share capital and reserves 137 Note 13 - Share-based payments 139 Note 14 - Pensions and other long-term benefits 141 Note 15 - Provisions 141 Note 16 - Income taxes 143 Note 17 - Borrowings and other interest-bearing liabilities 145 Note 18 - Financial instruments 148 Note 19 - Other liabilities 148 Note 20 - Employee benefits expense and number of employees 149 Note 21 - Operating income - Management of assets 149 Note 22 - Other operating income and expense 149 Note 23 - Finance cost, net 149 Note 24 - Share of income of associates 150 Note 25 - Earnings per share 150 Note 26 - Notes to the consolidated cash flow statement 151 Note 27 - Related party transactions 152 Note 28 - Commitments and contingencies 153 Note 29 - Scope of consolidation at 31 October 2007 157 Auditors report on the consolidated financial statements 158 Group structure at 31 October 2007 161 ADDITIONAL INFORMATION 162 Statutory Auditors special report on regulated agreements and commitments 165 Report of the board of directors on the proposed resolutions 169 Proposed resolutions
2007 ANNUAL REPORT
61
MANAGEMENT REPORT
1. Consolidated Financial Results
1.1. FINANCIAL HIGHLIGHTS
(in millions)
Other operating income and expense, corresponding to credit card costs, litigation and restructuring, represented a net expense of 21 million. Operating income stood at 14 million, reflecting an improvement in the leisure businesses and a lower contribution from
2006 Consolidated revenue Reported Like-for-like(1) EBITDAR - leisure (2) Operating income - leisure
Of which business interruption insurance settlements
2007 1,727 1,727 244 33

2
+2,8%* +3,4%**
the management of assets.

1.2. BUSINESS REVIEW FY 2006 Number of customers (in thousands) Of which Club Med Of which Jet tours Of which Club Med Gym 1,685 1,328 286 71 FY 2007 1,639 1,324 243 72 1,727 1,367 119.4 12,477 8,536 68.4% 86.5 Change vs. FY 2006 -2.7% -0.2% -15.1% +1.1% +3.4% +5.7% +8.1% - 0.6% -0.3% +0.2 pt +7.7 %
1,679 1,670 229 24

21
Operating income - management of assets Other operating income & expense Operating income Net income/(loss) Net debt
40 (29) 35 5 (294)
2 (21) 14 (8) (336)
Revenue like-for-like (in thousands) 1,670 Of which core business 1,292 Revenue like-for-like per hotel day (2) 110.4 Capacity in thousands of hotel days(2) Hotel days sold (in thousands)(2) Occupancy rate
(2)
(1) At constant exchange rates and comparable scope of consolidation. (2) EBITDAR - leisure: Earnings before interest, taxes, depreciation, amortization and rents. * including a 3.3% increase in core business. ** including a 5.7% increase in core business.
12,550 8,560 68.2% 80.4
Consolidated revenue amounted to 1,727 million, an increase of 2.8% on a reported basis. Like-for-like revenue was up 3.4%, reflecting 4% growth in the first half and 2.8% in the second. The fourth quarter saw a strong 5.3% increase in revenue. Core business rose by 5.7% like-for-like. EBITDAR - leisure rose to 244 million from 229 million the previous fiscal year. Excluding the impact of business interruption insurance settlements in fiscal 2006, EBITDAR was up 16%. Operating income - leisure, at 33 million, showed a sharp increase, particularly after taking into account the fiscal 2006 impact of business interruption insurance settlements. Operating income - management of assets, corresponding to the revenues and expenses generated by the management of property assets, amounted to 2 million versus more than 40 million in fiscal 2006. The sharp decline stemmed from the cost of closing year-round Villages for renovation and a weaker contribution from disposals and asset refinancing transactions, which were unusually high in fiscal 2006. Borrowings were also affected, rising to 336 million at 31 October 2007, despite the decrease in average net debt to 370 million in fiscal 2007 from 432 million in the previous year.
RevPAB(1) per hotel day, like-for-like
(1) RevPAB: Total like-for-like Village revenue excluding tax and transportation/Available beds. (2) For the core business.
Like-for-like revenue per hotel day rose by 8.1%, with gains in every region. The 9 increase in revenue per hotel day was mainly attributable to the nearly 6 effect of the ongoing upmarket strategy, involving resegmentation of the Village base, the impact of the Bar & Snacking Included formula introduced in Asia during the year and the Confort la Carte offering of rooms in a higher comfort category. Capacity was down 0.6% overall for Club Med Villages, including a 4.5% decrease in Europe that was mainly attributable to the closure of Opio en Provence and La Pointe aux Canonniers for renovation. In the Americas, capacity increased 8.7%, with the reopening of the newly renovated Cancn Yucatn, Trancoso and La Caravelle Villages. In Asia, capacity was up by 3.6%. Club Med Gym reported a 3.5% increase in revenue. However, due to the membership system, business growth is better measured in terms of new subscriptions, which rose by a satisfactory 5.3% in value over the prior year.
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M A N A G E M E N T R E P O RT
1.2.1. CUSTOMERS
4 Trident capacity grew 30% compared to fiscal 2006 and 53% compared to fiscal 2005 to represent 42% of the total. The number of hotel days sold during the period was in line with fiscal 2006 at 8,536,000.
FY 2006 Europe Capacity Occupancy rate Americas Capacity Occupancy rate Asia Capacity Occupancy rate Total Capacity Occupancy rate 8,142 72.3% 2,621 66.1% 1,787 52.7% 12,550 68.2% FY 2007 7,778 73.5% 2,847 62.0% 1,852 56.9% 12,477 68.4%
In fiscal 2007, the Group welcomed over 1,639,000 customers. The Villages business served 1,324,000 customers during the year, in line with fiscal 2006 and up for the first time in the summer months since 2001. The number of customers at 4-Trident Villages rose by 133,000 and by nearly 200,000 compared with fiscal 2005. These positive developments are key to the strategy to move upmarket. Jet tours served far fewer customers in fiscal 2007 as the upmarket strategy was pushed into higher gear, leading to plans to build four Eldorador hotels being removed from the catalogue. However, at the same time, the repositioning led to an 11% increase in the average price per customer, which is crucial to improving Jet tours future profitability.
1.2.2. HOTEL DAYS - VILLAGES HOTEL DAYS BY OUTBOUND ZONE
Outbound zones generate revenue and sales costs (e.g. France, United Kingdom, Belgium, Canada...).
(in thousands of hotel days sold)
The occupancy rate stood at 68.4% of available beds, an increase of 0.2 points from the previous year.
FY 2007 6,450 1,253 833 8,536 Change -0.9% -2.8% +9.7% -0.3% 1.2.4. REVPAB (REVENUE PER AVAILABLE BED)
(/hotel day)
FY 2006 Europe Americas Asia Total 6,511 1,290 759 8,560
Cumulative at 31 October (like-for-like) 2005 2006 2007 Change 2007 vs. 2006 +7.3% +1.9% +22.3% +7.7% Change 2007 vs. 2005 +17.0% +9.4% +42,2% +17.4%
HOTEL DAYS BY INBOUND ZONE
Inbound zones are where Villages are located and operated (e.g. France, Morocco, Polynesia, Mexico...).
(in thousands of hotel days sold)
Europe Americas Asia Total Villages
77.4 72.2 57.2 73.7
84.4 77.5 66.5 80.4
90.5 78.9 81.3 86.5
FY 2006 Europe Americas Asia Total 5,885 1,733 942 8,560
FY 2007 5,717 1,766 1,053 8,536
Change - 2.8% +1.9% +11.8% - 0.3%
RevPAB: Total Village revenue excluding tax and transportation/ Available beds.
Revenue per available bed (RevPAB) is a key business indicator since it measures how well customers are embracing the upmarket strategy. In fiscal 2007, RevPAB rose by 7.7% to nearly 87 per hotel day. After rising by 7 per hotel day in fiscal 2006, RevPAB increased by an additional 6 in fiscal 2007.
1.2.3. OCCUPANCY RATE BY CATEGORY Thousands of hotel days by destination FY 2006 2 Tridents 3 Tridents 4 and 5 Tridents Other Total 418 5,435 2,626 81 8,560 FY 2007 266 4,698 3,511 61 8,536 Occupancy rate FY 2006 71.1% 70.7% 65.0% 34.0% 68.2% FY 2007 75.4% 70.0% 66.9% 38.0% 68.4%
Growth was attributable to all the upmarket initiatives and reflected advances across all zones.
2007 ANNUAL REPORT
63
1.2.5 FINANCIAL MODEL (at 31 october 2007)

()
Fiscal 2007 revenue rose by 3.4% like-for-like and by 2.8% on a reported basis. The currency effect was a negative 23 million, due to the strength of the euro, while changes in
>
GOP*/hotel day Price

69 46 24
the scope of consolidation corresponding to the sale and management-back of the Almadies Village in Senegal had an 8 million negative impact.
Costs
In fiscal 2007, revenue was affected by two major developments: - Changes in price mix had a 75 million positive effect on rev-
4%
2 Tridents
54%
3 Tridents
42%
4 and 5 Tridents
> Comfort category
2007 capacity
enue, reflecting the ongoing rise in average prices. - The volume effect was positive, at 2 million, for the first time in five years. This indicator shows that the shift in the customer base has been completed in a number of countries.
LIKE-FOR-LIKE REVENUE BY REGION AND BUSINESS (OUTBOUND ZONES)
(in millions)
* GOP: Village operating income before property costs.
This financial model shows gross operating profit (GOP) per hotel day by comfort category. There is only a limited link between cost and comfort category, whereas prices vary by 20% to 50% from one category to another. For example, GOP per hotel day in the 4 Trident category is 69, which is 1.5 times higher than in the 3 Trident category.
1.3. STATEMENT OF INCOME 1.3.1. CONSOLIDATED REVENUE
(in millions)
FY 2005 Europe Americas Asia Villages Jet tours Other businesses Total 925 194 110 1,229 311 53 1,593
FY 2006 970 185 137 1,292 322 56 1,670
FY 2007 1 012 188 167 1,367 302 58 1,727
FY 2007 vs. FY 2006 +4.3% +1.7% +21.4% +5.8% -6.1% +4.1% +3.4%
FY 2006 Revenue Operating income - leisure Operating income - management of assets Other operating income & expense Operating income Finance costs and other financial income & expense Share of income of associates Income tax Net income/(loss) Of which attributable to shareholders FY 2007 VERSUS FY 2006 1,679 23.7 39.7 (28.7) 34.7 (32.1) 3.6 (1.2) 5.0 4.6
FY 2007 1,727 32.9 2.0 (20.5) 14.4 (26.4) 1.2 2.5 (8.3) (10.4)
1.3.2. INCOME BY REGION AND BUSINESS

(in millions)
EBITDAR FY 2006 Europe Americas Asia Sub-total Villages Jet tours Other businesses 163 22 20 205 9 15 229 13.7% FY 2007 166 21 32 219 8 17 244 14.1%
Operating income leisure FY 2006 21.4 (1.6) (1.6) 18.2 3.1 2.4 23.7 FY 2007 19.9 (2.2) 9.6 27.3 2.2 3.4 32.9
1,727 1,679 +2 31 +75

Currency effect and change in scope of consolidations Volume effect Change in price mix Jet tours Fiscal 2006 Fiscal 2007
Total % of like-for-like revenue
+2
Jet tours(1)
(1) Including 22 million due to changes in the scope of consolidation.
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LEISURE OPERATING INCOME - VILLAGES

(in millions - like-for-like)
FIXED OPERATING COSTS

(in millions)
FY 2006 Revenue Business interruption insurance settlements Other revenue Total revenue Margin on variable costs
as a % of revenue (1)
FY 2007 1,366.7
FY 2006 like-for-like Scope of consolidation/Capacity/Upmarket strategy
(402.6)
(35.9) per hotel day (1)
1,292.4 19.1 7.8 1,319.3 807.5

61.0%
(8.2) 9.4 9.0 (21.9) (1.8) (2.9) (8.6) (419.4)
1.9 9.8 1,378.4 845.4

61.7%
Villages closed definitively Villages closed for renovation New or reopened Villages Upmarket strategy Other Cost increases FY 2007
Fixed selling costs Fixed operating costs Property costs Overheads Operating income - leisure
(175.5) (402.6) (150.7) (62.0) 16.7
(171.8) (419.4) (163.3) (63.6) 27.3
(37.4) per hotel day (1)
(1) Excluding managed Villages.
(1) Adjusted to exclude insurance settlements.
Fixed operating costs rose by 17 million. Part of the increase

Reported fiscal 2006 operating income - leisure Currency effect Change in scope of consolidation Like-for-like fiscal 2006 operating income - leisure Volume effect Change in price mix Business interruption insurance settlements Change in margin on variable costs Fixed selling costs Fixed operating costs Property costs Overheads Fiscal 2007 operating income - leisure
was due to growth in capacity. Adjusted for changes in capac18 1 (2) 17 0 55 (17) 38 4 (17) (13) (2) 27
ity, average fixed operating costs per hotel day were 4.2% higher than in fiscal 2006, at 37.4. The two main reasons for the increase were as follows: - The ongoing shift of the Village base upmarket had an inevitable impact. The operating cost per hotel day of the 4-Trident Villages opened during the year is roughly 40, but this compares with an average price per hotel day of around 135. The Group also closed entry-level Villages that represented an operating cost per hotel day of around 27 compared with an average price, including Crested Butte, of 93 per hotel day. In all, changes in the scope of consolidation, both quantitative and qualitative, resulted in an overall cost increase of approximately 9 million.
FIXED SELLING COSTS
- A residual increase in costs of nearly 9 million, or 2.4%, with the effects of inflation partly offset by productivity gains.
PROPERTY COSTS
Reduced catalog costs accounted for half of the savings in selling costs and lower administrative costs for the other half.
Fiscal 2006 property costs Refinancing transactions Changes in scope of consolidation Upmarket strategy Rent escalation clauses and other Fiscal 2007 property costs
(150.7) (3.0) 1.2 (4.5) (6.3) (163.3)
Property costs increased by 12.6 million due to the effect of asset securitizations, the upmarket strategy and a particularly large upward rent adjustment of 7%.
2007 ANNUAL REPORT
65
LEISURE OPERATING INCOME - VILLAGES, BY REGION
Operating Income - leisure: Asia

Operating Income - leisure: Europe

FY 2006 FY 2006 FY 2007 1,012.1 0.0 10.5 1,022.6 576.2

56.9%
FY 2007 166.5 0.0 29.2 195.6 105.7

63.5%
Revenue Business interruption insurance settlements Other revenue (including inter-regional revenue) Total revenue Margin on variable costs
as a % of revenue
(1)
970.2 3.1 10.0 983.3 566.0

58.0%
Revenue Business interruption insurance settlements Other revenue (including inter-regional revenue) Total revenue Margin on variable costs
as a % of revenue(1)
137.3 0.0 22.4 159.7 84.4

61.4%
(120.5) (270.4) (115.5) (37.6) 22.0
(120.5) (273.4) (122.6) (39.8) 19.9
(21.3) (40.8) (16.8) (8.3) (3.0)
(23.1) (45.1) (18.6) (9.3) 9.6
Reported fiscal 2006 operating income - leisure Currency effect Change in scope of consolidation Like-for-like fiscal 2006 operating income - leisure Volume effect Change in price mix Business interruption insurance settlements Change in margin on variable costs Fixed selling costs Fixed operating costs Property costs Overhead Fiscal 2007 operating income - leisure
Reported fiscal 2006 operating income - leisure 21.4 2.9 (2.3) 22.0 (15.3) 28.7 (3.1) 10.3 0.0 (3.0) (7.1) (2.2) 19.9 Currency effect Change in scope of consolidation Like-for-like fiscal 2006 operating income - leisure Volume effect Change in price mix Business interruption insurance settlements Change in margin on variable costs Fixed selling costs Fixed operating costs Property costs Overheads Fiscal 2007 operating income - leisure
(1.6) (1.4) 0.0 (3.0) 12.1 9.3 0.0 21.4 (1.8) (4.3) (1.8) (1.0) 9.6
Operating income - leisure in Asia rose sharply, led by the 21% Operating income - leisure in Europe decreased slightly while revenue in the region rose 4.3%. Growth in revenue was mainly attributable to the 18% increase in the number of customers booking vacations in the Americas and Asia. These regions were the main beneficiaries of the increase. The price-mix impact offset the higher costs incurred during the year. growth in sales and the increased number of Europeans vacationing in Asia. The overall increase in business volume had a 12-million impact.
66
Operating Income - leisure: Americas

Club Med Gyms operating income continued to improve, rising to 5.3 million in fiscal 2007 from 4.4 million the previous year. Jet tours income
(in millions)
FY 2006 Revenue Business interruption insurance settlements Other revenue (including inter-regional revenue) Total revenue Margin on variable costs
as a % of revenue (1)
FY 2007 188.1 1.9
184.9 16.0 47.4 248.3 157.2

74.3%
FY 2006 65.2 255.2 163.4

85.4%
FY 2007 302 36.9

12.2%
Revenue Semi-net margin

as a % of revenue*
300 36.9
12.0%
Other costs Operating income - leisure
(33.8) 3.1
(34.7) 2.2
(33.8) (91.4) (18.3) (16.1) (2.3)
(28.1) (100.9) (22.1) (14.5) (2.2)
*Semi-net margin = gross margin (revenue less purchases) after agency commissions.
1.3.3. EBITDAR/OPERATING INCOME - LEISURE REVENUE TO EBITDAR FLOW-THROUGH RATE
(in millions)
Reported fiscal 2006 operating income - leisure Currency effect Change in scope of consolidation Like-for-like fiscal 2006 operating income - leisure Volume effect Change in price mix Business interruption insurance settlements Change in margin on variable costs Fixed selling costs Fixed operating costs Property costs Overheads Fiscal 2007 operating income - leisure
(1.6) (0.7) 0.0 (2.3) 3.2 17.1 (14.1) 6.2 5.6 (9.5) (3.8) 1.6 (2.2)
EBITDAR - leisure FY 2005 Villages Excluding business interruption insurance settlements(1)

as a % of like-for-like revenue
FY 2006 FY 2007 Change vs. FY 2006
156.0
12.7%
184.3
14.3%
217.2
15.9%
+18%
Business interruption insurance settlements Villages Other businesses EBITDAR - leisure as a % of like-for-like revenue
38.3 194.3 20.7 215.0 13.5%
20.8 205.1 23.9 229.0 13.7%
1.9 219.1 24.5 243.6 14.1% +7% +6%
Operating income - leisure was stable in the Americas region, thanks to a strong favorable change in the price mix which offset the sharp decline in business interruption insurance settlements, which amounted to 2 million in fiscal 2007 versus 16 million in fiscal 2006.
OTHER BUSINESSES Villages Excluding business interruption insurance settlements(1) Business interruption insurance settlements Villages Other businesses Operating income leisure Operating income - leisure FY 2005 FY 2006 FY 2007 Change vs. FY 2006
(17.2) 38.3 21.1 3.7 24.8
(2.6) 20.8 18.2 5.5 23.7
25.4 1.9 27.3 5.6 32.9
+28 M
Operating Income - leisure: Jet tours and other businesses

(in millions)
FY 2006 Jet tours Club Med Gym Club Med World Total 3.1 4.4 (2.0) 5.5
FY 2007 2.2 5.3 (1.9) 5.6
+50%
+39%
Operating income - leisure for Jet tours fell to 2.2 million due to its stepped-up repositioning at the end of 2006.
Change vs. FY 2006 - Villages revenue Change vs. FY 2006 - Villages EBITDAR Flow-through rate
(1) Business interruption insurance settlements.
+73.4 million +32.9 million 44%
2007 ANNUAL REPORT
67
On a reported basis, EBITDAR - leisure increased by nearly 6.4% and operating income - leisure by 39%. Villages EBITDAR before insurance settlements rose 18% to 217 million from 184 million. Growth was achieved in a difficult year primarily impacted by low winter 2007 snow levels. Fiscal 2007 was also shaped by the closure of several year-round Villages for renovation, including Opio en Provence, La Pointe aux Canonniers, Ixtapa Pacific and Punta Cana. Their closure represented a lost contribution of approximately 5 million. Despite these events, Village margins improved considerably, driven by changes in the financial model. The flow-through rate provides a means of comparing Villages EBITDAR growth to revenue growth. An additional 74 million in revenue generates nearly 33 million in EBITDAR, representing a flow-through rate of around 44%.
1.3.4. OTHER STATEMENT OF INCOME ITEMS
(in millions)
FINANCE COSTS AND OTHER FINANCIAL INCOME & EXPENSE

(in millions)
FY 2006 OCEANE convertible/exchangeable bonds Finance costs Other Finance costs and other financial income & expense before exchange gains and losses Realized and unrealized exchange gains and losses Finance cost, net Average debt Calculated cost of debt Cash cost of debt (excl. IFRS impact) (21) (12) (4)
FY 2007 (21) (10) (1)
(37) 5 (32) (432) 7.72% 5.95%
(32) 6 (26) (370) 8.47% 6.41%
Finance costs and other financial income & expense amounted to 26 million in fiscal 2007 compared with 32 million the previous year. This includes the significant impact of
FY 2007 1,727 32.9 2.0 (20.5) 14.4 (26.4) 1.2 2.5 (8.3) (10.4)
FY 2006 Revenue Operating income - leisure Operating income management of assets Other operating income & expense Operating income Finance costs and other financial income & expense Share of income of associates Income tax Net income/(loss) Of which attributable to shareholders 1,679 23.7 39.7 (28.7) 34.7 (32.1) 3.6 (1.2) 5.0 4.6
applying IFRS to OCEANE convertible/exchangeable bonds, representing some 8 million in fiscal 2007. The cost of debt can be measured in two ways: - Based on finance costs recognized in the income statement, or - Based on the economic cost of debt (coupon rate + premium), i.e. 6.41% in fiscal 2007. Finance cost, net improved due to three factors: - Fiscal 2006 finance costs included some 2 million in costs arising on buybacks of bonds issued to finance operations in the Americas. - Net realized and unrealized exchange gains were 1 million higher in fiscal 2007. - Finance costs were lower due to a roughly 15% decrease in average debt.
1.4. CONDENSED BALANCE SHEET
(in millions)
OPERATING INCOME - MANAGEMENT OF ASSETS
Operating income from the management of assets amounted to 2 million versus 40 million in fiscal 2006, when a high volume of refinancing transactions was carried out. The impact of costs relating to the closure of year-round Villages for renovation totaled 11 million in fiscal 2007. Property development profits from the sale of Villas are recognized under Operating income management of assets.
NET INCOME/LOSS
ASSETS
Property, plant and equipment Intangible assets Non-current financial assets Total non-current assets Government grants Total assets
31 October 2006 951 182 80 1,213 (28) 1,185
31 October 2007 928 191 86 1,205 (37) 1,168
Club Mditerrane ended the year with a net loss of 8 million versus net income of 5 million in fiscal 2006.
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EQUITY AND LIABILITIES

Equity Provisions Deferred taxes, net Working capital Net debt Total equity and liabilities Gearing
31 October 2006 514 69 51 257 294 1,185 57.2%
31 October 2007 490 51 34 257 336 1,168 68.6%
In fiscal 2007, the Group invested 108 million, net of government grants. The main investments included renovation expenditure of 16 million at La Pointe aux Canonniers, 11 million at Ixtapa Pacific, 6 million at La Plagne 2100, 6 million at Cancn Yucatn and 5.3 million at Opio en Provence, as well as Jet tours acquisition of Quotidien Voyages (Austral Lagons). Net borrowings totaled 336 million, for gearing of 68.6%. At 31 October 2007, Club Mditerrane had 234 million in
Equity declined by 24 million to 490 million at 31 October 2007, mainly due to a 29 million currency negative effect that was primarily caused by the fall in the dollar and Mexican peso against the euro. Working capital, which represents a net source of funds at Club Med, was unchanged from 31 October 2006 at 257 million or around 15% of revenue. Non-current assets totaled 1,205 million, a slight 8 million lower than at 31 October 2006. The 63 million positive net impact of net investments and depreciation and amortization expense was offset by the 56 million effect of refinancing transactions and disposals and by a negative currency effect of 29 million.
cash, including a 110 million undrawn line of credit expiring in June 2010.
INVESTMENTS AND DISPOSALS
(in millions)
FY 2006 Total Club Med investments net of government grants and tax-advantaged investments Disposals and asset refinancing transactions Investments net of disposals
FY 2007
(151) 143 (8)
(108) 65 (43)
1.5. PROPERTY PORTFOLIO (NET BOOK VALUE - IN MILLIONS) PROPERTY, PLANT AND EQUIPMENT Fully or partially owned Villages France Europe Africa Americas Asia Subtotal Villages Managed Villages Leased Villages Other assets (offices, machines) Total Villages Villages Surface area (hectares) Beds Rooms Net book value at 31 Oct. 2007
4 6 4 11 5 30 7 48 85
200 103 108 244 288 944 842 1,786
2,104 4,922 1,684 8,043 3,060 19,813 4,436 34,322 58,571
984 2,321 861 3,502 1,353 9,021 15,278 24,589
57 120 59 395 118 749 143 12 904
Property, plant and equipment amounted to 928 million, of which 904 million concerned Villages. Most of that amount corresponded to 30 owned Villages representing 749 million. A portion of property, plant and equipment concerned Villages owned jointly with partners. The 30 owned Villages represented 39% of capacity, leased Villages represented 51% and Villages operated under management contracts accounted for 10%. Approximately 301 rooms (660 beds) per Village. The net book value per Village stood at 25 million for an average value per room of 80,000.
I Assets held for sale (non-strategic and unused assets) II Mortgaged assets
Net book value at 31 Oct. 2006
Net book value at 31 Oct. 2007
93 26 130 540 789
68 118 124 439 749
III Assets that could be refinanced in the near term IV Other Village assets Total Village property, plant and equipment
2007 ANNUAL REPORT
69
A few Villages representing a net book value of 68 million still remain to be sold. Club Mditerrane owns three mortgaged Villages representing 118 million and eight Villages representing a net book value of roughly 124 million, which could be the subject of financing or refinancing transactions in the near term. Fully or partially owned Villages
Villages Tridents
The remaining assets, representing 439 million, include Villages that cannot be refinanced in the short or medium term. They correspond mainly to Villages owned jointly with partners, Villages in countries where refinancing is more difficult to arrange and Villages on land that Club Med does not own, for example in Asia
Surface area (hectares) 0.25 21.00 40.00 138.68 15.00 21.40 39.60 22.00 2.50 2.50 9.00 87.00 11.00 1.40 7.30 43.00 15.00 19.00 22.52 30.00 15.97 0.10 33.00 30.70 27.40 14.00 29.00 85.00 136.00 24.37 944.00
Beds
Rooms
Net book value at 31 October 2007 (in millions) 9.1 17.7 25.3 4.7 0.5
Notes
Arcs Altitude Cargese Club Med 2 Dieulefit Le Fleix Cefalu Gregolimano Kemer Kos Sestrieres St Moritz Roi Soleil Assinie Cap Skirring La Pointe aux Cannoniers Louxor Cancn Yucatn Colombus Isle Ixtapa Pacific La Caravelle Les Boucaniers Punta Cana Sandpiper Mexican archeology villas Itaparica Rio das Pedras Trancoso Bali Bora Bora Cherating Lindeman Island Phuket Total Villages
(1) (2) (3) (4)
1 1 1 1 0 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 30
2 3 4 Closed Land Closed 3 3 3 3 4 Closed 4 4 3 4 4 3 4 4 3 3 Villas 3 4 4 4 4 4 3 4 -
460 945 394 305
191 439 196 158
(3) (1) (3) (4) (1) (2) (2) Sold in Nov. 2007 (1) (1) (1) (3) (3) (3) (3)
1,072 901 920 880 569 580 407 420 585 272 785 473 822 620 649 1,399 751 444 700 810 590 840 300 800 475 645 19,813
536 419 460 328 267 311 238 205 280 138 376 236 374 250 293 519 337 213 330 324 250 400 149 297 216 291 9,021
6.6 32.8 8.7 28.9 12.1 30.9 0.1 12.1 33.5 13.7 59.2 23.8 33.1 42.4 59.5 51.5 33.8 1.7 31.1 30.3 28.3 29.4 27.3 19.0 17.4 24.6 749.0
Jointly owned in a 50/50 partnership. Tax-advantaged investment. Concession land. Minority interests of less than 20%.
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1.6. CASH FLOW STATEMENT

(in millions)
Net borrowings at 31 October 2007 breaks down as follows:

(in millions)
FY 2006 Cash flow Change in working capital Change in provisions Net cash from operating activities Acquisitions of non-current assets Proceeds from disposals of non-current assets Free Cash Flow Effect of changes in exchange rates on cash and cash equivalents and other Change in debt 22 22 3 47 (151) 143 39 (10) 29
FY 2007 24 (2) (9) 13 (108) 65 (30) (12) (42) Cash and cash equivalents Long-term borrowings and other interest-bearing liabilities Short-term borrowings and other interest-bearing liabilities Liabilities related to assets held for sale
31 Oct. 2005 160
31 Oct. 2006 165
31 Oct. 2007 108
435
346
408
48 0 483 323
109 4 459 294
36 0 444 336
Total borrowings and other interest-bearing liabilities Net debt
Cash flow remained stable at around 24 million and changes in working capital were limited, leading to net cash from operating activities of 13 million. Net cash used by investing activities, after taking into account disposals and refinancing transactions, amounted to 43 million in fiscal 2007 compared with 8 million the previous year. As a result, free cash flow was a negative 30 million and net debt came to 336 million, representing a gearing ratio of 68.6%.
1.7. FINANCING Due within one year Due beyond one year Fiscal 2007 Fiscal 2008 Fiscal 2009 Fiscal 2010 Fiscal 2011 Fiscal 2012 Beyond Total due beyond one year Total
The following table analyzes borrowings by maturity:

(in millions)
31 Oct. 2005 49 27 31 153 15 167 61 454 503
31 Oct. 2006 113 0 20 158 5 145 18 346 459
31 Oct. 2007 36
During fiscal 2007, Club Mditerrane actively implemented its refinancing strategy, which is designed to strengthen the Groups balance sheet and extend the maturity of debt. The main refinancing transactions in fiscal 2007 were as follows: - In April, a 30 million loan was taken out to refinance the Club Med 2 cruise ship. The loan is repayable in installments through April 2018. - On 31 May, Club Mditerrane obtained a new 120 million syndicated line of credit due June 2010 from a pool of nine banks. - In May, a 50 million loan facility was arranged. Due in 2017, the facility is secured by the Cancn Yucatn Village. A specific 26 million loan was arranged in June 2007 to finance work at the La Pointe aux Canonniers Village in Mauritius.
152 17 145 6 88 408 444
2. Significant Events of the Year

CHANGES IN CAPITAL
Changes in the Groups ownership structure in fiscal 2007 are presented in the section General information about the capital on page 83 of this registration document.
ACQUISITION OF QUOTIDIEN VOYAGES (AUSTRAL LAGONS) BY JET TOURS
On 15 May, Jet tours announced that it had acquired Quotidien Voyages, which does business under the name Austral Lagons. The acquisition is part of Jet tours strategy to build positions in the upscale travel market.
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STRATEGIC ADVANCES
Implementation of the upscale strategy moved up a gear in fiscal 2007. Six renovated villages came back on the market Opio en Provence, Ixtapa Pacific, Cancn Yucatn, La Caravelle, Palmiye and Villars-sur-Ollon - leading to a sharp rise in 4-Trident capacity, and the first 5-Trident Village - La Plantation dAlbion Club Med - was opened on Mauritius. A certain number of villas have been built around the Village, another innovation that will help to drive future growth.
CHANGES IN THE VILLAGE BASE
Attracting more affluent customers has been a critical challenge for Club Med since the Group announced its upmarket strategy in 2004. This process is nearing completion, with the 133,000-person increase in the number of 4-Trident customers last year. In fiscal 2007, 4-Trident guests accounted for 45% of the customer base compared with just 24% in fiscal 2003. In addition, in the summer of 2007 the Group attracted 9,000 additional customers worldwide. Lastly, the Group met its objective of generating 140 million in revenue via the Internet, which is the preferred booking method for the affluent families targeted by Club Med.
Plots of land in Greece and Mexico were sold during fiscal 2007.
3. Winter 2008
3.1. CAPACITY BY CATEGORY AND REGION
(in thousand hotel days)
Winter 2005 2 Tridents 3 Tridents 4 and 5 Tridents Other Total Europe Americas Asia Total worldwide 6% 57% 35% 2% 100% 2,984 1,461 786 5,231
Winter 2006 4% 53% 41% 2% 100% 3,011 1,414 844 5,269
Winter 2007 3% 46% 50% 1% 100% 2,925 1,484 927 5,336
Winter 2008 2% 44% 54% 0% 100% 3,172 1,406 932 5,510
vs Winter 2007 -1 pt -2 pts +4 pts - 1 pt +8,4% -5,3% +0,6% +3,3%
The offering is continuing to be resegmented. The percentage of 3 to 5-Trident Villages has steadily risen to the point that today they represent 98% of available capacity. Winter 4 and 5-Trident capacity is increasing and already represents more than half of total Winter 2008 capacity. Forecast capacity for the 2008 winter season is up 3.3% compared with last winter, with variations from one region to another. The 8.4% increase in Europe is due to the re-opening of the Opio en Provence Village, while the 5.2% decline in the Americas reflects the reduced capacity of the renovated Ixtapa PacificVillage, and the closure of the archeology villas in Mexico.
3.2. WINTER 2008 BOOKINGS

(compared with winter 2007)
As of 8 december 2007 Europe Americas Asia Total Club Med Jet tours +16.3% +3.2% +16.6% +14.4% +27.2%
As of 8 December 2007, winter 2008 bookings were up 14.4% on the prior-year date.
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These figures include a net gain of some 30,000 customers compared with the prior-year date, helped by sales and marketing initiatives designed to encourage customers to book earlier. The strong 16.3% growth in Europe is particularly noteworthy in that gains have been balanced between France and the other countries in the region. The increase is even greater for sun Villages. Winter 2008 snow village bookings got off to a slow start, due to the lack of snow in winter 2007, but have since gained momentum. The 3.2% growth in the Americas has been achieved despite a 5.6% reduction in capacity. Bookings in Asia are up 16.6%, representing a strong performance on the back of a 47.4% rise in year-to-date bookings as of 8 December 2006. The 27.2% increase in Jet tours bookings confirm the success of its repositioning. The total includes Austral Lagons which has increased bookings by 39%. Excluding Austral Lagons, Jet tours bookings are up 25% compared with the prior-year date.
3.3. SUBSEQUENT EVENTS
4. Risk Factors
Club Mditerranes corporate risk management policy is designed to effectively protect both the interests of shareholders and customers and the environment. It is based on a map of critical operational risks, which serves to prioritize risks based on their frequency and their financial and business impact.
4.1. ECONOMIC AND GEOPOLITICAL RISKS
The Groups vacation village operations are particularly sensitive to economic cycles and weather conditions. Economic slowdowns in the regions where the Group does business adversely affect demand for leisure activities generally and for vacation travel in particular. Economic-driven fluctuations in demand can cause significant changes in revenue. The related risk is reduced by our business model which focuses on variabilizing operating costs. Our presence in over forty countries increases our exposure to worldwide geopolitical risks. To limit our exposure in high-risk countries, we adopt the most flexible operating formulas, such as management contracts. Examples of where this solution is applied include the El Gouna Village in Egypt and Coral Beach in Israel. In view of the unpredictability of these risks, it is very difficult to assess their potential impact on our financial statements.
4.2. ENVIRONMENTAL RISKS
None
3.4. OTHER INFORMATION 3.4.1. DEPENDENCE ON PATENTS OR SUPPLY CONTRACTS
4.2.1. PREVENTION AND COMPLIANCE
Environmental risk prevention and management Our businesses do not give rise to any specific environmental risks. The risk of environmental damage caused by the technical installations at vacation villages is managed by performing regular inspections. Due to the absence of material risks, no environmental provisions or warranties have been recognized in the fiscal 2007 accounts. More information about the Groups sustainable development practices is provided in the Sustainable Development report, pages 34 to 60. Compliance No provisions for environmental liabilities arising from court decisions have been recorded in the fiscal 2007 financial statements of Club Mditerrane SA. Objectives assigned to subsidiaries Our subsidiaries outside France are required to apply our general environmental policy. They are also encouraged to share experience and best practices in the areas of business practices, the environment and labor relations. We also ensure that our subsidiaries comply with local regulations.
None
3.4.2. EXCEPTIONAL EVENTS, CLAIMS AND LITIGATION
To the best of the Companys knowledge, there are no claims, litigation or exceptional events that could have a material adverse effect on the results of operations, assets and liabilities or financial position of the Company or the Group.
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4.3. LEGAL RISKS 4.3.1. LEGAL RISKS ARISING FROM THE GEOGRAPHIC DIVERSIFICATION OF THE BUSINESS
In fiscal 2007, we purchased insurance cover primarily through the Marsh global insurance brokerage network. The insurance pool for the Property Damage and Business Interruption Program was led by ACE Europe and the London insurance market, and included ACE Europe, RSA, Tokio Marine, XL and AGF. The program was renewed in January 2007 for 16 months, with better cover at a more attractive price. ACE Europe became the lead insurer for the program in 2007. The insurance pool for the Third-Party Liability program was unchanged in 2007. It is lead-managed by Generali and includes GAN, AWAC, XL and ACE. In addition to insuring our own risks, we offer all of our cus-
The nature of the Groups business and the fact that its operations are conducted in a large number of countries with differing and sometimes contradictory regulations is a source of operating difficulties and can lead to disputes with suppliers, owners, employees or local authorities. Provisions are booked for the cost of identified risks, taking into account the nature of the business and its international nature, as soon as the amounts involved can be reasonably estimated.
4.3.2. LEGAL PROCEEDINGS AND EXCEPTIONAL EVENTS
tomers throughout the world extensive assistance cover purchased from Europ Assistance.
4.5. FINANCIAL RISK MANAGEMENT POLICY
To the best of the Companys knowledge, there are no other legal proceedings pending or in progress that could have a material impact on its business or results of operations.
4.4. INSURANCE - RISK COVERAGE
(see also note 18 to the consolidated financial statements Financial instruments). In the normal course of business, the Group is exposed to various market risks, including currency, interest rate and liquidity risks. From time to time, the Group may use derivative financial instruments to hedge currency risks arising in the course of its business and interest rate risks on floating rate debt. In practice, these instruments are used primarily to hedge currency risks on future transactions. Financial risks are identified, assessed, managed and hedged at Group level, by the Treasury and Financing unit, in accordance with the policies approved by the Audit Committee. Specific rules have been drawn up and approved banning the use of derivative instruments for trading purposes.
4.5.1. CURRENCY RISK
Insurable risks are managed by taking out insurance cover at Group level. Risk management tools and global insurance programs have been set up in partnership with pools of leading insurers. Where necessary, separate cover is purchased locally or for specific activities. After the natural disasters of 2005, since fiscal 2006 we have followed a policy of transferring risks to the insurance market whenever possible, without using a captive insurance or reinsurance company. The main global insurance programs are as follows: Global Third-Party Liability Program, covering the Groups liability towards customers and other third parties. The maximum insured value of 114 million has been maintained, based on the nature of our business, an overall assessment of the risks associated with Club Med sites and case law. The program provides worldwide cover. To reduce our exposure to risks, in the interests of our customers, we have set up reporting systems providing detailed and summary information by Village, country and region, on the number and circumstances of claims, as well as the related cost. This information ensures that immediate action is taken to implement preventive and safety measures. Property Damage and Business Interruption Program. This program covers all risks affecting our assets, such as fire and natural disasters. Coverage is capped at 100 million per claim, based on the insurance values of assets at the Club Med sites, with lower caps applying in some specific cases depending on the type of risk.
The international nature of our business exposes us to currency risks arising from the impact of changes in exchange rates on revenue, income and balance sheet items. Our exposure concerns three types of currency risk: - Transaction risk arising from marketing activities (in outbound zones) and operating activities (in inbound zones). - Balance sheet risk arising from financing raised in a currency other than the Groups functional currency and from the Groups net investment in foreign operations. In the latter case, the resulting unrealized exchange gains and losses are recognized directly in equity.
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TRANSACTION RISK
To permit transaction risks to be managed at Group level, intra- and inter-regional payment flows are centralized at the level of a regional wholesaler. Under this system: - Marketing subsidiaries are billed in their local currency by the wholesaler, and - Operating subsidiaries bill the wholesaler in their local currency. Currency risks are hedged using derivative instruments, mainly currency swaps and options, forward contracts and non-delivery forward contracts. The notional amount of hedges is limited to the future cash flows forecast in the budget. No derivative instruments are acquired for trading purposes. Our net exposure to currency risks on operating transactions (transaction risk) is presented in the following table.
Our policy consists of obtaining protection against the effects of exchange rate changes on reported net income compared with the budget. Based on budget forecasts, we hedge exposures for the coming fiscal year in the principal billing currencies (mainly sterling, yen, Canadian and Australian dollars and Korean won) and in US dollars, which is both a billing and an operating currency. As some operating expenses are paid in US dollars, the impact of changes in the American currency on our operating income in the US is entirely offset at Group level. Exposures in some currencies are partially self-hedged. This is the case for example of the yen, since Japan is both an outbound and an inbound zone. Currency risks in our operating currencies (mainly Moroccan dirham, Turkish lira, Tunisian dinar, Indonesian rupiah and Thai baht) are not systematically hedged. Exposure to transaction risk at 31 October 2007
(in millions)
USD Net exposure to currency risks on operating transactions Notional amount of derivative instruments (cash flow hedges) Net exposure of 2008 cash flows after hedging at 31 October 2007 Net exposure converted into euros
GBP
AUD
JPY
CAD
MXN
MAD
TND
TRY
KRW
(80)
15
10
1,700
29
(405)
(350)
(50)
(18)
8,600
76
(3)
(500)
(25)
340
(3) (2)
15 22
8 5
1,200 7
4 3
(65) (4)
(350) (31)
(50) (28)
(18) (11)
8,600 7
Amounts in parentheses correspond to purchases of foreign currencies; amounts not in parentheses correspond to sales of foreign currencies. USD: US dollars, GBP: pounds sterling, AUD: Australian dollars, JPY: yen, CAD: Canadian dollars, MXN: Mexican pesos, MAD: Moroccan dirham, TND: Tunisian dinars, TRY: Turkish new lira, KRW: Korean won.
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BALANCE SHEET RISK
Some of the Groups debt facilities include acceleration clauses that are triggered in the event of a breach of debt covenants or certain asset sales.
CONFIRMED LINE OF CREDIT
The Groups exposure to currency risks on external debt is limited and intra-group financing is generally denominated in the subsidiarys functional currency. Changes in the value of hedges of the net investment in foreign operations are recognized directly in equity. The Groups 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 independent subsidiaries is recognized as a separate component of equity. This risk is not hedged using derivative instruments.
4.5.2 INTEREST RATE RISK
Club Mditerrane has a 120 million line of credit obtained on 31 May 2007 and expiring in June 2010. At 31 October 2007, the line was drawn down in the amount of 10 million. The loan agreement includes certain debt covenants.
DEBT COVENANTS
The Groups debt covenants were redefined on 30 April 2006, to take into account the transition to IFRS. Under the redefined covenants, EBITDA is defined as operating income leisure before depreciation, amortization and provisions. Any breach of the ratios defined in the covenants constitutes an event of default, and the outstanding debt may become immediately repayable. Ratios applicable to the 120 million syndicated line of credit and the loan secured by the Club Med 2 cruise ship are as follows: - Off-balance sheet commitments < 200 million - Gearing (net debt/equity) < 1 - Leverage (net debt/EBITDA as defined above) < the following ratios:
30 April 2007 2008 2009 and beyond 31 Oct. 4.0 3.5 3.0
There are two types of interest rate risk: - Fair value risk on fixed rate net debt. This type of risk is not hedged. The carrying amount of financial assets and liabilities is not adjusted for changes in interest rates and fair value risk therefore corresponds to the opportunity cost of a fall in rates. - Cash flow risk on floating rate net debt, corresponding to the impact on future finance costs of an increase in interest rates. The Group has a combination of fixed and floating rate debt. In fiscal 2007, no interest rate hedges were set up as average floating rate net debt represented just 16% of total debt. The Group does not hold any material interest-bearing assets. At 31 October 2007, the Groups exposure to interest rate risk by maturity was as follows:
(in millions)
3.75 3.0
Total Fixed rate debt 368 72 Floating rate debt* Derivative instruments 4 Total 444
Less than one year 12 20 4 36
One to five years 290 30 320
More than five years 66 22 88
- Fixed charge cover (EBITDAR/(rent + net interest expense)) > the following ratios:
30 April 2007 2008 2009 and beyond 31 Oct. 1.25 1.35 1.45
* Including bank overdrafts.
1.25 1.45
A 1-point increase in short-term interest rates applied to the Groups net floating rate debt would lead to a 0.7 million increase in finance costs.
4.5.3 LIQUIDITY RISK
The covenants were complied with at 31 October 2007: - Off-balance sheet commitments < 200 million - Gearing < 1 - Leverage (net debt/EBITDA) < 4.00x - Fixed charge cover > 1.25x 118m 0.69 3.50x 1.42x
Liquidity risk is managed by using diversified sources of financing. Maturities of debt are presented on page 71 of this registration document.
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4.5.4 EQUITY RISK
Parent Company
The parent company of the Club Mditerrane Group is Club Mditerrane SA. As well as acting as the Group holding company, Club Mditerrane SA operates Villages under the Club Med brand in France and abroad. Consequently, its financial results and their year-on-year change only partially express the Groups performance and do not reflect the same trends as the consolidated financial statements. Club Mditerrane SA ended the year with a net loss of 38 million compared with a net loss of 14 million for the year ended 31 October 2006. The loss was primarily due to the increase in net financial expense to 41 million from 9 million in fiscal 2006, following an increase in provisions related to subsidiaries.
The Group does not hold any listed equities, apart from treasury stock which is recorded as a deduction from equity. As a result, it is not exposed to any risk of fluctuations in stock prices.
4.5.5 CREDIT AND COUNTERPARTY RISK
Most customers pay for their vacation before they leave and the Groups exposure to credit risk on commercial transactions is therefore limited. Transactions involving derivative instruments and borrowings are entered into with a wide range of leading counterparties. Temporary cash surpluses, representing limited amounts, are invested in certificates of deposit or Sicav money market funds purchased from leading banks.
2008 FINANCIAL CALENDAR

11 March 2008: Annual Shareholders Meeting and first-quarter revenue release. June 13, 2008: Fiscal 2008 interim results release. September 2008: Third quarter revenue release. 11 December 2008: Fiscal 2008 results release.
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78
GENERAL INFORMATION
80 GENERAL INFORMATION ABOUT CLUB MDITERRANE 83 GENERAL INFORMATION ABOUT THE COMPANYS CAPITAL 88 GENERAL INFORMATION ABOUT CLUB MDITERRANE SECURITIES 90 CORPORATE GOVERNANCE
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GENERAL INFORMATION ABOUT CLUB MDITERRANE

Company name
Club Mditerrane. or emblems owned by the Company, or under any new brand, logo or emblem owned or registered by the Company in the future.
Registered office 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 to compliance with applicable laws and regulations. More generally, the Company may conduct all industrial, commercial or financial operations, involving both movable property and real estate, including the acquisition, holding and management of interests in any industrial or commercial venture, directly or indirectly related to the corporate purpose of the Company as described above and any other similar or related purposes.
Legal form and governing law

Club Mditerrane (the Company) is a French socit anonyme (public limited company) governed by the laws of France, including Articles L. 225-17 to L. 225-56 of the Commercial Code.
Term
The Company will be dissolved on October 31, 2095 unless it is wound up in advance or its term is extended by decision of an Extraordinary Shareholders Meeting.
Incorporation details
572 185 684 RCS Paris - APE Code 552 E
Corporate purpose (article 2 of the bylaws)

Club Mditerrane was established to develop and manage hotels, holiday centers and/or leisure facilities and/or entertainment facilities and any and all activities relating thereto, whether directly or indirectly, in France or abroad, including the prospecting, purchase and/or sale and leasing, on any basis, of land, movable property and real estate; the creation and operation of design offices; the construction, fitting out, management and maintenance of hotels, restaurants and holiday centers and/or leisure facilities and/or entertainment facilities; the promotion, organization or delivery of travel and holiday packages; the provision of accommodation, food and transport for participants; the organization of tours and excursions; the organization and execution of sporting, educational, tourist, cultural or artistic activities; the organization of events and shows, the performance thereof and the provision of any related consulting services; the creation or acquisition and operation of any and all equipment, organizations and facilities for sporting, educational, tourist, cultural or artistic purposes; the drafting and signature of any and all contracts for the same purposes; the creation or acquisition and operation of any and all businesses or facilities conducting the same activities; participation by any method and in any form in any and all existing or future ventures or companies; the design, creation, production and marketing directly or indirectly through a licensee or other partner of any and all products and services that can be distributed under the brands, logos
Consultation of corporate documents

The bylaws, minutes of Shareholders Meetings, financial statements and Auditors reports are available for consultation at the Companys head office.
Fiscal year
The Companys fiscal year begins on 1 November and ends on 31 October.
Appropriation of income
Article 36 of the bylaws states that at least five percent of net income for the year, less any prior year losses, is appropriated to the legal reserve. This appropriation ceases to be compulsory once the legal reserve represents one-tenth of the Companys capital. However, if for any reason, the legal reserve falls to below one-tenth of the capital, it must be restored to the required level by the same method. The income remaining, less any prior year losses and any other amounts to be credited to reserves pursuant to the law or the Companys bylaws, plus any unappropriated retained earnings brought forward from prior years, is then appropriated as follows: - To any extraordinary reserves or to revenue reserves, by decision of the Annual Shareholders Meeting. - To the payment of a dividend, provided that, except in the case of a capital reduction, no distributions are made to shareholders if shareholders equity represents or would represent if the distribution were to be made less than the sum of capital and non-distributable reserves.
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G E N E R A L I N F O R M AT I O N
The Annual Shareholders Meeting may also decide to pay all or part of the dividend out of revenue reserves or to effect an exceptional distribution of revenue reserves. In this case, the reserves against which the dividend is to be charged must be designated in the related resolution. However, no distributions of reserves may be decided if distributable earnings for the year have not been fully distributed. Any losses recorded in the financial statements approved by the Annual Meeting are recorded in a special reserve account and set off against income earned in subsequent years until they have been absorbed in full. The Annual Meeting may offer shareholders the option to reinvest all or part of the interim or final dividend in new shares. The method of payment of cash dividends is decided by the Annual Meeting or, failing that, by the Board of Directors. In all cases, dividends must be paid within nine months of the year-end, unless the court grants an extension. If the audited annual or interim financial statements show that the Company has generated a profit for the period after deducting depreciation, amortization and provision expense as well as any prior year losses and any amounts to be appropriated to reserves pursuant to the law or the bylaws, and taking into account any unappropriated retained earnings an interim dividend may be paid prior to the approval of the financial statements for the year. Under no circumstances may interim dividends exceed the profit available for distribution thus defined.
If the sale takes place prior to the record date, the Company will take the appropriate measures to cancel or amend any related postal vote, proxy, admission card and/or attestation de participation. However, if any shares are sold by any method after the record date, the sale will not be reported to the Company by the shareholders bank or broker (intermdiaire habilit) and will not be taken into account by the Company, irrespective of any agreement providing otherwise. 5 - Holders of registered shares will be admitted to the meeting on presentation of evidence of their identity. Holders of bearer shares will be admitted on presentation of the proof that their shares have been recorded as described above. The Board of Directors may decide to issue individual admission cards to shareholders, in which case only the named shareholder or proxy may use the card.
Double voting rights

Article 8 of the bylaws stipulates that all fully paid shares registered in the name of the same holder for at least two years carry double voting rights. In the event such shares are transferred or converted to bearer form, they are stripped of their double voting rights. However, double voting rights are not lost and the two-year qualifying period continues to run if the shares are transferred in the estate of a deceased shareholder, or in connection with the settlement of the marital estate, or a donation inter vivos to a spouse or relative in the direct line of succession.
Disclosure thresholds Attendance and representation at shareholders meetings

1 - All shareholders have the right to attend Shareholders Meetings in accordance with the applicable law and to take part in the vote, in person or by proxy, whatever the number of shares held, upon presentation of evidence of their identity. 2 - All shareholders may vote by mail, using the postal voting form issued by the Company. Details of how to obtain postal voting forms are provided in the notice of meeting. 3 - Shareholders may give proxy only to their spouse or another shareholder. 4 - Pursuant to the applicable laws and regulations, for shareholders to be entitled to participate in Shareholders Meetings or cast a postal vote, their shares must be recorded in accordance with the relevant regulations no later than midnight (CET) on the third business day preceding the meeting (the record date). Shareholders who have cast a postal vote, lodged a proxy or requested an admission card or participation certificate (attestation de participation) in accordance with the applicable regulations may still sell all or some of their shares. Article 7 of the bylaws stipulates that any shareholder acting alone or in concert with others that directly or indirectly acquires a number of shares representing at least 0.5% of the Companys capital or voting rights or any multiple thereof is required to notify the Company of the total number of shares and voting rights held. Disclosure must be made by registered letter with return receipt requested, within five trading days of the date on which the disclosure threshold is crossed. For the purpose of determining whether a disclosure threshold has been crossed, account is taken of any securities that are convertible, exchangeable, redeemable or otherwise exercisable for shares of the Company. These disclosure thresholds apply in addition to the one-twentieth, one-tenth, three-twentieths, one-fifth, one-quarter, one-third, one-half, two-thirds, eighteen-twentieths and nineteen-twentieths thresholds provided for in Article L 233-7 of the Commercial Code. The same disclosure rules apply if a shareholders interest is reduced to below any of the above thresholds. At the Annual Shareholders Meeting to be held on 11 March 2008, shareholders will be invited to amend the disclosure threshold provided for in the Companys bylaws from 0.5% of the
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Companys capital or voting rights to 1%, which corresponds to a satisfactory level for precisely ascertaining the Companys ownership structure. For the purpose of applying these rules, the terms shares and voting rights have the same meaning as in Articles L.233-3, L.233-9 and L.233-10 of the Commercial Code. In the case of failure to comply with these requirements, duly noted in the minutes of the Shareholders Meeting, the shares in excess of the relevant threshold will be stripped of voting rights at all Shareholders Meetings for the period provided for by law at the request of one or several shareholders together holding at least 5% of the Companys capital or voting rights.
Identifiable bearer securities

The bylaws authorize the Company to apply at any time to the French securities clearing agency for details of the identity of holders of voting shares and any securities convertible, exchangeable, redeemable, or otherwise exercisable for voting shares, and of the number of securities held by each such holder, pursuant to Article L.228-2 of the Commercial Code. The Company makes such applications each year.
Services provided by the company to subsidiaries

Services provided by Club Mditerrane SA in its capacity as parent company to its subsidiaries include the usual senior management and support services, including administrative, financial, legal, communication, marketing, human resources, training, IT and sales services. They are billed at cost.
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GENERAL INFORMATION ABOUT THE COMPANYS CAPITAL

Share capital
At 31 October 2007 the Companys share capital amounted to 77,482,820, divided into 19,370,705 common shares with a par value of 4, all fully paid up. Shares registered in the name of the same holder for at least two years carry double voting rights (949,592 at 31 October 2007). The Companys share capital was 50,800 higher at 31 October 2007 than one year earlier due to the exercise of stock options during the period which led to the issuance of 12,700 new shares. 19,370,705 shares outstanding at 31 October 2007: + 2,193,731 convertible bonds (OCEANEs) due 1 November 2008 + 3,092,783 convertible bonds (OCEANEs) due 1 November 2010 + 1,160,226 stock options outstanding at 31 October 2007 + 44,490 shares to be granted free of consideration = 25,861,935 potential shares at 31 October 2007
Potential capital
The exercise of all outstanding equity warrants and stock options would result in the Companys capital being increased to 103,447,740 consisting of 25,861,935 shares of common stock, representing a potential dilution of 33.5%. These figures take into account all the securities outstanding at 31 October 2007 that are convertible, redeemable, exchangeable or otherwise exercisable for common shares at a future date.
Authorized, unissued capital

The Ordinary and Extraordinary Shareholders Meeting of 8 March 2007 approved several resolutions authorizing the Board of Directors to increase the Companys capital. The Board of Directors may delegate the right to use these authorizations in accordance with the Companys bylaws and Articles L.225-127 et seq of the Commercial Code. The purpose of these authorizations which expire in May 2009 is to enable the Company to issue shares and share equivalents in order to raise any necessary financial resources in a swift and flexible manner.
Financial authorizations at 31 october 2007

Authorization Issue of shares and share equivalents with pre-emptive subscription rights Issue of shares and share equivalents without pre-emptive subscription rights Issue of shares and share equivalents with no set issue price Capital increase to be paid up by capitalizing retained earnings, additional paid-in capital or profit Issue of shares and share equivalents in connection with a public exchange offer Issue of shares and share equivalents in payment for contributed assets Increase in the number of securities to be issued in the event of the issue of shares and share equivalents either with or without pre-emptive subscription rights (greenshoe option) Employee share issue Stock options for corporate officers and employees Share grants Maximum amount Equity: 20 million(1) Debt: 300 million Equity: 20 million(1) Debt: 300 million 10% of capital per year Equity: 32 million(1) Equity: 20 million(2) 10% of capital 15% of the initial issue based on the same price 3 million(1) (2) 10% of capital(3) 1% of capital(1) Duration Expiry date Used in fiscal 2006/2007 Not used Not used Not used Not used Not used Not used Not used Total used 26 months 7 May 2009 26 months 7 May 2009 26 months 7 May 2009 26 months 7 May 2009 26 months 7 mai 2009
26 months 7 May 2009 26 months 7 May 2009
Not used 26 months 7 May 2009 26 months 7 May 2009 125,000 options 26 months 7 May 2009 46,600 shares
125,000 options 46 600 shares
(1) Amount included in the overall authorized ceiling: 75 million (40th resolution of the Shareholders Meeting of 8 March 2007). (2) Amount included in the 20 million ceiling relating to the issue of shares and share equivalents without pre-emptive subscription rights. (3) The number of outstanding options may not exceed one-third of the Companys common stock (Article L.225-182 of the Commercial Code and Article D.174-17).
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Changes in capital since 31 october 2001

Share capital 000s At 31 October 2001 At 31 October 2002 At 31 October 2003 At 31 October 2004 At 31 October 2005 At 31 October 2006 At 31 October 2007 77,432 77,432 77,432 77,432 77,432 77,432 50 77,482 Additional paid-in capital 000s 412 19,358,005 19,358,005 19,358,005 19,358,005 19,358,005 19,358,005 12,700 19,370,705 Exercise of options Number of shares Type of transaction
Analysis of ownership structure

Number of shares 31 October 2007 Fipar Int (CDG Maroc) Accor Rolaco Nippon Life* Total Board of Directors Treasury stock Employees Richelieu Finance Air France Finance GLG Partners LP Susquehanna Ireland Ltd French institutions Foreign institutions Public and other Total
* Non-voting director.
Voting rights % 10.0 6.0 4.7 4.0 24.7 1.0 0.1 18.7 2.0 10.6 5.1 11.2 16.6 9.9 100.0 31 October 2007 1,935,801 1,162,630 909,577 769,731 4,777,739 201,588 54,741 4,385,219 387,160 2,047,573 993,666 2,235,000 3,229,811 2,007,800 20,320,297 % 9.5 5.7 4.5 3.8 23.5 1.0 0.3 21.6 1.9 10.1 4.9 11.0 15.9 9.9 100.0
1,935,801 1,162,630 909,577 769,731 4,777,739 201,588 27,591 3,615,730 387,160 2,047,573 993,666 2,177,177 3,219,791 1,922,690 19,370,705
Single voting rights Double voting rights Total voting rights
18,421,113 1,899,184 20,320,297*
* Taking into account 201,588 shares held in treasury that do not carry voting rights.
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Trading in the companys shares

AUTHORIZATION TO TRADE IN THE COMPANYS SHARES
For transactions to stabilize the share price, the maximum purchase price per share under this authorization is 70 and the minimum sale price is 30. This minimum sale price applies to the resale of shares acquired under this share buyback program and/or any programs authorized by previous shareholders meetings. On 11 July 2007, Club Mditerrane entered into a liquidity agreement with Natixis Securities that complies with the AFEI Code of Ethics as approved by the French securities regulator (Autorit des Marchs Financiers) on 22 March 2005. A total of 2,000,000 has been allocated to the related liquidity account. Between 8 March and 31 October 2007, the Company purchased 251,717 shares at an average price of 49.53 and sold 277,510 shares at an average price of 49.03. At 31 October 2007, a total of 201,588 shares were held in treasury. Shareholders will be asked to renew the share buyback authorization at the Annual Meeting on 11 March 2008. On 11 January 2008, an additional one million shares were transferred to the liquidity account, pursuant to an addendum to the liquidity agreement.
The authorization given to the Board of Directors to trade in the Companys shares on the stock market, in accordance with Articles L.225-209 et seq. of the Commercial Code and European Commission Regulation 2273/2003 was renewed at the Annual Shareholders Meeting of 8 March 2007 (fifteenth resolution) for a further period of eighteen months, expiring on 7 September 2008. Under the terms of this authorization, the number of shares purchased may not exceed 10% of the capital. The authorization may be used in the following order of priority: To maintain a liquid market in the Companys shares under a liquidity agreement that complies with the Code of Ethics of the French Association of Investment Firms (AFEI). To purchase shares for allocation on exercise of stock options granted to employees. To purchase shares to be exchanged for stock in other companies or to be used as consideration in connection with acquisitions. To purchase shares for subsequent cancellation.
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LIST OF TRADES IN THE COMPANYS SECURITIES CARRIED OUT DURING THE YEAR ENDED 31 OCTOBER 2007 GOVERNED BY ARTICLE L.621-18-2 OF THE MONETARY AND FINANCIAL CODE (CODE MONTAIRE ET FINANCIER) Date of transaction 30.03.2007 30.03.2007 17.04.2007 17.04.2007 18.04.2007 18.04.2007 18.04.2007 18.04.2007 18.04.2007 02.05.2007 02.05.2007 29.06.2007 Corporate officer Michel Wolfovski Executive Vice President Michel Wolfovski Executive Vice President Laurence Berman-Clment Member of the Management Committee Laurence Berman-Clment Member of the Management Committee Franois Salamon Executive Vice President Franois Salamon Executive Vice President Olivier Sastre Member of the Management Committee Olivier Sastre Member of the Management Committee Michel Wolfovski Executive Vice President Olivier Sastre Member of the Management Committee Olivier Sastre Member of the Management Committee Persons closely related to Michel Wolfovski Executive Vice President Henri Giscard dEstaing Chairman and Chief Executive Officer Henri Giscard dEstaing Chairman and Chief Executive Officer Michel Wolfovski Executive Vice President Michel Wolfovski Executive Vice President Franck Gueguen Member of the Management Committee Franck Gueguen Member of the Management Committee Shares/Other financial instruments Other financial instruments Other financial instruments Other financial instruments Shares Other financial instruments Shares Other financial instruments Shares Other financial instruments Other financial instruments Shares Shares Type of transaction Sale of call options Purchase of put options Purchase Sale Purchase Sale Purchase Sale Purchase Purchase Sale Sale Number of securities 15,000 15,000 15,000 15,000 15,000 15,000 5,000 5,000 15,000 5,000 5,000 15,000
02.07.2007 02.07.2007 10.07.2007 10.07.2007 11.07.2007 11.07.2007
Other financial instruments Shares Other financial instruments Shares Other financial instruments Shares
Purchase Sale Purchase Sale Purchase Sale
8,500 8,500 7,500 7,500 5,000 5,000
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Changes in ownership structure over the last three years

Changes in ownership structure over the last three years were as follows: 2005 - On 25 January 2005, Richelieu Finance informed the Company that it held 3,668,857 shares of Club Mditerrane common stock, representing 18.95% of the capital. Richelieu Finance subsequently continued to raise its shareholdings and at 31 October 2005 held 4,564,212 shares, representing 23.57% of the Companys capital. 2006 - On 18 April 2006, Richelieu Finance informed the Company that it had raised its interest to 4,895,369 shares, representing 25.28% of the capital. As part of its strategy to refocus operations on its Hotels and Services businesses, on 9 June 2006 Accor announced that it had decided to sell the bulk of its stake in Club Mditerrane, representing 22.9% of the capital out of its total holding of 28.9%. Accor first sold a 16% interest to a group of investors which have signed a shareholders pact with Accor (see Shareholders Pacts below). Following this transaction, Fipar Holding (a subsidiary of Caisse de Dpt 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 Companys shares to Generali France, following which it had a remaining 5.4% to divest. On 7 August 2006, Richelieu Finance increased its holdings in the Company to 5,107,492 shares, representing 26.38% of the capital. 2007 - On 23 January 2007, following sales of Club Mditerrane shares on the open market, Accor informed the Company that it had reduced its holdings to below the 10% threshold for both capital and voting rights and that it directly held 1,912,349 shares, representing 9.88% of the capital and 9.78% of the voting rights. In letters dated 12 and 17 April, Icade informed the Company that it had sold its 4% stake in Club Mditerrane. On 17 April 2007, Accor informed the Company that it had further reduced its interest in Club Mditerrane to 6% of the capital and 5.76% of the voting rights in accordance with the Shareholders Pact signed on 9 June 2006. In a letter dated 20 June 2007, Richelieu Finance disclosed that following sales of Club Mditerrane shares on the open market, on 14 June 2007 it had reduced its interest in the
Company to below the 25% threshold for capital and voting rights and below the 20% threshold for capital, and that it held 3,377,978 shares representing 4,147,467 voting rights, corresponding to 17.45% of the Companys capital and 20.18% of the voting rights. Following these sales the fund manager Susquehanna Ireland Ltd. had acquired a stake in the Company and the percentage interest held by GLG Partners a Londonbased investment firm increased from 3.5% to 8.5%. On 30 October 2007, GLG Partners informed the AMF that it had crossed the threshold of 10% of the Companys capital and that it held 2,006,249 Club Mditerrane shares, representing 10.36% of the capital and 9.87% of the voting rights. On the same date, Richelieu Finance disclosed that it once again raised its interest in the Company, and that it held 3,615,730 shares and 4,385,219 voting rights, representing 18.67% and 21.58% of the Companys total capital and voting rights respectively.
Shareholderspacts
In connection with the reorganization of Club Mditerranes ownership structure, a shareholders pact relating to 22% of the Companys shares was signed on 9 June 2006 between Accor (which had retained a 6% stake in the Company), Caisse de Dpt et de Gestion du Maroc (through its subsidiary Fipar Holding which had acquired a 10% interest), Air France Finance (holder of a 2% interest) and Icade (whose interest amounted to 4%). By signing this pact, these shareholders have illustrated their long-term commitment to holding a stake in Club Mditerrane with a view to enabling the Company to continue to implement its strategy via the backing of a solid ownership structure. The pact includes a two-year lock-up and standstill clause. Icades signature of the pact was subject to a condition precedent of entering into a real estate partnership agreement with Club Mditerrane by 30 September 2006. The planned transaction 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 Mditerrane. As a result Icade has withdrawn from the shareholders pact. To the best of the Companys knowledge, no other shareholders pacts exist.
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GENERAL INFORMATION ABOUT CLUB MDITERRANE SECURITIES

Club Mditerrane shares were originally floated on the Paris stock exchange in 1966 and are currently traded on the first market of Euronext. Club Mditerrane is one of the 120 stocks included in the SBF 120 index. Club Mditerrane shares are eligible for Euronexts deferred settlement service. Common shares are traded under ISIN code FR 0000 121568. Between the beginning of each fiscal year and the ex-dividend date, new shares issued ex-dividend are traded on the cash settlement market. For several years, Club Mditerrane shares have been selected as a support for covered warrants issued by various banks. To inform shareholders, financial analysts, brokers, portfolio managers and private investors of developments affecting the Group, press releases are distributed to the main press agencies and published in a number of newspapers, as well as on the Companys website. Prices and trading volumes for Club Mditerrane common stock and OCEANE convertible/exchangeable bonds are presented below.
Trading performance of Club Mditerrane securities

Common stock (ISIN: FR 0000 121568) Monthly share price (euros) High January 2007 February 2007 March 2007 April 2007 May 2007 June 2007 July 2007 August 2007 September 2007 October 2007 November 2007 December 2007 44.49 46.20 45.40 47.00 49.95 54.40 56.11 52.55 52.99 48.44 46.47 44.99 Low 40.40 42.00 40.00 42.20 46.95 45.40 51.00 48.25 45.00 45.26 39.75 43.01 Average 42.22 43.90 42.41 44.81 48.68 51.11 53.73 50.35 47.81 46.74 43.09 43.61 Monthly average daily trading volume (number of shares traded and thousands of euros) No. of shares 21.10 20.50 48.60 59.80 32.00 156.20 46.20 29.30 54.10 33.70 44.40 31.80 Capital 13,748.61 21,223.40 17,369.98 47,615.99 52,143.64 38,158.43 169,001.10 52,445.55 32,545.46 50,829.20 33,757.72 42,896.63
88
3% OCEANE convertible/exchangeable bonds (face value 58) (ISIN: FR 0000 180184) High(1) December 2006 January 2007 February 2007 March 2007 April 2007 May 2007 June 2007 July 2007 August 2007 September 2007 October 2007 November 2007 December 2007 66.00 66.20 70.00 68.00 66.25 66.50 67.00 67.50 66.54 66.95 67.30 67.99 -
Monthly price (euros) Low(2) 65.00 65.16 65.06 65.45 65.88 66.12 66.10 66.45 66.50 66.55 66.56 63.50 Average(3) 65.24 65.36 66.17 66.15 66.02 66.28 66.53 66.94 66.51 66.62 66.84 66.19 -
Monthly average daily trading volume (number of bonds traded and thousands of euros) No. of bonds 212 275 130 599 86 107 147 2,145 82 216 99 339 Capital 14 18 9 59 6 7 10 145 5 14 7 22 -
4.375% OCEANE convertible/exchangeable bonds (face value 48.50) (ISIN: FR 00 10130732) High(1) December 2006 January 2007 February 2007 March 2007 April 2007 May 2007 June 2007 July 2007 August 2007 September 2007 October 2007 November 2007 December 2007
Source: Fininfo (1) Highest intraday price during the period. (2) Lowest intraday price during the period. (3) Arithmetic average of closing prices.
Monthly price (euros)
Monthly average daily trading volume (number of bonds traded and thousands of euros) Average(3) 49.04 49.22 50.28 51.03 52.67 54.70 56.09 58.07 54.75 55.24 53.33 50.61 No. of bonds 753 214 637 436 1,225 312 8,444 387 178 354 116 508 Capital 37 11 32 25 65 17 470 23 10 19 6 26 -
Low(2) 48.65 48.60 48.60 48.60 51.05 52.40 51.13 52.50 50.00 51.20 47.92 46.41 -
50.00 53.00 51.50 53.00 54.00 56.00 60.95 59.85 56.15 56.50 55.00 51.95 -
Dividends
Years ended 31 October Number of shares Net 2005 2006 2007 19,358,005 19,358,005 19,370,705 Dividend for the year Share price Yield incl. tax credit based on 31 Oct. share price
Tax credit -
Total -
High 42.28 48.39 56.11
Low 34.00 35.90 39.75
31 Oct. 36.45 42.21 46.35
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CORPORATE GOVERNANCE
Compensation and benefits paid to directors and officers
The Company complies with the principles of corporate governance applicable in France. At the Annual Shareholders Meeting of 16 March 2005, the shareholders approved an amendment to the Companys corporate governance involving a switch from the two-tier system of an Executive Board and Supervisory Board to that of a Board of Directors.
COMPENSATION
The compensation paid to executive officers is made up of a fixed and variable portion. The rules used to calculate the variable portion are set by the Board of Directors each year on the basis of recommendations issued by the Nominations and Compensation Committee.
Gross compensation in euros
Fiscal 2006 annual compensation Fixed Variable Target Henri Giscard dEstaing Franois Salamon* Michel Wolfovski 640,020 320,000 332,300 450,000 160,000 155,200
(1)
Fiscal 2007 annual compensation Fixed Variable(2) Target 640,020 365,442 352,430 544,017 160,000 170,015 Paid 354,000 105,650 132,640 Benefits in- kind 23,909 8,921 12,721
Paid 288,000 104,300 121,600
Benefits in-kind 24,184 4,865 19,131
(1) Paid in January 2006 for fiscal 2005. (2) Paid in January 2007 for fiscal 2006. * Franois Salamon left Club Mditerrane on 28 September 2007.
Henri Giscard dEstaings variable compensation paid in January 2007 for fiscal 2006 in his capacity as Chairman and Chief Executive Officer was based partly on the Companys earnings and partly on the attainment of individual objectives. These performance criteria respectively represented 70% and 30% of his target bonus. The same criteria applied to the variable compensation of Franois Salamon and Michel Wolfovski in their capacity as Executive Vice Presidents (non-directors), and respectively represented 60% and 40% of their target bonuses.
Benefits in-kind correspond to a company car and fringe benefits associated with stays at Club Mditerrane Villages. No exceptional payments were made in fiscal 2007. No loans or guarantees have been granted by the Company to its executive officers.
OTHER BENEFITS AND COMMITMENTS
During fiscal 2007, stock options were granted to executive officers under Plan L, and share grants were also made. At 31 October 2007, the Companys executive officers held the following stock options:
OUTSTANDING STOCK OPTIONS GRANTED IN PRIOR YEARS Plan F2 Exercise dates 50 % at 24 March 2003 + balance at 24 March 2004 70.81 10,000 Plan G 7 Feb. 2005 Plan G3 6 Feb. 2005 Plan G5 5 Feb. 2006 Plan H 1 March 2006 Plan I 15 Jan. 2007 Plan J 11 Jan. 2008 Plan K 14 March 2009 Plan L 8 March 2010
Exercise price (in euros) Henri Giscard dEstaing Michel Wolfovski
111.11 25,000 5,000
92.78 5,000
44.74
35 121,500 7,500
31.03 33,000 10,000
35 40,000 25,000
42.67 30,000 20,000
43.07 31,500 16,000
On the recommandation of the Board of Directors, Franois Salamon was authorised to retain the 60,000 stock options received between 2002 and 2006 following termination of his employment contract on 31 October 2007.
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SHARE GRANTS MADE IN FISCAL 2007 Plan L Start of vesting period 8 March 2010 + sale of shares prohibited before 7 March 2012 3,600 1,850
Henri Giscard dEstaing Michel Wolfovski
TRADES IN THE COMPANYS SECURITIES CARRIED OUT BY CORPORATE OFFICERS IN FISCAL 2007 Date of transaction 30.03.2007 30.03.2007 18.04.2007 18.04.2007 18.04.2007 29.06.2007 Corporate officer Michel Wolfovski Executive Vice President Michel Wolfovski Executive Vice President Franois Salamon Executive Vice President Franois Salamon Executive Vice President Michel Wolfovski Executive Vice President Persons closely related to Michel Wolfovski Executive Vice President Henri Giscard dEstaing Chairman and Chief Executive Officer Henri Giscard dEstaing Chairman and Chief Executive Officer Michel Wolfovski Executive Vice President Michel Wolfovski Executive Vice President Shares/Other financial instruments Other financial instruments Other financial instruments Other financial instruments Shares Other financial instruments Shares Type of transaction Sale of call options Purchase of put options Purchase Sale Purchase Sale Number of securities 15,000 15,000 15,000 15,000 15,000 15,000
02.07.2007 02.07.2007 10.07.2007 10.07.2007
Other financial instruments Shares Other financial instruments Shares
Purchase Sale Purchase
8,500 8,500 7,500
Sale
7,500
The Companys executive officers are covered by supplementary defined-contribution pension plans. The contributions paid under these plans represent 8% of the officers gross compensation. Henri Giscard dEstaing, Franois Salamon and Michel Wolfovski are entitled to a contractual lump-sum severance payment in the event that their employment contracts are terminated, other than for gross or willful misconduct. The amount payable corresponds to two years gross remuneration, including variable compensation. For Henri Giscard dEstaing and Michel Wolfovski, this severance pay will be increased to three years gross compensation (including variable compensation) if the termination occurs within six months of a third party acquiring a controlling interest in the Company. Termination benefits paid in fiscal 2007 amounted to 0.9 million.
COMPENSATION PAID TO MEMBERS OF THE MANAGEMENT COMMITTEE
Total gross compensation paid to the members of the Management Committee (including executive officers) in fiscal 2007 amounted to 4,106,000 (3,928,000 in fiscal 2006). The members of the Management Committee (excluding executive officers) are covered by supplementary defined-contribution pension plans. The contributions paid under these plans represent 6.29% of their gross compensation.
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ATTENDANCE FEES
STOCK OPTIONS AND SHARE GRANTS
The Annual Shareholders Meeting of 14 March 2006 set the aggregate amount of attendance fees payable to members of the Board of Directors (including non-voting directors) at 305,000 for fiscal 2006, unchanged from the previous fiscal year. Based on the recommendations of the Nominations and Compensation Committee, on 11 December 2006 the Board of Directors decided to allocate these fees based on members actual attendance at meetings held by the Board of Directors and Board Committees during fiscal 2006. The total amount of 305,000, which was paid in January 2007, was allocated as follows: 244,000 for Board of Directors meetings and 61,000 for meetings of the Board Committees. Total attendance fees paid to each of the members of the Board of Directors in fiscal 2007 was as follows:
Members of the Board of Directors Ph. Adam S. Al Sulaiman M. Bakkoury E. Bertier Y. Caillire D. Dautresme T. Delaunoy de La Tour dArtaise J-M. Espalioux (retired) H. Giscard dEstaing P. Jeanbart A. Langlois-Meurinne P. Lebard T. Miyagawa V. Morali G. Pelisson S. Ragozin (retired) J. Stern (retired) P. Torodov K. Ujihara (retired) A-C. Taittinger 21,858.32 19,316.65 7,625.00 15,249.99 10,166.66 21,146.66 25,416.65 5,083.33 25,314.99 28,974.99 1,525.00 29,381.65 17,791.66 21,858.32 10,166.66 5,083.33 2,440.00 20,333.32 5,083.33 11,183.33
Stock options grants are discretionary. They are primarily awarded based on the level of responsibility and potential of the beneficiaries. Details of the stock option and share grant plans in place at October 31, 2007 for corporate officers and full-time GOs are presented below.
SHARE GRANT PLAN 2007 Plan L Date of Shareholders Meeting Date of Board of Directors Meeting Number of shares granted O/w number of shares granted to members of the Management Committee (based on membership at 31 October 2007) Number of executives concerned Start of vesting period 8 March 2007 8 March 2007 46,600
10,250 10 8 March 2010 + sale of shares prohibited before 7 March 2012 44,490
Number of shares held at 31 October 2007
Executive officers are required by law to retain a certain proportion of the shares acquired through the exercise of stock options and under share grants, for as long as they remain in office. The proportion corresponds to the equivalent of 30% of the capital gain realized on the exercise of the stock options or the sale of the shares received under share grants. In addition, share grants made to members of the Executive Committee and the Management Committee are subject to performance criteria, as explained in note 13.1.
David Dautresme received additional compensation of 30,000 for specific advisory work carried out in fiscal 2006 for the Chairman and Chief Executive Officer. No loans or guarantees have been granted by the Company to any member of the Board of Directors.
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1998 1999 Plan F2 Plan F3 Plan F4 Plan F5

Date of Shareholders Meeting Date of Executive Board/Board of Directors Meeting Number of options granted 23.04.97 23.04.97 23.04.97 23.04.97
2000 2001 2002 2003 Plan G Plan G2 Plan G3 Plan G4 Plan G5 Plan H*
23.04.97 23.04.97 23.04.97 23.04.97 23.04.97 29.03.02
2004 Plan I
17.03.03
2005 Plan J
17.03.03
2006 Plan K
16.03.05
2007 Plan L
24.03.98 73,500
24.08.98 9,000
17.02.99 21,000
29.07.99 46,000
07.02.00 258,400
26.07.00 21,815
06.02.01 212,530
24.07.01 37,400
05.02.02 127,000
28.02.03 283,000
15.01.04 272,000
11.01.05 300,000
14.03.06 250,000
08.03.07 125,000
o/w number of new or existing shares to be purchased by members of the Management Committee (based on membership 10,000 at 31 October 2007) Number of executives concerned Start of exercise period 1 50% at 24.03.03
+ balance
50% at 24.08.03
+ balance
1,000 1 50% at 17.02.04

+ balance
50% at 23.07.04
+ balance
37,400 7 07.02.05
26.07.04
9,900 4 06.02.05
24.07.05
6,800 4 05.02.06
136,000 4 01.03.06
prohibited
64,900 9 15.01.07
prohibited
89,300 10 11.01.08
prohibited
81,400 10 14.03.09
prohibited
84,100 10 08.03.10
prohibited
+ sale of shares + sale of shares + sale of shares + sale of shares + sale of shares
24.03.04 Expiry date Exercise price (in euros) Number of options outstanding at 31 October 2007 Number of options exerciced at 31.10.2007 23.03.08 70.81
24.08.04 23.08.08 79.12
17.02.05 16.02.09 81.13
23.07.05 22.07.09 92.79 06.02.10 111.11 25.07.10 136.13 05.02.11 92.78 23.07.11 63.99 04.02.12 44.74
before 28.02.07 27.02.13 35
before 14.01.08 14.02.14 31.03
before 10.01.09 10.01.13 35
before 13.03.10 13.03.14 42.67
before 07.03.11 07.03.15 43.07
13,500
3,000
7,000
2,000
86,042
5,700
82,615
11,400
72,700 5,000
154,000 81,500
188,450 7,700
240,950
213,800
116,050
The board of directors

GENERAL INFORMATION
16 March 2005, Club Mditerranes Board of Directors resolved to combine these two functions and appointed Henri Giscard dEstaing as Chairman and Chief Executive Officer. David Dautresme was appointed Vice Chairman of the Board and Michel Wolfovski was named Executive Vice President.. The Board met five times in fiscal 2007, with an average attendance rate of 77%. Nine out of eleven members attended the 11 December 2006 meeting, ten out of eleven members were present on 8 March 2007, and seven, six and eight of the total ten members attended the meetings held on 21 May, 7 June and 23 October 2007 respectively. The structure and operations of the Board of Directors are governed by internal rules which establish the terms of reference and powers of the Board, define the operating rules for the Board Committees and set out the confidentiality principle applicable to information obtained by members in their capacity as directors, as well as the duty of directors to comply with the fundamental principles of independence, ethical conduct and integrity. The internal rules require each director to disclose to the Board any actual or potential conflict of
In accordance with Article L.225-35 of the Commercial Code, the Board of Directors determines the Companys strategy and oversees its implementation. Except for the powers directly vested in shareholders and within the scope of the corporate purpose, the Board considers all matters related to the efficient management of the Company and makes all related decisions. The Board of Directors comprises a minimum of three and a maximum of eighteen members, elected by shareholders in an Ordinary Meeting. At the filing date of this report the Board comprised ten voting directors and one non-voting director. No directors are elected by the Companys employees. In application of Article 14 of the Companys bylaws, each member of the Board must own at least 50 Club Mditerrane shares. French law provides that a companys management may be placed under the responsibility of either the Chairman of the Board of Directors or another individual appointed by the Board as Chief Executive Officer. At its first meeting held on
2007 ANNUAL REPORT
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interest in which he or she may be directly or indirectly involved, and in such a case to abstain from taking part in any discussion and/or vote on the matters in question. They also set out the regulations applicable to trading in the Companys securities, in compliance with Article L.621-18-2 of the Monetary and Financial Code and Articles 222-14 and 222-15 of the AMFs General Regulations.
INDEPENDENT DIRECTORS (AS DEFINED IN THE AFEP/MEDEF REPORT ISSUED IN OCTOBER 2003 ON PROMOTING GOOD CORPORATE GOVERNANCE IN FRENCH LISTED COMPANIES)
MEMBERS OF THE BOARD OF DIRECTORS
The Board of Directors comprises ten directors seven of whom are independent and one non-voting director. It is made up of individuals with complementary skills and backgrounds.
MEMBERS OF THE BOARD OF DIRECTORS AND POSITIONS HELD IN OTHER COMPANIES
HENRI GISCARD DESTAING
Chairman and Chief Executive Officer Born on 17 October 1956 French Appointed on 16 March 2005 Term expires at the Annual Shareholders Meeting to be called to approve the accounts for the year ended 31 October 2007 First term of office within the Company began on 17 July 1997 Non-independent director Number of shares held: 50
At its meeting on 28 September 2006, the Board of Directors reviewed the assessment of the independence of Board members, based on the criteria set out in the AFEP/MEDEF report on corporate governance. According to these criteria, directors in the following situations are not independent: directors who represent a shareholder that owns more than 10% of the Companys capital, directors with close family ties with a corporate officer of the Company, directors with an employment contract, directors with a seat on the Board of another company of which the Company is also a director, directors who have been director of the Company for more than a certain period of time, directors who have been an auditor of the Company in any of the five preceding years, and directors who have material business interests with the Company. Based on these criteria, seven of the ten current Board members can be deemed independent, corresponding to more than the 50% minimum recommended in the AFEP/MEDEF report. The detailed information below concerning each director indicates whether or not he or she is classified as independent.
CHANGES SINCE THE ANNUAL SHAREHOLDERS MEETING OF 8 MARCH 2007
Biography: Henri Giscard dEstaing graduated from Institut dEtudes Politiques de Paris and has a masters degree in economics. He began his career with Cofremca where he served as an Associate Director between 1982 and 1987, specializing in researching changes in food consumption patterns and their marketing and strategic impacts. In 1987 he entered the Danone group and was successively Head of Development, Chief Executive Officer of the British subsidiary HP Food Lea and Perrins, Chief Executive Officer of Evian-Badoit and Head of the Mineral Water division. Henri Giscard dEstaing joined Club Mditerrane in 1997, holding the positions of Chief Operating Officer in charge of Finance, Development and International Relations (1997-2001), Chief Executive Officer (2001-2002), and Chairman of the Executive Board (2002-2005) before being appointed Chairman and Chief Executive Officer.
OTHER POSITIONS WITHIN THE GROUP
At its 8 March 2007 meeting the Board of Directors noted the resignation of Vronique Morali from her position as a director. On 7 June 2007 the Board noted Etienne Bertiers resignation as a non-voting director.
Chairman of the Board of Directors of: Club Med World Holding Jet tours SA Chairman and Founding Director of: Fondation dentreprise Club Mditerrane Senior Executive of: Club Med Management Asia Ltd. (Hong Kong)
94
Chairman of the Board of: Club Med Services Singapore Pte Ltd (Singapore) Director of: Holiday Htels AG (Switzerland) Carthago (Tunisia)
OTHER POSITIONS OUTSIDE THE GROUP
Finance. In 1966 he was appointed Comptroller at Caisse des Dpts et Consignations before joining Crdit Lyonnais in 1968 as Deputy Director, where he subsequently became Chief Operating Officer. He served as Chairman and Chief Executive Officer of Crdit du Nord between 1982 and 1986 before entering Banque Lazard Frres et Cie where he was Managing Partner until 2000 and appointed Senior Advisor in 2001. Since 2006 he has also been a Senior Advisor to Barclays Capital France.
MAIN POSITION OUTSIDE THE GROUP
Director of: Casino, Guichard-Perrachon Member of the Supervisory Board of: Vedior (Netherlands)
OTHER POSITIONS HELD WITHIN THE PAST FIVE YEARS
Senior Advisor to Lazard Frres

Chairman of the Executive Board of: Club Mditerrane Chairman of: Hteltour Club Med Marine CM U.K Ltd (United Kingdom) Vice-Chairman of: Nouvelle Socit Victoria (Switzerland) Permanent representative of: Club Mditerrane SA, on the Board of Directors of Hteltour Director of: SECAG Carabes
Sole Legal Manager of: DD Finance (France) Director of: Fimalac (France)
Executive Deputy Chairman of: Crdit Agricole - Lazard Financial Products Bank Vice-Chairman and Director of: Fonds - Partenaires Gestion (F.P.G.) Non-voting Director of: Eurazeo Groupe Go Sport Lazard Frres Banque Chairman of: Parande Dveloppement SAS Member of the Supervisory Board of: AXA (France) Club Mditerrane Casino Managing Partner of: Lazard Frres Maison Lazard Partena Director of:
DAVID DAUTRESME
Vice-Chairman of the Board of Directors Born on 5 January 1934 French Appointed on 16 March 2005 Term expires at the Annual Shareholders Meeting to be called to approve the accounts for the year ended 31 October 2007 First term of office within the Company began on 23 April 1997 Number of shares held: 1,591 Independent director
Biography: A graduate of ENA, David Dautresme held the post of Officer in charge of Algerian Affairs for the French government between 1958 and 1960. He was subsequently an auditor at and then honorary advisor to the Cour des Comptes (French National Audit Office), following which he served as a Policy Officer at the French Ministry of the Economy and
Socit Immobilire Marseillaise Axa Investment Managers Lazard Frres Banque Crdit Agricole Lazard Financial Products Ltd. Rue Impriale Permanent representative of: Lazard SA on the Board of Directors of Compagnie de Crdit
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PHILIPPE ADAM
SAUD AL SULAIMAN
Director Born on 1 May 1957 French Appointed on 16 March 2005 Term expires at the Annual Shareholders Meeting to be called to approve the accounts for the year ended 31 October 2007 Number of shares held: 50 Non-independent director
Director Born on 8 December 1961 Saudi-Arabian Appointed on 16 March 2005 Term expires at the Annual Shareholders Meeting to be called to approve the accounts for the year ended 31 October 2007 First term of office within the Company began on 12 December 2003 Number of shares held: 50 Independent director
Biography: Philippe Adam is a graduate of Institut dEtudes Politiques de Strasbourg and also holds an MBA degree. He began his career in 1984 as a financial analyst before joining Accor in 1986. In 1993 he entered the Compass Group, the worldwide leader in contract catering. Philippe Adam is currently Executive Vice-President, Strategy and Hotel Development with the Accor Group.
Biography: Saud Al Sulaiman graduated in Finance from the University of New York in the United States. Since he began his career he has held several management positions within the Rolaco Trading & Contracting group, which is partly owned by the Al Sulaiman family. He has contributed to driving the groups expansion in a number of areas including manufacturing, finance, real estate development and tourism.
Executive Vice-President, Strategy and Hotel Development Accor

Partner and Managing Director of Rolaco Trading and its subsidiaries (Jeddah, Saudi Arabia)
OTHER POSITIONS OUTSIDE THE GROUP OTHER POSITIONS HELD WITHIN THE PAST FIVE YEARS
Chairman and Chief Executive Officer of: Devimco Member of the Board of Directors of: Arabian Cement Company (Saudi Arabia) Saudi Arabian Refineries Company (Saudi Arabia) Capital Finance Company SAL. (Lebanon) Rolaco Holding SA (Luxembourg) Hadhan Holding SA (Luxembourg) Oryx Finance Ltd. (Grand Cayman) Semiramis Intercontinental Hotel (Egypt) Sharjah National Lube Oil Company (United Arab Emirates) This Works (United Kingdom) Muzun International Aviation Fund (Bahamas)
Permanent representative of: SAMINVEST, on the Board of Directors of GO Voyages Managing Director of: Carlson Wagon Lit Travel
Member of the Supervisory Board of: Club Mditerrane (France)
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MUSTAPHA BAKKOURY
Director of: Banque Centrale Populaire (Morocco) Mditlcom (Morocco) Ciments du Maroc Air Liquide (Morocco) Fonds dEquipement Communal (Morocco) Poste Maroc Compagnie dAssurance Atlanta Crdit Eqdom Mdi 1 Sat (Morocco)
Director Born on 20 December 1964 Moroccan Appointed on 28 September 2006 Term expires at the Annual Shareholders Meeting to be called to approve the accounts for the year ended 31 October 2007 First term of office within the Company began on 28 September 2006 Number of shares held: 250 Non-independent director
THIERRY DELAUNOY DE LA TOUR DARTAISE
Director Born on 27 October 1954 Biography: Mustapha Bakkoury graduated from Ecole Nationale des Ponts et Chausses de Paris and also holds a degree in Banking and Finance. He spent some ten years working in the banking industry, including with BNP Paribas in France and BMCI in Morocco, and in August 2001 was appointed Chief Executive Officer of Caisse de Dpt et de Gestion du Maroc in Morocco. Mustapha Bakkoury is also ViceChancellor of Al Akhawayn University, a member of the Mohammed VI Foundation (which promotes the teaching profession and performs charity work) and Co-Chairman of Groupe dImpulsion Economique France Maroc, aimed at furthering economic relations between France and Morocco.
French Appointed on 16 March 2005 Term expires at the Annual Shareholders Meeting to be called to approve the accounts for the year ended 31 October 2007 Number of shares held: 100 Independent director
Biography: A graduate of Ecole Suprieure de Commerce de Paris, Thierry Delaunoy de La Tour dArtaise served as head of internal audit with the Chargeurs group from 1983 to 1984, before joining Croisres Paquet where he held the post of Chief Financial Officer from 1984 to 1986 and subsequently Chief Executive Officer from 1986 to 1993. He joined Groupe SEB in 1994 as Chief Executive Officer of Calor SA, of which he became Chairman and Chief Executive Officer in 1996. He was appointed Chairman of the Home Appliances Division of Groupe SEB in 1998, Senior Vice-President, Chief Executive Officer in 1999 and Chairman and Chief Executive Officer in 2000.
Chief Executive Officer of Caisse de Dpt et de Gestion du Maroc

Chairman of the Board of Directors of: Fipar Holding (Morocco) CDG Capital (Morocco) Socit Immobilire de la Mer (Morocco) Socit dAmnagement Ryad (Morocco) Massira Capital Management (Morocco) CDG Dveloppement (Morocco)
Chairman of the Board and Chief Executive Officer of Groupe SEB

Chairman of the Supervisory Board of: Crdit Immobilier et Htelier (Morocco) Compagnie Gnrale Immobilire MEDZ
Chairman of: SEB SA (France) SEB Internationale (France) Member of the Supervisory Board of:
Member of the Supervisory Board of: TMSA (Agence Spciale Tanger Med) Banque Marocaine pour le Commerce et lIndustrie (Morocco)
Rowenta Invest BV (Netherlands) Permanent representative of: Sofinaction on the Board of Directors of Lyonnaise de Banque (France)
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Director of: Tefal UK (United Kingdom) Groupe Seb Japan (Japan) Groupe Seb Mexicana (Mexico) Plastic Omnium (France) Legrand (France)
construction firm and also specialized in trading construction materials, vehicles and road and maritime freight equipment. He worked at Rolaco Trading & Contracting from 1964 until 1982 when he moved to Geneva to manage the investments of the Luxembourg-based company Rolaco Holding SA Group in various sectors, including tourism, hotel services, finance, insurance and the maritime industry (covering both ship owners and operators).
Chairman of: Groupe SEB Moulinex (France) Chairman of the Supervisory Board Rowenta Werke (Germany) Member of the Supervisory Board of: Groupe SEB Deutschland (Germany) Permanent representative of: SEB Internationale for Groupe SEB UK (United Kingdom) SEB Internationale for Groupe SEB Iberica (Spain) SEB Internationale for Rowenta France SEB Internationale for Calor (France) SEB Internationale for Tefal (France) Director of: T-Fal Corp (United States) T-Fal de Mexico (Mexico) Rowenta Inc (United States) Groupe Seb Colombia (Colombia) Tefal UK (United Kingdom) Seb Benrubi (Greece) Groupe Seb South Africa (South Africa) Legal Manager of: Rowenta Deustchland GmbH (Germany) Krups GmbH (Germany)
AIMERY LANGLOIS-MEURINNE PAUL JEANBART
Managing Director of Rolaco Holding SA (Luxembourg)

Chairman and Chief Executive Officer of: Oryx Finance Limited, Grand Cayman Htels Intercontinental Genve SA Managing Director of: All of the subsidiaries of Rolaco Holding SA, Luxembourg Director of: Sodexho Alliance SA Luxury Brand Development SA Semiramis Htel Co, Egypt
Director of: Orfverie Christofle SA XL Capital Limited, Bermuda Delta Bank International, Egypt Nasco Insurance Group Bermuda Member of the Supervisory Board of: Club Mditerrane
Director Born on 27 May 1943 French Appointed on 28 September 2006 Term expires at the Annual Shareholders Meeting to be called to approve the accounts for the year ended 31 October 2007 First term of office within the Company began on 28 September 2006 Number of shares held: 1,000 Independent director
Director Born on 23 August 1939 Canadian Appointed on 16 March 2005 Term expires at the Annual Shareholders Meeting to be called to approve the accounts for the year ended 31 October 2007 First term of office within the Company began on 23 April 1997 Number of shares held: 50 Independent director
Biography: Aimery Langlois-Meurinne graduated from Biography: After graduating in civil engineering from the University of Alep in Syria, Paul Jeanbart co-founded the Rolaco Trading & Contracting Group, which started out as a Sciences Po in Paris in 1965, earned a doctorate in law in 1966 and graduated from Frances Ecole Nationale dAdministration in 1970. He joined the Paribas group in 1971 where he worked
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for 12 years before being appointed Managing Director of G. Becker Paribas (New York) and subsequently Merrill Lynch Capital Markets (New York). Between 1987 and 1998, he served as Chief Executive Officer and then Senior Vice-President, Chief Executive Officer of Parfinance Paris. In 1998, he was appointed Chairman of the Supervisory Board of Imerys and has been the Chairman of that companys Board of Directors since 2005. He has also been Managing Director of Pargesa Holding in Geneva since 1990.
In 2003 he joined Worms & Cie (which was renamed Sequana Capital in 2005) as a member of the Supervisory Board (20032004), subsequently becoming a member of the Management Board (2004-2005) and then Chief Operating Officer (20052007).
Chief Executive Officer of Sequana Capital

Chairman of: Safic Alcan Boccafin (formerly Permal Group SAS) Chairman of the Supervisory Board of:
Chief Executive Officer and Member of the Board of Pargesa Holding SA (Geneva)
Director of: Groupe Bruxelles Lambert SA (Belgium) Eiffage (France) PAI Management (France) Pascal Investment Advisers SA (Switzerland) Director and Chairman of: Pargesa Luxembourg SA (Luxembourg) Pargesa Netherlands BV (Netherlands) Imerys (France)
ArjoWiggins SAS Antalis SAS Director of: LISI (Paris) SGS (Geneva) Financire Worms SA (Geneva) Greysac (formerly Domaines Codem)
Chairman of the Supervisory Board of: Club Mditerrane MICEL (Saint-Chamond) Chief Executive Officer of: Exor SA (Paris) Chairman and Chief Executive Officer of: Domaines Codem (Begadan)
Director of: Corporation Financire Power (Canada) Axis Capital Management (United Kingdom) Club Franais du Livre (France)
PASCAL LEBARD
Director of: Domaines Codem (Begadan) Europenne de Financement (Paris) Soficol (Paris) Exint. (Paris) Member of the Executive Board of: Worms & Cie (Paris)
Director Born on 15 May 1962 French Appointed on 16 March 2005 Term expires at the Annual Shareholders Meeting to be called to approve the accounts for the year ended 31 October 2007 First term of office within the Company began on 23 April 1997 Number of shares held: 54 Independent director
Biography: After graduating from EDHEC, Pascal Lebard became a Charg dAffaires at Crdit Commercial de France in 1986. He held the post of Associate Director at 3i SA from 1989 until 1991, before becoming a Director at Ifint, the predecessor of the Exor Group, which is part of the Agnelli Group.
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ANNE-CLAIRE TAITTINGER
Permanent Representative of Groupe Taittinger on the Boards of: Socit Htelire Luttia Concorde Taittinger CCVC Director of: DIXIA Chairman of: SAS du Riffray II
Director Born on 3 November 1959 French Appointed on 14 March 2006 Term expires at the Annual Shareholders Meeting to be called to approve the accounts for the year ended 31 October 2007 First term of office within the Company began on 12 June 2003 Number of shares held: 400 Independent director
TETSUYA MIYAGAWA
Non-voting director Born on 6 April 1955 Japanese Appointed on 14 March 2006
Biography: Anne-Claire Taittinger is a graduate of Institut dtudes Politiques de Paris. She also holds ordinary and advanced degrees in urban planning as well as an executive MBA from HEC-CPA. She spent four years working in the regional urban development subsidiaries of Caisse des Dpts et Consignations (1976-1979), before occupying various managerial and CEO positions within holding companies for Groupe du Louvre and Groupe Taittinger until 2006.
Biography: After graduating in economics from the University of Tokyo in Japan, Tetsuya Miyagawa joined Nippon Life Insurance Company in 1978. He was appointed General Manager in charge of the International Investment Department in 2001 and has been Nippon Lifes chief representative in London since 2005.
Senior Advisor to the Womens Forum for the Economy and Society (WEFCOS)
Chief Representative of Nippon Life Insurance Company at its London office

Member of the Supervisory Board of: Carrefour

Director of: Nippon Life Insurance International PLC Nippon Life Insurance Investments Europe Ltd.
Chairman of the Executive Board of: Groupe Taittinger Chief Executive Officer of: Socit du Louvre - Groupe du Louvre Groupe du Louvre Chairman of: Louvre Htels SAS Chairman and Chief Executive Officer, subsequently Chairman and subsequently Director of: Baccarat Chairman and Director of: Baccarat Inc. (United States) Baccarat Pacific KK (Japan)
N/A At the Annual Shareholders Meeting to be held on 11 March 2008, shareholders will be asked to renew the terms of office of all the Companys directors for a three-year period expiring at the Annual Shareholders Meeting to be held to approve the accounts for the year ending 31 October 2010.
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HENRI GISCARD DESTAING IS ASSISTED BY AN EXECUTIVE VICE PRESIDENT: MICHEL WOLFOVSKI
The members of the Board Committees are appointed by the Board of Directors. The responsibilities of the Committees, whose role is exclusively advisory, are set by the Board of Directors.The Committees report on their work to the Board of Directors.
THE STRATEGY COMMITTEE
Executive Vice President, Chief Financial Officer Non-director Born on 3 April 1957 French
The Strategy Committee is chaired by Henri Giscard dEstaing and has six other members: Philippe Adam, Mustapha Bakkoury, Paul Jeanbart, Aimery Langlois-Meurinne, Pascal Lebard and Tetsuya Miyagawa (non-voting director). Four of the Committees members are independent. The roles and responsibilities of the Strategy Committee are described in the Report of the Chairman of the Board of Directors on Preparing and Organizing Board Meetings and on the Companys Internal Control Procedures (see page 104). The Strategy Committee met twice in fiscal 2007.
THE AUDIT COMMITTEE
OTHER POSITIONS WITHIN THE GROUP
Permanent representative of: Club Mditerrane SA for Club Med World Holding (Paris) Director of: Jet tours SA (Ivry)
Member of the Supervisory Board of: Adenclassifieds

Member of the Executive Board of: Club Mditerrane SA (Paris) Director of: Club Med Gym (Paris) Chairman of: Club Med Amrique du Nord (Paris) Club Med Amrique du Sud (Paris) Club Med Asie (Luxembourg) As far as the Company is aware, in the past five years none of its corporate officers have been convicted of any fraudulent offences or have been associated with any bankruptcies, receiverships or liquidations. In addition no official public incriminations and/or sanctions have been pronounced against any of the Companys officers by any statutory or regulatory authorities and they have never been disqualified by a court from acting as a member of the administrative, management or supervisory bodies of an issuer or from acting in the management or conduct of the affairs of any issuer. Finally, to the best of the Companys knowledge, there are no potential conflicts of interests between the duties of the corporate officers to the Company and their private interests.
BOARD COMMITTEES
The Audit Committee is chaired by David Dautresme and has two other members: Philippe Adam and Pascal Lebard. Two of the Committees members are independent. The Audit Committee is one of the key components of the corporate governance structure set up by the Company. It is responsible for assisting the Board with reviewing and approving the interim and annual financial statements, as well as with examining any operations or events that may have a significant impact on the Group and its subsidiaries in terms of commitments and/or risks. The roles and responsibilities of the Audit Committee are described in the Report of the Chairman of the Board of Directors on Preparing and Organizing Board Meetings and on the Companys Internal Control Procedures (see page 103). The Audit Committee met twice in fiscal 2007.
THE NOMINATIONS AND COMPENSATION COMMITTEE
The Nominations and Compensation Committee has three members, all of whom are independent: Anne-Claire Taittinger, Thierry de La Tour dArtaise and Saud Al Sulaiman. It is chaired by Thierry de La Tour dArtaise. The roles and responsibilities of the Nominations and Compensation Committee are described in the Report of the Chairman of the Board of Directors on Preparing and Organizing Board Meetings and on the Companys Internal Control Procedures (see page 104). The Nominations and Compensation Committee met twice in fiscal 2007.
At its meeting on 16 March 2005, the Board of Directors set up three specialized committees: - A Strategy Committee - An Audit Committee - A Nominations and Compensation Committee
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CHAIRMANS REPORT
ON THE PRACTICES AND PROCEDURES OF THE BOARD OF DIRECTORS AND INTERNAL CONTROL PROCEDURES
This report has been drawn up in accordance with paragraph 6 of Article L.225-37 of the French Commercial Code, as amended by Act 2005-842 of 26 July 2005. Its purpose is to report to shareholders on the conditions underlying the preparation and organization of the work of the Board of Directors (the Board) and the internal control procedures set up by Club Mditerrane SA (the Company). - is not a customer, supplier, investment banker or commercial banker (i) that is material for the Company or Group, or (ii) for which the Company or Group represents a significant portion of the business of the director concerned; - does not have close family ties with a corporate officer; - has not been an auditor of the Company within the previous five years; - does not, in whole or in part, control the Company; for directors holding in excess of 10% of the Companys capital and/or voting rights, the classification as independent takes into account the Companys ownership structure and any potential conflict of interests. Based on these criteria, seven of the ten directors are considered to be independent.
1.1.2 BOARD PRACTICES AND PROCEDURES INTERNAL RULES
I. Practices and procedures

The Boards practices and procedures are governed by French law, the Companys by-laws, and the internal rules of the Board and the Board Committees.
1.1 MEMBERSHIP, PRACTICES AND PROCEDURES 1.1.1 MEMBERS OF THE BOARD
Article 14 of the Companys by-laws states that The Company shall be administered by a Board of Directors comprising between three and eighteen members. At 31 October 2007, the Board was composed of ten voting directors and one non-voting director. The directors biographies and details of their other directorships and functions are provided on page 94 of this registration document. In compliance with its internal rules, the Board regularly checks that its members include the requisite number of independent directors, based on the independence criteria defined in Frances AFEP-MEDEF report on corporate governance. In accordance with these criteria, a director is deemed to be independent when he or she: - has not been a director of the Company for more than twelve years; - is not an employee or corporate officer of the Company, nor an employee or director of its parent or one of its consolidated subsidiaries, and has not been one during the previous five years; - is not a corporate officer of a company in which the Company is a corporate director, either directly or indirectly, or in which an employee appointed in that role, or a corporate officer of the Company (currently in office or having held such office in the past five years), is a director;
At its meeting on 16 March 2005 the Board adopted a set of internal rules governing its organization, practices and procedures. These are based on French law, the Companys by-laws and the recommendations set out in Frances AFEP-MEDEF Corporate Governance Code for listed companies published in October 2003. The internal rules stipulate that the Board should meet as often as required in the Companys interests. They describe the terms of reference and powers of the Board, define the practices and procedures of the Board Committees, and impose a duty on directors to treat as strictly confidential all information obtained in their capacity as Board members, as well as the duty to comply with the fundamental principles of independence, ethical conduct and integrity. The internal rules also require each director to disclose to the Board any actual or potential conflict of interest in which he or she may be directly or indirectly involved, and in such a case to abstain from taking part in any discussion and/or vote on the matters in question. In addition, they set out the rules applicable to trading in the Companys shares, as defined in Article L.621-18-2 of the French Monetary and Financial Code and Articles 222-14 and 222-15 of the General Regulations issued by the French securities regulator (AMF).
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C H A I R M A N S R E P O RT
The internal rules state that directors may participate in Board meetings by videoconference or using other forms of telecommunication technology (including conference calls and any other interactive means of electronic communication) that enable them to be identified and to effectively participate in the discussion and vote, subject to compliance with the applicable regulations. Accordingly, directors who take part in Board meetings through such means are deemed to be present for the purposes of calculating the quorum and voting majority, except for Board meetings held to approve the financial statements of the Company and the Group and the related management report.
BOARD MEETINGS
In fiscal 2007, the Board examined the financial statements of the Company and the Group for the year ended 31 October 2006, approved the reports and resolutions to be presented at the Annual Shareholders Meeting of 8 March 2007, reviewed the Groups quarterly performance and results, reviewed the budget and the business plan, examined the financial statements of the Company and the Group for the first half of fiscal 2007, and set up a stock option plan and stock grant plan for members of senior management and certain employees. The Board also examined and approved capital expenditure requests (including for asset acquisitions and renovation projects) and planned disposals or asset refinancing for amounts requiring the Boards prior approval pursuant to its internal rules. During the year the Board also reviewed the reports of the various Board Committees.
1.2.2 ROLES OF THE BOARD COMMITTEES
Average period of notice for calling Board meetings The provisional schedule of meetings of the Board and Board Committees is sent to each director at the beginning of the fiscal year. The average period of notice for calling these meetings is approximately two weeks. Chairman Board meetings are chaired by the Chairman of the Board or, in his or her absence, by the Vice-Chairman or by a director designated as acting Chairman or by another director designated by the Board. All of the meetings in fiscal 2007 were chaired by the Chairman of the Board. Directors right to information The Chairman of the Board is required to provide directors on a timely basis with any and all documents and information they may need to fulfill their duties. During fiscal 2007 the Board met five times with an average attendance rate of 77%. Each meeting lasted an average of two hours. The Companys Executive Vice-Presidents attended all of the Board meetings.
1.2 ROLE AND RESPONSIBILITIES OF THE BOARD AND BOARD COMMITTEES 1.2.1 ROLE OF THE BOARD
At its meeting on 16 March 2005, the Board set up three standing Committees whose role is to facilitate the work of the Board and efficiently contribute to preparing Board decisions the Audit Committee, the Nominations and Compensation Committee and the Strategy Committee. The Board of Directors appoints the members of these Committees (including the Chairman) from among its members.
THE AUDIT COMMITTEE
The Audit Committee has three members including two independent members who are appointed for their term of office as director. The current Audit Committee members are David Dautresme (Chairman), Philippe Adam, and Pascal Lebard. In accordance with best corporate governance practice, no executive directors sit on the Audit Committee. The rules governing the Audit Committees organization, modus operandi, tasks and duties are described in a specific Charter that was unanimously approved by the Committees members during its meeting of 8 June 2005. The Audit Committee is one of the key components of the corporate governance structure set up by the Company. It is responsible for assisting the Board with reviewing and approving the interim and annual financial statements, as well as for advising on transactions or events that could have a material impact on the financial position of the Group or its subsidiaries in terms of commitments and/or risk.
In accordance with Article L.225-35 of the French Commercial Code, the Board determines the Companys strategy and oversees its implementation. Except for the powers directly vested in shareholders, the Board considers all matters concerning the efficient management of the Company and makes all related decisions within the limits set by the Companys corporate purpose.
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The roles and responsibilities of the Audit Committee are to: - Review the annual and interim financial statements of the Company and the Group, together with the related reports. - Ensure that the data in these financial statements are consistent with other information available to the Committee. - Ensure that the accounting policies used to prepare the financial statements are appropriate and have been applied consistently from one period to the next. - Check the effectiveness of internal reporting and control procedures. - Analyze recent regulatory developments and assess their impact on the financial statements. The Committee reviews the work performed by the Statutory Auditors. In addition, it examines audit service proposals and makes recommendations concerning the appointment or re-appointment of the Statutory Auditors. The Audit Committee met twice in fiscal 2007, with an average attendance rate of 86%. During these two meetings, which were dedicated to reviewing the annual and interim financial statements, the Committee checked that the closing process had gone smoothly and was presented with a report on the work of the Statutory Auditors. The Committee also examined (i) the tax audits in progress within the Group; (ii) ongoing measures to rationalize the Groups legal structure by reducing the number of separate companies; (iii) hedging operations; (iv) the Groups real-estate portfolio; and (v) refinancing operations. In addition the Audit Committee was presented with a report of the work performed by the internal auditors in fiscal 2007 and their internal control assessments, and gave its opinion on the internal audit plan.
THE NOMINATIONS AND COMPENSATION COMMITTEE
the Chief Executive Officer and, at the Chairmans request, compensation payable to the Groups Executive Vice-Presidents and senior executives. - Review proposed stock option plans and stock grant plans for the management and employees of the Group (including corporate officers). - Obtain all the required information concerning the compensation and status of Group executives. - Make proposals and recommendations concerning attendance fees and any other compensation and benefits for members of the Board (including non-voting directors). In order to effectively perform its role of setting the amount of remuneration and benefits for corporate officers, the Nominations and Compensation Committee draws on the expertise of a specialized independent consulting firm as well as on market information obtained on an annual basis. The principles and rules used to set the remuneration and benefits of corporate officers are described on page 90 of this registration document. The Nominations and Compensation Committee met three times in fiscal 2007, with a 100% attendance rate. During these meetings the Committee recommended that the Board of Directors grant 125,000 stock options to members of senior management and certain employees, as well as 46,600 new or existing shares without consideration. This recommendation was adopted by the Board at its meeting of 8 March 2007.
THE STRATEGY COMMITTEE
The Strategy Committee has seven members, four of whom are independent. The current Committee members are Henri Giscard dEstaing (Chairman), Philippe Adam, Mustapha Bakkoury, Paul Jeanbart, Aimery Langlois-Meurinne, Pascal Lebard and Tetsuya Miyagawa (non-voting director). The role of the Strategy Committee is to review: - The main growth strategies of the Company and its subsidiaries, from both a financial and commercial perspective, focusing particularly on ensuring that changes to the product offering appropriately reflect the Companys image and corporate culture. - The three-year business plan presented annually by the Chief Executive Officer. The Strategy Committee receives input from all of the Groups corporate departments. The Strategy Committee met twice in fiscal 2007, with an attendance rate of 86%, notably to update the 2007-2009 business plan taking into account Magellan, the new corporate program aimed at positioning Club Mditerrane as the worldwide specialist in all-inclusive upscale, friendly, multicultural vacations.
The Nominations and Compensation Committee has three members, all of whom are independent: Thierry de La Tour dArtaise (Chairman) Anne-Claire Taittinger and Saud Al Sulaiman. In accordance with best corporate governance practice, no executive directors sit on the Committee. The roles and responsibilities of the Nominations and Compensation Committee are to: - Review candidates for election to the Board either at its own initiative or on the request of the Board based on the candidates skills, business experience, and economic, social and cultural background. - Review candidates for the position of Chief Executive Officer and Executive Vice-President. - Review the membership structure of Board Committees and make related recommendations. - Recommend methods for determining the compensation payable to the Chairman of the Board, the Vice-Chairman and
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1.3 RESTRICTIONS ON THE POWERS OF THE CHIEF EXECUTIVE OFFICER IMPOSED BY THE BOARD OF DIRECTORS RESTRICTIONS RESULTING FROM INTERNAL RULES
II. Internal control procedures

2.1 DEFINING INTERNAL CONTROL OBJECTIVES DESCRIPTION OF INTERNAL CONTROL OBJECTIVES
At its first meeting, which was held on 16 March 2005, the Board decided to combine the functions of Chairman of the Board and Chief Executive Officer, and appointed Henri Giscard dEstaing as Chairman and CEO. This decision reflected the Boards view that combining these two positions would be the best manner of ensuring the success of the Groups upscale strategy. In accordance with Article L.225-56 of the French Commercial Code, the Chief Executive Officer has the broadest powers to act on behalf of the Company under all circumstances within the scope of the corporate purpose, except for those powers directly vested by law in shareholders and the Board of Directors. The Chief Executive Officer represents the Company in its dealings with third parties. For internal purposes, the Board decided that certain transactions and decisions require its prior approval due to their nature and/or the amounts involved. These include: The annual budget. The 3-year business plan. Any capital projects or asset disposals not included in the annual budget representing an aggregate amount of more than 9.2 million. Purchases, sales and exchanges of property, plant and equipment, intangible assets, rights or securities, and the creation of any and all companies, partnerships and business ventures, representing an investment or disposal proceeds in excess of 15.3 million. This restriction does not apply, however, to related party transactions not governed by Article L.225-38 of the French Commercial Code. New loans and borrowings (including bond issues and shortterm advances) in excess of 45.8 million. Transactions in settlement of claims or litigation representing over 6.1 million.
REPORTING RULES
According to the internal control reference framework published on 31 October 2006 by the working group of the AMF, internal control is a system developed and implemented by a company that provides assurance concerning: - The companys compliance with the applicable laws and regulations. - Application of senior management instructions and strategic guidelines. - The effectiveness of internal processes, particularly those contributing to the protection of assets. - The reliability of financial information. The system contributes to the overall control of the business, the effectiveness of its operations and the efficient utilization of resources. By helping to limit and manage the risk of the Company failing to meet its objectives, the internal control system plays a key role in the conduct and management of the business. However, no system of internal control can provide an absolute guarantee that the companys objectives will be met. Club Mditerranes internal control system is organized on a decentralized basis, underpinned by rules relating to organization, strategies, procedures and practices aimed at controlling risks that may have a material impact on the Groups assets or on its ability to achieve its objectives. The purposes of the procedures in place within the Company and its subsidiaries are to: - Ensure that all acts of management, all transactions, and the behavior of all Company employees comply with the general strategic guidelines established by the Companys corporate governance bodies, the applicable laws and regulations, and the Companys corporate values, standards and internal rules. - Protect the Groups assets. - Provide assurance that the accounting, financial and management information submitted to the Companys corporate governance bodies gives a true and fair view of the Companys operations and financial position. In order to meet these goals, internal control procedures in each Business Unit extend to every level of the organization and are the responsibility of the operating and corporate departments.
The Chief Executive Officer is required to report regularly to the Board on the use of his powers, particularly in relation to share buyback programs and the issuance of guarantees, as well as regularly updating the Board on specific matters such as changes in the Companys ownership structure and strategic partnerships.
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THE CONTROL ENVIRONMENT
2.2 MEETING INTERNAL CONTROL OBJECTIVES 2.2.1 INTERNAL CONTROL PROCEDURES RELATING TO OPERATING CONTROLS AND REGULATORY COMPLIANCE OPERATING CONTROLS
Internal standards Code of Ethics and best practices Following a decision by the Executive Board on 23 June 1997, the Group drew up a Code of Ethics in order to raise employee awareness about the fact that certain types of activities and relationships are heavily restricted, and in some cases must be avoided at all costs. This Code covers topics such as potential conflicts of interest, Group policy concerning gifts, benefits, invitations and payments to employees, as well as the use of confidential information, compliance with applicable laws in the Groups host countries and adherence to Group strategy. A questionnaire is sent to all Group employees, in which they are required to answer yes or no to questions about whether they (i) may have direct or indirect conflicts of interest with the Group; (ii) are prepared to comply with all aspects of the Code of Ethics and have taken all requisite measures to ensure that close members of their family do likewise; and (iii) will promptly inform the Human Resources Department of any event or situation covered in the Code that may concern them. Internal Audit Charter The aim of the Internal Audit Charter is to define the role, objectives and responsibilities of the Groups Internal Audit team and ensure that this team can perform its duties appropriately. Procedures Accounting and financial procedures, as well as general procedures relating to each of the Groups main businesses are sent out to the various managers and their teams and are centralized within the Internal Audit Department. The procedures concerning the Groups Villages can be viewed on the Groups intranet and are regularly updated. Crisis management manual The purpose of this manual is to set out the procedures to be applied in the event of a sensitive or emergency situation. Compiled by the Health, Safety and Security Department with a view to both preventing and dealing with such events, the manual contains numerous examples of typical situations that may occur at the Group facilities or in its host countries, including outbreaks of diseases, hostilities and natural disasters. The manual is also used in all internal training sessions on crisis management and communication.
Effective operating controls consist of gauging customer satisfaction and monitoring quality, as well as ensuring that the Groups global information systems are sustainable and adequately backed up. . Quality Improving quality has always been an essential part of Club Mditerranes corporate culture. For this reason, in recent years the Quality Department has taken steps to set up a structured process in line with developments concerning the Company as well as its products and markets. This process hinges on tracking products and carefully assessing feedback from the Groups customers (GMs). GM Feedback GM Feedback is a satisfaction survey sent to all GMs around the globe. Over 367,000 questionnaires are sent out, in nine different languages, and GMs can respond either by post or online via e-Feedback. The average response rate is 43%, with highs of 48% in France and 50% in Switzerland. The response rate is also very high for non-European customer bases, such as the United States (36%). GM Feedback is a valuable tool for monitoring progress made by the Group and serves as an internal benchmark. The results are analyzed and taken into account in the day-to-day management of the Villages and also in selecting long-term strategic options. The results are sent to a wide range of people within the Group, from the Village Manager to the Senior Management Committee, as well as to the operating departments concerned. Quality standards Club Mditerrane required a set of quality standards that would be sufficiently rigorous to ensure consistent levels of service over time and from one Village to another, while also being flexible enough to let the Groups teams give free rein to spontaneous and creative ideas. These standards called Quali Signs were drafted by over 600 GOs throughout the world. A manual was then compiled for each Village department, which can be viewed on the Groups intranet. Quali Signs have also been put in place for Club Med Agencies and for visitor reception areas at the Companys headquarters.
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Practical guidelines have been drawn up for each Club Mditerrane profession in order to deliver the service quality that customers expect and that complies with the Quali Signs standards. Procedures and best practices for more than 110 of the Groups professions were developed by experts in each field and grouped together as standards called Pro Signs. The Human Resources, Purchasing and Safety departments all contributed towards creating the Pro Signs, which define the duties of members of each hotel profession and set out rules relating to attitudes, behavior and safety, as well as the procedures to be implemented before, during and after the season. A list of the available tools is also provided, with a view to continually enhancing the professional approach of the Groups GOs and GEs. Mystery visits Mystery visitors from an external specialist company visit the Groups Villages and carry out checks covering some 650 issues. A report is sent to the Village Manager within ten days of these visits, enabling numerous points to be improved. Information systems The reservation system and related data, as well as Club Mditerranes accounting system, are major assets for the Group. The Information Systems Department has set up the following procedures in order to minimize the risks of system downtime due to major failures, fire or site damage or other incidents: - All hardware and software components are split between two distinct but interconnected sites. - Data is replicated in real time between the two sites and can be accessed indifferently by either of the two sites. - A recovery plan has been drawn up so that key applications such as reservations and accounting can be restarted without delay. Less sensitive applications including resource management and decision-making tools also form part of this plan wherever possible. Each information system user can store important data on a secure server. The Groups information systems are accessed via an international telecommunications network that operates around the globe. Strict access controls prevent unauthorized access to the Groups systems from the computer terminals and work stations linked up to this network. The risk of an intruder hacking into the network and/or a centralized application is assessed and tested on a periodic basis. User profiles and access rights are managed jointly with the Human Resources Department in order to ensure that only people within the Group can access its systems.
REGULATORY COMPLIANCE THE LEGAL AFFAIRS AND INSURANCE DEPARTMENTS
Structure The role of the Legal Affairs Department which reports to the Corporate Secretary is to protect and safeguard the assets and operations of the Group as a whole, as well as to defend the interests of the Group, its officers and employees in the performance of their duties, and to ensure that Club Mditerrane complies with local laws and regulations in its host countries. The Americas and Asia regions each have their own Regional Legal Director who is responsible for protecting and defending Club Mditerranes interests. The Group Legal Affairs Department performs this role for Europe and Africa. The role of the Insurance Department which also reports to the Corporate Secretary is to ensure that the Group has adequate insurance coverage in relation to the nature and extent of its risks. Risk management and insurance policies are organized on a consolidated basis. The Group has set up risk management tools and global insurance programs with pools of top-ranking insurers, and specific insurance coverage is taken out at a local level. Procedures The Regional Legal Directors are required to notify the Group Legal Affairs Department of issues which are deemed to be sensitive. A list of these sensitive issues is provided at the beginning of each fiscal year and generally includes: - Significant arbitration or legal proceedings. - Any criminal proceedings taken against Club Mditerrane or any of its executives or employees. - Growth projects requiring the authorization of the Board of Directors or that involve a particular risk for the Group (e.g. legal or financial risks). - Guarantees issued in the name of the Company and/or its subsidiaries and any liens or charges on the Groups assets. - Material purchases, sales or exchanges of property, plant and equipment, intangible assets, rights or securities, and the creation of companies, partnerships or other business ventures. - Projects involving the creation of an entity in which the shareholders have unlimited liability. - Any matters that could have a future impact on the Groups day-to-day operations or that raise issues of principle concerning the running of the Group. - Any transactions between the Company and any one of its subsidiaries or between subsidiaries or between companies with common directors. - Any matter that is considered as needing to be brought to the attention of senior management as it could damage the image of the Group or be contrary to its corporate ethics.
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2.2.2 INTERNAL CONTROL PROCEDURES COVERING THE PREPARATION AND PROCESSING OF ACCOUNTING AND FINANCIAL INFORMATION
trol issues at his or her site, while the representative office in each country deals with specific local issues and performs an accounting oversight role. The Group produces monthly accounts. Procedures The main monthly accounting controls are as follows: - Suppliers: a check is carried out to ensure that the different systems are correctly interfaced (trade payables balance in the aged payables system and the trade payables balance in the general ledger system). A control is also performed on amounts due from suppliers. - Trade receivables: the Sales Departments analyze and explain any differences compared with the Groups general terms of sales, such as extended payment terms. The Receivables Accounting Department at the Head Office and the Finance Managers then check these explanations based on the receivables ledgers. - Checks performed by the Headquarters Accounting Department on current account balances between Club Mditerrane SA and other Group entities. - Bank reconciliations. - Revenue by country: the various entities validate that revenue and receivables figures have been correctly entered by type of structure (reseller or agent) and that data from the reservation system is properly fed into the accounting system. - A system has been set up to control the automatic interfaces with fixed asset management systems. Automatically-generated depreciation and amortization charges are checked on a monthly basis. The Consolidation Department also performs the following key controls: - Reconciliation of intra-group current accounts at Group level. - Monthly analysis of the components of consolidated profit: Operating profit - Leisure, Operating profit - Management of assets, Other operating income & expense, Finance costs and other financial income & expense. - Reconciliation between the asset management system and the accounting system in order to ensure data consistency. The consolidation system includes programmed controls to ensure that accounting flows such as increases, decreases and reclassifications have been correctly recorded by the various entities. - Extensive balance sheet analyses, performed in March and September. At the interim and annual balance sheet dates in April and October an in-depth analysis is performed of all balance sheet, off-balance sheet and cash flow statement items, and is subsequently published in the notes to the financial statements. - Analyses of foreign exchange gains and losses, by currency pair.
The Groups financial information is directly derived from its integrated accounting and management system, which is linked up to a global database. This technology enables the Group to monitor, on a real time basis, accounting changes from numerous input locations throughout the world, such as Villages and representative offices at country or regional level. Data is automatically transferred to the Groups management and consolidation system on a monthly basis. The Group publishes financial information based on its internal reporting format. Accounting and financial information is prepared by the Finance Department which oversees the work of the Accounting, Management Control, Treasury & Financing, Tax and Internal Audit Departments. The Internal Audit Department performs cross-business controls for all of the Groups operations and cash flows. Each Business Unit has a Managing Director and a Financial/ Management Control Department whose manager reports to the Executive Vice-President, Chief Financial Officer. One of the main objectives of an internal control system is to contribute to ensuring that the financial statements of the Company and the Group provide a true and fair view of the Groups assets, liabilities and results operations as well as a reasonable assessment of any potential risks to which the Group may be exposed. Club Mditerrane has set up a series of controls at each Business Unit in order to monitor the principal risks inherent in their operations and the related financial consequences. These controls include checks on the input of monthly revenue figures, the tracking of capital expenditure and debt recovery data, as well as the monitoring of local tax regulations, purchases, and financial information reported by all of the Groups host countries. They are performed regularly by members of the Finance Department at country, regional and Group level.
THE ACCOUNTING DEPARTMENT
Structure The Accounting Department organizes and plans all of the Groups accounting tasks in order to ensure that consolidated data is consistent and reliable. This task is facilitated by the use of a Group chart of accounts. The Management Controller/Finance Manager of each Village is responsible for accounting, management and internal con-
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The following controls are also performed on a monthly basis in coordination with the Management Control and Treasury & Financing Departments: - Reconciliation of revenue to sales data. - Reconciliation of Operating profit Leisure to profit reported in the management accounts. - Capital expenditure analyses. - Analyses of finance costs and other financial income and expense, including foreign exchange gains and losses. - Net debt analyses. The Groups transition to International Financial Reporting Standards was completed in fiscal 2006 and these standards have been applied since then by all local entities for consolidated reporting purposes.
THE MANAGEMENT CONTROL DEPARTMENT
A detailed monthly reporting process All entities submit monthly reporting packages. Each Business Unit presents its results for the month at a Senior Management Committee meeting. Monthly consolidated income statements are also produced, based on the management accounts which comprise the same underlying transaction data as the statutory accounts. Forecasts The Management Control Department draws up forecasts for the remainder of the season based on actual figures for the first two months and updated forecasts for the remaining months. This process enables the Group to assess the impact of any changes in operations. The forecasts are revised after each monthly close until the end of the season. The main controls performed by the Management Control Department are as follows: - Detailed analyses of revenue by outbound and inbound zone. - Detailed profitability analyses covering, in particular, transport margins, operating margins, Village and Headquarters cost controls. - Reviews of employee numbers.
THE TREASURY & FINANCING DEPARTMENT
Structure The Management Control Department is responsible for coordinating this function worldwide. Each region also has a management control department staffed by locally-based controllers. Procedures Three-year business plan The rolling three-year business plan reflects the main changes expected to affect the Group during the period as well as their financial impacts. The narrative section of the plan includes data from market research carried out in the Groups strategic countries and the related action plans. The business plan schedules simulate the financial impacts of the Groups strategy and the macro-economic environment, including such variables as growth in the tourism sector and changes in exchange rates. Rolled forward annually, the plan forms the basis for income statement, balance sheet and cash flow projections. Budgetary process The budgetary process which is coordinated by the Management Control Department begins at Village and sales office level. Local budgets are consolidated first by Business Unit and then at Group level. The budgetary process is an effective internal control tool that enables the Group to analyze all of its financial flows. The budget is presented to the Board of Directors for approval in October of each year.
Structure The Treasury & Financing Department is responsible for ensuring the security, transparency and effectiveness of treasury and financing operations. Its main roles are to: - Manage investments and financing transactions to ensure that the Group has sufficient liquidity. - Control the level of finance costs. - Perform cash management tasks. - Quantify and hedge financial risks notably currency and interest-rate risks. - Monitor banking relations. - Help subsidiaries with cash management processes and assist the Development Department in arranging financing for new projects. Procedures The Treasury & Financing Department has drawn up a set of Group rules and procedures. Examples include a procedure on authorized bank account signatures in order to limit the risk of fraud, as well as a procedure on signing and sending files containing batches of supplier payments.
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Weekly and monthly reporting systems have also been set up in order to provide senior management with information on matters such as (i) the Groups actual and forecast levels of debt and liquidity; (ii) risk monitoring and hedging transactions; and (iii) the Groups dealings with its banks, including details of cash flows and commitments, account movements and banking terms and conditions. The Treasury team uses a treasury management system that enables it to track key liquidity indicators as well as all of the financial instruments used on a centralized basis. Tasks relating to financial market transactions are segregated, with orders, execution and controls carried out by three different people. All currency hedges are systematically presented to the Audit Committee.
THE TAX DEPARTMENT
Structure The Internal Audit Department is a centralized structure based at the Companys headquarters. It comprises six people who carry out cross-functional audits of all of the Groups operations and transaction flows. The Internal Audit Department reports directly to the Executive Vice-President, Chief Financial Officer. Role and responsibilities The internal auditors perform audits of specific functions or businesses at Group, Headquarters, Country Representative Office and Village level. They coordinate their work with that of the Statutory Auditors. The internal auditors activities cover: - Financial audits, which consist of reviewing the financial statements and examining the systems and rules set up to ensure the reliability of financial information. - Operational audits, which include reviewing the various cycles (such as sales, purchasing and human resources) and assessing internal control procedures in order to obtain assurance that the organization in place contributes to managing Group risks and meeting Group objectives. - Specific engagements, corresponding to various one-off projects such as providing support for operations staff, or organizational and diagnostic work. The Internal Audit Department also takes part in events such as financial seminars and training sessions for new Cost Controllers and Management Controllers/Finance Managers as well as more experienced Management Controllers/Finance Managers, with a view to relaying a control culture throughout the Group and driving changes to improve the internal control and risk management environment. Operational structure and procedures The Internal Audit Department draws up an annual audit program and an audit plan covering all of the Groups operations. The audit program is based on maps of the main risks at Group level and by country and domain (Human Resources, Purchasing, Legal/Tax/Asset Management, Sales, Accounting, Treasury, Information Systems, Geopolitical Risks/Quality/ Security).
Structure The Tax Department is responsible for coordinating international tax issues, ensuring that taxation policies are applied consistently by each Business Unit and monitoring all tax audits carried out on Group companies. At the level of the parent company, the Department ensures that the company complies with all its tax reporting obligations as head of the French tax group, monitors tax audits carried out on the companies in the tax group and manages tax disputes. The American and Asian regions have their own Tax Director who is responsible for these issues on a regional basis, while the Group Tax Department covers Europe and Africa. Procedures The Tax Department monitors tax issues, in coordination with the person responsible for tax matters in each country or region. It reports to the Audit Committee on a six-monthly basis, giving a detailed account of any tax audits and/or disputes in process.
THE INTERNAL AUDIT DEPARTMENT
The Internal Audit Department ensures that internal control procedures are effectively conveyed and respected across the Group and verifies that they are properly applied throughout the various departments. It also helps to enhance the Groups performance and operations by assisting the senior management team in its decision-making process. To this end it presents a report on its work once a year to the members of the Senior Management Committee.
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The audit program is presented twice a year to the Audit Committee along with a progress report and a summary of the audits performed since the start of the year. Internal audits are conducted in four phases: - Collecting information on the entity or domain concerned. - On-site checks by teams to ensure that appropriate controls have been set up to address the risk areas identified in the mapping process and to assess the quality of internal controls. - Drawing up reports on the main identified weaknesses, updating the risk map and proposing action plans. These reports are then sent to senior management as well as to the audited units and support functions. - Follow-ups to check that the internal auditors recommendations have been implemented and, if necessary, to assist the audited units with their risk management action plans. Since 2005, the frequency of the audits carried out on the Groups Villages by the Internal Audit team has been stepped up substantially, to support Club Mditerranes upscale strategy and the implementation of a leaner management organization in certain Villages. The aim behind these more frequent audits was to ensure that new processes were being applied correctly. In 2007, the Internal Audit team continued to focus on auditing the Villages, which accounted for an average of 46% of the total time spent by the internal auditors. The remainder of the hours worked breaks down more or less equally between audit engagements in national representative offices (26%) and engagements at headquarters (28%). As part of the Groups phased project to assess its internal control procedures, 2007 was dedicated to fine-tuning a selfassessment internal control matrix for the Villages in order to help enhance each departments internal control process. The matrix is based on: - Regularly assessing risk control. - Carrying out an objective and realistic evaluation of the quality of the internal controls in place, using consistent methodology resulting in a mathematical score. - Setting up action plans and monitoring that these plans are properly implemented. This matrix has been successfully tested with a pilot group and will be rolled out to all the Villages during 2008.
After each internal audit of a Village or a national representative office, the entity is rated on a scale of 10. This enables the Group to assess the internal controls in place, compare performance between the audited entities and measure their progress. The two follow-up audits carried out in fiscal 2007 showed that internal control processes are continuing to improve and that the Department Managers are much more aware of the importance of strictly implementing procedures.
STATUTORY AUDITORS
The Statutory Auditors certify the annual financial statements of Club Mditerrane SA and its subsidiaries and the annual consolidated financial statements of the Group. They also perform a limited review of the interim consolidated financial statements and verify the information given in the interim report. They attend meetings of the Audit Committee, are regularly informed of the work carried out by the Internal Audit team, and receive a copy of the yearly Internal Audit report.
2.3 RAISING AWARENESS OF INTERNAL CONTROL 2.3.1 ROLLING OUT THE NEW VILLAGE ORGANIZATION TO STRENGTHEN INTERNAL CONTROL
As part of the Groups overall upscale strategy, the new organization structure trialed at ten Villages in 2005 and put in place in thirteen Villages in 2006 was rolled out on a permanent basis in 2007. Under the new leaner and more coherent structure, each Village Manager has just five direct reports compared with an average of fifteen previously. The aim of this approach is to enhance the management of each Villages P&L by fully leveraging the available products and resources. The new organization is also more customer-focused, enabling the Group to build the skill-sets of its GOs by providing training in specific skills and creating new professions. Introduction of the new Village organization led to the creation of a new recruitment/placement unit whose first season began in February 2006. The unit was tasked with improving the GO placement process and reducing turnover an aim that was achieved in the first season with the GO turnover rate decreasing sharply.
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At the same time, the Group has created a new position of Cost Controller reporting to the Village Management Controller/Finance Manager. The Cost Controller is responsible for closely monitoring the Villages P&L and ensuring that purchasing procedures are correctly applied. The creation of this position as part of the new Village structure will help the Management Controllers/Finance Managers fulfill their duty of ensuring compliance with internal control processes.
2.3.2 OTHER MEASURES IMPLEMENTED TO STRENGTHEN INTERNAL CONTROL PRODUCT INNOVATIONS
NEW PURCHASING STRUCTURE
In line with its aim to enhance cost controls, the Group has set up a Global Purchasing Department reporting to the Executive Vice-President, Chief Financial Officer. This new department uses a central purchasing system to monitor purchases in real time and provide users with lists of products for which prices have been negotiated by product family purchasers. It also tracks implementation of action plans and savings on purchasing costs. The information system enables the Global Purchasing Department to verify that negotiated contracts are being properly used in order to optimize purchases.
CONCLUSION
As part of its continued drive to tighten control over revenue and in order to reduce the circulation of cash within the Villages, the Group extended the Bar & Snacking Included and Club Med Pass formulas to all of its Villages as from the summer of 2006. After paying a deposit, customers can use the Club Med Pass to pay for drinks that are not included in the Bar & Snacking formula (such as champagne and VSOP alcohols) as well as for additional services (such as spa treatments).
During the year, the Group continued to focus on raising awareness of the risks inherent in its operations and of the related internal control procedures. These procedures will be once again updated in 2008 in order to apply the recommendations issued by the AMF on 31 October 2006 as part of its internal control reference framework.
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STATUTORY AUDITORS REPORT ON INTERNAL CONTROL

Statutory Auditors report prepared in accordance with Article L. 225-235 of the French Commercial Code, on the report of the Chairman of the Board of Directors of Club Mditerrane on internal control procedures related to the preparation and processing of accounting and financial information We performed our procedures in accordance with professional standards applicable in France. Those standards require us to perform procedures to assess the fairness of the information set out in the Chairmans report concerning the internal control procedures related to the preparation and processing of financial and accounting information. These procedures included:
YEAR ENDED 31 OCTOBER 2007
- Examining the internal control procedures related to preparation and processing of accounting and financial data underlying the information presented in the Chairmans report, as well as existing documentation. - Acquiring an understanding of the work performed in order to prepare this information and existing documentation. - Determining whether the major internal control weaknesses concerning the preparation and processing of accounting and financial information that we may have identified as part of our audit are appropriately disclosed in the Chairmans report.
To the shareholders, In our capacity as Statutory Auditors of Club Mditerrane and in accordance with the requirements of Article L. 225-235 of the French Commercial Code, we present below our report on the report prepared by the Chairman of the Board of Directors of Club Mditerrane in application of Article L. 225-37 of the French Commercial Code for the year ended 31 October 2007. In his report, the Chairman is required to comment on the conditions applicable for the preparation and organization of the work carried out by the Board of Directors and the internal control procedures implemented within the Company. Our responsibility is to report to you our comments on the information contained in the Chairmans report concerning the internal control procedures related to the preparation and processing of accounting and financial information.
Based on the procedures performed, we have no matters to report concerning the information provided on the Companys internal control procedures related to the preparation and processing of accounting and financial information, as contained in the report of the Chairman of the Board of Directors prepared in accordance with Article L. 225-37 of the French Commercial Code.
Neuilly-sur-Seine and Paris-La Dfense, 12 February 2008 The Statutory Auditors Deloitte & Associs Dominique Jumaucourt Ernst & Young Audit Pascal Macioce
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FEES PAID TO THE STATUTORY AUDITORS

(in thousands)
Ernst & Young network 2007 Amount excl. VAT Statutory and contractual audits - Issuer - Fully consolidated subsidiaries Audit-related services - Issuer - Fully consolidated subsidiaries Sub-total Other services provided to fully consolidated subsidiaries - Legal and tax advice - Other Sub-total Total fees % Montant excl. VAT 2006 % Amount excl. VAT 2007
Deloitte network 2006 % Amount excl. VAT %
472 521
42.58% 47.08%
412 471 100
41.41% 47.34% 10.05%
328 348
47.81% 50.73%
307 298 160
40.13% 38.95% 20.92%
3 996
0.27% 89,93% 983 98.80% 676 98.54% 765 100.00%
112 112 1,108
10.07% 10.07% 100.00%
5 7 12 995
0.50% 0.70% 1.20% 100.00%
10 10 686
1.46% 1.46% 100.00% 765 100.00%
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Club Mditerrane Group
CONSOLIDATED FINANCIAL STATEMENTS

116 CONSOLIDATED STATEMENTS OF INCOME 117 CONSOLIDATED BALANCE SHEETS 118 CONSOLIDATED CASH FLOW STATEMENT 118 CHANGE IN CONSOLIDATED NET DEBT 119 CONSOLIDATED STATEMENT OF CHANGES IN EQUITY 120 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 120 Note 1 - General information 120 Note 2 - Summary of significant accounting policies, scope of consolidation 128 Note 3 - Changes in scope of consolidation 128 Note 4 - Segment information 131 Note 5 - Goodwill and business combinations 132 Note 6 - Intangible assets 133 Note 7 - Property, plant and equipment 134 Note 8 - Non-current financial assets 135 Note 9 - Assets held for sale 136 Note 10 - Other receivables 136 Note 11 - Cash and cash equivalents 136 Note 12 - Share capital and reserves 137 Note 13 - Share-based payments 139 Note 14 - Pensions and other long-term benefits 141 Note 15 - Provisions 141 Note 16 - Income taxes 143 Note 17 - Borrowings and other interest-bearing liabilities 145 Note 18 - Financial instruments 148 Note 19 - Other liabilities 148 Note 20 - Employee benefits expense and number of employees 149 Note 21 - Operating income - Management of assets 149 Note 22 - Other operating income and expense 149 Note 23 - Finance cost, net 149 Note 24 - Share of income of associates 150 Note 25 - Earnings per share 150 Note 26 - Notes to the consolidated cash flow statement 151 Note 27 - Related party transactions 152 Note 28 - Commitments and contingencies 153 Note 29 - Scope of consolidation at 31 October 2007 157 AUDITORS REPORT ON THE CONSOLIDATED FINANCIAL STATEMENTS 158 GROUP STRUCTURE AT 31 OCTOBER 2007
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CONSOLIDATED STATEMENTS OF INCOME

(in millions)
Years ended 31 October Revenue Other income Total income from ordinary activities Purchases External services Employee benefits expense Taxes other than on income EBITDAR - Leisure Rent Depreciation and amortization expense Provision expense, net Operating income - Leisure Operating income - Management of assets Other operating income and expense Operating income Finance cost, net Income/(loss) before tax Income tax Share of income of associates Net income/(loss) - Attributable to equity holders of the parent - Minority interests
Notes 4.2 & 4.3
2006 1,679 41 1,720 (751) (379) (329) (32) 229 (142) (63) -
2007 1,727 8 1,735 (765) (360) (332) (34) 244 (148) (64) 1 33 2 (21) 14 (26) (12) 3 1 (8) (10) 2
20 2.1.4
4.2 21 22 4.2 23 16.1 8.1 & 24
24 40 (29) 35 (32) 3 (1) 3 5 5 -
(in )
Basic earnings/(loss) per share Diluted earnings/(loss) per share
25 25
0.24 0.24
(0.55) (0.55)
116
C O N S O L I D AT E D F I N A N C I A L S TAT E M E N T S
CONSOLIDATED BALANCE SHEETS

Assets
(in millions)
Note Goodwill Intangible assets Property, plant and equipment Non-current financial assets Total fixed assets Deferred tax assets Non-current assets Inventories Trade receivables Other receivables Cash and cash equivalents Current assets Assets held for sale Total assets 9 16.2 5 6 7 8
31 October 2006 103 79 859 80 1,121 35 1,156 21 81 108 165 375 92 1,623
31 October 2007 108 83 841 86 1,118 30 1,148 22 86 142 108 358 87 1,593
10 11
Equity and liabilities

(in millions)
Note Share capital Additional paid-in capital Retained earnings/(deficit) Net income/(loss) for the year Equity attributable to shareholders Minority interests Total equity Pensions and other long-term benefits Long-term borrowing and other interest-bearing liabilities Other non-current liabilities Deferred tax liabilities Non-current liabilities Provisions Short-term borrowings and other interest-bearing liabilities Trade payables Other current liabilities Customer prepayments Current liabilities Liabilities related to assets held for sale Total equity and liabilities 9 15 17 19 14 17 19 16.2 12.1 12.2
31 October 2006 77 562 (185) 5 459 55 514 28 346 36 86 496 41 109 170 177 112 609 4 1,623
31 October 2007 77 563 (201) (10) 429 61 490 27 408 43 64 542 24 36 184 186 131 561 1,593
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CONSOLIDATED CASH FLOW STATEMENT

(in millions)
Years ended 31 October
Note
2006
2007
Cash flows from operating activities

Net income/(loss) Adjustments for: Depreciation, amortization and provisions Share of income of associates Disposal (gains) and losses, net Finance cost, net Income tax Other Change in working capital (1) Cash generated from operations Interest paid Income taxes paid Net cash from operating activities 5 26.1 70 (4) (49) 32 1 (4) 24 75 (22) (6) 47 (8) 56 (1) (11) 26 (3) (2) (20) 37 (16) (6) 15
Cash flows from investing activities

Acquisitions of non-current assets(2) Acquisitions of equity interests, net of cash acquired (3) Proceeds from disposals of non-current assets Net cash used in investing activities Free cash flow 26.2 26.3 (151) 143 (8) 39 (104) (4) 65 (43) (28)
Cash flows from financing activities

Proceeds from long-term borrowings Repayments of long-term borrowings Increase (decrease) in short-term bank loans Dividends paid and other Net cash used in financing activities Effect of changes in exchange rates on cash and cash equivalents and other Net increase/(decrease) in cash and cash equivalents Cash and cash equivalents at beginning of period Effect of a change of method (adoption of IAS 32 and IAS 39 at 1 November 2005) Cash and cash equivalents at end of period
(1) Including charges to/(releases from) short-term provisions considered as accrued expenses. (2) Net of government grants. (3) Including 4 million in cash acquired.
102 (118) (12) (4) (32) (2) 5 11 168 (8) 165
94 (127) 5 2 (26) (3) (57) 165
11
108
CHANGE IN CONSOLIDATED NET DEBT

(in millions)
Years ended 31 October Net debt at beginning of period Impact on net debt of the adoption of IAS 32 and IAS 39 at 1 November 2005 Decrease/(increase) in net debt Net debt at end of period
Note 17.1
2006 (335) 12 29 (294)
2007 (294) (42) (336)
17.1
118
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY (Note 12)

(in millions)
Shares outstanding
Share capital
Additional paid-in capital
Treasury shares
Retained Equity earnings attributable and net to shareincome/(loss) holders for the year
Minority interests
Total equity
At 31 October 2005 Excluding IAS 32/39

Effect of a change of method (adoption of IAS 32 & 39)
19,358,005
77
562
(9)
(185)
24
454
15
54
508
15
At 1 November 2005 Including IAS 32/39

Gains/(losses) on cash flow hedges taken to equity Exchange differences on translating foreign operations
19,358,005
77
562
(9)
(161)
(1)
469
(1)
54
523
(1)
(15) (16) 5 (11) (1) 2
(15) (16) 5 (11) (1) 2 (1) 2
(15) (16) 5 (11) (1) 2 (1) 2
Income and expenses recognized directly in equity Net income for the year Total recognized income and expense for the period (Purchases) and sales of treasury shares Share-based payments Dividends Effect of changes in scope of consolidation
At 31 October 2006
Gains/(losses) on cash flow hedges taken to equity Revaluation of available-for-sale financial assets Exchange differences on translating foreign operations
19,358,005
77
562
(10)
(170)
(4)
459
(4)
55
514
(4)
10
10
10
(31) (25) (10) (35) 2 (1) 3 12,700 1
(31) (25) (10) (35) 2 (1) 3 1
2 2 2 4
(29) (23) (8) (31) 2 (1) 3
Income and expenses recognized directly in equity Net loss for the year Total recognized income and expense for the period Share-based payments (Purchases) and sales of treasury shares Exercise of stock options Capital increase Dividends
3 (1)
4 (1)
At 31 October 2007
19,370,705
77
563
(8)
(203)
429
61
490
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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS AT 31 OCTOBER 2007

Note 1. General information
Club Mditerrane SA is a socit anonyme (joint stock corporation) governed by the laws of France. Its registered office is at 11, rue de Cambrai, 75957 Paris Cedex 19, France. Club Mditerrane shares are traded on the Euronext Paris First Market and are included in the SBF 120 index. The consolidated financial statements include the financial statements of Club Mditerrane SA and its subsidiaries (the Group), and associated companies. The Companys fiscal year covers the twelve-month period ending 31 October. The subsidiaries financial statements cover the same period and are prepared using the same accounting policies. The Group is one of the worlds leading providers of all-inclusive vacation packages and also operates in related businesses (tour operating, fitness clubs and leisure and entertainment complexes). The consolidated financial statements for the year ended 31 October 2007 were approved by the Board of Directors on 12 December 2007. All amounts are presented in millions of euros, unless otherwise specified. - IFRIC Interpretation 4: Determining whether an Arrangement Contains a Lease. - IFRIC Interpretation 8: Scope of IFRS 2. - IFRIC Interpretation 10: Interim Financial Reporting and Impairment. The amendment to IAS 19 provides the option of recognizing actuarial gains and losses in equity in the period in which they occur. However, the Group has elected to continue using the corridor method to recognize actuarial gains and losses. These standards, revised standards and interpretations did not have a material impact on the consolidated financial statements. The Group decided not to early adopt any standards, revised standards or interpretations applicable in accounting periods commencing after 31 October 2007. These include: Standards, revised standards and interpretations applicable as from 1 November 2007: - Amendment to IAS 1: Capital Disclosures. - IFRS 7 - Financial Instruments: Disclosures. - IFRIC Interpretation 11: Group and Treasury Share Transactions. Standards, revised standards and interpretations applicable as from 1 November 2009: - IFRS 8: Operating Segments. The practical implications of applying these standards, revised
2.1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Note 2. Summary of significant accounting policies, scope of consolidation

In accordance with European Council Regulation 1606/2002/EC dated 19 July 2002, the consolidated financial statements for the year ended 31 October 2007 have been prepared in accordance with the International Financial Reporting Standards (IFRSs), International Accounting Standards (IASs) and related interpretations adopted by the European Union at that date. The Group has applied IAS 32 Financial Instruments: Disclosure and Presentation and IAS 39 Financial Instruments: Recognition and Measurement since 1 November 2005, as permitted under IFRS 1. The following standards, revised standards and interpretations adopted by the European Union were applicable as from 1 November 2006: - Amendment to IAS 19: Actuarial Gains and Losses, Group Plans and Disclosures. - Amendment to IAS 39: Fair Value Option. - Amendment to IAS 39: Cash Flow Hedge Accounting of Forecast Intragroup Transactions.
standards and interpretations and their effect on the consolidated financial statements are currently being assessed.
2.1.1. MEASUREMENT METHODS APPLIED FOR THE PREPARATION OF THE CONSOLIDATED FINANCIAL STATEMENTS
The consolidated financial statements have been prepared on a historical cost basis, except for derivative financial instruments and available-for-sale financial assets, which have been measured at fair value. The Group opted to measure certain land and buildings at the IFRS transition date at their fair value. The preparation of financial statements in accordance with IFRS requires management to make certain estimates and assumptions. These assumptions are determined on a going concern basis according to the information available at the time. At each period-end, assumptions and estimates may be revised to take into account any changes in circumstances or any new information that has come to light. Actual results may differ from these estimates. Estimates and assumptions are used in particular:
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- For non-current asset impairment tests, which are based on estimated future cash flows and assumptions concerning future growth rates and discount rates. - For the determination of provisions for claims and litigation. - For the calculation of pensions and other long-term employee benefit obligations, which is based on actuarial assumptions. - For the determination of deferred taxes, particularly in assessing the recoverability of deferred tax assets.
2.1.2. FINANCIAL STATEMENT PRESENTATION
- Operating income Management of assets, corresponding to all the costs related to changes in the scope of consolidation, including gains and losses on disposals of assets, the costs of temporary and permanent Village closures, all the costs related to new Village projects, and impairment charges on operating and marketing units. - Other operating income and expense, corresponding mainly to restructuring costs, claims and litigation, the impact of natural disasters and credit card costs.
The consolidated statement of income is presented in accordance with the nature of expense method.
A) INCOME FROM ORDINARY ACTIVITIES
C) FINANCE COST, NET
This item includes: - Interest expense and income on net debt. - Bank charges. - Discounting adjustments to provisions for pensions and other long-term benefit obligations. - Gains and losses on derivative instruments. - Exchange gains and losses, net. - Dividends received from non-consolidated companies. - Impairment charges on financial assets.
2.2. BASIS OF CONSOLIDATION
Income from ordinary activities is recognized when it is probable that the economic benefits associated with the transaction will flow to the Group and the amount of income can be measured reliably. Total income from ordinary activities includes: Revenue Revenue corresponds to amounts received on the sale of goods and services by fully consolidated companies in the normal course of business, and is recognized as follows: - Service revenues: land package revenues are recognized over the period of service provision. Transport revenues are recognized on the travel date. Other operating revenues are recognized in the period in which the transaction takes place. - Sales of goods: revenue from the sale of goods is recognized when the goods are delivered and the significant risks and rewards of ownership are transferred to the buyer. Other income Other income mainly includes insurance settlements for business interruption losses as well as government grants recognized in accordance with the accounting methods described in Note 2.18.
B) OPERATING INCOME
All companies that are controlled by Club Mditerrane, directly or indirectly, are fully consolidated. Control is the direct or indirect power to govern the financial and operating policies of an entity so as to obtain benefits from its activities. Companies over which the Group exercises significant influence (associates) are accounted for by the equity method. Holiday Villages of Thailand, which is 49.21%-owned, and Recreational Villages, 21%-owned, are fully consolidated because Club Mditerrane exercises de facto control. Socit Martiniquaise des Villages de Vacances, which is 10%owned, is also fully consolidated because the majority of the associated risks are assumed by the Group. Subsidiaries are consolidated from the acquisition date, corresponding to the date on which control is transferred to the Group, until the date on which control ceases. The results of consolidated subsidiaries acquired or divested during the year are included in consolidated income from the acquisition date or up to the divestment date. All intra-group balances and transactions, income and expenses are eliminated in full in consolidation, together with the profits included in the carrying amount of assets acquired in intra-group transactions. The list of consolidated companies and the consolidation methods applied are presented in Note 29.
Operating income is broken down in the statement of income between: - Operating income - Leisure, corresponding to all the income and expenses directly related to the Groups operations. The performance of the Villages (owned or leased) is tracked internally based on the Leisure activities EBITDAR. As from 2007, reversals of utilized provisions, which were previously set off against the corresponding expense, have been reclassified under provisions to make the EBITDAR indicator more meaningful. Comparative data for 2006 has been restated to reflect this change although the amounts involved were not material.
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2.3. FOREIGN CURRENCY TRANSLATION 2.3.1. TRANSLATION OF THE FINANCIAL STATEMENTS OF FOREIGN SUBSIDIARIES
2.4. BUSINESS COMBINATIONS, GOODWILL AND INTANGIBLE ASSETS 2.4.1. BUSINESS COMBINATIONS AND GOODWILL
The consolidated financial statements are presented in euros. The financial statements of independent subsidiaries whose functional currency is not the euro are translated into euros by the closing rate method, as follows: - Balance sheet items are translated at the closing exchange rate at the balance sheet date. - Income statement and cash flow statement items are translated at the average rate for the period. The resulting exchange differences are recognized as a separate component of equity, under Translation reserve. The financial statements of operating and real estate companies that are not independent from the parent, Club Mditerrane SA, are translated into euros using the historical rate method, as follows: - Non-current assets and the corresponding amortization and depreciation charges are translated at the historical rate, corresponding to the exchange rate on the transaction date. - Monetary assets and liabilities are translated at the closing rate. - Income statement items (other than amortization and depreciation charges) and cash flow statement items are translated at the average rate for the period. The resulting exchange differences are recorded in Finance cost, net.
2.3.2. TRANSACTIONS IN CURRENCIES OTHER THAN THE FUNCTIONAL CURRENCY
Business combinations recorded prior to 1 November 2004 have not been retrospectively restated in accordance with IFRS. Business combinations carried out since that date are accounted for by the purchase method, by measuring the assets acquired and liabilities and contingent liabilities assumed at their fair value at the date of the combination. The excess of the cost of the business combination over the Groups interest in the net fair value of the identifiable assets, liabilities and contingent liabilities of the acquired entity at the date of the combination is recognized as goodwill. For business combinations not achieved in stages, minority interests in the identifiable assets and liabilities of the acquired entity are also measured at fair value.
2.4.2. CHANGES IN MINORITY INTERESTS
As there is currently no specific accounting treatment prescribed in IFRS for changes in minority interests, the Group has chosen to apply the following method: - Purchases of additional minority interests result in goodwill, being the difference between the consideration paid and the relevant share acquired of the carrying amount of non-revalued net assets of the subsidiary. - Transactions that reduce the Groups interest in an entity (without loss of control) are treated as a sale of interests to minority shareholders, and the resulting impact is recorded in the statement of income. The revised version of IFRS 3 Business Combinations, representing the second phase of the business combinations project, should describe how to account for this type of transaction. The method adopted by the IASB may differ from that described above.
2.4.3. INTANGIBLE ASSETS
Exchange differences on monetary assets and liabilities that are an integral part of the Groups net investment in a consolidated foreign operation are accumulated in equity until the foreign operation is sold or liquidated. The same accounting treatment applies to monetary items that are receivable from or payable to a foreign operation for which settlement is neither planned nor likely to occur in the foreseeable future, as these items are considered as representing, in substance, part of the Groups net investment in the foreign operation.
2.3.3. OPTION SELECTED BY THE GROUP ON FIRST-TIME ADOPTION OF IFRS
Intangible assets consist mainly of brands, lease premiums and software. Purchased intangible assets are carried at cost less accumulated amortization and any accumulated impairment losses. Intangible assets are analyzed to determine whether they have a finite or indefinite life. Based on this analysis, the Jet tours brand and lease premiums in France have been qualified as having an indefinite life. Consequently, they are not amortized but are tested for impairment at least once a year and whenever events or circumstances indicate that their recoverable amount may be less than their carrying amount, in accordance with the policy described in Note 2.7 Impairment of assets.
In accordance with IFRS 1 - First Time Adoption of IFRS cumulative translation adjustments arising on the translation of the financial statements of foreign subsidiaries were reset to zero at 1 November 2004 by adjusting opening retained earnings. Any gains or losses on subsequent disposals of foreign subsidiaries will exclude translation differences that arose before 1 November 2004.
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All other intangible assets (software and licenses) are qualified as having a finite life and are amortized over their estimated useful life. The main useful lives are as follows:
Financial information system Marketing system Other software Other intangible assets 3 to 15 years 3 to 24 years 3 to 8 years 3 to 10 years
The main useful lives are as follows:

Groundworks, foundations and structures Roof structures and coverings External and internal walls Utility installations (plumbing, electricity, heating, etc.) Fixed hotel equipment Fixtures and fittings (joinery, wall and floor coverings, windows, etc.) Other 50 years 30 years 25 years 20 years 15 years 10 years 3 to 10 years
These useful lives are reviewed at each year-end and adjusted if necessary. The adjustments are treated as a change in accounting estimates and are made prospectively. Intangible assets with a finite life are tested for impairment whenever there is an indication that their recoverable amount may be less than their carrying amount (see Note 2.7 Impairment of assets).
2.5. PROPERTY, PLANT AND EQUIPMENT
Property, plant and equipment are tested for impairment whenever there is an indication that their recoverable amount may be less than their carrying amount (see Note 2.7 Impairment of assets). Property, plant and equipment held under finance leases that transfer substantially all the risks and rewards of ownership of the assets to the lessee are recognized as assets.
2.6. LEASES
At the IFRS transition date (1 November 2004), certain land and buildings were measured at fair value in accordance with the option available under IFRS 1. Property, plant and equipment are measured using the cost model, and are therefore stated at cost less accumulated depreciation and any accumulated impairment losses. Cost corresponds to the assets purchase or production cost plus the directly attributable costs of bringing the asset to the location and condition necessary for it to be capable of operating in the manner intended. Production cost includes materials and direct labor, as well as borrowing costs that are directly attributable to the construction or production of the asset. Property, plant and equipment are depreciated on a straightline basis over their estimated useful lives. Villages are expected to be used throughout their useful life and depreciation is therefore calculated without deducting any residual value. Useful lives are reviewed at each year-end and adjusted if necessary. The adjustments are treated as a change in accounting estimates and are made prospectively. The individual parts of each item of property, plant and equipment are recognized separately when their estimated useful life is different from that of the asset as a whole.
Leases are classified as either finance leases or operating leases based on the substance of the transaction.
FINANCE LEASES
Finance leases that transfer substantially all the risks and rewards of ownership of the assets to the Group are initially recognized in the balance sheet at amounts equal to the fair value of the leased asset or, if lower, the present value of the minimum lease payments, each determined at the inception of the lease. Lease payments are apportioned between the finance charge and the reduction of the outstanding liability. The finance charge is allocated to each period during the lease term so as to produce a constant periodic rate of interest. Finance charges are recorded directly in the statement of income. Assets under finance leases are depreciated over their estimated useful life. However, if there is no reasonable certainty that the Group will obtain ownership by the end of the lease term, they are fully depreciated over the shorter of the lease term and their useful life.
OPERATING LEASES
Leases that do not transfer substantially all the risks and rewards of ownership to the lessee are classified as operating leases. Lease payments under operating leases are recognized as an expense on a straight-line basis over the lease term.
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2.7. IMPAIRMENT OF ASSETS 2.7.1. GOODWILL AND INTANGIBLE ASSETS WITH INDEFINITE USEFUL LIVES
2.7.2. PROPERTY, PLANT AND EQUIPMENT AND DEPRECIABLE INTANGIBLE ASSETS
These assets are tested for impairment whenever there is an indication that their recoverable amount may be less than their carrying amount. Indications of impairment include: - Evidence that an assets physical condition has deteriorated beyond the effects of normal wear and tear. - Plans to discontinue or restructure the operation to which the asset belongs. - Evidence that the assets economic performance is worse than expected. - Changes in the economic or legal environment, leading to a significant decline in the assets market value. The Group has determined that each Village represents a separate CGU. Impairment tests are therefore performed Village by Village, whenever there is an indication that their recoverable amount may be less than their carrying amount. Recoverable amount corresponds to the higher of the Villages fair value less costs to sell and its value in use. Fair value is estimated based on independent valuations or earnings multiples. Value in use is determined by estimating the future cash flows expected to be derived from the asset. Future cash flows are based on cash flow projections contained in management forecasts and the Groups business plan covering a period of three years. Cash flow projections for subsequent periods are estimated by extrapolating the projections based on a growth rate to perpetuity and the present value of the assets concerned at the end of their useful lives. If the carrying amount of a Villages assets is greater than the Villages recoverable amount, an impairment loss is recorded for the difference. Impairment losses may be reversed in subsequent periods if the conditions that led to their recognition have changed.
2.8. AVAILABLE-FOR SALE FINANCIAL ASSETS AND OTHER FINANCIAL ASSETS
In accordance with IAS 36 Impairment of Assets, goodwill and intangible assets with an indefinite life are tested for impairment annually and whenever there is an indication that their recoverable amount may be less than their carrying amount. For impairment testing purposes, goodwill is allocated to the cash-generating unit (CGU) to which it relates. The cash-generating units used by the Group are based on the groups of assets used to organize its businesses and analyze their results. Goodwill related to the Village business is allocated and analyzed by region (see Note 4 Segment information). Goodwill related to the other businesses (tour operating, Club Med Gym, etc.) is tested for impairment at the level of these businesses. Impairment tests are based on recoverable amounts estimated by reference to market multiples (to determine estimated fair value less costs to sell) and discounted cash flows (to determine estimated value in use). Value in use is determined on the basis of cash flow projections contained in management forecasts and the Groups business plan covering a period of three years. Cash flow projections for subsequent periods are estimated by extrapolating the projections based on a growth rate to perpetuity and the present value of the assets concerned at the end of their useful lives. The discount rate used is determined based on weighted average cost of capital (WACC). This is a post-tax rate applied to post-tax cash flow projections. The recoverable amounts obtained using this method are the same as those that would be obtained by applying a pre-tax discount rate to pre-tax cash flow projections as required by IAS 36. When the CGUs recoverable amount determined by the above methods is less than the carrying amount of its assets, an impairment loss is recognized to write down the CGU to recoverable amount, defined as the higher of value in use and fair value less costs to sell. Impairment losses are recorded in priority against any goodwill allocated to the CGU. Estimates of recoverable amounts are based on assumptions concerning Village occupancy rates, growth rates for the region or the business, perpetual growth rates and discount rates.
Financial assets are classified in four categories in accordance with IAS 39, as follows: - Financial assets at fair value through profit or loss. - Held-to-maturity investments. - Loans and receivables. - Available-for-sale financial assets. Financial assets are initially recognized at cost, corresponding to the fair value of the consideration paid plus directly attributable transaction costs. Their subsequent measurement depends on their classification.
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Financial assets at fair value through profit or loss are classified in current assets and measured at fair value, with changes in fair value recognized in Finance cost, net. Derivative instruments are included in this category, except for the portion representing an effective hedge in a designated hedging relationship. Held-to-maturity investments and loans and receivables are measured at amortized cost, determined by the effective interest method, less any accumulated impairment losses. Gains and losses are recognized in the statement of income. Heldto-maturity investments are financial assets with fixed or determinable payments and a fixed maturity. At each period-end, the recoverability of loans is assessed and an impairment loss is recognized if their recoverable amount is less than their carrying amount. Other financial assets are classified as available-for-sale financial assets and measured at fair value. Gains and losses arising on remeasurement at fair value are recognized directly in equity until the asset is sold. The fair value of listed securities corresponds to their market value. The fair value of unlisted securities corresponds to their estimated value in use, determined using the most appropriate financial criteria for the issuers specific situation. When there is objective evidence of a prolonged decline in the fair value of an available-for-sale financial asset, the cumulative loss that had been recognized directly in equity is transferred from equity to the statement of income. Investments in non-consolidated companies are classified as available-for-sale financial assets.
2.9. NON-CURRENT ASSETS HELD FOR SALE
2.10. INVENTORIES
Inventories are measured at the lower of cost, calculated by the weighted average cost method, and net realizable value. Net realizable value is the estimated selling price in the ordinary course of business less the estimated costs of completion and the estimated costs necessary to make the sale.
2.11. TRADE AND OTHER RECEIVABLES
Trade receivables are recognized and measured based on the initial invoice amount. A provision is recorded when there is objective evidence of impairment. Bad debts are written off when it is certain they will not be recovered.
2.12. CASH AND CASH EQUIVALENTS
Cash and cash equivalents are held to meet the Groups shortterm cash needs. They include cash at bank and in hand, short-term deposits with an original maturity of less than three months and money-market funds that are readily convertible into cash. Cash equivalents are defined as short-term, highly liquid investments that are readily convertible into known amounts of cash and which are subject to an insignificant risk of changes in value.
2.13. PROVISIONS
Provisions are recognized when the Group has a present obligation (legal or constructive) as a result of a past event, it is probable that an outflow of resources embodying economic benefits will be required to settle the obligation and a reliable estimate can be made of the amount of the obligation. Where some or all of the expenditure required to settle a provision is expected to be reimbursed by another party, for example under an insurance policy, the reimbursement is recognized as a separate asset when, and only when, it is virtually certain that reimbursement will be received. The provision expense is recorded in the statement of income, net of any expected reimbursement. Where the effect of the time value of money is material, provisions are discounted using a pre-tax discount rate that reflects any specific risks associated with the obligation. The increase in discounted provisions due to the passage of time is recognized in Finance cost, net.
2.14. PENSIONS AND OTHER LONG-TERM BENEFITS
In accordance with IFRS 5, non-current assets and groups of non-current assets (disposal groups) are classified as held for sale when their carrying amount will be recovered principally through a sale transaction rather than through continuing use. This is considered to be the case when (i) the asset (or disposal group) is available for immediate sale in its present condition; (ii) management has initiated a plan to sell the asset (or disposal group); and (iii) the sale is highly probable. Non-current assets (and disposal groups) classified as held for sale are measured at the lower of their carrying amount prior to reclassification and fair value less costs to sell. They are not depreciated. Non-current assets held for sale and the related liabilities are presented on separate lines of the balance sheet.
Group employees are covered by various plans providing for the payment of supplementary pensions, length-of-service awards and other long-term benefits in line with the laws and practices in the Groups host countries. A description of the main plans is provided in Note 14.
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POST-EMPLOYMENT BENEFITS
2.15. DEFERRED TAX
Defined contribution plans Contributions to government plans and other defined contribution plans are recognized as an expense for the period in which they are due. No provision is recorded as the Groups obligation is limited to its contributions to the plan. Defined benefit plans Obligations under defined benefit plans are measured by the projected unit credit method. This method involves the use of long-term actuarial assumptions concerning demographic variables (such as employee turnover and mortality) and financial variables (such as future increases in salaries and discount rates). These variables are reviewed each year. Actuarial gains and losses corresponding to the effect of changes in actuarial assumptions on the amount of the obligation are recognized as explained below. The interest cost, corresponding to the increase in the obligation due to the passage of time, is recognized in Finance cost, net.
In accordance with IAS 12 Income Taxes, deferred taxes are recognized for temporary differences between the carrying amounts of assets and liabilities and their tax bases, as well as on tax loss carryforwards, by the liability method. Deferred tax assets are recognized for deductible temporary differences to the extent that it is probable that taxable income will be available against which the deductible temporary difference can be utilized. The carrying amount of deferred tax assets is reviewed at each period-end. Tax assets and tax liabilities are offset when the Group has a legally enforceable right to set off the recognized amounts, they relate to income taxes levied by the same taxation authority and the Group intends to settle on a net basis. Income tax expense is recognized in the statement of income, except when it relates to items recognized directly in equity in which case it is also recognized in equity.
2.16. BORROWINGS AND OTHER FINANCIAL LIABILITIES
Treatment of actuarial gains and losses Actuarial gains and losses arising on post-employment benefits are recognized in income by the corridor method, applied separately to each individual plan. Under this method, actuarial gains and losses are recognized in the statement of income when cumulative unrecognized gains and losses exceed the greater of 10% of the present value of the defined benefit obligation and 10% of the fair value of plan assets. The portion of actuarial gains and losses that exceeds the 10% corridor is recognized in income over the average remaining service lives of plan participants. In accordance with the option provided under IFRS 1, nonamortized actuarial gains and losses as of 1 November 2004 have been recognized in equity. Past service cost Past service cost is the increase in the present value of the defined benefit obligation resulting from changes to postemployment benefits or other long-term benefits. Past service cost is recognized as an expense over the average period until the benefits become vested. If the benefits are already vested, past service cost is recognized immediately. Curtailments and settlements Gains or losses on the curtailment or settlement of defined benefit plans are recognized when the curtailment or settlement occurs. The gain or loss on a curtailment or settlement comprises any resulting change in the present value of the defined benefit obligation and any related actuarial gains and losses and past service cost that had not previously been recognized.
Borrowings and other financial liabilities are initially recognized at fair value, adjusted for directly attributable transaction costs. They are subsequently measured at amortized cost, using the effective interest method.
2.16.1. OCEANEs (BONDS CONVERTIBLE INTO NEW OR EXISTING SHARES)
The Groups debt includes two convertible bond issues (OCEANEs). These financial instruments comprise both a liability component and a conversion option recognized as an equity component. The component classified as a financial liability is measured at the present value of the future contractual cash flows (including interest, redemption premiums and the settlement of the obligation at maturity), discounted at the market interest rate on the issue date for debt instruments with the same characteristics in terms of maturity and cash flows but without a conversion option. The value of the equity component represents the difference between the nominal amount of the issue and the fair value of the liability component. Issue costs are allocated to each component pro rata to their respective carrying amounts. The difference between interest expense determined by the effective interest method and the interest actually paid is added to the carrying amount of the liability, so as to increase the carrying amount over the life of the debt to the amount payable at maturity to settle the obligation if the bonds are not converted.
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2.16.2. OTHER FINANCIAL LIABILITIES
2.18. GOVERNMENT GRANTS
Other financial liabilities are measured at amortized cost using the effective interest method, including issue costs and issue and redemption premiums.
2.17. DERIVATIVE FINANCIAL INSTRUMENTS AND HEDGING INSTRUMENTS 2.17.1. MEASUREMENT OF DERIVATIVE FINANCIAL INSTRUMENTS
Government grants are recognized when there is reasonable assurance that the conditions attached to them will be met and that the grants will be received. Grants that are intended to compensate costs are recognized as income over the periods necessary to match them with the related costs that they are intended to compensate, on a systematic basis. Government grants related to assets are initially recognized as deferred income (other non-current liabilities) at fair value and subsequently recognized under Other income over the useful lives of the assets concerned.
2.19. SHARE-BASED PAYMENTS
Derivative financial instruments are initially recognized at their fair value on the date when the Group becomes a party to the contractual provisions of the contract. They are subsequently measured at fair value. Derivative instruments with a positive fair value are recognized as an asset and derivative instruments with a negative fair value are recognized as a liability.
2.17.2. HEDGE ACCOUNTING
The Group has set up stock option plans for members of senior management and certain employees. In accordance with IFRS 2, the benefit granted to employees in the form of stock options is recognized as an expense over the vesting period (corresponding to the period up to the start date of the exercise period). The cost of stock options corresponding to the fair value of the employee services rendered, determined using the Black & Scholes option pricing model is recognized in employee benefits expense with a corresponding increase in equity. This cost is adjusted based on the actual number of options that will be exercisable at the start of the exercise period. In accordance with the transitional provisions of IFRS 2, only options granted after 7 November 2002 that had not yet vested at 1 November 2005 were recognized and measured at the IFRS transition date.
2.20. TREASURY SHARES
The Group uses financial instruments to optimize its borrowing costs and to hedge budgeted future net cash flows in foreign currencies. Derivative instruments are used by the Group as part of its cash flow hedging strategy, to hedge the Groups exposure to fluctuations in exchange rates. No interest rate hedges have been set up and the Group does not implement any fair value hedging strategy. Cash flow hedges are hedges of the exposure to variability in cash flows that is attributable to a particular risk associated with a recognized asset or liability, or a highly probable forecast transaction, or a firm commitment. The effective portion of changes in the fair value of cash flow hedges eligible for hedge accounting is recognized directly in equity and reclassified into Finance cost, net in the period when the firm commitment or future transaction affects profit or loss. The ineffective portion is recognized in Finance cost, net. If the forecast transaction is no longer expected to occur, the cumulative gain or loss recognized directly in equity is reclassified immediately into Finance cost, net. If the hedging instrument no longer meets the criteria for hedge accounting and the forecast transaction is still expected to occur, the cumulative gain or loss recognized directly in equity remains recognized in equity until the forecast transaction occurs. In both cases, the derivative instrument is classified as a financial instrument at fair value through profit or loss and subsequent changes in fair value are recognized in Finance cost, net. The Groups risk management policy is presented in Note 18.1.
All Club Mditerrane shares held by the Group, for whatever purpose, are recorded as a deduction from consolidated equity at cost. No gain or loss is recognized in the statement of income on the purchase, sale, issue or cancellation of equity instruments issued by the Group.
2.21. EARNINGS PER SHARE
Basic earnings per share correspond to net income attributable to equity holders divided by the weighted average number of shares outstanding during the period, net of treasury shares. Diluted earnings per share take into account dilutive potential ordinary shares, corresponding in the Groups case to stock options and convertible bonds.
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The average number of dilutive potential shares corresponding to stock options is determined by the treasury stock method. The calculation only includes options that are in the money (i.e. options whose exercise price is lower than the average Club Mditerrane share price for the period). The exercise price takes into account the fair value of the services remaining to be received, determined in accordance with IFRS 2. For convertible bonds, income attributable to shareholders is adjusted for the interest paid on the bonds, net of tax. This adjusted income is then divided by the average number of shares that would be issued assuming conversion of all the outstanding bonds. Potential ordinary shares corresponding to bond conversions are included in the calculation only if they are dilutive.
One company was liquidated: - CM Inc., liquidated on 31 March 2007. Two companies were sold: - SOMAVIVAC, sold on 31 October 2007. - CIVAC, sold on 31 October 2007. Two companies were deconsolidated: - SNC Caravelle 2006, deconsolidated on 13 December 2006. - Socit Immobilire de la Mer. The Group sold a 7.28% interest in this company, reducing its overall stake from 24.28% to 17%. Other changes in the scope of consolidation were as follows: - On 28 November 2006, CM Asie acquired 1.56% of the outstanding shares of SPVV, raising its stake to 99.94% from 98.38%. - On 31 January 2007, Jet tours acquired 35% of the outstanding shares of FST, raising its stake to 100% from 65%. - On 9 March 2007, CMSA acquired 40% of the outstanding shares of CM Viagens, raising its stake to 100% from 60%.
Note 3. Changes in scope of consolidation

Number of consolidated companies Scope of consolidation at 31 October 2006 Newly consolidated companies Liquidations Disposals Change in consolidation method Scope of consolidation at 31 October 2007 Full consolidation Equity method Total
Note 4. Segment information

4.1. BUSINESS SEGMENTS 121 6 (1) (2) (2)
112 5 (1)
9 1 (2)
The Group is organized around four business segments: - Villages - Tour operating - Club Med Gym - Club Med World The Groups operating activities are organized and managed separately, based on the type of products and services sold. Each segment offers different products and serves different
(1)
(1)
115
122
markets. The business segment therefore represents the Groups
Six companies were consolidated for the first time in fiscal 2007: - Albion Development Ltd, set up on 27 April 2007. - Club Med Villas et Chalets, set up on 19 September 2007. - Club Med Villas et Chalets Holding, set up on 4 September 2007. - Club Med Villas et Chalets Services, set up on 25 October 2007. - Club Med Ferias, set up on 25 October 2007. These changes in scope of consolidation did not have a material impact on the consolidated financial statements. - In addition, on 15 May 2007 Jet tours acquired the entire capital of Quotidien Voyages (Austral Lagons). This company is fully consolidated. The impact of this acquisition on the consolidated financial statements is described in Note 5, Goodwill and Business Combinations.
primary reportable segment. The Village business segment comprises the Villages, the cruise business (Club Med 2) and the marketing of Club Med Dcouverte tours. It corresponds to all-inclusive vacation packages and covers the marketing and organization of the vacation, transport and related services. It also includes the management of Village property assets. The Tour Operating business segment includes the development and marketing of tours and vacations by Jet tours, as well as the development of tours marketed by Club Med Dcouverte. The Club Med Gym business segment corresponds to the marketing and management of fitness clubs.
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The Club Med World business segment corresponds to the management of a leisure and entertainment complex, comprising conference facilities, restaurants, theaters and concert halls, as well as a night club and areas used to organize activities for children. Inter-segment transactions are not material. The main transactions concern the organization by the Tour Operating segment of tours sold by the Villages marketing network (Club Med Dcouverte) and the sale by the Jet tours marketing network of vacations in the Villages. The Groups secondary reportable format is the geographical segment. Operations are organized around three geographical segments: - Europe-Africa - Americas - Asia
Geographical segments can correspond to the location of customers and, therefore, to the region where the vacations are sold. These segments are qualified as outbound zones. Alternatively, geographical segments may correspond to the location of assets, in which case they are qualified as inbound zones. The Europe-Africa segment comprises the countries of Europe, the Middle East and Africa. The Americas segment comprises the countries of North and South America and the West Indies. The Asia segment comprises the countries of Asia and Oceania. Segment assets include goodwill, intangible assets and property, plant and equipment, non-current assets held for sale, and current assets other than cash and cash equivalents and tax receivables. Segment liabilities include provisions other than provisions for taxes and other liabilities, with the exception of borrowings and other interest-bearing liabilities, which are included in net debt.
4.2. INFORMATION BY BUSINESS SEGMENT

(in millions)
Fiscal 2006 Revenue Villages Tour operating (Jet tours) Club Med Gym Club Med World Eliminations Total 1,358 311 47 9 (46) 1,679 Inter-segment transactions (35) (11) Revenue contribution 1,323 300 47 9 1,679 Revenue 1,400 314 49 9 (45) 1,727
Fiscal 2007 Inter-segment transactions (33) (12) Revenue contribution 1,367 302 49 9 1,727
46 -
45 -
(in millions)
Fiscal 2006 Operating income Leisure Villages Tour operating (Jet tours) Club Med Gym Club Med World Total 19 3 4 (2) 24 Operating income 31 3 3 (2) 35 Depreciation, amortization and impairment (61) (1) (4) (1) (67) Share of income of associates 3
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(in millions)
Fiscal 2007 Operating income Leisure Villages Tour operating (Jet tours) Club Med Gym Club Med World Total 28 2 5 (2) 33 Operating income 9 2 5 (2) 14 Depreciation, amortization and impairment (52) (1) (3) (1) (57) Share of income of associates 1
(in millions)
31 October 2006 Segment assets Villages Tour operating (Jet tours) Club Med Gym Club Med World Total
(1) Excluding government grants.
31 October 2007 Segment assets 1,198 94 74 3 1,369 Segment liabilities 493 55 45 2 595 Capital expenditure(1) 94 1 4 99
Segment liabilities 473 48 40 3 564
Capital expenditure(1) 141 2 3 146
1,180 87 72 4 1,343
Reconciliation of segment assets and liabilities to the amounts reported in the balance sheet:
(in millions)
31 October 2006 Segment assets Non-current financial assets Deferred tax assets Cash and cash equivalents Total assets Segment liabilities Equity Borrowings and other interest-bearing liabilities Deferred tax liabilities Total equity and liabilities 4.3. INFORMATION BY GEOGRAPHICAL SEGMENT REVENUE (OUTBOUND ZONES)
(in millions)
31 October 2007 1,369 86 30 108 1,593 595 490 444 64 1,593
1,343 80 35 165 1,623 564 514 459 86 1,623
Fiscal 2006 Europe-Africa Americas Asia Total 1,338 196 145 1,679
Fiscal 2007 1,372 188 167 1,727
Revenue in France amounted to 637 million in fiscal 2007 (613 million in fiscal 2006).
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SEGMENT ASSETS AND CAPITAL EXPENDITURE (LOCATION OF ASSETS)

(in millions)
31 October 2006 Segment assets Europe-Africa Americas Asia Total

(1) Excluding government grants.
31 October 2007 Segment assets 871 392 106 1,369 Capital expenditure(1) 70 21 8 99
Capital expenditure(1) 60 71 15 146
869 367 107 1,343
Note 5. Goodwill and business combinations

5.1. ANALYSIS
(in millions)
31 October 2006 Net Villages Europe-Africa Tour operating (Jet tours) Club Med Gym Europe-Africa Villages Americas Villages Asia Total 19 33 43 95 3 5 103
31 October 2007 Net 20 39 43 102 2 4 108
Changes in goodwill were as follows:

(in millions)
The assets acquired and liabilities and contingent liabilities assumed were as follows:
103 6 (1) 108
(in millions)
At 1 November 2006 Changes in scope of consolidation(1) Translation adjustments and other At 31 October 2007
(1) Goodwill arising on the Quotidien Voyages acquisition.
Trade receivables Other receivables Cash and cash equivalents Trade payables and other current liabilities Fair value of acquired assets and assumed liabilities Goodwill Acquisition cost Acquisition cost net of acquired cash
5 1 4 (8) 2 6 8 4
There were no changes in goodwill in fiscal 2006.

5.2. BUSINESS COMBINATIONS ACQUISITION OF QUOTIDIEN VOYAGES (AUSTRAL LAGONS)
On 15 May 2007 Jet tours acquired the entire capital of Quotidien Voyages. Specialized in island vacations, this company operates under the name Austral Lagons.
Quotidien Voyages contributed 22 million to consolidated revenue in fiscal 2007. Its contribution to operating income was not material. If the company had been consolidated over the full year, it would have contributed 38 million to consolidated revenue and 1 million to consolidated operating income.
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5.3. IMPAIRMENT TESTS
The recoverable amount of the main CGUs to which material goodwill has been allocated is calculated based on their value in use. Value in use is determined by the discounted cash flows method described in Note 2.7 Impairment of assets. The assumptions used for impairment tests on the CGUs to which material goodwill and non-depreciable intangible assets have been allocated are as follows:
Goodwill is allocated to cash-generating units (CGUs), which correspond to the Villages in each geographical segment, the tour operating business and Club Med Gym. Goodwill was tested for impairment at the IFRS transition date and since then has been tested once a year. The principles underlying these tests are described in Note 2.7 Impairment of assets
(in millions and %)
Fiscal 2006 CGU Net

(1)
Fiscal 2007 Perpetual growth rate 1.50% 1.50% 1.50% Net

(1)
Discount rate 7.50% 7.50% 7.50%
Discount rate 7.00% 7.00% 7.00%
Perpetual growth rate 2.20% 2.20% 2.20%
Villages Europe-Africa Tour operating (Jet tours) Club Med Gym
29 56 43
29 62 43
(1) Goodwill and intangible assets with indefinite useful lives allocated to the CGU.
Based on the results of the impairment tests performed in fiscal 2006 and 2007, no impairment losses were recognized on goodwill or intangible assets with indefinite useful lives in either of these two years.
Note 6. Intangible assets

(in millions)
Brands and licenses Cost at 1 November 2005 Accumulated amortization Net at 1 November 2005 Acquisitions Disposals Amortization for the period Reclassifications Cost at 31 October 2006 Accumulated amortization Net at 31 October 2006 Acquisitions Amortization for the period Impairment Reclassifications and other Cost at 31 October 2007 Accumulated amortization Net at 31 October 2007 28 (3) 25 28 (3) 25 28 (3) 25
Software
Lease premiums 17 (4) 13 1 1
Other intangible assets 11 (5) 6 (2) (1) (5) 6 (3) 3
Intangible assets in progress 5 5 4
Total
104 (74) 30 3 (6) 5 112 (80) 32 5 (7) 1 5 119 (83) 36
165 (86) 79 8 (1) (7) 0 168 (89) 79 9 (7) 1 1 175 (92) 83
18 (3) 15
4 4 4
(4) 18 (3) 15 6 (3) 3 4 4
Intangible assets with indefinite useful lives amounted to 32 million, including 23 million for the Jet tours brand which was acquired in a business combination. Based on the results of
the annual impairment tests performed no impairment losses have been recognized in relation to these assets.
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Note 7. Property, plant and equipment

7.1. ANALYSIS
(in millions)
Land Cost at 1 November 2005 Accumulated depreciation Net at 1 November 2005 Acquisitions Disposals Changes in scope of consolidation Depreciation for the period Impairment losses Transfers to assets held for sale Translation adjustments Reclassifications Cost at 31 October 2006 Accumulated depreciation Net at 31 October 2006 Acquisitions Disposals Depreciation for the period Impairment reversal Translation adjustments Reclassifications Cost at 31 October 2007 Accumulated depreciation Net at 31 October 2007 FISCAL 2007 310 (1) 309 (9) (20)
Buildings and fixtures 1,040 (527) 513 48 (50) (7) (34) (4) (27) (6) 48 858 (377) 481 34 (12) (33) 6 (14) 37 846 (347) 499
Equipment 154 (103) 51 25 (4) (1) (13) (2) (2) 2 150 (94) 56 20 (2) (13) (2) 8 158 (91) 67 FISCAL 2006
Other 139 (90) 49 7
Assets under construction 53 53 58 (2) (4)
Total 1,696 (721) 975 138 (65) (32) (56) (4) (81) (16) 1,410 (551) 859 101 (45) (55) 6 (25) 1,362 (521) 841
(9) (2) 6 130 (79) 51 8 (1) (9) (1) (56) 48 48 39
(50) (7) 224 (1) 223 (30)
(6) 188 (1) 187
1 132 (82) 50
(3) (46) 38 38
The years capital expenditure mainly concerned the Villages of La Pointe au Canonniers (16 million), Ixtapa Pacific (11 million), La Plagne 2100 (6 million), Cancn Yucatan (6 million), La Caravelle (5 million), Opio en Provence (5 million), Villarssur-Ollon (4 million), and Punta Cana (4 million). In addition, the Da Balaia Village was sold and leased back at the end of April. The improvement in Village indicators led the Group to remeasure the value of certain impaired Villages. These remeasurements gave rise to a 6 million impairment reversal recognized under Operating income Management of assets. The decrease in asset value related to translation adjustments was primarily due to the US dollar and Mexican peso.
Capital expenditure in fiscal 2006 mainly concerned the Villages of La Caravelle (19 million), Cancn Yucatn (15 million), Les Boucaniers (15 million), Peisey-Vallandry (10 million), Kanifinolhu (10 million) and Cervinia (3 million). In addition, during the year the Group exercised the purchase options under the finance leases on the Sandpiper, Ixtapa Pacific and Cancn Yucatn Villages for a total of 14 million. Disposals included the outright sale of the Crested Butte, Flaine, Valbella and Cadaques Villages, and the sale-and-operating-leaseback of the Chamonix, Les Deux Alpes and Avoriaz Villages.
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7.2. OTHER INFORMATION
Property, plant and equipment break down as follows by business and geographical segment:
(in millions)
31 October 2006 Cost Europe-Africa Americas Asia Sub-total Villages Tour operating (Jet tours) Club Med Gym Club Med World Total 679 483 182 1,344 5 47 14 1,410 Depreciation and provisions (332) (110) (68) (510) (3) (27) (11) (551) Net 347 373 114 834 2 20 3 859 Cost 633 480 182 1,295 5 48 14 1,362
31 October 2007 Depreciation and provisions (295) (110) (74) (479) (3) (28) (11) (521) Net 338 370 108 816 2 20 3 841
Assets held under finance leases amounted to 4 million at 31 October 2007 (16 million at 31 October 2006). Finance lease obligations at 31 October 2007 stood at 4 million (8 million at 31 October 2006). At 31 October 2007, property, plant and equipment worth 113 million had been given as collateral for debts of 95 million, versus 37 million worth of collateral for debts of 36 million at 31 October 2006. In 2007, loans were set up secured by mortgages on the assets of the Club Med 2 cruise ship and the Cancn Yucatn Village, as well as by a lien on shares in the company that owns the
Pointe aux Canonniers Village. The lien on the Da Balaa Village was released when the Village was sold (see Note 17.3.3, Other long-term facilities).
Note 8. Non-current financial assets

(in millions)
31 October 2006 Investments in associates Available-for-sale financial assets Other non-current financial assets Total 31 5 44 80
31 October 2007 27 18 41 86
8.1. INVESTMENTS IN ASSOCIATES

(in millions)
31 October 2006 Sviluppo Turistico per Metaponto (Italy) Socit Immobilire de la Mer (Morocco) SPFT - Carthago Club Med Albion Resorts Other Total 7 5 10 4 5 31
Fiscal 2007 income
Changes in scope of consolidation and other
31 October 2007 7
(5) 1 11 4 5 (5) 27
In October 2007, the Group sold a 7.28% interest in Socit Immobilire de la Mer, decreasing its stake to 17%. The disposal gain was recorded under Operating income Management
of assets (see Note 21) and the remaining interest was reclassified at fair value under available-for-sale financial assets.
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8.2. AVAILABLE-FOR-SALE FINANCIAL ASSETS

(in millions)
Available-for-sale financial assets consist exclusively of shares in unlisted companies. Shares in unlisted companies carried at cost amounted to 5 million at 31 October 2007. No impairment losses were recorded in relation to availablefor-sale financial assets in fiscal 2007 or fiscal 2006.
8.3. OTHER NON-CURRENT FINANCIAL ASSETS 10
(in millions)
2006 At 1 November Changes in scope of consolidation Revaluation of available-for-sale financial assets At 31 October 6 (1)
2007 5 3
18
31 October 2006 Loans Deposits Loans to building organizations Other Total 1 33 6 4 44
31 October 2007
At 31 October 2007, shares in Socit Immobilire de la Mer were reclassified under available-for-sale financial assets following the sale of part of the Groups stake in the company. The shares were measured at fair value and equity was adjusted in a corresponding amount.
31 8 2 41
Note 9. 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 said classification is considered highly probable. However, this timeframe may be exceeded in some cases due to market constraints. An impairment loss of 1 million was recorded on these disposal groups in 2007 (3 million in 2006), to write down the assets to their estimated fair value less costs to sell. The impairment loss is included in Operating income - Management of assets.
(in millions)
Land Cost at 1 November 2006 Accumulated depreciation Net at 1 November 2006 Acquisitions Disposals Translation adjustments Cost at 31 October 2007 Accumulated depreciation Net at 31 October 2007 50 53 53
Buildings and fixtures 112 (77) 35 (1) (2) 106 (74) 32
Equipment 11 (9) 2
Other 5 (3) 2
Assets under construction
Total 181 (89) 92
1 (3) 50
1 (1) (5) 173 (86) 87
11 (9) 2
5 (3) 2
1 1
Liabilities related to assets held for sale at 1 November 2006 Liabilities related to assets held for sale at 31 October 2007
4 -
These assets do not correspond to discontinued operations as defined in IFRS 5.
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Note 10. Other receivables

(in millions)
Cost Uncalled capital from minority shareholders Tax receivables Accrued income Prepayments to suppliers Receivables on sales of non-current assets Current account advances to associates Employee advances and prepaid payroll taxes Other receivables Prepaid expenses Total
31 October 2006 Provisions
Net
Cost 3 42 1 9 9 1 1 31 54 151
31 October 2007 Provisions
Net 3 42 1 9 9 1 1 22 54 142
29 3 11 7 2 1 14 44 111
29 3 11 7 2 1 11 44 108
(3) (3)
(9) (9)
All receivables are due within one year. During fiscal 2007, the Group advanced funds to settle the liabilities of a company whose Village was closed. An 8 million provision for risk had been set aside in 2006 to cover the site closure costs relating to this Village. This provision was reclassified as a provision for impairment of receivables in 2007 and was reversed in an amount of 3 million. Prepaid expenses correspond mainly to services included in vacation packages that are paid before travel (such as transport and fee-based services), and prepaid rentals.
Note 12. Share capital and reserves

12.1. CHANGES IN EQUITY SHARE CAPITAL
Following the exercise of 12,700 options to purchase new shares, the Companys share capital at 31 October 2007 represented 19,370,705 shares with a par value of 4 each. At 31 October 2006, the total number of fully-paid shares issued and outstanding came to 19,358,005.
TREASURY SHARES
Note 11. Cash and cash equivalents

(in millions)
During fiscal 2007, 81,500 options to purchase existing shares were exercised for a total of 2.9 million. Treasury shares allocated to the exercise of these options increased the Companys equity by 3 million.
31 October 2007 31 1 76 108
31 October 2006 Marketable securities Derivative instruments Cash Total 9 156 165
Under the buyback programs approved by the Annual Shareholders Meetings of 14 March 2006 and 8 March 2007, during fiscal 2007 a total of 333,752 Club Mditerrane SA shares were purchased at an average price of 47.58 and 327,969 shares were sold at an average price of 48.09. These transactions were carried out under the liquidity contract. Based on the exercise of these options and movements in the liquidity contract during the period, a total of 201,588 shares were held in treasury at 31 October 2007, versus 277,305 at 31 October 2006.
TRANSLATION RESERVE
Marketable securities consist of money market instruments and short-term deposits with an original maturity of less than three months.
The translation reserve amounted to a negative 19 million at 31 October 2007, including a negative 25 million attributable to shareholders. This compares with a positive amount of 10 million at 31 October 2006, including 6 million attrib-
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utable to shareholders. The decrease in the translation reserve in fiscal 2007 stems primarily from the depreciation of the US dollar and Mexican peso against the euro. The decline in fiscal 2006 was mainly due to changes in the US dollar/euro exchange rate.
REVALUATION RESERVES RELATING TO FINANCIAL INSTRUMENTS
(in millions)
In fiscal 2007, shares in Socit Immobilire de la Mer were reclassified under available-for-sale financial assets (see Note 8.2). In fiscal 2006, the impact on equity of fair value adjustments concerning cash flow hedges and available-for-sale financial assets was not material. Information about stock option plans is provided in Note 13.
Cash flow hedges 1 November 2006 Fair value adjustments 31 October 2007 0 4 4
Available-for-sale financial assets 0 10 10
12.2. MINORITY INTERESTS

(in millions)
31 October 2006 Itaparica (Brazil) Holiday Villages Thailand Belladona Company for H&T (Egypt) Holiday Hotels AG (Switzerland) Taipe Trancoso (Brazil) St Villages Htels des Carabes (France) Covifra (Mauritius) Other Total 18 4 3 7 7 11 2 3 55
Fiscal 2007 income 1 1 1 (1)
Dividends (1)
Capital increase
Translation adjustments 2
31 October 2007 20 5 4 7 9 11 2 3 61
(1)
Note 13. Share-based payments

13.1. DESCRIPTION OF STOCK OPTION AND STOCK GRANT PLANS
Plan F expired during fiscal 2007 without any of the options having been exercised. On 8 March 2007, the Board of Directors used the authorization given at the Annual Shareholders Meeting that day to grant members of senior management and certain employees (i) 125,000 options to purchase new shares at an exercise price of 43.07; and (ii) 46,600 shares without consideration (Plan L). The exercise price corresponds to the average of the closing prices quoted for Club Mditerrane shares over the twenty trading days preceding the grant date. Vesting conditions for the 17,705 shares granted without consideration to members of the Senior Management Committee and the Executive Committee are based on the shares performance compared with the SBF 120 stock index.
The stock options granted to members of senior management and certain permanent employees of the Group are exercisable for new shares, with the exception of Plan H options, which are exercisable for existing shares. The plans do not allow for options to be cash-settled and do not include any vesting conditions based on market conditions or performance targets. All outstanding options have a ten-year life, except for those granted under Plans J, K and L, which have an eight-year life.
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The main characteristics of the plans in progress at 31 October 2007 are as follows:
1998 1999 Plan F2 Plan F3 Plan F4 Plan F5
Date of Shareholders Meeting Date of Board meeting Number of options granted Options granted to the Senior Management Committee (members as of 31 October 2007) Number of executives concerned Start date of exercise period 23.04.97 24.03.98 73,500 23.04.97 24.08.98 9,000 23.04.97 17.02.99 21,000 23.04.97 29.07.99 46,000
2000 2001 2002 Plan G Plan G2 Plan G3 Plan G4 Plan G5

23.04.97 07.02.00 258,400 23.04.97 26.07.00 21,815 23.04.97 06.02.01 212,530 23.04.97 24.07.01 37,400 23.04.97 05.02.02 127,000
2003 Plan H
29.03.02 28.02.03 283,000
2004 Plan I
17.03.03 15.01.04 272,000
2005 Plan J
17.03.03 11.01.05 300,000
2006 Plan K
16.03.05 14.03.06 250,000
2007 Plan L
08.03.07 08.03.07 125,000
10,000 1 50%: 24.03.03 50%: 24.03.04 23.03.08 70.81 13,500
50%: 24.08.03 50%: 24.08.04 23.08.08 79.12 3,000
1,000 1 50%: 17.02.04 50%: 17.02.05 16.02.09 81.13 7,000
50%: 23.07.04 50%: 23.07.05 22.07.09 92.79 2,000
37,400 7 07.02.05
26.07.04
9,900 4 06.02.05
24.07.05
6,800 4 05.02.06
136,000 4 01.03.06
Lock-up
64,900 9 15.01.07
Lock-up
89,300 10 11.01.08
Lock-up
81,400 10 14.03.09
Lock-up
84,100 10 08.03.10
Lock-up
until 28.02.07 06.02.10 111.11 86,042 25.07.10 136.13 5,700 05.02.11 92.78 82,615 23.07.11 63.99 11,400 04.02.12 44.74 72,700 5,000 27.02.13 35 154,000 81,500 5.3
until 14.01.08 14.02.14 31.03 188,450 7,700 6.3
until 10.01.09 10.01.13 35 240,950
until 13.03.10 13.03.14 42.67 213,800
until 07.03.11 07.03.15 43.07 116,050
Expiry of exercise period Exercise price (in ) Options outstanding at 31 October 2007 Number of options exercised in 2007 Remaining life
0.4
0.8
1.3
1.8
2.3
2.8
3.3
3.8
4.3
5.3
6.5
7.4
No options were exercised in fiscal 2006. The main characteristics of the stock grant plan in progress at 31 October 2007 are as follows:
2007 Plan L Date of Shareholders Meeting Date of Board Meeting Number of shares granted Shares granted to the Senior Management Committee (members as of 31 October 2007) Number of senior managers concerned Start date of vesting period Stock grants outstanding at 31 October 2007 08.03.07 08.03.07 46,600 10,250 10 08.03.10 Lock-up until 07.03.12 44,490
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13.2. OUTSTANDING OPTIONS Fiscal 2006 Number Average exercise price (in ) 50.89 42.67 48.48 49.64 63.84 Fiscal 2007 Number Average exercise price (in ) 49.64 43.07 35.19 57.92 48.22 56.14
Options outstanding at 1 November Options granted during the period Options exercised during the period Options canceled during the period Options outstanding at 31 October Options exercisable at 31 October
1,292,475 250,000 (105,055) 1,437,420 695,020
1,437,420 125,000 (94,200) (271,013) 1,197,207 626,404
13.3. RECOGNIZED COST
In accordance with the transitional provisions of IFRS 2, only options granted after 7 November 2002 that had not yet vested at 1 November 2005 were recognized and measured at the IFRS transition date. Five plans were set up between 2003 and 2007 and were measured and recognized in Employee benefits expense.
FAIR VALUE OF OPTIONS GRANTED
Note 14. Pensions and other long-term benefits

14.1. DESCRIPTION OF THE MAIN PLANS
Group employees receive certain short-term benefits, such as vacation pay, 13th month bonuses, compensated absences, health insurance and unemployment insurance in France. The Groups post-employment benefit plans are based on legal obligations in each host country and on the subsidiaries compensation policies. Long-term benefit plans include both defined contribution and defined benefit plans.
DEFINED CONTRIBUTION PLANS
Fair values were calculated at the grant dates of the various plans using the Black & Scholes option pricing model. The main data and assumptions used to determine the fair values of options granted under the 2006 and 2007 plans were as follows:
Plan K Club Mditerrane SA share price at grant date (in ) Exercise price (in ) Expected volatility (in %) Estimated life of the options (in years) Risk-free interest rate (%) Fair value per option 45.00 42.70 23.5 5 3.80 14.03 Plan L 41.77 43.07 22.7 5 3.97 11.36
Under defined contribution plans, the Group pays contributions to an external fund that is responsible for paying the benefits. The Groups legal or constructive obligation under these plans is limited to the amount that it agrees to contribute to the fund. The main defined contribution plans consist of government-sponsored basic and supplementary pension plans in Europe and defined contribution pension plans in North America. Corporate officers are covered by defined contribution supplementary pension plans. Contributions to all of these plans are recognized as an expense for the period in which they are due.
Expected volatility is determined on the basis of the shares historic volatility and the risk-free interest rate corresponds to the yield to maturity on government bonds (OATs) over a period equivalent to the life of the options. The shares granted without consideration in Plan L were valued on the basis of the share price at the date of grant. Vesting conditions related to share performance were taken into account in determining fair value. The cost recognized in respect of share-based payment plans in fiscal 2007 amounted to 2 million, unchanged from fiscal 2006.
DEFINED BENEFIT PLANS
Under defined benefit plans, the Group has an obligation to pay benefits to employees upon retirement or after they have retired. The Groups defined benefit plans are unfunded and are covered by provisions recorded in the balance sheet. The main defined benefit plans concern indemnities payable to employees on retirement (France, Greece and Turkey) or when they leave the Group (Italy and Japan).
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14.2. DEFINED BENEFIT PLANS 14.2.1. MAIN ACTUARIAL ASSUMPTIONS
salaries and discount rates). These variables are reviewed each year. Actuarial gains and losses corresponding to the effect of changes in actuarial assumptions on the amount of the obligation are recognized by the corridor method described in Note 2.14 Pensions and other long-term benefits. The assumptions used by the Group for the main plans are as follows:
The Groups obligations under defined benefit plans are measured by the projected unit credit method. This method involves the use of long-term actuarial assumptions concerning demographic variables (such as employee turnover and mortality) and financial variables (such as future increases in
2006 Japan Discount rate Long-term salary increases 2% 1.5% Europe 3.70% 3.60% Japan 2.0% 1.5%
2007 Europe 5.04% 3.60%
14.2.2. FUNDED STATUS OF DEFINED BENEFIT PLANS

(in millions)
14.2.4. ANALYSIS OF DEFINED BENEFIT PLAN COSTS

(in millions)
31 October 2006 Present value of the unfunded obligation Unrecognized actuarial gains and losses Net liability recognized in the balance sheet Actuarial (gains)/losses related to experience adjustments Actuarial (gains)/losses related to changes in assumptions 21 7 28
31 October 2007 19 8 27 (1) (1)
Fiscal 2006 Service cost Actuarial gains and losses recognized in the period Curtailments/settlements Cost recognized in employee benefits expense Interest cost Cost recognized in finance cost, net Total recognized (expense)/income (2)
Fiscal 2006 (1) 1 2
(2) (1) (1) (3)
2 (1) (1) 1
14.2.3. CHANGE IN DEFINED BENEFIT OBLIGATIONS

(in millions)
14.3. DEFINED CONTRIBUTION PLANS
Contributions under defined contribution plans amounted to 15 million in fiscal 2007, unchanged from fiscal 2006.
2006 2007 21 1 1 (2) (2)
Defined benefit obligation at 1 November Service cost Interest cost (discounting adjustment) Actuarial (gains) and losses for the period Curtailments/settlements Paid benefits Defined benefit obligation at 31 October
26 2 1 (7) (1) 21
19
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Note 15. Provisions

(en millions deuros)
31 October 2006
Increases
Utilizations
Reversals (surplus provisions) (1) (2) (5) (1) (1) (10) (10)
Reclassifications
31 October 2007
Provisions for liability claims and damages Restructuring provisions Provisions for litigation Tax provisions Other provisions Total - o/w current
6 16 13 2 4 41 41
2 7 1 10 10
(1) (4) (3) (1) (1) (10) (10)
(9) 2 1 (1) (7) (7)
6 1 14 1 2 24 24
In fiscal 2006, restructuring provisions included 10 million in provisions for site closure costs. In fiscal 2007, an 8 million provision set aside for site closure costs was reclassified as a provision for impairment of receivables (see Note 10). Provisions for litigation cover commercial claims, employee claims, and disputes with government agencies. Provisions are booked for the estimated cost of identified risks on the basis described in Note 2.13 Provisions.
The nature of the Groups business and the fact that its operations are conducted in a large number of countries with differing and sometimes contradictory regulations is a source of operating difficulties and can lead to disputes with suppliers, owners, employees or local authorities.
Note 16. Income taxes

16.1. INCOME TAX ANALYSIS
Current and deferred taxes can be analyzed as follows:

(in millions)
Fiscal 2006 Current taxes Deferred taxes on temporary differences Effect of changes in tax rates Reassessment of deferred tax assets Deferred taxes Total (6) (3) 3 5 5 (1)
Fiscal 2007 (14) 8 3 6 17 3
Current taxes in fiscal 2007 included 8 million in tax payable on the disposal of the Da Balaa Village. Deferred taxes on temporary differences included a 7 million benefit reflecting the reversal of a deferred tax liability previously recognized in relation to this same Village. Based on forecasts of future profits, deferred tax assets were recognized in relation to the North American tax group and certain Asian companies.
In fiscal 2007, corporate income tax rates were reduced in Greece and Mexico. Club Mditerrane SA has set up a tax group comprising twenty French subsidiaries. The North American tax group, headed by Club Med Sales, comprises ten companies.
2007 ANNUAL REPORT
141
EFFECTIVE TAX RATE
The following reconciliation is based on the current French income tax rate of 34.43% for fiscal 2007, unchanged from fiscal 2006.
Tax (in millions) Fiscal 2006 Income before tax Standard tax rate in France Tax at standard rate Effect of different foreign tax rates Effect of changes in tax rates Unrecognized deferred tax assets on tax losses for the year Deferred tax assets recognized on tax losses generated in prior years Tax loss carryforwards utilized during the year Permanent differences and other Total Effective tax rate 16.2. DEFERRED TAX ASSETS AND LIABILITIES
(in millions)
Tax rate Fiscal 2006 Fiscal 2007
Fiscal 2007 (12)
3 (1) 5 3 (55) 5 37 5 0 (1)
34.43% 4 9 3 (32) 6 13 0 (1) 3 33.30%
34.43%
25.00%
16.3. TAX LOSS CARRYFORWARDS BY EXPIRY DATE
Tax loss carryforwards at 31 October 2007 can be analyzed as

31 October 2006 31 October 2007 30 (64) (34) 2008 2009 to 2013 Beyond Evergreen tax losses Total tax loss carryforwards
follows by expiry date:

(in millions)
Deferred tax assets Deferred tax liabilities Net deferred tax liability
35 (86) (51)
31 October 2007 25 146 99 303 573
Deferred taxes recognized directly in equity are not material. Deferred tax assets break down as follows by balance sheet item:
(in millions)
Deferred tax assets corresponding to these loss carryforwards

31 October 2006 31 October 2007 3 50 53 (8) (77) (2) (87) (34) French tax group Other Europe-Africa Total Europe-Africa US tax group Other Americas Total Americas Asia Total deferred tax assets on tax loss carryforwards 28 28 15 2 17 5 45 68 113 5 21 26 1 73 68 141 20 23 43 6
break down as follows by geographical region:

(in millions)
Property, plant and equipment Tax loss carryforwards Total assets Intangible assets Property, plant and equipment Borrowings and other interest-bearing liabilities Total liabilities Net deferred tax liability
3 53 56 (8) (96) (3) (107) (51)
31 October 2007 Recognized Unrecognized Total
Deferred tax assets recognized on tax loss carryforwards concern the tax losses of tax groups in France and the United States and certain companies in Asia. Their recoverability was assessed based on the entities earnings forecasts.
50
140
190
At 31 October 2006, deferred tax assets on tax loss carryforwards totaled 170 million, of which 117 million were unrecognized.
142
Note 17. Borrowings and other interest-bearing liabilities

17.1. NET DEBT
(in millions)
Balance sheet items Cash and cash equivalents Long-term borrowings and other interest-bearing liabilities Short-term borrowings and other interest-bearing liabilities Liabilities related to assets held for sale Total borrowings and other interest-bearing liabilities Net debt
31 October 2006 165 346 109 4 459 294
31 October 2007 108 408 36 0 444 336
17.2. BORROWINGS AND OTHER INTEREST-BEARING LIABILITIES BY CATEGORY

(in millions)
31 October 2006 OCEANE convertible bonds Long-term bank borrowings Drawdowns on credit lines Finance lease obligations Total long-term borrowings and other interest-bearing liabilities OCEANE convertible bonds Current portion of long-term bank borrowings Drawdowns on credit lines Short-term bank loans and overdrafts Fair value of derivative instruments Total short-term borrowings and other interest-bearing liabilities Finance lease obligations Liabilities related to assets held for sale Total 269 57 16 4 346 10 10 80 9 109 4 4 459
31 October 2007 279 115 10 4 408 10 8 14 4 36
444
17.3. CHARACTERISTICS OF DEBT 31 October 2007 OCEANEs due 2008 fixed rate OCEANEs due 2010 fixed rate Total bonds Drawdowns on 120 million syndicated credit line Mortgage loan secured by Club Med 2 assets Mortgage loan secured by the Cancn Yucatn Villages assets La Pointe aux Cannoniers loan Other Total borrowings and other interest-bearing liabilities 144 145 289 10 28 49 18 50 444 Euribor + (a) Euribor + (b) 6.58% 6.15% 5.61% 5.44% 6.90% 6.24% June 2010 April 2018 May 2017 Jan. 2018 Nominal interest rate 5.25% 4.38% Effective interest rate 8.40% 7.39% Due Nov. 2008 Oct. 2010
Margins (a) and (b) depend on the Groups net debt/Ebitda ratio. The ranges are as follows: (a) 1.2% to 0.8%. (b) 1.75% to 1.35%.
2007 ANNUAL REPORT
143
17.3.1. OCEANE CONVERTIBLE BONDS
The Groups borrowings include two OCEANE convertible bond issues. The bonds main characteristics are as follows:
OCEANEs due 2008 Amount of the issue (in ) Number of bonds issued Start date for interest accruals Maturity Nominal interest rate Conversion ratio at maturity Yield to maturity Effective interest rate 139,474,514 2,404,733 30.04.02 01.11.08 3.00% 1 for 1 5.25% 8.40% OCEANEs due 2010 149,999,976 3,092,783 03.11.04 01.11.10 4.375% 1 for 1 4.375% 7.39%
Any unconverted OCEANEs due 2008 will be redeemed at maturity at a premium to their face value, increasing the yield to maturity to 5.25%. Bondholders had the option of redeeming the bonds early, on 30 April 2006, at a price representing a yield of 5.25%. A total of 211,002 bonds were redeemed early on 30 April 2006, for a total of 13.6 million including accrued interest.
(in millions)
OCEANEs due 2008 Nominal amount of the issue Issuance costs Equity component Initial amount recognized as a liability Recognized interest Interest paid Liability at 1 November 2005 under IFRS Interest recognized in fiscal 2006 Interest paid in fiscal 2006 Bonds redeemed early in April 2006 Liability at 31 October 2006 Interest recognized in fiscal 2007 Interest paid in fiscal 2007 Liability at 31 October 2007 Of which accrued interest 140 (3) (21) 116 38 (10) 144 10 (4) (13) 137 11 (4) 144 4
OCEANEs due 2010 150 (3) (18) 129 9 138 10 (7) 141 10 (7) 144 7
17.3.2. SYNDICATED LINE OF CREDIT
17.3.3. OTHER LONG-TERM FACILITIES
During fiscal 2007, Club Mditerrane actively implemented its refinancing strategy, which is designed to strengthen the Groups balance sheet and extend the maturity of debt. A confirmed, 120-million medium-term line of credit due in 2010 was arranged with a pool of nine banks on 31 May 2007. A previous 70 million line of credit obtained on 25 October 2004 was reimbursed. At 31 October 2007, 10 million had been drawn down from the new line.
In April 2007, the loan secured by a mortgage on the Club Med 2 cruise ship was renegotiated. This resulted in 13.5 million in additional financing, which raised the loan to a total of 30 million, and extended the repayment period until April 2018. At the end of May, a 50 million loan facility was arranged. Due in 2017, this facility is secured by the assets of the Cancn Yucatn Village.
144
Work on La Pointe aux Canonniers Village was financed by a dedicated 26 million loan taken out in June 2007. This loan is secured by a lien on the shares of the company that owns the Village. Also during the year, the Group paid back the loan taken out to finance the Da Balaa Village, which was secured by liens and mortgages on the Villages assets, following the sale and leaseback of the Village.
17.3.4. OTHER INFORMATION
- Currency risks on financing denominated in a currency other than the borrowers functional currency. - Currency risks on net investments in foreign operations whose impacts are recorded as a change in consolidated equity. Transaction currency risk The Groups policy consists of protecting itself against the effects of exchange rate changes on reported net income compared with forecasts. Based on forecasts, the Group hedges exposures for the coming fiscal year in the principal billing currencies (mainly pounds sterling, yen, Canadian and Australian dollars and Korean won) as well as in US dollars, which is both a billing and an operating currency. Currency risks relating to the Groups other functional currencies (mainly the Moroccan dirham, Turkish lira, Tunisian dinar, Indonesian rupiah and Thai baht) are not systematically hedged. Currency risks are hedged using derivative instruments, mainly currency swaps and options, forward contracts and nondelivery forward contracts. The notional amount of hedges is limited to the future cash flows forecast in the budget. No derivative instruments are acquired for trading purposes. Balance sheet risk The Groups exposure to currency risks on external debt is limited and intra-group financing is generally denominated in the subsidiarys functional currency. Unrealized currency gains and losses on hedges of net investments in foreign operations are recognized directly in equity. The Groups 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 independent subsidiaries is recognized as a separate component of equity. This risk is not hedged using derivative instruments.
EQUITY RISK
Debt secured by collateral amounted to 95 million at 31 October 2007 (36 million at 31 October 2006). At 31 October 2007, Club Mditerrane had three loans secured by mortgages on the assets of the Cancn Yucatn Village and the Club Med 2 cruise ship, and by a lien on the shares of the company that owns La Pointe aux Canonniers Village. At 31 October 2006, financing for the Da Balaa Village and the Club Med 2 cruise ship was secured by liens and mortgages on the underlying assets.
Note 18. Financial instruments

18.1. FINANCIAL RISK MANAGEMENT POLICY
In the normal course of business, the Group is exposed to various financial risks, including market risks (particularly currency and interest rate risks), credit risks and liquidity risks. The Group may use derivative financial instruments to hedge currency risks arising in the course of its business and interest rate risks on floating rate debt. In practice, these instruments are used primarily to hedge currency risks on future transactions. The Treasury and Financing unit identifies, assesses, manages and hedges financial risks on a centralized basis in accordance with the policies approved by the Audit Committee. Specific rules have been drawn up and approved prohibiting the use of derivative instruments for trading purposes.
18.1.1. MARKET RISKS CURRENCY RISK
The Group does not hold any listed equities, apart from treasury shares, which are recorded as a deduction from equity. As a result, it is not exposed to any risk of fluctuations in stock prices.
INTEREST RATE RISK
Club Mditerranes international operations expose the Group to the risk of fluctuations in foreign exchange rates affecting its income and equity. Its exposure concerns three types of currency risk: - Transaction currency risk arising from commercial activities (in outbound zones) and operating activities.
There are two types of interest rate risk: - Fair value risk on fixed rate net debt. As this type of risk is not hedged, the carrying amount of financial assets and liabilities is not adjusted for changes in interest rates. Fair value risk therefore corresponds to opportunity cost in the event of a fall in interest rates.
2007 ANNUAL REPORT
145
- Cash flow risk on floating rate net debt, corresponding to the impact on finance costs of an increase or decrease in interest rates. No cash flow hedges of interest rate risks have been put in place as the Groups net floating rate debt is not material. The Group does not hold any material interest-bearing assets.
18.1.2. CREDIT AND COUNTERPARTY RISK
Foreign exchange derivatives are forward contracts designated as cash flow hedges. The effective portion of these hedges was deducted from equity in an amount of 4 million in fiscal 2007 (see Note 12.1). The ineffective portion, recorded under Finance costs, net, was not material.
18.3. MATURITIES OF FINANCIAL LIABILITIES AND DEBT COVENANTS 18.3.1. ANALYSIS OF FINANCIAL LIABILITIES BY MATURITY
(in millions)
Most customers pay for their vacations in advance and the Groups exposure to credit risk on commercial transactions is therefore limited. Derivative instruments and borrowings are set up with a wide range of leading counterparties. Cash surpluses are invested in certificates of deposit or money-market funds from leading banks with a minimum A2/A/A rating issued by Moodys or Fitch.
18.1.3. LIQUIDITY RISK
31 October 2006 Due within one year (including short-term bank loans and overdrafts) Due beyond one year 2007-2008 2008-2009 2009-2010 2010-2011 2011-2012 Beyond Total due beyond one year
31 October 2007
113 20 158 5 145 18 346
36
Liquidity risk is managed by using diversified sources of financing. Some of the Groups debt facilities include early redemption clauses that are triggered if debt covenants are breached or assets are sold.
18.2. FAIR VALUE
152 17 145 6 88 408
The discounted present value of finance lease obligations, including those related to assets held for sale, was as follows at 31 October 2006 and 2007:
(in millions)
The following table shows the carrying amounts and fair values of financial instruments at 31 October 2007:
(in millions)
31 October 2006 Due within one year Carrying amount Foreign exchange derivatives Cash and cash equivalents 1 107 108 289 78 59 14 4 444 Fair value 1 107 108 312 82 59 14 4 471 18.3.2. CONFIRMED LINES OF CREDIT Due beyond five years Total due beyond one year Total 4 4 4 8
31 October 2007 0 4 4 4
Financial assets
Bonds Other fixed rate long-term borrowings and interest-bearing liabilities Other floating rate long-term borrowings and interest-bearing liabilities Short-term bank loans and overdrafts Foreign exchange derivatives
Club Mditerrane has a 120 million line of credit obtained on 31 May 2007 and expiring in June 2010. At 31 October 2007, the line was drawn down in the amount of 10 million. The line is subject to various covenants (see Note 18.3.3 Debt covenants).
Financial liabilities
The above table does not include trade receivables or trade payables. In light of their short-term nature, there is no difference between the carrying amount of trade receivables and trade payables and their fair value.
146
18.3.3. DEBT COVENANTS
At 31 October 2007, the Groups exposure to interest rate risk by maturity was as follows:
(in millions)
The Groups debt covenants have been redefined, effective from 30 April 2006, to take into account the transition to IFRS. Under the redefined covenants, EBITDA is defined as Operating income - Leisure before depreciation, amortization and provisions. If any of the ratios defined in the covenants are breached, the outstanding debt may become immediately repayable. Ratios applicable to the 120 million syndicated line of credit and the secured loan used to finance the Club Med 2 cruise ship are as follows: - Off-balance sheet commitments: less than 200 million - Gearing (net debt/equity): less than 1 - Leverage (net debt/EBITDA (as defined above)): less than the following:
30 April 2007 2008 2009 and beyond 31 October 4.0 3.5 3.0
Total
Less than one year
One to five years
More than five years
Cash and cash equivalents Floating rate debt* Net floating rate debt Fixed rate debt Derivative instruments Net debt
(108) 72 (36) 368 4 336
(108) 20 (88) 12 4 (72) 320 88 30 30 290 22 22 66
* Including short-term bank loans and overdrafts.
3.75 3.0
A 1-point increase in short-term interest rates applied to the Groups average gross floating rate debt would lead to a 0.8 million increase in interest expense.
18.5. CURRENCY RISK MANAGEMENT
- Fixed charge cover (EBITDAR/(rents + net interest)): greater than the following:
30 April 2007 2008 2009 and beyond 31 October 1.25 1.35 1.45
18.5.1. BALANCE SHEET RISK
The Groups exposure to currency risks on external debt is limited and intra-group financing is generally denominated in the subsidiarys functional currency. The impacts of changes in exchange rates on hedges of net investments in foreign operations are recognized directly in equity (see Note 12.1).
ANALYSIS OF FINANCIAL LIABILITIES BY CURRENCY
1.25 1.45
The covenants were complied with at 31 October 2007: - Off-balance sheet commitments: less than 200 million - Gearing: less than 1 - Leverage (net debt/EBITDA as defined above)): less than 4 - Fixed charge cover: greater than 1.25
18.4. MANAGEMENT OF INTEREST RATE RISK
118 million 0.69 3.50 1.42
(in millions)
31 October 2006 Euros US dollars Swiss francs Brazilian reals Derivative instruments Total 389 41 12 17 459
31 October 2007 411 1 11 17 4 444
The Group has a combination of fixed and floating rate debt. In fiscal 2007, no interest rate hedges were set up as average floating rate net debt only represented 16% of total debt.
The Groups 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 independent subsidiaries is recognized as a separate component of equity (see Note 12.1).
2007 ANNUAL REPORT
147
18.5.2. EXPOSURE TO CURRENCY RISK ON OPERATING ACTIVITIES (TRANSACTION CURRENCY RISK)
Net exposure to currency risks on operating transactions (transaction currency risk) is presented in the following table.
EXPOSURE TO TRANSACTION CURRENCY RISK AT 31 OCTOBER 2007
(in millions of foreign currency units)
USD Net exposure to currency risk on operating activities (1) Cash flow hedges (derivative notional amount) Net exposure of 2008 cash flows after hedging at 31 October 2007 Net exposure after conversion into euros (in millions) (80)
GBP 15
AUD 10
JPY 1,700
CAD 29
MXN (405)
MAD (350)
TND (50)
TRY (18)
KRW 8,600
76
(3)
(500)
(25)
340
(3)
15
1,200
(65)
(350)
(50)
(18)
8,600
(2)
22
(4)
(31)
(28)
(11)
(1) Amounts in parentheses correspond to net purchases of foreign currencies; amounts not in parentheses correspond to net sales of foreign currencies. USD: US dollar; GBP: British pound; AUD: Australian dollar; JPY: Japanese yen; CAD: Canadian dollar; MXN: Mexican peso; MAD: Moroccan dirham; TND: Tunisian dinar; TRY: new Turkish lira; KRW: Korean won.
Net exposures correspond to the exposure of estimated operating cash flows for the following year. Hedges are set up gradually over the year. All hedging instruments outstanding at the year-end expire within eighteen months. Derivative instruments designated as cash flow hedges are as follows:
(in millions)
Fair value Assets Forward currency contracts Options 1 NM Liabilities 4 NM
Notional amount
Expiry date Less than From 1 1 year to 5 years 98 2
98 6
Note 19. Other liabilities

(in millions)
Note 20. Employee benefits expense and number of employees

(in millions)
31 October 2006 Government grants Accrued rentals Total other non-current liabilities Accrued expenses Accrued personnel costs Accrued taxes Payables due to suppliers of non-current assets Deferred income Other Total other current liabilities 28 8 36 13 47 20 20 67 10 177
31 October 2007 37 6 43 9 50 35 13 71 8 186
Fiscal 2006 Wages and salaries Payroll taxes Pension contributions Share-based payment expense Other Total employee benefits expense Operating income - Leisure Total employee benefits expense Operating income Management of assets Total employee benefits expense Operating income (251) (49) (15) (2) (12) (329)
Fiscal 2007 (247) (61) (15) (2) (7) (332)
(3) (332)
(8) (340)
At 31 October 2007, accrued taxes included 8 million in current taxes payable on the sale of the Da Balaa Village.
148
NUMBER OF EMPLOYEES Full-time equivalents Fiscal 2006 Villages Tour operating Club Med Gym Club Med World Total number of employees 13,886 339 485 135 14,845 Full-time equivalents Fiscal 2007 14,594 335 407 129 15,465 O/w temporary contracts* Fiscal 2006 7,433 49 47 24 7,553 O/w temporary contracts* Fiscal 2007 7,580 29 40 25 7,674
* Seasonal employees and employees under fixed-term contracts
At 31 October 2007, employees of Club Mditerrane SA had accumulated 93,850 hours in statutory employee training rights (DIF) in France.
Note 21. Operating income management of assets

(in millions)
Note 22. Other operating income and expense

(in millions)
Fiscal 2006 Gains on disposals of Villages Gains and losses on Village and site closures Village opening costs Impairment losses Gains on disposals of shares Other costs Operating income Management of assets 49 4 (6) (4) 1 (4) 40
Fiscal 2007 10 (4) (7) 6 5 (8) 2 Restructuring costs Tsunami and hurricane costs Costs of claims and litigation Credit card costs Other
Fiscal 2006 (14) (1) (5) (9)
Fiscal 2007 (7) (1) (3) (9) (1) (21)
Other operating income and expense (29)
Note 23. Finance cost, net

(in millions)
FISCAL 2007 The disposal of the Da Balaa Village at the end of April 2007 and the sale of land in Mexico and Greece generated a gain of 10 million. Gains on disposals of shares stemmed primarily from the sale of part of the Groups stake in Socit Immobilire de la Mer (see Note 8.1). The sale agreement included an earn-out clause that could increase the price by 50% of any net-of-tax difference between the initial sale price and the share price set at the time of SIMs IPO, which is expected to take place by 31 October 2008. FISCAL 2006 Disposals mainly included the outright sale of the Crested Butte, Flaine, Valbella and Cadaques Villages, as well as the sale-andoperating-leaseback of the Chamonix, Les Deux Alpes and Avoriaz Villages. Details of the sale proceeds are provided in Note 26.3.
Fiscal 2006 Interest income 2 Interest on OCEANE convertible bonds (21) Other interest expense (15) Interest expense, net Exchange gains and losses, net Other Finance cost, net (34) 5 (3) (32)
Fiscal 2007 3 (21) (13) (31) 6 (1) (26)
Note 24. Share of income of associates

(in millions)
Fiscal 2006 Share of income of associates 3
Fiscal 2007 1
Details of the contribution of associates to consolidated income are provided in Note 8 Non-current financial assets.
2007 ANNUAL REPORT
149
Note 25. Earnings per share

25.1. BASIC EARNINGS PER SHARE
(in thousands of shares)
Note 26. Notes to the consolidated cash flow statement

26.1. DEPRECIATION, AMORTIZATION AND PROVISIONS
(in millions)
Fiscal 2006 Number of shares at 1 November Number of treasury shares at 1 November Weighted average number of treasury shares purchased/sold during the period Weighted average number of shares issued during the period Weighted average number of shares at 31 October 19,358 (257)
Fiscal 2007 19,358 (277)
Fiscal 2006 Amortization and impairment: intangible assets Depreciation and impairment: property, plant and equipment Other provisions Depreciation, amortization and provisions 7 60 3 70
Fiscal 2007 7 50 (1) 56
(23) 19,078
30 4 19,115
26.2. ACQUISITIONS OF NON-CURRENT ASSETS

(in millions)
25.2. DILUTED EARNINGS PER SHARE

(in thousands of shares)
Fiscal 2006 Acquisitions of intangible assets Acquisitions of property, plant and equipment Government grants and acquired cash Acquisitions of non-current financial assets Total acquisitions of non-current assets (8) (138) 7 (12) (151)
Fiscal 2007 (9) (102) 11 (4) (104)
Fiscal 2006 Weighted average number of shares Dilutive potential ordinary shares (stock options) Diluted weighted average number of shares 19,078 111 19,189
Fiscal 2007 19,115 19,115
In fiscal 2007, 1,241,697 potential ordinary shares (stock options and stock grants) were excluded from the calculation because they were anti-dilutive (687,020 shares in fiscal 2006). For the same reason, in both fiscal 2007 and 2006 the 5,287,000 potential ordinary shares corresponding to the conversion of OCEANE bonds were also excluded.
(in )
26.3. PROCEEDS FROM DISPOSALS OF NON-CURRENT ASSETS FISCAL 2007
Proceeds from disposals of property, plant and equipment amounted to 50 million, mainly reflecting the sales of the Da Balaa Village (39 million) and land in Greece and Mexico (10 million).
Fiscal 2006 Basic earnings per share Diluted earnings per share 0.24 0.24
Fiscal 2007 (0.55) (0.55)
Proceeds from disposals of non-current financial assets totaled 17 million and primarily corresponded to (i) 10 million in repayments of loans and deposits; and (ii) the sale of shares accounted for by the equity method (including 5 million relating to the sale of Socit Immobilire de la Mer).
No events occurred after the balance sheet date that would have a material impact on the calculation of diluted earnings per share.
FISCAL 2006
Proceeds from disposals of property, plant and equipment, in the amount of 110 million, mainly corresponded to sales of the following Village properties: Chamonix (27 million), Crested Butte (25 million), Les Deux Alpes (23 million), Avoriaz (13 million), Flaine (7 million), Valbella (5 million) and Cadaques (4 million). Proceeds from disposals of non-current financial assets corresponded to repayments of loans and deposits for 4 million and the 29 million in proceeds from the sale of shares in Vacances Cap Skirring (21 million), Club del Mar (5 million) and Taipe Trancoso (2 million).
150
Note 27. Related party transactions

27.1. TRANSACTIONS BETWEEN CLUB MDITERRANE SA AND ITS SUBSIDIARIES
The Groups parent company, Club Mditerrane SA, performs a general management role for its subsidiaries (which correspond to related parties), and handles traditional support functions such as administration and finance, legal affairs, communication, marketing, human resources, training, IT and sales. Financing is raised by the parent company, with justified exceptions, and cash surpluses are centralized in cooperation with the regional holding companies and subsidiaries. The Groups main subsidiaries are listed in Note 29. Transactions between the parent company and its subsidiaries are eliminated in the consolidated financial statements.
27.2. TRANSACTIONS WITH CLUB MDITERRANES MAIN SHAREHOLDERS AND COMPANIES THAT SHARE SENIOR MANAGERS
tributions representing between 6.29% and 8% of their gross compensation. Total contributions to this plan paid on behalf of members of the Senior Management Committee amounted to 0.3 million in fiscal 2007, unchanged from fiscal 2006.
SHARE-BASED PAYMENTS
During fiscal 2007, a stock option plan was set up for members of senior management and certain employees of Club Mditerrane, with an exercise price of 43.07. A total of 84,100 options were granted to members of senior management under this plan. A stock grant plan conditional on the achievement of performance targets was also set up during the year. A total of 10,250 shares were granted to members of senior management under this plan. The total fair value of these options and stock grants, determined in accordance with IFRS 2, was 0.9 million at 31 October 2007. During fiscal 2006, a stock option plan was set up for members of senior management and certain employees of Club Mditerrane, with an exercise price of 42.67. A total of 103,000 options were granted to members of senior management under this plan (based on the composition of the Senior Management Committee at 31 October 2006). The total fair value of these options, determined in accordance with IFRS 2, was 1.4 million at 31 October 2006. The cost recognized in fiscal 2007 for the stock options and stock grants awarded to members of senior management, as determined in accordance with IFRS 2, was 0.8 million, unchanged from fiscal 2006. Members of senior management exercised 76,000 stock options during fiscal 2007. Corporate officers are required to hold a percentage of the options and shares granted without consideration in 2007 in registered form until they leave their post. This percentage corresponds to 30% of the capital gain generated when the options are exercised or the shares granted without consideration are sold.
TERMINATION BENEFITS
The Group has signed lease contracts for certain Villages with companies belonging to groups that could be considered related parties as defined by IAS 24. These include Rolaco, Caisse de Dpt et de Gestion (Socit Immobilire de la Mer) and Carthago. Rent relating to these contracts recognized as an expense in the consolidated financial statements totaled 21 million in fiscal 2007 and 20 million in fiscal 2006. The related future minimum lease commitments amounted to 451 million at 31 October 2007.
27.3. TRANSACTIONS WITH ASSOCIATES
(in millions)
31 October 2006 Other receivables Other payables 2 4
31 October 2007 3 1
Rental payments to associates for the operation of certain Villages totaled 23 million in fiscal 2007 and 22 million in fiscal 2006. The future minimum lease commitments under the related contracts amounted to 521 million at 31 October 2007.
27.4. SENIOR MANAGEMENT COMPENSATION
Termination benefits paid to members of senior management totaled 0.9 million in fiscal 2007. Pension benefit obligations relating to members of senior management amounted to 0.4 million in both fiscal 2007 and 2006.
COMMITMENTS AND GUARANTEES
Disclosures of senior management compensation relate to the members of the Senior Management Committee and the Board of Directors.
SHORT-TERM BENEFITS
Gross compensation and related benefits paid (including attendance fees paid to members of the Board of Directors) came to 4.2 million in fiscal 2006 and 4.4 million in fiscal 2007.
POST-EMPLOYMENT BENEFITS
Executive directors are contractually entitled to a lump-sum payment if their employment contract is terminated, except in the event of gross or willful misconduct. This payment corresponds to two years of gross compensation, including variable bonuses, or three years of gross compensation, including variable bonuses, if the contract is terminated within six months of the parent company being taken over by a third party. No loans or guarantees have been granted to or on behalf of executive directors.
2007 ANNUAL REPORT
Members of senior management are covered by a defined contribution pension plan managed by an external fund, with con-
151
Note 28. Commitments and contingencies

28.1. OFF BALANCE SHEET COMMITMENTS AT 31 OCTOBER
(in millions)
31 October 2006 Total Commitments given Guarantees given (1) Europe-Africa Americas Asia Total commitments given Commitments received (2) Reciprocal commitments Unused lines of credit Rent guarantees Total reciprocal commitments Less than one year
31 October 2007 One to five years More than 5 years Total
65 20 6 91 13 15 7 22
40 6 2 48 3
7 20 7 34 2 118 6 124
27 8 35 5
74 34 9 117 10 118 6 124
(1) Guarantees given in connection with travel and transport agent licenses (25 million), rent bonds (17 million), sellers warranties relating to asset disposals (36 million), guarantees for credit card processors (16 million) and performance bonds (14 million). (2) Commitments received by the Group relating to travel agencies amounted to 7.4 million. Guarantees received from contractors involved in Village renovation projects under private contracts amounted to 1.4 million.
Loans have been secured by mortgages and liens on the Club Med 2 cruise ship, and the assets of the Cancn Yucatn and La Pointe aux Canonniers Villages (see Notes 7.2 and 17.3).
28.2. COMMITMENTS UNDER NON-CANCELABLE OPERATING LEASES
The Group leases offices and sales agencies under non-cancelable leases. Some office equipment and Village telephone and video equipment is also leased. Under its asset financing policy, certain Villages as well as other assets are also leased under non-cancelable operating leases. The following table shows the minimum future lease payments due under these non-cancelable operating leases. The amounts have been translated at the exchange rate prevailing at the balance sheet date. These rates are not discounted and are indexed to the last known rate.
(in millions)
Total minimum future lease payments Europe-Africa Americas Asia Sub-total Villages Tour operating Club Med World Club Med Gym Total minimum future lease payments 1,474 52 123 1,649 7 3 29 1,688
2008
2009
2010
2011
2012
2013 to 2017 514 16 48 578
2018 to 2027 358 17 25 400
2028 and beyond 61 1 62
109 4 11 124 2 1 5 132
109 4 10 123 2 1 5 131
107 4 10 121 2 1 4 128
109 3 9 121 1 4 126
107 3 10 120
4 124
6 584
1 401 62
Rental expense recognized in the statement of income for operating leases amounted to 148 million in fiscal 2007 (fiscal 2006: 142 million).
152
Note 29. Scope of consolidation at 31 October 2007

GROUP Member of the tax group Parent company % voting rights EUROPE REGION France Club Aquarius (ex. SECAG) Club Med Centre dAppels Europen Club Med Croisires & Tourisme Club Med vnements Club Med Marine Hoteltour Loin SAS SAS du Domaine de Dieulefit SCI Edomic Socit de Gestion Htelire et de Tourisme SA - SGHT St Immobilire des Rsidences Touristiques - S.I.R.T. St des Villages de Vacances Club Med Villas et Chalets Holding Club Med Villas et Chalets Club Med Villas et Chalets Services South Africa Vacances (Pty) ltd Germany Club Mditerrane Deutschland Belgium Club Mditerrane SA Belge Cte dIvoire Club Mditerrane Cte dIvoire Croatia Club Mditerrane Odmaralista Egypt Belladona Hotels & Tourisme Spain Club Mditerrane SA Espagne Hoteles y Campamentos - HOCASA Servicios Auxiliares del Club Mediterraneo - SACM United Kingdom Club Mditerrane UK ltd Club Mditerrane Services Europe ltd Greece Club Mditerrane Hellas Funhotel ltd (Ermioni) Mauritius Holiday Villages Management Services ltd Compagnie des Villages de Vacances de lIsle de France - COVIFRA Club Mditerrane Albion Resorts ltd Albion Development ltd 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 50.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 84.43% 22.50% 25.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 50.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 84.43% 22.50% 25.00% Full Full Full Full Full Full Full Full Full Full Full Full Full Full Full Full Full Full Full Full Full Full Full Full Full Full Full Full Full Full Equity Equity % interest Method
Club Mditerrane SA
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GROUP
Member of the tax group % voting rights % interest Method
Israel Club Mditerrane Israel ltd Italy Centrovacanze Kamarina Sole e sabbia di Sicilia SpA Sta Alberghiera Porto dOra - S.A.P.O. SpA Sviluppo Turistico per Metaponto Netherlands Club Mditerrane Holland BV CM Middle East BV Portugal Sociedade Hoteleira Da Balaa SA Club Med Viagens Lda Senegal Socit Immobilire et de Gestion Htelire de Cap Skirring Switzerland Club Mditerrane Suisse Holiday Hotels AG Nouvelle Socit Victoria Tunisia Club Mditerrane Voyages Club Med Basic Tunisie SPFT Carthago Turkey Akdeniz Turistik Tesisler A.S. Ukraine Club Mditerrane Ukraine SOUTH AMERICA REGION France Club Med Amrique du Sud Vacation Resort Club Med Ferias Argentina Club Med Argentina SRL Brazil Club Med Brasil SA Club Mditerrane do Brasil Turismo Ltda Itaparica SA Empreendimentos Turisticos Taipe Trancoso Empreendimentos SA Club Med Brasil Boutiques Ltda NORTH AMERICA REGION France Club Med Amrique du Nord French West Indies Socit Villages Htels des Carabes - SVHC Socit Htelire du Chablais Socit Martiniquaise des Villages de Vacances
100.00% 100.00% 40.52% 38.00% 100.00% 60.00% 100.00% 100.00% 100,00% 100.00% 50.00% 100.00% 49.00% 100.00% 37.43% 100.00% 100.00%
100.00% 100.00% 40.52% 38.00% 100.00% 60.00% 100.00% 100.00% 100.00% 100.00% 50.00% 100.00% 49.00% 100.00% 37.43% 100.00% 100.00%
Full Full Equity Equity Full Full Full Full Full Full Full Full Equity Full Equity Full Full
100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 50.10% 50.00% 100.00%
100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 50.10% 50.00% 100.00%
Full Full Full Full Full Full Full Full Full
100.00% 53.91% 100.00% 100.00%
100.00% 53.91% 100.00% 10.00%
Full Full Full Full
154
GROUP
Bahamas Club Mditerrane (Bahamas) Ltd Columbus Isle Casino Holiday Village (Columbus Island) Shipping Cruise Services Ltd Canada Club Med Sales Canada Inc. United States Club Med Management Services Inc. Club Med Sales Inc. Holiday Village of Sandpiper Sandpiper Resort Properties Inc/SRP Sun Cancun I Sun Cancun II Sun Ixtapa I Sun Ixtapa II Sunport Property Corporation Vacation Wholesaler Inc. Mexico Cancn Property SRL Ixtapa Property SRL Operadora de Aldeas Vacacionales SA de CV Profotur SA de CV Vacation Properties de Mexico SA de CV Villa Playa Blanca SA Dominican Republic Holiday Village of Punta Cana (formerly Newco) Turks & Cacos Holiday Villages Providenciales Turks & Caicos Ltd ASIA REGION Luxembourg Club Med Asie Australia Club Med Management (Australia) Pty Ltd Club Med Australia Pty Ltd Holiday Village (Australia) Pty Ltd South Korea Club Med Vacances (Korea) Ltd Hong Kong Club Mditerrane Hong Kong Ltd Club Mditerrane Management Asia Ltd Maldivian Holiday Villages Ltd Indonesia PT Bali Holiday Village Japan Club Mditerrane KK SCM leisure development Co Ltd
100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00%
100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00%
Full Full Full Full Full Full Full Full Full Full Full Full Full Full Full Full Full Full Full Full Full Full Full
100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00%
100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00%
Full Full Full Full Full Full Full Full Full Full Full
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GROUP
Malaysia Holiday Villages of Malaysia SDN BHD Recreational Villages SDN BHD Vacances (Malaysia) SDN BHD Singapore Club Med Services Singapore Pte Ltd Vacances (Singapore) Pte Ltd Taiwan Club Med Vacances (Taiwan) Ltd Thailand Holiday Villages Thaland Ltd Vacances Siam Club Med Ltd Polynesia and New Caledonia Socit Polynsienne des Villages de Vacances TOUR OPERATING France Jet tours Jet Eldo Jet Loisirs Jet Marques Jet Stim Le Quotidien Voyages Tunisia Jet Eldo Tunisie Morocco FST Jet Eldo Maroc CLUB MED WORLD France Club Med World Holding Club Med World France Canada CM World Montral Inc. CM World Montral Holding Inc. CLUB MED GYM France Club Med Gym SA Edifit Club Med Gym Corporate
Full: fully consolidated. Equity: accounted for by the equity method.
100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 49.21% 100.00% 99.94%
100.00% 21.00% 100.00% 100.00% 100.00% 100.00% 49.21% 100.00% 99.94%
Full Full Full Full Full Full Full Full Full
99.85% 100.00% 100.00% 100.00% 49.00% 100.00% 100.00% 100.00% 100.00%
99.85% 99.85% 99.85% 99.98% 49.00% 100.00% 99.85% 100.00% 99.85%
Full Full Full Full Equity Full Full Full Full
100.00% 100.00% 100.00% 100.00%
100.00% 100.00% 100.00% 100.00%
Full Full Full Full
100.00% 100.00% 100.00%
100.00% 100.00% 100.00%
Full Full Full
156
AUDITORS REPORT ON THE CONSOLIDATED FINANCIAL STATEMENTS

YEAR ENDED 31 OCTOBER 2007 II. JUSTIFICATION OF OUR ASSESSMENTS
In accordance with the requirements of article L.823-9 of the In accordance with the terms of our appointment by the Annual Shareholders Meeting, we have examined the accompanying consolidated financial statements of Club Mditerrane for the year ended 31 October 2007. The consolidated financial statements have been approved by the Board of Directors. Our role is to express an opinion on these financial statements based on our audit.
I. OPINION ON THE CONSOLIDATED FINANCIAL STATEMENTS
French Commercial Code (Code de Commerce) relating to the justification of our assessments, we draw to your attention the following matters: - Notes 2.7 (Impairment of assets) and 2.15 (Deferred taxes) describe the accounting policies and methods used to determine asset impairments and to assess the recoverability of deferred tax assets. As part of our assessment of the reasonableness of the underlying estimates, we assessed the appropriateness of these accounting policies and methods, as well as of the disclosures made in the notes. We also reviewed the consistency of the underlying data and assumptions, and the documents provided. The assessments were made in the context of our audit of the consolidated financial statements, taken as a whole, and therefore contributed to the formation of the unqualified opinion expressed in the first part of this report.
III. SPECIFIC PROCEDURES
We conducted our audit in accordance with the professional standards applicable in France. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free from material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion. In our opinion, the consolidated financial statements have been properly prepared and give a true and fair view of the assets and liabilities, financial position and results of operations of the consolidated companies, in accordance with the International Financial Reporting Standards (IFRSs), International Accounting Standards (IASs) and related interpretations adopted by the European Union.
We also examined the information about the Group given in the Management Report, in accordance with the professional standards applicable in France. We have no matters to report concerning the fairness of this information and its consistency with the consolidated financial statements.
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GROUP STRUCTURE AT 31 OCTOBER 2007

Marketing companies Service companies Real estate companies Service and real estate companies Other
EUROPE-AFRICA France CM Centre dAppels Europen CM Croisires et Tourisme CM Evnements CM Marine SGHT SVV SAS Domaine de Dieulefit SIRT St Civile Edomic CMSA Club Aquarius Hoteltour Loin SAS CM Villas et Chalets CM villas et Chalets Services CM Villas et Chalets Holding
Belgium Cte dIvoire Croatia Egypt
CM Belgique CM Cte dIvoire CM Odmaralista Belladona Hotels & tourisme CM Deutschland CM Hellas CM Israel Centrovacanze Kamarina Ste Alberghiera Porto dOra Sviluppo Turistico per Metaponto HV Management Services CM Holland CM Viagens Sociedade Hoteleira de Balaia Socit Immobilire et de Gestion Htelire de Cap skirring Vacances Pty CM Espagne CM Suisse Holiday Hotels Nouvelle Socit Victoria SPT - Carthago Akdeniz Turistik Tesisler CM Ukraine CM UK CM Services Club Med Voyages CM Bazic Tunisie SACM Hocasa Covifra CM Albion Resorts Albion Development Ltd CM Middle East Funhotel
Germany Greece Israel Italy
Mauritius
Netherlands Portugal Senegal
South Africa Spain Switzerland Tunisia Turkey Ukraine United Kingdom
158
Marketing companies
Service companies
Real estate companies
Service and real estate companies
Other
SOUTH AMERICA France Argentina Brazil Vacation Resort CM Ferias CM Argentina CM do Brasil Turismo CM Brasil Boutiques Itaparica Taipe Trancoso Empredimentos CM Brasil CM Amrique du Sud
NORTH AMERICA France French West Indies St Martiniquaise des Villages de Vacances SVHC St Htelire du Chablais CM Bahamas Columbus Isle Casino Shipping Cruise Services HV of Punta Cana Operadora de Aldeas Vacacionales Villa Playa Blanca Profotur Cancun SRL Ixtapa SRL HV Ste Lucie HV Providenciales CM Sales CM Management services Sandpiper Resort Properties Sun Property Corporation Sun Cancun I et II Sun Ixtapa I et II Holiday Village of Sandpiper Vacation Properties de Mexico CM Amrique du Nord
Bahamas
Holiday village (Columbus Island)
Canada Dominican Republic Mexico
CM Sales Canada Inc.
Santa Lucia Turks & Caicos United States
Vacation Wholesaler Inc ASIA Australia CM Australie CM Management Australia Beach Club Maldivian HV CM Management Asia
Holiday Village Australia
Hong Kong
CM Hong Kong
Indonesia Japan Luxembourg Malaysia Vacances (Malaysia) CM KK SCM Leisure Development Co
PT Bali HV
CM Asie HV Malaysia Recreational Villages Sdn Bhd
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Marketing companies Polynesia and New Caledonia Singapore South Korea Taiwan Thailand TOUR OPERATING France CM Services (Singapore) CM Vacances Korea CM Vacances (Taiwan) Vacances Siam CM
Service companies
Real estate companies
Service and real estate companies SPVV
Other
Vacances (Singapore)
HV (Thaland)
Jet tours SA Jet Eldo Jet Loisirs Jet Marques Jet Stim Le Quotidien Voyages Four Season Travel Jet Eldo Maroc Jet Eldo Tunisie
Morocco Tunisia CLUB MED WORLD France Canada
CM World France CM World Montral
CM World Holding CM World Montral Holding
CLUB MED GYM France Club Med Gym SA Edifit CM Gym Corporate
160
ADDITIONAL INFORMATION
162 STATUTORY AUDITORS SPECIAL REPORT ON REGULATED AGREEMENTS AND COMMITMENTS 165 REPORT OF THE BOARD OF DIRECTORS ON THE PROPOSED RESOLUTIONS 169 PROPOSED RESOLUTIONS
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STATUTORY AUDITORS SPECIAL REPORT ON REGULATED AGREEMENTS AND COMMITMENTS

YEAR ENDED 31 OCTOBER 2007
To the shareholders, In our capacity as Statutory Auditors of Club Mditerrane (the Company), we present below our report on regulated agreements and commitments. Agreements and commitments authorized during the year In application of Article L. 225-40 of the French Commercial Code we have been informed of the agreements and commitments approved in advance by the Board of Directors. Our responsibility does not include identifying any undisclosed agreements or commitments. We are required to report to shareholders, based on the information provided, about the main terms and conditions of agreements and commitments that have been disclosed to us, without commenting on their relevance or substance. Under the provisions of Article R. 225-31 of the Commercial Code, it is the responsibility of shareholders to determine whether the agreements and commitments are appropriate and should be approved. We conducted our review in accordance with the professional standards generally accepted in France. Those standards require that we carry out the necessary procedures to verify the consistency of the information disclosed to us with the source documents.
1. WITH JET TOURS
with Caisse de Dpt et de Gestion to house Club Mditerranes assets in Morocco: - Yasmina Club Med Village: construction and fitting out of G.O accommodation and locker rooms. - Marrakech la Palmeraie Club Med Village: construction and fitting out of the new Club Med headquarters (previously located in Casablanca). - Agadir Club Med Village: upgrading the testing and cold storage areas in kitchens. Construction costs will be paid for by Club Mditerrane in its capacity as project manager and will be invoiced on a cost basis to SIM at the end of the construction work. The Company will be required to pay an additional rent corresponding to 8.5% of the final amount of the works (excluding VAT), representing the same basis of payment as under the existing leases. For the year ended 31 October 2007, Club Mditerrane paid a total of MAD 11,179,000 (excluding VAT) in rent for all of the Villages that it runs in Morocco. b. Type of agreement, purpose and terms and conditions On 8 March 2007 the Board of Directors authorized the Company to enter into two framework share transfer agreements under which Club Mditerrane would sell to CDG Dveloppement a subsidiary of Caisse de Dpt et de Gestion (i) its stake in a nontrading real-estate company called Somavivac for MAD 2,260,000; and (ii) its interest in the non-trading real estate company Civac for MAD 7,592,813. These framework agreements were signed on 31 October 2007.
Persons concerned: Henri Giscard dEstaing (Chairman and Chief Executive Officer) and Michel Wolfovski (Executive Vice-President). Type of agreement, purpose and terms and conditions On 11 December 2006 the Board of Directors authorized the Company to enter into a service agreement with Jet tours under which Club Mditerrane and Jet tours will pool their operations teams in order to manage the flights of their respective customers with a view to optimizing passenger load on the flights jointly chartered by the two companies. Under this agreement, each party shares the costs of the related joint operations, comprising salaries, telephone expenses and rental payments for premises. For the year ended 31 October 2007, the Company paid 449,687 in relation to this agreement, corresponding to flight management costs. Jet tours paid 978,587 for transport-related costs and 780,714 for airport-related expenses.
2. WITH CAISSE DE DPT ET DE GESTION
c. Type of agreement, purpose and terms and conditions
On 23 October 2007 the Board of Directors authorized the Company to enter into a share transfer agreement with Caisse de Dpt et de Gestion under which Club Mditerrane would sell to Caisse de Dpt et de Gestion part of its stake in SIM corresponding to 33,492 shares and representing 7.3% of SIMs capital and voting rights. This transaction would reduce the Companys interest in SIM from 24.3% to 17%. The sale price of the shares has been set at MAD 59,950,680 based on valuations carried out by Club Mditerrane and Caisse de Dpt et de Gestion. However, this price will be increased by an amount equal to 50% of any net-of-tax difference between the initial sale price and the share price set at the time of SIMs IPO, which is expected to take place by 31 October 2008. This share transfer agreement was signed on 23 October 2007. d. Type of agreement, purpose and terms and conditions On 7 June 2007 the Board of Directors authorized the Company to enter into an agreement with SIM under which Club Mditerrane would be appointed as project manager for the renovation and extension of 150 rooms at the Smir Club Med Village. In accor-
Director concerned: Mustapha Bakkoury. a. Type of agreement, purpose and terms and conditions On 11 December 2006 the Board of Directors authorized the Company to undertake the following three projects with Socit Immobilire de la Mer (SIM), a company set up in partnership
162
A D D I T I O N A L I N F O R M AT I O N
dance with this agreement, the Company will be paid a fee corresponding to 3% of the amount of the works (excluding VAT) that will be financed by SIM and which have been set at a maximum of 20 million. The addendum to the Smir Club Med Village rental agreement drawn up specifically to cover the above program and provide for the new rental terms and conditions had not been signed at 31 October 2007.
3. WITH THE ROLACO GROUP
5. WITH CARTHAGO
Person concerned: Henri Giscard dEstaing (Chairman and Chief Executive Officer).
Persons concerned: Saud Al Sulaiman and Paul Jeanbart (directors).
Following the Companys decision to develop a new holiday village in Taba (Egypt) through Med Taba, a company governed by Egyptian law which is 16.5% indirectly owned by Club Mditerrane (the other shareholders being Orascom Hotels Holding SAE with 67% and Rolaco Holding S.A. which owns 16.5%) it has been agreed that Med Taba will hold all of the assets of the new Village and will authorize the Company to manage and market the Village for a minimum period of fifteen years. Consequently, on 11 December 2006 the Board of Directors authorized the Company to sign a memorandum of understanding with Rolaco Holding S.A. aimed at: (i) describing the transaction and the related terms and conditions; and (ii) setting the terms of the main contracts related to the transaction, such as the construction contract, the hotel management contract between Club Mditerrane and Med Taba, and the development and marketing contract. This memorandum of understanding was signed on 17 December 2006.
4. WITH FRANOIS SALAMON, EXECUTIVE VICE-PRESIDENT
On 7 June 2007 the Board of Directors authorized the Company to enter into two agreements with Socit de Promotion et de Financement Touristique Carthago (Carthago), under which in its capacity as owner Carthago has entrusted Club Mditerrane with overseeing the renovation program for the Djerba la Douce and Djerba la Fidle Villages in Tunisia. The fees to be paid to the Company for its role as project manager have been set at 3% of the amount of the works (excluding VAT) carried out and paid for by Carthago in its capacity as owner of said Villages. During the year ended 31 October 2007, the Company received TND 159,611 (including VAT) from these project management agreements. Agreements and commitments approved in prior years which remained in force during the year In application of the French Commercial Code, we were advised of the following agreements and commitments approved in prior years and which remained in force during the year.
1. WITH FONDATION DENTREPRISE CLUB MDITERRANE
a. Based on the recommendation of the Nominations and Compensation Committee, on 11 December 2006 the Board of Directors authorized the signature of an addendum to Franois Salamons employment contract, for the purpose of granting him entitlement to a contractual lump-sum severance payment for termination of his contract, except if it is terminated due to gross or willful misconduct. This severance payment corresponds to the remuneration paid to Franois Salamon under his employment contract during the twenty-four months preceding the end of the notice period and includes any and all bonuses. It is not payable in the event of retirement giving rise to a statutory retirement bonus paid in accordance with the Companys customary procedures. b. The termination of Franois Salamons employment contract effective 31 October 2007 resulted in payment of the above severance indemnity, corresponding to a total amount of 882,316. c. On 7 June 2007, based on the recommendation of the Nominations and Compensation Committee, the Board of Directors authorized Franois Salamon to retain 60,000 stock options (including 35,000 exercisable options) granted between 2002 and 2006.
Type of agreement, purpose and terms and conditions At its 13 December 2004 meeting, the Supervisory Board authorized the Company to provide Fondation dEntreprise Club Mditerrane with various contributions in order for it to be able to conduct its operations. These contributions related to the following: - Staff (payment of the salary of the head of the Foundation and her assistant, as well as amounts paid to interns and the proportion of the accountants salary corresponding to the time spent on the Foundations accounts). - Premises (rent and rental expenses on a pro rata basis).
- Equipment and furniture.
These contributions represented the following amounts for the year ended 31 October 2007:
(in thousands) Volunteered hours worked during working hours (sharing of job skills) Volunteered hours worked during free time Salaries and payroll taxes Rent Miscellaneous expenses Total 150 231 156 37 13 587
2. WITH JET TOURS
a. Type of agreement, purpose and terms and conditions On 13 December 2004 the Supervisory Board authorized the Company to enter into a service agreement with Jet tours, under which Jet tours agreed to develop tours for Club Med Dcouverte and carry out any related necessary purchases with third-party service providers. Jet tours is the sole signatory of the contracts and commitments entered into with said thirty-party service providers, and consequently settles the corresponding payments.
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In accordance with the agreement, Club Mditerrane is free to define the business and marketing strategy for the tours. During the year ended 31 October 2007, Jet tours received 10,801,126 in fees from this agreement. b. Type of agreement, purpose and terms and conditions On 29 March 2003 the Supervisory Board authorized the Company to enter into a service agreement with its subsidiary Jet tours under which Jet tours would lead the two companies joint sales and marketing teams and would promote the products developed by the two brands in its indirect sales network. In return, Club Mditerrane undertook to promote Jet tours products in its own marketing network. In accordance with this agreement, the above reciprocal services are invoiced pro rata to (i) the revenue generated by the indirect networks of each of the two companies; and (ii) aggregate selling costs, including such items as salaries and overheads. The amount of costs rebilled by Jet tours to Club Mditerrane during the year ended 31 October 2007 totaled 1,850,674, corresponding to the costs of indirect sales teams. c. Type of agreement, purpose and terms and conditions On 21 October 2005 the Board of Directors authorized the Company to enter into an agreement with Jet tours under which Jet tours has entrusted Club Mditerrane with promoting, selling and marketing Jet tours products to works councils through Club Med Collectivits (Club Med Institutions), based on the prices and terms in Jet tours brochures. This agreement had not been signed at 31 October 2007 and was therefore not applicable.
3. WITH THE ROLACO GROUP
- An increase in the rental payment corresponding to 7% of the amount of the investment financed by Nouvelle Socit Villars Palace. Rental payments made during the year ended 31 October 2007 totaled CHF 2,716,413 excluding VAT. b. Type of agreement, purpose and terms and conditions In accordance with the authorization given by the Supervisory Board on 25 June 2001, the Company signed an agreement with the Rolaco group on 28 September 2001 relating to the provision of commercial support and assistance with developing new Villages in the Middle East. The term of the contract is four years and the related fees correspond to the following: - For commercial support: a commission representing 2% for the first two years and 3% for the following two years, determined based on sales of Club Med products in the Middle East. - For assistance with developing new Villages: a fee of 650 per new bed marketed in the region.
This agreement was not applied during the year ended 31 October 2007. Guarantees given
Company concerned SPVV (finance lease) Currency EUR Outstanding amount at 31 Oct. 2007 7,000,000
5. WITH HENRI GISCARD DESTAING
a. Type of agreement, purpose and terms and conditions
Following the Companys sale of the Villars-sur-Ollon Village in Switzerland to Nouvelle Socit Villars Palace, whose majority shareholder is indirectly the Rolaco group, Club Mditerrane entered into a lease agreement for the purpose of renting the entire property complex for a period of twenty years as from 1 May 1999, based on an annual rent of CHF 1,500,000, indexed on the price of the vacations. On 8 June 2006 the Board of Directors authorized the signature of an addendum to the above lease agreement, providing for the following amendments: - A large-scale renovation program for the Villars-sur-Ollon Village with a view to upgrading it to four-trident status, representing an estimated budget of CHF 13.2 million. - Payment by Nouvelle Socit Villars Palace of CHF 10 million worth of the related works, with the remainder being directly financed by Club Mditerrane in its capacity as project manager.
On 16 March 2005 the Board of Directors approved the suspension of Henri Giscard dEstaings employment contract as a result of his appointment as Chairman and Chief Executive Officer, and authorized the amendments to be made to the contract, including the conditions under which said contract would resume in the event of termination of Henri Giscard dEstaings duties as Chairman and Chief Executive Officer. Henri Giscard dEstaings employment contract continued to be suspended during the year ended 31 October 2007.
6. WITH THE COMPANYS SENIOR MANAGERS AND ITS SUBSIDIARIES CORPORATE OFFICERS
At the Supervisory Board meeting of 11 December 1997, the Company undertook to indemnify certain its senior managers and corporate officers of subsidiaries and associates, or supplement their insurance payments, if they are held liable in a claim that: - is not covered by the relevant insurance policy due to exclusion clauses; - is only partially covered as the policy contains a deductible. This agreement was not applied during the year ended 31 October 2007.
164
REPORT OF THE BOARD OF DIRECTORS ON THE PROPOSED RESOLUTIONS

We have called this annual general meeting to submit twenty-four resolutions for your approval, the purpose of which is described below.
3. APPROVAL OF DIRECTORS FEES
We are proposing the sum of 305,000 in Directors fees for the year from 1 November 2007 to 31 October 2008, unchanged from the amount voted in respect of previous years. The Board of Directors will have full discretion to allocate this sum among its members as it deems appropriate (fifth resolution).
4. RE-ELECTION OF DIRECTORS
I - Ordinary resolutions
As required by law, we are calling this Annual General Meeting within six months of the financial year end to seek your approval of the Companys financial statements and the transactions reflected therein. Various other matters, which are described briefly below, also require your approval by ordinary resolution.
1. APPROVAL OF THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 OCTOBER 2007
Ten Directors are due to retire by rotation at the Annual General Meeting and are standing for re-election for a further term of three years ending at the annual general meeting held to approve the financial statements for the year ended 31 October 2010. You will therefore be asked to re-elect the following Directors: - Philippe Adam (sixth resolution); - Saud Al Sulaiman (seventh resolution); - Mustapha Bakkoury (eighth resolution); - David Dautresme (ninth resolution); - Thierry de La Tour dArtaise (tenth resolution); - Henri Giscard dEstaing (eleventh resolution); - Paul Jeanbart (twelfth resolution); - Aimery Langlois-Meurinne (thirteenth resolution); - Pascal Lebard (fourteenth resolution); - Anne-Claire Taittinger (fifteenth resolution). As required by law, information on the position held by all Directors in office at 31 October 2007, together with a list of all their other directorships or similar offices, is provided in the Companys shelf-registration document.
The first three resolutions cover approval of Club Mditerranes parent company and consolidated financial statements for the year ended 31 October 2007, the proposed appropriation of the years net income and granting the Board of Directors discharge for the fulfillment of its duties. Accordingly, the first resolution approves the financial statements of Club Mditerrane SA for the year ended 31 October 2007 and grants the Board of Directors discharge for the fulfillment of its duties. The second resolution approves the Groups consolidated financial statements and the third resolution approves the appropriation of the years net loss amounting to 38,020,554, which we propose to transfer to the retained deficit. Including this loss and after the 260,341 effect of a change in accounting method concerning the measurement of assets, the retained deficit will amount to 296,245,806.
2. APPROVAL OF RELATED PARTY AGREEMENTS
You will then be asked to approve the related-party agreements described in detail in the special report of the Auditors (fourth resolution).
5. REPLACEMENT OF A SUBSTITUTE AUDITOR
Franois Carrega has resigned as substitute auditor and we are therefore seeking to appoint the firm Auditex in his place for the remainder of Mr Carregas term of office, that is until the Annual General Meeting held to approve the financial statements for the year ended 31 October 2012.
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6. AUTHORIZATION TO TRADE IN THE COMPANYS SHARES
- to cancel the shares acquired, including any shares purchased pursuant to earlier authorizations (provided that the extraordinary resolution authorizing the Board to reduce the Companys capital is passed); - for any other purpose that is currently authorized by law or may be authorized in the future, provided that the Company informs shareholders of said new purpose or purposes by press release or by any other legally authorized means. The shares may be purchased, sold or otherwise transferred by any appropriate method, on the market or over the counter, through a public cash or exchange offer, or through the use of options or derivatives, in compliance with the applicable regulations. The shares acquired, including those bought back under earlier authorizations, may be cancelled, provided that the extraordinary resolution authorizing the Board to reduce the Companys capital is passed. The maximum buyback price is set at 70 per share and the minimum resale price at 30. These prices do not apply to forward transactions entered into pursuant to previous authorizations permitting the purchase or sale of shares after this date of this meeting, nor do they apply to shares purchased to fulfill the exercise of stock options (or stock grants made to employees). In these cases, the sale price or equivalent financial value will be determined in accordance with the specific provisions that apply. The maximum amount invested in the share buyback program may not exceed 135,594,935. The buybacks, sales and transfers may be carried out and settled by any means, including through the use of derivatives and notes and the purchase of call options, in compliance with the Autorit des Marchs Financiers general regulations. The entire program may be carried out through a single block purchase.
The seventeenth resolution authorizes the Board of Directors to buy back shares of the Company in accordance with Articles L.225-209 et seq. of the French Commercial Code, European Commission Regulation 2273/2003 of 22 December 2003 implementing Directive 2003/6/EC of 28 January 2003, and Articles 241-1 to 241-6 of the Autorit des Marchs Financiers general regulations or any regulations that may subsequently replace them. The authorization will be valid for a period of 18 months and will cancel and supersede the authorization granted under the 15th resolution passed at the Annual General Meeting held on 8 March 2007. In accordance with the law, you are required to set the terms and conditions of the program and the maximum authorized amounts. The Board of Directors is seeking authorization, which may be further delegated in accordance with the provisions of the law, to buy back shares of the Company for the following purposes: - to carry out transactions under a liquidity contract complying with a code of ethics approved by the Autorit des Marchs Financiers or any other applicable provision, entered into with an investment service provider acting on an independent basis without any influence from the Company; - to allocate the shares to directors and/or employees of the Company and/or the Group upon exercise of stock options or under an employee stock ownership plan; - to allocate the shares upon the issue or exercise of rights attached to shares or share equivalents; - to constitute a stock of shares to be used (i) to pay for future business acquisitions or (ii) for future mergers, demergers or acquisitions of assets in exchange for shares. The number of shares used for this latter purpose shall not exceed 5% of the Companys capital as of the transaction date, currently 19,370,705 shares;
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The Company may use this authorization to continue implementing its share buyback program in connection with a takeover bid for the Company or a public exchange offer initiated by the Company, in accordance with the provisions of the law. We are also seeking full powers for the Board of Directors to use this authorization, to set the terms and conditions of the program where necessary, to enter into any and all deeds and agreements, to carry out any and all necessary formalities and generally to do everything necessary to implement this authorization. The Board may delegate these powers in accordance with the provisions of the law and the Companys by-laws.
7. POWERS
2. ALIGNMENT OF THE COMPANYS BY-LAWS WITH THE PROVISIONS OF DECREE 2006-1566 OF 11 DECEMBER 2006 ON SHAREHOLDERS MEETINGS
Decree no. 2006-1566 of 11 December 2006 (the Decree) has amended decree no. 67-236 of 23 March 1967 (French Companies Act) by adopting various measures applicable to companies limited by shares and more particularly the terms and conditions under which shareholders are entitled to attend and vote at general meetings. These provisions are a matter of public policy. The main amendments we are proposing are described below: - The Decree has radically changed the procedure for evidencing ownership of registered or bearer shares, which is now based on a system of record date as close as possible to the date of the General Meeting. - This is particularly important for companies that have issued bearer shares, as is the case for Club Mditerrane. Under the new law, shareholders are now entitled to attend and vote at General Meetings provided they are shareholders of record, either in the register of shares kept by the Company or in a securities account held by an authorized financial intermediary, at midnight (Paris time) on the third business before the date of the meeting. - The custodian of the shares now issues a certificate of ownership rather than a share-blocking certificate. Consequently, in the twentieth, twenty-first and twentysecond resolutions, we are proposing to amend the by-laws to take account of these new rules. The articles affected are article 8.2 (Rights and Obligations Attached to the Shares), article 28 (Attendance at General Meetings - Proxies) and article 30 (Quorum).
The eighteenth resolution grants the powers required to carry out all legal filing and other formalities with regard to the ordinary resolutions passed by the meeting.
II - Extraordinary resolutions
Six extraordinary resolutions will also be put to you for approval and are described below.
1. AMENDMENT OF ARTICLE 7.4 OF THE BY-LAWS ON DISCLOSURE THRESHOLDS
In the nineteenth resolution, we propose to amend the disclosure threshold set out in the first paragraph of article 7.4 of the by-laws (Form and Ownership of Shares). We are proposing to raise the disclosure threshold from 0.5% to 1% or any further multiple thereof, as we believe that this is sufficient for us to monitor and control the Companys ownership structure. The first paragraph of article 7.4 of the Companys by-laws will therefore be amended as follows: 4. Apart from the statutory disclosures required by law, any person or legal entity acting alone or in concert who comes to own either directly or indirectly 1% of the Companys capital, voting rights or share equivalents or any further multiple thereof is required to advise the Company by recorded delivery mail of the number of voting rights and share equivalents held, no later than five business days after occurrence. The rest of the article remains unchanged.
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3. AUTHORIZATION TO THE BOARD OF DIRECTORS TO REDUCE THE CAPITAL BY CANCELING SHARES
- deduct the difference between the net book value of the cancelled shares and their par value from any reserve or share premium accounts; - amend the by-laws accordingly and, more generally, do everything necessary in accordance with the laws prevailing at the time this authorization is used.
4. POWERS IN RESPECT OF EXTRAORDINARY RESOLUTIONS
The twenty-third resolution seeks authorization for the Board of Directors, in accordance with the provisions of articles L.225-209 et seq. of the French Commercial Code, to reduce the capital on one or more occasions in the proportions and at the times it deems appropriate by canceling all or part of the shares held or purchased by the Company within the limits permitted by law, which at present is 10% of the Companys capital, in any one twenty-four month period. This limit applies to the amount of capital after any adjustments for transactions made after the date of this meeting. The authorization will be valid for a period of 18 months. You will be asked to confer full powers on the Board of Directors, which may be further delegated, to do the following: - cancel the shares and make the resulting capital reduction(s); - determine the final amount of the capital reductions, set their terms and conditions and duly record their completion;
Lastly, the twenty-fourth and final resolution is the usual resolution granting the powers required to carry out any legal filing or other formalities with respect to the extraordinary resolutions passed at the meeting. We trust that these resolutions will meet with your approval.
The Board of Directors
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PROPOSED RESOLUTIONS
A. Ordinary resolutions
FIRST RESOLUTION - APPROVAL OF THE FINANCIAL STATEMENTS OF THE COMPANY FOR THE YEAR ENDED 31 OCTOBER 2007
As required by law, the Ordinary General Meeting notes that dividends for the last three fiscal years were as follows:
2003/04 Number of shares carrying dividend rights Net dividend per share Tax credit 2004/05 2005/06
The Ordinary General Meeting, having considered the report of the Board of Directors, the Chairmans report on the practices and procedures of the Board of Directors and the Companys internal control procedures, the Auditors report, and the financial statements of the Company for the year ended 31 October 2007 presented by the Board of Directors, approves the financial statements as presented, which show a net loss of 38,020,554, as well as the transactions reflected in these financial statements and described in these reports. As a result, the Ordinary General Meeting gives discharge to the Board of Directors for the fulfillment of its duties for the year ended 31 October 2007.
SECOND RESOLUTION - APPROVAL OF THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 OCTOBER 2007
19,358,005 -
19,358,005 -
19,358,005 -
FOURTH RESOLUTION - APPROVAL OF RELATED-PARTY AGREEMENTS
The Ordinary General Meeting, having considered the report of the Auditors on related party agreements governed by Articles L.225-38 et seq. of the French Commercial Code and for agreements entered into prior to the change in management system Articles L.225-86 et seq., approves the related party transactions and agreements that were entered into or remained in force during the year.
FIFTH RESOLUTION - DIRECTORS FEES
The Ordinary General Meeting, having considered the report of the Board of Directors, the Chairmans report on the practices and procedures of the Board of Directors and the Companys internal control procedures, the Auditors report, and the consolidated financial statements for the year ended 31 October 2007 presented by the Board of Directors, approves the consolidated financial statements as presented, which show a net loss of 10.468 million, as well as the transactions reflected in these consolidated financial statements and described in these reports.
THIRD RESOLUTION - APPROPRIATION OF PROFIT
The Ordinary General Meeting, having considered the report of the Board of Directors, sets the total amount of directors fees payable for the period from 1 November 2007 to 31 October 2008 at 305,000.
SIXTH RESOLUTION - RE-ELECTION OF PHILIPPE ADAM AS DIRECTOR
The Ordinary General Meeting, considering that Philippe Adam is due to retire by rotation at this meeting, re-elects Mr Adam as Director for a term of three years expiring at the annual general meeting held to approve the financial statements for the year ended 31 October 2010.
SEVENTH RESOLUTION - RE-ELECTION OF SAUD AL SULAIMAN AS DIRECTOR
The Ordinary General Meeting, considering the recommendation of the Board of Directors, resolves to appropriate the Companys net loss for the year, in the amount of 38,020,554, to the deficit. Including this loss and after the 260,341 effect of a change in accounting method concerning the measurement of assets, the deficit will amount to 296,245,806.
The Ordinary General Meeting, considering that Saud Al Sulaiman is due to retire by rotation at this meeting, re-elects Mr Al Sulaiman as Director for a term of three years expiring at the annual general meeting held to approve the financial statements for the year ended 31 October 2010.
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EIGHTH RESOLUTION - RE-ELECTION OF MUSTAPHA BAKKOURY AS DIRECTOR
FOURTEENTH RESOLUTION - RE-ELECTION OF PASCAL LEBARD AS DIRECTOR
The Ordinary General Meeting, considering that Mustapha Bakkoury is due to retire by rotation at this meeting, re-elects Mr Bakkoury as Director for a term of three years expiring at the annual general meeting held to approve the financial statements for the year ended 31 October 2010.
NINTH RESOLUTION - RE-ELECTION OF DAVID DAUTRESME AS DIRECTOR
The Ordinary General Meeting, considering that Pascal Lebard is due to retire by rotation at this meeting, re-elects Mr Lebard as Director for a term of three years expiring at the annual general meeting held to approve the financial statements for the year ended 31 October 2010.
FIFTEENTH RESOLUTION - RE-ELECTION OF ANNE-CLAIRE TAITTINGER AS DIRECTOR
The Ordinary General Meeting, considering that David Dautresme is due to retire by rotation at this meeting, re-elects Mr Dautresme as Director for a term of three years expiring at the annual general meeting held to approve the financial statements for the year ended 31 October 2010.
TENTH RESOLUTION - RE-ELECTION OF THIERRY DE LA TOUR DARTAISE AS DIRECTOR
The Ordinary General Meeting, considering that Anne-Claire Taittinger is due to retire by rotation at this meeting, re-elects Ms Taittinger as Director for a term of three years expiring at the annual general meeting held to approve the financial statements for the year ended 31 October 2010.
SIXTEENTH RESOLUTION - REPLACEMENT OF A SUBSTITUTE AUDITOR
The Ordinary General Meeting, considering that Thierry de La Tour dArtaise is due to retire by rotation at this meeting, re-elects Mr de La Tour dArtaise as Director for a term of three years expiring at the annual general meeting held to approve the financial statements for the year ended 31 October 2010.
ELEVENTH RESOLUTION - RE-ELECTION OF HENRI GISCARD DESTAING AS DIRECTOR
The Ordinary General Meeting, considering the resignation of Franois Carrega as substitute auditor as of the date of this meeting, appoints in his place the firm Auditex of Faubourg de lArche, 92037 Paris-La Dfense Cedex, for the remainder of Mr Carregas term of office, that is until the annual general meeting held to approve the financial statements for the year ended 31 October 2012.
SEVENTEENTH RESOLUTION - AUTHORIZATION TO TRADE IN THE COMPANYS SHARES
The Ordinary General Meeting, considering that Henri Giscard dEstaing is due to retire by rotation at this meeting, re-elects Mr Giscard dEstaing as Director for a term of three years expiring at the annual general meeting held to approve the financial statements for the year ended 31 October 2010.
TWELFTH RESOLUTION - RE-ELECTION OF PAUL JEANBART AS DIRECTOR
The Ordinary General Meeting, having considered the report of the Board of Directors, authorizes the Board of Directors to buy back shares of the Company in accordance with Articles L.225-209 et seq. of the French Commercial Code, European Commission Regulation 2273/2003 of 22 December 2003 implementing Directive 2003/6/EC of 28 January 2003, and Articles 241-1 to 241-6 of the Autorit des Marchs Financiers general regulations or any regulations that may subsequently replace them. The number of Club Mditerrane SA shares held under this authorization at any given time shall not represent more than 10% of the Companys capital, currently 19,370,705 shares, or 5% of the Companys capital if the shares are purchased for the purpose of tendering them in consideration for a future merger, demerger or asset transfer. Authority to act on this resolution may be delegated by the Board, subject to compliance with the law and the Companys by-laws.
The Ordinary General Meeting, considering that Paul Jeanbart is due to retire by rotation at this meeting, re-elects Mr Jeanbart as Director for a term of three years expiring at the annual general meeting held to approve the financial statements for the year ended 31 October 2010.
THIRTEENTH RESOLUTION - RE-ELECTION OF AIMERY LANGLOIS-MEURINNE AS DIRECTOR
The Ordinary General Meeting, considering that Aimery Langlois-Meurinne is due to retire by rotation at this meeting, re-elects Mr Langlois-Meurinne as Director for a term of three years expiring at the annual general meeting held to approve the financial statements for the year ended 31 October 2010.
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The Ordinary General Meeting authorizes the Board of Directors (or any person duly authorized by the Board) to buy back shares for the following purposes: - To permit transactions under a liquidity contract complying with a code of ethics approved by the Autorit des Marchs Financiers or other applicable provisions, entered into with an investment service provider acting on an independent basis without any influence from the Company; - For allocation to directors and/or employees of the Company and/or the Group, upon exercise of stock options or under an employee stock ownership plan or stock grant plan; - For allocation upon the issue or exercise of rights attached to shares or share equivalents, or for tender in consideration for future business acquisitions, mergers, demergers or acquisitions of assets; - For cancellation of the acquired shares, including any shares bought back pursuant to earlier authorizations (provided that the extraordinary resolution authorizing the Board to reduce the Companys capital is voted); - For any other purpose that is currently authorized by law or may be authorized in the future, provided that the Company informs shareholders of said new purpose or purposes by press release or by any other legally authorized means. The shares may be purchased, sold or otherwise transferred by any appropriate method, on the market or over the counter, through a public cash or exchange offer, or through the use of options or derivatives, in compliance with the applicable regulations. The shares acquired, including those bought back under earlier authorizations, may be cancelled, provided that the extraordinary resolution authorizing the Board to reduce the Companys capital is voted. The maximum buyback price is set at 70 per share and the minimum resale price at 30. These prices do not apply to forward transactions entered into pursuant to previous authorizations permitting the purchase or sale of shares after the date of this meeting, nor do they apply to shares purchased to fulfill the exercise of stock options (or stock grants made to employees). In these cases, the sale price or equivalent financial value shall be determined in accordance with the specific provisions that apply. The maximum amount invested in the share buyback program may not exceed 135,594,935.
The Board of Directors shall have full powers to adjust the prices or the number of shares specified above to take into account the effects of any corporate actions, particularly a change in the par value of the shares, a stock split or reverse stock split, an issue of bonus shares or an increase in the par value of existing shares paid up by capitalizing reserves or earnings, distribution of reserves or any other asset, capital redemptions or any other transaction affecting the Companys capital. The buybacks, sales and transfers may be carried out and settled by any means, including through the use of derivatives and notes and the purchase of call options, in compliance with the Autorit des Marchs Financiers general regulations. The entire program may be carried out through a single block purchase. The Company may use this authorization to continue implementing its share buyback program in connection with a takeover bid for the Company or a public exchange offer initiated by the Company in accordance with the provisions of article 232-17 of the Autorit des Marchs Financiers general regulations (or any other legal, regulatory or other provisions that may subsequently replace them). The Ordinary General Meeting gives full powers to the Board of Directors to use this authorization, to set the terms and conditions of the program, where necessary, to enter into any and all deeds and agreements, to carry out any and all necessary formalities and generally to do everything necessary to implement this authorization. The Board of Directors may delegate these powers in accordance with the provisions of the law and the Companys by-laws. This authorization will expire at the end of a period of eighteen months from the date of this meeting. It supersedes the existing authorization given in the fifteenth resolution of the Ordinary General Meeting of 8 March 2007.
EIGHTEENTH RESOLUTION - POWERS
The Ordinary General Meeting, having considered the report of the Board of Directors, gives full powers to the bearer of a copy or extract of the minutes of this Meeting to carry out all legal filing and other formalities.
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B - Extraordinary resolutions
NINETEENTH RESOLUTION - AMENDMENT TO ARTICLE 7 OF THE BY-LAWS (FORM AND OWNERSHIP OF SHARES)
New wording: However, double voting rights are conferred on all fully-paid shares which have been registered in the name of the same shareholder for at least two years. The rest of article 8 of the by-laws remains unchanged.
TWENTY-FIRST RESOLUTION - AMENDMENT TO ARTICLE 28 OF THE BY-LAWS (ATTENDANCE AT GENERAL MEETINGS - PROXIES)
The Extraordinary General Meeting, having considered the report of the Board of Directors, resolves to amend article 7 (Form and Ownership of Shares) to raise the threshold for disclosing holdings of shares and voting rights from 0.5% to 1%. The first paragraph of article 7.4 (Form and Ownership of Shares) is therefore amended as follows and the rest of the article remains unchanged. Old wording: 4. Apart from the statutory disclosures required by law, any person or legal entity acting alone or in concert who comes to own either directly or indirectly 0.5% of the Companys share capital, voting rights or share equivalents or any further multiple thereof is required to advise the Company by recorded delivery mail of the number of voting rights and share equivalents held, no later than five business days after occurrence. New wording: 4. Apart from the statutory disclosures required by law, any person or legal entity acting alone or in concert who comes to own either directly or indirectly 1% of the Companys share capital, voting rights or share equivalents or any further multiple thereof is required to advise the Company by recorded delivery mail of the number of voting rights and share equivalents held, no later than five business days after occurrence.
TWENTIETH RESOLUTION - AMENDMENT TO ARTICLE 8.2 OF THE BY-LAWS (RIGHTS AND OBLIGATIONS ATTACHED TO THE SHARES)
The Extraordinary General Meeting, having considered the report of the Board of Directors, resolves to amend article 28 of the by-laws to simplify it and bring it into line with the provisions of decree no. 2006-1566 of 11 December 2006. Article 28 is accordingly amended as follows: Old wording: 1. All shareholders are entitled to attend and vote at general meetings in person or by proxy regardless of the number of shares held, simply upon presentation of evidence of their identity, provided that they have settled all capital calls within thirty days of receiving notification of the amount called and that their shares are booked in an account opened in their name at least five days prior to the date of the meeting. 2. Shareholders may vote by mail in accordance with the terms and conditions set out by law. The Board of Directors may reduce the legal time period required for receiving postal voting forms. Shareholders may, in accordance with the provisions of the law, send their proxy form or postal voting form for any general meeting either by ordinary mail or by electronic means if permitted by the Board of Directors as published in one of the notices of meeting. 3. Shareholders may only appoint their spouse or another shareholder as their proxy. Owners of shares referred to in the seventh paragraph of article L.228-1 of the French Commercial Code may appoint an authorized intermediary as their nominee under the terms and conditions set out by law.
The Extraordinary General Meeting, having considered the report of the Board of Directors, resolves to amend article 8.2 of the by-laws (Rights and Obligations Attached to the Shares) to bring it into line with the provisions of decree no. 20061566 of 11 December 2006. The second paragraph of article 8.2 of the by-laws (Rights and Obligations attached to the Shares) is accordingly amended as follows: Old wording: However, double voting rights are conferred on all fully-paid shares which, no later than five days before the date of the meeting, have been registered with the issuer or registrar in the name of the same shareholder for at least two years.
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4. Holders of registered shares may attend and vote at general meetings or vote by mail provided that their shares are registered on the share register kept by the Company at least forty-eight hours before the date of the meeting. Holders of bearer shares may attend and vote at general meetings or vote by mail provided that their stockbroker, bank or other intermediary has lodged a certificate at the Companys head office or at any other address specified in the notice of meeting, at least forty-eight hours before the date of the meeting, attesting to the holders ownership of the shares and certifying that they are being held in a blocked account until after the date of the meeting. 5. Holders of registered shares will be admitted to the meeting on presentation of evidence of their identity. Holders of bearer shares will be admitted on presentation of the certificate referred to above. The Board of Directors may decide to issue individual admission cards to shareholders, in which case only the named shareholder or proxy may use the card. 6. The Company may ask the intermediaries acting as nominee for the shareholders referred to in the seventh paragraph of article L 228-1 of the French Commercial Code to provide a list of all shareholders whose shares they are voting at the meeting. Proxies given to or votes cast by any intermediary who fails to do so or who fails to disclose its capacity as nominee in accordance with the law or these by-laws will not be counted. New wording: 1. All shareholders may attend general meetings in accordance with the provisions of the law. 2. Shareholders may vote by mail in accordance with the provisions of the law. Shareholders may, in accordance with the provisions of the law, send their proxy form or postal voting form for any general meeting either by ordinary mail or by electronic means if permitted by the Board of Directors as published in one of the notices of meeting.
3. Shareholders may appoint a proxy to represent them in accordance with the provisions of the law. Owners of shares referred to in the seventh paragraph of article L.228-1 of the French Commercial Code may appoint an authorized intermediary as their nominee under the terms and conditions set out by law. 4. The Company may ask the intermediaries acting as nominee for the shareholders referred to in the seventh paragraph of article L 228-1 of the French Commercial Code to provide a list of all shareholders whose shares they are voting at the meeting. Proxies given to or votes cast by any intermediary who fails to do so or who fails to disclose its capacity as nominee in accordance with the law or these by-laws will not be counted.
TWENTY SECOND RESOLUTION - AMENDMENT OF ARTICLE 30 OF THE BY-LAWS (QUORUM)
The Extraordinary General Meeting, having considered the report of the Board of Directors, resolves to amend article 30 of the by-laws (Quorum) to bring it into line with the provisions of decree no. 2006-1566 of 11 December 2006. The second paragraph of article 30 of the by-laws (Quorum) is therefore amended as follows and the rest of the article remains unchanged. Old wording: The quorum is calculated on the basis of all shares comprising the share capital, less any shares deprived of their voting rights by virtue of the law. In the case of postal votes, only those forms duly completed and received by the Company at least three days before the date of the meeting will be counted for the purpose of calculating the quorum. New wording: The quorum is calculated on the basis of all shares comprising the share capital, less any shares deprived of their voting rights by virtue of the law.
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TWENTY-THIRD RESOLUTION - AUTHORIZATION GRANTED TO THE BOARD OF DIRECTORS TO REDUCE THE SHARE CAPITAL BY CANCELING SHARES
The Extraordinary General Meeting confers full powers on the Board of Directors, which may be further delegated, to do the following: - cancel the shares and make the resulting capital reduction(s); - determine the final amount of the capital reductions, set their terms and conditions and duly record their completion; - deduct the difference between the net book value of the cancelled shares and their par value from any reserve or share premium accounts; - amend the by-laws accordingly and, more generally, do everything necessary in accordance with the laws prevailing at the time this authorization is used.
TWENTY-FOURTH RESOLUTION - POWERS
The Extraordinary General Meeting, having considered the report of the Board of Directors and the special report of the Auditors, authorizes the Board of Directors, in accordance with the provisions of articles L.225-209 et seq. of the French Commercial Code, to reduce the share capital on one or more occasions in the proportions and at the times it deems appropriate, by canceling all or part of the shares held or purchased by the Company within the limit permitted by law, which at present is 10% of the capital in any one twenty-four month period. This limit applies to the amount of capital after any adjustments for transactions made after the date of this meeting. The authorization is valid for eighteen months with effect from the date of this meeting. It supersedes and replaces the unused portion of any previous authorization granted for the same purpose and particularly that granted under the twenty-eighth resolution passed at the annual general meeting of 8 March 2007.
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.
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The following information is incorporated by reference in the Registration Document: The business report, the consolidated financial statements of Club Mditerrane and the Auditors report on the consolidated financial statements for fiscal 2005, as presented on pages 60 to 78, 91 to 126 and 123 of the Registration Document filed with the Autorit des Marchs Financiers on 23 February 2006. The business report, the consolidated financial statements of Club Mditerrane and the Auditors report on the consolidated financial statements for fiscal 2006, as presented on pages 66 to 78, 91 to 143 and 140 of the Registration Document filed with the Autorit des Marchs Financiers on 14 February 2007.
STATUTORY AUDITORS
Beas, 185, avenue Charles de Gaulle 92524 Neuilly-sur-Seine Cedex. Beas was appointed for the first time at the Annual General Meeting of 17 March 2003. Its appointment was renewed at the Annual General Meeting of 8 March 2007 for a period of six years expiring at the Annual General Meeting to be called to approve the fiscal 2012 financial statements.
PERSON RESPONSIBLE FOR INFORMATION
Michel Wolfovski Executive Vice President and Chief Financial Officer 11, rue de Cambrai - 75019 Paris. Phone: + 33 (1) 53 35 34 00
VICE PRESIDENT, INVESTOR RELATIONS AND FINANCIAL COMMUNICATION
Ernst & Young Audit SAS, Faubourg de lArche 92037 ParisLa Dfense Cedex, represented by Pascal Macioce. Ernst & Young Audit was appointed for the first time at the Annual General Meeting of 30 April 1981. Its appointment was renewed at the Annual General Meeting of 8 March 2007 for a period of six years expiring at the Annual General Meeting to be called to approve the fiscal 2012 financial statements. Deloitte & Associs, 185, avenue Charles de Gaulle 92524 Neuilly-sur-Seine Cedex, represented by Dominique Jumaucourt. Deloitte & Associs was appointed for the first time at the Annual General Meeting of 17 March 2003. Its appointment was renewed at the Annual General Meeting of 8 March 2007 for a period of six years expiring at the Annual General Meeting to be called to approve the fiscal 2012 financial statements.
SUBSTITUTE AUDITORS
Caroline Bruel 11, rue de Cambrai - 75019 Paris. Phone: + 33 (1) 53 35 30 75 Fax: + 33 (1) 53 35 32 73 E-mail: investor.relations@clubmed.com
PERSON RESPONSIBLE FOR THE REGISTRATION DOCUMENT
I hereby declare that, having taken all reasonable care to ensure that such is the case, the information contained in this Registration Document is, to the best of my knowledge, in accordance with the facts and contains no omission likely to affect its import. I further declare that, to the best of my knowledge, i) the financial statements have been prepared in accordance with the applicable accounting standards and give a true and fair view of the assets and liabilities, financial position and results of Club Mditerrane and the consolidated companies, and ii) the management report on page 62 presents a fair view of the business, results and financial position of Club Mditerrane and the consolidated companies, as well as a description of the main risks and uncertainties they face. I have obtained a statement from the Statutory Auditors at the end of their engagement affirming that they had examined the information about the financial position and the accounts contained in this reference document and had read the entire reference document. The Chairman and Chief Executive Officer Henri Giscard dEstaing
Franois Carrega, 13, boulevard des Invalides 75007 Paris. Mr. Carrega was appointed for the first time at the Annual General Meeting of 13 March 2001. His appointment was renewed at the Annual General Meeting of 8 March 2007 for a period of six years expiring at the Annual General Meeting to be called to approve the fiscal 2012 financial statements. Mr. Carrega having resigned, shareholders at the Annual General Meeting of 11 March 2008 will be asked to appoint Auditex as his successor for the remainder of his term.
This registration document was filed with the Autorit des Marchs Financiers (AMF) on 12 February 2008 in accordance with Article 212-13 of the AMFs 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.
2007 ANNUAL REPORT
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The English language version of this Registration Document is a free translation from the original, which was prepared in French. All possible care has been taken to ensure that the translation is an accurate representation of the original. However in all matters of interpretation of information, views or opinion expressed therein the original language version of the document in French takes precedence over the translation.
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CLUB MDITERRANE SA 11, rue de Cambrai - 75957 Paris Cedex 19 - France Tel: +33 (0)1 53 35 35 53 Fax: +33 1 53 35 36 16 www.clubmed.com Socit anonyme (joint stock corporation) with share capital of 77,482,820 572 185 684 RCS Paris License: LI 075 95 0333 RCP No. AA 992 497 GENERALI ASSURANCES IARD - 7, boulevards Haussmann - F - 75456 Paris Cedex 9 Garantie Financire APS - 15, avenue Carnot - F - 75017 Paris

Case Study - Club Med

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Financial Report

Fiscal Year 2007

2007 ANNUAL REPORT

2007 1,727 1,727 244 33

the management of assets.

1,679 1,670 229 24

2 (21) 14 (8) (336)

12,550 8,560 68.2% 80.4

RevPAB(1) per hotel day, like-for-like

FY 2006 Europe Americas Asia Total 6,511 1,290 759 8,560

HOTEL DAYS BY INBOUND ZONE

Europe Americas Asia Total Villages

77.4 72.2 57.2 73.7

84.4 77.5 66.5 80.4

90.5 78.9 81.3 86.5

FY 2006 Europe Americas Asia Total 5,885 1,733 942 8,560

FY 2007 5,717 1,766 1,053 8,536

Change - 2.8% +1.9% +11.8% - 0.3%

2007 ANNUAL REPORT

1.2.5 FINANCIAL MODEL (at 31 october 2007)

GOP*/hotel day Price

> Comfort category

* GOP: Village operating income before property costs.

FY 2006 970 185 137 1,292 322 56 1,670

FY 2007 1 012 188 167 1,367 302 58 1,727

1.3.2. INCOME BY REGION AND BUSINESS

1,727 1,679 +2 31 +75

Total % of like-for-like revenue

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

LEISURE OPERATING INCOME - VILLAGES

FIXED OPERATING COSTS

FY 2006 like-for-like Scope of consolidation/Capacity/Upmarket strategy

1,292.4 19.1 7.8 1,319.3 807.5

(8.2) 9.4 9.0 (21.9) (1.8) (2.9) (8.6) (419.4)

1.9 9.8 1,378.4 845.4

(175.5) (402.6) (150.7) (62.0) 16.7

(171.8) (419.4) (163.3) (63.6) 27.3

(37.4) per hotel day (1)

(1) Excluding managed Villages.

(1) Adjusted to exclude insurance settlements.

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

FIXED SELLING COSTS

(150.7) (3.0) 1.2 (4.5) (6.3) (163.3)

2007 ANNUAL REPORT

LEISURE OPERATING INCOME - VILLAGES, BY REGION

Operating Income - leisure: Asia

Operating Income - leisure: Europe

FY 2006 FY 2006 FY 2007 1,012.1 0.0 10.5 1,022.6 576.2

FY 2007 166.5 0.0 29.2 195.6 105.7

970.2 3.1 10.0 983.3 566.0

137.3 0.0 22.4 159.7 84.4

(120.5) (270.4) (115.5) (37.6) 22.0

(120.5) (273.4) (122.6) (39.8) 19.9

(21.3) (40.8) (16.8) (8.3) (3.0)

(23.1) (45.1) (18.6) (9.3) 9.6

(1) Adjusted to exclude insurance settlements.

(1) Adjusted to exclude insurance settlements.

Operating Income - leisure: Americas

FY 2007 188.1 1.9

184.9 16.0 47.4 248.3 157.2

FY 2006 65.2 255.2 163.4

FY 2007 302 36.9

Revenue Semi-net margin

Other costs Operating income - leisure