Ubisoft 2004 Annual Report Download - page 44

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42
UBISOFT > 2005 FINANCIAL REPORT
at reducing exposure to this risk. In this regard, the group gives priority to fixed-rate loans for long-term financing needs
and variable rate loans for temporary needs related to an increase in working capital requirements during particularly
active periods.
As of March 31, 2005, the group's net debt basically comprised bond liability and fixed-rate loans. The group would
therefore not be greatly affected by a rise in interest rates but is exposed to opportunity cost risk if rates should decrease.
The average interest rate on Ubisoft debt is 4.5%. Since most of this debt is at a fixed rate, any fluctuation in interest rates
of ±1% would have an impact on operating income equal to €105,000.
Structure of Ubisoft debt
(€K)
Fixed-rate debt Rate type Rate Nominal Annual Change Difference
interest of 1%
Convertible Bond, 2005 Fixed 3.80% 24,876 945.3 1,194 248.8
Convertible Bond, 2006 Fixed 4.50% 92,188 4,148.5 5,070 921.9
Convertible Bond reimbursement, 2005 Fixed 3.80% -24,876 -945.3 -1,194 -248.8
Total opportunity cost 92,188 4,148.5 5,070 921.9
Variable-rate debt Rate type Rate Nominal Annual Change Difference
interest of 1%
Advances in foreign currencies Variable 3.27% 39,287 1,284.6 1,677 392.9
Cash Variable 2.80% -68,730 -1,927.7 -2,615 -687.3
Bonds with redeemable share Variable 2.14% 54,974 1,173.7 1,723 549.7
subscription warrants
Investments Variable 2.12% -60,859 -1,290.2 -1,899 -608.6
New debt arising from Convertible Variable 2.62% 24,876 651.8 901 248.8
Bond reimbursement, 2005
Total -10,452 -107.9 -104.5
Currency risk
The group is exposed to foreign exchange risk on its cash flows arising from operating activities as well as on its investments
in its foreign subsidiaries.
The group only protects its positions with regard to operating cash flows in the main significant currencies (i.e. the US dollar,
Canadian dollar, Pound sterling and the Australian dollar). The strategy is to hedge one fiscal year at time, and as a result, the
hedge period does not exceed 15 months.
The group uses natural hedges stemming from transactions in the opposite direction (i.e. purchase of goods in foreign cur-
rencies offset by royalties originating from subsidiaries in the same currency). For non-hedged balances as well as for non-
commercial transactions (i.e. internal loans in foreign currencies), the parent establishment borrows in these currencies or
sets up forward sale contracts or options.
As of March 31, 2005, the company had hedged US$55,000,000, £12,000,000, CDN$13,500,000 and AUS$4,000,000
through forward-sale contracts and foreign currency loans.
Impact of a change of ±1% in the principal currencies on sales and operating income in millions of euros for the
2004/2005 fiscal year:
Currency Impact on sales Impact on operating income
US dollar 2,783 662
Pound sterling 895 727
Canadian dollar 305 49
Australian dollar 172 140
Danish krone 176 136
Japanese yen 58 24