Kuoni Market Report 2009 by Kuoni Travel Holding Ltd.

M ar k et r eport 2009

a long history forms character â&#x20AC;&#x201C; in people and in companies. Over the last 104 years, Kuoni has changed and modernised, and continually found new inspiration for innovative ideas. But throughout, it has stayed true to its ambitious mission of putting the individual desires and requirements of the most demanding travellers and the >authenticity< of experiences at the centre of all it does. It is this that has earned Kuoni its unique image.

est.

1906

m ar k et r eport 2009

M ar k et r eport 2009

4 5 6 8

Kuoni Group facts and figures Information for investors A brief portrait of the Kuoni Group Message to shareholders

Organisation 16 18 20 21 22

Business model Board of Directors Group structure The new group organisation Group Executive Board

Reporting 30 32 39 40 43 44 45 46 47 48 49 50 51 52 55

2009 â&#x20AC;&#x201C; the year of financial and economic crisis and pandemic Kuoni Group At a glance | Kuoni Group Switzerland At a glance | Switzerland Southern Europe At a glance | Southern Europe Asia At a glance | Asia Scandinavia At a glance | Scandinavia United Kingdom and Benelux At a glance | United Kingdom and Benelux Destinations At a glance | Destinations

58 60 62 66 68 70 72

Corporate & Business Development Information Technology Corporate Responsibility Human Resources Addresses Kuoni glossary Agenda 2010

Kuoni Group – facts and figures

CHF MILLION

2009

2008

Turnover Total Northern Region Scandinavia UK & Benelux Total Southern Region Switzerland Southern Europe Asia Destinations Corporate

3 894 1 664 1 012 652 1 462 821 374 267 894 0

4 855 2 017 1 193 824 1 871 1 028 539 304 1 101 0

Earnings before interest and taxes (EBIT) Total Northern Region Scandinavia UK & Benelux Total Southern Region Switzerland Southern Europe Asia Destinations Corporate

15.1 14.5 5.3 9.2 33.5 1.5 6.1 25.9 15.5 – 48.4

150.4 61.2 29.0 32.2 80.8 39.4 18.9 22.5 38.5 – 30.1

1.6

151.0

Cash flow Investments in tangible and intangible assets Total assets Equity Equity ratio

46.7 44.2 1 852 592 32.0 %

108.7 59.5 1 728 606 35.1 %

Kuoni Economic Profit (KEP) Return on invested capital (ROIC)

– 64.3 0.1 %

71.9 18.8 %

9 070

9 797

Net result

Average number of employees (full-time equivalent)

Group turnover of CHF 3 894 million down 19.8 % on the prior year (2008: CHF 4 855 million)

EBIT is at CHF 15.1 million (2008: CHF 150 million)

EBIT margin is 0.4 % (2008: 3.1 %)

Net result of CHF 1.6 million (2008: CHF 151 million)

Cash flow from operating activities of CHF 46.7 million (2008: CHF 109 million)

ROIC is 0.1 % (2008: 18.8 %)

Year-end equity of CHF 592 million and equity ratio of 32.0 %

M a r k et R eport 2009

Information for investors

PERFORMANCE OF KUONI SHARE (CHF)

KUONI, SPI

800 700 600 500 400 300 200 100 0 Jan

Feb

Mar

Apr

May

Jun

Jul

Aug

Sep

Oct

Nov

Dec

Jan

Feb

Mar

Apr

May

Jun

Jul

Aug

Sep

2008

Net result Equity Dividend Stock market prices

per registered share A per registered share B per registered share A per registered share B per registered share A per registered share B per registered share A per registered share B per registered share B

Annual trading volume in CHF million Stock market capitalisation as at 31 December in CHF million 1

Dividend-Proposal of the Board of Directors to the Annual General Meeting of Shareholders. Subject to definitive approval by the Annual General Meeting of Shareholders.

Nov

Dec

2009

CHF

Cash flow

Oct

high low at year-end

2009

2008

3.26 16.31 0.02 0.08 40.67 203.37 1.601 8.001 387 253 349 697 1 063

7.60 38.01 10.54 52.68 41.74 208.70 2.00 10.00 616 290 360 1 447 1 097

The Kuoni Group – a brief portrait The Kuoni Group is one of the world’s leading globally-active leisure travel organisations, with a worldwide workforce of 9 070 (full-time-equivalent) employees and consolidated turnover for 2009 of CHF 3 894 million. Kuoni’s activities are focused on its core leisure travel and destination management businesses. The head office of Kuoni Travel Holding Ltd. is in Zurich, Switzerland, where Alfred Kuoni founded the company back in 1906. The Kuoni Group has steadily and systematically developed its position in the world travel market over the years, and has

Los Angeles

Las Vegas

St. Louis

branch operations today in more than 40 countries in Europe, Asia, Africa, Australia and North America. In the premium and specialist segment, Kuoni is the world’s number-one provider. Kuoni aims to be not only the leading but also the most successful and most internationally-established tourist travel company in this business segment. The Kuoni Group was named “World’s Leading Tour Operator” at the annual World Travel Awards for eleven years in a row.

New York

Atlanta Orlando Miami

Honolulu

Windhoek

Our Group

Head Office, Leisure Travel, Destination Management, Sales Office

Leisure Travel Destination Management (DM) Sales Office (DM)

As at 1 March 2010

Cape Town

M a r k et R eport 2009

Helsinki

Oslo Edinburgh

Stockholm

Copenhagen

Liverpool London Godalming Dorking

Moscow

Hamburg

Amsterdam Berlin Cologne Ghent Prague Frankfurt Paris Munich Vienna Geneva Budapest Zurich Lyon Innsbruck Milan Nice Genoa

Madrid

Barcelona

Rome

Sapporo Sendai

Beijing

Seoul

Dubai

New Delhi Mumbai Goa Bangalore Kochi Trivandrum

Taipei Guangzhou Hong Kong Vientiane Yangon Bangkok

Kathmandu

Abu Dhabi

Muscat

Tokyo Osaka Nagoya Fukuoka Shanghai

Hyderabad Chennai Colombo

Phnom Penh Ho Chi Minh City Kuala Lumpur Singapore

Nairobi Mombasa Arusha

Jakarta

Denpasar

Gold Coast Sydney Melbourne

Dear shareholder,

When we are travelling, every sight, every encounter and every conversation triggers something special. We have experiences with other people, with nature, with unusual things in special places. We see people, landscapes and objects in a different light. We are fascinated, amazed, happy and overwhelmed. Long after the journey has ended, it is these perfect moments that we remember. Kuoni formulated its “Perfect Moments” core value in 2008, and in 2009 we worked even harder on the concept. We want to make it possible for all our customers and for you, our valued shareholders, to enjoy these perfect moments in all their different facets whenever you travel with Kuoni. Meanwhile, 2009 also found us working very hard and with great dedication in an extremely difficult economic and social environment to set a successful course for the future of the Kuoni Group. In 2008, Kuoni initiated the most extensive changes in its history. Despite the worst global financial and economic crisis in decades, Kuoni accelerated the pace of change in 2009. We have acted anti-cyclically and proactively. We have used 2009 as an opportunity to ask ourselves even tougher questions and to analyse our organisation so that we could make sound decisions and take sustainable action. The aim is to profit even more in 2010 and 2011 from the expected economic upswing. In order to cut expenditure, we launched an extra ordinary investment and cost-reduction programme at the end of January 2009. This involves a total of CHF 106 million of investment over three-years. Key initiatives were launched in electronic distribution channels, global marketing and branding, as well as on measures to increase our employees’ skills and efficiency. CHF 30 million were spent on these areas during the year under review. As part of this ambitious program, a fundamental reorganisation of the Group’s structure was announced at the end of September 2009. This saw Kuoni moving from a decentralised to

a functional global organisational structure. The new organisation has a twin focus: marketing and sales on one side, and a new global Procurement and Production Unit on the other. This structure will help improve results by creating substantial additional buying power and a single-minded sales focus in all our core markets from 2010 onwards. The new group structure will also bring cost savings and further internationalise products and services. This reorganisation will be finished by the middle of 2010. The changes are reflected in our new, more transparent reporting structure. Divisions Market Region North and South replace the previous Style and Smart Strategic Business Divisions. Division Destinations (destination management) remains in place. We explain the new group structure in more detail on page 21. The global financial and economic crisis that became apparent in the fourth quarter of 2008 hit the entire tourism industry hard. Widespread recession, often exacerbated by local property crises, created a negative mood among consumers. Demand for holidays fell sharply. As a consequence customers in virtually all markets changed their booking habits. Many made the decision to book a holiday later than in previous years, and travelled at short notice. The strategic decision to sell Edelweiss Air in 2008 had a positive effect on 2009 results by reducing our exposure to flight risk. As a result of the crisis, some currencies lost significant value against the Swiss Franc. These currency fluc- tuations had a negative translation effect on results. The most important currencies for Kuoni, the British Pound (– 14.8 %), the Swedish Krona (– 13.6 %), the Norwegian Krona (– 10.3 %), the Euro (–4.8 %) and the Indian Rupee (– 9.9 %), all fell substantially against the Swiss Franc in 2009. Only the US dollar maintained its value at the previous year’s level.

M a r k et R eport 2009

pet er rot h w ell

henning boysen

Chief Executive Officer

Chairman of the Board of Directors

2009 was also the year in which the world was confronted with its first pandemic for many years. “Swine flu” broke out in Mexico in April 2009. It quickly spread across all continents, prompting the World Health Organisation to give it the highest pandemic rating of level 6. In our highly mobile, highly mediadriven world, this first wave of swine flu led to great concern among consumers. Falling demand for travel, especially in Asia, Europe and the USA, had a strong negative effect on the tourism industry. Given the serious nature of these external influences, it was very pleasing to see the dedication and commitment with which management and employees have tackled our day-to-day operational challenges. During this period they also found the energy to work on the changes required to secure Kuoni’s future, despite short-time working and other measures to reduce costs. It was a very special effort of which we are proud. In view of the numerous adverse external influences, Kuoni Group managed to achieve a satisfactory result for 2009. The Group generated turnover of CHF 3 894 million. This represents a decline of 19.8 % on the previous year. Earnings before interest and taxes (EBIT) stood at CHF 15.1 million (– 89.8 %). Underlying EBIT – i.e. excluding the cost of the investment and cost-reduction programme – was CHF 45.3 million. We are pleased that we were able to conclude the challenging 2009 financial year with a positive EBIT operating result.

The gross profit for 2009 came to CHF 808 million (– 23.5 %), and the gross profit margin declined from 21.8 % in the previous year to 20.8 %. The Board of Directors recommends to the Annual General Meeting of Shareholders on 20 April 2010 that a dividend of CHF 1.60 per registered share A and CHF 8.00 per registered share B be distributed for the 2009 business year. This compensates for the reduced dividend paid in the previous year owing to the uncertain outlook. All of the Kuoni Group’s divisions contributed to its positive EBIT operating result, with particularly strong contributions from the Norwegian, Swedish, British, French and Indian markets and Destination Management.

Great efforts were made in all markets to reduce costs in response to the decline in turnover. The voluntary action taken in this regard by management and employees – including waiving salary and taking unpaid leave – was particularly noteworthy. The Executive Board and Board of Directors also forewent the equivalent proportion of their salaries and fees. In order to strengthen its financial situation and to be resourced for the future, Kuoni Travel Holding Ltd. carried out a CHF 200 million four-year bond with a 3 % coupon in 2009. The bonds were placed very quickly, reflecting the Kuoni Group’s solid financial situation.

The net result came to CHF 1.6 million. The significant decline compared with 2008 is mainly due to the lower operating result as well as the very low interest rates, which meant that Kuoni generated almost no financial income.

In the new Group structure, Division Market Region South includes Switzerland, France, Italy, Spain, India and Hong Kong/China. All of these markets were negatively affected by the financial and economic crisis and by swine flu.

2009’s turnover of CHF 3 894 million included organic turnover development of – 14.8 %, while acquisitions accounted for 0.7 % of turnover. The significant negative currency influence reduced turnover by 5.7 %.

The Swiss market generated turnover of CHF 821 million, representing a fall of 20.1 %. In addition to the external influences, the lower price levels resulting from renegotiated hotel prices, and the reduction in

M a r k et R eport 2009

flight capacities also contributed to a lower turnover than in the previous year. Helvetic Tours, the package holiday brand successfully repositioned in 2008, once again took on a pioneering role in the Swiss travel industry during the year under review. Its beach holiday catalogue for the 2009/10 winter season was the first to be published without a printed price list. Consumers benefit from the latest daily price when they book.

in view of the economic conditions was an excellent performance. During the year under review, the Playitas holiday complex on Fuerteventura, now under Scandinavian management, was converted into the most up-to-date sports and family resort on the Canary Islands. The number of guests, especially from Denmark, are increasing sharply. In Russia, the restructuring measures continued in 2009.

The UK and Benelux markets generated turnover of CHF 652 million (– 20.9 %) in 2009. The British Pound’s The Southern Europe unit includes France, Italy and steep decline against the Swiss Franc had the main Spain. Turnover declined by 30.5 % to CHF 374 million. negative impact on the result. In addition, the ongoing Here, a trend towards short and medium-haul routes financial and economic crises hit the UK hard. contributed to the fall in demand, Kuoni in these markets is a premium provider of long-haul travel. Division Destinations, which includes all destination management activities, produced turnover of CHF 894 million for 2009. This 18.8 % decline on the previThe Asian unit includes India, and Hong Kong/China. ous year is once again due mainly to the external influTurnover came to CHF 267 million (– 12.4 %). The ences already mentioned and the absence of turnover decline can be attributed mainly to the weakening of generated at Euro’08. In Asia especially, consumers the Indian Rupee against the Swiss Franc. Pleasingly, were greatly unsettled by the spread of the flu pandemturnover in local currency in the Indian market was ic, leading to significantly reduced demand. maintained at the previous year’s level. The renewed growth of VFS Global made a substantial contribution In 2009 the Kuoni Group made fewer acquisitions to this steady result. VFS Global provides embassies than in previous years. We continued to examine and authorities with comprehensive administrative various companies to augment our portfolio strategiservices for issuing visas. cally. However, during the economic crisis the price Division Market Region North includes the Scandina- expectations of sellers and buyers were often too far apart – because of generally healthy prior-year results. vian, British, Benelux and Russian markets as well as Nevertheless, we intend to continue Kuoni Group’s the airline Novair and the sports and family holiday worldwide expansion in 2010 and make some key resort Playitas. All the markets in this division were strategic acquisitions. also affected by the financial and economic crisis and by swine flu. One important acquisition was, however, made in Scandinavia (Sweden, Norway, Denmark, Russia, 2009. Kuoni Group bought a stake of around 32 % Novair and Playitas) generated turnover of CHF 1 012 in Et-china.com International Holdings Limited million. The 15.1 % decrease on the previous year is (Et-china), making Kuoni the biggest single shareholddue mainly to the negative influence of the Swedish er in the most important South Chinese travel agency. Krona and Norwegian Krona against the Swiss Franc. This investment marked the start of a long-term In local currency terms, the Swedish and Norwegian partnership for Kuoni in China, a market which is markets achieved record turnover once again, which expected to see very attractive growth. This expansion

of activities in China could be one of the biggest milestones in the more than 100 years of Kuoni’s history. The medium-term aim is to take over a majority stake in Et-china. On 1 January 2009, Kuoni took over the tour operator Cotravel in Switzerland. The company is one of Switzerland’s leading providers of high quality study trips accompanied by expert guides. On 1 December 2009, Kuoni took over all the travel activities of the Touring Club Schweiz (TCS). This includes ten travel agencies and the production of holidays under the “Reisen TCS” label for members of the leading Swiss motorists’ organisation. The efficient sale of travel products and services is one of the key challenges for a globally active company. During the year under review, we continued to develop our sales through direct customer contact. New Kuoni Flagship Stores were successfully opened in Zurich and Milan. Several high-street stores opened for business in the UK. Of the electronic distribution channels, the share of internet bookings was 16 %. Call centres share of bookings stood also at 16 % in 2009. 53 % of turnover was generated through direct customer access. Several websites were completely overhauled during the year based on common technology with structures adjusted to holidaymakers’ needs. A fresh new visual design, including photographs and videos, provides additional inspiration for potential travellers. A substantial portion of the resources allocated to the investment and cost reduction programme launched at the start of 2009 were invested in IT projects. The standardisation of our booking systems was continued during the year under review, leading to much lower operating costs. The global booking system was introduced in Spain early in November 2009. It will now be progressively extended to further Kuoni markets.

As a globally active company, Kuoni attaches particular importance to responsible, sustainable conduct. The Group-wide strategy on Corporate Responsibility was further developed throughout 2009 both in source markets and in destinations. Kuoni continues to tackle the key issues proactively. These include protecting children from sexual exploitation, ensuring fair working conditions, improving the water situation at destinations, and alleviating the consequences of climate change. To further these aims, Kuoni trains employees and service providers in destinations, and sensitises customers to these issues. During the year under review, for example, Kuoni supported an international expedition that travelled by inflatable boat from the source of the Ganges to its delta. The idea was to increase public awareness of environmental issues as well as to highlight the tourist potential of the regions along the river. The project is described in more detail in the separate Brand Report section of this annual report. We value the awards we receive as a form of appreciation and recognition for outstanding performance. The dozens of awards we have won in our individual markets encourage us in our day-to-day commitment and in our determination to focus Kuoni on success and sustainability. We managed to repeat this in 2009. At the 2009 Annual General Meeting of Shareholders, Chairman of the Board Henning Boysen was re-elected to the Board of Directors for another three years and confirmed as Chairman. Board Member David Schnell was also elected for a further term of three years. In January 2009, the experienced British tourism specialist Peter Rothwell began his job as the new Chief Executive Officer (CEO) of the Kuoni Group. In his first year he led Kuoni through a difficult period dominated by adverse external influences, ensuring that the company recorded a positive result at the end of 2009. He set priorities and developed with his colleagues on the Executive Board the new and forward-looking Group structure.

M a r k et R eport 2009

Reto Wilhelm, a Member of the Executive Board since 2002, left the company at the end of 2009 in connection with the reorganisation of the Kuoni Group. We thank Reto Wilhelm for his years of commitment to the company. He has contributed much to the successful development of his parts of the business.

and the most visually attractive annual report. These awards strengthen our resolve to build further on Kuoni’s successful position as a global leader in premium and specialist travel business and as an independent company. We hope that you will also find the 2009 annual report full of interesting, informative and attractive content. Our desire to bring you closer to “Perfect Moments” in 2010 is reflected in this year’s report. We are dedicated to this task and, in a time full of change we are determined to explain our decisions, our actions and our ideas about the future more effectively to you.

Leif Vase Larsen was appointed as a new Member of the Executive Board. He is in charge of Division Market Region North. The 46-year-old Dane has been with Kuoni for ten years, most recently leading the Scandinavia unit with great success.

We are convinced that the Kuoni Group will continue to meet the ongoing challenges and achieve our ambitious goals. With the fundamental reorganisation of the Kuoni Group for many years, we are investing in a sustainable and successful future for Kuoni.

We would also like to express our sincere thanks to you, our shareholders. We are grateful for your continued trust, loyalty and support in 2009. We can look back on an extraordinary year of crisis that presented challenges to you and to us on a daily basis. We are convinced that the reorganisation and restructering of the Kuoni Group carried out in 2009 will strengthen the company for the long term, facilitating further growth, efficient cost management and improved profitability.

Henning Boysen Chairman of the Board of Directors

The Board of Directors of Kuoni Group thanks Peter Rothwell, the Members of the Executive Board and all employees for their commitment during a particularly challenging year.

However, first priority in 2010 will be to overcome the continuing negative effects of the global financial and economic crisis. Current Group-wide booking levels for the tour operating business confirm the upward trend. We expect a further increase in demand for travel in the second half of 2010. In 2008, Kuoni’s annual report was completely re designed and adjusted to match Kuoni’s new corporate identity and corporate values. We have received a lot of praise for this from you the shareholders, which was very pleasing. What is more, for the first time Kuoni’s annual report won last year several major international and national awards as the best annual report overall

Peter Rothwell Chief Executive Officer

Organisation

18 20 21 22 16

Business model Board of Directors Group structure The new group organisation Group Executive Board

The business model – leisure travel and destination management

The activities of the Kuoni Group are focused on two business areas, leisure travel (in the premium, specialist and mainstream segments) and destination management. For 2009, Kuoni’s leisure travel business accounted for 78 % of total group turnover. With its business activity Destination Management, Kuoni is the market leader in the USA, India and East Africa and one of the biggest providers of destination management services in Europe, Southeast Asia, South Africa, the United Arab Emirates and Australia. Kuoni’s destination management business accounted for 22 % of total group turnover for 2009. Kuoni’s business areas are both assimilated within the overall group strategy of low vertical integration. This means that Kuoni owns hardly any fixed assets such as aircraft, cruise ships or hotels. Variable costs account for 79 % of Kuoni’s total expense.

LEISURE TRAVEL Kuoni’s premium-segment leisure travel products are focused on providing a high-value travel experience, and are marketed under the Kuoni brand. The products are individually compiled and boast outstanding customer service levels, from flight and hotel bookings to further amenities such as limousine transfers, restaurant reservations, event tickets and more. The product further includes concierge services in Switzerland, the UK, France, Italy and Spain. The personal assistance and advice provided meet every individual customer wish within this luxury segment. In the specialist travel segment, Kuoni is home to a number of skilled and professional companies offering quality products and services under their own brands, many of which are already familiar and long-established brands. These niche providers are generally viewed as the leading specialists for their particular destinations or travel products within

their respective markets. Here, too, personal advice is placed centrestage to address and fulfil specific customer needs. In the mainstream leisure travel segment, Kuoni is active in the Swiss and Scandinavian markets, through such familiar brands as Helvetic Tours (Switzerland), Apollo (Sweden, Norway and Denmark) and Falk Lauritsen (Denmark). The products here are aimed at price-conscious customers seeking value-for-money and easy-to-book vacations, usually in inclusive-tour form. These products require less upfront advice, and are being increasingly booked online or via call centres. The general trend towards affordable quality hotel stays at beach holiday destinations further intensified in 2009, as demand for such products rose in response to the global financial and economic crisis. Kuoni’s tour operating units continued to buy-in and combine both individual and inclusive-tour travel products and supplement these with further service elements. In doing so, the Group’s leisure travel operations also benefit from the expertise and experience of the specialists at Division Destinations and their global network of destination management offices. It is a business model that enables Kuoni to shape and influence the entire value chain. Following the transformation of its group structure from a decentralised to a function-based global organisation, worldwide procurement and production is organised in a new unit specially created for this purpose from 2010 onwards (see also the “New group organisation” section, from page 20). Kuoni offers its leisure travel products and services via various distribution channels, from retail offices to the internet and call centres. The retail offices include Kuoni’s own branch outlets and third-party travel agencies. A further sales channel was also launched in markets such as the UK: mobile “personal

Orga nisat ion

M a r k et R eport 2009

travel consultants” who visit customers at home or their place of work and advise them on their holiday plans. All Kuoni’s distribution channels are further supported by the Group’s marketing and communications units.

web-based system. This new user-friendly online platform was launched in autumn 2009, which allows travel agents all over the world to access the portfolio of hotels under contract to Kuoni and book accommodation as swiftly and simply as possible.

Kuoni always strives to offer its products via those distribution channels that its customers prefer. Due regard is also paid to social change: while individual travellers still tend to value receiving personal and professional face-to-face advice at a retail office, the internet continues to play an important role as a distributor of easy-to-book travel arrangements. For 2009, some 16 % of total turnover derived from the internet, 21% from Kuoni’s own branch outlets, 16 % via call centres and 47 % via travel agents. Kuoni thus sells the majority of its products through direct customer contact (53 %). The company now aims to further raise the proportion of sales achieved via direct distribution channels, whether through its own branch offices, the internet or its call centre facilities.

As part of its strategic collaboration with Swiss International Air Lines, Kuoni now offers more than 15 000 hotels worldwide on its partner’s website, too, together with the corresponding online booking options. The new arrangement, which was introduced in March 2009, has already earned Kuoni numerous new customers in new markets. Kuoni’s destination management units are also active in the attractive MICE business, providing meeting, incentive, conference and event travel products. Here customers benefit from Kuoni’s expertise in devising land arrangements, which, combined with its extensive project management experience, delivers solutions that are specifically tailored to each client’s needs.

DESTINATION MANAGEMENT Kuoni maintains a comprehensive network of more than 80 sales and destination management operations offering land arrangements at various holiday locations around the world to tour operators, travel agencies, event and incentive arrangers, congress organisers and cruise companies. Kuoni has concluded contractual agreements with various hotels on all continents that can provide the capacities required. Kuoni also offers further local services such as transfers, excursions, and social and activity programmes. In addition to group travel, Kuoni’s destination management also meets individual travel needs, though land arrangements for individual travellers are being increasingly sold to tour operators, travel agencies and brokers (including numerous online hotel portals) via Kuoni Connect, the company’s own

Destination management has evolved into a key component of the Kuoni business model over the past few years. The segment already makes a substantial contribution to overall group earnings, and shows great potential for further business growth.

Board of Directors

Henning Boysen Chairman

Chairman of the Board of Directors of Global Refund Group, Nyon; Chairman of the Board of Directors of APODAN NORDIC AS, Copenhagen; Chairman of the Board of Trustees, Postgraduate Education, Copenhagen Business School; Member of the Board of Directors of Transcom Worldwide SA, Luxembourg; Member of the Advisory Board of the Ecole hôtelière de Lausanne (EHL), Lausanne. Current term expires in 2012.

Henning Boysen has been a member of Kuoni’s Board of Directors since 2003. In 2006, the Board elected Mr. Boysen, a Dane, to be its chairman. After studying economics, Henning Boysen began his career as a management consultant at Booz, Allan & Hamilton. In 1975 he joined SAS Service Partner as a project manager before going on to the posts of Chief Financial Officer and then Executive Vice-President Catering. After stints as Chief Operating Officer (COO) of Saudia Catering and President of Aero-Chef A/S, he served as Chairman of the Board of Directors and CEO of Gate Gourmet International from 1996 to 2004, and as Deputy Chairman from 2004 to 2005. During this period as Chairman and CEO, Gate Gourmet grew from a medium sized European company to become a global player.

Wolfgang Beeser Vice-Chairman

Chairman of the Board of Directors of DAMARE S.R.L., Milan. Current term expires in 2010.

Tourism specialist and industrial economist Wolfgang Beeser, a German national, served as CEO of Thomas Cook AG from January 2004 to the end of 2005, and can draw on 40 years of experience in the tourism sector. He embarked on his tourism career with Neckermann Reisen in 1967. Ten years later he assumed responsibility for Neckermann’s global procurement of hotel capacities. In 1994 he was named CEO of the company, now renamed NUR Touristic. From 1997 to 1999 he headed the Thomas Cook Group, which was then still known as C & N Touristic, as a Member of Executive Management. He was elected to the Kuoni Board of Directors in 2002, but stepped down at the end of 2003 after being appointed CEO of Thomas Cook AG. He then returned to Kuoni’s Board in 2007 as its Vice-Chairman.

Heinz Karrer

CEO of Axpo Holding AG, Baden; Chairman of the Board of Directors of Elektrizitäts-Gesellschaft Laufenburg AG, Dietikon; Chairman of the Board of Directors of Axpo AG, Baden; Chairman of the Board of Directors of Centralschweizerische Kraftwerke AG, Lucerne; Member of the Board of Directors of Resun AG, Aarau; Member of the Board of Directors of Swissgrid AG, Laufenburg. Current term expires in 2011.

Heinz Karrer, who is a Swiss national, has been CEO of Axpo Holding AG, Switzerland’s leading energy company, since 2002. After studying economics at St. Gallen University (HSG), he began his career in 1985 when he was appointed General Manager of the Association of Swiss Manufacturers, Suppliers and Agents for Sports Goods. He went on to serve as Managing Director of Intersport Schweiz AG from 1987 to 1992 and as CEO of Intersport Holding AG from 1992 to 1995. He then moved to the Ringier publishing house where he remained until 1997, becoming CEO of Ringier Switzerland and a member of Ringier Ltd.’s Group Executive Management. From 1998 to 2002 he was a member of Swisscom’s Group Executive Management and head of the group’s Marketing & Sales Division. He has served on Kuoni’s Board of Directors since 2007.

Orga nisat ion

M a r k et R eport 2009

John Lindquist

Senior Advisor, Boston Consulting Group, London; Member of the Board of Directors of Intourist, Moscow; Member of the Board of Directors of VisitBritain, London. Current term expires in 2011.

John Lindquist, a US and UK citizen, is resident in London. He gained a degree in economics from Princeton University and MBA from Harvard University and then joined The Boston Consulting Group (BCG) as a consultant in 1974. He was elected a Partner in 1981 and a Senior Partner and Managing Director in 1993. With over 25 years experience advising on strategy and transformation programmes for airlines, hotels, tour operators, and government tourism promotion bodies on a global basis, he was one of the leaders of BCG’s worldwide travel and tourism practice. A Senior Advisor to BCG since 2004, he joined Kuoni’s Board of Directors in 2007. He is also a Board Director of Intourist, the largest travel and tourism company in Russia, and of VisitBritain, the government tourism promotion agency for the UK.

David Schnell

Business Consultant; Member of the Board of Trustees of the Kuoni- and Hugentobler- Foundation, Zurich; Chairman of the Board of Directors of IFBC AG, Zurich; Vice-Chairman of the Board of Directors of ELMA Electronic AG, Wetzikon; Member of the Board of Directors of AlpTransit Gotthard AG, Lucerne; Member of the Board of Directors of Kardex AG, Zurich; Member of the Sanction Commission of the SIX Swiss Exchange AG, Zurich. Current term expires in 2012.

Kuoni’s Board of Directors has benefited from the great expertise and experience of Swiss business administration graduate David Schnell since 2002. Between 1985 and 1997 he worked at ELCO Looser Holding AG, initially as Chief Financial Officer (CFO) and Member of the Executive Board, and later as Chief Operating Officer (COO) and Member of the Board of Directors. In 1997 David Schnell moved to become CFO and Member of the Executive Board of telecommunications company Swisscom AG in Bern, where he stayed until 2002. Since 2002 David Schnell has been an independent business consultant and a Member of the Board of Directors of various companies.

Annette Schömmel

Founder and Vice-Chairman of the Board of Directors of arthesia AG, Zurich and Los Angeles; Managing Director of arthesia AG, Zurich and Los Angeles. Current term expires in 2010.

German entrepreneur Annette Schömmel has been a member of Kuoni’s Board of Directors since 2004. After studying economics, German and communications, she worked at several respected advertising agencies before becoming a TV and film producer in Hamburg and Berlin. In 1994 Annette Schömmel founded the creative think-lab arthesia AG, based in Zurich and Los Angeles, where she also sits on the company's Board of Directors as Vice-Chairman.

Raymond Webster

Member of the Institution of Electrical Engineers (MIEE), London; Member of the Board of Directors of Pegasus Airlines, Istanbul; Member of the Advisory Board of the Stanford Sloan Master’s Programme, California; Fellow of the Royal Aeronautical Society (FRAeSoc), London. Current term expires in 2010.

Raymond D. Webster, who is a citizen of New Zealand and resident in the United Kingdom, joined Kuoni’s Board of Directors in 2006. He worked for easyJet airline plc. from 1996 to 2005 – from 2000 as Chief Executive Officer. Before that he was with Air New Zealand in various functions, the last one being General Manager, Strategic Planning. He studied engineering at Canterbury University in New Zealand and obtained an MSc in Air Transport Engineering from the Cranfield Institute of Technology in the UK, as well as a Master of Business Management from Stanford Business School in the USA.

As at 1 March 2010 Board members’ detailed CVs can also be found on the Group’s website: www.kuoni-group.com.

Group structure

CEO P. Rothwell

IT & SECONDARy GOODS PROCUREMENT B. Jokic

ASSURANCE MANAGEMENT

HUMAN RESOURCES

CORPORATE COMMUNICATIONS

BRANDING & MARKETING

DISTRIBUTION

f. Bertisch

A. Brochier

P. Brun

R. Masala

M. Dahlquist

CORPORATE & BUSINESS DEVELOPMENT L. Pompeo

CORPORATE RESPONSIBILITy M. Leisinger

NORTHERN REGION

SOUTHERN REGION

PROCUREMENT & PRODUCTION

DESTINATIONS

fINANCE

L. V. Larsen

S. Leser

R. Schafroth

M. E. Katz

APOLLO SWEDEN

KUONI SWITzERLAND

HUB SWITzERLAND

DESTINATION EUROPE

CORPORATE CONTROLLING

P. Kjellin

S. Leser

T. Goosmann

S. Egli

R. Häsler

APOLLO NORWAy

KUONI fRANCE

HUB UK

DESTINATION NORTH AMERICA

BUSINESS CONTROLLING

L. Berbu

E. foiry

N. Delord

APOLLO DENMARK

KUONI ITALy

HUB SCANDINAVIA

J. Lockhart

D. Ponzo

T. filippopoulos

NOVAIR

KUONI SPAIN

DESTINATION ASIA PACIfIC

MERGERS & ACqUISITIONS

A. fred

C. Lopez

L. Matzig / L. Kuenzle

M. Simeon

UTE MEGAPOLUS

KUONI INDIA

INVESTOR RELATIONS

G. Bisgaard

z. Karkaria

DESTINATION INDIA/ SOUTH ASIA

PLAyITAS A. de la Presilla Tönnesmann

J. Rossmango DESTINATION AfRICA/ DESTINATION ARABIA/ SALES M-EAST & INDIA y. Noman

D. Deva

M. Bieri

L. Bienz

SALES ASIA PACIfIC & USA

LEGAL & COMPLIANCE

M. Ng

O. Moeschler

M. Neﬀ

KUONI CONNECT

J. Edmunds

I. Walter

KUONI BENELUX

KUONI BELGIUM

fINANCE & IT

R. Broekhoven

P. Weymans

T. Peyer

As at 1 March 2010

CORPORATE TREASURy

KUONI CHINA

KUONI UK

Executive Board

M. Müller

Orga nisat ion

M a r k et R eport 2009

The new group organisation – a function-based structure for a stronger customer focus The Kuoni Group announced at the end of September 2009 that it would be adopting a new corporate structure which will transform it from a decentralised to a function-based global organisation. The changes are a further element in the investment and cost-reduction programme that was launched at the beginning of 2009. The new structure features two divisions covering the North and South market regions, together with a new unit performing all procurement and production activities for both market divisions. Division Destinations remains the home of the Group’s global destination management operations. The new organisation provides two clear focuses: on marketing and sales, and on developing global procurement and production capabilities. The new group organisation draws on the model that has already been adopted at Kuoni Scandinavia, which has proved to be highly efficient and effective. The Scandinavian model has been further refined, however, to benefit from scales and better efficiency as well as to offer a broader product range and to pay due regard to the varied requirements within the Kuoni Group. In a further development, the globallyorganised function-based units such as Finance, IT, Human Resources, Branding & Marketing and Distribution now also bear operational and strategic responsibilities in the new group structure. The new organisational structure facilitates faster implementation of the existing growth strategy with an asset-light brand portfolio (hardly any fixed assets – aircraft, ships, hotels – are owned), especially since the planned Group-wide projects can also be realised more efficiently. The new structure is the first radical reorganisation of the Kuoni Group for some time. A stronger customer focus, further growth, efficient cost management and improved profitability are its prime ambitions. The new structure eliminates the previous “Style” and “Smart” divisional distinctions based on travel product type.

DIVISIONS MARKET REGION NORTH AND SOUTH: A STRONG CUSTOMER FOCUS Division Market Region North comprises the markets of the UK, Sweden, Norway, Denmark, Benelux and Russia, the Scandinavia-based Novair airline and the

Playitas vacation resort on Fuerteventura. Division Market Region South consists of the markets of Switzerland, France, Italy, Spain, India and Hong Kong/China. Responsibility for marketing and sales remains with the various country organisations within the two divisions. Responsibility for buyingin and developing land arrangements has now been entrusted to the new global Procurement & Produc tion Unit. But specific local business processes such as managing, monitoring and buying-in flight capacities basically remain the responsibility of the market regions.

pROCUREMENT & PRODUCTION Unit: ONE SOURCE FOR ALL MARKET REGIONS The new Procurement & Production Unit accom modates several “product categories” which are responsible for buying-in and developing land arrangements at the various leisure destinations worldwide. The products and services developed are then selected by the individual market organisations, in collaboration with the Procurement & Production Unit and in accordance with their own sales needs. The Procurement & Production Unit will operate three centres of excellence, in Zurich, Dorking (UK) and Stockholm. Each of these is responsible for a set of clearly-assigned destinations and/or travel styles. By concentrating these activities, the Kuoni Group can take greater advantage of its purchasing power, and can also ensure that full and Group-wide use is made of all its expertise and experience.

DIVISION DESTINATIONS: THE LAND ARRANGEMENT AND MICE SPECIALIST Division Destinations is home to all the Kuoni Group’s destination management activities, and remains unchanged in the new group structure. The division puts a special focus on organising and advising on land arrangements for groups and individual travellers, MICE (meetings, incentives, conferences and events), special tours and sporting events. Some 15 % of the products and services provided by the division are used within the Kuoni Group; the remaining 85 % are purchased by international tour operators, retailers, conference and event organisers and individual travellers.

Group Executive Board

peter rothwell Chief Executive Officer British, born in 1959 After studying languages at Oxford University (UK), in 1982 Peter Rothwell embarked on an executive career that took him through marketing, product management, purchasing and sales at several British-based travel companies. He became Managing Director of Airtours Holidays in 1995, then CEO of Airtours UK Leisure Group in 1998. Peter Rothwell later served as COO at Thomson Travel Group and as CEO of TUI Northern Europe, where he also took over as Managing Director of TUI UK in 2004. He was appointed COO and Member of the Board of TUI AG Tourism in 2006, from where he moved to become Deputy Chief Executive of TUI Travel PLC, London, following the merger with First Choice in 2007. Peter Rothwell became CEO of the Kuoni Group on 1 January 2009.

Orga nisat ion

M a r k et R eport 2009

m a x e. k atz

Swiss, born in 1955

Chief Financial Officer

After earning a university of applied sciences degree in business economics, Max E. Katz embarked on his professional career in 1978, joining Unilever as a Brand Manager. From 1981 to 1987 he served as a Regional Controller for Jacobs Suchard AG both in and outside Switzerland. He then joined the Executive Board of Effems AG as the companyâ&#x20AC;&#x2122;s Finance Director. In 1991 he moved to HĂźrlimann Holding AG to become Vice-President finance and a Member of the Executive Board. He joined Kuoni as a member of the Group Executive Board and Chief Financial Officer in 1995. For the 2008 financial year, Max E. Katz additionally was Speaker for the Group Executive Board.

Orga nisat ion

M a r k et R eport 2009

stefan leser

German, born in 1967

Executive Vice-President Southern Region, Chief Executive Officer Kuoni Switzerland

Having graduated in business administration (specialising in travel and transportation), Stefan Leser initially held a number of functions at various companies in the German travel sector. After completing an MBA in finance and strategic management at Augusta State University of Georgia, USA, he joined Atraxis AG in 1999 as Executive Vice-President Business Development, Marketing & Sales. He later moved to EDS, going on to become CEO of EDS Switzerland AG and Head of Sales & Distribution for Central and Eastern Europe. He joined Kuoni in July 2005 as a member of the Group Executive Board, in the newly-created position of Executive Vice-President Corporate Development. He assumed additional responsibility for the unit Scandinavia in 2006. In 2007 he was appointed Head of Strategic Business Division Smart and CEO of Kuoni Switzerland. As part of the restructuring of the Kuoni Group in 2009, Stefan Leser was appointed Executive Vice-President Southern Region.

leif vase larsen

Danish, born in 1963

Executive Vice-President Northern Region, Chief Executive Officer Kuoni Scandinavia

After completing an apprenticeship with Maersk Line and graduating from Copenhagen Business School, Leif Vase Larsen embarked on his professional career in 1986 as financial analyst at Bull A/S. From 1990 to 1999 he held various Controlling and Financial management functions at the shipping company DFDS. In 2007 he completed an Executive MBA at the University of Stockholm. Leif Vase Larsen has been with Kuoni Scandinavia since the start. During the first seven years he served as Financial Director and has been since 2006 as CEO. 2009 he was appointed Executive Vice-President for Northern Region and at the same time became a member of the Group Executive Board.

Orga nisat ion

M a r k et R eport 2009

rolf schafroth

Swiss, born in 1965

Executive Vice-President Procurement & Production, Chief Executive Officer Destination Management

After completing a commercial apprenticeship and earning a university of applied sciences degree in business economics, Rolf Schafroth joined Coopers & Lybrand in 1989 and went on to serve as a management consultant in Switzerland and the UK. In 1995 he moved to Deloitte & Touche, Switzerland, to perform the same function. A year later he joined Kuoni Switzerland as Head of Financial Controlling; and after just one year, in 1997, he was named Head of Finance & IT for Kuoni’s Incoming Strategic Business Unit. In 2003 he assumed overall responsibility for Incoming Europe, the Kuoni Group’s biggest incoming unit; and in 2006 he was named CEO of Destination Management, a new entity comprising all the Kuoni Group’s former incoming units. In 2007 he was appointed to the Group Executive Board as Head of the Strategic Business Division Destination Management. Following the restructuring of the Kuoni Group in 2009, Rolf Schafroth became Executive Vice-President Procurement & Production, while continuing as Chief Executive Officer Destination Management.

Reporting

2009 â&#x20AC;&#x201C; the year of financial and economic crisis and pandemic 32 Kuoni Group 39 At a glance | Kuoni Group 40 Switzerland 43 At a glance | Switzerland 44 Southern Europe 45 At a glance | Southern Europe 46 Asia 47 At a glance | Asia 48 Scandinavia 49 At a glance | Scandinavia 50 United Kingdom and Benelux 51 At a glance | United Kingdom and Benelux 52 Destinations 55 At a glance | Destinations 30

2009 – the year of financial and economic crisis and pandemic 2009 was overshadowed by the global financial and economic crisis. At the same time, an outbreak of swine flu in Mexico led to a pandemic that by June 2009 was severe enough for the World Health Organisation to raise its alert rating to 6 – the highest level. The effects were felt by the tourism industry all over the world. These external influences had a strong negative impact on the Kuoni Group during 2009. Because of the economic crisis that emanated from the financial services industry, demand for premium travel fell sharply. This unfortunate trend was exacerbated by widespread recession and negative consumer senti ment in all of Kuoni’s markets.

Unusually, there was also a very sharp fall in value of Kuoni’s most important currencies – including the British Pound, American Dollar, Swedish Krona, Norwegian Krona, and Indian Rupee – against the Swiss Franc. Experts declared 2009 to be the year of the worst economic crisis for almost 80 years. The overview opposite shows the key figures (GDP, unemployment rate) for Kuoni Group’s most im portant markets, as well as the worldwide changes in travel activity compared with the previous year.

R eport ing

M a r k et R eport 2009

GROSS DOmESTIC PRODUCT (IN %) 10 +8.7 8 +5.6

6 4 2 0 – 2

–1.5

–1.4 –2.3

– 4

–2.5

–3.6 –4.8

– 6

–4.3

–4.7

–4.8

–5.3

– 8 –8.7

– 10 Switzerland

France

Italy

Spain

Sweden

norway

Netherlands russia

usa

Japan

India

China

UNEmPlOymENT RaTE (IN %)

2009 2008 20

18.1

16 12 8.0

8 4

9.4

9.3

8.3

7.8

5.1

4.3

3.3

3.5

0 Switzerland

France

Italy

Spain

Sweden

norway

Netherlands

usa

Japan

Source: OECD Economic Outlook (January 2010)

InternatIonal tourIst arrIvals 2009 compared to 2008 Worldwide europe america Middle east asis/Pacific africa

neGatIve/PosItIve CurrenCY eFFeCts average rates compared to 2008 and to the Swiss Franc (CHF) – 4 % – 6 % – 5 % – 6 % – 2 % + 5 % Source: UNWTO (Estimation for 2009)

Pound (GBP) Swedish Krona (SEK) Norwegian Krona (NOK) Euro (EUR) Indian Rupees (INR) US Dollar (USD)

– 14.8 % – 13.6 % – 10.3 % – 4.8 % – 9.9 % + 0.3 % Source: Kuoni

Kuoni Group A positive Group result in an extremely difficult market environment Net turnover affected by external influences to an unprecedented extent Balance sheet still decidedly sound

The Kuoni Group clearly felt the external influence of the global financial and economic crisis through out its regions and markets during 2009. The crisis did begin in the fourth quarter of 2008; and the ensu ing economic downturn simultaneously depressed the Group’s business throughout its various regions to an unprecedented degree. Unlike earlier crises, such as the repercussions of the 2001 terrorist attacks, the bird flu and SARS, the current crisis is having a supraregional and far more substantially damaging impact on the tourism business. Consumer confidence (and thus consumer spending) has been dented by a growing fear of unemployment since the crisis began, restricting travel budgets. As a result, demand for leisure travel products has suffered tangible declines. Booking trends have seen radical changes: custom ers are booking their vacations at shorter notice, are tending to prefer shorter stays, and are also opting for regions and destinations that are closer to home.

In line with the overall Group strategy, numerous acquisition projects were evaluated in the premium and specialist segment in the course of the year. This resulted in three acquisitions pursued: Cotravel AG and the travel business of Touring Club Schweiz (TCS) in Switzerland, and an equity-consolidated holding of around 32 % in Et-china.com International Holdings Limited (Et-china) in China.

Total Group turnover for 2009 amounted to CHF 3 894 million, a 19.8 % decline on the record CHF 4 855 million of the previous year. Organic turnover development amounted to – 14.8 %; the net impact of currency movements eroded 5.7 % from the consolidated turnover result; and the net impact of acquisitions and disposals had a positive impact of 0.7 %. All markets were affected by the negative external effects of the financial and economic crisis and the corresponding marked decline in demand for travel products. In a market arena that saw a tan In addition to the more material consequences of the gible increase in competition levels, across-the-board price reductions and last-minute promotions had an current financial and economic crisis, the spread of adverse effect on gross profit margins, especially in swine flu from the second quarter of 2009 onwards the mainstream travel segment. The damage here was caused a high level of confusion about the safety of travelling. While no official restrictions were imposed partly offset by intensive renegotiations to secure on travelling, the swine flu pandemic clearly depressed more favourable procurement terms in all business Group results for the year, and had a particularly areas. The Kuoni Group achieved a gross profit margin of 20.8 % for 2009 (2008: 21.8 %). Gross adverse impact on North American destinations and profit amounted to CHF 808 million (2008: on travel from and within Asia. CHF 1 056 million). In the wake of the uncertainties on the capital markets, the average rate of all major currencies had Despite the significant fall in demand, Kuoni still lost further (and largely substantial) value against posted a positive operating result for the year. Earn the Swiss Franc. Developments of this kind have a ings before interest and taxes (EBIT) resulted at sizeable effect on consolidated results, especially for CHF 15.1 million. Underlying EBIT (i.e. net of the Year-on-year turnover cost of the ongoing investment and cost-reduction trends for the Markets a corporation with such an international business programme) amounted to CHF 45.3 million. The were as follows: model as the one of the Kuoni Group. various units of the Kuoni Group have made substan tial improvements to their fixed costs base since the fourth quarter of 2008 – partly through structural TURNOVER FOR INDIVIDUAL MARKETS adjustments, but also through temporary measures such as short-time working, the voluntary waiving CHF MILLION of salary and the taking of unpaid leave. 2009

1 400 1 200

2008

1193 1101

1028

1 000

1012

The strengthening of the Swiss Franc against other currencies eroded CHF 3.8 million from the annual operating result.

894

800

821

824

600 400

Net profit amounted to CHF 1.6 million. In addition to the diminished EBIT result, the decline in net profit from its prior-year level is also attributable to a substantially lower financial result: with interest rates very low, financial income was almost impossi ble to generate over the course of the year.

652 539 374 267

200

304

0 Switzerland Southern Europe

Asia

Scandinavia

UK & Benelux

Destinations

The Board of Directors recommends to the Annual General Meeting of Shareholders on 20 April 2010

R eport ing

that a dividend of CHF 1.60 per registered share A and CHF 8.00 per registered share B be distributed for the 2009 business year. This distribution compen sates for the reduced dividend paid in the previous year owing to the uncertain outlook. The Kuoni Group announced the adoption of a new corporate structure in September 2009. The reorganisation of the company’s business activities is part of the investment and cost-reduction pro gramme launched at the beginning of the year, which is intended to accelerate the transformation process and improve Group infrastructure. As part of this restructuring, the Kuoni Group is adopting a functional global organisation, creating marketbased sales units that will enable it to focus more firmly on local customer sales, and on serving as a trustworthy advisor for its customers. The new structure consists of the Divisions Market Region North and South – superseding the previous Divisions Smart and Style – as well as the Division Destinations, which remains unchanged. The new structure also includes a new global Procurement and Production Unit which, from 2010 onwards, will deliver material benefits on the procurement front that will have a sustainably positive effect on net Group results. Division Market Region South comprises the markets of Switzerland, Southern Europe and Asia. The division generated turnover of CHF 1 462 million for 2009 and achieved an EBIT of CHF 33.5 million. Market Switzerland posted turnover of CHF 821 mil lion for the year. The result was a 20.1 % decline on its prior-year equivalent, though this is partly due to the first-time full-year impact of the disposal of Edelweiss Air, which was sold in autumn 2008. The acquisition of Cotravel AG added CHF 5.8 million to the 2009 turnover result. The travel business of Touring Club Schweiz (TCS), which was acquired in December, adds some CHF 20 million (annualised) to the division’s annual turnover volume. The business environment in the Market Switzerland was characterised by the effects of both the finan cial and economic crisis and the spread of swine flu throughout the year. The trend towards shorter trips and closer-to-home destinations had a particularly strong impact on turnover levels. Here, the premium segment was hit harder by the declines in demand than were more inexpensive travel products. The specialist operators managed the year relatively well. Particularly impressive performances were posted by Private Safaris (East Africa) and Dorado

M a r k et R eport 2009

Latin Tours (South America), which both exceeded their prior-year turnovers. Largely through the sale of Edelweiss Air, but also as a result of market over capacity and tough competition (especially through last-minute products), gross profit margin suffered a substantial decline, falling from 24.5 % to 21.3 %. But thanks to numerous cost savings, including the adoption of short-time working and a voluntary waiving of salaries among management personnel, Market Switzerland made a positive CHF 1.5 million contribution to the Group EBIT result. All the country units within Market Southern Europe were hit hard by both the financial and economic crisis and the swine flu pandemic. Kuoni France, Italy and Spain all suffered broadly similar year-on-year declines in their turnover results. Market Southern Europe is strongly focused on long-haul leisure travel, and this has suffered a particularly steep decline in the current crisis. Turnover for the unit amounted to CHF 374 million, 30.5 % down on 2008. 4.8 % of the decline can be ascribed to the weakening of the euro against the Swiss Franc. Despite an extremely difficult competitive environment and strong pres sure on margins in all its countries of operation, Market Southern Europe posted a positive EBIT of CHF 6.1 million for the year. Market Asia, which consists of the Group’s business units in India and Hong Kong/China, posted turnover of CHF 267 million for 2009. The turnover was 12.4 % down on the previous year; but most of the decline was caused by the Indian Rupee, which lost 9.9 % of its value against the Swiss Franc. Kuoni India achieved a further year-on-year increase in its turno ver levels in local currency. Kuoni Hong Kong/China felt the full effect of the economic crisis and the resulting slump in demand, especially for long-haul destinations. Given the financial and economic crisis and the ramifications of the swine flu pandemic, de velopments for the region can be considered highly encouraging overall. As in previous years, results were substantially buoyed by the rapidly-expanding busi ness of Visa Facilitation Services (VFS Global), which clearly surpassed its 2008 revenue result. With its EBIT of CHF 25.9 million, a 15.1 % improvement on the previous year, Market Asia impressively improved its earnings performance. Division Market Region North embraces Scandina- via (consisting of the Swedish, Norwegian, Danish and Russian markets, the Novair airline and the Playitas holiday resort), as well as United Kingdom and Benelux. The division generated a turnover of CHF 1 664 million for the year and achieved an EBIT of CHF 14.5 million.

22 %

21 %

Destination Management

Switzerland

16 %

Southern Europe

UK & Benelux

Group turnover by activity and market

78 % Leisure Travel

7% 25 %

Asia

Scandinavia

Most of the Kuoni units in the Scandinavian market were able to surpass their record turnover levels of 2008 in local-currency terms. Kuoni Sweden, Kuoni Norway and Novair all continued the growth path they had embarked on in previous years. Following its expansion and refurbishment, the Playitas vaca tion resort also saw a tangible increase in its turnover. As expected, with its restructuring in the course of 2009, business at Kuoni Russia made a smaller contri bution to the overall turnover result. Turnover for Market Scandinavia was to a large ex tend also strongly affected by adverse currency move ments. The Swedish Krona lost 13.6 % against the Swiss Franc, while the Norwegian Krona fell 10.3 %. Turnover declined 15.1 % to CHF 1 012 million. The market environment saw strong competition to fill aircraft capacity throughout the year. This, and severe short-term currency movements, put sizeable pressure on gross profit margins, which declined from the 19.1 % of 2008 to 15.2 %. Kuoni Scandinavia posted an EBIT for 2009 of CHF 5.3 million. Market UK and Benelux generated total turnover of CHF 652 million for the year (2008: CHF 824 mil lion). The year-on-year decline was due to a large extent to the steep 14.8 % decline in the value of the UK Pound against the Swiss Franc.

the changed customer booking behaviour with new products, developed and offered at short notice, to successfully counter the declines in demand. In this difficult overall business environment, gross profit margin for Market UK and Benelux slipped from 17.5 % to 16.9 %. EBIT for the year amounted to CHF 9.2 million, with both units posting posi tive operating results despite their sizeable falls in demand. The overall EBIT decline was also partly due to adverse currency movements. Business at Division Destinations was characterised by a substantial fall in demand at most units, and in Europe in particular. The division was also especially hard hit by the global economic and financial crisis, and by the swine flu pandemic. The slump in the demand for long-haul leisure travel (which was seen in both the individual and the group travel sector) and companies’ radical reductions of their incentive events both had a sizeable impact on the turnover of what had been the strongest-growing division within the Kuoni Group over the last few years. On top of these market influences, however, results for the division were further burdened by adverse currency movements.

The UK was one of the first countries to feel the pinch of the financial and economic crisis, and is one of those that have felt it most severely, too. Kuoni UK’s product range, which is geared to the higher-end market, was hit hard by the banking crisis, combined with rapidly-rising unemployment and missing bonus payments.

Total turnover for the division amounted to CHF 894 million (2008: CHF 1 101 million.). Both the acquisitions added to the division in 2008, in the United Arab Emirates and Australia, made positive contributions. But with market prices generally suf fering significant declines, gross profit came under substantial pressure. This was countered, however, by continuously renegotiating procurement terms and conditions.

Both Kuoni UK and Kuoni Benelux reported steep declines in demand for their core long-haul travel products, as a result of both the economic crisis and the spread of swine flu. Both units responded to

Gross profit margin for the year amounted to 17.6 %, an improvement of 1.3 percentage points on its prioryear equivalent. With an enhanced gross profit mar gin and radical adjustments to operating costs, all the

R eport ing

division’s units posted positive operating results, and EBIT for the division amounted to CHF 15.5 million. The portfolio of the Kuoni Group showed a healthy spread of turnover throughout the three divisions and their markets. As in previous years, increases were seen in the relative shares of the Scandinavian and Asian markets as well as of Division Destinations. The Markets Switzerland, South Europe as well as UK and Benelux saw their shares of Group turnover decline. In the leisure travel sector, Kuoni earned three quarter of its turnover outside Switzerland. The Kuoni Group positions itself as a leisure travel organisation with the two business activities of leisure travel (which accounted for 78 % of total turnover in 2009) and destination management (which accounts for the remaining 22 %, but whose share of total turnover showed a further slight increase in 2009, in line with the prevailing trend of the last few years.) The Kuoni Group achieved earnings before interest and taxes (EBIT) of CHF 15.1 million for 2009. The underlying EBIT, which excludes the costs incurred for its investment and cost-reduction programme, resulted at CHF 45.3 million for the year. The prime cause of the steep decline in operating earnings power compared to 2008 was the slump in demand, which was itself the product of negative external influences. The lower turnover volumes eroded CHF 209 million from the EBIT result. The decline in gross profit margin (gross profit as a percentage of turnover) from 21.8 % to 20.8 % reduced the Group EBIT result by a further CHF 39.0 million. All the Group’s units substantially adjusted their fixed costs in the course of the year. The cost reductions were achieved by both structural changes and temporary measures such as short-time working and the waiving of salary amounts. All in all, the Kuoni Group reduced its fixed costs by CHF 113 million. The Group workforce was also downsitzed; the average number of employees (in full-time-position terms) stood at 9 070, a reduction of 7.4 %. The average exchange rates have developed strong negatively in Swiss-Franc terms compared to the prior year. Among the major foreign currencies, the UK Pound declined 14.8 %, the Swedish Krona lost 13.6 %, the Norwegian Krona fell 10.3 % and the Indian Rupee lost 9.9 %. The cumulative effect of these losses eroded CHF 3.8 million from the Group EBIT result. As in previous years, all markets made a positive contribution to the Group operating result. The

M a r k et R eport 2009

Kuoni Group earnings portfolio remained largely well balanced. Market Asia further improved its EBIT result, despite highly adverse currency movements: as a result, Market Asia was – for the first time – the biggest single contributor to the Group operating result. With the general slump in demand, all other markets suffered year-on-year EBIT declines (the particularly steep decline for Market Switzerland is also due to the fact that the prior-year result included the one-off effect of the sale of Edelweiss Air). As a result of a change to International Accounting Standards (IFRS), an adjustment was made in 2009 to the recognition of brochure costs. This change in accounting policy effects the income statement, the balance sheet, the statement of changes in equity and the cash flow statement. Prior-year results have been restated accordingly. Further details of these changes can be found on page 9 of the Financial Report. No amortisation of goodwill has been effected since 2005, in line with international accounting standards that have abolished the ordinary amortisation of goodwill on acquisitions. Goodwill is still appraised annually, however, and corresponding impairments are effected if required. The Kuoni Group reported a net financial result of CHF 0.8 million for 2009, substantially below the CHF 23.0 million of the previous year. The decline is due primarily to lower interest rates. Last year’s result, however, also included CHF 6.5 million from the release of provisions relating to a legal dispute about the sale of BTI Central Europe, as well as CHF 3.8 million of profit from the sale of subsidiaries. The financial expenses of CHF 4.5 million (2008: CHF 5.6 million) include interest on bank and other debts and non-operating exchange-rate losses. Tax expenses stood at CHF 14.3 million (2008: CHF 22.4 million). The tax ratio was higher because some units reported losses for which no deferred taxes could be capitalised. The Kuoni Group posted a net result of CHF 1.6 million for the 2009 business year (compared to a net profit of CHF 151 million for 2008). Given the extraordinarily challenging market conditions in which it was achieved, the result is testimony to the high flexibility of the Kuoni Group and its business model, and to their capability to swiftly adapt cost levels to changed and changing economic conditions. Earnings per registered share B amounted to CHF 0.08 (2008: CHF 52.68). The Board of Directors will recommend to the Annual General Meeting of Shareholders on 20 April 2010 that a dividend of CHF 1.60

per registered share A and CHF 8.00 per registered share B be distributed for the 2009 business year. Capital expenditure on tangible and intangible assets amounted to CHF 44.2 million in 2009, CHF 15.3 million lower than the prior-year level. The lion’s share of this spending went on extending or renovating branches, updating the Playitas hotel resort, and expanding the VFS Global business. A significant part was linked to the investment and cost-reduction programme launched at the beginning of the year, the main investment items being a new holiday travel reservation system and new e-business technology. The Kuoni Group held cash and cash equivalents of CHF 665 million on 31 December 2009, an increase of 46 % on the end of 2008. Most of the increase comes from the bond that Kuoni Travel Holding Ltd. issued in October 2009 to strengthen its financial position. This CHF 200 million issue carries a coupon of 3 % and a term of four years. Cash and cash equivalents also included CHF 342 million of advance payments from customers (2008: CHF

The transformation of the EBIT compared to 2008 and a breakdown by Markets produces the following picture:

EARNINGS BEFORE INTEREST AND TAXES (EBIT) CHF MILLION

329 million). This 4.1 % increase on the previous year is due to a steady improvement in booking activity in the last few weeks of 2009. The Group reported a year-end net cash position of CHF 59.3 million (2008: CHF 88.0 million). Cash flow from operating activities amounted to CHF 46.7 million, a decline on the CHF 109 million of the previous year. Free cash flow amounted to CHF 4.7 million (2008: CHF 55.5 million). The decline is due to the lower operating result. The change in net working capital was much improved on the previous year. Kuoni Group’s equity went down from CHF 606 million to CHF 592 million, giving a group equity ratio of 32.0 %. This is better than most companies in the travel sector, reflecting the Kuoni Group’s sound balance-sheet. After falling (in line with general market trends) in 2008, the price of the Kuoni registered share B remained largely stable throughout 2009, and closed the year at CHF 349.00. Share price movements throughout the year were heavily influenced by the uncertainties felt in and around the travel industry.

OUTLOOK 0 – 50 – 100 +113

– 150

–135

– 200 – 250

–209

–39

Impact on EBIT of turnover decline

– 300

Impact of decline in gross proﬁt margin

Impact of reduction in operating costs

Year-on-year EBIT change

GROUP EBIT BY MARKET/DIVISION CHF MILLION 2009

2008 45

39.4

38.5 32.2

22.5 15.5

15 10

9.2

5.3

1.5 Switzerland Southern Europa

0 Asia

Real-economy challenges are likely to remain the biggest influence on business trends in 2010. Upcoming tax increases and the continuing fear of unemployment continues to tighten travel budgets among Kuoni’s target customers. The Kuoni Group will continue to take consistent advantage of any market opportunities that might arise in the course of 2010. At the same time, the Group will further pursue the programme of key strategic initiatives which was launched last year, and which will see total investments in enhancing Group efficiency of some CHF 106 million over a three-year period. The prime emphases of the programme are on differentiating the Kuoni product, optimising distribution and reducing costs.

18.9

6.1

35 30

29.0

25.9

There were already signs of a year-on-year increase in booking figures in the fourth quarter of 2009. This steady improvement in bookings has continued in the first weeks of 2010. However, as in 2009, people are still booking their holidays at short notice.

Scandinavia

UK & Benelux

Destinations

As well as proactively executing these anticyclical investments to strengthen our corporate performance, Kuoni will continue to pursue its present strategy of combining organic growth with selected acquisitions to further expand its business volume at rates which

R eport ing

M a r k et R eport 2009

PERFORMANCE OF KUONI SHARE (CHF)

KUONI

400 350 300 250 200 150 100 50

2009

0 Jan

Feb

Mar

Apr

May

are considerably higher than the market as a whole, and thereby significantly enhance its earnings power and potential. The adaption of the new Group struc ture enables Kuoni to focus even more firmly on its customers and their specific wishes and needs. All in all, Kuoni intends to further sharpen its focus on its core “travel” competency, and will be actively seeking and exploiting new distribution channels for its various travel products. In doing so, Kuoni aims to maintain a clear emphasis on the premium segment, a strong position in growth markets, a broad range of products that are closely aligned to individual cus tomer needs, rigorous cost management and a policy of actively promoting new direct sales channels to secure its continued business success.

VALUE-BASED MANAGEMENT The value-based management approach at the Kuoni Group is based on the “economic profit” concept. This aims to keep top management aligned as closely as possible to creating added value on behalf of the Group’s owners. The central management performance indicator is known as Kuoni Economic Profit or KEP. Developed by Kuoni, this indicator includes various parameters that pay due and full regard to all of the company’s specific characteristics. KEP is calculated from net operating profit after tax (NOPAT) less the cost of capital invested in opera tions. The Group-level weighted average cost of capi tal (WACC) has been set at a sustainable rate of 8.5 %. Specific WACC rates that accommodate geographical and currency considerations have also been set for the Group’s individual divisions and markets. NOPAT divided by the average capital invested in operations

June

July

Aug

Sept

Oct

gives return on invested capital (ROIC), which is compared with the WACC for the Kuoni Group and/ or its constituent units to determine value-adding performance. Kuoni has integrated this value-based management approach based on the KEP performance indicator into its entire management process, to ensure that it has a sustainable effect. To this end, planning and budgeting, performance measurement, internal and external communications and management compen sation models have all been consistently adapted to the value-adding philosophy.

The target-setting and planning process KEP goals which reflect investors’ expectations of a return on their invested capital that is appropriate to their investment risk are set as part of the annual strategic planning process. In addition, and based on Kuoni’s enterprise value, KEP goals are set for the Group as a whole and for its Divisions whose achieve ment will provide the company’s shareholders with a return on their investment that is at least as high as Kuoni’s WACC.

Performance measurement and assessment The KEP and ROIC for the Kuoni Group and its Divi sions are calculated every quarter and compared with the corresponding budgeted and prior-year figures as an integral part of the reporting process. The devel opment of KEP over time (known as “delta KEP”) and changes in the difference between ROIC and WACC reveal the value added by the Group as a whole and its Divisions. Linking these results to the operational value drivers of turnover growth, cost efficiency and capital efficiency also reveals how such value was achieved.

Nov

Dec

KEP

Variable compensation CHF MILLION 80

71.9

60 40

60.4 48.1

20 –64.3

0 – 20 – 40 – 60 – 80 2006

2007

16.1

17.0

2006

2007

2008

2009

ROIC (%) 20 18 16

18.8

14 12 10 8 6 4 2

KEP (i.e. actual KEP in relation to budgeted objec tives) is the prime financial criterion for determining bonus payments to members of senior manage ment at the Kuoni Group, i.e. members of the Group Executive Board and senior management groupwide. The definition of a single groupwide medium-termoriented bonus plan is intended to ensure consistent alignment to sustainable value creation within the Kuoni Group. Having substantially raised its KEP the previous year, the Kuoni Group saw Kuoni Economic Profit fall sharply during the year under review owing to the difficult economic conditions. The significant fall in turnover implicated that NOPAT was much lower than in the previous year. Despite sharp cuts in operating costs, cost efficiency was substantially below the 2008 figure. The reduction in the gross profit margin also contributed to the lower NOPAT. Owing to acquisitions, average invested capital went up during the year under review, resulting in a slight decline in capital efficiency. As a consequence, KEP fell by CHF 136.2 million to CHF – 64.3 million. The return on invested capital (ROIC) was 0.1 %, or 3.5 % after adjusting for spending on the investment and cost-cutting programme. Kuoni Group’s net result was therefore insufficient to cover its capital costs in 2009.

0.1

0 2008

2009

key Figures Value communication The presentation of KEP and ROIC trends for the Kuoni Group is part of Kuoni’s external communi cations with financial analysts and investors. This clearly and bindingly illustrates the Kuoni Group’s focus on sustainable value creation to the outside world, too.

CHF MILLION

Net operating profit after tax (NOPAT) Average invested capital Return on invested capital (ROIC) Weighted average capital costs (WACC) ROIC – WACC spread Kuoni Economic Profit (KEP) Delta KEP

2009

2008

0.5

131.7

759.6 0.1 %

701.2 18.8 %

8.5 %

– 8.4 % – 64.3 – 136.2

10.3 % 71.9 11.5

R eport ing

m a r k et r eport 2009

At a Glance – Kuoni group

Given the business parameters within which it was achieved, the Kuoni Group posted a satisfactory net result for 2009 in an unprecedentedly difficult market environment. The global economic and financial crisis and the repercussions of the swine flu pandemic prompted unparalleled declines in the demand for travel products in all Kuoni regions. The consolidated income statement was further saddled by strongly adverse exchange-rate movements in all key foreign currencies. Group turnover for the year totalled CHF 3 894 million. Organic turnover development amounted to minus 14.8 %. Despite the extremely challenging market environment, the Group achieved an EBIT for the year of CHF 15.1 million. All the Group’s divisions contributed to this black-ink operating performance. The Group net result amounted to CHF 1.6 million.

TURNOVER CHF MILLION 6 000 5 000 4 000 3 000 2000 1 000 0 2005

2006

2007

2008

2009

EBIT AND NET RESULT CHF MILLION EBIT

NET RESULT

200 150 100 50 0 – 50 – 100 2005

2006

2007

2008

2009

2008

2009

EARNINGS PER REGISTERED SHARE B CHF 60 50 40 30 20 10 0 – 10 – 20 2005

2006

2007

Division Market Region South Switzerland

Internal transformation project launched Helvetic Tours drops printed price list for freshly updated prices Second Flagship Store opened in Zurich

The Swiss market generated turnover of CHF 821 mil lion in 2009. This represents a fall of 20.1 % on the previous year (2008: CHF 1 028 million). Earnings before interest and taxes (EBIT) came to CHF 1.5 mil lion (2008: CHF 39.4 million). The global financial and economic crisis and the effects of swine flu resulted in a significant drop in demand in the Swiss market. The lower price level resulting from continuously renegotiated hotel prices, and a reduction in flight capacities also contributed to the fall in turnover compared with 2008. A shift in consumer demand away from long-haul and towards short and medium-haul routes had a negative impact on the turnover figure. Price levels were additionally driven lower by the fact that oil prices – and therefore kerosene prices – were lower than in 2008. Rising margins on package holidays during the summer months and on the specialist brands were not enough to compensate for the fall in margins for the whole year caused by the intensely competitive environment. Based on the cancellation of holiday flights to Mexico for the whole summer season, the effect of swine flu was calculated as having reduced EBIT by CHF 3 mil lion. The previous year’s results were also lifted by the sale of the Edelweiss Air aircraft: i.e. EBIT effect of CHF 9.5 million from the saving on depreciation. The decision by middle and upper management and the Executive Board to forego half a month’s salary, and the introduction of short-time working from 1 September 2009 led to a significant reduction in costs. These were just two of the many savings meas ures taken in the Swiss market. In mid-2009 Kuoni launched the internal trans formation project “Patrouille Suisse”. This is trans forming the Swiss market from a product-oriented organisation to a consumer-focused structure. Around 100 people are working on the various sub projects within Patrouille Suisse. Among other things, a customer segmentation system is being developed so that Kuoni can speak to and win customers in a more targeted way. Customer contact during and after travel is being redesigned to offer customers greater added value. Kuoni has set itself the goal of perfecting

every moment of the travel experience. The idea is to improve the quality of the travel, the destinations and the services and so set Kuoni apart from other provid ers. Other projects focus on the further profession alisation of existing and new sales channels. Kuoni wants to be able to identify and look after its custom ers wherever they come into contact with Kuoni and its products. On 1 January 2009, Kuoni took over the Basel-based tour operator Cotravel. This company is one of Swit zerland’s leading organisers of high-quality study trips accompanied by expert guides. On 1 December 2009 Kuoni also took over all the travel activities of the motoring organisation Touring Club Schweiz (TCS), including ten travel agencies and the production of holidays under the “Reisen TCS” label. These holidays are now being offered in partnership with TCS to its 1.6 million members and are available in the approxi mately 100 Kuoni and Helvetic Tours travel agencies.

Kuoni Market Management (formerly Tour Operating): Helvetic Tours breaks new ground and drops its printed price lists Helvetic Tours, the package holiday brand that was successfully repositioned in 2008, once again took on a pioneering role in the Swiss travel industry during the year under review. Its beach holiday catalogue for the 2009/10 winter season was the first to be published without a printed price list. Consumers benefited by getting the latest daily price when they booked, whether at the travel agency, on the internet or through the call centre. Prices can alter depending on supply and de mand, meaning that newly negotiated hotel prices can be offered to customers straight-away. A fixed, printed price list included in the summer 2009 holiday bro chure was out of date as soon as it appeared. In 2010 the city-break programmes offered by Helvetic Tours and Kuoni will also dispense with a printed price list. Ho tels are connected directly to the Kuoni booking system and can update their offers at any time, which means that Kuoni and Helvetic Tours city breaks are as up-todate and attractive as those available on the internet.

R eport ing

Because of the financial and economic crisis and the consequent fall in demand, reduced-price special offers were offered under the Kuoni brand for the first time in 2009 as part of the “Luxuriös sparen” (“luxury savings”) campaign. Newly negotiated hotel prices were offered to customers as they became available. Demand for these products was very high. In 2009 new holiday programmes for Africa (East and Southern Africa) and India were launched under the Kuoni brand. In 2009 a training camp was run for all employees in Market Management (formerly Tour Operating). Several internal workshops were held, including some with external experts, to explore Kuoni brand values. The top destinations in 2009 for Swiss customers were Egypt, Greece, Cyprus and the Canary Islands (Spain). In the long-haul sector, the Dominican Republic benefited from the cancellation of direct flights to Mexico. Following political unrest in Kenya in 2008, demand for travel to East Africa started to rise again in 2009. At the 2009 Travel Star Awards, Kuoni Switzerland carried off eight gold, silver and bronze prizes, thus confirming its place as Switzerland’s best tour operator.

Kuoni retail: second Flagship Store opened in Zurich Following the opening of the first Swiss Kuoni Flag ship Store in Bellevue (Zurich) in 2008, the second was opened in September 2009 on Zurich’s famous Bahnhofstrasse. The interior design – colours, materials and accessories – were all tailored to match the international ambience of the store’s location. The “Meine Agentur” (“my agency”) project – unique within the Swiss travel industry – was started dur ing the year under review. Four young graduates of Kuoni’s training scheme now manage the converted and modernised Helvetic Tours travel agency in Zu rich’s Wiedikon district. The “youngest travel agency in Switzerland” uses web-based social networks as part of its communications strategy, and organises special events and campaigns to attract young con

M a r k et R eport 2009

sumers. The project will run for at least three years. Kuoni’s aim is to give talented young people the op portunity to take on responsibility and use creative new ideas to appeal to new customers. On 1 December 2009, Kuoni Switzerland took over the travel activities of the Touring Club Schweiz (TCS). Ten TCS branches were incorporated into Kuoni’s network of travel agencies. New agencies were thus created in Schwyz, Stans, Glarus, Wetzikon and Monthey while duplicate locations were merged. The kuoni.ch website was completely renovated dur ing the year under review, and its structure adjusted to suit holidaymakers’ various needs. A “Holiday Finder” has been set up, for example, which shows users tailor-made holiday offers based on criteria they enter. The personalised “My Kuoni” area lets customers create their own travel profile and save a wish list of holidays and hotels. The new Kuoni web site has also been given a fresh design overhaul that uses photographs and videos to give consumers new inspiration for their holidays. In 2009 the website started to include independent hotel ratings from “Trip Advisor”. Before choosing their hotel, consum ers can read reviews from other hotel guests directly on the Kuoni site. The Helvetic Tours website was given a visual makeover during the year under review. Booking through the site was made easier and now covers more products.

Private Safaris, Rotunda Tours and intens travel (PRZ AG): Kenya recovers from the unrest of the previous year; South Africa, India and China suffer from the economic crisis Private Safaris, the East African specialists, saw turnover go up again in 2009 after the political unrest in Kenya in 2008. In 2009 the Kuoni Mara Bushtops Camp in Kenya was once again chosen as the best camp of its kind in East Africa. Plans to set up further camps in the Serengeti National Park are due to be realised this year. During the year under review, holidays in East Africa were produced under the Kuoni brand for the first time.

Rotunda Tours, the specialist for Southern Africa, suffered a decline in turnover owing to the financial and economic crisis. Now that holidays are being produced in South Africa under the Kuoni brand, Rotunda Tours can also sell its products in Frenchspeaking Switzerland. The whole region is expected to attract a lot more attention as a holiday destination this year as a result of the FIFA World Cup in South Africa. In 2009 Rotunda Tours won a Travel Star Gold Award as the Best African Tour Operator. intens travel, the specialist for travel to India and China, suffered in 2009 not only from the drop in turnover resulting from the financial and economic crisis, but also from the impact of the terror attacks in Mumbai. However, it was able to build on its leading position in the Swiss market for travel to India by concentrating more on service and product differen tiation. Travel to China was hit by falling demand in 2009. China has not yet recovered in the Swiss market from the impact of the severe earthquake and the political disputes with Tibet.

Manta Reisen: price falls lead to decline in turnover

tendency of customers to book at late notice, and the number of holidays within Switzerland was increased. Railtour Suisse won a Travel Star Gold Award as the Best City-Break Tour Operator.

Kontiki-Saga AG: booming demand for Iceland The specialist in holidays to Northern Europe only saw turnover slip a little in 2009. On the other hand due to margin improvements a record EBIT was achieved. Product innovations plus specialist and readers’ holidays led to positive demand. Iceland, which was hit so hard by the economic crisis, did best of all as a destination. Bookings matched the record level of the previous year thanks to the publicity and the lower prices. Kontiki-Saga won a Travel Star Silver Award in 2009.

Dorado Latin Tours: another increase in turnover The South American travel specialist can look back on a successful 2009. Argentina, Chile and Peru were the most popular destinations. Turnover went up once again. Dorado Latin Tours won another Travel Star Gold Award as Best South American Tour Opera tor in 2009.

The specialist for diving holidays and travel to the Indian Ocean saw turnover fall in 2009 owing to gener ally lower prices. Increased last-minute bookings for the key winter period could not compensate for the decline. The Maldives and Mauritius remain the most popular dream island destinations. The portfolio of Maldives products was enhanced by the debut “First Class AllInclusive Resort”. Manta Reisen won a Travel Star Gold Award as Best Tour Operator to the Indian Ocean.

Unique Travel: new holiday destinations in Croatia

Railtour Suisse / Frantour Suisse: increased cooperation

Direkt Reisen: integration into Kuoni Market Management

The restructuring of the two train travel companies was continued during the year under review. Procure ment and production of holidays was merged, but the two brands and the offices in Cantons Bern and Geneva remain in place. The restructuring led to 30 job losses, and both train travel specialists posted lower turnover. Products were adjusted to match the

The direct holiday provider was streamlined and re structured during the year under review. At the same time the brand was given a new visual identity. Direkt Reisen was integrated into Market Management this year in order to benefit more from synergies within Kuoni Switzerland. The established brand and distri bution channels are, however, being retained.

The Croatia specialist suffered under the financial and economic crisis and posted a decline in turnover compared with the previous year. Direct flights from Switzerland to the Croatian holiday areas of Istria and Kvarner were introduced for the first time. Unique Travel also produced the Croatia programmes for Helvetic Tours and Direkt Reisen.

R eport ing

M a r k et R eport 2009

At a glance – Switzerland

Lower prices and reduced flight capacities in a generally difficult economic environment led to a fall in turnover. Costs were reduced significantly by a combination of middle and senior managers waiving part of their salaries, the introduction of short-time working and other savings measures. A positive operating result (EBIT) was achieved in the highly competitive Swiss market despite all the negative external influences. The Helvetic Tours package holiday brand once again played a pioneering role in the market, introducing flexible daily prices instead of a printed price list. Kuoni’s network of travel agencies was bolstered by the acquisition of Touring Club Schweiz’s travel business.

TURNOVER CHF MILLION 1 200 1 000 800 600 400 200 0 2005

2006

2007

2008

2009

2006

2007

2008

2009

2006

2007

2008

2009

EBIT CHF MILLION 45 40 35 30 25 20 15 10 5 0 2005

ROIC (%) 50 45 40 35 30 25 20 15 10 5 0 2005

Division Market Region South Southern Europe

New premises in France First Flagship Store opened in Milan Concierge Service introduced in Spain

Within the Division Market Region South, the Southern Europe Unit covers France, Italy and Spain. All of these markets were heavily affected by the financial and economic crisis and all posted similar falls in turnover compared with the previous year. The spread of swine flu also acted as a brake on demand. Overall the Southern Europe Unit achieved turnover of CHF 374 million (– 30.5 %) (2008: CHF 539 million). Earnings before interest and taxes (EBIT) came to CHF 6.1 million (2008: CHF 18.9 million).

France: changing competitive environment creates greater pressure Kuoni France posted turnover of CHF 245 million in 2009 (2008: CHF 345 million). The decline was mainly due to the widespread recession, which hit France hard over the course of the year under review. In addition, a changed competitive environment meant that sales of Kuoni France’s products through a large chain of travel agencies were significantly lower. A change in holiday habits towards short and medium-haul routes also resulted in lower turnover. Kuoni is a leading premium long-haul travel provider in France, and is one of the country’s five biggest tour operators. In 2009 the favourite destinations for French holidaymakers were once again the Maldives and Egypt. However, demand for both destinations was lower than last year. By contrast, the number of holidays to Indonesia and Kenya went up. In 2009 Kuoni’s travel agency in Lyon was completely renovated before reopening in September. Kuoni France also relocated its headquarters to SaintOuen, north of Paris, in July 2009.

Italy: direct sales expanded Kuoni Italy reported turnover of CHF 105 million in 2009 (2008: CHF 145 million). Here too, the difficult economic conditions led to a very restrained mood among consumers. An increase in last-minute offers,

especially to the Indian Ocean and South Africa, and particularly in the second half of the year and for the important Christmas season, was not enough to compensate for the decline. The expansion of direct sales begun in the previous year was continued in 2009. This included a call centre to provide advice directly to customers, an improved internet platform and, since the start of 2010, mobile personal travel consultants. In June 2009 Italy’s first Kuoni Flagship Store was opened in the middle of Milan. Since the start of 2009 customers have also been offered a Concierge Service. The most popular holiday destinations for Italians in 2009 were the USA, Australia, India and Polynesia (South Sea Islands). Owing to the widespread recession, demand for these holidays was lower in 2009 than in the previous year. By contrast there was a welcome increase in demand for holidays in South Africa, Japan and, to a certain extent, China and Mauritius.

Spain: new global booking system Kuoni Spain posted turnover of CHF 25 million for the year under review (2008: CHF 38 million). The fall comes largely as the result of a poor economic climate made worse by the continuing Spanish real estate crisis. In addition, demand for holidays fell in the wake of the first wave of swine flu in spring 2009. Spain was the first country in Europe to be hit seriously by swine flu. A Concierge Service was also introduced in Spain in 2009. A new holiday programme that combines cruises with land arrangements was also launched. In November 2009 Spain also became the first market in the Kuoni Group to start using the standard Group-wide booking system. Favourite holiday destinations included the USA, Thailand, the Maldives and China.

R eport ing

M a r k et R eport 2009

At a glance â&#x20AC;&#x201C; southern europe

The Southern European markets (France, Italy and Spain) were hit hard by the financial and economic crisis. A trend away from long-haul towards short and medium-haul routes led to a fall in turnover. At the same time, the spread of swine flu had a negative effect on consumer sentiment. In mid-2009, Spain became the first country in Europe to be affected by the pandemic. Numerous cost-cutting measures were not enough to compensate for the decline in EBIT caused by lower turnover. The first Kuoni Flagship Store in Italy was opened in Milan. The companyâ&#x20AC;&#x2122;s French headquarters were moved, resulting in lower costs. And Spain became the first market to start using the standardised, Group-wide booking system.

turnoVer chF Million 600 500 400 300 200 100 0 2005

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2007

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2009

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2008

2009

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EBIT chF Million 25 20 15 10 5 0 2005

roic (%) 70 60 50 40 30 20 10 0 2005

Division Market Region South Asia

Stake taken in biggest southern Chinese holiday company Further growth at VFS Global New flagship training centre opened in Mumbai

During the year under review the Asia Unit (India, Hong Kong/China) recorded turnover of CHF 267 million (2008: CHF 304 million). This 12.4 % decline can be attributed mainly to the weakening of the Indian Rupee against the Swiss Franc (– 9.9 %). Given the global financial and economic crisis, the fact that turnover could be kept at the previous year’s level in the Indian market is a very good performance. Earnings before interest and taxes (EBIT) increased pleasantly to CHF 25.9 million (2008: CHF 22.5 million). The continued growth of VFS Global (Outsourced Consular Services) made a large contribution to this result.

India: first Corporate Travel Centre opened In the year under review Kuoni India posted turnover of CHF 229 milion. (2008: CHF 256 million). The retail network of the Kuoni brand was increased from 14 to 19 shops. Kuoni India became the first travel company in India to open its own leisure travel offices within one of the biggest Indian IT companies. The company’s approximately 100 000 employees can use this to book their holidays. A programme of skiing holidays was launched for the first time. Kuoni is the first premium provider in India to offer such a product line. Favourite travel destinations for Indians in 2009 included Southeast Asia, the United Arab Emirates (Dubai), Europe, Egypt, Turkey, Australia and New Zealand. Kuoni continues to be India’s leading travel company. Kuoni again received numerous awards during the year under review. These included Best Travel Agency – India (TTG Asia Award) and an award from the Indian Ministry of Tourism for Kuoni’s exceptional contribution to the growth of tourism in India. The Kuoni Academy, founded in 2003, further expanded its network of locations. The number of training centres – Kuoni’s own and the franchises – was increased from 11 to 21. A new 10 000 square meters flagship training centre was opened in Mumbai. Kuoni Academy provides training and development courses for people working in the tourism industry. VFS Global continued to grow. In 2009 the number of Visa Application Centres (VAC) rose to 337 in 45 countries. The introduction of a concept of Joint

VACs for visa applications for multiple countries offering Schengen visas (for Europe) has made processing more efficient and cheaper. Working for embassies and authorities, VFS Global handles the monitoring and processing of all the administrative tasks involved in issuing visas.

Hong Kong / China: stake taken in Southern China’s biggest travel company Et-china In 2009 turnover fell to CHF 38 million (2008: CHF 49 million). This fall is due mainly to the effects of the global financial and economic crisis and swine flu. These external factors had a strong negative effect on demand for travel. During the year under review Kuoni Hong Kong introduced an electronic booking system for travel agents, which allows them to check directly online for availability and booking options for group travel. A system was also introduced for direct customer contact which shows customers photos to help them visualise the products when discussing holidays. The most popular holiday destinations included Central and Eastern Europe, Russia, the Middle East, Egypt, Tunisia, Kenya, South Africa and South America. Among neighbouring countries, Vietnam, Cambodia and Bhutan were the top destinations. In Hong Kong, Kuoni China has established itself as a premium-segment specialist for cruises, longhaul travel, niche products and services. At the start of June 2009, Kuoni Group bought a stake of around 32 % in Et-china. This made Kuoni the biggest single shareholder in the Southern China’s biggest travel company. The medium-term aim is for Kuoni to take over a majority stake in Et-china. Et-china includes Guangzhou International Travel Services (GZL) and it specialises in group package holidays within China and abroad. It also runs a leading internet platform for individual travellers. In addition, the company is involved in a joint venture with China’s biggest airline, China Southern Airlines, for whom it processes all ticket sales.

R eport ing

M a r k et R eport 2009

At a glance – Asia

The Asian markets, particularly India, maintained turnover at the previous year’s level in local currency terms. The main reason for the overall reduction in turnover was the fall in the value of the Indian Rupee against the Swiss Franc. By contrast there was a pleasing increase in operating earnings (EBIT) despite the financial and economic crisis and the effects of the pandemic in Asia. VFS Global once again recorded particularly good growth. Kuoni Group bought a stake of around 32 % in Et-china. This is one of Southern China’s most important tour operators, offering products including group package tours within China and to other countries.

turnoVer chF Million 350 300 250 200 150 100 50 0 2005

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EBIT chF Million 30 25 20 15 10 5 0 2005

roic (%) 25 20 15 10 5 0 2005

Division Market Region North Scandinavia

Increased market share in Sweden and Norway Playitas converted into sports and family resort UTE Megapolus restructured in Russia

Kuoni Scandinavia, UTE Megapolus (Russia) and the sports and family resort Playitas generated total turnover of CHF 1 012 million in 2009 (2008: CHF 1 193 million). This represents a year-on-year decrease of 15.1 %. Earnings before interest and taxes (EBIT) fell to CHF 5.3 million (2008: CHF 29 million). Although the Swedish and Norwegian markets achieved record turnover once again in local currency terms, the devaluation of the Swedish Krona and Norwegian Krona against the Swiss Franc resulted in lower turnover. The greater margin pressure produced by last-minute offers also ate into the EBIT figure. The restructuring measures carried out in Russia continued in 2009.

Scandinavia: record turnover in Sweden and Norway During the year under review, Kuoni Scandinavia (Sweden, Norway, Denmark) recorded turnover of CHF 945 million (2008: CHF 1 075 million). Despite the global financial and economic crisis and the effects of swine flu, the Swedish and Norwegian markets once again posted record turnover in local currency terms. This excellent improvement was clouded only by the steep fall in the value of the Swedish Krona and Norwegian Krona (– 13.6 % and – 10.3 % respectively) against the Swiss Franc. The Apollo brand is number three in the Swedish market and was able to win further market share in 2009. In Norway Apollo is the second biggest travel company, and it too was able to increase its share of the market. Of all the Scandinavian markets, Denmark was hit hardest by the financial and economic crisis. Apollo Denmark, including Falk Lauritsen, is the number two provider in this market. Following the record figures recorded in the previous year, the fall in operating earnings (EBIT) was due mainly to the fall in value of the Swedish Krona and to the lower gross profit margin. Margins were tighter because of the tough competitive environment and the discounts offered on last-minute bookings. During the year under review Kuoni in Sweden continued to build up its online partnership with the country’s biggest retail chain, Coop. This sells Apollo Sweden’s holidays over the internet. In 2009 all the Apollo-brand websites in Scandinavia were modernised and adapted to match the Kuoni Group technical platform. This led to a further improvement in user-friendliness and visual appeal.

The proportion of holidays sold over the internet rose again in 2009. 43 % of customers in Scandinavia booked their holidays online during the year under review. During the Scandinavian summer the most popular destinations were the Greek islands of Crete and Rhodes, as well as Southern Turkey, Cyprus, Bulgaria and Mallorca. In winter the Canary Islands, Egypt and Thailand topped the list. During the year under review, Novair, the airline operated by Kuoni Scandinavia with a fleet of three Airbus A321s, was the first charter airline to practice “green landings”: an exact landing time is agreed well in advance with local flight controllers at Stockholm-Arlanda airport, which enables pilots to reduce airspeed and altitude early in the descent and thus substantially reduce emissions. Apollo received the Grand Travel Award for Best Tour Operator in Norway. “Stopover”, Novair’s flight magazine, was awarded the Swedish Designer Prize for best customer magazine. In 2009, Kuoni Scandinavia managed the conversion of the Playitas holiday resort into a modern sports and family holiday centre. This included the construction of a state-of-the-art cycling centre, an 18-hole golf course, an Olympic swimming pool and modernised fitness and wellness facilities. Playitas is now the leading sports resort on Fuerteventura. During the year under review Playitas entered into a strategic partnership with the well-known international cycling team “Saxo Bank”. The team used the new infrastructure at Playitas for training and preparation work.

UTE Megapolus (Russia): successful restructuring Russian subsidiary UTE Megapolus was restructured in 2009. The company was transformed from a traditional Russian tour operator into a functional, modern company with professional procurement and production, marketing and sales. At the same time, risks relating to flight capacities were significantly reduced. These measures were supported by online booking and a streamlining of the retail network. UTE Megapolus introduced Spain and Thailand as new destinations.

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At a glance â&#x20AC;&#x201C; Scandinavia

Kuoni Scandinavia saw turnover fall mainly because of the weakness of the Swedish Krona and Norwegian Krona against the Swiss Franc. The Swedish and Norwegian markets once again posted record turnover in local currency terms. The greater margin pressure produced by the fall of the Swedish Krona and lastminute offers also resulted in lower operating earnings (EBIT). The Playitas holiday resort was converted under Scandinavian management into a state-of-the-art sports and family holiday centre. The number of Scandinavian guests at the resort rose significantly. Russian subsidiary UTE Megapolus was further restructured in 2009.

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Division Market Region North United Kingdom and Benelux

New Kuoni Stores opened in the UK Successful expansion of last-minute holiday offers Direct sales further strengthened

Within the Division Market Region North, the UK and Benelux markets posted turnover of CHF 652 million for 2009 (– 20.9 %) (2008: CHF 824 million). Earnings before interest and taxes (EBIT) fell to CHF 9.2 million (2008: CHF 32.2 million). A big fall in the British Pound against the Swiss Franc (– 14.8 %) and the ongoing financial and economic crisis had a particularly negative impact on the result. The effects of swine flu also put a damper on consumer sentiment.

UK: successful last-minute travel offers Kuoni UK reported turnover of CHF 524 million for the year under review (2008: CHF 661 million). The United Kingdom was one of the first Kuoni markets to be hit by serous recession, and the UK’s economic figures continued to worsen in 2009. Despite the negative external influences, Kuoni UK experienced a much smaller drop in turnover in local currency terms than other Kuoni markets. This was largely due to various efforts involving direct customer contact. Owing to changing consumer behaviour and stronger demand for late-booked holidays, in late 2008 Kuoni UK launched a new team to focus on the negotiation and marketing of last-minute travel offers. In January 2009 the “Kuoni Sale” was launched successfully for the first time and was repeated in May 2009. Adjusting products to more value-sensitive customers, especially in the premium market, proved to be an astute and successful move. Following the opening of the first Kuoni Flagship Stores in Kensington (London) and Manchester in 2008, new Kuoni Stores were opened in Bristol, Milton Keynes and Bluewater in 2009. Newly refurbished stores were opened in the City of London and in Knightsbridge. Based on direct feedback from Kuoni customers, the company’s internet presence was further modernised and made even more user-friendly. The website was given a clearer structure and introduced a new technologies such as the dynamic price calendar and clearer special offers. Following the global rebranding of 2008, partnerships with luxury brands, other consumer goods and exclusive events were expanded in the UK.

At the start of this year Kuoni UK published its Long Haul Report on Britons’ favourite holiday destinations. As in the previous year, the Maldives were at the top of the list, followed by Thailand and the USA. Kuoni UK once again received numerous awards during the year under review. British consumers chose Kuoni for several awards, including the Telegraph’s Ultra Travel Award for the Best Large Tour Operator and the Sunday Times Travel Readers’ Award as Favourite Tour Operator for Family Holidays. Kuoni UK was also honoured with the industry’s most prestigious Travel Weekly Globe Award for Best Long-Haul Tour Operator, Best Specialist for the Far East, the Pacific, Australia and New Zealand and Best Specialist Operator Middle East. Our UK-based specialists also won numerous awards. These include CV Travel, chosen as best tour operator in the “Best Villas” category of the Condé Nast Traveller Readers’ Travel Awards. Kirker and Carrier were also honoured for their outstanding service. The introduction of a new Group structure also brought a change in the management of Kuoni UK in October 2009. Joanna Edmunds, an experienced tourism professional, is now in charge of the UK market.

Benelux: smaller demand for long-haul destinations Kuoni Benelux posted turnover of CHF 129 million for the year under review (2008: CHF 164 million). This fall is due mainly to the global financial and economic crisis and the swine flu pandemic. As a long-haul specialist, Kuoni in the Netherlands and Belgium was affected by the low demand for overseas destinations. The successful introduction of last-minute holiday offers was not enough to compensate for this. The most popular destinations at Kuoni Benelux in 2009 were the USA, Africa, China, the Maldives, the Netherlands Antilles and cruises in the Caribbean. In the Netherlands, Kuoni continues to be the leading travel specialist for long-haul destinations. In the travel market as a whole, Kuoni reasserted its position as the fifth-largest provider. Kuoni once again received numerous awards during the year. These included Best Tour Operator to North America, Africa, Australia and New Zealand, as well as Best Specialist Operator.

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At a glance â&#x20AC;&#x201C; UK And BENELUX

Kuoni suffered particularly badly from the widespread recession in the UK in 2009. In addition, the substantial fall in the value of the British Pound against the Swiss franc resulted in lower turnover. Operating (EBIT) also fell sharply owing to these negative external influences. Nevertheless, new direct sales teams offering last-minute holidays were successfully positioned in the market. The opening of various new travel agencies also increased the rate of direct customer contact. Kuoni Benelux, as a long-haul specialist, was affected by the decline in demand for overseas travel. The successful introduction of last-minute offers was not enough to compensate for this.

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Division Destinations Destination Management

Online link for hotels keeps offers right up to date Greater demand for travel to East and Southern Africa Expansion of activities in Arabic countries

The Division Destinations generated turnover of CHF 894 million (2008: CHF 1 101 million). This 18.8 % fall is due to the global financial and economic crisis and the effects of the swine flu pandemic. In Asia especially, consumers were greatly unsettled by the spread of swine flu, leading to significantly reduced demand. The Division’s results were also hurt by negative currency influences. EBIT fell to CHF 15.5 million (2008: CHF 38.5 million). Kuoni Destination Management continues to be the market leader in the USA, India and East Africa. In Europe, South Africa, Southeast Asia and the United Arab Emirates, Kuoni Destination Management is one of the major providers.

Destination Management Europe: expansion of online links with hotels and service providers Destination Management Europe posted turnover of CHF 413 million for the year under review. (2008: CHF 601 million). The previous year’s results included turnover of CHF 60 million and EBIT of CHF 3 million from the successful organisation of hotels for the 2008 European Football Championships. The main destinations in Europe for travellers from Asia were France, Italy and Switzerland, followed by the Netherlands, Austria, Germany and the UK. The large cities in particular were very popular in 2009. Demand for short, cost-effective holidays with few extra services also rose as a result of the financial

and economic crisis. Kuoni maintained its leading position in organising large groups of travellers from Asia. Kuoni Connect was developed further and launched worldwide at the World Travel Market (WTM) in November 2009 in London. This web-based platform allows business partners, travel agents and direct customers to access Kuoni Destination Management’s portfolio of hotels and make bookings. Meanwhile, the hotels themselves can go onto Kuoni Connect at any time to update their room prices. Kuoni Connect had already been integrated into the strategic partnership with Swiss International Air Lines earlier in the year. Kuoni started using the system to offer hotels on Swiss’s website in March 2009. This has provided access to new customers in new markets. Bookings via this channel have met expectations. The online link to providers of group services was also expanded. This allows hotels to make offers to groups of travellers online.

Destination Management USA: new product lines launched in top segment In 2009 AlliedTPro (Destination Management USA) generated turnover of CHF 189 million (2008: CHF 243 million). This fall is due on the one hand to the global financial and economic crisis, and on the other to the effects of the swine flu pandemic, which hit the USA hard. Despite healthy demand from

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Europe, the continuing cheapness of the dollar was not enough to compensate for the decline. The trend towards late booking also led to lower prices. Favourite destinations were New York, Las Vegas and Orlando. Hawaii, Las Vegas and certain national parks enjoyed the biggest growth. A new “lifestyles” programme was launched in 2009. This offers customers in the luxury segment highquality services and unique experiences. The newly launched “VIP Concierge” also helps selected guests meet their personalised, tailor-made holiday requirements.

Destination Management India and South Asia: market leader despite negative external influences The financial and economic crisis and a very strong outbreak of swine flu in India’s big cities resulted in a significant fall in demand. In addition, the bomb attacks of 2008 continued to hamper business in 2009. The fall in the value of the rupee against the Swiss franc also had a negative impact. These external influences led to a reduction in turnover at the Indian destination management unit with its SITA and Distant Frontiers brands. Turnover fell to CHF 58 million (2008: CHF 80 million). In 2009 the most popular destinations were Kerala, Rajasthan and Goa. Luxury trains were also in fashion. A new line of adventure products was launched for journeys to Nepal.

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Destination Management India and South Asia again received some major awards in 2009, including its sixth consecutive Galileo Express Travel World Award for Best Inbound Tour Operator, and an award from the Indian Ministry of Tourism for Kuoni’s exceptional contribution to the growth of tourism in India. This is the first time a travel company has received such an award in India.

Destination Management Africa: significant rise in turnover Demand for holidays in East and Southern Africa suffered a steep decline following political unrest in Kenya and South Africa. Private Safaris (Destination Management Africa) generated turnover of CHF 56 million in 2009 (2008: CHF 42 million), a pleasing increase of a third. The office in Namibia that opened for business at the end of 2007 was already able to post a positive operating result in 2009. Cape Town, Kruger National Park and the winegrowing region were the most popular Southern African destinations in 2009. Holidays to South Africa were increasingly combined with visits to Namibia and Botswana. In East Africa, tourists favoured the Masai Mara Nature Reserve and Samburu National Park. In Kenya and Southern Africa, Private Safaris introduced the Kuoni Concierge Service for select guests.

In 2009, the Kuoni Mara Bushtops Camp in Kenya was once again chosen as the most beautiful and modern camp of its kind in East Africa. South Africa is hosting the FIFA World Cup in 2010. Early signs show a greater demand for safaris, which tourists are looking to combine with attending football matches.

Destination Management Asia / Pacific: Thailand hit by external influences The year under review was strongly affected by the crises and the swine flu pandemic. Demand for holidays in Thailand fell particularly sharply. This was also due to the political unrest in that country at the end of 2008. Turnover recorded by Asian Trails and Australian Tours Management (Destination Management Asia/Pacific) was down to CHF 88 million (2008: CHF 98 million) as a result of these external factors. Favourite destinations included Vietnam, Indonesia, Malaysia, Laos, Cambodia, Myanmar and, to a certain extent, Thailand. The trend towards late booking was evident in 2009, too. In 2009, the trade press awarded Asian Trails the major Best Travel Agency award for Indochina.

Destination Management Arabia: strong growth after acquisition Thanks to the acquisition of Dubai-based Desert Adventures Tourism (DAT) in 2008, Destination Man-

agement Arabia enjoyed strong growth. Turnover rose by 72 % to CHF 95 million (2008: CHF 55 million). Desert Adventures Tourism (DAT) is one of the top three destination management companies in the United Arab Emirates and is market leader in the tours sector. In 2009, DAT was given a rebranding and a new logo that emphasises its place within the Destinations Division. The product and service area was greatly expanded. New programmes (“Once in a Lifetime”, “Secrets of Arabia”) give holidaymakers some out-of-theordinary experiences and help Kuoni differentiate its products from those of its competitors. The most popular holiday destinations in 2009 were Dubai, Abu Dhabi, Fujairah and Oman. China, India and South America are all new source markets with growth opportunities.

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At a glance â&#x20AC;&#x201C; destinations

The globally active Division Destinations was hit hard by the financial and economic crisis and the effects of swine flu. In Asia especially, consumers were greatly unsettled by the pandemic, which had a negative effect on travel patterns. These external influences led to lower turnover. Successful price renegotiations and higher margins were not enough to compensate for this, resulting in lower operating earnings (EBIT). Destination Management Africa saw a welcome increase in turnover. Arabia also posted higher turnover thanks to acquisitions. Kuoni Connect, a web-based platform, was launched all over the world. This allows hoteliers to offer customers the very latest hotel prices.

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Corporate & Business Development 60 Information Technology 62 Corporate Responsibility 66 Human Resources 68 Addresses 70 Kuoni glossary 72 Agenda 2010 58

Corporate & Business Development – preparing the path ahead

No Swiss company can survive and thrive for 104 years as Kuoni has unless it keeps a clear and constant eye on its vision, on its strategy and on social and eco nomic change. The tourist industry has seen particu larly strong upheavals in recent times, driven by new technologies, almost limitless information possibilities and sea changes in consumer behaviour; and all these developments demand consistent, alert and profes sional analysis of the markets, the competitive envi ronment and the company’s own situation. Identifying trends, appreciating innovations, breaking new ground: the Kuoni story boasts many milestones of the company successfully positioning itself by using its skill, its vision and the personal commitment of its people to craft and contour the new and leave the old behind. Within the Kuoni Group, the Corporate & Business Development unit (CBD) plays the prime role in preparing the corporate path ahead. It is CBD that guides the annual strategic planning process and the company’s strategic initiatives. In doing so, CBD supports the Board of Directors and the Group Exe cutive Board in their decision-making processes, by asking such apparently simple questions as: What do we stand for (our vision)? How do we achieve this (our strategy)? What projects and other measures will

this require (our actions)? What earnings improve ments can we expect this to deliver? (our results). CBD also shows the company’s top decision-making bodies what external and internal influences might impact on earnings performance, and what person nel and financial resources are needed (or what major repercussions – positive or negative – can be expected in personnel and financial terms). In doing all this, CBD can draw on a number of professional infor mation tools, networks and external specialists that provide it with a comprehensive overview and with all the information the company’s top bodies need to make the right key decisions on its further development. The Kuoni Group reappraises and modifies or con firms its corporate vision and strategy on an annual basis. The corresponding strongly fact-based process culminates each year in the two joint workshops which CBD holds with the members of the Board of Directors and the Group Executive Board. CBD then fleshes out whatever decisions are taken here, and manages and monitors their implementation. Corporate & Business Development laid the ground work for a number of decisions in 2009 that should en sure the Kuoni Group’s successful further development:

M a r k et R eport 2009

An exceptional investment and cost-reduction pro gramme was launched in January 2009 that will see total capital spending of CHF 106 million over a three-year period. Key investments have already been made in the company’s electronic distribution channels, in global branding and marketing, and in measures to enhance employee competencies and efficiency. A total of CHF 30 million had been invested in these areas by year-end. September 2009 saw the announcement of a reorganisation of the entire Kuoni Group, in favour of a more customer-focused structure. The changes will transform Kuoni from a decentralised to a functional global organisation. The restructuring will be com pleted by mid-2010. This radical reorganisation, which is the first the Kuoni Group has conducted for some time, calls for a precisely-coordinated approach involving not only the frontline units concerned in the various countries of Kuoni’s operations, but also the supporting HR and communications units. CBD is steering and moni toring the entire change process, and is also serving as the link between the implementation of the new structure and the Kuoni Group’s two top decisionmaking bodies, the Board of Directors and the Group

Executive Board. Corporate & Business Develop ment had also been closely and actively involved in shaping various strategic corporate decisions the previous year. These included the strategic partner ship with Swiss International Air Lines Ltd. which was embarked on in the course of 2008, as part of which the aircraft of Edelweiss Air were sold to Kuoni’s new airline partner. CBD also oversaw the realignment and expansion in various key markets of Kuoni’s local distribution organisation in direct customer contact. The creation of “flagship” and “high street” stores in the UK market was a particular highlight of these activities. CBD has further been in charge of coordinating and supervising all group projects since autumn 2009. The new brief should enable Kuoni to implement key projects in all areas of the company and its operations faster, more efficiently and thus successfully.

Information Technology – major investments for tomorrow

The Kuoni Group distributes its products and services via the sales channels that its customers demand and expect. Among these, the internet plays an important role. Kuoni already earns 16 % of its turnover from the internet. Scandinavia continued to lead the way here in 2009, with internet sales accounting for 43 % of all such bookings. With their round-the-clock availability and their ease of use, online sales chan nels will continue to enjoy above-average growth. For simpler products in particular which demand little assistance or advice, the internet is an attractive book ing tool. In the premium and specialist segment, the online option will not replace the established distri bution channels such as retail offices and call centres, but can usefully complement them. In this segment, the internet is seeing growing use as a source of information and inspiration in preparation for a per sonal discussion at a retail office or via a call centre. To ensure the further development of its electronic sales channels, Kuoni has now placed its e-business activities in a new globally-active “Distribution” unit. The websites of the Kuoni brand in Switzerland (including Helvetic Tours) and the UK and of various specialist brands were totally redesigned in 2009. In Scandinavia, the Apollo brand website was given its own relaunch. The new site features updated structures that are aligned to the latest findings on user habits and behaviour. The destination, flight, hotel and services search functions have been ex panded; and the home pages have been given a fresh

new look and design with images and video clips to further inspire visitors in their vacation plans. The websites of Kuoni Switzerland and UK have also been expanded to incorporate the independent “Trip Advisor” hotel assessments, enabling visitors to read the comments of previous residents before selecting their hotel. Kuoni uses the same Content Manage ment System (CMS) for the design and the content of all its websites Group-wide. Kuoni knows all the world’s best spots. And it is to pass on this expertise to its customers in a form that best meets their needs that the company has devel oped its Customer Relationship Management (CRM) and introduced this to its Swiss and Scandinavian markets. CRM enables Kuoni to further enhance the quality of the assistance and advice it provides for its customers before, during and after their trip, not only through personal face-to-face contact but also through the use of the latest technologies, including the internet and mobile phone. CRM is gradually being extended to more and more Kuoni markets. The Cross-Media Publishing System (CMP) project, which was launched back in 2007 with the aim of establishing a single standard data pool for producing publications (brochures, promotional material and similar), has now seen the system enter into full operation. CMP not only allows these publications to be produced more flexibly and inexpensively; it also helps strengthen the presence of the global Kuoni

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travel brand in all markets, by ensuring both the quality of its content and its consistent visual appeal. Kuoni Connect was launched worldwide in the course of 2009. The web-based platform enables business partners, travel agencies and end-user customers to access Kuoni Destination Management’s hotel port folio and book their hotel(s) of choice. The hotels, for their part, can update their room rates themselves online any time they wish. Kuoni has also been offering its hotel products on the Swiss International Air Lines website since March 2009, providing access to new customers in new markets. Online connections have also been expanded with the service providers within Destina tion Management for Kuoni’s group-travel business, enabling the hotels concerned to electronically enter their group booking rates.

New systems for more efficiency in 2010 The Kuoni Group Board of Directors approved an exceptional three-year investment programme at the beginning of 2009. A large part of the CHF 106 mil lion spending approved will be devoted to IT projects. 2009 saw further progress achieved in standardising the Group’s various reservation systems. This should both facilitate the management of the hotel capaci ties and further services concerned and improve the systems’ usability for selling travel products in

Kuoni’s various markets. This is turn should result in higher turnover levels and substantial reductions in operating costs. The new global reservation system was introduced in its first market – Spain – in November 2009. It will now be gradually extended to further Kuoni markets. A new global finance system has also been intro duced in 2010 (initially at Kuoni UK and France), as has the first-ever global intranet (K-Net), which should permit and promote the exchange of information among all the Group’s employees. In addition, all our European employees will be connected to a system that enables them to easily communicate and exchange their destination knowledge for the benefit of the customers. More then 2 500 employees in six countries are already linked in. All these major investments in tomorrows technolo gies will support Kuoni’s new functional global organisation. This in turn will benefit Kuoni’s customers – not only in choosing their vacation and being advised thereon, but also through the direct contact they can enjoy with Kuoni both during and after their vacation. For the company’s employees, meanwhile, the new systems offer an efficient and effective means of positioning Kuoni as a 21st-cen tury company and ensuring its continued further development.

Corporate Responsibility

Particularly in difficult times, companies that go about their business sustainably and act responsi bly are the ones that achieve longer-lasting success. Kuoni is aware that enduring success is not possible unless we treat the environment and society in general with care. As a globally active tourism busi ness, we have a responsibility towards the people and the environment in the destinations we go to, and in the places our customers come from. For Kuoni, sustainable business means combining economic success with a responsibility for the environment and society. The aim of the sustainability strategy is to minimise the risks and the negative impact of our business while also tapping into new business opportunities.

More information is available at http://www.kuonigroup.com/Corporate+Responsibility/Strategy

MANAGEMENT STRUCTURES FOR SUSTAINABILITY

SUSTAINABLE VALUE CHAINS AT KUONI

Kuoni’s sustainability work is coordinated centrally by the Corporate Responsibility unit. The Corporate Responsibility unit is the internal coordination and control centre for implementation in the company’s day-to-day life. It is also the contact point for external stakeholders. Over the last year, the Kuoni Group has built up and consolidated its Corporate Responsibility network. By establishing a “virtual CR team” Kuoni has taken another step in the integration of CR into all of its activities. This network consists of 12 people from op erational and functional areas, ensuring that sustain ability issues are integrated into business processes and that regional priorities are identified. The Corporate Responsibility Strategy is further integrated into business processes and day-to-day business by means of specific training and workshops. The CR unit has, for example, held workshops for Kuoni Destination Management, used the CR news letter to inform all employees about the latest projects and initiatives, and organised a Group-wide “CR paperless day”.

gether in the Kuoni Code of Conduct, which is binding for every employee of the Kuoni Group. More information is available at http://www.kuonigroup.com/Corporate+Responsibility/Strategy.htm

CR strategy We are keen to identify key issues relating to sustain able development as early as possible. Using a matrix approach, Kuoni works with external stakeholders to assess which issues could become a business risk or opportunity now or in the near future.

Living up to our responsibilities As an international company Kuoni has a significant influence on the sustainable development of tour ism at its destinations. Kuoni’s value chains include a network of several thousand service providers in well over a hundred countries. However, the company’s influence is not just limited to its own employees and to direct providers like hotels, excursion firms and transport companies. Our product managers’ purchasing strategies, the power relationships at play within our negotiations, and our economies of scale all have an influence on the business processes used in the whole sector, in the different national markets and in the networks of other tourism companies. The Kuoni Group uses various measures to promote and impose sustainability along the whole value chain. Within the value chain Kuoni aims to minimise the negative effects on people and the environment while reinforcing the positive effects. We believe that this commitment pays dividends for people, the environ ment and for the business, in terms of both short-term goals and the long-term development of tourism.

Implementing efficient measures Kuoni’s Code of Conduct If a company wants long-term success, it has to oper ate from clearly defined principles. We have brought our corporate values, principles and guidelines to

The Kuoni Group uses a whole range of measures to achieve sustainability in the value chain. The pri mary focus at the moment is on our most important service partners, the hotels. With its Code of Conduct

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for Suppliers, Kuoni has established a legal basis for sustainability in the value chain. It monitors compli ance with these standards using Travelife, a system for measuring sustainability. Kuoni also tries to help hotels in their efforts to achieve sustainability, as well as facilitating knowledge transfer between its business partners, and stimulating dialogue with stakeholders through transparent communication.

Supplier Code of Conduct In 2007, as a first step in managing the value chain, Kuoni incorporated ethical clauses into its agree ments with suppliers. These were revised in 2009 to create a “Supplier Code of Conduct” – a policy document for our suppliers’ sustainability standards. Kuoni requires its partners to respect local labour laws and international human rights, not to tolerate discrimination by gender or religion, to ensure workplace safety and hygiene, to pay wages in accordance with the law, and to comply with environmental standards. Kuoni also reserves the right to inspect its suppliers’ business activities at any time.

the 300 most important hotels in 12 destinations. They happen to be located in destinations where the relevant laws are not always adequately enforced. Consequently, the active commitment of Kuoni and its partner hotels can have a large positive influence on the employees, the environment and, not least, the whole tourism industry in these places.

Kuoni helps its suppliers to develop as sustainably as possible Kuoni runs regular workshops at various destinations for its hotel partners. In 2009, three child protec tion workshops were held in Thailand and three in India. Working with local experts and organisations, Kuoni sensitised more than 140 hotel managers and employees to this subject. In collaboration with the United Nations Industrial Development Organisation (UNIDO) and its local partner organisation, 30 hotel managers in Bulgaria were also given training this year on personnel management and sustainable resources management.

Transparent communication enables open debate Making sustainability indicators measurable with Travelife with stakeholders In a second step we use the Travelife Sustainability System to monitor our suppliers’ commitment. A Travelife-trained inspector from Kuoni, another tour operator or an independent company subjects the hotel to a Travelife check lasting several hours, during which about a hundred criteria are analysed. These cover the hotel’s activities relating to the environment and use of resources (water, energy, waste), the hotel’s relationship with the local population and the way it treats its own employees. In 2009, the Kuoni Group trained 15 of its own em ployees to be Travelife inspectors. They have already carried out 120 Travelife checks at key partner hotels in various destinations from Egypt to Thailand. Of these 120 hotels, 32 received a Travelife Gold (12), Silver (11) or Bronze (9) Award, demonstrating that they are making a real effort to be sustainable. The Travelife Sustainability System has already inspected 1 300 hotels, 240 of which have won an award. In its effort to foster sustainability, Kuoni is targeting its resources as efficiently as possible by evaluating

As well as intensifying its commitment to a sustainable value chain, Kuoni wants to contribute more to an open debate about this aspect in tourism. Spe cifically, last year we looked to start a dialogue with other tourism companies, using Travelife as a regular platform for discussing achievements and challenges relating to sustainability in tourism.

IMPLEMENTATION OF THE CODE OF CONDUCT FOR THE PROTECTION OF CHILDREN FROM SEXUAL EXPLOITATION Swiss Television last April showed how a reporter had no trouble procuring an under-age prostitute simply by asking hotel staff – including at hotels which have contracts with Kuoni. Kuoni responded immediately and struck five hotels in Pattaya from its list. Discussions were held in per son with the hotel managers, and specific measures were defined that must be implemented by summer 2010 if these hotels are to be reinstated into Kuoni’s programme. Additionally, Kuoni ran workshops for

all its partner hotels in Pattaya, Phuket and Krabi to reinforce our zero-tolerance policy, but also to offer the hotels support in the fight against child sex tour ism. Further workshops were held in Kerala and Goa in India. For more on Kuoni’s commitment to child protection:

1 000 tonnes a year. This is equivalent to a CO2 reduc tion of 3 %.

http://www.kuoni-group.com/ Corporate+Responsibility/Child+Protection/

Supporting the Ganges Exhibition

CLIMATE CHANGE Climate change remains one of the central challenges in tourism. According to the UN World Tourism Organisation (UNWTO), tourism is responsible for about 5 % of global CO2 emissions. 75 % of tourismdriven CO2 emissions are caused by passenger trans port, 21 % by accommodation and 4 % by activities at the holiday destinations. Often, the places that attract tourists – fragile coastal zones, islands and mountains – are also the ones un der most threat from climate change. As the example of the Maldives shows, a great effort is required to protect them. For Kuoni, looking after the climate is an integral part of our corporate social responsibility. Our aim is to reduce our own direct emissions and emissions in the value chain. In June, Novair, the charter airline operated by Kuoni Scandinavia, was the first in Europe to test a “green curved approach” landing with an Airbus using GPS navigation. This new technique is designed to trim kerosene consumption even further, cut harmful emissions and reduce aircraft noise. The test was part of the MINT project (Minimum CO2 in Terminal Manoeuvring Area) and the SESAR-AIRE initiative in which airlines, airports, air traffic control centres and aircraft manufacturers work together on vari ous tests to assess how air traffic management can be improved to produce environmental benefits. First results proved, that over 500 kg of CO2 can be saved per approach. Through various environmentally friendly measures, that the company established in 2007, Novair saved 300 kg of kerosene per flight, or

For more about Kuoni’s work on climate change: http://www.kuoni-group.com/ Corporate+Responsibility/Climate+Change/

Last autumn an international team of specialists travelled the entire length of the Ganges by boat in 35 days in order to draw attention to the environmental problems in and around India’s national river, as well as to highlight sustainable solutions. Kuoni’s partici pation in this unprecedented project underlined its commitment to corporate responsibility in the areas of climate change and water scarcity. It also wanted to increase awareness of India’s diverse qualities as a travel destination and to highlight the importance of sustainable tourism to the region. You can read more about the expedition and the participants’ unique experiences in the Kuoni Brand Report.

social responsibility Kuoni’s economic success depends on the trust and social acceptance given to the company by the people and institutions around it. Beyond its economic activ ity, the company is also committed to wider social issues. We are encouraged in this regard by the sup port of our shareholder, the Kuoni and Hugentobler Foundation. Its aim as a charitable foundation is to protect the environment and maintain its balance as the basis for sustainable tourism. Particular attention is paid to supporting disadvantaged children in tour ist regions in Switzerland and abroad, and to fostering understanding between different cultures. In 2009 the Kuoni and Hugentobler Foundation made donations to several organisations including the following:

Pestalozzi Children’s Village Northern Thailand is home to various ethnic minori ties, many of whom speak no Thai. Parents often see no point in sending their children to school, so

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illiteracy rates in this region are very high. The project involves educating children in their native languages in order to improve their job opportunities. www.pestalozzi.ch/

activities to this end. In the wake of its restructuring, the Kuoni Group’s internal focus and training will be integrated into the process.

Supplier Code of Conduct Biovision – stop malaria Each year sees up to two million people die as a result of contracting malaria. Most of these deaths are in sub-Saharan Africa. Biovision’s pilot projects have shown that environmentally-friendly, cost-effective methods supported by local populations provide an effective means of combating this deadly tropical disease. www.biovision.ch

Salvation Army – Kenya WASH Project Kenya’s government set itself the goal of connecting all Kenyan households up to the water and sewage network by the year 2000. It failed to achieve this and passed the responsibility back to private individu als. However, most of these people, especially in rural areas, continue to live below the poverty line. The Salvation Army wants to help and has proposed build ing proper sanitary facilities in 40 schools it already sponsors, or bringing existing facilities up to an acceptable standard. Its ultimate aim is to reduce the spread of diseases spread by dirty water. It also wants to reduce the incidence of diarrhoea among school children and create a better environment for learning.

fairunterwegs.org The innovative travel website run by the Arbeitskreis Tourismus & Entwicklung offers something that people increasingly want these days: solid informa tion about the countries that people visit and concrete recommendations for responsible travel. Fairunter wegs.org offers users country-specific information about environmental issues, human rights and energy consumption. The site also offers other interesting information, including “fairness tips” that can be applied before and during a holiday, and articles on specific travel-related issues.

GOALS FOR 2010 Kuoni intends to step up its commitment to a sustain able value chain in 2010 and is constantly refining its

In 2010 the newly revised Supplier Code of Conduct should be incorporated into the remaining contracts with worldwide suppliers.

Travelife certification Within the next two years, Kuoni wants to ensure that the 300 most important hotels are subjected to a selfevaluation and a Travelife sustainability check. Kuoni and Travelife will then carry out reviews every two years. This will help the Kuoni Group strengthen its long-term relationship with the hotels, review their progress on sustainability issues and support them with targeted help.

Support and knowledge transfer In 2010 Kuoni will intensify knowledge transfer and use examples of best-practice to alert its most impor tant hotel partners to new opportunities for sustain able action. Kuoni will offer support to its suppliers through workshops as well as through web-based knowledge transfer.

Internal focus and training The restructuring of the Kuoni Group provides new opportunities for internal cooperation. The new procurement and production unit is becoming a key partner for our suppliers, enabling Kuoni to continue developing its commitment to sustainability. In addi tion, internal training is being increased and internal production processes are being scrutinised. The central challenge for Kuoni will be to foster a debate about the future of value chains in tourism. In ternational travel companies, hoteliers and excursion providers, but also civil society organisations, local populations, governments and customers, have to be made aware of how increasingly sustainable value chains benefit everyone. If every institution and every individual shows the right commitment, sustainabil ity in tourism can become the most natural thing in the world.

Human Resources – employees help shape the future

We all have longings and desires. As an established premium and specialist service provider, Kuoni’s goal has always been to explore travellers’ individual aspirations and turn them into unique experiences. To do this, the company needs passionately committed employees who can also keep up with constantly changing customer requirements and the latest trends. Because even in times of economic difficulty, people still have dreams. Kuoni operates all over the world, and in 2009 it employed an average total of 9 070 people (full-time equivalents). This is 7.4 % lower than in the previous year (2008: 9 797).

Brand identification Rebranding and brand development are lengthy and continuous processes. Employees need to engage with the brand values and help shape the changes. Only if they do this with conviction can they live up to the values and fully understand the company’s new products and services. The Kuoni Brand Campus continued its work in 2009, teaching employees about all the innovations involved in Kuoni’s rebranding. Various supporting measures were also introduced to anchor our corporate values even more firmly. In Switzerland, for example, a Brand Campus was run for Market Management (formerly Tour Operating). In various workshops, employees, and sometimes external service providers, explored Kuoni’s core values (passion, authenticity and reliability).

Code of Conduct The Board of Directors and Executive Board approved the Code of Conduct (CoC) for Group-wide use at the start of 2007. It has since been introduced throughout the company, serving as a binding guide to ethically correct conduct by employees, and forming a fundamental element of Corporate Governance. The CoC information is given to all employees when they join the company. As well as rules on how to behave, it includes a list of people who can help if anything is unclear or if difficult situations occur in the workplace. A presentation covering all the most important points is available to employees on Kuoni’s intranet. The Head of Group Human Resources meets regularly with individual Managing Directors in the markets to discuss issues and additional measures relating to the CoC.

Training Continuous learning and development is vital for employees if Kuoni is to remain competitive in the future. The company offers suitable candidates various specially tailored development centres, training options and management courses. Middle and senior managers can attend the Kuoni Corporate University, run in collaboration with the internationally renowned Ashridge Business School in the United Kingdom. Its programmes are tailor-made for Kuoni; they give

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managers the business know-how, transformation tools and strategic execution skills they need to de ploy efficient, local measures flexibly in response to the challenges facing the travel industry. The Individual Potential Discussion (IPD) process was introduced during the year under review. This is an internal, Group-wide, facts-based process that delivers concrete improvement measures for all managers and high potentials. The IPD is used to assess employees’ skills and performance, and to determine very pre cisely whether Group strategy is being followed. Every manager in the company is rated by higher ranked managers. Executive Board members are assessed by the Board of Directors.

Management compensation system In 2008, Kuoni introduced a new, uniform compensa tion model for senior management throughout the Group. It focuses on value creation and the success of the Group as a whole, and it incentivises managers to think and act sustainably. The compensation model is designed to align managers’ personal goals with those of the company and the interests of its shareholders. It is based on the performance of Kuoni’s shares, while also recognising individual contributions to operational value creation. Following its introduc tion in the previous year, the compensation system continued to have a positive impact during the year under review and it further strengthened global collaboration.

Employee Cockpit In 2008 the process of reorganising the whole Kuoni Group into a functional global structure began. Even before this, the Human Resources department was working to establish a better international network and make itself more efficient and competent. Uniform, Group-wide HR processes were introduced, though always with an eye on local conditions. A good example is the Employee Cockpit. The roll-out of this new personnel management system – Kuoni’s first Group-wide HR system – was completed during the year under review. Employee Cockpit encourages global cooperation, quick decision-making, a good flow of information, and employee management across national borders. It offers a uniform solution that also accommodates the needs of individual countries. The new system is easy to use and includes functions for employee appraisals, training, and management of job applica tions. Employees can manage some of their profile information themselves. HR and line managers can use Employee Cockpit to find suitable employees – perhaps for a project – quickly and efficiently. Employee Cockpit has been implemented in 38 coun tries. Around 100 HR specialists and more than 1 000 managers now actively use the system for HR management.

Addresses – a worldwide presence Kuoni Travel Holding Ltd.

Denmark

Italy

Kuoni Travel Holding Ltd. Neue Hard 7 CH-8010 Zurich P + 41 44 277 44 44 F + 41 44 271 52 82 communications@kuoni.com www.kuoni-group.com

Apollo / Kuoni Denmark Nørrebrogade 10, Ved Søerne DK-2200 Kopenhagen P + 45 35 20 10 00 F + 45 35 20 10 09 salg@kuoni.dk www.kuoni.dk

Kuoni Italia S.p.A. Mura di Santa Chiara 1 I-16128 Genoa P + 39 010 596 81 F + 39 010 596 88 18 infotours@kuoni.it www.kuoni.it

Countries and the companies based in them are listed alphabetically.

France

Japan

Voyages Kuoni SA 22, rue Dieumegard F-93407 Saint-Ouen P + 33 1 55 87 80 00 F + 33 1 55 87 82 86 infocenter@kuoni.fr www.kuoni.fr

Kuoni Travel (Japan) Ltd. Osaki Takagi Bldg. 1F 1-20-18, Osaki, Shinagawa-ku JP-Tokyo 141-0032 P + 81 (3) 5759 45 00 F + 81 (3) 5759 45 01 dmc.tyo@jp.kuoni.com www.kuoni-dmc.com

Australia Australian Tours Management Kuoni Destination Management Level 1, 28 Victoria Street Carlton 3053, Victoria P + 61 3 96 62 15 99 F + 61 3 96 63 24 27 bee@atmtravel.com.au www.atmtravel.com.au

Belgium Kuoni Travel Belgium B.V.B.A. Koningin Elisabethlaan 45 B-9000 Gent P + 32 9 269 20 10 F + 32 9 233 52 55 info@kuoni.be www.kuoni.be

China Kuoni Travel (China) Ltd. 30/F One Landmark East 100 How Ming Street Kwun Tong Kowloon HK-Hong Kong P + 852 2956 68 88 F + 852 2956 67 89 mgt@kuonitravel.com.hk www.kuonitravel.com.hk Kuoni Destination Management China Room 1001, SciTech Tower 22 Jianguomenwai Avenue Chaoyang District 100004 Beijing P + 86 10 6515 92 59 F + 86 10 6515 92 93 dmc.pek@cn.kuoni.com www.kuoni-dmc.com

Germany Conference & Touring C & T GmbH Kaiserdamm 110 D-14057 Berlin P + 49 303 012 80 F + 49 30 301 281 28 berlin@dmcgermany.de www.dmcgermany.de

India Kuoni Travel Group, India Kuoni House Colaba IN-Mumbai 400 001 P + 91 22 6656 20 64 F + 91 22 6656 20 69 communications@kuoniindia.com www.kuoniindia.com Kuoni Destination Management India Tower B, Delta Square M.G. Road, Sector 25 IN-Gurgaon 122001 P + 91 124 456 30 00 F + 91 124 456 31 00 corporate@kdm.in www.kuoni-dmc.com VFS Global Kuoni House, Colaba IN-Mumbai 400 001 P + 91 22 66 56 20 64 F + 91 22 66 56 20 69 zubink@kuoniindia.com www.vfsglobal.com

Kenya Private Safaris East Africa Ltd. Destination Management Africa Twinstar Bldg. Mombasa Road P.O. Box 45205 KE-Nairobi 00100 P + 254 20 53 06 01 F + 254 20 53 38 54 info@privatesafaris.co.ke www.privatesafaris.co.ke

Nepal SITA World Travel Nepal (Pvt.) Ltd. Kathmandu Plaza, 3rd floor, Y Block P.O. Box 2656 Kathmandu, Nepal P + 977 1 423 30 12 F + 977 1 423 30 31 info@sitanepal.com www.sitanepal.com

Netherlands Kuoni Travel Nederland B.V. Entrada 211–214 NL-1001 AD Amsterdam P + 31 20 398 92 92 F + 31 20 398 92 02 info@kuoni.nl www.kuoni.nl

M a r k et R eport 2009

Norway

Switzerland

USA

Apollo / Kuoni Norway Grensen 3 N-0159 Oslo P + 47 23 21 30 00 F + 47 23 21 30 01 info@kuoni.no www.kuoni.no

Kuoni Reisen AG Neue Hard 7 CH-8010 Zurich P + 41 44 277 44 44 F + 41 44 271 52 82 communications@kuoni.ch www.kuoni.ch

AlliedTPro Inc. Destination Management US 500, 7th Avenue, 9th Floor US-New York, NY 10018 P + 1 212 596 10 00 F + 1 212 313 98 00 nyc@alliedtpro.com www.alliedtpro.com

Russia

Kuoni Travel Ltd. Destination Management Europe Überlandstrasse 360 CH-8051 Zurich P + 41 44 325 21 11 F + 41 44 321 19 09 dmc.info@ch.kuoni.com www.kuoni-dmc.com

UTE Megapolus group Kuoni Destination Management Pokrovskiy blvd. 8, bld. 1 RU-109028 Moscow P + 7 495 786 97 63 F + 7 495 786 97 64 hr@mail.ute.ru www.ute.ru

South Africa Kuoni Private Safaris (Pty) Ltd. Destination Management Africa 1st floor Waterford House Waterford Place Century City 7446 ZA-Cape Town P + 27 21 528 22 00 F + 27 21 528 22 22 info@privatesafaris.com www.privatesafaris.com

Thailand Asian Trails Ltd. (Thailand) Destination Management Asia 9th Floor, SG Tower 161/1 Soi Mahadlek Luang 3 Rajdamri Road Lumpini, Pathumwan TH-Bangkok 10330 P + 66 2 626 20 00 F + 66 2 651 81 11 res@asiantrails.org www.asiantrails.info

United Arab Emirates Spain Viajes Kuoni SA Paseo Infanta Isabel, 17 ES-28014 Madrid P + 34 91 538 27 00 F + 34 91 538 27 27 kuoni@kuoni.es www.kuoni.es

Sweden Apollo / Kuoni Sweden Ynglingagatan 2 S-11347 Stockholm P + 46 8 673 84 00 F + 46 8 673 84 03 info@kuoni.se www.apollo.se

Desert Adventures Tourism Destination Management Arabia 7th Floor Qatar Airways Building Doha Center Maktoum Road UAE-Dubai 24488 P + 971 4 224 28 00 F + 971 4 224 29 00 E-mail: info@desertadventures.ae www.desertadventures.com

United Kingdom Kuoni Travel Ltd. Kuoni House GB-Dorking, Surrey RH5 4AZ P + 44 1306 74 08 88 F + 44 1306 74 41 57 information@kuoni.co.uk www.kuoni.co.uk

A full list of addresses is available on the www.kuoni-group.com website. As at 1 March 2010

Kuoni glossary Acquisition

Currency effect

Takeover of a company (purchase).

The change in the financial results caused by conver sion from a foreign currency to Kuoni’s corporate currency, the Swiss franc (CHF). The effect may be positive or negative, depending on exchange rate movements.

Agent An independent travel agency selling Kuoni products. The term is also used for companies acting as handling agents at Kuoni destinations.

Destination Management Asset-light brand portfolio Brands that don’t own any fixed assets such as hotels, aircraft or ships.

Bond Fixed-term corporate debt taken on to increase liquidity. Money is raised from investors by issuing bonds on the capital market.

Branding Establishing and cultivating brand names to give a business a clear and unmistakable profile and image among existing and potential customers.

Organisationally part of the Destination Division. Destination Management offers professional advice and organisation of land arrangements at travel des tinations. The division is divided into five business areas: Destination Management Europe, USA, India / South Asia, Africa / Arabia and Asia Pacific.

Direct sales / direct customer contact Product sales direct to consumers via proprietary sales channels, without involving an intermediary (third-party travel agent or internet portal).

Distribution Advice on, and sale of holidays.

Brand Campus A worldwide employee training programme focused on Kuoni’s new corporate values, visual image, new product lines and service offerings, as well as on the changing expectations of today’s customers.

Charter flight A flight with seating capacity purchased specifically for a tour operator and to be filled at the operator’s risk. Typically used when putting together a package holiday (flight, transfer and hotel accommodation).

Distribution channels The outlets (virtual or real) from which products are sold to customers. These could be travel agencies, the internet or call centres. Also includes Personal Travel Consultants who visit customers in person to discuss travel plans.

Employee Cockpit A worldwide electronic employee management system with built-in features for employee qualifica tion, training, and vacancy applications.

CO2 offsetting

Financial payment made to offset the CO2 emissions generated by a holiday. Available on the internet, as well as in Kuoni travel agencies in certain markets.

Flagship Store A one-of-a-kind sales office located at a prime retail site. Reinforces the credibility of the Kuoni brand in the premium sector.

Concierge Service Personal advice and help aimed at fulfilling travel lers’ individual requests. For customers in the luxury segment.

Inbound business Destination Management’s core business: organising excursions, accommodation, transfers, congresses and similar for incoming customers at the destination.

Consolidation The merging and harmonisation of individual companies’ financial results to produce a set of accounts for the Group as a whole.

K-Net Kuoni Group’s first global intranet. Went online in 2010. Facilitates and encourages communication between all employees worldwide.

Corporate Responsibility Corporate Responsibility is the unifying term that Kuoni uses to describe overarching themes in the long-standing public debate on consumer goods and services: environmental awareness, fairness, social responsibility and ethics.

Kuoni Connect Online platform that allows contracted partners to access the hotel portfolio directly in order to update offers or book rooms.

M a r k et R eport 2009

Kuoni Getaway Council

Procurement & Production

A discussion panel comprised of external experts from the worlds of business, science, art, fashion and culture. Panellists convene in differing constellations to exchange views on questions about the future of travel.

New unit that buys hotel rooms, services and land arrangements, and prepares them for sale in Kuoni’s different markets. The unit is based in three hubs: Zurich, Dorking (London) and Stockholm.

Restructuring Mainstream segment Consumers who want to be able to book holidays eas ily and get good value for money.

The reshaping of old business processes and operating structures in order to improve the cost-benefit ratio.

Retailing Market The name given to an individual country in which Kuoni markets and sells travel products (e.g. Swiss market, Italian market).

Market Management (formerly Tour operating) A core business for Kuoni. It involves selecting and buying products and services and combining them into package tours or tailored arrangements.

M.I.C.E. travel The organisation and provision of travel products connected with meetings, incentives, conferences and events.

Organic growth Growth achieved through a company’s own efforts, without acquisitions.

The distribution and sale of products and services (e.g. through travel agencies).

Service provider Any supplier of services for travellers such as an airline, a hotel or a restaurant.

Source markets The countries where travel and related services are sold. Customers travel from these markets to their holiday destinations.

Synergies The mutually beneficial effects on e.g. efficiency and financial results that are generated when depart ments, business areas, companies etc. start working with each other.

Tour operating Outbound business Foreign travel organised by the individual business units for customers in their national markets.

One of Kuoni’s core businesses, tour operating in volves selecting and buying-in products and services and combining them into inclusive tours or tailored travel arrangements.

Package holiday A package of holiday products and services (flights, hotel, transfers, local assistance etc.) offered at a pre determined all-in price.

Travelife A sustainability system with international standards for assessing the environmental credentials of hotels. Kuoni introduced the system in 2009.

Pandemic Rapid worldwide outbreak of an illness, usually a virus, that is easily passed on from person to person (e.g. swine flu).

Value chain The system of business processes (purchasing, pro duction, sale) that extends all the way through from suppliers to end customers.

Premium and specialist segment Individually arranged, high-end travel and related services. Notable for first-rate level of customer serv ice. Within the specialist segment, highly competent niche providers also use their specialist knowledge to offer bespoke travel to specific destinations, or specific styles of travel.

Vertical integration Expansion of a company’s business activities to cover the whole of its industry’s value chain, e.g. a tour operator acquiring its own hotels, airlines, car rental companies, etc.

Kuoni glossary Brands (selection) Apollo Kuoni’s all-inclusive tour brand in Scandinavia (Sweden, Norway, Denmark), offering outstandingly good value on long- and short-haul beach holidays.

sole distributor of the airline’s e-tickets. With some 160 travel agencies, its call centre and its well-known internet portal, Et-china is well positioned within the Chinese travel market.

Australian Tours Management Australian Tours Management operates in the desti nation management business, where it specialises in leisure and special-interest travel, along with incen tives and events within Australia.

Carrier Carrier is a leader in the United Kingdom luxury segment, specialising in individual and service- oriented travel to destinations worldwide.

Cotravel Cotravel is one of Switzerland’s leading organisers of study trips accompanied by expert guides. These are mainly operated in collaboration with prominent Swiss newspapers and magazines.

Falk Lauritsen Rejser The brand is excellently established in the Danish travel market as a provider of inclusive-tour arrange ments to destinations including Spain, Greece, Turkey, Egypt and the Caribbean. Distributes its products solely via direct sales.

Helvetic Tours Kuoni Switzerland’s all-inclusive tour brand, offer ing outstandingly good value on long- and short-haul beach holidays and city tours.

Kuoni Travel Holding Ltd. The holding company of the Kuoni Group.

Kuoni and Hugentobler Foundation Desert Adventures Tourism The company is among the foremost and best-known destination management companies operating in the United Arab Emirates and Oman.

Kuoni Travel Holding Ltd.’s principal shareholder in terms of voting-rights (25 % of voting rights, 6.25 % of share capital).

UTE Megapolus Et-China Et-china is with the brand specialised in group inclusive-tour arrangements both within China and to destinations abroad. GZL is one of South China’s best-known travel brands, and also holds a licence to offer foreign travel products. Et-china also operates a leading internet platform in China for air tickets, hotel reservations and rental car arrangements for individual travellers. And the company further main tains a joint venture with China Southern Airlines, the country’s biggest air carrier, under which it is the

UTE Megapolus specialises in travel for middle-class Russians. It joined the Kuoni Group at the end of August 2007.

VFS Global (Visa Facilitation Services) VFS Global is part of Kuoni Travel (India) Pvt. Ltd. In partnership with foreign embassies and UK visas, it provides services relating to the issuance of visas and residence permits around the world. VFS Global operates a network of more than 337 offices in 45 countries.

Agenda 2010 h

Annual General Meeting of Shareholders

20 April 2010

Half-year results

19 August 2010

Nine-month results

11 November 2010