Ubisoft 2005 Annual Report Download - page 52

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Fixed-rate debt Rate type Effective Nominal Annual Annuel interests Difference
interest rate interest with change
of 1%
2006 OCEANE bonds Fixed 6.29% 89,854 5,652 6,550 898
Total opportunity cost 89,854 5,652 6,550 898
Debts Rate type Effective Nominal Annual Annuel interests Difference
interest rate interest with change
of 1%
Advances in foreign currencies Variable 4.25% 5,432 231 285 54
Cash Variable 4.09% -49,068 -2,007 -2,497 -490
OBSAR bonds Variable 4.26% 52,079 2,219 2,739 520
Investments Variable 2.12% -37,259 -790 -1,162 -372
Total -28,816 -347 -635 -288
Structure of Ubisoft’s debt
In thousands of €
Foreign exchange risk:
The group is exposed to foreign exchange risk on its ope-
rating cash flow and its investments in its foreign subsidia-
ries. The group protects only its positions related to its
operating cash flow in the major currencies (i.e. the US
dollar, Canadian dollar, Pound sterling and Australian dol-
lar). The strategy is to hedge one fiscal year at a time,
which means that the hedge period does not exceed 15
months.
The Group relies mainly on natural hedges resulting from
two-way transactions (i.e. development expenses in foreign
currencies offset by royalties received from subsidiaries in
the same currency). For non-hedged balances and non-
commercial transactions (i.e. internal loans in foreign
currencies), the parent company borrows in these
currencies or sets up forward-sale contracts or options. As
of March 31, 2006, the company had hedged USD 67 mil-
lion, GBP 8.3 million, CAD 19.2 million and AUD 2.2 mil-
lion through forward sales and loans in foreign currencies.
Impact of a change of ±1% in the principal foreign curren-
cies on sales and operating income in thousands of euros
for FY 2005-06:
Equity price risk:
The company has four main types of equity investment:
Long-term strategic investments in sectors related to
video games, such as the investment in Gameloft in which
Ubisoft owns 13,367,923 shares and has a 19.42% interest.
This investment is valued at €30 million on the company’s
balance sheet while the stock exchange value of these
shares was €76 million as of March 31, 2006.
Shares held directly under a market-making and liquidity
contract signed with Exane BNP: these purchases are
governed by a market-making contract pursuant to
current regulations and are intended to ensure liquidity on
stock sales and purchases. As of March 31, 2006, these
shares totaled 20,500 and were valued at €679 thousand.
Money market funds: these funds involve temporary
investments of liquid assets. They are therefore invested in
products offering a high degree of security and very low
volatility.
An equity swap contract: this derivative is recorded at its
fair value on the balance sheet. Any fluctuations in the
share price in relation to the sale price of €18.66 are
Currency Impact on sales in thousands Impact on operating income in thousands
of € of €
USD 2,142 311
GBP 927 711
CAD 305 274
AUD 161 127
DKK 180 143
JPY 41 12