Ubisoft 2003 Annual Report Download

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ANNUAL REPORT 2004

Table of contents

  • Page 1
    ANNUAL REPORT 2004

  • Page 2
    CONTENTS 3 9 15 19 23 29 Chairman's Statement History and Key Figures Market Studios Brands Financial Report

  • Page 3
    ... million units and became one of the five top-selling games on Xbox®. More recently, Tom Clancy's Splinter Cell®: Pandora Tomorrow ranked number one in game sales at its release in Europe and the United States, with more than 1.7 million units sold by end-March. › 2003/04: an ambition came true...

  • Page 4
    ... with more than 26 million games sold worldwide as of March 2004. √ Presented at E3 2004 in May, Splinter Cell® Chaos Theory has already been awarded Best Game of the Show, Best PC Game and Best Action Adventure Game by GameSpot and Best PC Graphics by IGN! • Strengthen our position as leader...

  • Page 5
    ...blockbuster brands by capitalizing on existing brands and creating two new brands On the one hand, we will consolidate already-existing brands with the launch of sequels, including Prince of Persia® Warrior Within, Splinter Cell® Chaos Theory, Yves Guillemot President & CEO ANNUAL REPORT 2004 5

  • Page 6
    Tom Clancy's Splinter Cell® Pandora Tomorrow Highly acclaimed with an exceptional 93 percent rating on www.gamerankings.com 1.7 million units sold as of March 2004

  • Page 7
    01 Yves Guillemot President & CEO Christine Burgess Executive Director, Worldwide Studios Alain Martinez Chief Financial Officer Serge Hascoët Executive Director, Worldwide Content Strategy Laurent Detoc Executive Director, North America Alain Corre Executive Director, EMEA Territories ANNUAL ...

  • Page 8
    Tom Clancy's Ghost Recon® Island Thunder #1 on Xbox Live™ Tom Clancy's Ghost Recon® Island Thunder and Jungle Storm sold 1.1 million copies during the 2003/04 fiscal year

  • Page 9
    ... on promising new markets, in particular online gaming, and by forming strong partnerships with leading manufacturers and publishers, Ubisoft has become a force to be reckoned with in the industry. * Sources: USA: NPD, UK: Chart -Track, Germany: Media Control, France: GFK - 2003 ANNUAL REPORT 2004...

  • Page 10
    ... in Australia. Going Public • Ubisoft Entertainment S.A. is listed on the Second Market of the Paris Stock Exchange. Getting Started • Ubisoft is the brainchild of the five Guillemot brothers, who join forces to launch an educational software and video game publishing and distribution company...

  • Page 11
    02 History and Key Figures The Year of Recognition Ubisoft: • Introduces a new logo and announces the sale of its one hundred millionth game unit. • Receives numerous awards during the fiscal year 2003/04, in particular for Tom Clancy's Splinter Cell®, Prince of Persia® The Sands of Time, Far...

  • Page 12
    ...at a constant exchange rate), due to a substantial increase in market share in North America and Europe. Ubisoft showed gross margin growth (65% of sales this year), and 1.5 million euros in operating results. › Free Cash Flow : ¤58 million Sales growth in millions of euros Ubisoft exceeded its...

  • Page 13
    ... company sales, compared to 77% in 2002/03, confirming the relevance of Ubisoft's studio and production strategies. Distribution Publishing Public › Capital Distribution as of June 30, 2004 Guillemot Family Ubisoft SA * During the 2003/04 calendar year ANNUAL REPORT 2004 13 History and Key...

  • Page 14
    Tom Clancy's Rainbow Six®3 Elected best first-person shooter game and best online game on Xbox® by Ign.com 2.2 million units sold as of March 2004

  • Page 15
    03 A Market with Multiple Opportunities In 2003, in a business sector where overall growth stagnated at 1%*, Ubisoft once again succeeded in outperforming the American market by 42%. The company has shown the strongest growth in the United States. The group's brands continue to win over the public ...

  • Page 16
    ...As in previous years, Ubisoft outperformed the American market for all formats with the strongest growth in software sales among the top twenty software publishers. A Strong and Active Installed base US + Europe (1) (2) Market (2) Growth rate million units 2002 Sony PlayStation 2 Microsoft Xbox...

  • Page 17
    ... creations*. A huge popular success, Ubisoft's Tom Clancy is rapidly becoming the number one franchise on Xbox® in the U.S., Great Britain and France*. As of March 2004, 26 million Tom Clancy games have been sold worldwide. Tom Clancy's Splinter Cell® Pandora Tomorrow, Tom Clancy's Rainbow Six...

  • Page 18
    Prince of Persia® The Sands of Time Awarded best game of the year at the 2003 E3 show 2.4 million copies sold as of March 2004

  • Page 19
    ... to developing exciting new products to enhance the overall gaming experience for players. Thanks to 1760 creative minds* in 13 studios around the world, Ubisoft is now the second largest video game producer in the world. * Calculation option including studio administration functions ANNUAL REPORT...

  • Page 20
    ... number of employees increased by 18% in 2003/04, with the creative team members representing approximately three-quarters of the full-time staff. Ubisoft's studio teams are highly experienced: On average, every developer now has two to three projects or more to his credit. The company capitalizes...

  • Page 21
    ... development teams, Ubisoft has created an in-house Academy of Experts. A group of 30 specialists working on different projects meet up several times a year to share their skills and experience in various areas such as graphics, animation, sound design, and programming. Ubisoft's knowledge-sharing...

  • Page 22
    Far Cry™ Elected Best Game at the 2003 ECTS show A brand with high potential: N° 1 bestseller for PCs in England, France and Australia as of its launch in March 2004

  • Page 23
    ... Having received the major video games awards in 2003/04, Ubisoft has earned international industry recognition for the exceptional quality of its games. Two new brands created this year have met with resounding success: Far Cry™ and Prince of Persia® The Sands of Time. ANNUAL REPORT 2004...

  • Page 24
    ... awaited Tom Clancy's Splinter Cell® Chaos Theory, slated for 2005. Tom Clancy's Ghost Recon® Island Thunder and Jungle Storm also met with resounding success, with sales of over 1.1 million copies during the last fiscal year. › Ubisoft Breaks New Ground with Gaming Experiences on a Par with...

  • Page 25
    ... number of top ratings in the industry. Ubisoft's high-performance creativity has set a new standard for the market and made it a force to contend with. Position Title Platform Average score 1 2 3 4 5 6 7 8 9 10 Tom Clancy's Splinter Cell Pandora Tomorrow Prince of Persia The Sands of Time...

  • Page 26
    2004/05 Flagship Brands and Top-Performing Studios

  • Page 27
    05 ANNUAL REPORT 2004 27 Brands

  • Page 28

  • Page 29
    Report 2004 Financial 2004 FINANCIAL REPORT 1 29

  • Page 30
    ... Working hours 1.4.6 Ongoing training 1.4.7 Distribution of staff by activity 37 37 37 37 37 37 38 38 2.2 Corporate accounts of Ubisoft Entertainment SA as of March 31, 2004 2.2.1 Ubisoft Entertainment SA balance sheet 2.2.2 Ubisoft Entertainment SA income statement 2.2.3 Table of changes in share...

  • Page 31
    ... 8.5 Schedule of financial announcements for fiscal year 2004-05 129 129 4.3 Changes in capital and voting rights over the past three fiscal years 4.4 Distribution of capital and voting rights as of June 24, 2004 4.5 Securities market 4.6 Dividends 5. Corporate governance 5.1 Group Management and...

  • Page 32
    ... BSA offered for one Ubisoft share. August 2003 â- â- June 2003 â- Signing of a publishing agreement with Sony Online Entertainment for Everquestâ„¢ II and Lords of Everquestâ„¢ in Europe. Prince of Persia The Sands of Timeâ„¢ is chosen as Best Action-Adventure Game on PlayStation® 2 by the...

  • Page 33
    ...licensing agreement is signed with CBS Consumer Products® to publish CSI: Miamiâ„¢ (The Experts: Miamiâ„¢) for PC, with a worldwide release planned for the winter of 2004-05. â- 1.3 Analysis of activity and comments on results for fiscal year 2003-04 1.3.1 Quarterly and annual consolidated sales...

  • Page 34
    ...'s quality. Publishing covers revenues from titles designed and produced by third-party developers, for whom Ubisoft finances and supervises production in exchange for acquiring the license. Ubisoft then handles localization and manufacturing, as well as marketing and sales distribution. The company...

  • Page 35
    ... of 29% at current exchange rates and 49% at constant rates. Europe accounts for 49% of annual sales with ¤250 million, a stable sales figure with respect to the previous year. The UK posted a strong increase in sales (37%). 1.3.6 Change in Income statement The group's gross margin increased by...

  • Page 36
    ..., Ubisoft also presents pro forma accounts in which in-house development costs are stated as expenses, as is the practice of certain American video-game publishers. Differences between the standards: â- French standards (French GAAP): - In-house research and development expenses are reported as...

  • Page 37
    ... majority of group employees have permanent work contracts. In order to meet certain needs imposed by the nature of its business, Ubisoft also resorts to fixed-term or temporary work contracts. 1.4.5 Working hours In France, the working week for full-time employees is 35 hours. Work schedules vary...

  • Page 38
    ...training policy over the past fiscal year has focused on helping employees acquire and expand their expertise, especially in terms of: 1.4.9 Environmental data Environmental impact Ubisoft publishes and distributes video games but does not manufacture them. The company thus has a very low impact...

  • Page 39
    ... SARL Ubisoft Productions France SARL Ubi Studios Srl Ubi Studios S.L Ubi Soft S.R.L Ubisoft Music Inc Red Storm Entertainment Inc(1) Blue Byte Software Inc(1) Blue Byte Software (de) Wolfpack Inc(1) GameLoft. S.A. (Morocco) (Canada) (France) (France) (Italy) (Spain) (Roumania) (Canada) (USA) (USA...

  • Page 40
    .... These amortizations are posted to the Red Storm Entertainment Inc. corporate accounts and then restated in the consolidated accounts in order to amortize goodwill over 20 years. Marketing subsidiaries: These subsidiaries are responsible for distributing Ubisoft products around the world and have...

  • Page 41
    ...withdrawal of games that have been illegally placed online. 1.6.2 Investment policy T wo years ago, Ubisoft decided to focus its investments on those of its major products that are developed in-house, i.e. on top-quality video games and "time-to-market games". During 2003-04, the company reaffirmed...

  • Page 42
    ... games. The company pays particular attention to the quality of its own brands and maintains control over the design/development/duplication/manufacturing/delivery chain in order to guard against inaccurate projections regarding a product's release. Like all publisher-distributors, Ubisoft...

  • Page 43
    ... if rates should decrease. Moreover, the possible loss of key staff of the target company must be considered among the risks related to mergers and acquisitions. Such a loss could have a negative effect on the acquired company's sales, earnings and/or financial situation. Nonetheless, Ubisoft has...

  • Page 44
    ...signed with developer Gearbox Software for the publication of Brothers in Armsâ„¢, a new military license game for consoles and PCs; release is planned for the end of 2004. Ubisoft's strategic interest in the capital of Gameloft increases to 30%. An exclusive long-term publishing agreement is signed...

  • Page 45
    ...has developed Tom Clancy's Splinter Cell® Chaos Theory™, the sequel to the popular franchise, with release planned for the end of 2004. An exclusive publishing agreement is signed with Square Enix for the European release of Star Ocean™ Till the End of Time™. The Ubisoft games presented at E3...

  • Page 46
    ... reserves Consolidated earnings Investment subsidy Share capital (group share) Minority interests Provisions for risk and charges Financial debts (1) Current accounts of the partners Advances and installments received Trade creditors and related accounts payable Sundry creditors and accrued...

  • Page 47
    ... 266,406 29,006 Income for fiscal year Grants received Total share capital Situation as of March 31, 2002 Appropriation of consolidated earnings N-1 Change in capital of consolidating company Consolidated income (group share) Change in conversion adjustments Reclassification of merger premiums...

  • Page 48
    ... from operating activities Net income Share in results of companies using the equity method of accounting Depreciation of game software (internal and external) Depreciation of other tangible and intangible fixed assets Depreciation of deferred charges Amortization of goodwill write-backs Changes in...

  • Page 49
    02 Financial Report for FY ending 3/31/04 2.1.5 Explanatory notes on the consolidated accounts The figures in the notes and tables that follow are shown in thousands of euros unless otherwise indicated. Issues of mixed securities: On May 14, 2003, the company issued new share purchase and ...

  • Page 50
    ... method. At year-end, the net accounting value is compared with sales projections in light of the contract conditions. If the net accounting value is below projections, a write of is made to the income statement. Where appropriate, to the various balance sheet items of the companies acquired. As...

  • Page 51
    ... to the income statement as set forth in the contracts signed with the publishers (either by the unit or based on the gross margin or sales) or, in the case of flat contracts, amortized using the straight-line method. At year-end, the net accounting value is compared with sales projections in light...

  • Page 52
    ... Graphics and modeling Marketing Internet services Global marketing Development Marketing, Development and the Internet Development Activity Founded or acquired 1986 1991 1995 1989 1991 1993 1994 1994 1995 1995 1995 1996 1996 1996 1996 1997 1998 1998 1997 France Parent company USA France UK...

  • Page 53
    ... SrL UBISOFT France SAS UBISOFT PRODUCTIONS France SARL UBISOFT WORLD STUDIOS SARL UBI COMPUTER SOFTWARE BEIJING COMPANY Co. Ltd. UBISOFT SWEDEN AB UBISOFT MUSIC Inc. UBISOFT WARENHANDELS GmbH LUDIMEDIA SAS LUDI FACTORY SARL Belgium Spain Italy France France France China Sweden Canada Austria France...

  • Page 54
    ...over Ubi Sound Studio SARL on September 30, 2003. Red Storm Entertainment Inc. took over Sinister Games Inc. as of December 31, 2003. Ubisoft Ltd. took over Blue Byte Software Ltd. as of February 28, 2004. There was no impact on mergers conducted during the fiscal year. Deconsolidated companies as...

  • Page 55
    02 General information on the listed, non-consolidated companies (in euros) Listed companies Book value as of March 31, 2004 Number of shares Share value as of March 31, 2004 Write-back over the fiscal year Depreciation over the fiscal year Cybersearch 148,800 24,000 0.03 -7,200 2.1.5.4 Explanatory...

  • Page 56
    ...SARL Ubisoft Inc. Ubisoft Ltd. Ubi Soft Entertainment GmbH Ubisoft Holdings Inc. Sinister Games Inc. 3D Planet SPA Blue Byte Software Ltd. Blue Byte Software GmbH Co. KG Blue Byte Software Inc. Red Storm Entertainment Inc. Ubisoft Canada Inc. Gameloft SA Tiwak SAS Distribution in France Distribution...

  • Page 57
    ...Increase Decrease Change in Reclassifications consolidation structure -1,948 116 1,948 164 63 -1 Exchange rate differences -281 -257 -67 -7 3/31/04 Cumulative Released software programs External developments Software tools Localization software Office software Leased office software Logo Other...

  • Page 58
    ... attributable to the following: â- â- The acquisition of Gameloft SA shares for K¤5,780. The use of the equity method to account for Gameloft SA shares totaling -K¤13,392. The reduction totaling K¤683 relates primarily to repayment of deposits and guarantees. 58 2004 FINANCIAL REPORT

  • Page 59
    .../03 Gross Change in consolidation structure 309 309 Exchange rate differences 3/31/04 Gross 325 325 Increase 34 34 Decrease 18 18 Equity in subsidiaries TOTAL Since the further acquisitions of Gameloft SA shares on September 15, 2003, Ubisoft Entertainment SA has held a controlling percentage of...

  • Page 60
    ... Ubi.com Inc. Ubisoft Warenhandels GmbH Blue Byte Software Inc. Red Storm Entertainment Inc. Ubisoft France SAS Ubisoft EMEA SARL Ubisoft Holdings Inc. Ubisoft Computing SARL Ubi Soft Entertainment GmbH Ubisoft Divertissements Inc. Ubi Soft Entertainment BV Shanghai Ubi Computer Software Ltd. Other...

  • Page 61
    ... 2004, was Kâ,¬4,518. Apart from activated ARD, redemption premiums of convertibles bonds and losses, all receivables have a maturity of less than one year. Note 10 Investment securities Investment securities break down as follows: Nature Gross value Treasury shares Investment funds TOTAL 1,020 42...

  • Page 62
    ...subscribe for one share with a face value of ¤0.31 Issue price: ¤0.01 Strike period: May 14, 2002, to May 14, 2006 Strike price: ¤28 The 1,169,733 warrants allocated to Ubisoft Entertainment SA were cancelled. 11,280 warrants were exercised during the fiscal year via delivery of own shares. As of...

  • Page 63
    ...Rate of salary changes Discount rate Average remaining years of service 5% 5% 24 years Italy 1.50% 5% 34 years France 3-7% 5% 34 years â- â- Projected return on assets 5% 5% 5% Licenses Large-scale destruction of old licensed products, which licenses are expired (so, products cannot be sold...

  • Page 64
    ... of a maximum of three years. New borrowings over the fiscal period amounted to K¤680. Financial debt 243,592 299,394 Chief characteristics of the 3.80% bond issue: Number and face value: 314,815 bonds with a face value of ¤164.64. As a result of the 5-for-1 stock split and the adjustment made...

  • Page 65
    ... would be redeemed in full on November 30, 2006, by redemption at a price of ¤52.70, or roughly 110.94% of their face value. During the fiscal year, the company bought back 200,000 bonds for ¤6,6m. These bonds were cancelled. As of March 31, 2004, 1,749,301 bonds remained to be converted. Chief...

  • Page 66
    ... customer accounts. 2.1.5.5 Explanatory notes on the income statement Note 16 Sales The group had K¤508,400 in sales during the 2003-04 fiscal year. At the current rate, sales increased 12% over the 2002-03 fiscal year; at a constant rate, growth in sales was 22.5%. Breakdown of sales by activity...

  • Page 67
    02 Financial Report for FY ending 3/31/04 Note 19 Depreciation and provisions Depreciation and provisions break down as follows: 3/31/04 Depreciation of intangible fixed assets Released software programs External developments Software tools Localization software Office software Logo Other ...

  • Page 68
    ...At the same time, Ubisoft Entertainment SA finances all the production studios around the world and most of the licensing and external development agreements. In this way, all of the exchange rate risk is centralized with Ubisoft EMEA SARL and Ubisoft Entertainment SA. When exchange rate risk exists...

  • Page 69
    ...(39.83% - 34.33%) Red Storm Entertainment Inc.: -3.829* (38.95% - 34.33%) Shanghai Ubi Computer Software Ltd.: -1.263* (10% - 34.33%) Other subsidiaries: Corporate tax correction, N-1: Ubisoft Entertainment SA Ubisoft Ltd. Ubisoft Inc. Cancellation of activation of deferred tax credits as of 3/31/03...

  • Page 70
    ... to officers of the company in accordance with Article L225-43 of the French Commercial Code. Corporate officer Total compensation paid Yves Guillemot Gérard Guillemot Michel Guillemot Claude Guillemot Christian Guillemot ¤193,130 ¤189,315 ¤185,505 ¤177,890 ¤177,890 3/31/04 Total benefits in...

  • Page 71
    ... period on the understanding that Ubisoft will record in its entirety any fluctuation in the share price from the sale price of ¤18.66. Changes between the date on which the contract is signed and its expiration will be recorded in temporary accounts pending a final adjustment. Unrealized gains...

  • Page 72
    ...SA shares On April 16, 2004, Ubisoft Entertainment SA acquired 6,284,876 shares of Gameloft SA at the price of ¤2.99. The company now holds 31.55% of the voting rights. 2.1.10 Employees (note part 1.4.8) The Group does not provide profit sharing or salary contributions. 72 2004 FINANCIAL REPORT

  • Page 73
    02 2.2 Corporate accounts of Ubisoft Entertainment SA as of March 31, 2004 2.2.1 Ubisoft Entertainment SA balance sheet ASSETS Intangible assets Business assets Tangible assets Financial assets 2 3 3/31/04 Gross Kâ,¬ 345,445 1,524 6,778 228,374 3/31/04 Amort/dep Kâ,¬ 192,262 4,029 11,423 3/31/04 Net...

  • Page 74
    ... income from equity holdings Income from other securities and claims on fixed assets Other interest and related income (1) Write-back of provisions Positive exchange differences Net proceeds from sales of investment securities Total financial proceeds Appropriations to provisions Other interest and...

  • Page 75
    ... premium on shares with warrants Increase in issue premium on group savings plan Variation in current accounts Conditional government loan Grants received Total cash flow from financial transactions Net change in cash flow Net cash position at the beginning of the financial year Net cash position...

  • Page 76
    ... of the year, Ubisoft Entertainment SA bought back 200,000 convertible bonds (OCEANEs) at an average price of ¤33. 2.2.5.3 Accounting rules and methods Business assets The business assets acquired include all the intangible elements (client base, know-how) needed for the company to do business and...

  • Page 77
    ...income statement as set forth in the contracts signed with the publishers (either by the unit or based on the gross margin or sales) or, in the case of flat contracts, amortized over 36 months using the straight-line method. At year-end, the net accounting value is compared with sales projections in...

  • Page 78
    ...948 128 244 An additional provision of ¤46 million was entered over the course of the fiscal year, reflecting the shortfall in estimated sales and projected operating income on certain games. Business assets Nature Distribution in Switzerland TOTAL As of 3/31/03 Cumulative 1,524 1,524 As of 3/31...

  • Page 79
    ...780 • Ubisoft Music Publishing Inc., K¤27 • Ubisoft SA (Spain), K¤361 • Ubisoft Sarl (Morocco), K¤247 • Ubisoft PTY Ltd., K¤658 â- The acquisition of 3.4 million shares in Gameloft SA, totaling K¤5,780, as well as the acquisition of Tiwak SAS for K¤1,409. 2004 FINANCIAL REPORT 79

  • Page 80
    General information on the listed companies (in euros): Listed companies Book value as of March 31, 2004 Number of shares Share value as of March 31, 2004 Write-back over the fiscal year Depreciation over the fiscal year Gameloft SA 13,391,746 12,238,047 2.80 Cybersearch 148,800 24,000 0.03 -7,200 ...

  • Page 81
    ... to other debts. Note 7. Statement of claims and debts STATEMENT OF CLAIMS Gross amount < 1 year > 1 year Claims on fixed assets Other financial assets 363 363 Claims on current assets Doubtful debts Trade receivables Government (VAT credit, other) Group and partners Advances and installments...

  • Page 82
    Note 9. Investment securities Nature Company name Ubisoft Entertainment SA CLAM EONIA CPR CASH SI Number Avg. price, ¤ Gross value, Closing price, Provision, Net value, K¤ ¤ K¤ K¤ % of capital Own shares Mutual fund Mutual fund 40,249 79 966 19 2,024 (1) 25.3481 181.871 18.763 223.178 2.769...

  • Page 83
    ...: Strike price: 17,540,082, with 15 warrants needed to subscribe for one share with a face value of ¤0.31. ¤0.01. May 14, 2002, to May 14, 2006. ¤28. The 1,169,733 warrants allocated to Ubisoft Entertainment SA were cancelled. 11,280 warrants were exercised during the fiscal year via delivery of...

  • Page 84
    ... increases and issue premiums during the past fiscal year were partly driven by the exercise of stock options. For the record, the exercise conditions of the stock option plans are as follows: 3rd plan Initial number of shares Face value Subscription value Exercise period 250,000 ¤0.31 ¤20.40 10...

  • Page 85
    ...2006 by redemption at a price of ¤52.70, or roughly 110.94% of their face value. During the fiscal year, the company bought back 200,000 bonds with the option of conversion and/or exchange for new or existing shares for the total sum of ¤6,600,000. These bonds were cancelled. As of March 31, 2004...

  • Page 86
    ... for receivables and debts. As of 3/31/03 Cumulative Exchange conversion adjustment to liabilities 649 As of 3/31/04 Cumulative 236 Increase 236 Decrease 649 2.2.5.5 Explanatory notes on the income statement Note 19. Sales Breakdown of sales by geographical area: As of 3/31/04 Europe USA Canada...

  • Page 87
    ... 728 51 72,596 3/31/03 Former presentation 68,746 1,588 728 51 71,113 *An additional provision of â,¬46 million was entered over the course of the fiscal year, reflecting the shortfall in estimated sales and projected operating income on certain games. Additional amortization relating to abandoned...

  • Page 88
    .... At the same time, Ubisoft Entertainment SA finances all the production studios around the world and most of the licensing and external development agreements. In this way, all of the exchange rate risk is centralized at Ubisoft EMEA SARL and Ubisoft Entertainment SA. When exchange rate risk exists...

  • Page 89
    02 Financial Report for FY ending 3/31/04 Note 26. Corporate tax As of March 31, 2004, the scope of fiscal integration remained unchanged. Ubisoft France SAS and Ubisoft EMEA SARL are integrated fiscally, with Ubisoft Entertainment SA at the head of the group. Under the tax integration agreement, it...

  • Page 90
    ... officers Ubisoft Entertainment SA paid K¤525 to corporate officers during the 2003-04 fiscal year as compensation. No attendance fees were paid. No loans or advances were made to officers of the company in accordance with Article L 225-43 of the French Commercial Code. 90 2004 FINANCIAL REPORT

  • Page 91
    ... Financial Report for FY ending 3/31/04 2.2.7 Subsidiaries and affiliated companies In thousands of currency Country Cur- Capital rency Reserves and amounts carried forward before earnings appropriation In thousands In thousands of euros of euros Percentage of capital held Book value of securities...

  • Page 92
    ...Basis for assessment Pursuant to the provisions of Article L. 225-235 of the French Commercial Code relating to the basis for our assessments, as established in the Law on Financial Security of August 1, 2003 and applicable to this fiscal year for the first time, we bring the following items to your...

  • Page 93
    ... for our assessment Pursuant to the provisions of Article L. 225-235 of the French Commercial Code relating to the basis for our assessments, as established in the Law on Financial Security of August 1, 2003 and applicable to this fiscal year for the first time, we bring the following items to your...

  • Page 94
    ... statutory auditors of your company, we hereby present our report on regulated agreements. I - Previously authorized agreements signed over the course of the fiscal year Pursuant to Article L. 225-40 of the French Commercial Code, we have been advised of the agreements for which prior authorization...

  • Page 95
    ... the fiscal year totaled ¤10,892.65. This agreement was approved at the Board meeting held on April 3, 2003. 6. Loan to Red Storm Entertainment Inc. (US) Director concerned: Mr. Yves GUILLEMOT Nature and purpose: Your company was authorized to grant current account advances to Red Storm. Maximum...

  • Page 96
    ...at the Board meeting held on February 20, 2004. 15. Sale of shares in Blue Byte Software Ltd. (UK) 11. Loan to Ubisoft KK (Japan) Director concerned: Messrs. Yves, Michel and Gérard GUILLEMOT, as well as Mrs. Yvette GUILLEMOT Nature and purpose: Your company was authorized to grant current account...

  • Page 97
    ... issued on behalf of Ubisoft Entertainment SA, valued at US $1,119,666.60 each. This agreement was approved at the Board meeting held on December 22, 2003. â- With regard to Ubi EMEA SARL: Authorization to guarantee commitments made with Nintendo of Europe GmbH, a company incorporated under German...

  • Page 98
    ... the past fiscal year. Current account advance granted to Gameloft SA Nature and purpose: Current account advance granted to Gameloft SA. Interest collected over the fiscal year totaled ¤193,124. This agreement was approved at the Board meeting held on July 17, 2002. Executed in Rennes on July...

  • Page 99
    ...Articles of Association, financial statements and reports, and minutes of General Meetings may be consulted at the business address or at the registered office. 4.1.5 Objectives of the company (Article 3 of the Articles of Association) Ubisoft Entertainment SA has the following objectives in France...

  • Page 100
    ... with the exception of the company itself, Ubisoft Entertainment SA. They shall represent the totality of shareholders. They shall be called and shall deliberate under the conditions stipulated by the French Commercial Code. General Meetings shall be held at the registered office or at any other...

  • Page 101
    ... of the French Commercial Code, in order of priority: â- To stabilize the company's stock price by systematic counterbalancing actions. To remit shares in exchange or in payment as part of any financial transactions. To purchase and sell shares in accordance with changing market conditions. To...

  • Page 102
    ... arrange for themselves to be part of a group or organize the purchase or sale of the number of shares or rights that constitute the necessary fraction. Voting rights double those conferred on other shares, based on the proportion of the corporate assets that they represent, shall be attributed to...

  • Page 103
    ... full on November 30, 2006 at a price of ¤52.70, or 110.94% of face value. No bonds were exercised. The company bought back 200,000 bonds with the option of conversion and/or exchange for new or existing shares in the amount of ¤6,600,000. These bonds were cancelled. As of March 31, 2004, 1,749...

  • Page 104
    ... SA were cancelled. 11,280 stock purchase warrants were exercised during the fiscal year. Ubisoft Entertainment delivered the shares from its directly-held shares. As of March 31, 2004, 16,359,069 subscription warrants remained to be converted. e) At its meeting of November 3, 2003, the Board of...

  • Page 105
    ... the aforementioned companies and exercised during the fiscal year by the 10 employees having the largest number of shares thus subscribed for (global information) Number Weighted average price ¤9.20 Plan number and maturity date Plan 10 (10/27/07) Plan 3 (2/27/04) Plan 8 (10/15/07) Plan 10 (10...

  • Page 106
    ..., to proceed with a new equity issue reserved for French employees, subject to a limit of 2.5% of the total shares comprising the company's share capital at the time the authorization was used, specifically by means of an FCPE. At its meeting on March 3, 2004, the Board of Directors used the...

  • Page 107
    ... of transaction Number Number of of shares shares (cumulative) Amount of increase in capital Nominal share value (in FrF, then in ¤) Issue Cumulative premium amounts in (in FrF, capital then in ¤) (in FrF, then in ¤) (in FrF, then ¤) March 1986 Formation of the company September 1990 Capital...

  • Page 108
    ... Prime Montants nominale d'émission cumulés de l'action...employees (PEE), conversion of stock options and bonds, and exercise of warrants 10/19/01 Conversion of share capital into euros (increase in par value) 4/22/02 Capital increase following conversion of stock...euros. 108 2004 FINANCIAL REPORT

  • Page 109
    ...rights over the past three fiscal years General information As of March 31, 2002 Number of shares Ubi Participations SA Claude Guillemot Yves Guillemot Michel Guillemot Gérard Guillemot Christian Guillemot Other members of the Guillemot family Ubisoft Entertainment SA GameLoft SA 2,314,527 141,272...

  • Page 110
    ...1.793% 0.227% Subtotal Ubisoft Entertainment SA Public and group employees** TOTAL 3,091,585 20,191 14,571,617 17,683,393 17.483% 0.114% 82.403% 100% 4,435,062 12,297,169 16,732,231 26.506% 73.494% 100% * This company is wholly held by the Guillemot family. ** The shares and voting rights held...

  • Page 111
    ... Securities market General information on the securities market of the issuer: Euroclear code: FR0000054470 Listing market: Euronext-Paris - Premier Marché â- Number of listed shares as of March 31, 2004: 17,582,304 â- Market capitalization as of March 31, 2004: ¤361 million at the closing price...

  • Page 112
    ... Article L. 225-37 of the French Commercial Code - in a specific report issued by the Chairman of the Board of Directors. Additional management information: Managing Director, EMEA Territories: Managing Director, North America: Chief Financial Officer: Managing Director, International Production...

  • Page 113
    ... Other offices held by the Directors Mr. Yves GUILLEMOT Director, Chairman and Chief Executive Officer of Ubisoft Entertainment SA His term of office will expire at the Ordinary General Meeting called to vote on the financial statements of the fiscal year ending March 31, 2007. Co-Managing Director...

  • Page 114
    ...(Italy) Ubisoft Sweden AB Shanghai Ubi Computer Software Company Ltd. (China) Ubisoft Canada Inc. Mr. Michel GUILLEMOT Director and Vice President of Ubisoft Entertainment SA His term of office will expire at the Ordinary General Meeting called to vote on the financial statements of the fiscal year...

  • Page 115
    ... SpA (Italy) Ubisoft Sweden AB Shanghai Ubi Computer Software Company Ltd. (China) Vice-President Ubisoft Divertissements Inc (Canada) Managing Director Ubi Studios SL (Spain) Ubi Studios SrL (Italy) Other positions: FRANCE Director Director and Vice President Gameloft SA Guillemot Corporation SA...

  • Page 116
    ... strategic questions concerning the Ubisoft group. Examining regulated agreements in accordance with Article L. 225-38 of the Commercial Code. Examining and approving projections regarding future activity. â- â- â- â- The Board met approximately 30 times during the fiscal year and the level...

  • Page 117
    ... management data conveyed to the corporate bodies. Take measures to prevent and control risk resulting from the company's activities and the risk of error or fraud. 6.2.2.2 Dependence on customers The company has no significant dependence on customers that could affect its development plan. Ubisoft...

  • Page 118
    ... up forward-sale contracts or options. 6.3 Scope of internal audit The Ubisoft group is composed of 19 French subsidiaries and 31 foreign subsidiaries, broken down as follows: 21 distribution companies, 20 production companies, seven support companies and two Internet companies. Major strategies...

  • Page 119
    ... and coordinates cash flow management for the French and foreign subsidiaries. It ensures that policies governing the management of interest rate risk, foreign exchange risk and liquidity correspond with published financial information. It delegates authority to a limited number of employees, who...

  • Page 120
    ... in order to facilitate quality control for accounting and financial data. The Consolidation department has implemented procedures to help the subsidiaries gain a better understanding of available tools and use them more effectively: â- â- The establishment of a group accounting plan. The...

  • Page 121
    ... accounting and financial information Dear Shareholders: In our capacity as statutory auditors for Ubisoft Entertainment SA, and pursuant to the provisions in the final paragraph of Article L. 225-235 of France's Commercial Code, we present our findings on the report prepared by your company...

  • Page 122
    ... from the Chairman of the Board of Directors (pursuant to Article L. 225-37 of the Commercial Code) and the reports presented by the statutory auditors, the General Meeting approves the parent company's financial statements, dated March 31, 2004, as presented, showing a profit of ¤1,305,237.48. In...

  • Page 123
    ... (Change in company name and corresponding amendments to the Articles of Association) The Extraordinary General Meeting, having acquainted itself with the report of the Board of Directors, resolves to adopt the following as the new company name as from the present date: "UBISOFT ENTERTAINMENT...

  • Page 124
    ... the employees and officers of the company and affiliated companies, subject to the conditions set forth in Article L. 225-180 of the French Commercial Code, options granting the right to apply for stock in the company (stock application options) and to purchase stock in the company (stock purchase...

  • Page 125
    ... these, the annual company financial statements - are published. During the period between the date on which the management of the company becomes aware of information that, if it were in the public domain, could have a significant impact on the market price of stock in the company, and a date...

  • Page 126
    ... retroactively; to determine the method of payment for the shares or other securities issued; where applicable, to define their buyback terms on the stock market and, in general, to take any action that may be necessary and sign any agreements needed to float the contemplated issues successfully...

  • Page 127
    ... Code, involving the exchange of company stock for the securities of another company listed on one of the markets indicated in the aforementioned Article L. 225-148 of the Commercial Code, and decides to remove, to the benefit of the holders of these securities, the preferential share application...

  • Page 128
    ... between the purchase price for the cancelled shares and their face value to an entry for premiums or available reserves. To make any such reduction(s) in share capital resulting from cancellations of stock authorized under the present resolution, to make corresponding amendments to the Articles of...

  • Page 129
    ... of our mission. The forecast data presented in the reference document represent the objectives of company management rather than isolated projections resulting from a structured process of data preparation. The annual and consolidated financial statements for the fiscal years ending March...

  • Page 130
    ... final paragraph of Article L. 225-235 of the Commercial Code, on the report from the Chairman of the Board of Directors of Ubisoft Entertainment SA with regard to internal audit procedures for preparing and handling accounting and financial information. â- 8.3 Names, addresses and professional...

  • Page 131
    ...8.4 Information policy Party responsible for information: Mr. Yves GUILLEMOT Chairman and Chief Executive Officer 28, rue Armand Carrel 93108 MONTREUIL-SOUS-BOIS Cedex Tel.: +33 (0)1 48 18 50 00 www.ubisoft.com 8.5 Schedule of financial announcements for fiscal year 2004-05 Date First-quarter sales...

  • Page 132
    ... a program to a system other than the one for which it was originally developed (and designed) and moving it from one environment to another. Production: The period during which a game is developed (character animation, integration of the data into the driver etc.). Xboxâ„¢: Microsoft game console...

  • Page 133
    ... General information Issuer Applicable regulations (foreign companies) Capital Special features (limitations on the exercise of voting rights etc.) Authorized unissued capital Potential capital Five-year historical table of changes in share capital Securities market Table of changes in share price...

  • Page 134
    ... to the 10 non-corporate officer employees granted the most options, and options exercised by them Regulated agreements 5.1 and 5.2 112 and 113 5.3 4.2.4 3.3 115 102 94 Section 8 8.1 8.2 Recent developments and outlook Recent developments Outlook 1.10.1 1.10.2 44 45 134 2004 FINANCIAL REPORT

  • Page 135
    ... Report are available from Ubisoft's commercial offices: 28, rue Armand Carrel, 93108 MONTREUIL-SOUS-BOIS Cedex - FRANCE A joint stock company with capital euros 5,481,851.83 Divided into 17 683 393 stocks Registered office: 107, avenue Henri Fréville, BP 10704 - 35207 RENNES cedex 2 - FRANCE Phone...

  • Page 136
    ...Angle Moulay Youssef Casablanca Tel: +212 (22) 20 85 87 Fax: +212 (22) 20 85 86 USA • 625 Third Street, 3rd floor San Francisco - CA 94107 Tel: +1 (415) 547 4000 Fax: +1 (415) 547 4001 • Red Storm 3200 Gateway Centre Boulevard Suite 100 Morrisville - NC 27560 Tel: +1 (919) 460 1776 Fax: +1 (919...