Ubisoft 2012 Annual Report Download - page 44

Management Report
2012
39
INTEREST-RATE RISK
Interest-rate risk is mainly incurred through the Group's interest-bearing debt. This is essentially euro-
denominated and centrally managed. Interest-rate risk management is primarily designed to minimize
the cost of the Group's borrowings and to reduce exposure to this risk. For this purpose, the Group
uses primarily fixed-rate loans for its long-term financing needs and variable-rate loans to finance
specific needs related to increases in working capital during particularly busy periods.
At March 31, 2012, the Group's debt included bank overdrafts which, given the Group's positive cash
position, were used essentially to finance the high year-end working capital requirement engendered
by the highly seasonal nature of the business.
The sensitivity of debt to a change in interest rates is described in Note 16 to the consolidated financial
statements.
1.7.4.2 COUNTERPARTY RISK
The Group is exposed to counterparty risk - mostly banking-related - in the course of its financial
management. The aim of the Group's banking policy is to focus on the creditworthiness of its
counterparties and thus reduce its risks.
1.7.4.3 SECURITIES RISK
RISK TO THE COMPANY'S SHARES
In accordance with its share buyback policy and within the authorizations granted by the Shareholders'
Meeting, the Company may decide to buy back its own shares. The fluctuations in the price of shares
bought in this way have no impact on the Group's income.
Own shares are held under a market-making and liquidity agreement signed with Exane BNP. These
buybacks are made under the terms of a market-making agreement that complies with all applicable
regulations, and are designed to ensure the liquidity of purchases and sales of shares.
The Company allocated €1.7 million for the implementation of this agreement over the last financial
year.
400,000 shares were purchased on the market (assigned to employee shareholdings) under the 6th
resolution of the Shareholders’ Meeting of June 30, 2011.
As at March 31, 2012, the Company held 566,584 of its own shares with a value of €2,491 thousand.
Own shares are deducted from equity at cost of sale.
RISK ON OTHER SECURITIES
The Gameloft shares are covered by an equity swap agreement signed by the Group with CA-CIB
(Crédit Agricole Corporate & Investment Bank).
On July 12, 2007, Ubisoft Entertainment SA signed two contracts with CACIB. The first concerns the
sale of all Gameloft securities held by Ubisoft Entertainment SA, i.e. 13,367,923 shares at a price of
€6.08 per share. The second relates to the opportunity for Ubisoft to continue to benefit from share
price fluctuations either up or down in relation to a value of €6.08 per share until July 15, 2013.
Under IAS 39, as all risks and benefits have not been transferred, Gameloft shares have been
classified as current financial assets available for sale.
The sale of Gameloft shares on the market by Calyon is recorded in the income statement.
The Gameloft shares not yet sold by Calyon are measured at fair value. The change in fair value of
shares not yet sold by Calyon is recognized in the consolidated reserves.
At March 31, 2012, financial assets included €14.6 million in shares in the listed company Gameloft.
Information on the valuation of these shares is presented in Note 9 to the consolidated financial
statements and the accounting principles.
A 10% change in closing price would have an impact of €1.5 million on shareholders' equity.