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2006 Annual Report // 65
Financial Report
66 // MANAGEMENT REPORT
74 // RISK FACTORS
78 // 2007 FINANCIAL CALENDAR
79 // CHAIRMAN’S REPORT ON THE PRACTICES AND PROCEDURES OF THE BOARD OF DIRECTORSAND INTERNAL CONTROL PROCEDURES
90 // AUDITORS’ REPORT ON INTERNAL CONTROL
66
The consolidated financial statements for fiscal 2006 represent
the Group’s first financial statements prepared in accordance
with IFRS. Comparative financial information for 2005 has been
prepared on the same basis.
The IFRS transition options selected by the Group are present-
ed in Note 2 to the consolidated financial statements. The
Group elected to adopt IAS 32 and IAS 39 as from 1 November
2005. Pro forma financial information for fiscal 2005 is provided
to facilitate year-on-year comparisons.
FINANCIAL HIGHLIGHTS(in € millions)
2005 pro forma 2006(includingIAS 32/39)
Consolidated revenueReported 1,590 1,679Like-for-like 1,601 1,679
EBITDAR - Leisure (1) 222 232Operating income - Leisure 25 24Operating income -Management of assets 89 40Other operating income & expense (33) (29)
Operating income 81 35
Net income attributable to shareholders 3 5
Net borrowings (323) (294)
(1) EBITDAR - Leisure: Earnings before interest, taxes, depreciation,amortization and rents.
Consolidated revenue amounted to €1,679 million, an
increase of 5.6% on a reported basis. This was the first year of
growth after four straight years of decline.
Like-for-like revenue was up 4.9%, reflecting 7.7% growth in
the first half and 2.3% in the second.
Operating income - Leisure was stable at €24 million, reflect-
ing the impact of asset refinancing transactions currently in
progress under the Group’s property management strategy.
Although these transactions have an accretive impact on net
income, their effect on operating income is dilutive because
the rents paid to the buyers of the Villages exceed the depre-
ciation charges recorded when Club Méditerranée was the
owner.
EBITDAR - Leisure rose to €232 million in fiscal 2006 from
€222 million the previous year.
EBITDAR represents the best indicator of operating per-
formance, because it excludes the impact of depreciation,
amortization, rents and changes in provisions.
Operating income - Management of assets, corresponding
to the revenues and expenses generated by the management
of property assets, amounted to €40 million versus €89 million
in fiscal 2005, when an unusually high volume of asset refi-
nancing transactions was carried out.
Other operating income and expense, corresponding to
restructuring, litigation and credit card costs, represented a net
expense of €29 million, more or less unchanged from fiscal 2005.
The Group’s bottom line was positive for the second year
running, with net income rising to €5 million from €3 million.
CONSOLIDATED FINANCIAL RESULTS
BUSINESS REVIEW
CustomersIn fiscal 2006, the Group welcomed over 1.6 million customers.
The 3.1% decline compared with fiscal 2005 was largely due
to the 3.4% reduction in capacity over the year, including 6%
in the summer season with the closure of five entry-level
Villages in Europe and the temporary closure of certain Villages
for renovation, notably Cancún and La Caravelle. The number
of Jet tours and Club Med Gym customers was up slightly
compared with fiscal 2005.
Number of customers in France(in thousands)
Change vs.2004 2005 2006 2004
Individual customers 443 451 443 -
Business customers 66 58 66 -
Groups 72 73 59 - 18.0%
Total 581 582 568 - 2.4%
In fiscal 2006, Club Med France customers represented 43%
of total customers. The number of individual and business
customers remained stable over the last three years, while
groups declined. The decline mainly concerned vacations
organized by certain companies’ works councils, generally at
hut and 2-Trident Villages.
Management Report
+ 4.9%+ 5.6%
Management Report
2006 Annual Report // 67
Hotel days - VillagesHOTEL DAYS BY ISSUING ZONE
(in thousands of hotel days sold)
2005 2006 Change
Europe 6,846 6,511 - 4.9%Americas 1,475 1,290 - 12.6%Asia 627 759 + 21.0%
Total 8,948 8,560 - 4.3%
HOTEL DAYS BY RECEIVING ZONE
(in thousands of hotel days sold)
2005 2006 Change
Europe 6,272 5,885 - 6.2%Americas 1,901 1,733 - 8.8%Asia 775 942 + 21.6%
Total 8,948 8,560 - 4.3%
Capacity and occupancy rates
2005 2006 Change
Occupancy Occupancy Occupancy Capacity rate Capacity rate rate
Europe 8,494 73.8% 8,142 72.3% - 1.5 ptsAmericas 2,855 66.6% 2,621 66.1% - 0.5 ptsAsia 1,639 47.3% 1,787 52.7% + 5.4 pts
Total 12,988 68.9% 12,550 68.2% - 0.7 pts
Occupancy rate by category
Thousands of hotel daysby destination Occupancy rate
2005 2006 2005 2006
Huts and2 Tridents 747 418 71.9% 71.1%3 Tridents 5,882 5,435 71.2% 70.7%4 Tridents 2,206 2,626 64.2% 65.0%Other 113 81
Total 8,947 8,560 68.9% 68.2%
A total of 8.56 million hotel days were sold during the
year, representing a 4.3% decline. Hotel days at 3 and
4-Trident Villages were stable, with the 7.6% fall at
3-Trident Villages offset by 19% growth at 4-Trident units.
Although the occupancy rate was down 0.7 points
overall, it improved in the 4-Trident category.
The overall occupancy rate reflects major changes in the
Village base, particularly the shift upmarket. These
changes also affected the breakdown between Villages
open throughout the year (year-round capacity) and those
open during part of the year only (seasonal capacity).
Year-round capacity is generally more profitable, but it
tends to bring down the Group’s average occupancy rate.
In the five years since 2001, year-round capacity has risen
from 64% of the total to 74%, and it is expected to reach
80% in 2008.
Average prices (like-for-like)
(€/hotel day)
Winter Summer Full year
Club Med average price - 2005 115.8 88.5 100.2
Price effect 2.5 1.6 2.1Implementation of the strategy(1) 6.9 8.6 7.8Other effects(2) 1.9 1.2 1.9
Club Med average price - 2006 127.1 99.9 112.0
Change 9.8% 12.9% 11.8%
(1) Bar & Snacking Included, resegmentation, Comfort à la carte.(2) Changes in mix (issuer zones, Villages).
It is important to note that the increase in average price was
not due to higher catalog rates, but rather to the implemen-
tation of the Group’s upmarket strategy, with the introduction
of Bar & Snacking Included, Village resegmentation and the
rollout of Comfort à la carte boosting the average price per
hotel day by €7.80.
Rates were increased in line with or by slightly less than
inflation, adding €2.10 to the average price per hotel day.
RevPAB (Revenue per available bed)(€/hotel day)
Year ended 31 October
Change Change 2004 2005 2006 2006 vs. 2005 vs.
2005 2004
Europe 73.8 77.7 84.6 + 9% + 15%Americas 69.6 73.5 80.7 + 10% + 16%Asia 72.9 61.0 69.7 + 14% - 4%
Total Villages 72.7 74.7 81.7 + 9% + 12%
RevPAB: Total Village revenue excluding tax and transportation/Available beds.
RevPAB (revenue per available bed) is an important business
indicator, reflecting the effect of changes both in price mix
and in occupancy rates. For this reason, it is a key measure
of how well customers are embracing the Group’s strategy.
In fiscal 2006, RevPAB increased by €7 per hotel day (9%),
reflecting advances across all zones.
68
STATEMENT OF INCOME
1. Revenue
1.1 FISCAL 2006 VS. FISCAL 2005
(in € millions)
At constant exchange rates, fiscal 2006 revenue rose 4.9%,
including €115 million from an improved price mix. The differ-
ence compared with the 5.6% growth on a reported basis was
due to the €11 million currency effect, primarily related to the
US dollar, Brazilian real and Mexican peso.
1.2 LIKE-FOR-LIKE REVENUE BY REGION AND BUSINESS (ISSUING ZONES)
(in € millions)
2005 2006 2006vs. 2005
Europe 936 982 + 4.9%Asia 116 145 + 24.9%Americas 206 196 - 5.2%
Villages 1,258 1,323 + 5.1%
Jet tours 289 300 + 3.8%Other businesses 54 56 + 5.2%
Total 1,601 1,679 + 4.9%
2. Income by region and business(in € millions)
EBITDAR Operating income- Leisure
2005 2006 2005 2006
Europe 151 164 18.0 21.4Asia 27 21 5.3 (1.6)Americas 22 23 (2.2) (1.6)
Sub-total Villages 200 208 21.1 18.2
Jet tours 9 9 4.3 3.1Other businesses 13 15 (0.7) 2.4
Total 222 232 24.8 23.7
%of like-for-like revenue 13.8% 13.8%
2.1 VILLAGE EBITDAR
(in € millions)
2005 2006
Revenue (1) 1,288 1,346Margin on variable costs 791 823as a % of revenue (2) 60.2% 60.4%
Fixed selling costs (162) (171)Fixed operating costs (395) (405)Other (34) (39)
EBITDAR - Leisure* 200 208
EBITDAR - Leisure (fiscal 2005) 200
Currency effect 9Volume effect (34)Change in price mix 76Impact of operating loss (19)
Change in margin on variable costs 32
Currency effect (6)Fixed selling costs (7)Fixed operating costs (7)Other (4)
EBITDAR - Leisure (fiscal 2006) 208
(1) Revenue plus insurance settlements.(2) Adjusted to exclude insurance settlements.
*EBITDAR - Leisure: Earnings before interest, taxes, depreciation andamortization and rents.
The favorable change in price mix contributed to a €32 million
increase in margin on variable costs.
Fixed selling costs rose €7 million, primarily reflecting higher
marketing and advertising costs in the Europe-Africa region.
Fixed operating costs increased by €7 million (1.8%). Adjusted
for changes in capacity, fixed costs per hotel day were 5.9%
higher, or just 2.6% higher based on a comparable number
of Villages.
1,590
+ 11+ 115
- 37
1,679
Fiscal 2006Price mix
Fiscal 2005
Winter Summer Full year
Reported revenue + 10.5% + 1.2% + 5.6%
Like-for-like revenue + 7.7% + 2.3% + 4.9%
Currency effectVolume effect
Management Report
2006 Annual Report // 69
The increase was primarily due to:
• The rapid shift in the Village base, with the closure of entry-
level Villages.
• Service enhancements to support the upmarket strategy.
• Exceptional increases in energy and insurance costs, as well
as certain other costs.
2.2 VILLAGE EBITDAR BY REGION
2.2.1 EBITDAR - Leisure: Europe
(in € millions)
2005 2006
Revenue (1) 946 986Margin on variable costs 543 568as a % of revenue (2) 57.1% 57.5%
Fixed selling costs (108) (115)Fixed operating costs (266) (270)Other (19) (20)
EBITDAR - Leisure 151 164
EBITDAR - Leisure (fiscal 2005) 151
Currency effect 0Volume effect (39)Change in price mix 69Impact of operating loss (6)
Change in margin on variable costs 24
Currency effect 1Fixed selling costs (7)Fixed operating costs (4)Other (1)
EBITDAR - Leisure (fiscal 2006) 164
(1) Revenue plus insurance settlements.(2) Adjusted to exclude insurance settlements.
EBITDAR in the Europe region rose €13 million and EBITDAR
margin was 0.6 points higher. Growth was led by the upmarket
strategy and a favorable change in price mix.
2.2.2 EBITDAR - Leisure: Asia
(in € millions)
2005 2006
Revenue (1) 142 146Margin on variable costs 94 89as a % of revenue (2) 61.1% 60.6%
Fixed selling costs (22) (22)Fixed operating costs (40) (41)Other (6) (5)
EBITDAR - Leisure 27 21
EBITDAR - Leisure (fiscal 2005) 27
Currency effect 0Volume effect 18Change in price mix 0Impact of operating loss (24)
Change in margin on variable costs (6)
Currency effect 0Fixed selling costs 0Fixed operating costs (1)Other 1
EBITDAR - Leisure (fiscal 2006) 21
(1) Revenue plus insurance settlements.(2) Adjusted to exclude insurance settlements.
In fiscal 2006, EBITDAR in the Asia region continued to be
adversely affected by the previous year’s natural disasters; for
example, the Kani Village did not fully open until the begin-
ning of the summer. This loss of income, more than twelve
months after the tsunami, was not covered by insurance.
Summer EBITDAR in Asia was stable compared with summer
2005, when it included insurance settlements, and has
returned to summer 2004 levels.
2.2.3 EBITDAR - Leisure: Americas
(in € millions)
2005 2006
Revenue (1) 200 213Margin on variable costs 152 166as a % of revenue(2) 75.6% 76.0%
Fixed selling costs (32) (35)Fixed operating costs (89) (95)Other (9) (13)
EBITDAR - Leisure 22 23
EBITDAR - Leisure (fiscal 2005) 22
Currency effect 9Volume effect (13)Change in price mix 7Impact of operating loss 11
Change in margin on variable costs 14
Currency effect (7)Fixed selling costs 0Fixed operating costs (2)Other (4)
EBITDAR - Leisure (fiscal 2006) 23
(1) Revenue plus insurance settlements.(2) Adjusted to exclude insurance settlements.
EBITDAR in the Americas region rose slightly, despite the
closure of the Cancún Village for reconstruction following
hurricane Wilma, and the closure of La Caravelle during the
summer for renovation.
70
2.3 OTHER BUSINESSES
2.3.1 Operating income - Leisure:
Jet tours and other businesses
(in € millions)
2005 2006
Operating income - Leisure
Jet tours 4.3 3.1Club Med Gym 2.5 4.4Club Med World (3.2) (2.0)
Total 3.6 5.5
2.3.2 Jet tours income
(in € millions)
2005 2006
Revenue 295 303
Semi-net margin* 38.7 36.9as a % of revenue 13% 12%
Other costs (34.4) (33.8)
Operating income - Jet tours 4.3 3.1
(*) Semi-net margin = gross margin (revenue less purchases) afteragency commissions.
• Jet tours ended fiscal 2006 with operating income of
€3.1 million, down €1.2 million from the previous year. Winter
season operating income declined €3 million, due to a fall-
off in business in Egypt and an unfavorable currency effect.
The company’s summer season operating income improved,
however, to €4.5 million from €3 million in summer 2005.
• Club Med Gym’s operating income climbed to €4.4 million
in fiscal 2006 from €2.5 million the previous year, reflecting
the success of marketing efforts to support the upmarket
strategy.
2.4 REVENUE TO EBITDAR CONVERSION RATE
(in € millions)
2005 2006
Club Med EBITDARExcluding operating loss 162 187
Business interruption insurance settlements 38 21
Club Med EBITDAR 200 208Other (Jet tours, Club Med Gym, etc.) 22 24
Consolidated EBITDAR 222 232
• Like-for-like consolidated revenue grew €78 million over the
fiscal year, including a €46 million increase in Village revenue
excluding transportation.
• Club Med EBITDAR before insurance settlements was
€25 million higher, or €22 million excluding transportation.
• With EBITDAR up €22 million on revenue up €46 million, the
conversion rate was 48%.
3. Income statement
(in € millions)
2005 2005 2006Pro forma
Reported incl. IAS incl. IAS32/39 32/39
Revenue 1,590 1,590 1,679
Operating income - Leisure 25 25 24Operating income - Management of assets 89 89 40Other operating income & expense (33) (33) (29)
Operating income 81 81 35Finance costs and other financial income & expense (38) (45) (32)Share of income of associates 3 3 3Income tax expense (36) (35) (1)Minority interests (1) (1) 0
Net income 9 3 5
Consolidated operating income, comprising operating income
from leisure businesses and the management of assets and
other operating income & expense, amounted to €35 million
in fiscal 2006. Operating income from the management of
assets amounted to €40 million, which was lower than in
fiscal 2005 when an unusually high volume of asset refinanc-
ing transactions was carried out.
3.1 FINANCE COSTS AND OTHER FINANCIAL INCOME & EXPENSE
(in € millions)
2005 2005 2006Pro forma
excl. IAS incl. IAS incl. IAS32/39 32/39 32/39
OCEANE convertible/exchangeable bonds (16) (22) (21)Finance costs (17) (18) (12)Other (1) (2) (4)
Finance costs and other financial income & expense before exchange gains and losses (34) (41) (37)Realized and unrealized exchange gains and losses (4) (4) 5
Finance cost, net (38) (45) (32)
Average debt (625) (594) (481)
Reported cost of debt (1) 5.72% 7.12% 7.02%Effective cost of debt (2) 5.72% 5.72% 5.76%
(1) Reported cost of debt is calculated based on finance costs and otherfinancial income & expense adjusted for the effect of applyingIAS 32 and IAS 39.
(2) The effective cost is based on interest payments, as reported inthe cash flow statement.
Finance costs and other financial income & expense
including the effect of applying IAS 32 and IAS 39 (financial
instruments) amounted to €32 million in fiscal 2006 compared
with €45 million the previous year.
+ €25 m
INVESTMENTS AND DISPOSALS
(in € millions)
2005 2006
Total Club Med investments (114) (151)Net of government grants and tax relief
Disposals and asset refinancing transactions 245 143
Investments net of disposals 131 (8)
In fiscal 2006, the Group invested €151 million, net of govern-
ment grants of €7 million. A further €30 million was invested
by third parties, such as Gecina, owner of the La Plagne
Village. The total included €20 million at La Caravelle, €15 mil-
lion at Cancún, €15 million at Les Boucaniers, €10 million at
Kani, €3 million at Cervinia and €3 million at Trancoso, as well
as €14 million for the buyout of minority interests in the
Cancún/Ixtapa/Sandpiper Villages and €6 million on informa-
tion systems.
In fiscal 2007, the main investments will concern the La Pointe
aux Canonniers, Ixtapa and Kos Villages.
The Village upgrade program will be completed by the end
of fiscal 2008.
Disposals in fiscal 2006 concerned:
• Villages that did not fit in with the upmarket strategy - such
as Crested Butte, Flaine, Valbella and Cadaques - which
were sold as going concerns.
• Sale and operating leaseback transactions involving the
Chamonix, Avoriaz and Les Deux Alpes Villages, under the
Group’s asset refinancing strategy.
PROPERTY PORTFOLIO (NET BOOK VALUE)
(in € millions)
December 2006assumptions
Assets available for sale 92Assets refinancable over the short and medium-term 310*Other assets(including assets refinancable over the longer term) 549Total property, plant and equipment 951
* Including around €100 million in secured debt.
Property, plant and equipment are divided into three categories:
1. Assets that do not fit in with the upmarket strategy, repre-
senting a carrying amount of €92 million at 31 October 2006.
2. Assets that can be refinanced in the near term, with a
carrying amount of €310 million at 31 October 2006.
The improvement can be explained as follows:
- Finance costs declined in tandem with the reduction in
average debt. However, application of IAS 32 and IAS 39
to the OCEANE convertible/exchangeable bonds had a
significant impact. At 5.76%, the effective cost of debt was
stable year-on-year.
- Realized and unrealized exchange gains and losses repre-
sented a net gain of €5 million. This was mainly attributa-
ble to the US dollar, for which the hedging rate was more
favorable than the average exchange rate for the year and
whose year-end rate was more favorable than the rate at
1 November 2005.
Income tax expense declined in 2006 compared with 2005
when deferred tax assets were set off against tax on the
exceptionally high disposal gains realized during the year.
Net income for fiscal 2006 came in at €5 million, up from
€3 million the previous year.
BALANCE SHEET
(in € millions)
Assets 1 Nov. 2005 31 Oct. 2006incl. IAS incl. IAS
32/39 32/39
Non-current assets:- Property, plant and equipment 986 951- Intangible assets 182 182- Non-current financial assets 66 80
Total non-current assets 1,234 1,213Government grants (22) (28)
Total assets 1,212 1,185
Equity and liabilities 1 Nov. 2005 31 Oct. 2006incl. IAS incl. IAS
32/39 32/39
Equity 523 514
Provisions 64 69
Deferred taxes, net 60 51
Working capital 242 257
Net debt 323 294
Total equity and liabilities 1,212 1,185
Gearing 61.8% 57.2%
- Equity contracted slightly to €514 million at 31 October
2006, including negative translation adjustments of around
€15 million.
- Net debt continued to decline, to €294 million, leading to
an improvement in gearing to 57%.
- Working capital, which represents a net source of funds at
Club Méditerranée, amounted to €257 million or 15% of
revenue, roughly unchanged from 31 October 2005.
- Non-current assets amounted to €1,213 million at 31 October
2006, an amount close to the year-earlier figure.
Management Report
2006 Annual Report // 71
Investments were almost entirely self-financed by the increase
in net cash from operations and the proceeds from asset
disposals, generating free cash flow of €39 million and a
€29 million reduction in net debt.
SIGNIFICANT EVENTS OF THE YEAR
A FASTER SHIFT IN THE VILLAGE BASE
Club Med is vigorously pursuing its upmarket strategy. More
than 50 Villages have been renovated over the past five years
and around 15 more will be upgraded in the two years to
come. This systematic move up the quality scale will be com-
pleted at the end of 2008, when all of the Villages will be rated
either 3 or 4-Tridents.
In fiscal 2006, the Group decided to close five entry-level
Villages and prepared to upgrade seven Villages to 4-Trident
status.
Nearly €200 million has been committed to renovating exist-
ing Villages and opening new ones, including La Caravelle
(€20 million), Cancún Yucatán (€15 million), Villars (€10 million),
La Plagne (€14 million) and Opio (27 million) that were tem-
porarily closed during fiscal 2006.
In fiscal 2006, €158 million was invested directly by Club
Méditerranée and more than €30 million indirectly by
the Group’s real estate partners. In 2007, investments will
total around €100 million by Club Méditerranée and some
€100 million by partners.
Major product innovationsIn 2006, Bar & Snacking Included was rolled out to all the sea
and sun Villages, giving Club Med a significant competitive
advantage.
Comfort à la carte has delivered the expected response to
customers looking for quality and who want to choose their
room comfort.
And lastly, the creation of Club Med Baby Welcome and Club
Med Passworld has effectively met the needs of families.
Major shift in the customer base andrecord satisfaction ratingsThe percentage of Club Med’s core target customers in
France (the Top 12*) rose significantly in fiscal 2006, to 69%
of all French customers from 35% in fiscal 2003.
*Top 12: the 12% of the population with the highest average dispos-able incomes.
3. Other assets with a carrying amount of €549 million at
31 October 2006, corresponding mainly to Villages that can-
not be refinanced in the near term. They include Villages
owned jointly with partners, Villages built on leasehold land,
restricted assets that cannot be sold in the near term and other
items of property, plant and equipment.
VALUATION OF THE CLUB MED BRAND
(in € millions)
2002 2004 2006
Value of the Club Med brand 302 362 438
Club Méditerranée’s main asset - its brand - is not recognized
in the consolidated balance sheet.
The brand was valued in fiscal 2006, 2004 and 2002 by UK-
based Brand Finance.
The results of the latest valuation show that the brand has
grown steadily in value, to €438 million or around €22-23 per
share in fiscal 2006 from €20 per share in 2004.
Brand Finance’s valuation does not take into account certain
aspects of Club Méditerranée’s strategy that can be expect-
ed to add value to the brand, such as development opportu-
nities in the vacation villa market and the Group’s strong
growth potential in Asia. As a result, the valuation may be con-
sidered as conservative.
CASH FLOW STATEMENT
(in € millions)
Fiscal 2005 Fiscal 2006(including IAS 32/39)
Cash flow 15 22
Change in working capital 9 22
Change in provisions (2) 3
Net cash from operations 22 47
Investments (114) (151)
Proceeds from disposals 246 143
Free cash flow 154 39
Effect of changes in exchange rates and other (4) (10)
Decrease in net debt 150 29*
*After taking into account the impact on net debt of applying IAS 32and IAS 39.
72
WINTER 2007
CAPACITY BY CATEGORY AND REGION
(in % and thousands of hotel days)
Winter Winter Winter 2007 2005 2006 2007 vs. 2006
2 Tridents 6% 4% 3%3 Tridents 57% 53% 46%4 Tridents 35% 41% 50%Other 2% 2% 1%
Total 100% 100% 100%
Europe 2,984 3,011 2,919 - 3%Asia 786 844 927 9.8%Americas 1,461 1,414 1,523 7.7%
Total worldwide 5,231 5,269 5,370 1.9%
The resegmentation process is continuing, with 3 and 4-Trident
Villages now representing 96% of capacity. More importantly,
for the first time this year, 4-Trident units represent half of total
capacity.
Forecast capacity for the 2007 winter season is up 1.9% compared
with last winter, with variations from one region to another:
• In Europe, the 3% decline is mainly due to the closure of the
Opio Village for renovation.
• In Asia, capacity will increase 10% this winter, with the full
reopening of the Kani Village and the conversion of the
Cherating Village in Malaysia to a year-round unit.
• In the Americas, capacity will expand 8% despite the
closure of Crested Butte, thanks to the reopening of the
Cancún Village and the availability of total capacity at Les
Boucaniers.
The closure of year-round Villages for renovation leads to a
loss of contribution while they are closed. The effect mainly
concerns fiscal 2006 and 2007, with:
• In fiscal 2006, Les Boucaniers, Louxor, the first phase in the
renovation of La Caravelle and Cancún, for the costs not
covered by insurance.
• In fiscal 2007, the closure during the summer of La Pointe
aux Canonniers, Opio and Ixtapa for renovation, and the
final phase in the renovation of La Caravelle.
Management Report
2006 Annual Report // 73
4-Trident Villages, for example, gained 44,000 customers over
the year, an increase of 11%.
These gains in the core target segment helped to partially
offset the reduction in the number of entry-level beds. In
addition, average customer spend improved by nearly 12%.
Lastly, measured customer satisfaction has hit record levels,
especially in the 4-Trident Villages. The figures for "intend to
return" and "good value for the money" are also trending
upwards.
Two high-potential and fast changing regionsThe Americas region has been repositioned in the upmarket
family segment. Based on IPSOS surveys, the number of
potential Club Med customers in the United States has been
estimated at around 28 million people. Club Med enjoys high
local brand awareness, since nearly 90% of high-income
Americans have heard of the Club, far more than for the
Group’s major competitors. In 2008, the Club will offer 12 ren-
ovated Villages in the region, including eight 4-Trident units.
Club Med is making significant inroads in Asia, gaining
20,000 customers in China, Singapore, Hong Kong and Taiwan.
The move upmarket corresponds perfectly to the new demand
from these customers, who want to vacation in exceptional
locations and very comfortable accommodation. Club Med’s
objective is to welcome more than 100,000 GMs from these
countries in 2008.
In both the Americas and Asia, teams have been renewed and
strengthened, to ensure the strategy’s successful implemen-
tation.
MAIN CHANGES IN THE VILLAGE BASE IN FISCAL 2006
The following Villages were sold or permanently closed
in fiscal 2006:
- Flaine (France)
- Valbella (Switzerland)
- Cadaqués (Spain)
- Crested Butte (USA)
- Pakostane (Croatia)
The following Villages were refinanced through sale-and-
leaseback transactions:
- Chamonix (France)
- Avoriaz (France)
- Les Deux Alpes (France)
- Les Almadies (Senegal)
74
BOOKINGS FOR WINTER 2007 COMPAREDWITH WINTER 2006, AS OF 9 DECEMBER 2006
(like-for-like revenue)
Total as of 9 December 2006
Europe + 8.9%Americas + 0.6%Asia + 47.4%
Total Club Med + 10.2%
Jet tours + 2.0%
Bookings are expressed as revenue at constant exchange
rates. As of 9 December 2006, winter 2007 bookings were up
10.2% on the prior-year date.
In Asia, bookings are up by a strong 47.4%.
DIVIDENDNo dividend will be paid in respect of fiscal 2006 (see "General
Information").
OTHER INFORMATION
DIRECTORS’ COMPENSATION
(see "General Information").
OWNERSHIP STRUCTURE
Based on the disclosures received pursuant to Articles L.233-7
and L.233-11 of the French Commercial Code, Richelieu
Finance held more than 20% of the Company’s capital as of
October 31, 2006 (information provided in accordance with
Article L.233-12 of the Code).
At October 31, 2006, 277,305 shares were held in treasury,
representing 1.4% of the capital.
A shareholders’ pact was signed on 9 June 2006 between
Accor (with 6% of the capital), Caisse de Dépôt et de Gestion
du Maroc through its subsidiary Fipar Holding (10% of the
capital), Air France Finance (2% of the capital) and Icade
(4% of the capital). The total shares held by the members of
the pact represented 22% of the capital at the time of signa-
ture. On 1 October 2006, the percentage was reduced to 18%,
following the withdrawal of Icade whose participation was
linked to the execution of a real estate transaction.
(See "General Information").
ACQUISITIONS OF CONTROLLING ANDOTHER INTERESTS IN FRENCH COMPANIES
None.
DEPENDENCE ON PATENTS OR SUPPLYCONTRACTS
None.
EXCEPTIONAL EVENTS, CLAIMS AND LITIGATION
To the best of the Company’s knowledge, there are no claims,
litigation or exceptional events that could have a material adverse
effect on the results of operations, assets and liabilities or finan-
cial position of the Company or the Group.
MAIN COMPETITORS
Because Club Med is not a pure tour operator or a pure hotel
group, unlike most companies in the tourism industry, it does not
have any direct competitors operating on a worldwide scale.
The only companies offering anything close to a competing
product are local in scope.
SUBSEQUENT EVENTS
None.
RISK FACTORS
Club Méditerranée’s corporate risk management policy is
designed to effectively protect both the interests of share-
holders and customers and the environment. It is based on a
map of critical operational risks (see Chairman’s report on
internal control procedures) which serves to prioritize risks
based on their frequency and their financial and business
impact.
1. Economic and geopolitical risksThe Group’s vacation village operations are particularly sen-
sitive to economic cycles and weather conditions. Economic
slowdowns in the regions where the Group does business
adversely affect demand for leisure activities generally and for
vacation travel in particular. Economic-driven fluctuations in
demand can cause significant changes in revenue. The relat-
ed risk is reduced by our business model which focuses on
variabilizing operating costs. Our presence in over forty coun-
tries increases our exposure to worldwide geopolitical risks.
To limit our exposure in high-risk countries, we adopt the most
flexible operating formulas, such as management contracts.
Examples of where this solution is applied include the
El Gouna Village in Egypt and Coral Beach in Israel. In view
of the unpredictability of these risks, it is very difficult to assess
their potential impact on our financial statements.
2006 Annual Report // 75
2. Environmental risks2.1 PREVENTION AND COMPLIANCE
Environmental risk prevention and management
Our businesses do not give rise to any specific environmen-
tal risks. The risk of environmental damage caused by the
technical installations at vacation villages is managed by
performing regular inspections.
Due to the absence of material risks, no environmental pro-
visions or warranties have been recognized in the fiscal 2006
accounts.
More information about the Group’s sustainable development
practices is provided in the Sustainable Development report,
pages 38 to 64.
Compliance
No provisions for environmental liabilities arising from court
decisions have been recorded in the fiscal 2006 financial state-
ments of Club Méditerranée SA.
Objectives assigned to subsidiaries
Our subsidiaries outside France are required to apply our
general environmental policy. They are also encouraged to
share experience and best practices in the areas of business,
the environment and labor relations. We also obtain assur-
ance that our subsidiaries comply with local regulations.
3. Legal risks3.1 LEGAL RISKS ARISING FROM THE GEOGRAPHICDIVERSIFICATION OF THE BUSINESS
The nature of our business and the fact that our operations are
conducted in a large number of countries with differing and
sometimes contradictory regulations is a source of operating
difficulties and can lead to disputes with suppliers, owners or
local authorities.
Provisions are booked for the cost of identified risks, taking
into account the nature of the business and its international
nature, as soon as the amounts involved can be reasonably
estimated.
3.2 LEGAL PROCEEDINGS AND EXCEPTIONAL EVENTS
Information about legal proceedings and exceptional events
that may have, or have had in the recent past, significant effects
on the group’s results of operations is provided in Appendix 10.
To the best of the Company’s knowledge, there are no other
legal proceedings pending or in progress that could have
a material impact on its business or results of operations.
Accounting policies for the recognition of provisions and
liabilities are described in Appendix 10.
4. Insurance - Risk coverageInsurable risks are managed by taking out insurance cover
at Group level. Risk management tools and global insurance
programs have been set up in partnership with pools of
leading insurers. Where necessary, separate cover is purchased
locally or for specific activities.
After the natural disasters of 2005, in fiscal 2006 we followed
a policy of transferring risks to the insurance market whenev-
er possible, without using a captive insurance or reinsurance
company.
The main global insurance programs are as follows:
- Global Third-Party Liability Program, covering the Group’s
liability towards customers and other third parties. The max-
imum insured value of €110 million has been maintained,
based on the nature of our business, an overall assessment
of the risks associated with Club Med sites and case law. The
program provides worldwide cover. To reduce our exposure
to risks, in the interests of our customers, we have set up
reporting systems providing detailed and summary informa-
tion by Village, country and region, on the number and
circumstances of claims, as well as the related cost. This
information ensures that immediate action is taken to
implement preventive and safety measures.
- Property Damage and Business Interruption Program. This
program covers all risks affecting our assets, such as fire and
natural disasters. Coverage is capped at €100 million per
claim, based on the insurance values of assets at the Club
Med sites, with lower caps applying in some specific cases
depending on the type of risk.
In 2006, we purchased insurance cover primarily through the
Marsh global insurance brokerage network. The insurance
pool for our property damage and business interruption pro-
gram was lead-managed by Zurich Assurances and the
London insurance market, and included ACE Europe, AIG
and Swiss Ré International. The new property damage and
business interruption program set up in January 2007 offers
better cover at a more attractive price. The new program is
lead-managed by ACE Europe.
Management Report
76
The insurance pool for the 2006 third-party liability program
is lead-managed by Generali and includes GAN, AWAC and
ACE. In addition to insuring our own risks, we offer all of our
customers throughout the world extensive assistance cover
purchased from Europ Assistance.
5. Market risksIn the normal course of business, we are exposed to various
financial risks, including liquidity risks, market risks (particularly
currency and interest rate risks) and credit risks. The Treasury
and Financing unit of the Corporate Finance department is
responsible for managing liquidity, interest rate, currency and
counterparty risks at Group level.
From time to time, we may use derivative financial instruments
to hedge currency risks arising in the course of our business
and interest rate risks on floating rate debt. In practice, these
instruments are used primarily to hedge currency risks on
future transactions. The Treasury and Financing unit identifies,
assesses, manages and hedges financial risks in accordance
with the policies approved by the Audit Committee. Specific
rules have been drawn up and approved banning the use of
derivative instruments for trading purposes.
5.1 LIQUIDITY RISK
Liquidity risk is managed by the Treasury and Finance unit with
the aim of ensuring that the Group will be able to replace its
sources of financing when they mature, while at the same time
optimizing annual borrowing costs.
Diversified sources of financing are used, according to the
Group’s needs.
The categories and characteristics of debt and other interest-
bearing liabilities are described in Note 18 to the consolidated
financial statements. The breakdown of financial liabilities by
maturity is presented in Note 19.3.
Loan agreements include covenants which, if breached,
could result in the outstanding loan becoming immediately
repayable.
These covenants have been redefined, effective from
30 April 2006, to take into account the transition to
International Financial Reporting Standards (IFRS). The
covenants define EBITDA as Operating income - Leisure
before depreciation, amortization and provisions.
The financial ratios to be complied with under the bank
covenants are as follows:
- Off-balance sheet commitments Less than €200 million
- Gearing Less than 1
- Leverage (net debt/Ebitda (as defined above)) See below
Ratios applicable to the €70 million syndicated line of credit
and loan secured by the Club Med 2 cruise ship and the
Da Balaïa Village*:
30 April 31 October
2007 4.17 4.17
2008 3.88 3.88
2009 and beyond 3.58 3.58
* Until 30 April 2008 for Da Balaïa.
The covenants were complied with at 31 October 2006:
- Off-balance sheet commitments
(less than €200 million): €91 million
- Gearing (less than 1): 0.57
- Leverage (net debt/Ebitda (as defined above))
(less than 4.47): 3.26
In addition the Group’s confirmed lines of credit and other
facilities include acceleration clauses that would apply in the
case of any breach of its covenants or significant asset sales
(see Note 19 to the consolidated financial statements).
5.2 INTEREST RATE RISK
A weekly debt reporting system has been set up, using Finance
Active software.
The Group does not hold any material interest-bearing assets.
It is exposed to two types of interest rate risk:
- Fair value risk on fixed rate net debt. This type of risk is not
hedged. The carrying amount of financial assets and liabili-
ties is not adjusted for changes in interest rate risk and fair
value risk therefore corresponds to the opportunity cost of
a fall in rates.
- Cash flow risk on floating rate net debt, corresponding to
the impact on finance costs of an increase in interest rates.
The Group has a combination of fixed and floating rate debt.
2006 Annual Report // 77
In fiscal 2006, no interest rate hedges were set up as average
floating rate net debt represented less than €50 million. Our
exposure to the risk of an increase in interest rates therefore
corresponded to this amount. A 100-basis point increase or
decrease in short-term interest rates would have the effect of
raising or lowering finance costs by €500,000.
5.3 CURRENCY RISK
The geographic diversification of our Villages and sales offices
exposes us to the risk of fluctuations in the exchange rates
of our transaction currencies compared to our functional
currency.
To reduce this risk, we use derivative financial instruments to
hedge budgeted cash flows for the coming year. The policy
consists of:
• Hedging the main currencies in which sales are denominated
(British pound, Japanese yen, Canadian dollar, Australian
dollar, Korean won, etc.).
• Hedging our exposure to the US dollar, which is both a billing
currency and a functional currency.
• Not systematically hedging other functional currencies
(Moroccan dirham, Turkish pound, Tunisian dinar, Indonesian
rupee, Thai bath, etc.), which are purchased as and when
required.
Hedging instruments consist of forward purchases and sales
of foreign currencies and non-deliverable forwards.
Our net exposure to currency risks on operating transactions
is presented in Note 19.5.2 to the consolidated financial
statements.
Our exposure to currency risks on external debt is limited and
intra-group financing is generally denominated in the sub-
sidiary’s functional currency. Changes in the value of hedges
of the net investment in foreign operations are recognized
directly in equity.
The Group’s net investment in foreign operations is exposed
to the risk of fluctuations in foreign currencies against the euro.
The impact of these fluctuations on net investments in inde-
pendent subsidiaries is recognized as a separate component
of equity. This risk is not hedged using derivative instruments.
5.4 CREDIT AND COUNTERPARTY RISK
Most customers pay for their vacation before they leave and
our exposure to credit risk on commercial transactions is
therefore limited.
Transactions involving derivative instruments and borrowings
are entered into with a wide range of leading counterparties.
Temporary cash surpluses, representing limited amounts,
are invested in certificates of deposit or Sicav mutual funds
purchased from leading banks.
5.5 EQUITY RISK
We do not hold any listed equities, apart from treasury stock
which is recorded as a deduction from equity. As a result, we
are not exposed to any risk of fluctuations in stock prices.
PARENT COMPANY
The parent company of the Club Méditerranée Group is Club
Méditerranée SA. As well as acting as the Group holding
company, Club Méditerranée SA operates Villages under the
Club Med brand in France and abroad.
Consequently, its financial results and their year-on-year
change only partially express the Group’s performance and
do not reflect the same trends as the consolidated financial
statements.
Club Méditerranée SA ended the year with a net loss of €14
million compared with net income of €94 million for the year
ended 31 October 2005.
The loss was primarily due to the swing to net financial
expense of €9 million from net financial income of €94 million
in fiscal 2005, following a change in the method of calculating
provisions on subsidiaries.
Management Report
78
8 March 2007: Annual Shareholders’ Meeting and first-quarter revenue announcement
8 June 2007: Interim results announcement
September 2007: Third-quarter revenue announcement
13 December 2007: Fiscal 2007 results announcement
2007 financial reporting calendar
2006 Annual Report // 79
Chairman’s report
This report has been drawn up in accordance with para-
graph 6 of Article L.225-37 of the French Commercial
Code, as amended by Act 2005-842 of 26 July 2005.
Its purpose is to report to shareholders on the condi-
tions underlying the preparation and organization of
the work of the Board of Directors ("the Board") and
the internal control procedures set up by Club
Méditerranée SA ("the Company").
I. PRACTICES AND PROCEDURES
The Board’s practices and procedures are governed by French
law, the Company’s by-laws, and the internal rules of the Board
and the Board Committees.
1.1 MEMBERSHIP, PRACTICES ANDPROCEDURES
1.1.1 Members of the BoardArticle 14 of the Company’s by-laws states that "The Company
shall be administered by a Board of Directors comprising
between three and eighteen members".
At 31 October 2006, the Board was composed of eleven
voting directors and two non-voting directors. The directors’
biographies and details of their other directorships and func-
tions are provided on page 158.
In compliance with its internal rules, the Board regularly checks
that its members include the requisite number of independent
directors, based on the independence criteria defined
in France’s Bouton report on corporate governance. In
accordance with these criteria, a director is deemed to be
independent when he or she:
- has not been a director of the Company for more than
twelve years;
- is not an employee or corporate officer of the Company,
nor an employee or director of its parent or one of its
consolidated subsidiaries, and has not been one during the
previous five years;
- is not a corporate officer of a company in which the
Company is a corporate director, either directly or indirectly,
or in which an employee appointed in that role, or a
corporate officer of the Company (currently in office or
having held such office in the past five years), is a director;
- is not a customer, supplier, investment banker or commercial
banker (i) that is material for the Company or Group, or (ii)
for which the Company or Group represents a significant
portion of the business of the director concerned;
- does not have close family ties with a corporate officer;
- has not been an auditor of the Company within the previous
five years;
- does not, in whole or in part, control the Company; for direc-
tors holding in excess of 10% of the Company’s capital
and/or voting rights, the classification as independent takes
into account the Company’s ownership structure and any
potential conflict of interests.
Based on these criteria, at its meeting on 28 September 2006
the Board classified eight of the eleven directors as independent.
1.1.2 Board practices and proceduresINTERNAL RULES
At its meeting on 16 March 2005 the Board adopted a set of
internal rules governing its organization, practices and proce-
dures. These are based on French law, the Company’s by-laws
and the recommendations set out in the France’s AFEP-
MEDEF Corporate Governance Code for listed companies
published in October 2003.
Chairman’s Reporton the practices and procedures of the Board ofDirectors and internal control procedures
80
The internal rules stipulate that the Board should meet as
often as required in the Company’s interests. They describe
the terms of reference and powers of the Board, define the
practices and procedures of the Board Committees, and
impose a duty on directors to treat as strictly confidential all
information obtained in their capacity as Board members, as
well as the duty to comply with the fundamental principles of
independence, ethical conduct and integrity. The internal
rules also require each director to disclose to the Board any
actual or potential conflict of interest in which he or she may
be directly or indirectly involved, and in such a case to abstain
from taking part in any discussion and/or vote on the matters
in question. In addition, they set out the rules applicable
to trading in the Company’s shares, as set out in Article
L.621-18-2 of the French Monetary and Financial Code and
Articles 222-14 and 222-15 of the AMF’s General Regulations.
The internal rules state that directors may participate in Board
meetings by videoconference or using other forms of
telecommunication technology (including conference calls
and any other interactive means of electronic communication)
that enable them to be identified and to effectively participate
in the discussion and vote, subject to compliance with the
applicable regulations. Accordingly, directors who take part
in Board meetings through such means are deemed to be
present for the purposes of calculating the quorum and
voting majority, except for Board meetings held to approve
the financial statements of the Company and the Group and
the related management report.
BOARD MEETINGS
• Average period of notice for calling Board meetings
The provisional schedule of meetings of the Board and Board
Committees is sent to each director at the beginning of the
fiscal year. The average period of notice for calling these
meetings is approximately two weeks.
• Chairman
Board meetings are chaired by the Chairman of the Board or,
in his or her absence, by the Vice-Chairman or by a director
designated as acting Chairman or by another director desig-
nated by the Board. All of the meetings in fiscal 2006 were
chaired by the Chairman of the Board.
• Directors’ right to information
The Chairman of the Board is required to provide directors
on a timely basis with any and all documents and information
they may need to fulfill their duties.
During fiscal 2006 the Board met four times with an average
attendance rate of 85%. Each meeting lasted an average of
two hours.
The Company’s Chief Financial Officer and the Senior
Executive Vice-President - Europe-Africa & North America
attended all of the Board meetings.
1.2 ROLE AND RESPONSIBILITIES OF THEBOARD AND BOARD COMMITTEES
1.2.1 Role of the BoardIn accordance with Article L.225-35 of the French Commercial
Code, the Board determines the Company’s strategy and
oversees its implementation. Except for the powers directly
vested in shareholders, the Board considers all matters
concerning the efficient management of the Company and
makes all related decisions within the limits set by the
Company’s corporate purpose.
In fiscal 2006, the Board examined the financial statements
of the Company and the Group for the year ended 31 October
2005, approved the reports and resolutions to be presented
at the Annual Shareholders’ Meeting of 14 March 2006,
reviewed the Group’s quarterly performance and results,
reviewed the budget and the business plan, examined the
impact on the consolidated accounts of the transition to
International Financial Reporting Standards (IFRS), analyzed
the financial statements of the Company and the Group for
the first half of fiscal 2006, set up stock option plans for
members of senior management and certain employees, and
reviewed the plan drawn up with the aim of leveraging syner-
gies with the Accor group. The Board also examined and
approved capital expenditure requests (including for asset
acquisitions and hotel renovation projects) and planned
disposals for amounts requiring the Board’s prior approval
pursuant to its internal rules.
During the year the Board also reviewed the reports of the
various Board Committees.
1.2.2 Roles of the Board CommitteesAt its meeting on 16 March 2005, the Board set up three stand-
ing Committees whose role is to facilitate the work of the
Board and efficiently contribute to preparing Board decisions
– the Audit Committee, the Nominations and Compensation
Committee and the Strategy Committee.
The Board of Directors appoints the members of these
Committees (including the Chairman) from among its members.
2006 Annual Report // 81
THE AUDIT COMMITTEE
The Audit Committee has four members – including three
independent members – who are appointed for their term of
office as director.
The current Audit Committee members are David Dautresme
(Chairman), Véronique Morali, Philippe Adam and Pascal
Lebard. In accordance with best corporate governance prac-
tice, no executive directors sit on the Audit Committee.
The rules governing the Audit Committee’s organization,
modus operandi, tasks and duties are described in a specific
Charter that was unanimously approved by the Committee’s
members during its meeting of 8 June 2005. The Audit
Committee is one of the key components of the corporate
governance structure set up by the Company. It is responsible
for assisting the Board with reviewing and approving the interim
and annual financial statements, as well as for advising on
transactions or events that could have a material impact on
the financial position of the Group or its subsidiaries in terms
of commitments and/or risk.
The roles and responsibilities of the Audit Committee are to:
- Review the annual and interim financial statements of the
Company and the Group, together with the related reports.
- Ensure that the data in these financial statements are consis-
tent with other information available to the Committee.
- Ensure that the accounting policies used to prepare the
financial statements are appropriate and have been applied
consistently from one period to the next.
- Check the effectiveness of internal reporting and control
procedures.
- Analyze recent regulatory developments and assess their
impact on the financial statements.
The Committee reviews the work performed by the Statutory
Auditors. In addition, it examines audit service proposals and
makes recommendations concerning the appointment or
re-appointment of the Statutory Auditors. At its meeting
on 5 December 2006, the Audit Committee recommended
renewing the appointment of the current Auditors and their
substitutes.
The Audit Committee met twice in fiscal 2006, with an average
attendance rate of 75%.
During these two meetings, which were dedicated to review-
ing the annual and interim financial statements, the Committee
checked that the closing process had gone smoothly and was
presented with a report on the work of the Statutory Auditors.
The Committee also examined (i) the tax audits in progress
within the Group, (ii) ongoing measures to rationalize the
Group’s legal structure by reducing the number of separate
companies, (iii) hedging operations, (iv) the Group’s real-estate
portfolio, and (v) refinancing operations.
In addition the Audit Committee reviewed the work of the
internal auditors and their internal control assessments, and
gave its opinion on the internal audit plan.
Lastly, the Committee was informed of the work performed by
the Internal Audit Department to update the Chairman of
the Board’s report to shareholders on internal control.
THE NOMINATIONS AND COMPENSATION COMMITTEE
The Nominations and Compensation Committee has three
members, all of whom are independent: Thierry de La Tour
d’Artaise (Chairman), Anne-Claire Taittinger and Saud
Al Sulaiman. In accordance with best corporate governance
practice, no executive directors sit on the Committee.
The roles and responsibilities of the Nominations and
Compensation Committee are to:
- Review candidates for election to the Board – either at its
own initiative or on the request of the Board – based on
the candidates’ skills, business experience, and economic,
social and cultural background.
- Review candidates for the position of Chief Executive Officer
and, where appropriate, Chief Operating Officer.
- Review the membership structure of Board Committees and
make related recommendations.
- Recommend methods for determining the compensation
payable to the Chairman of the Board, the Vice-Chairman
and the Chief Executive Officer and, at the Chairman’s
request, compensation payable to the Group’s Executive
Vice-Presidents and senior executives.
- Review proposed stock option plans and stock grants for the
management and employees of the Group (including exec-
utive directors).
- Obtain all the required information concerning the compen-
sation and status of Group executives.
- Make proposals and recommendations concerning atten-
dance fees and any other compensation and benefits for
members of the Board (including non-voting directors).
The Nominations and Compensation Committee met twice
in fiscal 2006, with a 100% attendance rate. During these
meetings the Committee recommended that the Board grant
250,000 stock options to executive directors and selected
members of management. This recommendation was adopted
by the Board at its meeting of 14 March 2006.
Chairman’s report
82
THE STRATEGY COMMITTEE
The Strategy Committee has eight members, five of whom
are independent. The current Committee members are
Henri Giscard d’Estaing (Chairman), Véronique Morali,
Philippe Adam, Mustapha Bakkoury, Paul Jeanbart, Aimery
Langlois-Meurinne, Pascal Lebard and Tetsuya Miyagawa
(non-voting director).
The role of the Strategy Committee is to review:
- The main growth strategies of the Company and its
subsidiaries, from both a financial and commercial perspec-
tive – focusing particularly on ensuring that changes to the
product offering appropriately reflect the Company’s image
and corporate culture.
- The three-year business plan presented annually by the Chief
Executive Officer.
The Strategy Committee receives input from all of the Group’s
corporate departments.
The Strategy Committee met once in fiscal 2006, with an
attendance rate of 89%. The purpose of the meeting – which
was held on 27 October 2006 – was to review and approve the
2007-2009 business plan.
1.3 RESTRICTIONS ON THE POWERS OF THE CHIEF EXECUTIVE OFFICERIMPOSED BY THE BOARD OF DIRECTORS
RESTRICTIONS RESULTING FROM INTERNAL RULES
At its first meeting, which was held on 16 March 2005, the
Board decided to combine the functions of Chairman of the
Board and Chief Executive Officer, and appointed Henri
Giscard d’Estaing as Chairman and CEO. This decision
reflected the Board’s view that combining these two positions
would be the best way of ensuring the success of the Group’s
upmarket strategy.
In accordance with Article L.225-56 of the French Commercial
Code the Chief Executive Officer has the broadest powers to
act on behalf of the Company under all circumstances within
the scope of the corporate purpose, except for those powers
directly vested by law in shareholders and the Board of
Directors. The Chief Executive Officer represents the Company
in its dealings with third parties.
For internal purposes, the Board decided that certain trans-
actions and decisions require its prior approval due to their
nature and/or the amounts involved. These include:
• The annual budget.
• The 3-year business plan.
• Any capital projects or asset disposals not included in the
annual budget representing an aggregate amount of more
than €9.2 million.
- Purchases and sales – for cash or stock – of property, plant
and equipment, intangible assets, rights or securities, and
the creation of any and all companies, partnerships and
business ventures, representing an investment or disposal
proceeds in excess of €15.3 million. This restriction does
not apply, however, to related party transactions not
governed by Article L.225-38 of the French Commercial
Code.
- New loans and borrowings (including bond issues and
short-term advances) in excess of €45.8 million.
- Transactions in settlement of claims or litigation repre-
senting over €6.1 million.
REPORTING RULES
The Chief Executive Officer is required to report regularly to
the Board on the use of his powers, particularly in relation to
share buyback programs and the issuance of guarantees, as
well as regularly updating the Board on specific matters such
as changes in the Company’s ownership structure and strate-
gic partnerships.
II. INTERNAL CONTROL PROCEDURES
2.1 DEFINING INTERNAL CONTROL OBJECTIVES
DESCRIPTION OF INTERNAL CONTROL OBJECTIVES
According to the internal control reference framework pub-
lished on 31 October 2006 by the working group of the
Autorité des Marchés Financiers, internal control is a system
developed and implemented by a company that provides
assurance concerning:
- The company’s compliance with the applicable laws and
regulations.
- Application of senior management instructions and
strategic guidelines.
- The effectiveness of internal processes, particularly those
contributing to the protection of assets.
- The reliability of financial information.
The system contributes to the overall control of the business,
the effectiveness of its operations and the efficient utilization
of resources.
2006 Annual Report // 83
By helping to limit and manage the risk of the Company fail-
ing to meet its objectives, the internal control system plays a
key role in the conduct and management of the business.
However, no system of internal control can provide an absolute
guarantee that the company’s objectives will be met.
Club Méditerranée’s internal control system is organized
on a decentralized basis, underpinned by rules relating to
organization, strategies, procedures and practices aimed at
controlling risks that may have a material impact on the
Group’s assets or on its ability to achieve its objectives.
The purposes of the procedures in place within the Company
and its subsidiaries are to:
- Ensure that all acts of management, all transactions, and
the behavior of all Company employees comply with the
general strategic guidelines established by the Company’s
corporate governance bodies, the applicable laws and
regulations, and the Company’s corporate values, standards
and internal rules.
- Protect the Group’s assets.
- Provide assurance that the accounting, financial and
management information submitted to the Company’s
corporate governance bodies gives a true and fair view of
the Company’s operations and financial position.
In order to meet these goals, internal control procedures in
each Business Unit extend to every level of the organization
and are the responsibility of the operating and corporate
departments.
THE CONTROL ENVIRONMENT
• Internal standards
Code of Ethics and best practices
Following a decision by the Executive Board on 23 June 1997,
the Group drew up a Code of Ethics in order to raise employ-
ee awareness about the fact that certain types of activities
and relationships are heavily restricted, and in some cases
must be avoided at all costs. This Code covers topics such as
potential conflicts of interest, Group policy concerning gifts,
benefits, invitations and payments to employees, as well as
the use of confidential information, compliance with applica-
ble laws in the Group’s host countries and adherence to Group
strategy. A questionnaire is sent to all Group employees, in
which they are required to answer yes or no to questions about
whether they (i) may have direct or indirect conflicts of inter-
est with the Group, (ii) are prepared to comply with all aspects
of the Code of Ethics and have taken all requisite measures
to ensure that close members of their family do likewise, and
(iii) will promptly inform the Human Resources Department
of any event or situation covered in the Code that may con-
cern them.
Internal Audit Charter
The aim of the Internal Audit Charter is to define the role,
objectives and responsibilities of the Group’s Internal Audit
team and ensure that this team can perform its duties appro-
priately.
Procedures
Accounting and financial procedures, as well as general
procedures relating to each of the Group’s main businesses
are sent out to the various managers and their teams and are
centralized within the Internal Audit Department.
The procedures concerning the Group’s Villages can be
viewed on Club Med’s intranet and are regularly updated.
Crisis management manual
The purpose of this manual is to set out the procedures to
be applied in the event of a sensitive or emergency situation.
Compiled by the Health, Safety and Security Department with
a view to both preventing and dealing with such events, the
manual contains numerous examples of typical situations that
may occur at the Group’s facilities or in its host countries,
including outbreaks of diseases, hostilities and natural disasters.
The manual is also used in all internal training sessions on
crisis management and communication.
2.2 MEETING INTERNAL CONTROL OBJECTIVES
2.2.1 Internal control proceduresrelating to operating controls andregulatory compliance OPERATING CONTROLS
Effective operating controls consist of gauging client satisfac-
tion and monitoring quality, as well as ensuring that the
Group’s global information systems are sustainable and
adequately backed up.
• Quality
Improving quality has always been an essential part of Club
Méditerranée’s corporate culture. For this reason, in recent
years the Quality Department has taken steps to set up a struc-
tured process in line with developments concerning the
Company as well as its products and markets. This process
hinges on tracking products and carefully assessing feedback
from the Group’s customers (“GMs”).
Chairman’s report
84
GM Feedback
GM Feedback is a satisfaction survey sent to all GMs around
the globe. Over 390,000 questionnaires are sent out, in nine
different languages, and GMs can respond either by post or
online via “e-Feedback”. The average response rate is 40%,
with highs of 44% in France and 47% in Switzerland. The
response rate is also very high for non-European customer
bases, such as the United States (31%).
GM Feedback is a valuable tool for monitoring progress made
by the Group and serves as an internal benchmark. The results
are analyzed and taken into account in the day-to-day man-
agement of the Villages and also in selecting long-term strate-
gic options. The results are sent to a wide range of people
within the Group, from the Village Manager to the Senior
Management Committee, as well as to the operating depart-
ments concerned.
Quality standards
Club Méditerranée required a set of quality standards that
would be sufficiently rigorous to ensure consistent levels of
service over time and from one Village to another, while also
being flexible enough to let the Group’s teams give free rein
to spontaneous and creative ideas. These standards – called
“Quali Signs” – were drafted by over 600 GOs throughout the
world. A manual was then compiled for each Village depart-
ment, which can be viewed on the Group’s intranet. Quali
Signs have also been put in place for Club Med Agencies and
for visitor reception areas at the Company’s headquarters.
Practical guidelines have been drawn up for each Club
Méditerranée profession in order to deliver the service quality
that customers expect and that complies with the Quali
Signs standards. Procedures and best practices for more than
110 of the Group’s professions were developed by experts in
each field and grouped together as standards called “Pro
Signs”. The Human Resources, Purchasing and Safety depart-
ments all contributed towards creating the Pro Signs, which
define the duties of members of each hotel profession and
set out rules relating to attitudes, behavior and safety, as well
as the procedures to be implemented before, during and after
the season. A list of the available tools is also provided, with
a view to continually enhancing the professional approach of
the Group’s GOs and GEs.
Mystery visits
Mystery visitors from an external specialist company visit
the Group’s Villages and carry out checks covering some
650 issues. A report is sent to the Village manager within ten
days of these visits, enabling numerous points to be improved.
• Information systems
The reservation system and related data, as well as Club
Méditerranée’s accounting system, are major assets for the
Group. The Information Systems Department has set up the
following procedures in order to minimize the risks of system
downtime due to major failures, fire or site damage or other
incidents:
- All hardware and software components are split between
two distinct but interconnected sites.
- Data is replicated in real time between the two sites and can
be accessed indifferently by either of the two sites.
- A recovery plan has been drawn up so that key applications
such as reservations and accounting can be restarted with-
out delay. Less important applications – including resource
management and decision-making tools – also form part of
this plan wherever possible.
Each information system user can store important data on a
secure server.
The Group’s information systems are accessed via an interna-
tional telecommunications network that operates around
the globe. Strict access controls prevent unauthorized
access to the Group’s systems from the computer terminals
and work stations linked up to this network. The risk of an
intruder hacking into the network and/or a centralized appli-
cation is assessed and tested on a periodic basis.
User profiles and access rights are managed jointly with the
Human Resources Department in order to ensure that only
people within the Group can access its systems.
REGULATORY COMPLIANCE – THE LEGAL AFFAIRS AND INSURANCE DEPARTMENTS
• Structure
The role of the Legal Affairs Department is to protect and
safeguard the assets and operations of the Group as a whole,
as well as to defend the interests of the Group, its officers and
employees in the performance of their duties, and to ensure
that Club Méditerranée complies with local laws and regula-
tions in its host countries.
The Americas and Asia regions each have their own Regional
Legal Director who is responsible for protecting and defend-
ing Club Méditerranée’s interests. The Group Legal Affairs
Department performs this role for Europe and Africa.
2006 Annual Report // 85
The role of the Insurance Department – which reports to the
Group General Counsel – is to ensure that the Group has
adequate insurance coverage in relation to the nature and
extent of its risks. Risk management and insurance policies are
organized on a consolidated basis. The Group has set up risk
management tools and global insurance programs with pools
of top-ranking insurers, and specific insurance coverage is
taken out at a local level.
In light of the specific nature of the US market, particularly in
terms of liability and litigation, Club Méditerranée has set up
a local Risk Management department in that country which
works closely with the Group Insurance Department.
• Procedures
The Regional Legal Directors are required to notify the Group
Legal Affairs Department of issues which are deemed to be
sensitive. A list of these sensitive issues is provided at the
beginning of each fiscal year and generally includes:
- Significant arbitration or legal proceedings.
- Any criminal proceedings taken against Club Méditerranée
or any of its executives or employees.
- Growth projects requiring the authorization of the Board of
Directors or that involve a particular risk for the Group (e.g.
legal or financial risks).
- Guarantees issued in the name of the Company and/or its
subsidiaries and any liens or charges on the Group’s assets.
- Material purchases or sales of property, plant and equip-
ment, intangible assets, rights or securities, and the creation
of companies, partnerships or other business ventures.
- Projects involving the creation of an entity in which the share-
holders have unlimited liability.
- Any matters that could have a future impact on the Group’s
day-to-day operations or that raise issues of principle con-
cerning the running of the Group.
- Any transactions between Club Méditerranée SA and any
one of its subsidiaries or between Group subsidiaries or
between companies with common directors.
- Any matter that is considered as needing to be brought to
the attention of senior management as it could damage the
image of the Group or be contrary to its corporate ethics.
2.2.2 Internal control procedurescovering the preparation and processing of accounting and financialinformation The Group’s financial information is directly derived from its
integrated accounting and management system, which is
linked up to a global database. This technology enables the
Group to monitor, on a real time basis, accounting changes
from numerous input locations throughout the world, such as
Villages and representative offices at country or regional level.
Data is automatically transferred to the Group’s management
and consolidation system on a monthly basis.
The Group publishes financial information based on its
internal reporting format. Accounting and financial informa-
tion is prepared by the Finance Department which oversees
the work of the Accounting, Management Control, Treasury
& Financing, Tax and Internal Audit Departments. The Internal
Audit Department performs cross-business controls for all of
the Group’s operations and cash flows.
Each Business Unit has a Managing Director and a Finan-
cial/Management Control Department whose manager
reports to the Executive Vice-President, Chief Financial Officer.
One of the main objectives of an internal control system is to
contribute to ensuring that the financial statements of the
Company and the Group provide a true and fair view of the
Group’s assets, liabilities and results of operations as well as
a reasonable assessment of any potential risks to which the
Group may be exposed.
Club Méditerranée has set up a series of controls at each
Business Unit in order to monitor the principal risks inherent
in their operations and the related financial consequences.
These controls include checks on the input of monthly
revenue figures, the tracking of capital expenditure and debt
recovery data, as well as the monitoring of local tax regula-
tions, purchases, and financial information reported by all of
the Group’s host countries. They are performed regularly by
members of the Finance Department at country, regional and
Group level.
THE ACCOUNTING DEPARTMENT
• Structure
The Accounting Department organizes and plans all of the
Group’s accounting tasks in order to ensure that consolidated
data is consistent and reliable. This task is facilitated by the
use of a Group chart of accounts.
The Management Controller of each Village is responsible
for accounting, management and internal control issues at
his or her site, while the representative office in each country
deals with specific local issues and performs an accounting
oversight role.
The Group produces monthly accounts.
Chairman’s report
86
• Procedures
The main monthly accounting controls are as follows:
- Suppliers: a check is carried out to ensure that the different
systems are correctly interfaced (trade payables balance in
the aged payables system and the trade payables balance
in the general ledger system). A control is also performed
on amounts due from suppliers.
- Trade receivables: the Sales Departments analyze and
explain any differences compared with the Group’s gen-
eral terms of sales, such as extended payment terms. The
Receivables Accounting Department at the Head Office
and the Finance Managers then check these explanations
based on the receivables ledgers.
- Checks performed by the Headquarters Accounting
Department on current account balances between Club
Méditerranée SA and other Group entities.
- Bank reconciliations.
- Revenue by country: the various entities validate that
revenue and receivables figures have been correctly
entered by type of structure (Reseller or Agent) and that
data from the reservation system is properly fed into the
accounting system.
- A system has been set up to control the automatic interfaces
with fixed asset management systems. Automatically gen-
erated depreciation and amortization charges are checked
on a monthly basis.
The Consolidation Department also performs the following
key controls:
- Reconciliation of intra-group current accounts at Group level.
- Monthly analysis of the components of consolidated profit:
Operating profit – Leisure, Operating profit – Management
of assets, Other operating income & expense, Finance costs
and other financial income & expense.
- Reconciliation between the asset management system and
the accounting system in order to ensure data consistency.
The consolidation system includes programmed controls to
ensure that accounting flows such as increases, decreases
and reclassifications have been correctly recorded by the
various entities.
- Extensive balance sheet analyses, performed in March and
September. At the interim and annual balance sheet dates
in April and October an in-depth analysis is performed of all
balance sheet, off-balance sheet and cash flow statement
items, and is subsequently published in the notes to the
financial statements.
- Analyses of foreign exchange gains and losses, by currency
pair.
The following controls are also performed on a monthly basis
in coordination with the Management Control and Treasury
& Financing Departments:
- Reconciliation of revenue to sales data.
- Reconciliation of Operating profit – Leisure to profit reported
in the management accounts.
- Capital expenditure analyses.
- Analyses of finance costs and other financial income and
expense, including foreign exchange gains and losses.
- Net debt analyses.
The Group’s transition to International Financial Reporting
Standards was completed in fiscal 2006 and these standards
are now applied by all local entities for consolidated reporting
purposes.
THE MANAGEMENT CONTROL DEPARTMENT
• Structure
The Management Control Department is responsible for
coordinating this function worldwide. Each region also has a
management control department staffed by locally based
controllers.
• Procedures
Three-year business plan
The rolling three-year business plan reflects the main changes
expected to affect the Group during the period as well as their
financial impacts. The narrative section of the plan includes
data from market research carried out in the Group’s strategic
countries and the related action plans. The business plan
schedules simulate the financial impacts of the Group’s strat-
egy and the macro-economic environment, including such
variables as growth in the tourism sector and changes in
exchange rates.
Rolled forward annually, the plan forms the basis for income
statement, balance sheet and cash flow projections.
Budgetary process
The budgetary process – which is coordinated by the
Management Control Department - begins at Village and sales
office level. Local budgets are consolidated first by Business
Unit and then at Group level.
The budgetary process is an effective internal control tool that
enables the Group to analyze all of its financial flows.
The budget is presented to the Board of Directors for approval
in October of each year.
2006 Annual Report // 87
A detailed monthly reporting process
All entities submit monthly reporting packages. Each Business
Unit presents its results for the month at a Senior Management
Committee meeting. Monthly consolidated income state-
ments are also produced, based on the management accounts
which comprise the same underlying transaction data as the
statutory accounts.
Forecasts
The Management Control Department draws up forecasts for
the remainder of the season based on actual figures for the
first two months and updated forecasts for the remaining
months. This process enables the Group to assess the impact
of any changes in operations. The forecasts are revised after
each monthly close until the end of the season.
The main controls performed by the Management Control
Department are as follows:
- Detailed analyses of revenue by outbound and inbound zone.
- Detailed profitability analyses covering, in particular, trans-
port margins, operating margins, Village and Headquarters
cost controls.
- Reviews of employee numbers.
THE TREASURY & FINANCING DEPARTMENT
• Structure
The Treasury & Financing Department is responsible for man-
aging the Group’s capital and liquid resources. As part of
this role it is responsible for relations with the banks, and for
managing cash flows, currency and interest rate risks, as well
as debt. It is also in charge of asset management and assists
the Development Department in arranging financing for new
projects.
• Procedures
A monthly reporting system has been set up, covering funds
generated by operations, debt and finance costs, cash fore-
casts and currency and interest rate hedges.
A summary of the Group’s dealings with its banks is drawn up
– including details of fund flows and commitments, account
movements and banking terms and conditions – to enable the
Group to decide whether any changes are required, such as
adjusting currency and interest rate hedges or cash forecasts.
This reporting process is also used to closely monitor liquidity
risk.
The Treasury & Financing Department has set up procedures
aimed at limiting the risk of fraud and error concerning trans-
fers of funds. These procedures include strict rules applica-
ble on an international scale for bank transfers to third parties,
authorized signatories (including a double signature process)
and payments by bank card.
The Group regularly checks that its cash pool is operating
efficiently and tracks and analyzes bank charges.
Tasks relating to financial market transactions are segregated
with orders, execution and controls carried out by three
different people.
All currency hedges are systematically presented to the Audit
Committee.
THE TAX DEPARTMENT
• Structure
The Tax Department is responsible for coordinating interna-
tional tax issues, ensuring that taxation policies are applied
consistently by each Business Unit and monitoring all tax audits
carried out on Group companies. At the level of the parent
company, the Department ensures that the company complies
with all its tax reporting obligations as head of the French tax
group, monitors tax audits carried out on the companies in
the tax group and manages tax disputes. The American and
Asian regions have their own Tax Director who is responsible
for these issues on a regional basis, while the Group Tax
Department covers Europe and Africa.
• Procedures
- The Finance Directors in the national representative offices
for the Europe-Africa region and the Tax Directors for the
other regions have a duty to report any emerging tax issues.
- Bi-monthly reporting to the Executive Vice-President, Chief
Financial Officer.
- Six-monthly reporting to the Finance Department, including
the following data for each country in the Europe-Africa
region – legal organization chart, taxable profit for each com-
pany and intra-group current accounts, summary data sheets
showing key figures for the previous period, an analysis of
exceptional transactions that could have a tax impact, and
other events that may affect the Group’s accounts.
Chairman’s report
88
- Six-monthly reporting to the Audit Committee on any tax
audits and/or disputes that could impact the Group’s
accounts.
THE INTERNAL AUDIT DEPARTMENT
The Internal Audit Department ensures that internal control
procedures are effectively conveyed and respected across the
Group and verifies that they are properly applied throughout
the various departments. It also helps to enhance the Group’s
performance and operations by assisting the Executive
Management team in its decision-making process.
• Structure
The Internal Audit Department is a centralized structure based
at the Company’s headquarters. It comprises six people who
carry out cross-functional audits of all of the Group’s opera-
tions and transaction flows.
The Internal Audit Department reports directly to the Executive
Vice-President, Chief Financial Officer.
• Role and responsibilities
The internal auditors perform audits of specific functions or
businesses at Group, Headquarters, country and Village level.
They coordinate their work with that of the Statutory Auditors.
The internal auditors’ activities cover:
- Financial audits, which consist of reviewing the financial
statements and examining the systems and rules set up to
ensure the reliability of financial information.
- Operational audits, which include reviewing the various
cycles (such as sales, purchasing and human resources) and
assessing internal control procedures in order to obtain
assurance that the organization in place contributes to man-
aging Group risks and meeting Group objectives.
- Specific engagements, corresponding to various one-off
projects such as providing support for operations staff, or
organizational and diagnostic work.
The Internal Audit Department also takes part in events such
as financial seminars and training sessions for both new and
experienced managers, with a view to relaying a control culture
throughout the Group and driving changes to improve the
internal control and risk management environment.
• Operational structure and procedures
The Internal Audit Department draws up an annual audit pro-
gram and an audit plan covering all of the Group’s operations.
The audit program is based on maps of the main risks at
Group level and by country and domain (Human Resources,
Purchasing, Legal/Tax/Asset Management, Sales, Accounting,
Treasury, Information Systems, Geopolitical Risks/Quality/
Security).
The audit program is presented twice a year to the Audit
Committee along with a progress report and a summary of
the audits performed since the start of the year.
Internal audits are conducted in four phases:
- Collecting information on the entity or domain concerned.
- On-site checks to ensure that appropriate controls have been
set up to address the risk areas identified in the mapping
process and to assess the quality of internal controls.
- Drawing up reports on the main identified weaknesses,
updating the risk map and proposing action plans. These
reports are then sent to senior management and to the
audited unit, and the internal auditors’ findings and recom-
mendations are presented to two members of the Senior
Management Committee.
- Follow-up to check that the internal auditors’ recommenda-
tions have been implemented and, if necessary, to assist the
audited units with their risk management action plans.
In 2005, the frequency of the audits carried out on the Group’s
Villages by the Internal Audit team was stepped up, to sup-
port Club Méditerranée’s upmarket strategy and the imple-
mentation of a leaner management organization in certain
Villages. The aim behind these more frequent audits was to
ensure that new processes were being applied correctly. In
2006, the Internal Audit team continued to focus on auditing
the Villages, which accounted for an average of 46% of the
total time spent by the internal auditors.
As part of the Group’s phased project to asses its internal
control procedures, two processes have been set up:
- In early 2006, questionnaires were developed summarizing
the main control areas in the Villages.
These questionnaires are filled in each month by the
Management Controllers at each Village with input from
department managers, and are submitted to the country-level
Finance manager. The questionnaires help to ensure that key
controls are carried out on a regular basis and that timely
corrective action is taken when necessary.
- After each internal audit of a Village or a national represen-
tative office, the entity is given marks out of 10. This enables
the Group to assess the internal controls in place, compare
performance between the audited entities and measure their
progress. The three follow-up audits carried out in fiscal 2006
showed that internal control processes are continuing to
improve and that the Department managers are much more
aware of the importance of strictly implementing procedures.
2006 Annual Report // 89
STATUTORY AUDITORS
The Statutory Auditors certify the annual financial statements
of Club Méditerranée SA and its subsidiaries and the annual
consolidated financial statements of the Group. They also per-
form a limited review of the interim consolidated financial
statements and verify the information given in the interim
report. They attend meetings of the Audit Committee and are
regularly informed of the work carried out by the Internal Audit
team.
2.3 RAISING AWARENESS OF INTERNALCONTROL
2.3.1 Rolling out the new Villageorganization to strengthen internalcontrol As part of its overall upmarket strategy, the new organization
structure trialed at ten Villages in 2005 was rolled out on a per-
manent basis to thirteen Villages in 2006. Under the new leaner
organization structure, each Village Manager has just five direct
reports compared with an average of fifteen previously. The
aim of this approach is to enhance the management of each
Village’s P&L by fully leveraging the available products and
resources.
The new organization is also more customer-focused, enabling
the Group to build the skill-sets of its GOs by providing train-
ing in specific skills and creating new professions.
Introduction of the new Village organization led to the creation
of a new recruitment/placement unit whose first season began
in February 2006. The unit was tasked with improving the GO
placement process and reducing turnover – an aim that was
achieved in the first season with the GO turnover rate decreas-
ing by 16%.
At the same time, the Group has created a new position of Cost
Controller reporting to the Village Management Controller.
The Cost Controller is responsible for closely monitoring the
Village’s P&L and ensuring that purchasing procedures are
correctly applied. The creation of this position as part of the
new Village structure will help the Management Controllers
fulfill their duty of ensuring compliance with internal control
processes.
The Group plans to roll out the new structure to 25 Villages
in 2007 and to all of the Villages by the end of 2009.
2.3.2 Other measures implementedto strengthen internal control PRODUCT INNOVATIONS
As part of its continued drive to tighten control over revenue
and in order to reduce the circulation of cash within the
Villages, the Group extended the “Bar & Snacking Included”
and “Club Med Pass” formulas to all of its Villages as from the
summer of 2006. After paying a deposit, customers can use
the Club Med Pass to pay for drinks that are not included in
the Bar & Snacking formula (such as champagne and VSOP)
as well as for additional services (such as spa treatments).
NEW PURCHASING STRUCTURE
In line with its aim to enhance cost controls, the Group has set
up a Global Purchasing Department reporting to the Executive
Vice-President, Chief Financial Officer. This new department
uses a central purchasing system to monitor purchases in real
time and provide users with lists of products for which prices
have been negotiated by product family purchasers. It also
tracks implementation of action plans and savings on pur-
chasing costs. The information system enables the Global
Purchasing Department to verify that negotiated contracts are
being properly used in order to optimize purchases.
CONCLUSION
During the year, the Group continued to focus on raising
awareness of the risks inherent in its operations and of the
related internal control procedures. In 2007, Club Méditerranée
plans to analyze its internal control procedures based on the
internal control reference framework published by the Working
Group of the French securities regulator (AMF) on 31 October
2006.
Chairman’s report
90
Statutory Auditors’ report on internal controlStatutory Auditors’ report prepared in accordance with
Article L. 225-235 of the French Commercial Code, on the
report of the Chairman of the Board of Directors of Club
Méditerranée on internal control procedures related to the
preparation and processing of accounting and financial
information
YEAR ENDED 31 OCTOBER 2006
To the shareholders,
In our capacity as Statutory Auditors of Club Méditerranée and
in accordance with the requirements of Article L. 225-235
of the French Commercial Code, we present below our
report on the report prepared by the Chairman of the Board
of Directors of Club Méditerranée in application of Article
L.225-37 of the French Commercial Code for the year ended
31 October 2006.
In his report, the Chairman of the Board of Directors is required
to comment on the conditions applicable for the preparation
and organization of the work carried out by the Board of
Directors and the internal control procedures implemented
within the Company.
Our responsibility is to report to you our comments on the
information contained in the Chairman’s report concerning the
internal control procedures related to the preparation and
processing of accounting and financial information.
We performed our procedures in accordance with profession-
al guidelines applicable in France. Those guidelines require us
to perform procedures to assess the fairness of the informa-
tion set out in the Chairman’s report concerning the internal
control procedures related to the preparation and processing
of financial and accounting information. These procedures
included:
- Examining the objectives and general organization of the
Company’s internal control environment and the internal con-
trol procedures related to the preparation and processing
of accounting and financial information, as described in the
Chairman’s report.
- Acquiring an understanding of the work performed to
support the information given in the report.
Based on the procedures performed, we have no matters to
report concerning the information provided on the Company’s
internal control procedures related to the preparation and
processing of accounting and financial information, as con-
tained in the report of the Chairman of the Board of Directors
prepared in accordance with the final paragraph of Article
L. 225-37 of the French Commercial Code.
Neuilly-sur-Seine and Paris-La Défense, 12 February 2007
The Statutory Auditors
Deloitte & Associés Ernst & Young Audit
Alain Pons Dominique Jumaucourt Pascal Macioce
2006 Annual Report // 91
Consolidated Financial Statements
Club Méditerranée Group
92 // CONSOLIDATED STATEMENTS OF INCOME
93 // CONSOLIDATED BALANCE SHEETS
94 // CONSOLIDATED CASH FLOW STATEMENT
94 // CHANGE IN CONSOLIDATED NET DEBT
95 // CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
96 // NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
96 // Note 1 - General information
96 // Note 2 - Summary of significant accounting policies, scope of consolidation
104 // Note 3 - First-time adoption of IAS 32 and IAS 39 104 // Note 4 - Changes in scope of consolidation105 // Note 5 - Segment information108 // Note 6 - Goodwill109 // Note 7 - Intangible assets110 // Note 8 - Property, plant and equipment111 // Note 9 - Non-current financial assets112 // Note 10 - Assets held for sale113 // Note 11 - Other receivables113 // Note 12 - Cash and cash equivalents113 // Note 13 - Equity114 // Note 14 - Share-based payments115 // Note 15 - Pension and other long-term benefits117 // Note 16 - Provisions117 // Note 17 - Income taxes119 // Note 18 - Borrowings and other interest-bearing liabilities 122 // Note 19 - Financial instruments125 // Note 20 - Other liabilities125 // Note 21 - Employee benefits expense125 // Note 22 - Operating income - Management of assets125 // Note 23 - Other operating income & expense126 // Note 24 - Finance cost, net126 // Note 25 - Share of income of associates126 // Note 26 - Earnings per share126 // Note 27 - Notes to the consolidated cash flow statement 127 // Note 28 - Related party transactions127 // Note 29 - Commitments and contingencies128 // Note 30 - Transition to IFRS136 // Note 31 - Scope of consolidation at 31 October 2006
140 // AUDITORS’ REPORT ON THE CONSOLIDATED FINANCIAL STATEMENTS
141 // GROUP STRUCTURE AS OF 31 OCTOBER 2006
92
Consolidated Statements of Income(in € millions)
Notes 2005 2006excl. IAS
32/39
Revenue 5.2 & 5.3 1,590 1,679
Other income 40 41
Total income from ordinary activities 1,630 1,720
Purchases (721) (751)External services (350) (377)Employee benefits expense 21 (306) (328)Taxes other than on income (31) (32)
EBITDAR - Leisure 2.1 222 232
Rent 29.2 (125) (142)Depreciation and amortization expense (70) (63)Provision expense, net (2) (3)
Operating income - Leisure 5.2 25 24Operating income - Management of assets 22 89 40Other operating income & expense 23 (33) (29)
Operating income 5.2 81 35
Finance cost, net 24 (38) (32)
Income before tax 43 3
Income tax expense 17.1 (36) (1)Share of income of associates 9.1 & 25 3 3
Net income 10 5
Attributable: Equity holders of the parent 9 5Minority interest 13.2 1 -
(in €)
Basic earnings per share 26 0.48 0.24 Diluted earnings per share 26 0.48 0.24
If IAS 32 and IAS 39 had been applied from 1 November 2004, net income for fiscal 2005 would have amounted to €4 million,
including €3 million attributable to equity holders of the parent.
Consolidated Balance Sheets
2006 Annual Report // 93
ASSETS(in € millions)
Notes 31 October 2005 1 November 2005 31 October excl. IAS 32/39 incl. IAS 32/39 2006
Goodwill 6 103 103 103Intangible assets 7 79 79 79Property, plant and equipment 8 975 975 859Non-current financial assets 9 66 66 80
Total fixed assets 1,223 1,223 1,121
Deferred tax assets 17.2 44 42 35
Non-current assets 1,267 1,265 1,156
Inventories 21 21 21Trade receivables 66 66 81Other receivables 11 99 96 108Cash and cash equivalents 12 168 160 165
Current assets 365 354 467
Assets held for sale 10 11 11 92
Total assets 1,632 1,619 1,623
EQUITY AND LIABILITIES(in € millions)
Notes 31 October 2005 1 November 2005 31 October excl. IAS 32/39 incl. IAS 32/39 2006
Share capital 77 77 77Additional paid-in capital 562 562 562Retained earnings (194) (179) (185)Net income for the year 9 9 5
Equity attributable to shareholders 13.1 454 469 459
Minority interest 13.2 54 54 55
Total equity 508 523 514
Pensions and other long-term benefits 15 26 26 28Long-term borrowings and other interest-bearing liabilities 18 455 435 346Other non-current liabilities 20 30 30 36Deferred tax liabilities 17.2 98 102 86
Non-current liabilities 609 593 496
Provisions 16 50 38 41Borrowings and other interest-bearing liabilities 18 48 48 109Trade payables 160 160 170Other current liabilities 20 164 164 177Customer prepayments 20 93 93 112
Current liabilities 515 503 609
Liabilities related to assets held for sale 10 4
Total equity and liabilities 1,632 1,619 1,623
Consolidated FinancialStatements
94
Consolidated Cash FlowStatement(in € millions)
Notes 2005 2006excl. IAS 32/39
Cash flows from operating activitiesNet income 10 5Adjustments for:Depreciation, amortization and provisions 27.1 83 70Share of income of associates (3) (4)Disposal (gains) and losses, net (107) (49)Finance costs and other financial income & expense 38 32Income tax expense 36 1Other 1 (4)Change in working capital (1) 12 24
Cash generated from operations 70 75
Interest paid (38) (22)Income taxes paid (3) (6)
Net cash from operating activities 29 47
Cash flows from investing activitiesAcquisitions of non-current assets (2) 27.2 (114) (151)Proceeds from disposals of non-current assets 27.3 246 143
Net cash from (used in) investing activities 132 (8)
Free cash flow 161 39
Cash flows from financing activitiesProceeds from long-term borrowings 169 102Repayments of long-term borrowings (320) (118)Increase (decrease) in short-term bank loans (5) (12)Dividends paid and other (2) (4)
Net cash used in financing activities (158) (32)
Effect of changes in exchange rates on cash and cash equivalents and other 5 (2)
Net increase in cash and cash equivalents 8 5
Cash and cash equivalents at the beginning of period 12 160 168Effect of a change in method (adoption of IAS 32 and IAS 39) on the opening balance sheet at 1 November 2005 - (8)Cash and cash equivalents at the end of period 12 168 165
(1) Including charges to/(releases from) short-term provisions considered as accrued expenses.(2) Net of government grants.
Change in Consolidated Net Debt(in € millions)
18.1 2005 2006excl. IAS 32/39
Net debt at beginning of period (485) (335)Impact of the adoption of IAS 32 and IAS 39 on net debt at 1 November 2005 12Decrease in net debt 150 29
Net debt at end of period (335) (294)
Consolidated Statement of Changes in Equity
2006 Annual Report // 95
(in € millions)
Shares Share Additional Treasury Retained Equity Minority Totaloutstanding capital paid-in stock earnings attributable interest equity
capital and net to share-income for holders
the year
At 1 November 2004Excluding IAS 32/39 19,358,005 77 562 - (217) 422 50 472Exchange differences on translating foreign operations 21 21 4 25
Income and expenses recognized directly inequity 21 21 4 25
Net income for the year 9 9 1 10
Total recognized income and expense for the period 30 30 5 35
Share-based payments 2 2 2Dividends (1) (1)
At 31 October 2005Excluding IAS 32/39 19,358,005 77 562 - (185) 454 54 508Effect of a change ofmethod (adoption of IAS 32 & 39) (9) 24 15 15
At 1 November 2005Including IAS 32/39 19,358,005 77 562 (9) (161) 469 54 523Gains (losses) on cash flow hedges taken toequity (1) (1) (1)Exchange differences on translating foreign operations (15) (15) (15)
Income and expenses recognized directly inequity (16) (16) (16)
Net income for the year 5 5 5
Total recognized income and expense for the period (11) (11) (11)
(Purchases) and sales of treasury shares (1) (1) (1)Share-based payments 2 2 2Dividends (1) (1)Effect of changes in scope of consolidation 2 2
At 31 October 2006 19,358,005 77 562 (10) (170) 459 55 514
Consolidated FinancialStatements
96
NOTE 1. GENERAL INFORMATION
Club Méditerranée SA is a société anonyme (joint stock
corporation) governed by the laws of France. Its registered
office is at 11, rue de Cambrai, 75957 Paris Cedex 19, France.
Club Méditerranée shares are traded on the Euronext Paris
First Market and are included in the SBF 120 index.
The consolidated financial statements include the financial
statements of Club Méditerranée SA and its subsidiaries
(“the Group”), and associated companies. The Company’s
fiscal year covers the twelve-month period ended 31 October.
The subsidiaries’ financial statements cover the same period
and are prepared using consistent accounting policies.
The Group is one of the world’s leading providers of
all-inclusive vacation packages and also operates in related
businesses (tour operating, fitness clubs and Club Med World).
The consolidated financial statements for the year ended
31 October 2006 were approved by the Board of Directors
on 11 December 2006. All amounts are presented in millions
of euros, unless otherwise specified.
NOTE 2. SUMMARY OF SIGNIFICANTACCOUNTING POLICIES,SCOPE OF CONSOLIDATION
2.1 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
In accordance with European Council Regulation 1606/2002/EC
dated 19 July 2002, the consolidated financial statements
for the year ended 31 October 2006 have been prepared in
accordance with the International Financial Reporting
Standards (IFRSs), adopted by the European Union at that date.
Comparative financial information has been restated on the
same basis for the year ended 31 October 2005, with the
exception of IAS 32 – Financial Instruments: Disclosure and
Presentation and IAS 39 – Financial Instruments:
Recognition and Measurement, which have been applied as
from 1 November 2005, as allowed under IFRS 1. Information
about the effects of applying these two standards as from
1 November 2005 is disclosed in Note 3.
The IFRSs applied to prepare the consolidated financial
statements for the year ended 31 October 2006 correspond
to the standards and interpretations whose application by
European Union companies at that date was mandatory.
The Group decided not to early adopt any standard, revised
standard or interpretations applicable in accounting periods
commencing after 31 October 2006. These include:
Standards, revised standards and interpretations applicable
by the Group as from 1 November 2006:
- Amendment to IAS 19: Actuarial Gains and Losses, Group
Plans and Disclosures.
- Amendment to IAS 39: Fair Value Option.
- Amendment to IAS 39: Cash Flow Hedge Accounting of
Forecast Intragroup Transactions.
- IFRIC Interpretation 4: Determining Whether an Arrangement
Contains a Lease.
- IFRIC Interpretation 8: Scope of IFRS 2.
Standards, revised standards and interpretations applicable
by the Group as from 1 November 2007:
- Amendment to IAS 1: Capital Disclosures.
- IFRS 7 – Financial Instruments: Disclosures.
The practical implications of applying these standards, revised
standards and interpretations and their effect on the consol-
idated financial statements are currently being assessed.
In accordance with IFRS 1– First-Time Adoption of IFRS, the
transition effects were recognized in the opening IFRS balance
sheet at 1 November 2004. Details of the transition effects
on the opening and closing balance sheets and the income
statement for fiscal 2005 are disclosed in Note 30.
2.1.1 Options chosen by the Group for the preparation of the openingbalance sheet at 1 November 2004Under IFRS 1 – First-Time Adoption of IFRS, certain optional
exemptions from full retrospective application of IFRSs are
available to first-time adopters. In line with these exemptions,
the Group has elected to prepare its IFRS transition balance
sheet at 1 November 2004 as follows:
- Business combinations carried out prior to 1 November 2004
have not been restated.
- Cumulative translation differences at the transition date have
been reset to zero at the IFRS transition date by adjusting
retained earnings.
Notes to the ConsolidatedFinancial Statements
2006 Annual Report // 97
- Unrecognized actuarial gains and losses on pension and
other long-term benefit obligations at the transition date
have been recognized directly in equity.
- Certain items of property, plant and equipment (land and
buildings) have been measured at fair value at the transition
date.
- IFRS 2 has been applied only to stock options granted
after 7 November 2002 that had not fully vested as of
1 November 2005.
2.1.2 Accounting treatment chosenwhen IFRS permits alternativeaccounting treatmentCertain standards offer a choice between applying a bench-
mark treatment and an allowed alternative treatment for
the recognition and measurement of assets and liabilities.
The main treatments selected by the Group are as follows:
- Property, plant and equipment and intangible assets are
measured using the cost model and not the fair value model
(IAS 16).
- The cost of inventories is determined using the weighted
average cost formula (IAS 2).
- Actuarial gains and losses are recognized using the corridor
method, which consists of recognizing the portion that
exceeds the greater of 10% of the present value of the
benefit obligation and 10% of the fair value of the related
plan assets over the average remaining service lives of plan
participants (IAS 19).
- Borrowing costs that are directly attributable to the acqui-
sition, construction or production of qualifying assets are
capitalized as part of the cost of those assets (IAS 23).
2.1.3 Measurement methods appliedfor the preparation of the consolidatedfinancial statementsThe consolidated financial statements have been prepared
according to a historical cost basis, except for derivative finan-
cial instruments which have been measured at fair value. As
explained above, the Group opted to measure certain laws
and buildings at the IFRS transition date at their fair value.
The preparation of financial statements in accordance with
IFRS requires management to make certain estimates and
assumptions. These assumptions are determined on a going
concern basis according to the information available at the
time. At each period-end, assumptions and estimates may be
revised to take into account any changes in circumstances or
any new information that has come to light. Actual results may
differ from these estimates and assumptions. Estimates and
assumptions are used in particular:
- For non-current asset impairment tests, which are based on
estimated future cash flows and assumptions concerning
growth rates and discount rates.
- For the determination of provisions for claims and litigation.
- For the calculation of pension and other long-term employee
benefit obligations, which is based on actuarial assumptions.
- For the determination of deferred taxes, particularly in
assessing the recoverability of deferred tax assets.
2.1.4 Financial statement presentationIn the consolidated income statement, is presented by nature
of expense.
a - Income from ordinary activities
Revenue is recognized when it is probable that the economic
benefits associated with the transaction will flow to the Group
and the amount of revenue can be measured reliably.
Revenue from the sale of goods and services by fully consoli-
dated companies in the normal course of business is recognized
as follows:
• Service revenues: land package revenues are recognized
over the period of service provision. Transport revenues are
recognized on the travel date. Other operating revenues are
recognized in the period in which the transaction takes place.
• Sales of goods: revenue from the sale of goods is recognized
when the significant risks and rewards of ownership of the
goods are transferred to the buyer.
Other income includes mainly insurance settlements compen-
sating for business interruption losses.
b - Operating income
Operating income is broken down in the statement of income
between:
- Operating income – Leisure, corresponding to all the
income and expenses directly related to the Group’s
operations. In order to analyse the Village’s performance
(wherever owned or leased), the Group monitors is using
the EBIDAR – Leisure.
- Operating income – Asset Management, corresponding
to all the costs related to changes in the scope of consoli-
dation, including gains and losses on disposals of assets,
the costs of temporary and permanent Village closing, all
the costs related to new Village opening, and impairment
losses (operating and marketing units).
- Other operating income & expense, corresponding mainly
to restructuring costs, claims and litigation, the impact of
natural disasters and credit card costs.
Consolidated FinancialStatements
98
c - Finance cost, net
This item includes:
- Interest costs, net, corresponding to interest expense and
income on net debt.
- Bank charges.
- Discounting adjustments to provisions for pensions and
other long-term employee benefit obligations.
- Gains and losses on derivative instruments.
- Exchange gains and losses.
- Dividends received from non-consolidated companies.
- Impairment charges on financial assets.
d - Earnings per share
Basic earnings per share corresponds to net income attrib-
utable to equity holders divided by the weighted average
number of shares outstanding during the period, net of
treasury shares.
Diluted earnings per share takes into account dilutive poten-
tial ordinary shares, corresponding in the Group’s case to stock
options exercisable for existing shares and convertible bonds.
The average number of potential dilutive shares correspon-
ding to stock options is determined by the treasury stock
method. The calculation only includes options that are in
the money (i.e. options whose exercise price is higher than
the average Club Méditerranée share price for the period).
The exercise price takes into account the fair value of the
services remaining to be received, determined in accordance
with IFRS 2.
For convertible bonds, income attributable to shareholders
is adjusted for the interest paid on the bonds, net of tax. This
adjusted income is then divided by the average number of
shares that would be issued assuming conversion of all the
outstanding bonds. Potential ordinary shares corresponding
to bond conversions are included in the calculation only if they
are dilutive.
2.2 BASIS OF CONSOLIDATION
All companies that are controlled by Club Méditerranée,
directly or indirectly, are fully consolidated. Control is the
power to govern the financial and operating policies of an
entity so as to obtain benefits from its activities.
Companies over which the Group exercises significant influ-
ence (“associates”) are accounted for by the equity method.
Holiday Villages of Thailand, which is 49.21%-owned, and
Recreational Villages, 21%-owned, are fully consolidated
because Club Méditerranée exercises de facto control.
Société Martiniquaise des Villages de Vacances, which is
10%-owned, is also fully consolidated because the majority of
associated risks are assumed by the Group.
New subsidiaries are consolidated from the acquisition date,
being the date on which the Group obtains and continue to
be consolidated until the date that such control ceases. The
results of consolidated subsidiaries acquired or divested
during the year are included in consolidated income from
the acquisition date or up to the divestment date.
All intra-group balances and transactions, income and
expenses are eliminated in full, together with the results from
intra-group transactions recognized in assets.
The list of consolidated companies and the consolidation
methods applied are presented in Note 31.
2.3 FOREIGN CURRENCY TRANSLATION
2.3.1 Translation of the financialstatements of foreign subsidiariesThe consolidated financial statements are presented in euros.
The financial statements of independent subsidiaries whose
functional currency is not the euro are translated into euros by
the closing rate method, as follows:
- Balance sheet items are translated at the closing exchange
rate at the balance sheet date.
- Income statement and cash flow statement items are
translated at the average rate for the period.
The resulting exchange differences are recognized as a
separate component of equity, under “Translation reserve”.
The financial statements of operating and real estate com-
panies that are not independent from the parent, Club
Méditerranée SA, are translated using the historical rate
method, as follows:
- Non-current assets and the corresponding amortization and
depreciation charges are translated at the historical rate,
being the exchange rate at the transaction date.
- Monetary assets and liabilities are translated at the closing
exchange rate.
- Income statement items (other than amortization and
depreciation charges) and cash flow statement items are
translated at the average rate for the period.
The resulting exchange differences are recorded in finance
cost, net.
2006 Annual Report // 99
2.3.2 Transactions in currenciesother than the functional currencyExchange differences on monetary assets and liabilities
that are an integral part of the Group’s net investment in a
consolidated foreign operation are taken directly to equity
until the foreign operation is sold or liquidated.
The same accounting treatment applies to monetary items
that are receivable from or payable to a foreign operation for
which settlement is neither planned nor likely to occur in the
foreseeable future, as these items are considered as repre-
senting, in substance, part of the Group’s net investment in
the foreign operation.
2.4 BUSINESS COMBINATIONS, GOODWILLAND INTANGIBLE ASSETS
2.4.1 Business combinations and goodwillBusiness combinations recorded prior to 1 November 2004
have not been retrospectively restated in accordance with
IFRS. Business combinations carried out since that date are
accounted for using the acquisition accounting method, by
measuring the assets acquired and liabilities and contingent
liabilities assumed at their fair value at the date of the combi-
nation.
The excess of the cost of the business combination over the
Group’s interest in the net fair value of the identifiable assets,
liabilities and contingent liabilities of the acquired entity at the
date of the combination is recognized as goodwill.
For business combinations not achieved in stages, minority
interest in the identifiable assets and liabilities of the acquired
entity are also measured at fair value.
2.4.2 Intangible assetsIntangible assets consist mainly of brands, lease premiums and
software. Purchased intangible assets are carried at cost less
accumulated amortization and any accumulated impairment
losses.
Intangible assets are analyzed to determine whether they have
a finite or indefinite life. Based on this analysis, the Jet tours
brand and lease premiums in France have been qualified as
having an indefinite life. Consequently, they are not amortized
but are tested for impairment at least once a year and when-
ever events or circumstances indicate that their recoverable
amount may be less than their carrying amount, in accordance
with the principle described in Note 2.7 “Impairment of assets”.
All other intangible assets (software and licenses) are assessed
as having a finite life and are amortized over their estimated
useful life. The main useful lives are as follows:
Financial information system 3 to 15 yearsMarketing system 3 to 24 yearsOther software 3 to 8 yearsOther intangible assets 3 to 10 years
These useful lives are reviewed at each year-end and adjusted
if necessary. The adjustments are treated as a change in
accounting estimates and are made prospectively.
Intangible assets with a finite life are tested for impairment
whenever there is an indication that their recoverable amount
may be less than their carrying amount (see Note 2.7
“Impairment of assets”).
2.5 PROPERTY, PLANT AND EQUIPMENT
At the IFRS transition date (1 November 2004), certain items
of land and buildings were measured at fair value, in accor-
dance with the option available under IFRS 1.
Property, plant and equipment are measured using the cost
model, and are therefore stated at cost less accumulated
depreciation and any accumulated impairment losses. Cost
corresponds to the asset’s purchase or production cost
plus the directly attributable costs of bringing the asset to
the location and condition necessary for it to be capable of
operating in the manner intended. Production cost includes
materials and direct labor, as well as borrowing costs that
are directly attributable to the construction or production of
the asset.
Property, plant and equipment are depreciated on a straight-
line basis over their estimated useful lives. Villages are expected
to be used throughout their useful life and depreciation is
therefore calculated without deducting any residual value.
Useful lives are reviewed at each year-end and adjusted if
necessary. The adjustments are treated as a change in account-
ing estimates and are made prospectively.
The individual parts of each item of property, plant and equip-
ment are recognized separately when their estimated useful
life is different from that of the asset as a whole.
Consolidated FinancialStatements
100
The main useful lives are as follows:
Groundworks, foundations and structures 50 yearsRoof structures and coverings 30 yearsExternal and internal walls 25 yearsUtility installations (plumbing, electricity, heating, etc.) 20 yearsFixed hotel equipment 15 yearsFixtures and fittings (joinery, wall and floor coverings, windows, etc.) 10 yearsOther 3 to 10 years
Property, plant and equipment are tested for impairment
whenever there is an indication that their recoverable amount
may be less than their carrying amount (see Note 2.7
“Impairment of assets”).
Finance leases that transfer substantially all the risks and
rewards of ownership of the assets to the lessee are recog-
nized as assets.
2.6 LEASES
Leases are classified as either finance leases or operating
leases based on the substance of the transaction. Leases are
classified as finance leases if they transfer substantially all the
risks and rewards of ownership to the lessee. All other leases
are classified as operating leases.
Finance leases Finance leases that transfer substantially all the risks and
rewards of ownership of the assets to the Group are initially
recognized in the balance sheet at amounts equal to the fair
value of the leased asset or, if lower, the present value of the
minimum lease payments, each determined at the inception
of the lease. Lease payments are apportioned between
the finance charge and the redemption of the finance lease
obligation. The finance charge is allocated to each period
during the lease term so as to produce a constant periodic
rate of interest. Finance charges are recorded directly in the
income statement. Assets under finance leases are depre-
ciated over their estimated useful life or the lease tenue, if
shorten and there is no reasonable certainty that the Group
will obtain ownership by the end of the lease term, they are
fully depreciated over the shorter of the lease term and their
useful life.
Operating leases Leases that do not transfer substantially all the risks and
rewards of ownership to the lessee are classified as oper-
ating leases. Lease payments under operating leases are
recognized as an expense on a straight-line basis over the
lease term.
2.7 IMPAIRMENT OF ASSETS
2.7.1 Goodwill and intangible assetswith indefinite lifeIn accordance with IAS 36 – Impairment of Assets, goodwill
and intangible assets with an indefinite life are tested for
impairment annually and whenever there is an indication that
their recoverable amount may be less than their carrying
amount.
For impairment testing purposes, goodwill is allocated to
the cash-generating unit to which it relates. A cash-generating
unit (CGU) is the smallest identifiable group of assets at
the level at which the Group organizes its businesses and
analyzes their results. Goodwill related to the Village business
is allocated and analyzed by region (see Note 5 “Segment
information”). Goodwill related to the other businesses (tour
operating, Club Med Gym, etc.) is tested for impairment at the
level of these businesses.
Impairment tests are based on recoverable amounts estimated
by reference to market multiples (to determine estimated
fair value less costs to sell) and discounted cash flows (to deter-
mine estimated value in use) (see Note 2.7.2).
When the CGU’s recoverable amount determined by the above
methods is less than its carrying amount, an impairment loss is
recognized to write down the CGU carrying amount to recover-
able amount, defined as the higher of value in use and fair value
less costs to sell. Impairment losses are allocated first to the
goodwill.
Estimates of recoverable amounts are based on assumptions
concerning Village occupancy rates, growth rates for the region
or the business, perpetual growth rates and discount rates.
2.7.2 Property, plant and equipmentand depreciable intangible assetsThese assets are tested for impairment whenever there is an
indication that their recoverable amount may be less than their
carrying amount. Indications of impairment include:
- Evidence that an asset’s physical condition has deteriorated
beyond the effects of normal wear and tear.
- Plans to discontinue or restructure the operation to which the
asset belongs.
- Evidence that the asset’s economic performance is worse than
expected.
- Changes in the economic or legal environment, leading to a
significant decline in the asset’s market value.
2006 Annual Report // 101
The Group has determined that each Village represents
a CGU. Impairment tests are therefore performed Village
by Village, whenever there is an indication that their recov-
erable amount may be less than their carrying amount.
Recoverable amount corresponds to the higher of the Village’s
fair value less costs to sell and its value in use.
Fair value is estimated based on independent valuations or
earnings multiples. Value in use is determined by estimating
the future cash flows expected to be derived from the asset.
Estimates of future cash flows are based on the budget and
three-year business plan, and on a growth rate beyond that
period equal to inflation, taking into account the discounted
present value of the asset’s residual value at the end of its
estimated use.
If the carrying amount of a Village’s assets is greater than the
Village’s recoverable amount, an impairment loss is recorded
for the difference. In subsequent periods, if there is indication
that condition that lead to impairement have changed, the
impairment may be reversed. Impairement losses are also
recorded on assets that are considered as being permanently
impaired.
2.8 AVAILABLE-FOR-SALE FINANCIAL ASSETSAND OTHER FINANCIAL ASSETS
Financial assets are classified in four categories in accordance
with IAS 39, as follows:
- Financial assets at fair value through profit or loss.
- Held-to-maturity investments.
- Loans and receivables.
- Available-for-sale financial assets.
Financial assets are initially recognized at cost, being the
fair value of the consideration paid plus directly attributable
transaction costs. Their subsequent measurement depends
on their classification.
Financial assets at fair value through profit or loss are classi-
fied in current assets and measured at fair value, with changes
in fair value recognized in finance cost, net. Derivative instru-
ments are included in this category, except for the portion
representing an effective hedge in a designated hedging
relationship.
Held-to-maturity investments and loans and receivables
are measured at amortized cost, determined by the effective
interest method, less any accumulated impairment losses.
Gains and losses are recognized the statement of income.
Held-to-maturity investments are financial assets with fixed or
determinable payments and a fixed maturity. At each period-
end, the recoverability of loans is assessed and an impairment
loss is recognized if their recoverable amount is less than their
carrying amount.
Other financial assets are classified as available-for-sale
financial assets and measured at fair value. Gains and losses
arising on remeasurement at fair value are recognized directly
in equity until the asset is sold. The fair value of listed securi-
ties corresponds to their market value. The fair value of unlist-
ed securities corresponds to their estimated value in use,
determined using the most appropriate financial criteria for
the issuer’s specific situation. When there is objective evidence
that available-for-sale financial assets have to be impaired, the
cumulative loss that had been recognized directly in equity
is transfered from equity to statement of income. Investments
in non-consolidated companies are classified as available-
for-sale financial assets.
2.9 NON-CURRENT ASSETS HELD FOR SALE
In accordance with IFRS 5, non-current assets and groups of
non-current assets (disposal groups) are classified as held for
sale when their carrying amount will be recovered principally
through a sale transaction rather than through continuing use.
This is considered to be the case when (i) the asset (or disposal
group) is available for immediate sale in its present condition,
(ii) (or disposal group) and a plan to sell the asset has been
initiated by management, and (iii) its sale is highly probable.
Non-current assets (and disposal groups) classified as held for
sale are measured at the lower of their carrying amount prior
to reclassification and fair value less costs to sell. They are
not depreciated.
Non-current assets held for sale and the related liabilities are
presented on separate lines of the balance sheet.
2.10 INVENTORIES
Inventories are measured at the lower of cost, calculated by
the weighted average cost method, and net realizable value.
Net realizable value is the estimated selling price in the
ordinary course of business less the estimated costs of com-
pletion and the estimated costs necessary to make the sale.
2.11 TRADE AND OTHER RECEIVABLES
Trade receivables are recognized and measured based on the
initial invoice amount. A provision is recorded when there is
objective evidence of impairment. Bad debts are written off
when they are certain of not being recovered.
Consolidated FinancialStatements
102
2.12 CASH AND CASH EQUIVALENTS
Cash and cash equivalents are held to meet the Group’s
short-term cash needs. They include cash at bank and in hand,
short-term deposits with an original maturity of less than
three months and marketable securities that are readily
convertible into cash. Cash equivalents are defined as short-
term, highly liquid investments that are readily convertible
into known amounts of cash and which are subject to an
insignificant risk of changes in value.
2.13 PROVISIONS
Provisions are recognized when the Group has a present obli-
gation (legal or constructive) as a result of a past event, it is
probable that an outflow of resources embodying economic
benefits will be required to settle the obligation and a reliable
estimate can be made of the amount of the obligation. Where
some or all of the expenditure required to settle a provision
is expected to be reimbursed by another party, for example
under an insurance policy, the reimbursement is recognized
as a separate asset when, and only when, it is virtually certain
that reimbursement will be received. The provision expense
is shown in the income statement, net of any expected reim-
bursement. Where the effect of the time value of money is
material, provisions are discounted using a pre-tax discount
rate that reflects any specific risks associated with the obli-
gation. The increase in discounted provisions due to the
passage of time is recognized in financial cost, net.
2.14 PENSION AND OTHER LONG-TERMBENEFITS
Group employees are covered by various plans providing for
the payment of supplementary pensions, justice awards and
other long-term benefits in line with the laws and practices in
force in the Group’s host countries. A description of the main
plans is provided in Note 15.
2.14.1 Post-employment benefits
Defined contribution plans
Contributions to government plans and other defined contri-
bution plans are recognized as an expense for the period in
which they are due. No provision is recorded as the Group’s
obligation is limited to its contributions to the plan.
Defined benefit plans
Obligations under defined benefit plans are measured using
the projected unit credit method. This method involves the
use of long-term actuarial assumptions concerning demo-
graphic variables (such as employee turnover and mortality)
and financial variables (such as future increases in salaries
and discount rates). These variables are reviewed each year.
Actuarial gains and losses – corresponding to the effect of
changes in actuarial assumptions on the amount of the obli-
gation – are recognized as explained below. The interest cost,
corresponding to the increase in the obligation due to the
passage of time, is recognized in financial expense.
Treatment of actuarial gains and losses
Actuarial gains and losses are recognized in income by the
corridor method, applied separately to each individual plan.
Under this method, actuarial gains and losses are recognized
in the statement of income when cumulative unrecognized
gains and losses exceed the greater of 10% of the present
value of the defined benefit obligation and 10% of the fair
value of plan assets. The portion of actuarial gains and
losses that exceeds the 10% corridor is recognized in income
over the average remaining service lives of plan participants.
Past service cost
Past service cost is the increase in the present value of
the defined benefit obligation, resulting from the changes
to, post-employment benefits or other long-term benefits.
Past service cost is recognized as an expense over the average
period until the benefits become vested. If the benefits are
already vested, past service cost is recognized immediately.
Curtailments and settlements
Gains or losses on the curtailment or settlement of defined
benefit plans are recognized when the curtailment or settle-
ment occurs. The gain or loss on a curtailment or settlement
comprises any resulting change in the present value of the
defined benefit obligation and any related actuarial gains
and losses and past service cost that had not previously been
recognized.
2.14.2 Other long-term benefitsActuarial gains and losses and past service cost on other
long-term benefit plans are recognized immediately in the
statement of income.
2.15 DEFERRED TAX
In accordance with IAS 12 – Income Taxes, deferred taxes are
recognized for temporary differences between the carrying
amounts of assets and liabilities and their tax bases, as well
as on tax loss carryforwards, by the liability method. Deferred
tax assets are recognized for deductible temporary differences
to the extent that it is probable that taxable income will be
available against which the deductible temporary difference
can be utilized. The carrying amount of deferred tax assets is
reviewed at each period-end.
Tax assets and tax liabilities are offset when the Group has a
legally enforceable right to set off the recognized amounts,
they relate to income taxes levied by the same taxation author-
ity and the Group intends to settle on a net basis.
2006 Annual Report // 103
Income tax expense is recognized in the statement of income,
except when it relates to items recognized directly in equity
in which case it is also recognized in equity.
2.16 BORROWINGS AND OTHER FINANCIALLIABILITIES
Borrowings and other financial liabilities are initially recognized
at fair value, adjusted for directly attributable transaction
costs. They are subsequently measured at amortized cost,
using the effective interest method.
2.16.1 OCEANEs (Bonds convertibleinto new or existing shares)The Group debt includes two convertible bond issues
(OCEANEs). These financial instrument comprise both a
liability component and conversion option recognized as an
equity component.
The component classified as a financial liability is valued at the
present value of the future contractual cash flows (including
interest, redemption premiums and the settlement of the obli-
gation at maturity), discounted at the market interest rate on the
issue date for debt instruments with the same characteristics
in terms of maturity and cash flows but without a conversion
option. The equity component is obtained by deducting, from
the instrument as a whole, the liability component’s fair value.
Issue costs are allocated to each compnents pro rata to their
respective carrying amounts. The difference between inter-
est expense determined by the effective interest method and
the interest actually paid is added to the carrying amount of
the liability, so as to increase the carrying amount over the
life of the debt to the amount payable at maturity to settle the
obligation if the bonds are not converted.
2.16.2 Other financial liabilitiesOther financial liabilities are measured at amortized cost using
the effective interest method, including issue costs and issue
and redemption premiums.
2.17 DERIVATIVE FINANCIAL INSTRUMENTSAND HEDGING INSTRUMENTS
2.17.1 Measurement of derivativefinancial instrumentsDerivative financial instruments are initially recognized at their
fair value on the date when the Group becomes a party to the
contractual provisions of the contract. They are subsequently
measured at fair value. Derivative instruments with a positive
fair value are recognized as an asset and derivative instruments
with a negative fair value are recognized as a liability.
2.17.2 Hedge accountingThe Group uses financial instruments to optimize its borrow-
ing costs and to hedge budgeted future net cash flows in
foreign currencies over periods not exceeding 18 months.
Derivative instruments are used by the Group as part of its
cash flow hedging strategy, to hedge the Group’s exposure
to fluctuations in exchange rates. No interest rate hedges have
been set up and the Group does not implement any fair value
hedging strategy.
Cash flow hedges are hedges of the exposure to variability in
cash flows that is attributable either to a particular risk asso-
ciated with a recognized asset or liability, or a highly probable
forecast transaction or a firm commitment.
The effective portion of changes in the fair value of cash flow
hedges eligible for hedge accounting is recognized directly
in equity and subsiquently reclassified into finance cost, net in
the period when the firm commitment or future transaction
affects profit or loss. The ineffective portion is recognized in
finance cost, net.
If the forecast transaction is no longer expected to occur, the
cumulative gain or loss recognized directly in equity is reclas-
sified immediately into finance cost, net. If the hedging instru-
ment no longer meets the criteria for hedge accounting and
the forecast transaction is still expected to occur, the cumula-
tive gain or loss recognized directly in equity remains recog-
nized in equity until the forecast transaction occurs. In both
cases, the derivative instrument is classified as a financial instru-
ment at fair value through profit or loss and subsequent
changes in fair value are recognized in finance cost, net.
The Group’s risk management policy is presented in Note 19.
2.18 GOVERNMENT GRANTS
Government grants are recognized when there is reasonable
assurance that the conditions attached to them will be met
and the grants will be received. Grants that are intended to
compensate costs are recognized as income over the periods
necessary to match the related costs which they are intended
to compensate, on a systematic basis. Government grants
related to assets are initially recognized as deferred income
(other liabilities) at fair value and subsequently recognized as
income over the useful life of the asset components.
Consolidated FinancialStatements
104
2.19 SHARE-BASED PAYMENTS
The Group has set up stock option plans for members of
senior management and certain employees. In accordance
with IFRS 2, the benefit granted to employees in the form of
stock options is recognized as an expense over the vesting
period (corresponding to the period up to the start date of
the exercise period). The cost of stock options – correspon-
ding to the fair value of the employee services rendered,
determined using the Black & Scholes option pricing model
– is recognized in personal cost with a corresponding increase
in equity. This cost is adjusted based on the actual number of
options that will be exercisable at the start of the exercise peri-
od. In accordance with the transitional provisions of IFRS 2,
only options granted after 7 November 2002 that had not yet
vested at 1 November 2005 were recognized and measured
at the IFRS transition date.
2.20 TREASURY SHARES
All Club Méditerranée shares held by the Group, for what-
ever purpose, are recorded as a deduction from consolidated
equity at cost. No gain or loss is recognized in the statement
of income on the purchase, sale, issue or cancellation of
equity instruments issued by the Group.
NOTE 3. FIRST-TIME ADOPTION OF IAS 32 AND IAS 39
IAS 32 and IAS 39 have been applied as from 1 November
2005, without restating comparative financial information.
The following table shows the effect, net of deferred taxes,
on consolidated equity at 1 November 2005 of applying
IAS 32 and IAS 39.
(in € millions)
Equity at 31 October 2005 508excluding IAS 32 and IAS 39
OCEANEs 22Treasury shares (9)Foreign currency derivatives 2
Equity at 1 November 2005 523including IAS 32 and IAS 39
Accounting treatment of OCEANEbondsOCEANEs, which were recognized in full in borrowings in the
French GAAP accounts, have been restated based on the
accounting policy described in Note 2.16 “Borrowings and
other financial liabilities”.
Accounting treatment of treasurysharesEquity instruments purchased by the Group, which were
recognized in marketable securities in the French GAAP
accounts, are now recorded as a deduction from equity.
Accounting treatment of foreign currency derivativesForeign currency derivatives and the underlyings form part
of documented cash flow hedging relationships. The effective
portion of cumulative gains and losses on hedging instruments
at 1 November 2005 was recognized in equity in the amount
of €2 million. The hedge accounting policies applied by the
Group are described in Note 2.17 “Derivative financial instru-
ments and hedging instruments”.
NOTE 4. CHANGES IN SCOPE OF CONSOLIDATION
Number of consolidated Full Equity Totalcompanies consolidation method
Scope of consolidation at 31 October 2005 115 10 125
Newly consolidated companies 11 1 12Liquidations (6) (6)Disposals (3) (3)Mergers (7) (7)Change in consolidation method 2 (2)
Scope of consolidation at 31 October 2006 112 9 121
Twelve companies were consolidated for the first time in
fiscal 2006:
• Carthago, following an increase in the Group’s interest from
12.43% to 37.43% on 13 December 2005 (accounted for by
the equity method).
• Club Med Ukraine, created on 22 December 2005 and
wholly-owned.
• Sunport Property Corporation, acquired on 23 March 2006
and wholly-owned.
• SNC Caravelle 2006, created on 23 March 2006 and
wholly-owned.
• Sun Mexico Holding Inc. and its subsidiaries, Sun Cancun I,
Sun Cancun II, Ixtapa I, Ixtapa II, Cancun Property SRL and
Ixtapa Property SRL, acquired on 1 May 2006 and wholly-
owned.
• Société Immobilière et de Gestion Hôtelière de Cap Skirring,
created on 1 September 2006.
2006 Annual Report // 105
These acquisitions and company creations had no material
effects on the consolidated financial statements.
In line with the ongoing rationalization of the Group’s legal
structure, the following operations were carried out during the
year:
Six companies were liquidated:
• Club Med Resorts BV on 3 January 2006.
• Holiday Village Paradise Island on 15 May 2006.
• Club Med Haiti on 17 July 2006.
• Société Hôtelière d’Oyster Pond on 20 July 2006.
• Club Mepe Ltd on 31 July 2006.
• CM Crested Butte LLC on 31 August 2006.
Three companies were sold:
• Club Med Gym Belgique on 26 July 2006.
• Vacances Cap Skirring on 30 October 2006.
• Club Del Mar on 31 October 2006.
Seven companies were merged:
• Condominios Med de San Carlo was merged into Opera-
dora de Aldeas Vacacionales SA de CV on 1 November 2005.
• Jet Hôtel Tunisie was merged into Jet Eldo Tunisie on
14 November 2005.
• Grand Hotel Parisien was wound up without being liquidated
on 19 April 2006.
• Jet Hotel was wound up without being liquidated on
26 August 2006.
• Société Civile de la Tour d’Opio was wound up without being
liquidated on 28 September 2006.
• Sun Mexico Holdings was merged into CM Sales Inc. on
10 October 2006.
• Instituts des Métiers de la Forme was wound up without
being liquidated on 12 October 2006.
The consolidation method applied to four companies has
changed:
• CM Middle East, previously accounted for by the equity
method, was fully consolidated as from 1 November 2005.
• Club Méditerranée Albion Resorts Ltd, previously fully
consolidated, was accounted for by the equity method as
from 25 April 2006.
• Columbus Isle Casino, previously accounted for by the equity
method, was fully consolidated as from 30 April 2006.
• Société Immobilière des Résidences Touristiques, previously
accounted for by the equity method, was fully consolidated
as from 30 April 2006.
In addition, the Group sold 22% of the shares of Taipe
Trancoso.
The impact of these changes in scope of consolidation on the
consolidated financial statements was not material.
NOTE 5. SEGMENT INFORMATION
5.1 BUSINESS SEGMENTS
The Group is organized around four business segments:
- Villages
- Tour operating
- Club Med Gym
- Club Med World
The Group’s operating activities are organized and managed
separately, based on the type of products and services sold.
Each segment offers different products and serves different
markets.
The business segment therefore represents the Group’s
primary reportable segment.
The Villages business segment comprises the Villages, the
cruise business (Club Med 2) and marketing of Club Med
Découverte tours. The Villages activity corresponds to all-
inclusive vacation packages and covers the marketing and
organization of the vacation, transport and related services.
It also includes the management of Village property assets.
The Tour Operating business segment includes the devel-
opment and marketing of tours and vacations by Jet tours,
as well as the development of tours marketed by Club Med
Découverte.
The Club Med Gym business segment corresponds to the
marketing and management of fitness clubs.
The Club Med World business segment corresponds to the
management of a leisure and entertainment complex,
comprising conference facilities, restaurants, theaters or
concert halls, a night club and areas used to organize activi-
ties for children.
Inter-segment transactions are limited. The main transactions
concern the organization by the Tour Operating segment
of tours sold by the Villages’ marketing network (Club Med
Découverte) and the sale by the Jet tours marketing network
of vacations in the Villages.
The Group’s secondary reportable format is the geographi-
cal segment. Operations are organized around three geo-
graphical segments:
- Europe-Africa
- Americas
- Asia
Geographical segments can correspond to the location of
customers and, therefore, to the region where the vacations
are sold. These segments are qualified as outbound zones.
Alternatively, geographical segments may correspond to the
location of assets, in which case they are qualified as inbound
zones.
Consolidated FinancialStatements
106
The Europe-Africa segment comprises the countries of
Europe, the Middle East and Africa.
The Americas segment comprises the countries of North and
South America and the West Indies.
The Asia segment comprises the countries of Asia and
Oceania.
Segment assets include goodwill, intangible assets and prop-
erty, plant and equipment, non-current assets held for sale,
and current assets other than cash and cash equivalents and
tax receivables.
Segment liabilities include provisions – other than provisions
for taxes – and other liabilities, with the exception of borrow-
ings and financial liabilities which are included in net debt.
5.2 INFORMATION BY BUSINESS SEGMENT
(in € millions)
2005 2006
Gross Inter-segment Revenue Gross Inter-segment RevenueRevenue transactions Revenue transactions
Villages 1,250 (3) 1,247 1,326 (3) 1,323Tour operating 319 (30) 289 335 (35) 300Club Med Gym 46 46 47 47Club Med World 8 8 9 9Eliminations (33) 33 (38) 38
Total 1,590 - 1,590 1,679 - 1,679
(in € millions)
2005
Operating Operating Depreciation and Share of incomeincome - Leisure income amortization of associates
and impairment
Villages 21 85 (71) 3Tour operating 4 3 (2)Club Med Gym 3 (1) (4)Club Med World (3) (6) (4)
Total 25 81 (81) 3
(in € millions)
2006
Operating Operating Depreciation and Share of incomeincome - Leisure income amortization of associates
and impairment
Villages 19 31 (61) 3Tour operating 3 3 (1)Club Med Gym 4 3 (4)Club Med World (2) (2) (1)
Total 24 35 (67) 3
(in € millions)
31 October 2005 31 October 2006
Segment Segment Capital Segment Segment Capital assets liabilities expenditure (1) assets liabilities expenditure (1)
Villages 1,190 417 (128) 1,180 473 (141)Tour operating 83 52 (1) 87 48 (2)Club Med Gym 74 39 (3) 72 40 (3)Club Med World 4 3 4 3
Total 1,351 511 (132) 1,343 564 (146)
(1) Excluding government grants
Reconciliation of segment assets and liabilities to the amounts reported in the balance sheet:
(in € millions)
31 October 2005 31 October 2006Including IAS 32/39
Segment assets 1,351 1,343Non-current financial assets 66 80Deferred tax assets 42 35Cash and cash equivalents 160 165
Total assets 1,619 1,623
Segment liabilities 511 564Equity 523 514Borrowings and other interest-bearing liabilities 483 459Deferred tax liabilities 102 86
Total equity and liabilities 1,619 1,623
5.3 INFORMATION BY GEOGRAPHICAL SEGMENT
Revenue (issuing zones)
(in € millions)
2005 2006
Europe-Africa 1,278 1,338Americas 194 196Asia 118 145
Total 1,590 1,679
Revenue in France amounted to €613 million in fiscal 2006 and €585 million in fiscal 2005.
Segment assets and capital expenditure (location of assets)
(in € millions)
31 October 2005 31 October 2006
Segment Capital Segment Capital assets expenditure (1) assets expenditure (1)
Europe-Africa 694 (68) 869 (60)Americas 558 (52) 367 (71)Asia 99 (12) 107 (15)
Total 1,351 (132) 1,343 (146)
(1) Excluding government grants
2006 Annual Report // 107
Consolidated FinancialStatements
NOTE 6. GOODWILL
6.1 ANALYSIS
There were no changes in goodwill during 2006.
(in € millions)
31 October 2005 31 October 2006Net Net
Villages – Europe-Africa 19 19Tour operating 33 33Club Med Gym 43 43
Europe-Africa 95 95
Villages – Americas 3 3Villages – Asia 5 5
Total 103 103
108
6.2 IMPAIRMENT TESTS
Goodwill is allocated to cash-generating units (CGUs), which
are the Villages by geographical segment, the tour operat-
ing business and Club Med Gym. Goodwill was tested for
impairment at the IFRS transition date and since then has been
tested once a year. The principles underlying these tests are
described in Note 2.7 “Impairment of assets”.
The recoverable amount of the main CGUs to which material
goodwill has been allocated, has been determined by the
value in use approach. Value in use is determined by the
discounted cash flows method. Future cash flows are estimated
on the basis of the budget and the three-year business plan,
with a perpetual growth rate applied beyond this period. They
are discounted by applying a discount rate corresponding to
the weighted average cost of capital (WACC). Both estimated
future cash flows and the discount rate are determined on an
after-tax basis.
The assumptions used for impairment tests on the CGUs to
which material goodwill has been allocated are as follows:
(in € millions)
2005 2006
CGU Net allocated After-tax Perpetual Net allocated After-tax Perpetualgoodwill discount rate growth rate goodwill discount rate growth rate
Villages – Europe-Africa 19 7.5% 1.5% 19 7.5% 1.5%Tour operating 33 7.5% 1.5% 33 7.5% 1.5%Club Med Gym 43 7.5% 1.5% 43 7.5% 1.5%
Based on the results of the impairment tests performed in 2005 and 2006, no impairment losses were recognized on goodwill
in either of these two years.
2006 Annual Report // 109
NOTE 7. INTANGIBLE ASSETS
(in € millions)
Brands and Software Lease Other Intangible Totallicenses premiums intangible assets
assets in progress
Cost at 1 November 2004 28 103 16 10 3 160
Accumulated amortization (3) (68) (5) (3) (79)
Net carrying amountat 1 November 2004 25 35 11 7 3 81
Acquisitions 3 1 1 4 9Disposals (1) (1) Amortization for the period (9) (2) (11)Reclassifications and translation adjustments 2 1 (2) 1
Cost at 1 November 2005 28 104 17 11 5 165
Accumulated amortization (3) (74) (4) (5) (86)
Net carrying amount at 1 November 2005 25 30 13 6 5 79
Acquisitions 3 1 4 8Disposals 1 (2) (1)Amortization for the period (6) (1) (7)Reclassifications and translation adjustments 5 (5)
Cost at 31 October 2006 28 112 18 6 4 168
Accumulated amortization (3) (80) (3) (3) (89)
Net carrying amount at 31 October 2006 25 32 15 3 4 79
Following extensive development work on the Group’s
reservation and accounting systems, the estimated useful
lives of these systems were adjusted in 2006. The adjustment
was treated as a change in estimates and made prospec-
tively. The impact on annual amortization expense was
€2.6 million.
Intangible assets with an indefinite useful life amount to
€32 million, including €23 million for the Jet tours brand which
was acquired in a business combination. Based on the results
of the impairment tests performed in 2005 and 2006, no
impairment losses were recognized on these assets in either
of these two years.
Consolidated FinancialStatements
110
Capital expenditure in fiscal 2006 mainly concerned the
Villages of La Caravelle (€19 million), Cancún (€15 million),
Les Boucaniers (€15 million), Peisey-Vallandry (€10 million),
Kanifinolhu (€10 million) and Cervinia (€3 million). As well as
the acquisition of Sandpiper, Ixtapa and Cancún buildings and
fixtures previously held under finance leases for a total of
€14 million.
Disposals mainly included the sale of the Crested Butte, Flaine,
Valbella and Cadaques Villages, and the sale-and-operating-
leaseback of the Chamonix, Les Deux Alpes and Avoriaz
Villages.
NOTE 8. PROPERTY, PLANT AND EQUIPMENT
8.1 ANALYSIS
(in € millions)
Land Buildings and Equipment Other Assets under Totalfixtures construction
Cost at 1 November 2004 314 1,200 168 138 41 1,861
Accumulated depreciation (1) (599) (114) (85) (799)
Net carrying amount at 1 November 2004 313 601 54 53 41 1,062
Acquisitions 7 37 12 6 61 123Disposals (7) (84) (1) (34) (126)Changes in scope of consolidation (3) (15) (2) 1 (21)Depreciation for the period (38) (12) (9) (59)Impairment losses (7) (1) (3) (11)Transfers to assets held for sale (3) (8) (11)Translation adjustment 2 15 (1) 1 1 18Reclassifications 12 2 1 (15)
Cost at 1 November 2005 310 1,040 154 139 53 1,696
Accumulated depreciation (1) (527) (103) (90) (721)
Net at 1 November 2005 309 513 51 49 53 975
Acquisitions 48 25 7 58 138Disposals (9) (50) (4) (2) (65)Changes in scope of consolidation (20) (7) (1) (4) (32)Depreciation for the period (34) (13) (9) (56)Impairment losses (4) (4)Transfers to assets held for sale (50) (27) (2) (2) (81)Translation adjustment (7) (6) (2) (1) (16)Reclassifications 48 2 6 (56)
Cost at 31 October 2006 224 858 150 130 48 1,410
Accumulated depreciation (1) (377) (94) (79) (551)
Net at 31 October 2006 223 481 56 51 48 859
2006 Annual Report // 111
8.2 OTHER INFORMATION
Property, plant and equipment break down as follows by business and geographical segment:
(in € millions)
31 October 2005 31 October 2006
Cost Depreciation and Net Cost Depreciation and Netprovisions carrying provisions
amount
Europe-Africa 807 (393) 414 679 (332) 347Americas 566 (169) 397 483 (110) 373Asia 248 (114) 134 182 (68) 114
Sub-total Villages 1,621 (676) 945 1,344 (510) 834
Tour operating 14 (7) 7 5 (3) 2Club Med Gym 48 (28) 20 47 (27) 20Club Med World 13 (10) 3 14 (11) 3
Total 1,696 (721) 975 1,410 (551) 859
Asset under finance leases amounted to €16 million at
31 October 2006 (€85 million at 31 October 2005). During
the year, the Group purchased the ownership of the assets
of the Sandpiper Village in the United States and the Ixtapa
and Cancún Villages in Mexico.
Finance lease obligations at 31 October 2006 stood at
€8 million at 31 October 2006 (€103 million at 31 October 2005).
At 31 October 2006, property, plant and equipment worth
€37 million had been given as collateral (montgage and
pledge) for debts of €36 million (€39 million and €41 million
respectively at 31 October 2005).
NOTE 9. NON-CURRENT FINANCIALASSETS
(in € millions)
31 October 31 October2005 2006
Investments in associates 12 31Available-for-sale financial assets 6 5Deposits 36 33Other non-current financial assets 12 11
Total 66 80
9.1 INVESTMENTS IN ASSOCIATES
(in € millions)
31 October 2005 2006 Changes in scope of 31 October income consolidation and other 2006
Sviluppo Turistico per Metaponto (Italy) 5 2 7Société Immobilière de la Mer (Morocco) 5 5SPFT - Carthago (Tunisia) (1) 10 10Club Med Albion Resorts (Mauritius) (2) 4 4Other 2 1 2 5
Total 12 3 16 31
(1) Increase in the Group’s stake from 12.43% to 37.43%.(2) Reduction in the Group’s stake from 100% to 22.5% following a share capital issue underwritten by our partners.
Consolidated FinancialStatements
112
9.2 AVAILABLE-FOR-SALE FINANCIAL ASSETS
Investments in non-consolidated companies are classified as
available-for-sale financial assets, in accordance with IAS 39.
The following table shows movements for the last two fiscal
years:
(in € millions)
2005 2006
At 1 November 8 6
Changes in scope of consolidation (2) (1)
At 31 October 6 5
Available-for-sale financial assets consist exclusively of shares
in unlisted companies. The amount held at cost was €5 mil-
lion. No impairment losses were recorded on these assets in
fiscal 2006 or fiscal 2005.
Since the beginning of fiscal 2006, Carthago has been
accounted for by the equity method following an increase in
the Group’s stake to 37.43%.
9.3 OTHER NON-CURRENT FINANCIAL ASSETS
(in € millions)
31 October 31 October 2005 2006
Loans 2 1Deposits 36 33Loans to building organizations 6 6Other 4 4
Total 48 44
NOTE 10. ASSETS HELD FOR SALE
The assets and liabilities attributable to certain Villages have been classified as disposal groups held for sale and reported on
a separate line of the balance sheet, as their sale within 12 months from the date of their classification is considered highly
probable.
An impairment loss of €3 million has been recorded on these disposal groups, to write down the assets to their estimated fair
value less costs to sell. The impairment loss is included in “Operating income – Management of assets”.
(in € millions)
Land Buildings and Equipment Other Total assets fixtures held for sale
Cost at 1 November 2005 3 18 2 1 24
Accumulated depreciation (10) (2) (1) (13)
Net carrying amount at 1 November 2005 3 8 11
Acquisitions 51 31 2 2 86Disposals or reclassification (1) (4) (5)
Net at 31 October 2006 53 35 2 2 92
Cost at 31 October 2006 53 112 11 5 181Accumulated depreciation (77) (9) (3) (89)
Liabilities related to assets held for sale at 1 November 2005Liabilities related to assets held for sale at 31 October 2006 4
These assets do not correspond to discontinued operations as defined in IFRS 5.
2006 Annual Report // 113
NOTE 11. OTHER RECEIVABLES
(in € millions)
31 October 2005 1 November 2005 31 October 2006Excluding Including Cost Provisions NetIAS 32/39 IAS 32/39
Net Net
Tax receivables 23 23 29 29Accrued income 3 3 3 3Prepayments to suppliers 14 14 11 11Receivables on sales of non-current assets 7 7 7 7Current account advances to associates 3 3 2 2Employee advances and prepaid payroll taxes 1 1 1 1Other receivables 11 11 14 (3) 11Prepaid expenses 37 34 44 44
Total 99 96 111 (3) 108
NOTE 12. CASH AND CASH EQUIVALENTS
(in € millions)
31 October 2005 1 November 2005 31 October 2006Excluding IAS 32/39 Including IAS 32/39
Marketable securities 21 21 9Treasury shares 9 - -Derivative instruments - 1 -Cash 138 138 156
Total 168 160 165
Marketable securities consist of money market instruments
subject to an insignificant risk of changes in value.
NOTE 13. EQUITY
13.1 CHANGES IN EQUITY
At 31 October 2006, a total of 19,358,005 fully-paid €4 par
value ordinary shares were issued and outstanding, unchanged
from the previous fiscal year-end.
The 277,305 shares held in treasury at 31 October 2006 (257,165
shares at 31 October 2005) are stripped of dividend rights.
Under a liquidity agreement as part of the buyback programs
approved by the Annual Shareholders’ Meetings of 16 March
2005 and 14 March 2006, during fiscal 2006 a total of 156,709
Club Méditerranée SA shares were purchased at an average
price of €41.53 and 136,569 shares were sold at an average
price of €43.42.
The translation reserve amounted to €10 million at 31 October
2006, including €6 million attributable to shareholders
(€25 million, including €21 million attributable to sharehold-
ers, at 31 October 2005). The decrease in fiscal 2006 was
primarily due to changes in the dollar/euro exchange rate.
The impact on equity of cash flow hedges was not material.
Information about stock option plans is provided in Note 14.
All receivables are due within one year.
Prepaid expenses correspond mainly to services paid before travel (such as transport and fee-based services), and prepaid leases.
Consolidated FinancialStatements
114
13.2. MINORITY INTEREST
(in € millions)
31 October 2006 Dividends Capital Changes in 31 October2005 income decrease scope of 2006
consolidation
Itaparica (Brazil) 19 1 (1) (1) 18Holiday Villages Thailand 5 (1) 4Belladona Company for H&T (Egypt) 3 3Holiday Hotels AG (Switzerland) 7 7Taipe Trancoso (Brazil) 4 3 7Sté Villages Hôtels des Caraïbes (France) 11 11Covifra (Mauritius) 2 2Other 3 3
Total 54 (1) (1) 3 55
NOTE 14. SHARE-BASED PAYMENTS
14.1. DESCRIPTION OF STOCK OPTIONPLANS
The stock options granted to members of senior management
and certain permanent employees of the Group are exercis-
able for new shares, with the exception of Plan H options, which
are exercisable for existing shares. The plans do not allow for
options to be cash-settled and do not include any vesting con-
ditions based on market conditions or performance targets.
All outstanding options have a ten-year life, with the exception
of those granted under Plans J and K, which have an eight-year
life.
The main characteristics of the plans outstanding at 31 October
2006 are as follows:
On 14 March 2006, the Board used the authorization given at the Annual Shareholders’ Meeting of 16 March 2005 to grant
250,000 stock options at an exercise price of €42.67 (Plan K).
The exercise price corresponds to the average of the closing prices quoted for Club Méditerranée shares over the twenty
trading days preceding the grant date. No options were exercised during the year.
1997 1998 1999 2000 2001 2002 2003 2004 2005 2006Plan F Plan F2 Plan F3 Plan F4 Plan F5 Plan G Plan G2 Plan G3 Plan G4 Plan G5 Plan H Plan I Plan J Plan K
Date of Shareholders’ Meeting 23.04.97 23.04.97 23.04.97 23.04.97 23.04.97 23.04.97 23.04.97 23.04.97 23.04.97 23.04.97 29.03.02 17.03.03 17.03.03 16.03.05
Date of Board 18.08.97 24.03.98 24.08.98 17.02.99 29.07.99 07.02.00 26.07.00 06.02.01 24.07.01 05.02.02 28.02.03 15.01.04 11.01.05 14.03.06meeting
Number of optionsgranted 663,370 73,500 9,000 21,000 46,000 258,400 21,815 212,530 37,400 127,000 283,000 272,000 300,000 250,000
Options granted to the Senior Management Committee (members as of 31 October 2006) 63,159 10,000 - 1,000 - 34,800 - 18,900 - 13,800 229,000 95,000 111,000 103,000
Starting date of exercise period 50%: 50%: 50%: 50%: 50%: 07.02.05 26.07.04 06.02.05 24.07.05 05.02.06 01.03.06 15.01.07 11.01.08 14.03.09
18.08.02 24.03.03 24.08.03 17.02.04 23.07.04 Lock-up Lock-up Lock-up Lock-up50%: 50%: 50%: 50%: 50%: until until until until
18.08.03 24.03.04 24.08.04 17.02.05 23.07.05 28.02.07 14.01.08 10.01.09 13.03.10
Exercise period ends 17.08.07 23.03.08 23.08.08 16.02.09 22.07.09 06.02.10 25.07.10 05.02.11 23.07.11 04.02.12 27.02.13 14.02.14 10.01.13 13.03.14
Exercise price (in €) 68.8 70.81 79.12 81.13 92.79 111.11 136.13 92.78 63.99 44.74 35 31.03 35 42.67
Options outstanding at 31 October 2006 119,063 13,500 3,000 10,000 3,000 89,542 6,200 105,315 13,900 86,500 245,000 226,800 268,600 247,000
Remaining life 0.8 1.4 1.8 2.3 2.8 3.3 3.8 4.3 4.8 5.3 6,3 7.3 6.3 7.5
2006 Annual Report // 115
14.2 OUTSTANDING OPTIONS
2005 2006
Number Average Number Averageexercise price exercise price
(in €) (in €)
Options outstanding at 1 November 1,056,497 56.54 1,292,475 50.89
Options granted during the period 300,000 35.00 250,000 42.67Options exercised during the period - - - -Options canceled during the period (64,022) (69.66) (105,055) (48.48)
Options outstanding at 31 October 1,292,475 50.89 1,437,420 49.64Options exercisable at 31 October 387,125 88.10 695,020 63.84
14.3 SHARE BASED PAYMENTS
In accordance with the transitional provisions of IFRS 2, only
options granted after 7 November 2002 that had not yet
vested at 1 November 2005 were recognized and measured
at the IFRS transition date.
The plans concerned were the four plans set up between 2003
and 2006.
Fair value of options grantedFair values were calculated at the grant dates of the various
plans using the Black & Scholes option pricing model.
The main data and assumptions used to determine the fair
values of options granted under the 2005 and 2006 plans were
as follows:
Plan J Plan K
Club Méditerranée SA share price at grant date (in €) 35.18 45Exercise price (in €) 35 42.7Expected volatility (in %) 23.5 23.5Expected life of the options (in years) 5 5Risk free interest rate (%) 3.00 3.80Fair value per option 9.58 14.03
The weighted average fair value of options granted during
fiscal 2006 was €14.03 per option.
The cost recognized in respect of share-based payment plans
amounted to €2 million in 2006 and in 2005.
NOTE 15. PENSION AND OTHERLONG-TERM BENEFITS
15.1 DESCRIPTION OF THE MAIN PLANS
Group employees receive certain short-term benefits, such as
vacation pay, “13th month” bonuses, compensated absences,
health insurance and unemployment insurance in France.
The Group’s post-employment benefit plans are based on
legal obligations in each host country and on the subsidiaries’
compensation policies. Long-term benefit plans include both
defined contribution and defined benefit plans.
Defined contribution plans Under defined contribution plans, the Group pays contribu-
tions to an external fund which is responsible for paying the
benefits. The Group’s legal or constructive obligation under
these plans is limited to the amount that it agrees to contribute
to the fund. The main defined contribution plans consist of
government-sponsored basic and supplementary pension
plans in Europe and defined contribution plans in North
America. Senior management benefits for defined contribu-
tion supplementary pension plans.
Contributions to all of these plans are recognized as an
expense for the period in which they are incurved.
Consolidated FinancialStatements
15.2.2 Funded status of defined benefit plans (in € millions)
31 October 31 October2005 2006
Present value of the unfunded obligation 26 21Unrecognized actuarial gains and losses - 7
Net liability recognized in the balance sheet 26 28
15.2.3. Change in defined benefitobligations(in € millions)
2005 2006
Defined benefit obligation at 1 November 25 26Service cost 2 2Interest cost (discounting adjustment) - 1Actuarial gains and losses for the period - (7)Paid benefits (1) (1)
Defined benefit obligation at 31 October 26 21
15.2.4 Analysis of defined benefitplan costs (in € millions)
Fiscal 2005 Fiscal 2006
Service cost (2) (2)Actuarial gains and losses recognized in the period - -
Cost recognized in employee benefits expense (2) (2)
Interest cost (1)
Cost recognized in financial cost, net (1)
Total cost (2) (3)
15.3 DEFINED CONTRIBUTION PLANS
Contributions under defined contribution plans amounted
to €15 million in 2006 (€14 million in 2005).
Defined benefit plans Under defined benefit plans, the Group has an obligation to
pay benefits to employees upon retirement or after they have
retired. The Group’s defined benefit plans are unfunded and
provisions are recorded in the balance sheet.
The main defined benefit plans related to retirement indem-
nity payable to employees on retirement (France, Greece and
Turkey) or when they leave the Group (Italy, Japan and Mexico).
15.2 DEFINED BENEFIT PLANS
15.2.1 Main actuarial assumptionsThe Group’s obligations under defined benefit plans are meas-
ured by the projected unit credit method. This method
involves the use of long-term actuarial assumptions concern-
ing demographic variables (such as employee turnover and
mortality) and financial variables (such as future increases in
salaries and discount rates). These variables are reviewed each
year. Actuarial gains and losses – corresponding to the effect
of changes in actuarial assumptions on the amount of the
obligation – are recognized by the corridor method described
in Note 2.14 “Pension and other long-term employee benefit
obligations”.
The main discount rates applied by the Group are as follows:
Europe Turkey Japan Mexico
Discount rate 3.7% 18.6% 2.0% 8.4%
116
2006 Annual Report // 117
NOTE 16. PROVISIONS
(in € millions)
31 October 1 November Increases Utilizations Reversals 31 October2005 2005 (surplus 2006
Excluding Including provisions)IAS 32/39 IAS 32/39
Provisions for liability claims and damages 7 7 3 (2) (2) 6Restructuring provisions 10 10 13 (7) 16Provisions for litigation 12 12 6 (3) (2) 13Provision for OCEANE convertible bond redemption premiums 13 1 (1)Tax provisions 3 3 1 (1) (1) 2Other provisions 5 5 2 (2) (1) 4
Total 50 38 25 (16) (6) 41
- o/w current 50 38 25 (16) (6) 41
NOTE 17. INCOME TAXES
17.1. INCOME TAX ANALYSIS
Current and deferred taxes can be analyzed as follows:
(in € millions)
2005 2006
Current income tax (3) (6)Deferred taxes on temporary differences (33) (3)Effect of changes in tax rates - 3Reassessment of deferred tax assets - 5Deferred income tax (33) 5
Total (36) (1)
In 2006, corporate income tax rates were reduced in Greece and Turkey. The impact of these reductions on the net deferred
tax liabilities of the companies concerned was €3 million.
Club Méditerranée SA has set up a tax group comprising twenty French subsidiaries.
The nature of the Group’s business and the fact that its
operations are conducted in a large number of countries with
differing and sometimes contradictory regulations is a source
of operating difficulties and can lead to disputes with suppli-
ers, owners or local authorities.
Restructuring provisions include €10 million in provisions for
site closure costs.
Provisions for litigation cover commercial claims, employees
claims and disputes with government agencies. Provisions
are booked for the estimated cost of identified risks on the
basis described in Note 2.13 “Provisions”.
Consolidated FinancialStatements
118
Effective tax rateThe following reconciliation is based on the current French income tax rate of 34.43% for fiscal 2006 (34.93% for fiscal 2005).
Tax (in € millions) Tax rate
2005 2006 2005 2006
Income before tax 43 3
Current tax rate 34.93% 34.43%Tax at current rate (15) (1)Effect of different foreign tax rates 2 (1)Effect of changes in tax rates - 3Unrecognized deferred tax assets on tax losses for the year (37) (49)Deferred tax assets recognized on tax losses generated in prior years 5Tax loss carryforwards utilized during the year 13 37Permanent differences and other 1 5
Total (21) 0
Effective tax rate (36) (1) 83.7% 33.3%
17.2. DEFERRED TAX ASSETS AND LIABILITIES
(in € millions)
31 October 2005 1 November 2005 31 October 2006Excluding IAS 32/39 Including IAS 32/39
Deferred tax assets 44 42 35Deferred tax liabilities (98) (102) (86)
Net deferred tax liability (54) (60) (51)
Deferred taxes recognized directly in equity are not material.
Deferred tax analysed by balance sheet captions:
(in € millions)
31 October 2005 1 November 2005 31 October 2006Excluding IAS 32/39 Including IAS 32/39
Property, plant and equipment (103) (103) (94)Tax loss carryforwards 55 53 53
Total assets (48) (50) (41)
Intangible assets (8) (8) (8)Property, plant and equipment 2 2 1Borrowings and other interest-bearing liabilities (4) (3)
Total liabilities (6) (10) (10)
Net deferred tax liability (54) (60) (51)
Deferred tax assets recognized on tax loss carryforwards concern the tax losses of tax groups in France and the United States.
Their recoverability was assessed based on the two tax groups’ earnings forecasts, particularly in France where the tax losses
were viewed as non-recurrent based on business plan outlook.
2006 Annual Report // 119
17.3. TAX LOSS CARRYFORWARDS BY EXPIRATION DATE
Tax loss carryforwards at 31 October 2006 can be analyzed as follows by expiration date:
(in € millions)
31 October 2006
2007 232008 to 2012 176 Beyond 107 Evergreen tax losses 271
Total tax loss carryforwards 576
Deferred tax assets corresponding to these loss carryforwards break down as follows by geographical region:
(in € millions)
Recognized Unrecognized Total
French tax group 35 33 68 Other – Europe-Africa 64 64
Total – Europe-Africa 35 97 132
US tax group 13 4 17 Other – Americas 2 7 9
Total – Americas 15 11 26
Asia 3 9 12
Total deferred tax assets on tax loss carryforwards 53 117 170
NOTE 18. BORROWINGS AND OTHER INTEREST-BEARING LIABILITIES
18.1 NET DEBT
(in € millions)
Balance sheet items 31 October 2005 1 November 2005 31 October 2006Excluding IAS 32/39 Including IAS 32/39
Cash and cash equivalents 168 160 165
Long-term borrowings and other interest-bearing liabilities 455 435 346 Short-term borrowings and other interest-bearing liabilities 48 48 109 Liabilities related to assets held for sale 4Total borrowings and other interest-bearing liabilities 503 483 459
Net debt 335 323 294
Consolidated FinancialStatements
120
18.2. BORROWINGS AND OTHER INTEREST-BEARING LIABILITIES BY CATEGORY
(in € millions)
31 October 2005 1 November 2005 31 October 2006Excluding IAS 32/39 Including IAS 32/39
OCEANE convertible bonds 290 270 269Long-term bank borrowings 70 70 57Drawdowns on credit lines - - 16Finance lease obligation 95 95 4
Total borrowings and other interest-bearing liabilities, non current 455 435 346
OCEANE convertible bonds 10 10 10Current portion of long-term bank borrowings 8 8 10Current portion of lease liabilities 8 8 -Drawdowns on credit lines 80Short-term bank loans and overdrafts 22 22 9
Total borrowings and other interest-bearing liabilities, current 48 48 109
Finance lease obligation - - 4
Liabilities related to assets held for sale 4
Total 503 483 459
Debt secured by collateral amounted to €36 million at 31 October 2006 (€41 million at 31 October 2005).
During 2006, Club Méditerranée purchased the ownership of the Sandpiper, Ixtapa and Cancún Villages previously held on
finance lease.
18.3 CHARACTERISTICS OF DEBT
31 October 2006 Nominal interest Effective interest Maturityrate rate date
OCEANE due 2008 fixed rate 137 (1) 5.25% 8.40% Nov-2008OCEANE due 2010 fixed rate 141 4.38% 7.39% Oct-2010
Total bonds 278
Drawdowns on €70 million credit line 55 Euribor + (a) 3.60% (2) Oct-2009 Mortgage loan on Da Balaïa Village 18 Euribor + (b) 5.16% (2) Oct-2008Mortgage loan on Club Med 2 18 Euribor + (c) 4.55% (2) Dec- 2010Drawdown on confirmed short-term credit line 41 USD Libor + 1.2 7.20% (2) April-2007 Other (including short-term bank loans and overdrafts) 49
Total borrowings and other interest-bearing liabilities 459
(1) Yield to maturity including redemption premium.(2) Average rate in 2006 including fees.
Margins (a), (b) and (c) depend on the Group’s net debt/Ebitda ratio. The ranges are as follows:(a) 1.10% to 0.7%(b) 1.60% to 1.20%(c) 1.75% to 1.35%
2006 Annual Report // 121
18.3.1 OCEANE convertible bondsThe Group’s borrowings include two OCEANE convertible bond issues. The bonds’ main characteristics are as follows:
OCEANEs due 2008 OCEANEs due 2010
Amount of the issue (in €) 139,474,514 149,999,976Number of bonds issued 2,404,733 3,092,783Starting date for interest accruals 30.04.02 03.11.04Maturity 01.11.08 01.11.10Nominal interest rate 3.00% 4.375%Yield to maturity 5.25% 4.375%Effective interest rate 8.40% 7.39%
Any unconverted OCEANE due 2008 will be redeemed at
maturity at a premium to their face value. Increasing the yield
to maturity to 5.25%. Bond holders had the option of redeem-
ing the bonds early, on 30 April 2006, at a price representing
a yield of 5.25%.
A total of 211,002 bonds were redeemed early on 30 April 2006,
for a total of €13.6 million including accrued interest.
(in € millions)
OCEANE due 2008 OCEANE due 2010
Nominal amount of the issue 140 150Issuance costs (3) (3)Equity components (21) (18)
Initial amount recognized in liability 116 129
Recognized interest 38 9Interest paid (10)
Liability at 1 November 2005 under IFRS 144 138
Interest recognized in 2006 10 10Interest paid in 2006 (4) (7)Bonds redeemed early in April 2006 (13)
Liability at 31 October 2006 137 141
Of which accrued interest 4 6
18.3.2. Syndicated line of creditClub Méditerranée has a €70 million line of credit obtained
on 25 October 2004 and expiring in 2009. At 31 October 2006,
the line was drawn down in the amount of €55 million.
18.3.3 Other long-term facilitiesThe Da Balaïa Village and the Club Med 2 cruise ship are
financed by two loans due in October 2008 and October 2010
respectively. The loans are secured by mortgages and pledges
on the Village’s assets and the cruise ship. The balance
outstanding on the two loans at 31 October 2006 totaled
€36 million.
Consolidated FinancialStatements
122
NOTE 19. FINANCIAL INSTRUMENTS
19.1 FINANCIAL RISK MANAGEMENT POLICY
In the normal course of business, the Group is exposed to
various financial risks, including, market risks (particularly cur-
rency and interest rate risks), credit risks and liquiduty risks.
The Group may use derivative financial instruments to hedge
currency risks arising in the course of its business and interest
rate risks on floating rate debt. In practice, these instruments
are used primarily to hedge currency risks on future transac-
tions. The Treasury and Financing unit identifies, assesses,
monitors and hedges financial risks on a centrally basis in
accordance with the policies approved by the Audit
Committee. Specific rules have been drawn up and approved
banning the use of derivative instruments for trading purposes.
19.1.1 Market risks
Currency risk
Club Méditerranée’s international operations expose the
Group to the risk of fluctuations in foreign exchange rates
affecting its income and equity.
Three types of risk may be identified:
- Currency risks on billing currencies and operating cash flows.
- Currency risks on financing denominated in a currency other
than the borrower’s functional currency.
- Risks of a change in consolidated equity arising from the
Group’s net investment in foreign operations.
The Group’s policy based on budgeted cash flows for the
coming year consists of:
- Hedging the main currencies in which sales are denomi-
nated (British pound, Japanese yen, Canadian dollar,
Australian dollar, Korean won, etc.), using options, forward
sales, non-deliverable forwards.
- Hedging the Group’s exposure to the US dollar, correspon-
ding to both a billing currency and an operating currency,
using instruments such as options and forward purchases.
- Not systematically hedging other functional currencies
(Moroccan dirham, Turkish pound, Tunisian dinar, Indonesian
rupee, Thai bath, etc.), which are purchased as and when
required.
The Group’s exposure to currency risks on external debt is
not significant. Intra-group financing is generally denominat-
ed in the subsidiary’s functional currency. When identifical
as hedges of the net investment in foreign operations, their
unrealized change in value is recognized directly in equity.
The Group’s net investment in foreign operations is exposed
to the risk of fluctuations in foreign currencies against the euro.
The impact of these fluctuations on net investments in inde-
pendent subsidiaries is recognized as a separate component
of equity. This risk is not hedged using derivative instruments.
Equity risk
The Group does not hold any listed securities, apart from treas-
ury shares which is recorded as a deduction from equity. As a
result, it is not exposed to any risk of fluctuations in stock
prices.
Interest rate risk
There are two types of interest rate risk:
- Fair value risk on fixed rate net debt. This type of risk being
not hedged, the carrying amount of financial assets and lia-
bilities is not adjusted for changes in interest rate. Fair value
risk therefore corresponds to the opportunity cost in case of
a fall in rates.
- Cash flow risk on floating rate net debt, corresponding to
the impact on finance costs of an increase or decrease in
interest rates.
No cash flow hedges of interest rate risks have been put in
place as the Group’s net floating rate debt is not material.
The Group does not hold any interest-bearing assets.
19.1.2 Credit and counterparty riskMost customers pay in advance for their vacations and the
Group’s exposure to credit risk on commercial transactions is
therefore limited.
Derivative instruments and borrowings are entered into with
a wide range of leading counterparties.
In case of cash surpluses, first rank, they are invested in certifi-
cates of deposit or Sicav mutual funds of leading banks.
19.1.3 Liquidity riskLiquidity risk is monitored by using diversified sources of
financing.
Some of the Group’s debt facilities include early redemption
clauses that are triggered in the event of a breach of the debt
covenants or of asset disposal.
2006 Annual Report // 123
19.2 FAIR VALUE OF FINANCIAL INSTRUMENTS
The following table shows the carrying amounts and fair values
of financial instruments at 31 October 2006:
(in € millions)
Carrying Fair valueamount
Cash and cash equivalents 165 165
Financial assets 165 165Bonds 278 302Other fixed rate long-term borrowings and interest-bearing liabilities 15 14Other floating rate long-term borrowings and interest-bearing liabilities 157 157Short-term bank loans and overdrafts 9 9
Financial liabilities 459 483
The above table does not include trade receivables or trade
payables. In light of their short-term nature, there is no differ-
ence between the carrying amount of trade receivables and
trade payables and their fair value.
The fair value of derivative instruments is not material.
19.3 MATURITIES OF FINANCIAL LIABILITIESAND DEBT COVENANTS
19.3.1 Analysis of financial liabilitiesby maturity
(in € millions)
31 October 31 October2005 2006
Due within one year (including short-term bank loans and overdrafts) 49 113
2006-2007 272007-2008 31 20 2008-2009 153 158 2009-2010 15 5 2010-2011 167 145 Beyond 61 18
Total due beyond one year 454 346
Total 503 459
The discounted present value of finance lease obligations,
including those related to assets held for sale, is as follows:
(in € millions)
31 October 31 October 2005 2006
Due within one year 8 4
Due in one to five years 49Due beyond five years 46 4
Total due beyond one year 95 4
Total 103 8
19.3.2 Confirmed lines of creditClub Méditerranée has a €70 million line of credit obtained
on 25 October 2004 and expiring in 2009. At 31 October 2006,
the line was drawn down in the amount of €55 million. Following
the asset disposals carried out at the end of the year, the
Group repaid €18 million in November 2006. Under the terms
of the facility agreement, the amount of the line will be
reduced to €16 million in October 2007. The line is subject to
various covenants (see 19.3.3 “Debt covenants”).
19.3.3 Debt covenantsThe debt covenants have been redefined, effective from
30 April 2006, to take into account the transition to IFRS. Under
the redefined covenants, EBITDA is defined as Operating
income - Leisure before depreciation, amortization and
provisions. Any breach of the ratios defined in the covenants
the outstanding debt may become immediately repayable.
Ratios applicable to the €70 million syndicated line of credit
and the occured loans financing the Club Med 2 cruise ship
and the Da Balaïa Village are as follows:
- Off-balance sheet commitments: less than €200 million
- Gearing: less than 1
- Leverage (net debt/Ebitda (as defined above): less than the
following:
30 April 31 October
2006 4.47 4.472007 4.17 4.172008 * 3.88 3.88
2009 and beyond 3.58 3.58
* Da Balaïa until 2008.
The covenants were complied with at 31 October 2006:
- Off-balance sheet commitments
(less than €200 million): €91 million
- Gearing (less than 1): 0.57
- Leverage (net debt/Ebitda (as defined above))
(less than 4.47): 3.26
Consolidated FinancialStatements
124
19.5.2 Exposure to currency risk on operating activities
At 31 October 2006
(in millions of foreign currency)
USD GBP AUD JPY CAD MXN KRW TND MAD TRY
Net exposure to currency risk on operating activities (62) 15 7 1,000 27 (327) 10,200 (41) (155) (16)
Cash flow hedges (derivative notional amount) 20 (10) (5) (19) 105 (4,000)
Net exposure of 2007 cash flows after hedges at 31 October 2006 (42) 5 2 1,000 8 (222) 6,200 (41) (155) (16)
Net exposure after converted into euros (in € millions) (33) 7 1 7 6 (16) 5 (24) (14) (9)
NOTE: Amounts in parentheses correspond to purchases of foreign currencies; amounts not in parentheses correspond to sales of foreigncurrencies. GBP: British pound; AUD: Australian dollar; JPY: Japanese yen; CAD: Canadian dollar; MXN: Mexican peso; KRW: South Korean won;USD: US dollar; TND: Tunisian dinar; MAD: Moroccan dirham; TRY: Turkish pound.
Net exposures correspond to the exposure of estimated operating cash flows for the following year. Hedges are set up grad-
ually over the year.
All hedging instruments outstanding the year-end expire within one year.
Currency hedges consist of forward contracts, including non-delivery forwards on the South Korean won, qualifying for cash
flow hedge accounting.
19.4 MANAGEMENT OF INTEREST RATE RISK
The Group has a combination of fixed and floating rate debt.
In fiscal 2006, no interest rate hedges were set up as average
floating rate net debt represented less than €50 million.
At 31 October 2006, the Group’s exposure to interest rate
risk by maturity was as follows:
(in € millions)
Total Less One More than to five thanone years fiveyear years
Cash and cash equivalents (165) (165)Floating rate debt * 166 100 56 10Net floating rate debt 1 (65) 56 10Fixed rate debt 293 14 272 7
Net debt 294 (51) 328 17
* Including short-term bank loans and overdrafts.
19.5 CURRENCY RISK MANAGEMENT
19.5.1 Analysis of financial liabilitiesby currency
(in € millions)
31 October 2005 31 October 2006Excluding IAS 32/39
Euros 378 389US dollars 96 41Swiss francs 13 12Brazilian reals 10 17Other 6
Total 503 459
Most external financing is in the borrower’s functional currency
and the Group’s exposure to currency risk on external borrow-
ings is therefore limited.
2006 Annual Report // 125
NOTE 20. OTHER LIABILITIES
(in € millions)
31 October 31 October 2005 2006
Customer prepayments 93 112Accrued expenses 16 13Accrued payrollexpense 44 47Taxes payables 22 20Payables to suppliersof non-current assets (1) 18 20Accrued rentals 8 8Deferred income 63 67Government grants 22 28Other liabilities 1 10
Total 287 325- Of which non-current (2) 30 36- Of which current 257 289
(1) At 31 October 2006, these liabilities mainly concerned three Villages,Peisey-Vallandry (€4 million), La Caravelle (€7 million) and LesBoucaniers (€2 million).
(2) Non-current liabilities consist of government grants and accrualsarising from the recognition of rental expenses on a straight-linebasis.
NOTE 21. EMPLOYEE BENEFITSEXPENSE
(in € millions)
2005 2006
Wages and salaries (234) (250)Payroll taxes (43) (49)Pension contributions (14) (15)Share based payment expense (2) (2)Other (13) (12)
Total (306) (328)
Consolidated FinancialStatements
Number of employees
Full-time Full-time O/w temporary O/w temporaryequivalents equivalents contracts* contracts*
2005 2006 2005 2006
Villages 14,257 13,886 7,452 7,433Tour operating 280 339 70 49Club Med Gym 471 485 48 47Club Med World 166 135 17 24
Total number of employees 15,244 14,845 7,587 7,553
* Seasonal employees and employees under fixed-term contracts.
NOTE 23. OTHER OPERATINGINCOME & EXPENSE
(in € millions)
2005 2006
Restructuring costs (12) (14)Tsunami and hurricane costs (5) (1)Costs of claims and litigation (7) (5)Credit card costs (8) (9)Other (1)
Other operating income & expense (33) (29)
NOTE 22. OPERATING INCOME –MANAGEMENT OF ASSETS
(in € millions)
2005 2006
Gains on disposals of Villages 108 50Gains and losses on Village and site closures (7) 4Village opening costs (4) (6)Impairment losses (4) (4)Other (4) (4)
Operating income – Management of assets 89 40
Disposals included the sale of the Crested Butte, Flaine,
Valbella and Cadaques Villages, and the sale-and-operating-
leaseback of the Chamonix, Les Deux Alpes and Avoriaz
Villages. Details of the sale proceeds are provided in Note
27.3.
26.2 DILUTED EARNINGS PER SHARE
(in thousands of shares)
2005 2006
Weighted average number of shares 19,101 19,078 Dilutive potential ordinary shares (stock options) 38 111Diluted weighted average number of shares 19,139 19,189
In fiscal 2006, 687,020 potential ordinary shares (stock options)
were excluded from the calculation because they were anti-
dilutive (786,475 shares in fiscal 2005).
In fiscal 2006, 5,287 thousand anti-dilutive potential ordinary
shares corresponding to OCEANE convertible bonds were
also excluded (5,498 thousand shares in fiscal 2005).
(in €)
2005 2006
Basic earnings per share 0.48 0.24 Diluted earnings per share 0.48 0.24
No events occurred after the balance sheet date that would
have a material impact on the calculation of diluted earnings
per share
NOTE 27. NOTES TO THE CONSOLIDATED CASHFLOW STATEMENT
27.1 DEPRECIATION, AMORTIZATION AND PROVISIONS
(in € millions)
2005 2006
Amortization and impairment: intangible assets 11 7Depreciation and impairment: property, plant and equipment 70 60Other provisions 2 3
Depreciation, amortization and provisions 83 70
27.2 ACQUISITIONS OF NON-CURRENT ASSETS
(in € millions)
2005 2006
Acquisitions of intangible assets (9) (8)Acquisitions of property, plant and equipment (123) (138)Government grants 22 7Acquisitions of non-current financial assets (4) (12)
Total acquisitions of non-current assets (114) (151)
126
NOTE 24. FINANCE COST, NET
(in € millions)
2005 2005 2006(pro forma)
Excluding IncludingIAS 32/39 IAS 32/39
Interest income 2 2 2Interest on OCEANE convertible bonds (15) (22) (21)Other interest costs (23) (23) (15)
Interest costs, net (36) (43) (34)
Exchange gains and losses, net (4) (4) 5
Autres 2 2 2
Finance cost, net (38) (45) (32)
IAS 32 and IAS 39 have been applied prospectively as from
1 November 2005 and interest costs for 2006 and 2005 are
therefore not directly comparable. The main change in
accounting method concerned interest on OCEANE convert-
ible bonds, leading to an increase in finance costs without any
corresponding increase in cash payments. Pro forma informa-
tion is provided to facilitate year-on-year comparisons.
NOTE 25. SHARE OF INCOME OF ASSOCIATES
(in € millions)
2005 2006
Share of income of associates 3 3
Details of the contribution of associates to consolidated
income are provided in Note 9 “Non-current financial assets”.
NOTE 26. EARNINGS PER SHARE
26.1 BASIC EARNINGS PER SHARE
(in thousands of shares)
2005 2006
Number of shares at 1 November 19,358 19,358 Number of treasury shares at 1 November (257) (257) Weighted average number of treasury shares purchased/sold during the period - (23) Weighted average number of shares issued during the period - -
Weighted average number of shares at 31 October 19,101 19,078
27.3 PROCEEDS FROM DISPOSALS OF NON-CURRENT ASSETS
Proceeds from disposals of property, plant and equipment,
in the amount of €110 million, mainly correspond to sales of
the following Village properties: Chamonix (€27 million),
Crested Butte (€25 million), Les Deux Alpes (€23 million),
Avoriaz (€13 million), Flaine (€7 million), Valbella (€5 million)
and Cadaques (€4 million).
Proceeds from disposals of non-current financial assets corre-
spond to repayments of loans and deposits for €4 million and
the €29 million in proceeds from the sale of shares in Vacances
Cap Skirring (€21 million), Club del Mar (€5 million) and Taipe
Trancoso (€2 million).
NOTE 28. RELATED PARTY TRANSACTIONS
Related party transactions were as follows:
Transactions with associates(in € millions)
31 October 2005 31 October 2006
Other receivables 3 2Other current liabilities 1 4
Transactions with associates in fiscal 2006 were not material.
2006 Annual Report // 127
NOTE 29. COMMITMENTS AND CONTINGENCIES
29.1 AT 31 OCTOBER
(in € millions)
31 October 2005 31 October 2006
Total Less than One to five More than Totalone year years 5 years
Commitments givenGuarantees given (1)
Europe 55 17 25 23 65Americas 29 20 20Asia 5 3 1 2 6
Total commitments given 89 40 26 25 91
Commitments received (2) 16 6 3 4 13
Reciprocal commitmentsUnused lines of credit 70 15 15Rent guarantees 7 7 7
Total reciprocal commitments 77 15 7 22
(1) Guarantees given in connection with travel and transport agent licenses (€23 million), rent bonds (€6 million), guarantees for liabilities relatedto disposals (€31 million), guarantees for credit cards processors (€12 million) and tax and customs bonds (€3 million).
(2) Guarantees received by the Group in regard to travel agencies amounted to €7 million.
Financing for the Da Balaïa Village and the Club Med 2 cruise ship is secured by liens and mortgages on the underlying assets
(see Notes 8.2 and 18.3).
Senior management compensationDisclosures of senior management compensation relates the
members of the Senior Management Committee. Total gross
compensation and benefits paid in fiscal 2006 amounted to
€3,928 thousand (€3,624 thousand in fiscal 2005).
Members of senior management are covered by a defined
contribution pension plan managed by an external fund with
a contribution between 6.29% and 8% of their gross compen-
sation. Contributions to this plan paid on behalf of members
of the Senior Management Committee amounted to
€285 thousand in fiscal 2006.
During fiscal 2006, a stock option plan was granted for mem-
bers of senior management and certain employees of Club
Méditerranée, with an exercise price of €42.67. A total of
103,000 options were granted to members of the Senior
Management Committee under this plan. The total fair value
of these options, determined in accordance with IFRS 2, is
€1,445 thousand.
The cost recognized in fiscal 2006 for stock options granted
to members of the Senior Management Committee, as
determined in accordance with IFRS 2, was €756 thousand
(€642 thousand in fiscal 2005).
No loans or guarantees have been granted to or on behalf of
executive directors.
No stock options were exercised by members of the Senior
Management Committee during the year.
Consolidated FinancialStatements
128
29.2 COMMITMENTS UNDER NON-CANCELABLE OPERATING LEASES
The Group leases offices and sales agencies under non-cancelable leases. Some office equipment and Village telephone and
video equipment is also leased.
Under its asset financing policy, certain Villages as well as other assets are also leased under non-cancelable operating leases.
The following table shows the minimum future lease payments due under these non-cancelable operating leases:
(in € millions)
Total 2006 2007 2008 2009 2010 2011 2016 2026minimum to to and
future lease 2015 2025 beyondpayments
Europe 1,657 113 114 115 112 113 543 481 66Americas 43 4 4 4 3 3 14 11Asia 144 12 11 11 11 10 52 37
Sub-total Villages 1,844 129 129 130 126 126 609 529 66
Tour operating 10 3 3 2 2Club Med World 12 1 1 1 1 1 4 3Club Med Gym 29 5 5 3 3 3 9 1
Total minimum future lease payments 1,895 138 138 136 132 130 622 533 66
Rental expense recognized in the income statement for operating leases amounted to €142 million in fiscal 2006 (fiscal 2005:
€125 million). The year-on-year increase resulted from Group’s asset financing policy.
NOTE 30. TRANSITION TO IFRS
30.1 BACKGROUND TO THE TRANSITION
In accordance with European Council Regulation 1606/2002/EC
dated 19 July 2002, the consolidated financial statements for
the year ended 31 October 2006 have been prepared in accor-
dance with the International Financial Reporting Standards
(IFRSs), International Accounting Standards (IASs) and related
interpretations adopted by the European Union at that date.
This note presents the effect of the IFRS transition on opening
equity at 1 November 2004, fiscal 2005 income and the closing
balance sheet at 31 October 2005. It also includes a descrip-
tion of the main differences between IFRS and the French
generally accepted accounting principles (French GAAP)
applied by the Group to prepare its published consolidated
financial statements for the year ended 31 October 2005.
Comparative financial information for fiscal 2005 has been
prepared in accordance with IFRS 1 - First-Time Adoption of IFRS,
and the IFRSs, IASs and related interpretations adopted by
the European Union as of 31 October 2006.
The Group has elected not to early adopt any standards,
amendments to standards or interpretations.
Certain IFRSs and IASs propose both a benchmark treatment
and an allowed alternative treatment for the recognition and
measurement of assets and liabilities, and various options
are also available to first-time adopters under IFRS 1. The
options selected by the Group are presented in Note 2.1 -
Summary of significant accounting policies.
Preliminary information about the transition to IFRS was
published in the fiscal 2005 Annual Report. The quantified
impact of the transition, effective 1 November 2004, on the
fiscal 2005 income statement and the balance sheet at
31 October 2005 was reviewed during the preparation of
the consolidated financial statements for the year ended
31 October 2006. The adjustments and reclassifications made
compared with the preliminary information are presented in
Note 30.2 below.
30.2 DESCRIPTION OF THE MAIN IFRSADJUSTMENTS
A. IFRS 1 & IAS 16: Property, Plant and Equipment
French GAAP
Property, plant and equipment were stated at purchase or
production cost, and were depreciated over their estimated
useful lives.
IFRS
As allowed under IFRS 1, the Group opted to measure certain
items of property, plant and equipment at the IFRS transition
date at their fair value and to use that fair value as their
deemed cost at that date. Club Méditerranée has frequently
been one of the first companies to develop new vacation
destinations and some of its assets, particularly land, were
significantly undervalued in the French GAAP accounts. The
Group therefore decided to measure assets at fair value at the
2006 Annual Report // 129
IFRS transition date. The process consisted of measuring either
the land only or the entire Village, as appropriate, based on
independent valuations.
In addition, for the application of IAS 16, the tracking of prop-
erty, plant and equipment according to a components-based
approach was fine-tuned.
The individual parts of each item of property, plant and equip-
ment are recognized separately when their estimated useful
life - and consequently their depreciation period - is different
from that of the asset as a whole. Villages are expected to be
used throughout their useful life and depreciation is therefore
calculated without deducting any residual value.
B. IAS 36 & IFRS 3: Impairment of Assets and Business CombinationsA. IAS 36: IMPAIRMENT OF ASSETS
French GAAP
The Group tested assets for impairment based on the higher
of fair value and the discounted present value of future cash
flows. The impairment tests were performed at the level of
cash-generating units (CGUs), with each CGU corresponding
to all the Villages in a given region.
IFRS
For the application of IAS 36, the Group reviewed the defini-
tion of its CGUs, which now correspond to individual Villages.
Impairment tests are performed, Village by Village, whenever
there is an indication that their recoverable amount might be
less than their carrying amount.
Recoverable amount is defined as the higher of fair value and
the discounted present value of future cash flows.
B. IFRS 3: BUSINESS COMBINATIONS
French GAAP
Goodwill was amortized over a maximum of 20 years. Goodwill
representing small amounts was amortized over the year in
which it was recognized.
IFRS
In accordance with IFRS 3, goodwill is no longer amortized
but is tested annually for impairment at the level of the CGU
to which it is allocated. Any impairment losses recognized in
the income statement are irreversible.
The Group has elected not to restate business combinations
recorded prior to the IFRS transition date and accumulated
amortization at 1 November 2004 has therefore been main-
tained in the opening IFRS balance sheet.
Impact on opening equity at 1 November 2004: + €158m Impact on fiscal 2005 net income: + €13m
Goodwill is no longer amortized, effective from 1 November
2004.
C. IAS 18 & 17: Sale-and-LeasebackTransactions/LeasesA. FINANCE LEASES
French GAAP
The Group applied the recommended method under stan-
dard CRC 99-02, which consists of recognizing finance leases
in the balance sheet. Sale-and-leaseback transactions were
accounted for by recording a sale and either an operating
lease or a finance lease.
IFRS
All of the Group’s operating leases and sale-and-leaseback
transactions were reviewed at 1 November 2004 based on the
criteria in IAS 17 and IAS 18. This review led to the identifica-
tion of five finance leases, which were recognized as assets
and liabilities in the opening IFRS balance sheet.
B. RECOGNITION OF RENTS ON A STRAIGHT-LINE BASIS
IFRS
Following a review of all of the Group’s leases based on the
criteria in IAS 17, rent on all operating leases is now recog-
nized on a straight-line basis.
D. IAS 38: Intangible Assets
French GAAP
Village pre-opening costs were recognized in intangible assets
and amortized on a straight-line basis over five years.
IFRS
Pre-opening costs do not qualify as intangible assets under
IAS 38 or as a component of property, plant and equipment
under IAS 36, and they are therefore recognized as an expense
for the period in which they are incurred.
Impact on opening equity at 1 November 2004: - €2m Impact on fiscal 2005 net income: €0m
Impact on opening equity at 1 November 2004: - €6m Impact on fiscal 2005 net income: - €2m
Impact on opening equity at 1 November 2004: - €41m Impact on fiscal 2005 net income: - €3m
Impact on opening equity at 1 November 2004: - €54m Impact on fiscal 2005 net income: + €8m
Consolidated FinancialStatements
130
E. IFRS 2: Share-Based Payments
IFRS
In application of IFRS 2, the benefit granted to employees in
the form of stock options is recognized as an expense over
the option vesting period.
The Group has not elected for full retrospective application of
IFRS 2. Consequently, as allowed under IFRS 1, IFRS 2 has
been applied only to options granted after 7 November 2002
that have not yet vested.
F. IAS 19: Employee Benefits
French GAAP
The Group elected to apply the recommended method under
standard CRC 99-02, which consists of recording provisions
for pension obligations and for post-employment obligations
towards permanent employees.
IFRS
Provisions are recorded for length-of-service awards payable
to employees on retirement when the Group has a legal or
contractual obligation under the plan or a constructive obli-
gation based on its informal practices.
All cumulative actuarial gains and losses were recognized at
the IFRS transition date, in accordance with the option avail-
able to first-time adopters under IFRS 1.
(1) Including actuarial gains and losses recognized in accordance withIFRS 1 for - €2m.
G. IAS 38: IFRS Framework -Intangible Assets/Prepaid Expenses
French GAAP
Advertising and marketing services - including the design and
production of sales brochures -, services rendered in the Villages
before the fiscal year-end that relate to the next season and
pre-season employee travel expenses were recognized under
“Prepaid expenses”.
Impact on opening equity at 1 November 2004: - €6m Impact on fiscal 2005 net income: €0m
Impact on opening equity at 1 November 2004: €0mImpact on fiscal 2005 net income: - €2m
IFRS
The IFRS Framework states that application of the accrual basis
of accounting should not lead to the recognition of items that
do not satisfy the definition of an asset or a liability.
IAS 38 states that prepayments may be recognized as an asset
when payment for the delivery of goods or services has been
made in advance of the delivery of goods or the rendering of
services.
The prepaid expenses listed above do not satisfy the defini-
tion of an asset under IFRS and are therefore recognized as
an expense when the service is rendered.
H. Income Statement PresentationThe transition to IFRS has led to material changes in the
presentation of the income statement. In order to clearly
identify the different sources of income, operating income
has been analyzed between:
• Operating income - Leisure, corresponding to all the income
and expenses directly related to our operations.
• Operating income - Management of assets, corresponding
to all the costs related to changes in the scope of consolida-
tion, including gains and losses on disposals of assets, the
costs of temporary and permanent Village closures, all the
costs related to new Village projects, and impairment charges
on operating and marketing units.
• Other operating income & expense, corresponding mainly
to restructuring costs, claims and litigation, the impact of
natural disasters and credit card costs. Under French GAAP,
credit card costs - corresponding to the cost of deferred
payments - were recorded in interest expense. Under IFRS,
these costs are charged against operating income.
Impact on opening equity at 1 November 2004: - €20m Impact on fiscal 2005 net income: + €1m
2006 Annual Report // 131
I. Opening equity at 1 November 2004
ANALYSIS BY STANDARD
(in € millions)
Reported Additional Equity after equity adjustments additional
adjustments
Equity under French GAAP (including minority interests) 444 444
IFRS 1 & IAS 16: Property, Plant and Equipment 159 (1) 158IAS 36 & IFRS 3: Impairment of Assets and Business Combinations (49) (5) (54)IAS 17 & IAS 18: Sale-and-Leaseback Transactions and Leases (40) (7) (47)IAS 19: Employee Benefits (5) (1) (6)IFRS Framework & IAS 38: Intangible Assets/Prepaid Expenses (22) (22)Other (1) (1)
Total IFRS adjustments net of deferred taxes 43 (15) 28
Equity under IFRS 487 (15) 472
ANALYSIS OF ADDITIONAL ADJUSTMENTS BY TYPE
(in € millions)
Impact on equity
Reported equity under IFRS 487IAS 16: Property, Plant and Equipment (2)Deferred tax adjustment (12)Other adjustments (1)
Total additional IFRS adjustments net of deferred taxes (15)
Equity under IFRS after additional adjustments 472
Consolidated FinancialStatements
132
J. Closing IFRS Balance Sheet at 31 October 2005 (in € millions)
Assets French GAAP IAS 38: IFRS 1 IAS 17 & 18: IAS 17: IAS 36: IAS 19: IFRS 2: IFRS Other Reclassifications Total IFRS IFRS balance balance Intangible & IAS 16: Sale-and- Recognition Impairment Employee Share-based Framework: adjustments sheet
sheet assets Revaluation/ leaseback of rents on a of assets benefits payments Prepaid 31 October 31 October Components transactions straight-line IFRS 3: expenses 2005
2005 method and leases basis Business combination
Intangible assets 103 (23) (1) (24) 79Goodwill 72 28 3 31 103Property, plant and equipment 685 234 100 (48) 15 (11) (4) 290 975Available-for-sale financial assets 15 (7) (7) 8Investments in associates 12 12Loans 10 4 4 14Deposits 52 (20) (20) 32Non-current financial assets 89 (7) (20) 4 (23) 66
Total fixed assets 949 (2) 234 80 (46) 15 (7) 274 1,223
Deferred tax assets 1 43 (1) 44 44
Total non-current assets 949 (2) 234 81 (46) 15 36 318 1,267
Assets held for sale 11 (4) 11 11Inventories 21 21Trade receivables 65 1 1 66Other receivables 138 (17) (13) ( 5) (4) (39) 99Deferred tax assets 60 (60) (1) (60)Cash and cash equivalents 168 168
Total current assets 452 (17) (13) (5) (52) (87) 365
Total assets 1,401 (2) 234 64 (46) (13) 10 (16) 231 1,632
Equity and liabilities French GAAP IAS 38: IFRS 1 IAS 17 & 18: IAS 17: IAS 36: IAS 19: IFRS 2: IFRS Other Reclassifications Total IFRS IFRS balance balance Intangible & IAS 16: Sale-and- Recognition Impairment Employee Share-based Framework: adjustments sheet
sheet assets Revaluation/ leaseback of rents on a of assets benefits payments Prepaid 31 October 31 October Components transactions straight-line IFRS 3: expenses 2005
2005 method and leases basis Business combination
Share capital and additional paid-in capital 640 640Deficit (204) (2) 132 (41) (6) (55) (6) 2 (20) 5 9 (195)Net income for the year 4 13 (3) (2) 8 (2) 1 (10) 5 9Equity attributable to shareholders 440 (2) 145 (44) (8) (47) (6) (19) (2) 14 454Minority interests 27 26 1 27 54
Total equity 467 (2) 171 (44) (8) (46) (6) (19) (5) 41 508
Long-term provisions 92 6 (72) (2) (66) 26Long-term borrowings and other interest-bearing liabilities 408 88 1 (41) (3) 48 456Other non-current liabilities 8 22 (5) 30 30Deferred tax 63 15 13 7 (2) 98 98
Total non-current liabilities 500 63 103 8 6 14 (84) 110 610
Short-term provisions 49 (2) 49 49Trade payables 150 6 4 10 160Other current liabilities 191 (27) (5) (27) 164Customer prepayments 93 93Short-term borrowings and other interest-bearing liabilities 5 1 42 (3) 48 48
Total current liabilities 434 5 6 68 80 514
Total equity and liabilities 1,401 (2) 234 64 (46) (13) 10 (16) 231 1,632
Reclassifications:(1) Deferred tax assets classified as non-current for €60 million and deferred tax assets and liabilities set off by entity for €17 million.(2) Provisions classified as current (provisions other than for length-of-service awards payable to employees on retirement) for €49 million
and deferred tax liabilities for €23 million on an identified line. (3) Interest-bearing liabilities classified as current for €42 million.(4) Assets intended to be sold within 12 months.(5) Including government grants classified as non-current for €22 million.
2006 Annual Report // 133
IAS 19: IFRS 2: IFRS Other Reclassifications Total IFRS IFRS balance Employee Share-based Framework: adjustments sheet
benefits payments Prepaid 31 October expenses 2005
(24) 7931 103
15 (11) (4) 290 975(7) 8
124 4 14
(20) 324 (23) 66
15 (7) 274 1,223
43 (1) 44 44
15 36 318 1,267
11 (4) 11 1121
1 1 66(13) ( 5) (4) (39) 99
(60) (1) (60)168
(13) (5) (52) (87) 365
(13) 10 (16) 231 1,632
IAS 19: IFRS 2: IFRS Other Reclassifications Total IFRS IFRS balance Employee Share-based Framework: adjustments sheet
benefits payments Prepaid 31 October expenses 2005
640(6) 2 (20) 5 9 (195)
(2) 1 (10) 5 9(6) (19) (2) 14 454
27 54
(6) (19) (5) 41 508
6 (72) (2) (66) 26
1 (41) (3) 48 45622 (5) 30 30
13 7 (2) 98 98
6 14 (84) 110 610
49 (2) 49 496 4 10 160
(27) (5) (27) 16493
1 42 (3) 48 48
6 68 80 514
(13) 10 (16) 231 1,632
Consolidated FinancialStatements
134
K. Fiscal 2005 income statement (in € millions)
French GAAP IFRS 1 & IAS 17 & 18: IAS 17: IAS 36: IFRS 2: IFRS Other Reclassifications: Total IFRS IFRS net net income IAS 16: leases Recognition Impairment Share-based Framework: adjustments income
Revaluation/ of rent on a of assets payments Prepaid Components straight-line IFRS 3: expenses
method basis Businesscombinations
Revenue 1,590 1,590Other income 59 (19) (1) (19) 40
Total revenue 1,649 (19) (19) 1,630
Purchases (721) (721)External services (476) 7 (2) 1 1 2 (2) 9 (467)Taxes other than on income (31) (31)Employee benefits expense (325) (2) 1 20 (1&2) 19 (306)Other expenses (9) 1 (2) 1 (8)Depreciation and amortization expense (70) (2) (2) 3 1 (70)Provision expense, net 5 (7) (2&3) (7) (2)
Total operating expense - Leisure (1,627) (2) 5 (2) 3 (2) 1 3 16 22 (1,605)
Operating income - Leisure 22 (2) 5 (2) 3 (2) 1 3 (3) 3 25Operating income - Management of assets 22 (1) (1) 69 89 89Other operating income & expense (2) (31) (3) (33) (33)
Operating income 22 20 5 (2) 2 (2) 1 35 59 81
Exchange gains and losses, net (4) (4)Other financial income & expense (34) 36 (3&4) 36 2Interest income 2 (4) 2 2Finance costs (8) (30) (4) (38) (38)
Finance costs and other financial income & expense, net (38) (8) 8 (38)
Loss before exceptional items and tax (16) 20 (3) (2) 2 (2) 1 43 59 43
Exceptional items 43 (1) (42) (43)
Income before tax 27 20 (3) (2) 1 (2) 1 1 16 43
Income tax expense (17) (7) (1) (10) (1) (19) (36)Net income of fully consolidated companies 10 13 (3) (2) (2) 1 (10) (3) 7Share of income of associates 3 3
Net income 13 13 (3) (2) (2) 1 (10) (3) 10
Minority interests (1) (1)Income attributable to shareholders before amortization of goodwill 12 13 (3) (2) (2) 1 (10) (3) 9Amortization of goodwill (8) 8 8
Income attributable to shareholders 4 13 (3) (2) 8 (2) 1 (10) 5 9
Reclassifications:(1) Expense transfers (€7 million) and own work capitalized (€11 million), corresponding to payroll costs deducted from “Employee benefits expense”. (2) Provision reversals set off against the corresponding expense (€7 million).(3) Exceptional items reclassified as operating items.(4) Reclassifications to comply with the IFRS presentation of finance costs and other financial expense.
2006 Annual Report // 135
IAS 36: IFRS 2: IFRS Other Reclassifications: Total IFRS IFRS net Impairment Share-based Framework: adjustments income
of assets payments Prepaid IFRS 3: expenses
Businesscombinations
1,590(19) (1) (19) 40
(19) (19) 1,630
(721)1 1 2 (2) 9 (467)
(31)(2) 1 20 (1&2) 19 (306)
1 (2) 1 (8)3 1 (70)
(7) (2&3) (7) (2)
3 (2) 1 3 16 22 (1,605)
3 (2) 1 3 (3) 3 25(1) 69 89 89(2) (31) (3) (33) (33)
2 (2) 1 35 59 81
(4)36 (3&4) 36 2
2 (4) 2 2(30) (4) (38) (38)
8 (38)
2 (2) 1 43 59 43
(1) (42) (43)
1 (2) 1 1 16 43
(1) (10) (1) (19) (36)(2) 1 (10) (3) 7
3
(2) 1 (10) (3) 10
(1)
(2) 1 (10) (3) 98 8
8 (2) 1 (10) 5 9
Consolidated FinancialStatements
136
NOTE 31. SCOPE OF CONSOLIDATION AT 31 OCTOBER 2006
GROUP Member of the tax
group
Club Méditerranée SA Parent company •
% voting rights % interest Method
Europe region
FranceClub Aquarius (ex. SECAG) 100.00% 100.00% Full •Club Med Centre d’Appels Européen 100.00% 100.00% Full •Club Med Croisières & Tourisme 100.00% 100.00% Full •Club Med Événements 100.00% 100.00% Full •Club Med Marine 100.00% 100.00% Full •Hoteltour 100.00% 100.00% Full •Loin SAS 100.00% 100.00% Full •SAS du Domaine de Dieulefit 100.00% 100.00% Full •SCI Edomic 100.00% 100.00% FullSociété de Gestion Hôtelière et de Tourisme SA - SGHT 100.00% 100.00% Full •Sté Immobilière des Résidences Touristiques - S.I.R.T. 100.00% 100.00% Full •Sté des Villages de Vacances 100.00% 100.00% Full •
South AfricaVacances (Pty) ltd 100.00% 100.00% Full
GermanyClub Méditerranée Deutschland 100.00% 100.00% Full
BelgiumClub Méditerranée SA Belge 100.00% 100.00% Full
Côte d’IvoireClub Méditerranée Côte d’Ivoire 100.00% 100.00% Full
CroatiaClub Méditerranée Odmaralista 100.00% 100.00% Full
EgyptBelladona Hotels & Tourisme 50.00% 50.00% Full
SpainClub Méditerranée SA Espagne 100.00% 100.00% FullHoteles y Campamentos - HOCASA 100.00% 100.00% FullServicios Auxiliares del Club Mediterraneo - SACM 100.00% 100.00% Full
United KingdomClub Méditerranée UK Ltd 100.00% 100.00% FullClub Méditerranée Services Europe Ltd 100.00% 100.00% Full
GreeceClub Méditerranée Hellas 100.00% 100.00% FullFunhotel ltd (Ermioni) 100.00% 100.00% Full
MauritiusHoliday Villages Management Services Ltd 100.00% 100.00% FullCompagnie des Villages de Vacances de l’Isle de France - COVIFRA 84.43% 84.43% FullClub Méditerranée Albion Resorts Ltd 22.50% 22.50% Equity
IsraelClub Méditerranée Israël Ltd 100.00% 100.00% Full
ItalyCentrovacanze Kamarina Sole e sabbia di Sicilia spa 100.00% 100.00% FullSta Alberghiera Porto d’Ora - S.A.P.O. spa 40.52% 40.52% EquitySviluppo Turistico per Metaponto 38.00% 38.00% Equity
2006 Annual Report // 137
GROUP Member of the tax
group
Club Méditerranée SA Parent company •
% voting rights % interest Method
MoroccoSociété Immobilière de la Mer - S.I.M. 24.28% 24.28% EquitySociété Civile Immobilière des Villages de Vacances CIVAC 47.47% 47.47% EquitySociété Marocaine des Villages de Vacances SOMAVIVAC 40.00% 40.00% Equity
NetherlandsClub Méditerranée Holland bv 100.00% 100.00% FullCM Middle East bv 60.00% 60.00% Full
PortugalSociedade Hoteleira Da Balaïa SA 100.00% 100.00% FullClub Med Viagens lda 60.00% 60.00% Full
SenegalSociété Immobilière et de Gestion Hôtelière de Cap Skirring 100.00% 100.00% Full
SwitzerlandClub Méditerranée Suisse 100.00% 100.00% FullHoliday Hotels AG 50.00% 50.00% FullNouvelle Société Victoria 100.00% 100.00% Full
TunisiaClub Méditerranée Voyages 49.00% 49.00% EquityClub Med Basic Tunisie 100.00% 100.00% FullSPFT Carthago 37.43% 37.40% Equity
TurkeyAkdeniz Turistik Tesisler AS 100.00% 100.00% Full
UkraineClub Méditerranée Ukraine 100.00% 100.00% Full
South America region
FranceClub Med Amérique du Sud 100.00% 100.00% Full •Vacation Resort 100.00% 100.00% Full •
ArgentinaClub Med Argentina SRL 100.00% 100.00% Full
BrazilClub Med Brasil SA 100.00% 100.00% FullClub Méditerranée do Brasil Turismo Ltda 100.00% 100.00% FullItaparica SA Empreendimentos Turisticos 50.10% 50.10% FullTaipe Trancoso Empreendimentos SA 50.00% 50.00% FullClub Med Brasil Boutiques Ltda 100.00% 100.00% Full
North America region
FranceClub Med Amérique du Nord 100.00% 100.00% Full •
Grand CaymanClub Med Inc. 100.00% 100.00% Full
French West IndiesSNC Caravelle 2006 100.00% 100.00% FullSociété Villages Hôtels des Caraïbes - SVHC 53.91% 53.91% FullSociété Hôtelière du Chablais 100.00% 100.00% Full •Société Martiniquaise des Villages de Vacances 100.00% 10.00% Full
Consolidated FinancialStatements
138
GROUP Member of the tax
group
Club Méditerranée SA Parent company •
% voting rights % interest Method
BahamasClub Méditerranée (Bahamas) Ltd 100.00% 100.00% FullColumbus Isle Casino 100.00% 100.00% FullHoliday Village (Columbus Island) 100.00% 100.00% FullShipping Cruise Services Ltd 100.00% 100.00% Full
CanadaClub Med Sales Canada Inc. 100.00% 100.00% Full
United StatesClub Med Management Services Inc. 100.00% 100.00% Full •Club Med Sales Inc. 100.00% 100.00% Full •Holiday Village of Sandpiper 100.00% 100.00% Full •Sandpiper Resort Properties Inc/srp 100.00% 100.00% Full •Sun Cancun I 100.00% 100.00% Full •Sun Cancun II 100.00% 100.00% Full •Sun Ixtapa I 100.00% 100.00% Full •Sun Ixtapa II 100.00% 100.00% Full •Sunport Property Corporation 100.00% 100.00% Full •Vacation Wholesaler Inc 100.00% 100.00% Full •
MexicoCancun Property SRL 100.00% 100.00% FullIxtapa Property SRL 100.00% 100.00% FullOperadora de Aldeas Vacacionales SA de cv 100.00% 100.00% FullProfotur SA de cv 100.00% 100.00% FullVacation Properties de Mexico SA de cv 100.00% 100.00% FullVilla Playa Blanca SA 100.00% 100.00% Full
Dominican RepublicHoliday Village of Punta Cana (ex Newco) 100.00% 100.00% Full
Turks & CaïcosHoliday Villages Providenciales Turks & Caicos Ltd 100.00% 100.00% Full
Asia region
LuxembourgClub Med Asie 100.00% 100.00% Full
AustraliaClub Med Management (Australia) Pty Ltd 100.00% 100.00% FullClub Med Australia Pty Ltd 100.00% 100.00% FullHoliday Village (Australia) Pty Ltd 100.00% 100.00% Full
South KoreaClub Med Vacances (Korea) Ltd 100.00% 100.00% Full
Hong KongClub Méditerranée Hong Kong Ltd 100.00% 100.00% FullClub Méditerranée Management Asia Ltd 100.00% 100.00% FullMaldivian Holiday Villages Ltd 100.00% 100.00% Full
IndonesiaPT Bali Holiday Village 100.00% 100.00% Full
JapanClub Méditerranée KK 100.00% 100.00% FullSCM Leisure Development Co Ltd 100.00% 100.00% Full
2006 Annual Report // 139
GROUP Member of the tax
group
Club Méditerranée SA Parent company •
% voting rights % interest Method
MalaysiaHoliday Villages of Malaysia sdn bhd 100.00% 100.00% FullRecreational Villages sdn bhd 100.00% 21.00% FullVacances (Malaysia) sdn bhd 100.00% 100.00% Full
SingaporeClub Med Services Singapore pte Ltd 100.00% 100.00% FullVacances (Singapore) pte Ltd 100.00% 100.00% Full
TaiwanClub Med Vacances (Taiwan) Ltd 100.00% 100.00% Full
ThailandHoliday Villages Thailand Ltd 49.21% 49.21% FullVacances Siam Club Med Ltd 100.00% 100.00% Full
Polynesia and New CaledoniaSociété Polynésienne des Villages de Vacances 98.45% 98.45% Full
Tour Operating
FranceJet tours 99.85% 99.85% Full •Jet Eldo 100.00% 99.85% Full •Jet Loisirs 100.00% 99.85% Full •Jet Marques 100.00% 99.98% FullJet Stim 49.00% 49.00% Equity
TunisiaJet Eldo Tunisie 100.00% 99.85% Full
MoroccoFST 65.00% 65.00% FullJet Eldo Maroc 100.00% 99.85% Full
Club Med World
FranceClub Med World Holding 100.00% 100.00% Full •Club Med World France 100.00% 100.00% Full •
CanadaCM World Montréal Inc 100.00% 100.00% FullCM World Montréal Holding Inc 100.00% 100.00% Full
Club Med Gym
FranceClub Med Gym SA 100.00% 100.00% FullEdifit 100.00% 100.00% FullClub Med Gym Corporate 100.00% 100.00% Full
Full: fully consolidated Equity: accounted for by the equity method
Consolidated FinancialStatements
Auditors’ report on the consolidated financial statements
140
YEAR ENDED 31 OCTOBER 2006
In accordance with the terms of our appointment by the
Annual Shareholders’ Meeting, we have examined the
accompanying consolidated financial statements of Club
Méditerranée for the year ended 31 October 2006.
The consolidated financial statements have been approved
by the Board of Directors. Our role is to express an opinion
on these financial statements based on our audit. These con-
solidated financial statements have been prepared for the first
time in accordance with the International Financial Reporting
Standards (IFRSs), International Accounting Standards (IASs)
and related interpretations adopted by the European Union.
They include comparative financial information for the year
ended 31 October 2006, prepared according to the same stan-
dards, except for IAS 32, IAS 39 and IFRS 4, which have been
adopted as from 1 November 2005 as allowed under IFRS 1.
I. Opinion on the consolidatedfinancial statementsWe conducted our audit in accordance with the professional
standards applicable in France. Those standards require that
we plan and perform the audit to obtain reasonable assurance
about whether the consolidated financial statements are free
from material misstatement. An audit includes examining, on
a test basis, evidence supporting the amounts and disclosures
in the financial statements. An audit also includes assessing
the accounting principles used and significant estimates made
by management, as well as evaluating the overall financial
statement presentation. We believe that our audit provides a
reasonable basis for our opinion.
In our opinion, the consolidated financial statements have
been properly prepared and give a true and fair vies of the
assets and liabilities, financial position and results of opera-
tions of the consolidated companies, in accordance with the
International Financial Reporting Standards (IFRSs), Interna-
tional Accounting Standards (IASs) and related interpretations
adopted by the European Union.
II. Justification of our assessmentsIn accordance with the requirements of article L.823-9 of the
French Commercial Code (Code de Commerce) relating to
the justification of our assessments, we draw to your attention
the following matters:
• Notes 2.7 (Impairment of assets) and 2.15 (Deferred taxes)
describe the accounting policies and methods used to
determine asset impairments and to assess the recover-
ability of deferred tax assets. As part of our assessment of
the reasonableness of the underlying estimates, we assessed
the appropriateness of these accounting policies and
methods, as well as of the disclosures made in the notes.
We also reviewed the consistency of the underlying data and
assumptions, and the documents provided.
The assessments were made in the context of our audit of the
consolidated financial statements, taken as a whole, and
therefore contributed to the formation of the unqualified
opinion expressed in the first part of this report.
III. Specific proceduresWe also examined the information about the Group given in
the Management Report, in accordance with the professional
standards applicable in France. We have no matters to report
concerning the fairness of this information and its consistency
with the consolidated financial statements.
Neuilly-sur-Seine and Paris-La Défense, 12 February 2007
The Statutory Auditors
Deloitte & Associés Ernst & Young Audit
Alain Pons Dominique Jumaucourt Pascal Macioce
2006 Annual Report // 141
Group Structure as of 31 October 2006
Marketing Service Real estate Service and Othercompanies companies companies real estate
companies
EUROPE
France CM Centre d’Appels SAS Domaine CMSA
Européen de Dieulefit Club AquariusCM Croisières Hoteltour
et Tourisme SIRT Loin SASCM Evénements Sté Civile Edomic
CM MarineSGHT
SVVBelgium CM Belgique
Côte d’Ivoire CM Côte d’Ivoire
Croatia CM Odmaralista
Egypt Belladona Hotels& tourisme
CM Germany Deutschland
Greece CM Hellas Funhotel
Israel CM Israël
Italy CentrovacanzeKamarina
Ste AlberghieraPorto d’Ora
Sviluppo Turisticoper Metaponto
Mauritius HV Management Covifra CM Albion ResortsServices
Morocco CIVACSOMAVIVAC
Ste Immobilièrede la Mer
Netherlands CM Holland CM Middle East
Portugal CM Viagens Sociedade Hoteleirade Balaia
Senegal Société Immobilièreet
de Gestion Hôtelièrede Cap skirring
South Africa Vacances Pty
Spain CM Espagne SACMHocasa
Switzerland CM Suisse Holiday HotelsNouvelle Société Victoria
Tunisia SPT - Carthago Club Med VoyagesCM Bazic Tunisie
Turkey Akdeniz TuristikTesisler
Ukraine CM Ukraine
United Kingdom CM UK CM Services
Consolidated FinancialStatements
142
Marketing Service Real estate Service and Othercompanies companies companies real estate
companies
SOUTH AMERICA
France Vacation Resort CM Amérique du Sud
Argentina CM Argentina
Brazil CM do Brasil Turismo Itaparica CM BrasilCM Brasil Boutiques Taipe Trancoso
Empredimentos
NORTH AMERICA
France CM Amérique du Nord
French West Indies Sté Martiniquaise SVHC Sté Hôtelièredes Villages SNC Caravelle 2006 du Chablaisde Vacances
Bahamas Holiday village CM Bahamas(Columbus Island) Columbus Isle Casino
ShippingCruise Services
Canada CM Sales Canada Inc.
Dominican Republic HV ofPunta Cana
Grand Cayman CM Inc.
Mexico Villa PlayaOperadora de Blanca Vacation Properties
Aldeas Vacacionales Profotur de MexicoCancun SRL
Ixtapa SRL
Saint Lucia HV Ste Lucie
Turks & Caicos HV Providenciales
United States CM Sales CM Management Sandpiper Resort Holiday Villageservices Properties of Sandpiper
Vacation Sun PropertyCorporation
Sun Cancun I et IIWholesaler Inc Sun Ixtapa I et II
ASIA
Luxembourg CM Asie
Australia CM Australie CM Managementa Holiday VillageAustralia Australia
Beach Club
Hong Kong CM Hong Kong Maldivian HVCM Management
Asia
Indonesia PT Bali HV
Japan CM KK SCM LeisureDevelopment Co
Malaysia Vacances (Malaysia) HV Malaysia Recreational Villages
Sdn Bhd
Polynesia & New Caledonia SPVV
Singapore CM Services (Singapore) Vacances (Singapore)
South Korea CM Vacances Korea
Marketing Service Real estate Service and Othercompanies companies companies real estate
companies
Taiwan CM Vacances (Taiwan)
Thailand Vacances Siam CM HV (Thailand)
TOUR OPERATING
France Jet tours SAJet Eldo
Jet LoisirsJet Marques
Jet Stim
Morocco Four Season Travel Jet Eldo Maroc
Tunisia Jet Eldo Tunisie
CLUB MED WORLD
France CM World France CM World Holding
Canada CM World Montréal CM World MontréalHolding
CLUB MED GYM
France Club Med Gym SAEdifit
CM Gym Corporate
2006 Annual Report // 143
Consolidated FinancialStatements
144
General information
146 // GENERAL INFORMATIONABOUT CLUB MÉDITERRANÉE
149 // GENERAL INFORMATION ABOUT THE COMPANY’S CAPITAL
153 // THE MARKET FOR CLUB MÉDITERRANÉE SECURITIES
154 // DIVIDENDS
155 // CORPORATE GOVERNANCE
2006 Annual Report // 145
146
COMPANY NAMEClub Méditerranée.
REGISTERED OFFICE AND HEAD OFFICE11, rue de Cambrai, 75957 Paris Cedex 19, France.
LEGAL FORM AND GOVERNING LAWClub Méditerranée (the Company) is a French société
anonyme (public limited company) governed by the laws
of France, including Articles L. 225-57 to L. 225-93 of the
Commercial Code.
TERMThe Company will be dissolved on 31 October 2095 unless it
is wound up in advance or its term is extended by decision of
an Extraordinary Shareholders’ Meeting.
CORPORATE PURPOSE (ARTICLE 2 OF THE BYLAWS)
Club Méditerranée was established to develop and manage
hotels or holiday centers and/or leisure facilities and/or enter-
tainment facilities and any and all activities relating thereto,
whether directly or indirectly, in France or abroad, including
the prospecting, purchase and/or sale and leasing, on any
basis, of land, movable property and real estate; the creation
and operation of design offices; the construction, fitting out,
management and maintenance of hotels, restaurants and
holiday centers and/or leisure facilities and/or entertainment
facilities; the promotion, organization or delivery of travel and
holiday packages; the provision of accommodation, food
and transport for participants; the organization of tours
and excursions; the organization and execution of sporting,
educational, tourist, cultural or artistic activities; the organi-
zation or events and shows, the performance thereof and
the provision of any related consulting services; the creation
or acquisition and development of any and all equipment,
organizations and facilities for sporting, educational, tourist,
cultural or artistic purposes; the drafting and signature of
any and all contracts for the same purposes; the creation or
acquisition and operation of any and all businesses or facilities
conducting the same activities; participation by any method
and in any form in any and all existing or future ventures or
companies; the design, creation, production and marketing
– directly or indirectly through a licensee or other partner –
of any and all products and services that can be distributed
under the brands, logos or emblems owned by the Company,
or under any new brand, logo or emblem owned or registered
by the Company in the future.
The Company may assist its subsidiaries by any method,
including by extending loans, advances and credits, subject
to compliance with applicable laws and regulations.
More generally, the Company may conduct all industrial,
commercial or financial operations, involving both movable
property and real estate, including the acquisition, holding
and management of interests in any industrial or commercial
venture, directly or indirectly related to the corporate purpose
of the Company as described above and any other similar or
related purposes.
INCORPORATION DETAILS
572 185 684 RCS Paris - APE Code 552 E
CONSULTATION OF CORPORATE DOCUMENTS
The by-laws, minutes of Shareholders’ Meetings, financial
statements and auditors’ reports are available for consultation
at the Company’s head office.
FISCAL YEAR
The Company’s fiscal year begins on 1 November and ends
on 31 October.
APPROPRIATION OF INCOME
Article 36 of the by-laws states that at least five percent of
net income for the year, less any prior year losses, is appro-
priated to the legal reserve. This appropriation ceases to be
compulsory once the legal reserve represents one-tenth of the
Company’s capital. However, if for any reason, the legal reserve
falls to below one-tenth of the capital, it must be restored to
the required level by the same method. The income remain-
ing, less any prior year losses and any other amounts to be
credited to reserves pursuant to the law or the Company’s
bylaws, plus any unappropriated retained earnings brought
forward from prior years, is then appropriated as follows:
General information about Club Méditerranée
2006 Annual Report // 147
• To any extraordinary reserves or to revenue reserves, by deci-
sion of the Annual Shareholders’ Meeting.
• To the payment of a dividend provided that, except in the
case of a capital reduction, no distributions may be made
to shareholders if shareholders’ equity represents – or would
represent if the distribution were to be made – less than the
sum of capital and non-distributable reserves.
The Annual Shareholders’ Meeting may also decide to pay all
or part of the dividend out of revenue reserves or to effect
an exceptional distribution of revenue reserves. In this case,
the reserves against which the dividend is to be charged must
be designated in the related resolution. However, no distri-
butions of reserves may be decided if distributable earnings
for the year have not been fully distributed.
Any losses recorded in the financial statements approved by
the Annual Meeting are recorded in a special reserve account
and set off against income earned in subsequent years until
they have been absorbed in full.
The Annual Meeting may offer shareholders the option to
reinvest all or part of the interim or final dividend in new
shares. The method of payment of cash dividends is decided
by the Annual Meeting or, failing that, by the Board of
Directors. In all cases, dividends must be paid within nine
months of the year-end, unless the court grants an extension.
If the audited annual or interim financial statements show that
the Company has generated a profit for the period – after
deducting depreciation, amortization and provision expense
as well as any prior year losses and any amounts to be appro-
priated to reserves pursuant to the law or the by-laws, and
taking into account any unappropriated retained earnings –
an interim dividend may be paid prior to the approval of the
financial statements for the year. Under no circumstances may
interim dividends exceed the profit available for distribution
thus defined.
ATTENDANCE AND REPRESENTATIONAT SHAREHOLDERS’ MEETINGS
1 - All shareholders have the right to attend Shareholders’
Meetings and take part in the vote, in person or by proxy,
whatever the number of shares held, upon presentation of
evidence of their identity, provided that they have settled all
capital calls within thirty days of receiving notification of the
amount called and that their shares are recorded in an account
opened in their name at least five days prior to the date of
the meeting.
2 - All shareholders may vote by mail, using the postal voting
form issued by the Company. Details of how to obtain postal
voting forms are provided in the notice of meeting.
3 - Shareholders may give proxy only to their spouse or another
shareholder.
4 - In order to be entitled to participate in Shareholders’
Meetings or to vote by mail, holders of registered shares are
required to have their shareholdings recorded in the share
register kept by the Company or the registrar at least five days
prior to the date of the Shareholders’ Meeting. Holders of
bearer shares wishing to attend the Shareholders’ Meeting
are required to lodge at the Company’s head office or at any
other address specified in the notice of meeting, at least five
days prior to the date of the meeting, a certificate issued by
their stockbroker, bank or other intermediary attesting to the
holder’s ownership of the shares and certifying that they are
being held in a blocked account until after the date of the
Shareholders’ Meeting.
5 - Holders of registered shares will be admitted to the meeting
on presentation of evidence of their identity. Holders of bearer
shares will be admitted on presentation of the certificate
referred to above.
The Board of Directors may decide to issue individual admis-
sion cards to shareholders, in which case only the named
shareholder or proxy may use the card.
DOUBLE VOTING RIGHTS
Article 8 of the by-laws stipulates that all fully paid shares
registered in the name of the same holder for at least two
years carry double voting rights. Evidence of eligibility for
double voting rights must be provided at least five days prior
to the date of the Shareholders’ Meeting. In the event such
shares are transferred or converted to bearer form, they
are stripped of their double voting rights. However, double
voting rights are not lost and the two-year qualifying
period continues to run if the shares are transferred in the
estate of a deceased shareholder, or in connection with the
settlement of the marital estate, or a donation inter vivos
to a spouse or relative in the direct line of succession.
General information
148
DISCLOSURE THRESHOLDS
Article 7 of the by-laws stipulates that any natural person or
legal entity acting alone or in concert with others that acquires
0.5% of the Company’s capital or any multiple thereof is
required to disclose to the Company the total number of
shares and voting rights held. Disclosure must be made by
registered letter with return receipt requested, within five
trading days of the date on which the disclosure threshold is
crossed. For the purpose of determining whether a disclosure
threshold has been crossed, account is taken of any securities
that are convertible, exchangeable, redeemable or other-
wise exercisable for shares of the Company. These disclosure
thresholds apply in addition to the one-twentieth, one-tenth,
three-twentieths, one-fifth, one-quarter, one-third, one-half,
two-thirds, eighteen-twentieths and nineteenth-twentieths
thresholds provided for in Article L 233-7 of the Commercial
Code. The same disclosure rules apply if a shareholder’s inter-
est is reduced to below any of the above thresholds.
For the purpose of applying these rules, the terms “shares”
and “voting rights” have the same meaning as in Articles
L.233-3, L.233-9 and L.233-10 of the Commercial Code.
In the case of failure to comply with these requirements, duly
noted in the minutes of the Shareholders’ Meeting, the shares
in excess of the relevant threshold will be stripped of voting
rights at all Shareholders’ Meetings for the period provided
for by law at the request of one or several shareholders together
holding at least 5% of the Company’s capital or voting rights.
IDENTIFIABLE BEARER SECURITIES
The by-laws authorize the Company to apply at any time
to the French securities clearing agency for details of the
identity of holders of voting shares and any securities convert-
ible, exchangeable, redeemable, or otherwise exercisable for
voting shares, and of the number of securities held by each
such holder, pursuant to Article L.228-2 of the Commercial
Code. The Company makes such applications each year.
SERVICES PROVIDED BY THE COMPANYTO SUBSIDIARIES
Services provided by Club Méditerranée SA in its capacity as
parent company to its subsidiaries include the usual senior
management and support services, including administrative,
financial, legal, communication, marketing, human resources,
training, IT and sales services. They are billed at cost.
SHARE CAPITAL
At 31 October 2006, the Company’s share capital amounted
to €77,432,020, divided into 19,358,005 common shares with
a par value of €4.00, all fully paid-up. These figures were
unchanged from 31 October 2005. Shares registered in the
name of the same holder for at least two years carry double
voting rights (193,985 at 31 October 2006).
POTENTIAL CAPITAL
The exercise of all outstanding equity warrants and stock
options would result in the capital being increased to
€104,327,756 consisting of 26,081,939 shares of common stock,
or a potential dilution of 34.7%. These figures take into account
all the securities outstanding at 31 October 2006 that are
convertible, redeemable, exchangeable or otherwise exercis-
able for common shares at a future date.
19,358,005 shares outstanding at 31 October 2006:
+ 2,193,731 convertible bonds (OCEANEs) due
1 November 2008
+ 3,092,783 convertible bonds (OCEANEs) due
1 November 2010
+ 1,437,420 stock options outstanding at 31 October 2006
= 26,081,939 potential shares at 31 October 2006
AUTHORIZED, UNISSUED CAPITAL
The Extraordinary Shareholders’ Meeting of 16 March 2005
approved several resolutions authorizing the Board of
Directors to increase the Company’s capital. The Board of
Directors may delegate the right to use these authorizations
in accordance with the Company’s by-laws and Articles
L.225-127 et seq of the Commercial Code.
The purpose of these authorizations is to enable the Company
to issue shares and share equivalents in order to raise any
necessary financial resources required in a swift and flexible
manner. They expire in May 2007, and the shareholders will be
invited to grant new and similar authorizations at the next
Annual Meeting.
General information about the Company’s capital
2006 Annual Report // 149
FINANCIAL AUTHORIZATIONS AT 31 OCTOBER 2006
Authorization Maximum Duration Expiry date Used in fiscal Total usedamount 2005/2006
Issue of shares and share Equity: €20 million(1) 26 months 15 May 2007 Not usedequivalents with pre-emptive Debt: €300 millionsubscription rights
Issue of shares and share Equity: €20 million(1) 26 months 15 May 2007 Not usedequivalents without pre-emptive Debt: €300 millionsubscription rights
Issue of shares and share 10% of capital 26 months 15 May 2007 Not usedequivalents with no set issue price per year
Capital increase to be paid Equity: 26 months 15 May 2007 Not usedup by capitalizing retained earnings, €226.5 million(1)
additional paid-in capital or profit
Issue of shares and share equivalents Equity: €20 million(2) 26 months 15 May 2007 Not usedin connection with a public exchange offer
Issue of shares and share equivalents 10% of capital 26 months 15 May 2007 Not usedin payment for contributed assets
Increase in the number of securities 15% of the initial 26 months 15 May 2007 Not usedto be issued in the event of the issue, based on issue of shares and share equivalents the same priceeither with or without pre-emptivesubscription rights (greenshoe option)
Employee share issue €3.5 million(1) (2) 26 months 15 May 2007 Not used
Stock options for corporate (3) 26 months 15 May 2007 250,000 250,000officers and employees options options
Shares awarded free of consideration (1) 14 months 15 May 2007 Not used
(1) Amount included in the overall authorized ceiling: €270 million (40th resolution of the Shareholders’ Meeting of 16 March 2005).(2) Amount included in the €20 million ceiling relating to the issue of shares and share equivalents without pre-emptive subscription rights.(3) The number of outstanding options may not exceed one-third of the Company’s common stock (Article L.225-182 of the Commercial Codeand Article D.174-17 of the Decree of 23 March 1967).
General information
150
CHANGES IN CAPITAL SINCE 31 OCTOBER 2001
Share capital Additional paid-in Number of shares Type of transactioncapital
€’000s €’000s
At 31 October 2001 77,432 - 19,358,005
- Conversion of capital- Employee share issue
Exercise of warrantsAt 31 October 2002 77,432 - 19,358,005
- Conversion of capital- Employee share issue
Exercise of warrantsAt 31 October 2003 77,432 - 19,358,005
- Conversion of capital- Employee share issue
Exercise of warrantsAt 31 October 2004 77,432 - 19,358,005
- Conversion of capital- Employee share issue
Exercise of warrantsAt 31 October 2005 77,432 - 19,358,005
- Conversion of capital- Employee share issue
Exercise of warrantsAt 31 October 2006 77,432 - 19,358,005
ANALYSIS OF OWNERSHIP STRUCTURE
Number of shares Voting rights31 Oct. 2006 % 31 Oct. 2006 %
Fipar Holding (CDG Maroc) 1,935,801 10.0 1,935,801 9.9Accor 2,212,349 11.4 2,212,349 11.3Rolaco 909,577 4.7 909,577 4.7Nippon life 769,731 4.0 769,731 3.9
Total Board of Directors 5,827,458 30.1 5,827,458 29.8
Treasury stock 277,305 1.4 277,305 1.4
Employees 31,241 0.2 58,591 0.3
Richelieu mutual fund 5,107,492 26.4 2,187,946 11.2
Air France 387,160 2.0 387,160 2.0
French institutions 2,692,116 13.9 2,749,939 14.1
Foreign institutions 2,259,401 11.7 2,269,421 11.6
Public and other 2,775,832 14.3 2,969,817 15.2
Total 19,358,005 100.0 19,551,990 100.0
Single voting rights 19,164,020
Double voting rights 387,970
Total voting rights 19,551,990*
* Taking into account 3,196,851 shares without voting rights (277,305held in treasury and 2,919,546 held by the Richelieu mutual fundstripped of voting rights in accordance with a decision issued by theFrench securities regulator (AMF) on 18 March 2005).
2006 Annual Report // 151
General information
CHANGES IN OWNERSHIP STRUCTUREOVER THE LAST THREE YEARS
Changes in ownership structure over the last three years have
been as follows:
• 2004: On 22 October 2004, Accor acquired a 28.9% interest
in the Company by purchasing the shares held by its two
historic shareholders, the Agnelli Group (through its Exor and
IFIL subsidiaries) and Caisse des Dépôts et Consignations.
On 19 October 2004 Richelieu Finance disclosed to
the Autorité des Marchés Financiers that the number of
Club Méditerranée shares held in its managed funds and
portfolios had exceeded the 10% threshold, at 10.22% of
the capital.
• 2005: On 25 January 2005, Richelieu Finance informed the
Company that it held 3,668,857 shares of Club Méditerranée
common stock, representing 18.95% of the capital.
On 9 February 2005, Richelieu Finance disclosed to the
Autorité des Marchés Financiers that its holdings had
exceeded the 20% threshold, at 20.13% of the capital.
Having reduced its holdings in the Company to below the
20% threshold at 18.06%, representing 3,495,635 shares,
on 9 June 2005, Richelieu Finance disclosed to the Autorité
des Marchés Financiers that it had once again exceeded the
20% threshold through the ownership of 3,871,780 shares.
Richelieu Finance subsequently continued to raise its
shareholdings and at 31 October 2005 held 4,564,212
shares, representing 23.57% of the Company’s capital.
• 2006: On 21 November 2005, Richelieu Finance informed the
Company that it held 4,784,817 shares of Club Méditerranée
common stock, representing 24.71% of the capital.
On 18 April 2006, Richelieu Finance informed the Company
that it had raised its interest to 4,895,369 shares, represent-
ing 25.28% of the capital.
As part of its strategy to refocus operations on its Hotels and
Services businesses, on 9 June 2006 Accor announced that it
had decided to sell the bulk of its stake in Club Méditerranée,
representing 22.9% of the capital out of its total holding of
28.9%. Accor first sold a 16% interest to a group of investors
which have signed a shareholders’ pact with Accor (see
“Shareholders’ Pacts” below). Following this transaction, Fipar
Holding (a subsidiary of Caisse de Dépôt et de Gestion du
Maroc), Icade and the Air France-KLM group held respective
interests of 10%, 4% and 2%. Accor then sold a further 1.5%
of the Company’s shares to Generali France, following which
it had a remaining 5.4% to divest.
On 7 August 2006, Richelieu Finance increased its holdings
in the Company to 5,107,492 shares, representing 26.38% of
the capital.
• 2007: On 23 January 2007, Accor divested part of its interest
in Club Méditerranée in the open market, reducing its stake
in the Company to below the 10% capital and voting rights
threshold. Following this divestment Accor disclosed that it
held 1,912,349 shares of Club Méditerranée common stock,
representing 9.88% of the capital and 9.78% of the voting
rights.
AUTHORIZATION TO TRADE IN THE COMPANY’S SHARES
The authorization given to the Board of Directors to trade in
the Company’s shares on the stock market, in accordance with
Articles L.225-209 et seq. of the French Commercial Code and
European Commission Regulation 2273/2003 , was renewed
at the Annual Shareholders’ Meeting of 14 March 2006
(seventh resolution) for a further period of eighteen months,
expiring on 13 September 2007.
Under the terms of this authorization, the number of shares
purchased may not exceed 10% of the capital.
The authorization may be used, in the following order of
priority:
• To maintain a liquid market in the Company’s shares under
a liquidity agreement that complies with the Code of Ethics
of the French Association of Investment Firms (AFEI).
• To purchase shares for allocation on exercise of stock options
granted to employees.
• To purchase shares to be exchanged for stock in other com-
panies or to be used as consideration in connection with
acquisitions.
• To purchase shares for subsequent cancellation.
For transactions to stabilize the share price, the maximum
purchase price per share under this authorization is €70 and
the minimum sale price is €30. This minimum sale price applies
to the resale of shares acquired under this share buyback
program and/or any programs authorized by previous share-
holders’ meetings.
152
Club Méditerranée entered into an AFEI liquidity agreement
with CA Cheuvreux as part of the share buyback program
authorized by the Annual Shareholders’ Meeting of 16 March
2005. This agreement came into effect on 15 November 2005
for an automatically renewable one-year term. The Company
originally allocated €2 million in liquidity under the agreement,
followed by a further €2 million on 14 March 2006, bringing
the total available amount to €4 million.
At 31 October 2006, the Company had used the 16 March
2006 authorization to purchase 156,709 shares at an average
price of €41.53 per share and sell 136,569 shares at an average
price of €43.42.
At 31 October 2006, a total of 277,305 shares were held in
treasury.
At the Annual Meeting on 8 March 2007, shareholders will be
asked to approve a new share buyback authorization.
SHAREHOLDERS’ PACTS
In connection with the reorganization of Club Méditerranée’s
ownership structure, a shareholders’ pact relating to 22% of
the Company’s shares was signed on 9 June 2006 between
Accor (which has retained a 6% stake in the Company), Caisse
de Dépôt et de Gestion du Maroc (through its subsidiary Fipar
Holding which has acquired a 10% interest), Air France Finance
(holder of a 2% interest) and Icade (whose interest amounts
to 4%).
By signing this pact, these shareholders have illustrated their
long-term commitment to holding a stake in Club Méditerranée
with a view to enabling the Company to continue to imple-
ment its strategy via the backing of a solid ownership struc-
ture. The pact includes a two-year lock-up and standstill clause.
Icade’s signature of the pact was subject to a condition prece-
dent of entering into a real estate partnership agreement with
Club Méditerranée by 30 September 2006. The planned trans-
action – which concerned refinancing three Club Med Villages
– could not be completed by that date as the related economic
and financial conditions were not suitably advantageous for
Club Méditerranée. As a result Icade has withdrawn from the
shareholders’ pact.
To the best of the Company’s knowledge, no other share-
holders’ pacts exist.
Club Méditerranée shares were originally floated on the Paris
stock exchange in 1966 and are currently traded on the first
market of Euronext. Club Méditerranée is one of the 120 stocks
included in the SBF 120 index. At 31 December 2006, its index
weighting was 0.05%. Club Méditerranée shares are eligible
for Euronext’s deferred settlement service.
Common shares are traded under ISIN code FR 0000 121568.
Between the beginning of each fiscal year and the ex-dividend
date, new shares issued ex-dividend are traded on the cash
settlement market. For several years, Club Méditerranée
shares have been selected as a support for covered warrants
issued by various banks.
To inform shareholders, financial analysts, brokers, portfolio
managers and private investors of developments affecting
the Group, press releases are distributed to the main press
agencies and published in a number of newspapers, as well
as on the Company’s website.
Prices and trading volumes for Club Méditerranée common
stock and OCEANE convertible/exchangeable bonds are
presented below.
The market for Club Méditerranéesecurities
2006 Annual Report // 153
General information
TRADING PERFORMANCE OF CLUB MÉDITERRANÉE SA SECURITIES
Common stock Monthly share price Monthly average daily (ISIN: FR 0000 121568) (euros) trading volume
(number of shares traded and thousands of euros)
High Low Average (1) No. of shares Capital
July 2005 39.60 37.11 39.38 32,070 1,238
August 2005 40.36 38.70 38.85 22,805 907
September 2005 40.30 38.50 39.10 19,233 755
October 2005 39.15 36.20 36.45 25,770 973
November 2005 39.43 36.30 37.79 25,360 964
December 2005 39.40 37.20 39.32 27,259 1,037
January 2006 42.45 39.00 41.51 36,359 1,504
February 2006 42.96 40.80 42.17 13,670 574
March 2006 48.91 41.46 45.79 48,335 2,208
April 2006 47.60 43.28 47.05 49,600 2,259
May 2006 48.59 44.45 47.40 17,151 803
June 2006 48.00 38.50 39.80 25,438 1,054
July 2006 39.89 35.25 37.00 18,033 674
August 2006 41.99 36.25 41.60 10,774 415
September 2006 44.70 40.56 42.00 15,920 675
October 2006 43.00 41.37 42.21 10,902 462
November 2006 43.50 40.40 42.80 25,738 1,086
December 2006 42.96 40.31 40.80 18,636 772
Source: Fininfo(1) Average calculated based on daily closing prices.
154
3% OCEANE convertible/exchangeable bonds Monthly price Monthly average daily trading volume(face value €58) (euros) (number of bonds traded and(ISIN: FR 0000 180184) thousands of euros)
High Low Average (1) No. of bonds Capital
July 2005 65.50 64.20 65.18 873 57
August 2005 65.95 64.50 65.44 2,888 190
September 2005 66.50 65.50 65.91 2,634 174
October 2005 66.50 65.83 66.12 200 13
November 2005 66.00 63.50 65.03 380 25
December 2005 69.00 64.35 64.93 741 49
January 2006 66.35 64.80 65.77 333 22
February 2006 66.45 64.80 65.80 1,842 121
March 2006 66.70 65.40 65.89 4,780 315
April 2006 66.40 65.60 65.98 206 14
May 2006 66.80 65.70 66.31 389 26
June 2006 66.80 65.70 66.13 335 22
July 2006 66.90 65.15 65.89 147 10
August 2006 66.40 65.25 66.00 96 6
September 2006 67.10 65.25 65.81 298 20
October 2006 67.15 65.00 66.17 251 17
November 2006 66.00 65.00 65.35 305 20
December 2006 66.00 65.00 65.24 212 14
4.375% OCEANE convertible/exchangeable bonds Monthly price Monthly average daily trading volume(face value €48.50) (euros) (number of bonds traded(ISIN: FR 00 10130732) and thousands of euros)
High Low Average (1) No. of bonds Capital
November 2005 50.2 46.50 49.30 189 9
December 2005 51.6 44.40 50.00 545 27
January 2006 52.0 50.05 51.00 4,348 219
February 2006 54.9 51.05 51.05 631 33
March 2006 55.3 49.00 54.00 3,088 166
April 2006 54.9 50.00 54.00 4,175 225
May 2006 55.2 53.00 54.80 289 16
June 2006 54.8 49.50 51.80 144 7
July 2006 53.0 49.00 53.00 246 13
August 2006 52.7 49.13 49.21 63 3
September 2006 52.7 49.20 50.35 2,002 102
October 2006 51.4 50.00 50.00 351 18
November 2006 49.4 48.25 48.60 851 41
December 2006 50.0 48.65 49.00 753 37
(1) Average calculated based on daily closing prices - Source: Fininfo
DividendsYears ended Number of Dividend for the year Share price Yield incl. tax creditOctober 31 shares based on 31 Oct.
share price
Net Tax credit Total High Low 31 Oct.
2004 19,358,005 - - - 40.00 29.20 35.30
2005 19,358,005 - - - 42.28 34.00 36.45
2006 19,358,005 - - - 48.39 35.90 42.21
The Company complies with the principles of corporate
governance applicable in France.
At the Annual Shareholders’ Meeting of 16 March 2005,
the shareholders approved an amendment to the Company’s
corporate governance involving a switch from the two-tier
system of an Executive Board and Supervisory Board to that
of a Board of Directors.
COMPENSATION AND BENEFITS PAIDTO DIRECTORS AND OFFICERS
CompensationThe compensation paid to executive officers is made up of a
fixed and variable portion. The rules used to calculate the
variable portion are set by the Board of Directors each year
on the basis of recommendations issued by the Nominations
and Compensation Committee.
Corporate governance
2006 Annual Report // 155
General information
Gross compensation in euros
Fiscal 2005 annual compensation Fiscal 2006 annual compensation
Fixed Variable(1) Benefits Fixed Variable(2) BenefitsTarget Paid in-kind Target Paid in-kind
Henri Giscard d’Estaing 648,653* 435,000 261,000 17,388 640,020 450,000 288,000 24,184François Salamon 320,000 160,000 64,000 7,083 320,000 160,000 104,300 4,865Michel Wolfovski 302,500 137,500 82,500 16,800 332,300 155,200 121,600 19,131
(1) Paid in January 2005 for fiscal 2004.(2) Paid in January 2006 for fiscal 2005.(*) This figure includes the balance paid in relation to amounts due when the Company’s corporate governance structure was changed. Henri Giscardd’Estaing’s annual basic compensation in his capacity as Chairman and Chief Executive Officer was €640,020 for the period under review.
Henri Giscard d’Estaing’s variable compensation paid in
January 2006 for fiscal 2005 in his capacity as Chairman and
Chief Executive Officer was linked to the Company’s earnings.
He received 64% of the target amount set for that year.
The variable portion of the compensation of François Salamon
and Michel Wolfovski – who are Executive Vice-Presidents
(non-directors) – is based partly on the Company’s earnings
and partly on the attainment of individual objectives. These
factors respectively represent 60% and 40% of the Executive
Vice-Presidents’ target bonus.
Benefits in-kind correspond to a company car and fringe
benefits associated with stays at Club Méditerranée Villages.
No exceptional payments were made in fiscal 2006.
No loans or guarantees have been granted by the Company
to its executive officers.
Other benefits and commitmentsStock options were granted to executive officers during fiscal
2006 under Plan K.
At 31 October 2006, the Company’s executive officers held
the following stock options:
Outstanding stock options granted in prior years
Plan F Plan F2 Plan G Plan G3 Plan G5 Plan H Plan I Plan J Plan K
Exercise dates 50 % at 50% at 7 Feb. 2005 6 Feb. 2005 5 Feb. 2006 1 March 2006 15 Jan. 2007 11 Jan. 2008 14 March 200918 Aug. 2002 24 March 2003+ balance at + balance at
18 Aug. 2003 24 March 2004
Exercise price (in euros) 68.80 70.81 111.11 92.78 44.74 35.00 31.03 35.00 42.67
Henri Giscard d’Estaing 51,099 25,000 130,000 33,000 40,000 30,000
François Salamon 10,000 25,000 15,000 15,000 10,000
Michel Wolfovski 10,000 5,000 5,000 30,000 10,000 25,000 20,000
156
On 6 April 2006, Michel Wolfovski set up hedges in relation to
15,000 options and filed a notice of the transaction with the
Autorité des Marchés Financiers.
No stock options were exercised during the period under
review.
The Company’s executive officers are covered by supplemen-
tary defined-contribution pension plans. The contributions
paid under these plans represent 8% of the officers’ gross
compensation.
Henri Giscard d’Estaing, François Salamon and Michel
Wolfovski are entitled to a contractual lump-sum severance
payment in the event that their employment contracts are
terminated, other than for gross or willful misconduct. The
amount payable corresponds to two years’ gross remunera-
tion, including variable compensation. For Henri Giscard
d’Estaing and Michel Wolfovski, this severance pay will be
increased to three years’ gross compensation (including vari-
able compensation) if the termination occurs within six months
of a third party acquiring a controlling interest in the Company.
Compensation paid to members of the Executive CommitteeTotal gross compensation paid to the members of the
Executive Committee (including executive officers) in fiscal
2006 amounted to €3,928,000 (€3,624,000 in fiscal 2005).
The members of the Executive Committee (excluding
executive officers) are covered by supplementary defined-
contribution pension plans. The contributions paid under
these plans represent 6.29% of their gross compensation.
Attendance fees The Annual Shareholders’ Meeting of 16 March 2005 set the
aggregate amount of attendance fees payable to members
of the Supervisory Board and subsequently the Board of
Directors (including the non-voting director) at €305,000 for
fiscal 2005, unchanged from the previous fiscal year.
Based on the recommendations of the Nominations and
Compensation Committee, on 12 December 2005 the Board
of Directors decided to allocate these fees based on members’
actual attendance at meetings held by the Board of Directors
and Board Committees during fiscal 2005.
The total amount of €305,000, which was paid in January 2006,
was allocated as follows: €244,000 for Board of Directors’
meetings and €61,000 for meetings of the Board Committees.
Total compensation and benefits paid to each of the members
of the Board of Directors in fiscal 2006 was as follows (infor-
mation disclosed in accordance with Article L.225-102-1 of the
Commercial Code):
In euros
Members of the Board of Directors
Ph. Adam -
M. Bakkoury -
S. Al Sulaiman 18,007.95
E. Bertier 5,500.00
Y. Caillère -
D. Dautresme 33,730.45
T. Delaunoy de La Tour d’Artaise 21,412.11
R. Espirito Santo Silva Salgado 0.00
J-M. Espalioux 27,020.45
H. Giscard d’Estaing 22,835.45
P. Jeanbart 25,602.83
A. Langlois-Meurinne -
P. Lebard 23,497.95
T. Miyagawa -
V. Morali 28,850.45
G. Pélisson -
S. Ragozin 27,020.45
J. Stern 28,850.45
P. Todorov 34,137.11
K. Ujihara 0.00
A-C. Taittinger -
David Dautresme received additional compensation of €30,625
for specific advisory work carried out in fiscal 2005 for the
Chairman and Chief Executive Officer.
No loans or guarantees have been granted by the Company
to any member of the Board of Directors.
Stock optionsStock options grants are discretionary. They are primarily
awarded based on the level of responsibility and potential of
the beneficiaries.
Plan K
Number of potential new shares to be issued 250,000
Exercise price €42.67
Expiry date of exercise period 13 March 2014
2006 Annual Report // 157
Details of the stock option plans in place at 31 October 2006 for corporate officers and full-time GOs are presented below.
1997 1998 1999 2000 2001 2002 2003 2004 2005 2006Plan F Plan F2 Plan F3 Plan F4 Plan F5 Plan G Plan G2 Plan G3 Plan G4 Plan G5 Plan H* Plan I Plan J Plan K
Date of Shareholders’ Meeting 23.04.97 23.04.97 23.04.97 23.04.97 23.04.97 23.04.97 23.04.97 23.04.97 23.04.97 23.04.97 29.03.02 17.03.03 17.03.03 16.03.05
Date of Executive 18.08.97 24.03.98 24.08.98 17.02.99 29.07.99 07.02.00 26.07.00 06.02.01 24.07.01 05.02.02 28.02.03 15.01.04 11.01.05 14.03.06Board/Board of Directors’ Meeting
Number of options granted 663,370 73,500 9,000 21,000 46,000 258,400 21,815 212,530 37,400 127,000 283,000 272,000 300,000 250,000
o/w number of new or existing shares to be purchased by members of the Executive Committee (based on composition at 31 October 2006) 63,159 10,000 - 1,000 - 34,800 - 18,900 - 13,800 229,000 95,000 111,000 103,000
Number of executives concerned 3 1 - 1 - 5 - 4 - 3 7 9 8 9
Start date of exercise period 50% at 50% at 50% at 50% at 50% at 07.02.05 26.07.04 06.02.05 24.07.05 05.02.06 01.03.06 15.01.07 11.01.08 14.03.09
18.08.02 24.03.03 24.08.03 17.02.04 23.07.04 + sale of + sale of + sale of + sale of+ balance + balance + balance + balance + balance shares shares shares shares
18.08.03 24.03.04 24.08.04 17.02.05 23.07.05 prohibited prohibited prohibited prohibitedbefore before before before
28.02.07 14.01.08 10.01.09 13.03.10
Expiry date 17.08.07 23.03.08 23.08.08 16.02.09 22.07.09 06.02.10 25.07.10 05.02.11 23.07.11 04.02.12 27.02.13 14.02.14 10.01.13 13.03.14
Exercise price(in euros) 68.8 70.81 79.12 81.13 92.79 111.11 136.13 92.78 63.99 44.74 35 31.03 35 42.67
Number of options outstanding at 31 October 2006 119,063 13,500 3,000 10,000 3,000 89,542 6,200 105,315 13,900 86,500 245,000 226,800 268,600 247,000
* The options granted under Plan H entitle beneficiaries to purchase shares of common stock which have already been issued and are heldin treasury. Their exercise will not therefore have the effect of increasing the Company’s capital.
General information
THE BOARD OF DIRECTORS
1. GENERAL INFORMATION
In accordance with Article L.225-35 of the Commercial Code,
the Board of Directors determines the Company’s strategy and
oversees its implementation. Except for the powers directly
vested in shareholders and within the scope of the corporate
purpose, the Board considers all matters related to the efficient
management of the Company and makes all related decisions.
The Board of Directors comprises a minimum of three and a
maximum of eighteen members, elected by shareholders in
an Ordinary Meeting. At the filing date of this report the Board
comprised eleven voting directors and two non-voting direc-
tors. No directors are elected by the Company’s employees.
In application of Article 14 of the Company’s by-laws, each
member of the Board must own at least 50 Club Méditerranée
shares.
French law provides that a company’s management may be
placed under the responsibility of either the Chairman of the
Board of Directors or another individual appointed by the
Board as Chief Executive Officer.
At its first meeting held on 16 March 2005, Club Méditerranée’s
Board of Directors resolved to combine these two functions
and appointed Henri Giscard d’Estaing as Chairman and Chief
Executive Officer.
David Dautresme was appointed Vice-Chairman of the Board,
François Salamon was named Executive Vice-President,
Europe and North America, and Michel Wolfovski became
Executive Vice-President, Chief Financial Officer.
The Board met four times in fiscal 2006, with an average atten-
dance rate of 85%. Eleven out of twelve members attended
the 12 December 2005 meeting, ten out of twelve members
were present at both the 14 March 2006 and 8 June 2006
meetings, and nine out of eleven members attended the
28 September 2006 meeting.
158
The structure and operations of the Board of Directors are
governed by internal rules which establish the terms of refer-
ence and powers of the Board, define the operating rules
for the Board Committees and set out the confidentiality
principle applicable to information obtained by members in
their capacity as directors, as well as the duty of directors to
comply with the fundamental principles of independence,
ethical conduct and integrity. The internal rules require each
director to disclose to the Board any actual or potential conflict
of interest in which he or she may be directly or indirectly
involved, and in such a case to abstain from taking part in
any discussion and/or vote on the matters in question. They
also set out the regulations applicable to trading in the
Company’s securities, in compliance with Article L.621-18-2 of
the French Monetary and Financial Code and Articles 222-14
and 222-15 of the AMF’s General Regulations.
2. INDEPENDENT DIRECTORS (AS DEFINEDIN THE AFEP/MEDEF REPORT ISSUED IN OCTOBER 2003 ON PROMOTING CORPORATE GOVERNANCE IN FRENCHLISTED COMPANIES)
At its meeting on 28 September 2006, the Board of Directors
reviewed the assessment of the independence of Board
members, based on the criteria set out in the AFEP/MEDEF
report on corporate governance. According to these criteria,
directors in the following situations are not independent:
directors who represent a shareholder that owns more than
10% of the Company’s capital, directors with close family ties
with a corporate officer of the Company, directors with an
employment contract, directors with a seat on the Board of
another company of which the Company is also a director,
directors who have been director of the Company for more
than a certain period of time, directors who have been an
auditor of the Company in any of the five preceding years, and
directors who have material business interests with the
Company.
Based on these criteria, eight of the eleven current Board
members can be deemed independent, corresponding to
more than the 50% minimum recommended in the AFEP/
MEDEF report. The detailed information below concerning
each director indicates whether or not he or she is classified
as independent.
3. CHANGES SINCE THE ANNUAL SHAREHOLDERS’ MEETING OF 14 MARCH 2006
At its 14 March 2006 meeting the Board of Directors noted the
resignations of Jacques Stern, Serge Ragozin and Kiyoshi
Ujihara and appointed Philippe Adam, Yann Caillère and Anne-
Claire Taittinger to replace them. Acting on the recommen-
dation of the Chairman and Chief Executive Officer, and in
accordance with Article 23 of the by-laws, the Board also
appointed Tetsuya Miyagawa as a non-voting director.
At its 28 September 2006 meeting the Board of Directors
noted the resignations of Yann Caillère, Gilles Pélisson and
Pierre Todorov and appointed Mustapha Bakkoury and Aimery
Langlois-Meurinne as their replacements.
4. MEMBERS OF THE BOARD OF DIRECTORS
The Board of Directors comprises eleven directors - eight of
whom are independent - and two non-voting directors. It is made
up of individuals with complementary skills and backgrounds.
MEMBERS OF THE BOARD OF DIRECTORS AND POSITIONS
HELD IN OTHER COMPANIES
HENRI GISCARD D’ESTAING
Chairman and Chief Executive Officer
Born on 17 October 1956
French
Appointed on 16 March 2005
Term expires at the Annual Shareholders’ Meeting to
be called to approve the accounts for the year ending
31 October 2007
First term of office within the Company began
on 17 July 1997
Non-independent director
Number of shares held: 50
Biography: Henri Giscard d’Estaing graduated from Institut
d’Etudes Politiques de Paris and has a masters degree in eco-
nomics. He began his career with Cofremca where he served
as an Associate Director between 1982 and 1987, specializing
in researching changes in food consumption patterns and their
marketing and strategic impacts. In 1987 he entered the
Danone group and was successively Head of Development,
Chief Executive Officer of the British subsidiary HP Food Lea
and Perrins, Chief Executive Officer of Evian-Badoit and Head
of the Mineral Water division.
Henri Giscard d’Estaing joined Club Méditerranée in 1997,
holding the positions of Chief Operating Officer in charge of
Finance, Development and International Relations (1997-2001),
Chief Executive Officer (2001-2002), and Chairman of the
Executive Board (2002-2005) before being appointed Chairman
and Chief Executive Officer.
2006 Annual Report // 159
OTHER POSITIONS WITHIN THE GROUP
Chairman of the Board of Directors of:
Club Med World Holding
Jet tours SA
Chairman and Founding Director of:
Fondation d’entreprise Club Méditerranée
Senior Executive of:
Club Med Management Asia Ltd. (Hong Kong)
Chairman of the Board of:
Club Med Services Singapore Pte Ltd (Singapore)
Director of:
Holiday Hôtels AG (Switzerland)
Carthago (Tunisia)
OTHER POSITIONS OUTSIDE THE GROUP
Director of:
Casino, Guichard-Perrachon
Member of the Supervisory Board of:
Vedior (Netherlands)
OTHER POSITIONS HELD WITHIN THE PAST FIVE YEARS
Chairman of the Executive Board of:
Club Méditerranée
Chairman of:
Grand Hôtel Parisien
Hôteltour
Club Med Marine
Centrovacanze Kamarina (Italy)
CM U.K Ltd (United Kingdom)
Gregolimano Etabe (Greece)
Vice-Chairman of:
Nouvelle Société Victoria (Switzerland)
Legal Manager of:
Loin
Permanent Representative of:
Club Méditerranée SA on the Board of Directors of STCL 2
Hôteltour on the Board of Directors of CM Middle East BV
(Netherlands)
Loin on the Boards of Directors of Flèche Bleue Voyages and
SECAG Caraïbes
Chairman of:
Club Méditerranée Trustee Ltd (United Kingdom)
DAVID DAUTRESME
Vice-Chairman of the Board of Directors
Born on 5 January 1934
French
Appointed on 16 March 2005
Term expires at the Annual Shareholders’ Meeting to
be called to approve the accounts for the year ending
31 October 2007
First term of office within the Company began
on 23 April 1997
Number of shares held: 1,591
Independent director
Biography: A graduate of ENA, David Dautresme held the
post of Officer in charge of Algerian Affairs for the French gov-
ernment between 1958 and 1960. He was subsequently an
auditor at and then honorary advisor to the Cour des Comptes
(French National Audit Office), following which he served as
a Policy Officer at the French Ministry of the Economy and
Finance. In 1966 he was appointed Comptroller at Caisse des
Dépôts et Consignations before joining Crédit Lyonnais in
1968 as Deputy Director, where he subsequently became Chief
Operating Officer. He served as Chairman and Chief Executive
Officer of Crédit du Nord between 1982 and 1986 before
entering Banque Lazard Frères et Cie where he was Managing
Partner until 2000 and appointed Senior Advisor in 2001. Since
2006 he has also been a Senior Advisor to Barclays Capital
France.
Main position outside the Group: Senior Advisor
to Lazard Frères
OTHER POSITIONS OUTSIDE THE GROUP
Member of the Supervisory Board of:
AXA (France)
Sole Legal Manager of:
DD Finance (France)
Director of:
Fimalac (France)
Non-voting director of:
Eurazeo (France)
OTHER POSITIONS HELD WITHIN THE PAST FIVE YEARS
Executive Deputy Chairman of:
Crédit Agricole - Lazard Financial Products Bank
Vice-Chairman and director of:
Fonds - Partenaires Gestion (F.P.G.)
General information
160
Non-voting director of:
Eurazeo
Groupe Go Sport
Lazard Frères Banque
Chairman of:
Parande Développement SAS
Member of the Supervisory Board of:
Club Méditerranée
Casino
Managing Partner of:
Lazard Frères
Maison Lazard
Partena
Director of:
Société Immobilière Marseillaise
Axa Investment Managers
Lazard Frères Banque
Crédit Agricole Lazard Financial Products Ltd
Rue Impériale
Permanent representative of:
Lazard SA
Compagnie de Crédit (director)
PHILIPPE ADAM*
Director
Born on 1 May 1957
French
Appointed on 16 March 2005
Term expires at the Annual Shareholders’ Meeting to
be called to approve the accounts for the year ending
31 October 2007
Number of shares held: 50
Non-independent director
Biography: Philippe Adam is a graduate of Institut d’Etudes
Politiques de Strasbourg and also holds an MBA degree.
He began his career in 1984 as a financial analyst before
joining Accor in 1986. In 1993 he entered the Compass Group,
the worldwide leader in contract catering. Philippe Adam is
currently Executive Vice-President, Strategy and Hotel
Development with the Accor Group.
Main position outside the Group: Executive Vice-President,
Strategy and Hotel Development - Accor
OTHER POSITIONS OUTSIDE THE GROUP
Chairman and Chief Executive Officer of:
Devimco
Permanent representative of:
SAMINVEST, on the Board of Directors of GO Voyages
OTHER POSITIONS HELD WITHIN THE PAST FIVE YEARS
Managing Director of:
Carlson Wagon Lit Travel
*Appointment subject to ratification by the shareholders at the AnnualMeeting of 8 March 2007.
SAUD AL SULAIMAN
Director
Born on 8 December 1961
Saudi-Arabian
Appointed on 16 March 2005
Term expires at the Annual Shareholders’ Meeting to
be called to approve the accounts for the year ending
31 October 2007
First term of office within the Company began
on 12 December 2003
Number of shares held: 50
Independent director
Biography: Saud Al Sulaiman graduated in Finance from the
University of New York in the United States. Since he began
his career he has held several management positions within
the Rolaco Trading & Contracting group, which is partly owned
by the Al Sulaiman family. He has contributed to driving the
group’s expansion in a number of areas including manufactur-
ing, finance, real estate development and tourism.
Main position outside the Group: Partner and Managing
Director of Rolaco Trading and its subsidiaries (Jeddah,
Saudi Arabia)
OTHER POSITIONS OUTSIDE THE GROUP
Member of the Board of Directors of:
Arabian Cement Company (Saudi Arabia)
Saudi Arabian Refineries Company (Saudi Arabia)
Saudi Industrial Development Company (Saudi Arabia)
Capital Finance Company SAL. (Lebanon)
Rolaco Holding SA (Luxembourg)
Hadhan Holding SA (Luxembourg)
Oryx Finance Ltd. (Grand Cayman)
Semiramis Intercontinental Hotel (Egypt)
Sharjah National Lube Oil Company (United Arab Emirates)
This Works (United Kingdom)
Muzun International Aviation Fund (Bahamas)
OTHER POSITIONS HELD WITHIN THE PAST FIVE YEARS
Member of the Supervisory Board of:
Club Méditerranée (France)
MUSTAPHA BAKKOURY*
Director
Born on 20 December 1964
Moroccan
First appointed on 28 September 2006
Term expires at the Annual Shareholders’ Meeting to
be called to approve the accounts for the year ending
31 October 2007
Number of shares held: 250
Non-independent director
Biography: Mustapha Bakkoury graduated from Ecole Nationale
des Ponts et Chaussées de Paris and also holds a degree in
Banking and Finance. He spent some ten years working in the
banking industry, including with BNP Paribas in France and
BMCI in Morocco, and in August 2001 was appointed Chief
Executive Officer of Caisse de Dépôt et de Gestion du Maroc
in Morocco. Mustapha Bakkoury is also Vice-Chancellor of
Al Akhawayn University, a member of the Mohammed VI
Foundation (which promotes the teaching profession and
performs charity work), a member of the Employers’ Fede-
ration (Conseil du Patronat) and Co-Chairman of Groupe
d’Impulsion Economique France Maroc, aimed at furthering
economic relations between France and Morocco.
Main position outside the Group: Chief Executive Officer
of Caisse de Dépôt et de Gestion du Maroc
OTHER POSITIONS OUTSIDE THE GROUP
Chairman of the Board of Directors of:
Fipar Holding (Morocco)
Société Générale de Réassurance (Morocco)
CDG Capital (Morocco)
SOFAC Crédit (Morocco)
Société Immobilière de la Mer (Morocco)
Société d’Aménagement Ryad (Morocco)
Massira Capital Management (Morocco)
Chairman of the Supervisory Board of:
CDG Développement (Morocco)
Crédit Immobilier et Hôtelier (Morocco)
Member of the Supervisory Board of:
TMSA (Tanger Med Special Agency)
Banque Marocaine pour le Commerce et l’Industrie (Morocco)
Director of:
Banque Centrale Populaire (Morocco)
Méditélécom (Morocco)
Ciments du Maroc
Lafarge Maroc
Air Liquide (Morocco)
Carnaud Metalbox (Morocco)
Fonds d’Equipement Communal (Morocco)
Poste Maroc
2006 Annual Report // 161
Compagnie d’Assurance Atlanta
Crédit Eqdom
Médi 1 Sat (Morocco)
OTHER POSITIONS HELD WITHIN THE PAST FIVE YEARS
Chairman of the Board of Directors of:
Banque Nationale de Développement Economique (Morocco)
Compagnie Générale Immobilière (Morocco)
Cellulose du Maroc
Papelera de Tétouan (Morocco)
SOGATOUR (Société d’Aménagement Touristique) (Morocco)
Loterie Nationale (Morocco)
Maroc Leasing
Caisse Marocaine des Marchés (Morocco)
Director of:
CNIA Assurances (Morocco)
Régie des Tabacs (Morocco)
Chairman of the Management Board of:
TMSA (Agence spéciale Tanger Med)
*Appointment subject to ratification by the shareholders at the AnnualMeeting of 8 March 2007.
THIERRY DELAUNOY DE LA TOUR D’ARTAISE
Director
Born on 27 October 1954
French
Appointed on 16 March 2005
Term expires at the Annual Shareholders’ Meeting to be
called to approve the accounts for the year ending 31
October 2007
Number of shares held: 100
Independent director
Biography: A graduate of Ecole Supérieure de Commerce de
Paris, Thierry Delaunoy de La Tour d’Artaise served as head
of internal audit with the Chargeurs group from 1983 to 1984,
before joining Croisères Paquet where he held the post of
Chief Financial Officer from 1984 to 1986 and subsequently
Chief Executive Officer from 1986 to 1993. He then went on to
work at Calor SA from 1994 to 1997 as Chief Executive Officer
and subsequently Chairman and Chief Executive Officer. In
1998 he joined Groupe SEB where he was Chairman of the
Home Appliances Division and Senior Vice-President, Chief
Executive Officer, before being appointed Chairman and Chief
Executive Officer in 2000.
General information
162
Main position outside the Group: Chairman of the board
and Chief Executive Officer of Groupe SEB
OTHER POSITIONS OUTSIDE THE GROUP
Chairman of:
SEB Internationale (France)
Member of the Supervisory Board of:
Rowenta Invest BV (Netherlands)
Permanent representative of:
Sofinaction, director of Lyonnaise de Banque (France).
Director of:
Tefal UK (United Kingdom)
Groupe Seb Japan (Japan)
Groupe Seb Mexicana (Mexico)
Siparex Associés (France)
Plastic Omnium (France)
Legrand
OTHER POSITIONS HELD WITHIN THE PAST FIVE YEARS
Chairman of:
Groupe SEB Moulinex (France)
Chairman of the Supervisory Board of:
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)
SEB SA (France)
Tefal UK (United Kingdom)
Seb Benrubi (Greece)
Groupe Seb South Africa (South Africa)
Legal Manager of:
Rowenta Deustchland GmbH (Germany)
Krups GmbH (Germany)
PAUL JEANBART
Director
Born on 23 August 1939
Canadian
Appointed on 16 March 2005
Term expires at the Annual Shareholders’ Meeting to
be called to approve the accounts for the year ending
31 October 2007.
First term of office within the Company began
on 23 April 1997
Number of shares held: 50
Independent director
Biography: After graduating in civil engineering from the
University of Alep in Syria, Paul Jeanbart co-founded the
Rolaco Trading & Contracting Group, which started out as a
construction firm and also specialized in trading construction
materials, vehicles and road and maritime freight equipment.
He worked at Rolaco Trading & Contracting from 1964 until
1982 when he moved to Geneva to manage the investments
of the Luxembourg-based company Rolaco Holding SA Group
in various sectors, including tourism, hotel services, finance,
insurance and the maritime industry (covering both ship owners
and operators).
Main position outside the Group: Managing Director of
Rolaco Holding SA (Luxembourg)
OTHER POSITIONS OUTSIDE THE GROUP
Chairman and Chief Executive Officer of:
Oryx Finance Limited, Grand Cayman
Hôtels Intercontinental Genève SA
Managing Director of:
All of the subsidiaries of Rolaco Holding S.A, Luxembourg
Director of:
Sodexho Alliance SA
Luxury Brand Development SA
Semiramis Hôtel Co, Egypt
Nasco Insurance Group, Bermuda
OTHER POSITIONS HELD WITHIN THE PAST FIVE YEARS
Director of:
Orfèverie Christofle SA
XL Capital Limited, Bermuda
Delta Bank Intenational, Egypt
Member of the Supervisory Board of:
Club Méditerranée
2006 Annual Report // 163
AIMERY LANGLOIS-MEURINNE*
Director
Born on 27 May 1943
French
First appointed on 28 September 2006
Term expires at the Annual Shareholders’ Meeting to
be called to approve the accounts for the year ending
31 October 2007.
Number of shares held: 1,000
Independent director
Biography: Aimery Langlois-Meurinne graduated from
Sciences Po in Paris in 1965, earned a doctorate in law in 1966
and graduated from France’s Ecole Nationale d’Administration
in 1970. He joined the Paribas group in 1971 where he worked
for 12 years before being appointed Managing Director of
G. Becker Paribas (New York) and subsequently Merrill Lynch
Capital Markets (New York). Between 1987 and 1998, he served
as Chief Executive Officer and then Senior Vice-President,
Chief Executive Officer of Parfinance Paris. In 1998, he was
appointed Chairman of the Supervisory Board of Imerys and
has been the Chairman of that company’s Board of Directors
since 2005. He has also been Managing Director of Pargesa
Holding in Geneva since 1990.
Main position outside the Group: Chief Executive Officer
and Member of the board of Pargesa Holding SA (Geneva)
OTHER POSITIONS OUTSIDE THE GROUP
Director of:
Groupe Bruxelles Lambert SA (Belgium)
Eiffage (France)
PAI Management (France)
Pascal Investment Advisers SA (Switzerland)
Director and Chairman of:
Pargesa Luxembourg SA (Luxembourg)
Pargesa Netherlands BV (Netherlands)
Imerys (France)
OTHER POSITIONS HELD WITHIN THE PAST FIVE YEARS
Director of:
Power Financial Corporation (Canada)
Axis Capital Management (United Kingdom)
Club Français du Livre (France)
*Appointment subject to ratification by the shareholders at the AnnualMeeting of 8 March 2007.
PASCAL LEBARD
Director
Born on 15 May 1962
French
Appointed on 16 March 2005
Term expires at the Annual Shareholders’ Meeting to
be called to approve the accounts for the year ending
31 October 2007.
First term of office within the Company began
on 23 April 1997
Number of shares held: 54
Independent director
Biography: After graduating from EDHEC, Pascal Lebard
became a Chargé d’Affaires at Crédit Commercial de France
in 1986. He held the post of Associate Director at 3I SA from
1989 until 1991, before becoming a Director at Ifint, the
predecessor of the Exor Group. In 2003 he joined Worms
& Cie (which was renamed Sequana Capital in 2005) as a
member of the Supervisory Board (2003-2004), a member of
the Management Board (2004-2005) and Deputy Managing
Director (since 2005).
Main position outside the Group: Deputy Managing Director
of Sequana Capital
OTHER POSITIONS OUTSIDE THE GROUP
Chairman of:
Safic Alcan
Chairman of the Supervisory Board of:
Permal Group SAS
Member of the Supervisory Board of:
ArjoWiggins SAS
Antalis SAS
Director of:
LISI (Paris)
SGS (Geneva)
Financière Worms SA (Geneva)
Greysac (formerly Domaines Codem)
OTHER POSITIONS HELD WITHIN THE PAST FIVE YEARS
Chairman of the Supervisory Board of
MICEL (Saint-Chamond)
Club Méditerranée
Chief Executive Officer of:
Exor SA (Paris)
Chairman and Chief Executive Officer of:
Domaines Codem (Begadan)
General information
Director of:
Domaines Codem (Begadan)
Européenne de Financement (Paris)
Soficol (Paris)
Exint. (Paris)
Member of the Executive Board of:
Worms & Cie (Paris)
VÉRONIQUE MORALI
Director
Born on 12 September 1958
French
Appointed on 16 March 2005
Term expires at the Annual Shareholders’ Meeting to
be called to approve the accounts for the year ending
31 October 2007.
First term of office within the Company began
on 22 October 2004
Number of shares held: 50
Independent director
Biography: Having graduated from Institut d’Etudes Politiques
and Ecole Supérieure de Commerce de Paris, Véronique
Morali entered Ecole Nationale d’Administration in 1984. She
became part of the Inspectorate General team at the French
Finance Ministry in 1986 before joining Fimalac in 1990.
Véronique Morali is President of the Force Femmes Association
and Chairman of the Economic Dialog Committee for MEDEF,
the French employers’ organization. In 1999 and 2004 respec-
tively she received the prestigious titles for services to the
French state - Chevalier dans l’Ordre National du Mérite and
Chevalier de la Légion d’Honneur.
Main position outside the Group: Director and Chief
Operating Officer of Fimalac
OTHER POSITIONS OUTSIDE THE GROUP
Director of:
Eiffage
Valeo
Sole director of:
FCBS GIE
Director :
Fimalac, Inc. (United States)
Fitch Group Inc. (United States)
Fitch Ratings (United States)
OTHER POSITIONS HELD WITHIN THE PAST FIVE YEARS
Chairman and Chief Executive Officer of:
Fimalac Communication
Fimalac Investissements
Revue des Deux Mondes
164
Permanent representative of:
Fimalac on the Board of Directors of Facom
Fimalac, Inc. on the Board of Directors of Fitch France SA
Fimalac Investissements on the Board of Directors of Clestra
Minerais et Engrais on the Board of Directors of Monde Presse
Member of the Supervisory Board of:
Club Méditerranée
Director of:
Minerais et Engrais
Legal Manager of:
Pandour
Silmer
Member of:
Conseil des Marchés Financiers
Chairman of:
Strafor Facom, Inc. (United States)
Member of the Board of:
Core Ratings Ltd (United Kingdom)
ANNE-CLAIRE TAITTINGER*
Director
Born on 3 November 1959
French
Appointed on 14 March 2006
Term expires at the Annual Shareholders’ Meeting to
be called to approve the accounts for the year ending
31 October 2007
First term of office within the Company began
on 12 June 2003
Number of shares held: 400
Independent director
Biography: Anne-Claire Taittinger is a graduate of Institut
d’Études Politiques de Paris. She also holds ordinary and
advanced degrees in urban planning as well as a diploma
awarded by a specialized executive training institution (Centre
de perfectionnement aux affaires). She spent four years at
Caisse des Dépôts et Consignations (1976-1979), before hold-
ing various managerial positions within Groupe du Louvre and
subsequently Groupe Taittinger, as follows:
- Head of the Manufacturing Division (1979-1995) of Groupe
du Louvre. In her capacity as Chairman and CEO of Groupe
du Louvre she oversaw the gradual sale of this division
between 1994 and 2000.
- Chairman and CEO of Annick Goutal Fragrances (1986-1992)
where she was responsible for the launch of the company
and subsequent operations.
- CEO and then Chairman and CEO of Baccarat (1993-1994
and 1994-2002 respectively), and subsequently Chairman
of Baccarat’s Board of Directors from 2002.
2006 Annual Report // 165
- Executive director of Groupe Taittinger and Société du
Louvre holding companies (between 2002 and 2005), as well
as executive director of Groupe du Louvre from 1997 to
2006).
- Corporate Secretary, CEO and subsequently Chairman of
the Management Board of Groupe du Louvre (1985-2006) –
positions she held in parallel with those of Corporate
Secretary and subsequently Chairman of the Management
Board of Groupe Taittinger. These positions involved over-
seeing the various strategic and financial developments of
Groupe Taittinger-Louvre, optimizing returns on the group’s
prestigious property portfolio, and ensuring the smooth
implementation of changes in the group’s ownership struc-
ture - including the recent sale of Groupe Taittinger to an
investment fund.
Main position outside the Group: Corporate Secretary –
Groupe Taittinger
OTHER POSITIONS OUTSIDE THE GROUP
Director of:
Dexia
Baccarat
Member of the Supervisory Board of:
Carrefour
Senior Advisor to:
Wefcoms-Women’s Forum
OTHER POSITIONS HELD WITHIN THE PAST FIVE YEARS
Chairman of:
Louvre Hôtels SAS
A. Hôtels SAS
L. Hôtels SAS
S. Hôtels SAS
Groupe Envergure SAS
Permanent representative of Groupe Taittinger on the
Boards of:
Société Hôtelière Lutétia Concorde
Taittinger CCVC
Legal Manager of:
SAS du Riffray
Chairman of the Management Board of:
Groupe Taittinger
CEO of:
Société du Louvre
Groupe du Louvre
Chairman and Director of:
Baccarat Inc. (USA)
Baccarat Pacific KK (Japan)
Director of:
Baccarat Pacific Ltd. (USA)
*Appointment subject to ratification by the shareholders at the AnnualMeeting of 8 March 2007.
ÉTIENNE BERTIER
Non-voting director
Born on 25 February 1960
French
Appointed on 9 June 2005
Biography: Etienne Bertier graduated from Institut d’Etudes
Politiques de Paris, Essec and the Human Sciences Faculty of
Paris X Nanterre University. He began his career as a journal-
ist for the Expansion newspaper (1984-1987), Libération (1987-
1990) and Le Point (1990-1993). He was appointed Technical
Advisor to the French Ministry of the Economy in 1993 before
becoming a Policy Officer. In 1995 he joined EDF as Corporate
Secretary until his appointment in 1998 as Deputy Director of
the International Division, a position he held until 2003. In
January of that year he was appointed as advisor to the Chief
Executive Officer of Caisse des Dépôts and has been
Chairman and Chief Executive Officer of Icade since October
2003.
Main position outside the Group: Chairman of the board
and Chief Executive Officer of Icade SA
OTHER POSITIONS OUTSIDE THE GROUP
Director of:
Icade de Foncière des Pimonts SA
MAP Holding SA (formerly Financière Lille SA)
Fineco Vita SA
Member of the Supervisory Board of:
CNP Assurances SA
Non-voting director of:
Club Méditerranée SA
Permanent representative of:
Icade, as director of Icade Patrimoine SA
Icade, as director of Icade EMGP SA
Icade, as Legal Manager of SCI Patrimoniales, comprising:
SCI Construction du Bassin Parisien, Fontaine au Roi, Rhône,
Résidence de Sarcelles, Résidence d’Epinay/Seine, St Etienne
du Rouvray, Seloge, Vénissieux Grandes Terres des Vignes
General information
Henri Giscard d’Estaing is assisted by two ExecutiveVice-Presidents:
FRANÇOIS SALAMON
Executive Vice-President, Europe and North America -
Non-director
Born on 23 July 1953
French
OTHER POSITIONS WITHIN THE GROUP
Legal Manager of:
Club Med Viagens Lda (Portugal)
Director of:
Club Méditerranée Israel Ltd (Israel)
Vacances (Proprietary) Ltd (South Africa)
Director of:
Sociedade Hoteleira Da Balaia (Portugal)
HOCASA (Spain)
SACM (Spain)
TEK AE (Greece)
Carthago (Tunisia)
Director and founder of:
Fondation d’Entreprise Club Méditerranée
OTHER POSITIONS OUTSIDE THE GROUP
N/A
OTHER POSITIONS HELD WITHIN THE PAST FIVE YEARS
Member of the Executive Board of:
Club Méditerranée SA
MICHEL WOLFOVSKI
Executive Vice-President, Chief Financial Officer
Non-director
Born on 3 April 1957
French
OTHER POSITIONS WITHIN THE GROUP
Permanent representative of:
Club Méditerranée SA for Club Med World Holding (Paris)
Director of:
Jet tours SA (Ivry)
OTHER POSITIONS OUTSIDE THE GROUP
N/A
166
Permanent representative of Icade as co-legal manager of:
SNC Capri Danton
OTHER POSITIONS HELD WITHIN THE PAST FIVE YEARS
Permanent representative of Icade, as director of:
SCIC Habitat SA
SCIC Habitat Ile de France SA
SCET SA
CAPRI SA
CIRP SA
Member of the Supervisory Board of:
Club Méditerranée SA
CNCE SA
Crédit Foncier de France SA
Director of:
C3D SA
Representative of SCI Domaine IDF on the Management
Board of:
GIE Icade Patrimoine
Chairman of the Supervisory Board of:
Budapest EROMU SA
TETSUYA MIYAGAWA
Non-voting director
Born on 6 April 1955
Japanese
Appointed on 14 March 2006
Biography: After graduating from the University of Tokyo in
Japan, Tetsuya Miyagawa joined Nippon Life Insurance
Company in 1978. He was appointed General Manager in
charge of the International Investment Department in 2001
and has been Nippon Life’s chief representative in London
since 2005.
Main position outside the Group: Chief Representative of
Nippon Life Insurance Company at its London office
OTHER POSITIONS OUTSIDE THE GROUP
Director of:
Nippon Life Insurance International PLC
Nippon Life Insurance Investments Europe Ltd.
OTHER POSITIONS HELD WITHIN THE PAST FIVE YEARS
N/A
2006 Annual Report // 167
OTHER POSITIONS HELD WITHIN THE PAST FIVE YEARS
Member of the Executive Board of:
Club Méditerranée SA (Paris)
Director of:
Club Med Gym (Paris)
Chairman of:
Club Med Amérique du Nord (Paris)
Club Med Amérique du Sud (Paris)
Club Med Asie (Luxembourg)
As far as the Company is aware, none of its corporate officers
have any convictions in relation to fraudulent offences in the
past five years and none have been involved in any bankrupt-
cies, receiverships or liquidations in the past five years.
In addition no official public incriminations and/or sanctions
have been pronounced against any of the Company’s offi-
cers by any statutory or regulatory authorities and they have
never been disqualified by a court from acting as a member
of the administrative, management or supervisory bodies of
an issuer or from acting in the management or conduct of
the affairs of any issuer. Finally, to the best of the Company’s
knowledge, there are no potential conflicts of interests
between the duties of the corporate officers to the Company
and their private interests.
5. BOARD COMMITTEES
At its meeting of 16 March 2005, the Board of Directors set up
three specialized committees:
• A Strategy Committee.
• An Audit Committee.
• A Nominations and Compensation Committee
The members of the Board Committees are appointed by the
Board of Directors.
The responsibilities of the Committees, whose role is exclu-
sively advisory, are set by the Board of Directors.
The Committees report on their work to the Board of Directors.
The Strategy CommitteeThe Strategy Committee is chaired by Henri Giscard d’Estaing
and has seven other members: Véronique Morali, Philippe
Adam, Mustapha Bakkoury, Paul Jeanbart, Aimery Langlois-
General information
Summary of transactions carried out during fiscal 2006 concerning the Company’s securities (disclosed inaccordance with Article L.621-18-2 of the French Monetary and Financial Code)
Transaction Officer Financial instrument Type of transaction Number of date securities
6 April 2006 Michel Wolfovski Derivative instrument Sale of call 15,000relating to ordinary shares option – Purchase
of put option16 October 2006 Aimery Langlois-Meurinne Shares Purchase 1,000
Meurinne, Pascal Lebard and Tetsuya Miyagawa (non-voting
director). Five of the Committee’s members are independent.
The roles and responsibilities of the Strategy Committee are
described in the Report of the Chairman of the Board of
Directors on Preparing and Organizing Board Meetings and
on the Company’s Internal Control Procedures (see page 82).
The Strategy Committee met once in fiscal 2006.
The Audit CommitteeThe Audit Committee is chaired by David Dautresme and
has three other members: Véronique Morali, Philippe Adam
and Pascal Lebard. Three of the Committee’s members are
independent.
The Audit Committee is one of the key components of the
corporate governance structure set up by the Company. It is
responsible for assisting the Board with reviewing and approv-
ing the financial statements, analyzing risks and ensuring that
the Group’s internal control system operates efficiently.
The roles and responsibilities of the Audit Committee are
described in the Report of the Chairman of the Board of
Directors on Preparing and Organizing Board Meetings and
on the Company’s Internal Control Procedures (see page 81).
The Audit Committee met twice in fiscal 2006, prior to the
presentation of the financial statements. The Statutory
Auditors attended both of these meetings.
Nominations and CompensationCommitteeThe Nominations and Compensation Committee has three
members, all of whom are independent: Anne-Claire Taittinger,
Thierry de La Tour d’Artaise and Saud Al Sulaiman. It is chaired
by Thierry de La Tour d’Artaise.
The roles and responsibilities of the Nominations and
Compensation Committee are described in the Report of the
Chairman of the Board of Directors on Preparing and
Organizing Board Meetings and on the Company’s Internal
Control Procedures (see page 81).
The Nominations and Compensation Committee met twice
in fiscal 2006.
168
Additionalinformation
2006 Annual Report // 169
170 // RESOLUTIONS
170
A - ORDINARY RESOLUTIONS
FIRST RESOLUTION - APPROVAL OF THE FINANCIALSTATEMENTS OF THE COMPANY FOR THE YEAR ENDED31 OCTOBER 2006
The Ordinary General Meeting, having considered the
report of the Board of Directors, the Chairman’s report on the
practices and procedures of the Board of Directors and the
Company’s internal control procedures, the Auditors’ report,
and the financial statements of the Company for the year
ended 31 October 2006 presented by the Board of Directors,
approves the financial statements as presented, which show
a net loss of €14,480,839, as well as the transactions reflected
in these financial statements and described in these reports.
As a result, the Ordinary General Meeting gives discharge to
the Board of Directors for the fulfillment of its duties for the
year ended 31 October 2006.
SECOND RESOLUTION - APPROVAL OF THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 OCTOBER 2006
The Ordinary General Meeting, having considered the
report of the Board of Directors, the Chairman’s report on
the practices and procedures of the Board of Directors and
the Company’s internal control procedures, the Auditors’
report, and the consolidated financial statements for the year
ended 31 October 2006 presented by the Board of Directors,
approves the consolidated financial statements as presented,
which show net income of €4.58 million, as well as the trans-
actions reflected in these consolidated financial statements
and described in these reports.
THIRD RESOLUTION - APPROPRIATION OF PROFIT
The Ordinary General Meeting, considering the deficit carried
forward from the previous year and the recommendation of
the Board of Directors, resolves to appropriate the Company’s
net loss for the year, in the amount of €14,480,839, to the
deficit. Including this loss and the €12,893,044 effect of a
change in accounting method concerning the measurement
of assets, the deficit will amount to €258,485,594.
As required by law, the Ordinary General Meeting notes that
dividends for the last three fiscal years were as follows:
Fiscal 2003 Fiscal 2004 Fiscal 2005
Number of shares carrying dividend rights 19,358,005 19,358,005 19,358,005Net dividend per share - - -Tax credit - - -
FOURTH RESOLUTION - APPROVAL OF RELATED PARTYAGREEMENTS
The Ordinary General Meeting, having considered the report
of the Auditors on related party agreements governed by
Articles L.225-38 et seq. of the French Commercial Code and
– for agreements entered into prior to the change in manage-
ment system – Articles L.225-86 et seq, approves the related
party transactions and agreements that were entered into or
remained in force during the year.
FIFTH RESOLUTION - APPROVAL OF DIRECTORS’ FEES
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 2006
to 31 October 2007 at €305,000.
SIXTH RESOLUTION - RATIFICATION OF THE APPOINTMENTOF YANN CAILLÈRE AS DIRECTOR
The Ordinary General Meeting ratifies the appointment of
Yann Caillère as director to replace Jacques Stern for the
remainder of the latter’s term expiring at the Annual
Shareholders’ Meeting to be called to approve the fiscal 2007
financial statements, as decided at the Board meeting of
14 March 2006.
SEVENTH RESOLUTION - RATIFICATION OF THE APPOINTMENT OF PHILIPPE ADAM AS DIRECTOR
The Ordinary General Meeting ratifies the appointment of
Philippe Adam as director to replace Serge Ragozin for the
remainder of the latter’s term expiring at the Annual
Shareholders’ Meeting to be called to approve the fiscal 2007
financial statements, as decided at the Board meeting of
14 March 2006.
EIGHTH RESOLUTION - RATIFICATION OF THE APPOINTMENT OF ANNE-CLAIRE TAITTINGER AS DIRECTOR
The Ordinary General Meeting ratifies the appointment of
Anne-Claire Taittinger as director to replace Kiyoshi Ujihara
for the remainder of the latter’s term expiring at the Annual
Shareholders’ Meeting to be called to approve the fiscal 2007
financial statements, as decided at the Board meeting of
14 March 2006.
NINTH RESOLUTION - RATIFICATION OF THE APPOINTMENT OF MUSTAPHA BAKKOURY AS DIRECTOR
The Ordinary General Meeting ratifies the appointment of
Mustapha Bakkoury as director to replace Yann Caillère for
the remainder of the latter’s term expiring at the Annual
Shareholders’ Meeting to be called to approve the fiscal 2007
financial statements, as decided at the Board meeting of
28 September 2006.
Resolutions
2006 Annual Report // 171
TENTH RESOLUTION - RATIFICATION OF THE APPOINTMENT OF AIMERY LANGLOIS-MEURINNE AS DIRECTOR
The Ordinary General Meeting ratifies the appointment of
Aimery Langlois-Meurinne as director to replace Pierre Todorov
for the remainder of the latter’s term expiring at the Annual
Shareholders’ Meeting to be called to approve the fiscal 2007
financial statements, as decided at the Board meeting of
28 September 2006.
ELEVENTH RESOLUTION - RENEWAL OF THE APPOINTMENT OF DELOITTE & ASSOCIÉS AS STATUTORYAUDITOR
The Ordinary General Meeting, considering that the term of
Deloitte & Associés as Statutory Auditor expires at this Annual
General Meeting, renews the appointment as Statutory
Auditor of Deloitte & Associés (185, avenue Charles de Gaulle,
92524 Neuilly-sur-Seine Cedex), for the statutory period of
six years expiring at the Annual Shareholders’ Meeting to be
called to approve the fiscal 2012 financial statements.
TWELFTH RESOLUTION - RENEWAL OF THE APPOINTMENTOF ERNST & YOUNG AUDIT AS STATUTORY AUDITOR
The Ordinary General Meeting, considering that the term of
Ernst & Young Audit as Statutory Auditor expires at this Annual
General Meeting, renews the appointment as Statutory
Auditor of Ernst & Young Audit (Faubourg de l’Arche 92037
Paris-La Défense Cedex), for the statutory period of six years
expiring at the Annual Shareholders’ Meeting to be called to
approve the fiscal 2012 financial statements.
THIRTEENTH RESOLUTION - RENEWAL OF THE APPOINTMENT OF BEAS AS SUBSTITUTE AUDITOR
The Ordinary General Meeting, considering that the term of
Beas as Substitute Auditor expires at this Annual General
Meeting, renews the appointment as Substitute Auditor of
Beas (185, avenue Charles de Gaulle, 92524 Neuilly-sur-Seine
Cedex), for the statutory period of six years expiring at the
Annual Shareholders’ Meeting to be called to approve the
fiscal 2012 financial statements.
FOURTEENTH RESOLUTION - RENEWAL OF THE APPOINTMENT OF FRANÇOIS CARREGA AS SUBSTITUTEAUDITOR
The Ordinary General Meeting, considering that the term of
François Carrega as Substitute Auditor expires at this Annual
General Meeting, renews the appointment as Substitute
Auditor of François Carrega (13, boulevard des Invalides, 75007
Paris), for the statutory period of six years expiring at the
Annual Shareholders’ Meeting to be called to approve the
fiscal 2012 financial statements.
FIFTEENTH RESOLUTION - AUTHORIZATION TO TRADE IN THE COMPANY’S SHARES
The Ordinary General Meeting, having considered the report
of the Board of Directors, resolves to authorize the Board of
Directors to buy back shares of the Company in accordance
with Articles L.225-209 et seq. of the French Commercial Code,
European Commission Regulation 2273/2003 of 22 December
2003 implementing Directive 2003/6/EC of 28 January 2003,
and Articles 241-1 to 241-6 of the Autorité des Marchés
Financiers’ general regulations or any regulations that may be
substituted therefor. The number of Club Méditerranée SA
shares held under this authorization at any given time shall not
represent more than 10% of the Company’s capital, currently
19,358,005 shares. Authority to act on this resolution may be
delegated by the Board, subject to compliance with the appli-
cable laws and regulations.
The Ordinary General Meeting authorizes the Board of
Directors (or any person duly authorized by the Board) to buy
back shares for the following purposes:
• To permit transactions under a liquidity contract complying
with a code of ethics approved by the Autorité des Marchés
Financiers, entered into with an investment service provider
acting on an independent basis without any influence from
the Company.
• For allocation to directors and/or employees of the Company
and/or the Group, upon exercise of stock options or under
an employee stock ownership plan or stock grant plan.
• For allocation upon the issue or exercise of rights attached
to shares or share equivalents.
• To constitute a stock of shares to be used (i) to pay for future
business acquisitions or (ii) for future mergers, demergers or
acquisitions of assets in exchange for shares. The number of
shares used for this latter purpose shall not exceed 5% of
the Company’s capital as of the transaction date, currently
19,358,005 shares.
• For cancellation of the acquired shares, including any shares
bought back pursuant to earlier authorizations (provided
that 28th resolution authorizing the Board to reduce the
Company’s capital is voted).
• For any other purpose that is currently authorized by law or
may be authorized in the future, provided that the Company
informs shareholders of said new purpose or purposes by
press release or by any other legally authorized means.
The shares may be purchased, sold or otherwise transferred
by any appropriate method, on the market or over the count-
er, through a public cash or exchange offer, or through the use
of options or derivatives, in compliance with the applicable
regulations. The shares acquired, including those bought back
under earlier authorizations, may be cancelled, provided that
28th resolution authorizing the Board to reduce the Company’s
capital is voted.
The maximum buyback price is set at €70 per €4 par value
share and the minimum resale price at €30. Considering the
number of shares making up the Company’s capital as of the
date of this General Meeting, and any adjustments that may
result from corporate actions, the amount invested in the
buybacks shall not exceed €135,506,035.
Additionalinformation
The Board of Directors shall have full powers to adjust the
prices or the number of shares specified above to take into
account the effects of any corporate actions. In the case of any
such corporate actions, particularly a stock split or reverse
stock split, an issue of bonus shares or an increase in the par
value of existing shares paid up by capitalizing reserves or
earnings, the adjustment will be determined by multiplying
the price by the ratio between the number of shares outstand-
ing before and after the transaction.
The buybacks, sales and transfers may be carried out and
settled by any means, including through the use of derivatives
and notes and the purchase of call options, in compliance with
the Autorité des Marchés Financiers’ general regulations. The
entire program may be carried out through a single block
purchase.
The Company may use this authorization to continue imple-
menting its share buyback program and to take any and all
measures related to the program, including in connection with
a takeover bid for the Company or a public exchange offer
initiated by the Company in compliance with the applicable
regulations.
The Ordinary General Meeting gives full powers to the Board
of Directors to use this authorization, to set the terms and
conditions of the program, where necessary, to carry out any
and all necessary formalities and generally to do everything
necessary to implement this authorization. Authority to act
on this resolution may be delegated by the Board, subject to
compliance with the applicable laws and regulations.
This authorization will expire at the end of a period of eighteen
months from the date of this Meeting. It supersedes the
existing authorization given in the 7th resolution of the Ordinary
General Meeting of 14 March 2006.
SIXTEENTH RESOLUTION - POWERS
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.
B - EXTRAORDINARY RESOLUTIONS
SEVENTEENTH RESOLUTION - AUTHORIZATION TO ISSUESHARES AND SHARE EQUIVALENTS WITH PRE-EMPTIVESUBSCRIPTION RIGHTS FOR EXISTING SHAREHOLDERS
The Extraordinary General Meeting, having considered the
reports of the Board of Directors and the Auditors, resolves,
in accordance with Articles L.225-127, L.225-129, L.225-129-2,
L.225-132 and L.228-92 et seq. of the French Commercial
Code:
1) To terminate, with immediate effect, the powers granted
in the 31st resolution of the Extraordinary General Meeting
of 16 March 2005.
2) To give the Board of Directors a 26-month authorization
to increase the Company’s share capital on one or more
occasions, by the amounts and at the times that it considers
appropriate, by issuing, in France and abroad, shares and
securities exchangeable, convertible, redeemable or otherwise
exercisable for shares or debt securities – including stand-
alone warrants issued with or without consideration and rights
– to be paid up in cash or by capitalizing debt. Securities
other than shares may be denominated in euros, in foreign
currency or in any monetary unit determined by reference to
a basket of currencies. Existing shareholders shall have a
pre-emptive right to subscribe for the shares and securities
issued pursuant to this resolution. In accordance with Article
L.228-93 of the French Commercial Code, this resolution may
be used to carry out one or several issues.
However, it may not be used to issue preferred shares or
securities exchangeable, convertible, redeemable or other-
wise exercisable for preferred shares.
3) That the aggregate par value of shares issued pursuant to
this resolution, either directly or on exchange, conversion,
redemption or exercise of share equivalents, shall not exceed
€20 million, provided that this ceiling shall not include the
effect of any adjustments to be made to protect the rights of
holders of share equivalents pursuant to the law. Share issues
carried out pursuant to this resolution will be deducted from
the blanket ceiling of €75 million set in the 27th resolution.
4) That the Board of Directors may give existing shareholders
a pre-emptive right to subscribe for any shares or share
equivalents not taken up by other shareholders pursuant to
their pre-emptive rights. If the issue is oversubscribed,
participating shareholders will be allocated a number of
additional shares or share equivalents determined pro rata
to their existing interests. If the issue is not taken up in full by
shareholders, the Board may take one or more of the following
courses of action, in the order that it considers appropriate:
• Limit the issue to the amount of the subscriptions received,
provided that at least three-quarters of the original issue has
been taken up, in accordance with the law.
• Freely allocate all or some of the unsubscribed shares or
share equivalents.
• Offer all or some of the unsubscribed shares or share equiv-
alents to the public.
5) That this resolution shall automatically entail the waiver of
shareholders’ pre-emptive rights to subscribe for the shares
to be issued on exchange, conversion, redemption or exer-
cise of share equivalents.
6) That the price of each share issued directly or indirectly
pursuant to this resolution, after taking into account the issue
price of any stand-alone warrants or rights, shall not be less
than the minimum price stipulated in the laws and regulations
applicable on the issue date, whether or not the new shares
rank pari passu with existing shares.
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2006 Annual Report // 173
Additionalinformation
This resolution may be used to issue bonds or notes with an
equity component, or securities exchangeable, convertible,
redeemable or otherwise exercisable for bonds or notes with
an equity component, including dated or perpetual senior
or junior bonds or notes, denominated in euros, in foreign
currency or in any monetary unit determined by reference to
a basket of currencies, provided that the life of dated bonds
or notes issued pursuant to this resolution shall not exceed
twenty years. The aggregate nominal amount of debt securi-
ties issued pursuant to this resolution shall not exceed €300
million or the equivalent in foreign currency or monetary units
on the date when the issue is decided. Said aggregate
nominal amount shall be deducted from the blanket ceiling
on debt issues authorized by this Meeting.
The debt securities may consist of fixed or floating rate or zero
coupon bonds or notes and may be issued with or without a
redemption premium. They may be repayable in installments
or in full at maturity. The securities may be bought back on the
market or through a public offer initiated by the Company.
If this resolution is used to issue debt securities, the Board of
Directors shall have full powers to decide whether such debt
securities will be subordinated or not and to set the interest
rate, the life of the securities, the fixed or variable redemption
price – which may or may not include a premium –, the terms
and conditions of their repayment and the manner in which
the securities will be exchangeable, convertible, redeemable
or otherwise exercisable for shares. Authority to act on this
resolution may be delegated by the Board, subject to com-
pliance with the applicable laws and regulations.
The Board of Directors shall have full powers to use this author-
ization, including the power of delegation provided for by law
and by the Company’s bylaws. In particular, the Board shall
have full discretionary powers to set the terms and condi-
tions of the issue(s), place on record the capital increase(s)
resulting from the use of this authorization, amend the bylaws
to reflect the new capital, set the subscription date or period
and the terms and conditions of subscription, decide the char-
acteristics of the securities to be issued, enter into any and
all underwriting or other agreements and generally carry out
any and all formalities required to place the issues, have the
securities listed and make interest and principal payments.
The Board shall decide the amount of each issue, the issue
price of the shares or share equivalents and the subscription
price of the shares issued directly or indirectly on conversion,
redemption or exercise of share equivalents – in both cases
with or without a premium –, the cum-dividend or cum-inter-
est date, which may or may not be retroactive, the terms and
conditions of payment of the subscription price and, where
appropriate, the life and exercise price of warrants or the terms
and conditions of exchange, conversion, redemption or exer-
cise of share equivalents.
The Board of Directors shall have full powers, including the
power of delegation as permitted by the applicable laws
and regulations, to:
• Determine, pursuant to the law, the method to be used to
adjust the exchange, conversion, redemption or exercise
price of share equivalents, including warrants.
• Determine the method of dealing with fractions of shares
created on exchange, conversion, redemption or exercise
of share equivalents, particularly warrants.
• Determine any and all special provisions to be included in
the issue agreement.
• Provide for the temporary suspension of the rights attached
to the share equivalents for a period not exceeding the
maximum period specified in the applicable laws and
regulations.
• Set the terms and conditions of any allotment of stand-alone
warrants issued without consideration and the procedures
for the buyback or exchange of shares and share equivalents,
including warrants, or the allotment of shares in repayment
of share equivalents.
• Set the terms and conditions of purchase or exchange, at
any time or during fixed periods, of shares and share equiv-
alents issued or to be issued pursuant to this resolution.
• Charge any and all transaction or other costs against the
related premiums.
• Protect the rights of holders of securities exchangeable,
convertible, redeemable or otherwise exercisable for shares,
in accordance with applicable laws and regulations.
EIGHTEENTH RESOLUTION - AUTHORIZATION TO ISSUE SHARES AND SHARE EQUIVALENTS WITHOUTPRE-EMPTIVE SUBSCRIPTION RIGHTS FOR EXISTINGSHAREHOLDERS
The Extraordinary General Meeting, having considered the
reports of the Board of Directors and the Auditors, resolves,
in accordance with Articles L.225-127, L.225-129, L.225-129-2,
L.225-135, L.225-136 and L.228-92 et seq. of the French
Commercial Code:
1) To terminate, with immediate effect, the powers granted
in the 32nd resolution of the Extraordinary General Meeting of
16 March 2005.
2) To give the Board of Directors a 26-month authorization to
increase the Company’s share capital on one or more occasions,
by the amounts and at the times that it considers appropri-
ate, by issuing, in France and abroad, shares and securities
exchangeable, convertible, redeemable or otherwise exercis-
able for shares or debt securities – including stand-alone
warrants issued with or without consideration and rights – to
be paid up in cash or by capitalizing debt. Securities other
than shares may be denominated in euros, in foreign currency
or in any monetary unit determined by reference to a basket
of currencies. In accordance with Article L.228-93 of the French
Commercial Code, this resolution may be used to carry out
one or several issues.
3) That shareholders shall not have a pre-emptive right to
subscribe for the shares or share equivalents issued pursuant
to this resolution.
This resolution may not be used to issue preferred shares
or securities exchangeable, convertible, redeemable or
otherwise exercisable for preferred shares.
4) That the aggregate par value of shares issued pursuant to
this resolution, either directly or on exchange, conversion,
redemption or exercise of share equivalents, shall not exceed
€20 million, less the amount of any issues carried out pursuant
to the 21st resolution. However, this ceiling shall not include
the effect of any adjustments to be made to protect the
rights of holders of share equivalents pursuant to the law.
Share issues carried out pursuant to this resolution will be
deducted from the blanket ceiling of €75 million set in the
27th resolution.
5) To give the Board of Directors discretionary powers, in
accordance with the law, to determine whether to offer exist-
ing shareholders a priority right to subscribe for the issue –
which may or may not include a priority right to subscribe for
any securities not taken up by other shareholders – for a peri-
od at least equal to the minimum period specified by decree,
and to set the terms and conditions of exercise of this right in
accordance with Article L.225-135 of the French Commercial
Code.
If the issue is not taken up in full by shareholders, the Board
may take one or more of the following courses of action, in
the order that it considers appropriate:
• Limit the issue to the amount of the subscriptions received,
provided that at least three-quarters of the original issue
has been taken up, in accordance with the law.
• Freely allocate all or some of the unsubscribed shares or
share equivalents.
• Offer all or some of the securities for subscription by the
public.
6) That this resolution shall automatically entail the waiver of
shareholders’ pre-emptive rights to subscribe for the shares
to be issued on exchange, conversion, redemption or exer-
cise of share equivalents.
7) That the price of each share issued directly or indirectly
pursuant to this resolution, after taking into account the issue
price of any stand-alone warrants or rights, shall not be less
than the minimum price stipulated in the laws and regulations
applicable on the issue date, whether or not the new shares
rank pari passu with existing shares.
This resolution may be used to issue bonds or notes with an
equity component, or securities exchangeable, convertible,
redeemable or otherwise exercisable for bonds or notes
with an equity component, including dated or perpetual
senior or junior bonds or notes, denominated in euros, in
foreign currency or in any monetary unit determined by
reference to a basket of currencies, provided that the life of
dated bonds or notes issued pursuant to this resolution shall
not exceed twenty years. The aggregate nominal amount of
debt securities issued pursuant to this resolution shall not
exceed €300 million or the equivalent in foreign currency or
monetary units on the date when the issue is decided. Said
aggregate nominal amount shall be deducted from the
blanket ceiling on debt issues authorized by this Meeting.
If this resolution is used to issue debt securities, the Board of
Directors shall have full powers to decide whether such debt
securities will be subordinated or not and to set the interest
rate, the life of the securities, the fixed or variable redemption
price – which may or may not include a premium –, the terms
and conditions of their repayment and the manner in which
the securities will be exchangeable, convertible, redeemable
or otherwise exercisable for shares. Authority to act on this
resolution may be delegated by the Board, subject to com-
pliance with the applicable laws and regulations.
The Board of Directors shall have full powers to use this author-
ization, including the power of delegation provided for by law
and by the Company’s bylaws. In particular, the Board shall
have full discretionary powers to set the terms and condi-
tions of the issue(s), place on record the capital increase(s)
resulting from the use of this authorization, amend the bylaws
to reflect the new capital, set the subscription date or period
and the terms and conditions of subscription, decide the
characteristics of the securities to be issued, enter into any
and all underwriting or other agreements and generally carry
out any and all formalities required to place the issues, have
the securities listed and make interest and principal payments.
The Board shall decide the amount of each issue, the issue
price of the shares or share equivalents – which may or may
not include a premium –, the cum-dividend or cum-interest
date, which may or may not be retroactive, the terms and
conditions of payment of the subscription price and, where
appropriate, the life and exercise price of warrants or the terms
and conditions of exchange, conversion, redemption or
exercise of share equivalents.
The Board of Directors shall have full powers, including the
power of delegation as permitted by the applicable laws and
regulations, to:
• Determine, pursuant to the law, the method to be used to
adjust the exchange, conversion, redemption or exercise
price of share equivalents, including warrants.
• Determine any and all special provisions to be included in
the issue agreement.
• Provide for the temporary suspension of the rights attached
to the share equivalents for a period not exceeding the
maximum period specified in the applicable laws and
regulations.
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2006 Annual Report // 175
Additionalinformation
• Set the terms and conditions of purchase or exchange,
at any time or during fixed periods, of shares and share
equivalents issued or to be issued pursuant to this reso-
lution.
• Charge any and all transaction or other costs against the
related premiums.
• Protect the rights of holders of securities exchangeable,
convertible, redeemable or otherwise exercisable for shares,
in accordance with applicable laws and regulations.
NINETEENTH RESOLUTION - AUTHORIZATION TO ISSUE SHARES AND SHARE EQUIVALENTS AND FREELY SET THE ISSUE PRICE
The Extraordinary General Meeting, having considered the
reports of the Board of Directors and the Auditors, resolves,
in accordance with Article L.225-136-1, of the French Commercial
Code and within the limit of 10% of the Company’s capital in
any given year:
1) To terminate, with immediate effect, the powers granted
in the 33rd resolution of the Extraordinary General Meeting of
16 March 2005.
2) To give the Board of Directors a 26-month authorization
to issue shares or securities exchangeable, convertible,
redeemable or otherwise exercisable for shares or debt secu-
rities based on market opportunities and to determine the
issue price in the case of a public placement without pre-emp-
tive subscription rights provided that the amount received
by the Company for each share issued directly or on exchange,
conversion, redemption or exercise of share equivalents shall
be at least equal to its par value. As required by law, if this
resolution is used, the Board shall issue a report – certified by
the Auditors – describing the terms and conditions of the issue
and its impact on the situation of existing shareholders.
TWENTIETH RESOLUTION - AUTHORIZATION TO INCREASETHE COMPANY’S CAPITAL BY CAPITALIZING RESERVES,PROFIT OR PREMIUMS
The Extraordinary General Meeting, having considered the
report of the Board of Directors, resolves, in accordance with
Articles L.225-129, L.225-129-2 and L.225-130 of the French
Commercial Code:
1) To terminate, with immediate effect, the powers granted
in the 34th resolution of the Extraordinary General Meeting of
16 March 2005.
2) To give the Board of Directors a 26-month authorization
to increase the Company’s capital on one or more occasions,
in the amounts and at the times that it considers appropri-
ate, by issuing bonus shares or by increasing the par value of
existing shares, to be paid up by capitalizing reserves, profit
or premiums.
3) That any rights to fractions of shares shall not be tradable
or transferable, and that the corresponding shares will be sold,
with the proceeds from the sale allocated among the holders
of rights to fractions of shares within the period specified in a
decree of the French Council of State.
4) That the aggregate amount by which the capital may be
increased pursuant to this resolution shall not exceed €32 mil-
lion, to be deducted from the blanket ceiling of €75 million
set in the 27th resolution.
5) To give the Board of Directors full powers to use this author-
ization and to do everything necessary to permit the issue of
bonus shares or an increase in the par value of existing
shares in accordance with the law and the Company’s bylaws.
Authority to act on this resolution may be delegated by the
Board, subject to compliance with the applicable laws and
regulations and the Company’s bylaws.
TWENTY-FIRST RESOLUTION - AUTHORIZATION TO ISSUESHARES OR SHARE EQUIVALENTS IN CONNECTION WITHA TAKEOVER BID INITIATED BY THE COMPANY
The Extraordinary General Meeting, having considered the
reports of the Board of Directors and the Auditors, resolves,
in accordance with Articles L.225-148 and L.225-129 to
L.225-129-6 of the French Commercial Code:
1) To terminate, with immediate effect, the powers granted
in the 35th resolution of the Extraordinary General Meeting of
16 March 2005.
2) To give the Board of Directors a 26-month authorization
to issue shares, other equity securities, debt securities
exchangeable, convertible, redeemable or otherwise exercis-
able for shares or debt securities and stand-alone warrants in
payment for shares of another company listed on a regulated
market – as defined in Article L.225-148 of the French
Commercial Code – that are tendered to a public exchange
or cash-and-exchange offer initiated by the Company, and to
cancel, if necessary, existing shareholders’ pre-emptive rights
to subscribe to the issue.
3) That this resolution shall automatically entail the waiver of
shareholders’ pre-emptive rights to subscribe for shares to be
issued on exchange, conversion, redemption or exercise of
share equivalents.
4) That the aggregate par value of shares issued pursuant to
this resolution, either directly or on exchange, conversion,
redemption or exercise of share equivalents, shall not exceed
€20 million, less the par value of any shares issued pursuant
to the 18th resolution. However, this ceiling shall not include
the effect of any adjustments to be made to protect the
rights of holders of share equivalents pursuant to the law.
Share issues carried out pursuant to this resolution will be
deducted from the blanket ceiling of €75 million set in the
27th resolution.
5) That the price of each share issued directly or indirectly pur-
suant to this resolution, after taking into account the issue price
of any stand-alone warrants or rights, shall not be less than the
minimum price stipulated in the laws and regulations applica-
ble on the issue date, whether or not the new shares rank
pari passu with existing shares.
The Extraordinary General Meeting gives full powers to the
Board of Directors to carry out the public offers referred to
above and to issue shares or share equivalents in payment for
the shares or other securities tendered to the offer, to set the
exchange ratio and to place on record the number of securi-
ties tendered to the offer. Authority to act on this resolution
may be delegated by the Board, subject to compliance with
the applicable laws and regulations and the Company’s bylaws.
TWENTY-SECOND RESOLUTION - AUTHORIZATION TO ISSUE SHARES AND SHARE EQUIVALENTS IN PAYMENTFOR THE SECURITIES OF ANOTHER COMPANY
The Extraordinary General Meeting, having considered the
reports of the Board of Directors and the Auditors, resolves,
in accordance with Article L.225-147, paragraph 6, of the
French Commercial Code:
1) To terminate, with immediate effect, the powers granted
in the 36th resolution of the Extraordinary General Meeting of
16 March 2005.
2) To give the Board of Directors a 26-month authorization to
issue shares, other equity securities, securities exchangeable,
convertible, redeemable or otherwise exercisable for shares
or other securities in payment for the shares or share equiva-
lents of another company in a transaction not governed by
Article L.225-148 of the French Commercial Code, provided
that the aggregate par value of shares issued directly or indi-
rectly pursuant to this authorization shall not exceed 10% of
the Company’s capital at the issue date. In accordance with
the law, the aggregate value of shares or other securities
issued pursuant to this resolution shall be based on the values
reflected in the report of the Merger Auditor(s) provided for
in Article L.225-147 of the Code.
3) That shareholders shall not have a pre-emptive right to
subscribe for the shares or share equivalents issued pursuant
to this resolution, or the shares to be issued on conversion,
redemption or exercise of said share equivalents.
The price of each share issued directly or indirectly pursuant
to this resolution shall not be less than the minimum price
stipulated in the laws and regulations applicable on the issue
date, whether or not the new shares rank pari passu with
existing shares.
The Board of Directors shall have full powers to approve the
value attributed to the shares or other securities to be
acquired, set the exchange ratio and any cash payment, place
on record the exchange, charge any costs and expenses
against the issue premium, increase the capital, amend the
bylaws to reflect the new capital, and generally take any and
all measures, enter into any and all agreements and carry out
any and all formalities required to permit the exchange. The
balance of the issue premium, after deducting any and all costs
and expenses, shall be allocated by decision of the Board or
of the shareholders in General Meeting.
TWENTY-THIRD RESOLUTION - AUTHORIZATION TO GRANT STOCK OPTIONS TO EXECUTIVE DIRECTORSAND/OR EMPLOYEES OF GROUP COMPANIES
The Extraordinary General Meeting, having considered the
reports of the Board of Directors and the Auditors, resolves,
in accordance with Articles L.225-177 et seq. of the French
Commercial Code, to give the Board of Directors a 26-month
authorization to grant stock options, on one or several occa-
sions, to all or some of the employees and executive directors
of the Company and related companies and intercompany
partnerships as defined in Article L.225-180 of the French
Commercial Code, subject to the limits specified in the appli-
cable legislation. This resolution may be used to grant:
• Options to subscribe for new shares to be issued by the
Company, and/or;
• Options to purchase existing shares bought back by the
Company in accordance with the law.
The total number of options outstanding at any given time
shall not be exercisable for a number of shares in excess of
the legal limit or the blanket ceiling set in the 27th resolution.
This resolution automatically entails the waiver, by existing
shareholders, of their pre-emptive right to subscribe for the
shares to be issued upon exercise of the options.
The option exercise price shall be set by the Board of Directors
at the time of grant, within the limits and in the manner pre-
scribed by law.
The options shall have a ten-year life.
The shares issued upon exercise of the options shall carry
dividend and voting rights from the date of issue.
The Extraordinary General Meeting gives the Board of
Directors full powers to use this resolution within the above
limits and the limits specified in the Company’s bylaws.
Authority to act on this resolution may be delegated by the
Board, subject to compliance with the applicable laws and
regulations and the Company’s bylaws. In particular, the Board
of Directors shall have full powers to:
• Set the option grant dates.
• Set the terms and conditions of the options – which may
include a lock-up clause preventing the sale of all or some
of the shares acquired upon exercise of the options within
a specified period –, the option exercise price, the list of
grantees and the number of shares that may be acquired by
each grantee.
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2006 Annual Report // 177
Additionalinformation
• Set the terms and conditions of exercise of the options,
including the exercise period, and decide to allow for the
temporary suspension of the right to exercise the options
in accordance with the applicable laws and regulations.
• Decide the basis for adjusting the price and the number of
shares to be acquired upon exercise of the options in the
cases provided for by law.
• Determine the deadline for exercising the options, which
may not be more than ten years after the grant date, and
the exercise period.
• Carry out any and all formalities to effect the capital
increase(s) that may result from the exercise of options
granted pursuant to this resolution.
• Amend the Company’s bylaws to reflect the new capital and
generally do everything necessary.
The Board of Directors shall report to each Annual General
Meeting on the transactions carried out pursuant to this
authorization.
This authorization supersedes, with immediate effect, the
authorization given in the 37th resolution of the Extraordinary
General Meeting of 16 March 2005.
TWENTY-FOURTH RESOLUTION - AUTHORIZATION TOINCREASE ISSUES OF SHARES AND SHARE EQUIVALENTSWITH OR WITHOUT PRE-EMPTIVE SUBSCRIPTION RIGHTS
The Extraordinary General Meeting, having considered the
reports of the Board of Directors and the Auditors, resolves,
in accordance with Article L.225-135-1 of the French Commercial
Code:
1) To terminate, with immediate effect, the powers granted
in the 38th resolution of the Extraordinary General Meeting of
16 March 2005.
2) To give the Board of Directors a 26-month authorization to
increase the number of shares or share equivalents offered in
the event that an issue of shares or share equivalents with or
without pre-emptive subscription rights is oversubscribed,
provided that the additional issue is decided within the peri-
od and for no more than the maximum amount prescribed by
the laws and regulations in force on the issue date (currently
thirty days from the close of the initial subscription period and
15% of the original issue) and the additional shares or share
equivalents are offered at the same price as the original issue.
3) That the aggregate par value of shares issued directly or
indirectly pursuant to this resolution will be deducted from the
blanket ceiling of €75 million set in the 27th resolution.
TWENTY-FIFTH RESOLUTION - AUTHORIZATION TO MAKESTOCK GRANTS
The Extraordinary General Meeting, having considered the
reports of the Board of Directors and the Auditors, resolves,
in accordance with Articles L.225-197-1 et seq. of the French
Commercial Code:
• To authorize the Board of Directors to grant new or existing
shares of the Company, on one or several occasions, to
selected qualifying employees and/or executive directors of
the Company and/or related companies and intercompany
partnerships as defined in Article L.225-197-2 of the French
Commercial Code.
• To give the Board of Directors full discretionary powers to
draw up the list of grantees, determine the number of grants
to be made to each grantee, set the terms and conditions
of grant and any related criteria, and make the grants
subject to vesting conditions based on the performance of
the Group or the grantee.
• That the total number of stock grants made pursuant to this
resolution shall not exceed 1% of the Company’s capital
as of the date of this Meeting, not including any additional
shares to be issued or allotted to protect the rights of
grantees in the case of any corporate actions carried out
during the vesting period. The aggregate par value of shares
issued pursuant to this resolution will be deducted from
the blanket ceiling set in the 27th resolution.
• That the stock grants shall be subject to a vesting period of
between two and four years, and that the vested shares shall
be subject to a lock-up period of between two and four
years.
• To authorize the Board of Directors to adjust the number of
stock grants in the case of any corporate actions carried
out during the vesting period in order to protect the rights
of grantees.
• That, if new shares are issued in respect of stock grants, said
shares shall be paid up by capitalizing reserves, profits or
premiums and existing shareholders shall automatically
waive their right to said reserves, profits or premiums; and
that the Board of Directors shall be authorized to carry out
said share issues.
This authorization is given for a period of 26 months and
supersedes, with immediate effect, the authorization given in
the 10th resolution of the Extraordinary General Meeting of
14 March 2006.
The Board of Directors shall have full powers to use this author-
ization, including the power of delegation provided for by law.
In particular, the Board of Directors shall have full discretionary
powers to decide the timing and the terms and conditions of
the grants, and – if new shares are issued in respect of stock
grants – the amount and origin of the reserves, profits and/or
premiums to be capitalized, to increase the capital, to enter
into any and all agreements and to carry out any and all for-
malities to permit the grants, to place on record any capital
increases(s) resulting from the use of this resolution and to
amend the Company’s bylaws to reflect the new capital.
TWENTY-SIXTH RESOLUTION - AUTHORIZATION TO CARRY OUT AN EMPLOYEE SHARE ISSUE
The Extraordinary General Meeting, having considered
the reports of the Board of Directors and the Auditors,
resolves, in accordance with Articles L.443-1 et seq. of the
French Labor Code and Articles L.225-138 et seq., L.225-129-2
and L.225-129-6 of the French Commercial Code:
1) To terminate, with immediate effect, the powers granted
in the 39th resolution of the Extraordinary General Meeting of
16 March 2005.
2) To give the Board of Directors a 26-month authorization to
(i) issue shares or share equivalents to employees of
the Company and related companies as defined in Article
L.225-180 of the French Commercial Code who are members
of an employee stock ownership plan, for subscription either
directly by the employees concerned or through a corporate
mutual fund, and (ii) grant shares or share equivalents to said
employees without consideration, within the limits specified
in Articles L.443-5 et seq. of the French Labor Code, entail-
ing the waiver by existing shareholders of all rights to said
shares and share equivalents.
3) That the aggregate par value of shares issued pursuant to
this resolution, either directly or on exchange, conversion,
redemption or exercise of share equivalents, shall not exceed
€3 million. However, this ceiling shall not include the effect of
any adjustments to be made to protect the rights of holders
of share equivalents pursuant to the law. Share issues carried
out pursuant to this resolution will be deducted from the blan-
ket ceiling of €75 million set in the 27th resolution.
4) That the issue price of shares issued pursuant to this
resolution will be determined in accordance with Article
L.443-5 of the French Labor Code.
5) That this resolution entails the waiver by existing share-
holders of their pre-emptive right to subscribe for shares
issued pursuant to this resolution and Article L.444-3 of the
French Labor Code to employees of the Company and
related companies as defined in Article L.225-180 of the French
Commercial Code who are members of an employee stock
ownership plan.
The Ordinary General Meeting gives full powers to the
Board of Directors to use this authorization on one or several
occasions, subject to the above conditions and limits, and to
set the terms and conditions of the issues. Authority to act
on this resolution may be delegated by the Board, subject to
compliance with the applicable laws and regulations and the
Company’s bylaws. In particular, the Board of Directors shall
be authorized to:
• Decide to issue shares or share equivalents either directly
to employees or through a corporate mutual fund.
• Determine the characteristics, amounts, terms and conditions
of the issues, including the cum-interest or cum-dividend
date and the terms and conditions of payment of subscrip-
tion monies.
• Set the subscription price of the new shares in accordance
with the provisions of the law.
• Set the opening and closing dates of the subscription period.
• Set the period allowed for the payment of subscription
monies, which shall not exceed the maximum period spec-
ified in the applicable laws and regulations, and the mini-
mum service period, if any, qualifying employees to subscribe
for the shares or share equivalents and to receive a match-
ing payment from the Company.
• Amend the Company’s bylaws to reflect the new capital and
generally do everything necessary; charge the share issue
costs against the related premium and deduct from the pre-
mium the amount necessary to increase the legal reserve
to 10% of the new capital after each issue.
TWENTY-SEVENTH RESOLUTION - BLANKET CEILING ON SHARE ISSUES
The Extraordinary General Meeting, having considered the
reports of the Board of Directors and the Auditors, resolves,
in accordance with Article L.225-129-2 of the French Commercial
Code, to set a blanket ceiling of €75 million on the aggregate
par value of share issues carried out directly or indirectly under
the authorizations given to the Board of Directors in the 17th,
18th, 19th, 20th, 21st, 23rd, 24th, 25th and 26th resolutions, before
taking into account any shares to be issued in accordance with
the applicable laws and regulations to protect the rights of
holders of share equivalents. Within this blanket ceiling:
a) Issues with pre-emptive subscription rights pursuant to the
17th resolution, plus any additional shares and share equiva-
lents issued pursuant to the 24th resolution, shall not have the
effect of increasing the capital by more than €20 million.
b) Issues without pre-emptive subscription rights pursuant to
the 18th, 19th and 21st resolutions, plus any additional shares
and share equivalents issued pursuant to the 24th resolution,
shall not have the effect of increasing the capital by more than
€20 million.
c) Share issues (or increases in the par value of the shares) paid
up by capitalizing reserves, profits or premiums pursuant to
the 20th resolution shall not have the effect of increasing the
capital by more than €32 million.
d) Share issues in payment of the securities of another com-
pany pursuant to the 22nd resolution shall not have the effect
of increasing the capital by more than the maximum amount
prescribed by law.
178
2006 Annual Report // 179
Additionalinformation
e) Share issues upon exercise of stock options pursuant to
the 23rd resolution shall not have the effect of increasing the
capital by more than the maximum amount prescribed by law,
determined separately from the ceiling specified in b) above.
f) Stock grants made pursuant to the 25th resolution shall not
have the effect of increasing the capital by more than the
maximum amount prescribed by law.
g) Employee share issues pursuant to the 26th resolution shall
not have the effect of increasing the capital by more than
€3 million.
The above limits within the blanket ceiling do not take into
account the effect of any adjustments to be made to protect
the rights of holders of share equivalents pursuant to the law.
TWENTY-EIGHTH RESOLUTION - AUTHORIZATION TO CANCEL SHARES
The Extraordinary General Meeting, having considered the
reports of the Board of Directors and the Auditors, resolves,
in accordance with Articles L.225-209 et seq. of the French
Commercial Code, to authorize the Board of Directors to
reduce the capital on one or several occasions by canceling
all or some of the shares held or bought back by the Company.
The Board of Directors shall have full discretionary powers to
decide the amount(s) and timing of such cancellations, with-
in the legal limit (currently 10% of the Company’s capital per
24-month period). The share capital used to calculate this 10%
limit shall be adjusted for the effects of any corporate actions
carried out after this Meeting.
This authorization will expire at the end of a period of eight-
een months from the date of this Meeting.
The Extraordinary General Meeting gives full powers to the
Board of Directors – including the power of delegation – to:
• Cancel shares and reduce the capital accordingly.
• Determine the method and the final amount of the capital
reduction and place the capital reduction on record.
• Charge the difference between the carrying amount of the
canceled shares and their par value to any reserve account
or to additional paid-in capital.
• Amend the bylaws to reflect the new capital and generally
do everything necessary in accordance with the provisions
of the law applicable when this resolution is used.
TWENTY-NINTH RESOLUTION - POWERS
The Extraordinary General Meeting, having considered the
report of the Board of Directors, gives full powers to the
bearer of a copy or extract of the minutes of this Meeting to
carry out all legal registration, filing, announcement and other
formalities.
180
INFORMATION INCORPORATED BY REFERENCE
The following information is incorporated by reference in theregistration document:
• The business report, the consolidated financial statements
of Club Méditerranée and the Auditors’ report on the con-
solidated financial statements for fiscal 2004, as presented
on pages 15 to 27, 43 to 81 and 78 of the registration
document filed with the Autorité des Marchés Financiers on
21 February 2005 under no. D.05-133.• The business report, the consolidated financial statements
of Club Méditerranée and the Auditors’ report on the con-solidated financial statements for fiscal 2005, as presentedon pages 60 to 78, 91 to 126 and 123 of the registrationdocument filed with the Autorité des Marchés Financiers on23 February 2006.
The information in these two registration documents not incor-
porated by reference in this registration document has been
replaced and/or updated by the information in this registra-
tion document where appropriate.
The two reference documents referred to above can be
downloaded from the Club Méditerranée website
(www.clubmed.com) and the Autorité des Marchés Financiers
website (www.amf-france.org).
STATUTORY AUDITORS
• Ernst & Young Audit SAS, Faubourg de l’Arche 92037 Paris-La Défense Cedex, represented by Pascal Macioce. Ernst &Young Audit’s appointment was renewed at the AnnualGeneral Meeting of 13 March 2001 for a period of six yearsexpiring at the Annual General Meeting to be called toapprove the fiscal 2006 financial statements. The firm wasappointed for the first time at the Annual General Meetingof 30 April 1981. Renewal of its current appointment will beproposed at the Annual General Meeting of 8 March 2007.• Deloitte & Associés, 185, avenue Charles de Gaulle 92524Neuilly-sur-Seine Cedex, represented by Alain Pons andDominique Jumaucourt. The firm was appointed for the firsttime at the Annual General Meeting of 17 March 2003, for theremainder of its predecessor’s term expiring at the AnnualGeneral Meeting to be called to approve the fiscal 2006 finan-cial statements. Renewal of the firm’s appointment will beproposed at the Annual General Meeting of 8 March 2007.
SUBSTITUTE AUDITORS
• François Carrega, 13, boulevard des Invalides 75007 Paris.François Carrega was appointed for the first time at the AnnualGeneral Meeting of 13 March 2001 for a period of six yearsexpiring at the Annual General Meeting to be called toapprove the fiscal 2006 financial statements. Renewal of hisappointment will be proposed at the Annual General Meetingof 8 March 2007.• Beas, 185, avenue Charles de Gaulle 92524 Neuilly-sur-SeineCedex. The firm was appointed for the first time at the AnnualGeneral Meeting of 17 March 2003 for the remainder of itspredecessor’s term expiring at the Annual General Meetingto be called to approve the fiscal 2006 financial statements.Renewal of its appointment will be proposed at the AnnualGeneral Meeting of 8 March 2007.
PERSON RESPONSIBLE FOR INFORMATION
• Michel Wolfovski,Executive Vice President and Chief Financial Officer, 11, rue de Cambrai - 75019 Paris. Phone: + 33 (1) 53 35 34 00
VICE PRESIDENT, INVESTOR RELATIONS AND FINANCIAL COMMUNICATION
• Caroline Bruel 11, rue de Cambrai - 75019 Paris. Phone: + 33 (1) 53 35 30 75 - Fax: + 33 (1) 53 35 32 73E-mail: investor.relations@clubmed.com
PERSON RESPONSIBLE FOR THE REGISTRATION DOCUMENT
“To the best of our knowledge, having taken all reasonablecare to ensure that such is the case, the information containedin this registration document is in accordance with the factsand includes all the information needed by investors to assessthe Group’s assets and liabilities, business, financial position,results and outlook. No information has been omitted thatwould be likely to affect its import. We obtained a statementfrom the Statutory Auditors at the end of their engagementaffirming that they had examined, in accordance with the pro-fessional standards and guidelines applicable in France, theinformation about the financial position and the accounts con-tained in this reference document and had read the entirereference document.”
The Chairman and Chief Executive OfficerHenri Giscard d’Estaing
This registration document was filed with the Autorité des Marchés Financiers (AMF) on 14 February 2007 in accordancewith Article 212-13 of the AMF’s general regulations. It may be used in connection with a financial transaction providedthat it is accompanied by an information memorandum approved by the AMF.
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