Ubisoft 2004 Annual Report Download

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ANNUAL REPORT
2005

Table of contents

  • Page 1
    2005 ANNUAL REPORT

  • Page 2
    .../2005 KEY FIGURES p. 04 INTERVIEW WITH YVES GUILLEMOT, CEO p. 06 TOP MANAGEMENT Inspired minds forging the path ahead p. 08 HIGHLIGHTS The past year at a glance 02 THE ACTIVITIES p. 10 THE VIDEOGAME MARKET Continuous growth p. 12 UBISOFT'S POSITION IN THE MARKET p. 14 DEVELOPMENT STRATEGY On...

  • Page 3
    ...-quality games but also acquire an in-depth knowledge of its consumers that enables the company to meet market expectations. For the 2004/2005 fiscal year, sales came to â,¬538 million. In 2004, Ubisoft thus became the 3rd independent publisher in both France and Germany, 5th in the United Kingdom...

  • Page 4
    Ubisoft had another successful year in 2004/2005 - sales growth substantially higher than that of the videogame industry as a whole, and a remarkable increase in operating and net income as a result of efficient cost control. 2004/2005 KEY FIGURES Proven performance Income (after goodwill) • ...

  • Page 5
    ... 25% pc 5% gamecube™ 4% gba 3% nintendo ds™ 1% psp™ 1% psx 37% ps2 25% xbox ® ® ® 3 UBISOFT > 2005 ANNUAL REPORT internal growth a winning strategy Development accounted for 87% of Ubisoft's sales in 2004/2005 and thus made up an increasingly greater proportion of company income. This...

  • Page 6
    ... year! Not only did we increase overall sales by 8% (at constant exchange rates) to an all-time high of â,¬538 million, but we had a spectacular fourth quarter that surpassed any other in Ubisoft's history. Our last quarter saw the company rise to the 5th rank among independent publishers...

  • Page 7
    ... The Prince of Persia® brand has more than 30 awards to its credit. In addition, Ubisoft was selected as the Best Developer of 2004 by the United Kingdom's Official Xbox® Magazine, and the 2nd worldwide publisher by Game Informer, the top videogame magazine in the United States. We also managed to...

  • Page 8
    ...-house development strategy, and far-reaching global distribution network - there is no doubt we will succeed. " We plan to double worldwide revenue and triple profits by 2010" Will the company's financial health be able to sustain this expansion? I am confident in our ability to repeat last year...

  • Page 9
    ... of the San Francisco office, Laurent has established Ubisoft as a major force in the US market. Alain joined Ubisoft in 2000, when the company entered the Premier Marché, bringing with him experience as CFO for technology companies in Europe. REPORUBISOFT > 2005 ANNUAL REPORT Inspired minds...

  • Page 10
    .../04 > Announcement of deal signed with Universal Studios Consumer Products Group to produce an interactive game based on three-time Academy Award® winning director Peter Jackson's remake of "King Kong". October 28/04 > Licensing deal with LucasArts to develop videogames for handheld consoles based...

  • Page 11
    ...05 > Licensing deal announced with Sony Pictures Consumer Products to develop and publish videogames based on Sony Pictures Animation's first CGI motion pictures. AWARDS June 9/04 > Tom Clancy's Splinter Cell Chaos Theoryâ„¢ receives three official Game Critics' Best of E3 2004 awards: Best PC game...

  • Page 12
    ... ACTIVITIES the videogame market Continuous growth Between 1998 and 2003, the videogame industry's software sales grew by more than 40%, to $13.1 billion. Ubisoft anticipates similar growth over the next four years, with an increase of almost 20% in 2007 and 2008 following two years of stability as...

  • Page 13
    ... Working title. Tom Clancy's Ghost Recon Advanced WarfighterTM UBISOFT > 2005 ANNUAL REPORT Videogames are as much a form of mass entertainment today as the cinema, no longer the exclusive domain of hardcore gamers or children. The average age of videogame players has been rising around the world...

  • Page 14
    ... business network, rare among even the largest publishers on any continent. In parallel, the company enjoys the benefits of both a major publisher and a renowned developer. Not only does it have an impressive in-house production force, it also maintains and nurtures positive working relationships...

  • Page 15
    ... Nintendo DSâ„¢, PSPâ„¢ and the PC/Mac, and is working on a number of titles for the next-generation home consoles of the three principal manufacturers. Through selective acquisitions and careful management of financial and human resources, Ubisoft has firmly established itself as a major publisher...

  • Page 16
    ... on all high-potential market segments. development strategy Investing in brands, taking on new challenges â- Openly Ambitious In line with Ubisoft's ambition to reach an increasingly wider demographic of gamers, its portfolio of games and brands continues to expand each year. Its goal is to...

  • Page 17
    ... Hair Affair to Open Seasonâ„¢, based on Sony Pictures' upcoming CGI film. The opportunities offered by major Hollywood licenses such as the videogame adaptation of "King Kong" are also seized, expanding the reach and recognition of its products. With Peter Jackson's King Kong , Ubisoft will prove...

  • Page 18
    ... strategy. Development, promotion, aftersales service - this customer-centric philosophy is visible at every stage, from the creation of games to marketing. a customer-centric approach Providing optimal products and services to consumers â- Consumer studies constantly on the increase In order...

  • Page 19
    ... America and EMEA â- Customer service commitment to respond within 48 hours â- 2004 Award for Best Technical Support Service in French in the Entertainment Software Industry UBISOFT > 2005 ANNUAL REPORT Stores remain a key point of contact between Ubisoft and its customers, and the company...

  • Page 20
    ... its ambitions Ubisoft's in-house development studios not only represent the second largest videogame production force in the world, they represent one of the best, repeatedly recognized for producing games of outstanding quality. At the same time, the growth in human resources has been carefully...

  • Page 21
    ... developer. Always open to new opportunities, the company has ongoing feasibility studies to help identify potential new sites, and its Montreal studio recently announced the opening of an annex site in Quebec City to attract local talent. Overseeing it all is a team of studio managing directors...

  • Page 22
    ... reality. â- R&D the key to tomorrow's success The R&D department is instrumental in developing essential middleware and programming tools, as well as creating and customizing game engines whose design can be optimized for the needs of specific titles. By creating its own tools, Ubisoft is less...

  • Page 23
    ...creative needs Engines, tools and software...Game technology is constantly evolving, and mastering these changes is essential for success. Ubisoft pushes the limits of the best middleware on the market, transforms them and creates new tools when those available no longer fulfil developers' needs. As...

  • Page 24
    ... over the years. the people The heart of the company The intrinsic value of Ubisoft - like any other actor in the industry - lies squarely with its talents. Sound engineers, graphic artists, product managers, level designers, programmers, animators, producers, creative directors...These are...

  • Page 25
    ...23 UBISOFT > 2005 ANNUAL REPORT 2,000 1,500 1,000 500 0 00/01 01/02 02/03 03/04 04/05 PRODUCTION HEADCOUNT (AVERAGE) 3,000 employees as of March 31, 2005, of which: BY COUNTRY â- â- â- BY ACTIVITY â- â- â- 1,110 Canada 660 France 350 China 320 220 340 USA Romania Rest of the world...

  • Page 26

  • Page 27
    2005 Financial Report

  • Page 28
    ... 5, 2005 4.5 Securities market 4.6 Dividends CORPORATE GOVERNANCE 5.1 The group's management 5.2 Composition and functions of the Board of Directors 5.3 Other offices held by the directors 5.4 Interests of the officers INTERNAL CONTROL REPORT 6.1 Conditions under which the Board's work is prepared...

  • Page 29
    ... policy 1.2.9 Pro forma accounting 1.2.10 Table of results for the last five fiscal years, Ubisoft Entertainment SA 28 28 29 29 30 30 30 31 31 31 32 32 33 1.3 Human resources and environmental data 1.3.1 1.3.2 1.3.3 1.3.4 1.3.5 1.3.6 1.3.7 Workforce as of March 31, 2005 Recruiting Work-time...

  • Page 30
    ... Gearbox Software developer for Brothers in Arms™, a new military license game for consoles and PCs; Exclusive publishing agreement concluded with the US Army to develop and distribute the games of the America's Army® franchise for consoles; Tom Clancy's Splinter Cell Pandora Tomorrow™ is rated...

  • Page 31
    ...); A video game development and publishing agreement is signed with Sony Pictures Consumer Products based on Open Seasonâ„¢ and Surf's Up, the first two animated feature films from Sony Picture Animation. double the workforce in its Montreal studio by the year 2010; Ubisoft acquires the technology...

  • Page 32
    ... and supervises production in exchange for acquiring the license. Ubisoft then handles localization and manufacturing, and of course marketing and sales Breakdown of sales by core activity (%) Development Publishing Distribution Total 2004/2005 87% 10% 3% 100% 2003/2004 86% 11% 3% 100% Change in...

  • Page 33
    ...the exchange rate is excluded; an unfavorable basis for comparison: in 2003/2004 North America region benefited from the release in April of Tom Clancy's Splinter Cell Pandora Tomorrow™ for PlayStation®2, while it had been launched in the previous fiscal year in Europe. In Europe, sales increased...

  • Page 34
    ... use of factoring and discounts, primarily in Germany and the UK. 1.2.9 Pro forma accounting In addition to presenting its consolidated accounts according to French accounting standards, Ubisoft also presents pro forma accounts in which in-house development costs are stated as expenses, as is the...

  • Page 35
    ...and before allocations (â,¬) Per share, result after taxes and allocations (â,¬) Dividend attributed to each share Average no. of personnel Payroll total (â,¬K) Social security contributions and employee benefits (â,¬K) 33 UBISOFT > 2005 FINANCIAL REPORT 1.3 Human resources and environmental data...

  • Page 36
    ... the world of video games and help the group identify future employees. The goal for the 2005/2006 fiscal year is to enhance in-house creative expertise by hiring 600 new employees by March 31, 2006. Ubisoft recruits both experienced experts in game creation and junior staff who have benefited from...

  • Page 37
    ... compiled to help employees identify the range of skills and knowledge available within the group. Experts within Ubisoft meet on a regular basis to share their know-how and address the challenges that the company will face in the future. Annual evaluations designed to enhance skills management and...

  • Page 38
    ...In general, the Ubisoft group is working to combat waste by donating computer equipment to charitable organizations or selling it to wholesalers or employees in lieu of discarding it. With regard to the recycling of paper products, subsidiaries in Germany, Spain, Italy, Belgium, Switzerland, Britain...

  • Page 39
    ...SARL Ubisoft Pictures SARL Ubisoft Graphics SARL Ubisoft Divertissements Inc. Shanghaï Ubi Computer Software Co.Ltd Ubisoft SARL Ubisoft Productions France SARL Blue Byte GmbH Ubisoft Studios SRL Ubi Studios SL Ubisoft SRL Ubisoft Music Inc. Ubisoft Music Publishing Inc. Red Storm Entertainment Inc...

  • Page 40
    ...August 31, 2004, shares in Cybersearch SA valued at â,¬149,000 were written off following the company's liquidation. 38 UBISOFT > 2005 FINANCIAL REPORT 1.4.3 Activity of the subsidiaries Production subsidiaries They are responsible for software design and development. Their business has expanded...

  • Page 41
    ... development policy T wo years ago, Ubisoft decided to focus its investments on major products that are developed in-house, i.e. top-quality video games and the time-to-market for each game. During 2004/2005, the company reaffirmed its desire to consolidate its position by acquiring the resources...

  • Page 42
    ... design/development/duplication/manufacturing/delivery chain in order to guard against inaccurate projections regarding a product's release date. Like all publisher-distributors, Ubisoft is prey to any slowdown in economic growth. However, the company has acquired the marketing and sales resources...

  • Page 43
    ... covered by credit insurance. Ubisoft's 10 largest customers account for 46% of the group's pre-tax sales. 1.6.6 Risk related to intellectual property Ubisoft Entertainment games are covered by intellectual property rights both in Europe and internationally (for France: the "Institut National de...

  • Page 44
    ... 54,974 -60,859 24,876 -10,452 Annual interest 1,284.6 -1,927.7 1,173.7 -1,290.2 651.8 -107.9 Change of 1% 1,677 -2,615 1,723 -1,899 901 Difference 392.9 -687.3 549.7 -608.6 248.8 -104.5 42 UBISOFT > 2005 FINANCIAL REPORT Currency risk The group is exposed to foreign exchange risk on its cash...

  • Page 45
    ... impact on profitability. 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 46
    ... to house 200 designers, animators and programmers. This project is part of Ubisoft's initiative to create 1,000 new jobs in Quebec between now and 2010; An exclusive agreement was signed with Pegasus Infinite Digital Culture & Media Co. Ltd to develop a massively multiplayer online game based...

  • Page 47
    ... extremely high-quality products, including a number of mega hits such as Halo®2 (Microsoft Corporation) and Grand Theft Auto San Andreas™ (Take 2), fuelled added competition among publisher/developers. Ubisoft anticipates a stable market for game software in 2005 and 2006 in both Europe and the...

  • Page 48
    46 UBISOFT > 2005 FINANCIAL REPORT

  • Page 49
    ... of corporate officers 2.1.9 Off-balance-sheet commitments 2.1.10 Events after closure of accounts 2.1.11 Employees 2.1.1 2.1.2 2.1.3 2.1.4 2.1.5 2.1.6 48 48 49 49 50 52 55 55 56 59 61 72 75 76 76 77 77 47 UBISOFT > 2005 FINANCIAL REPORT 2.2 Corporate accounts of Ubisoft Entertainment SA as...

  • Page 50
    ... accounts2 Investment securities Cash Current assets Total assets 48 UBISOFT > 2005 FINANCIAL REPORT LIABILITIES Capital Premiums Consolidated reserves Consolidated earnings Investment subsidy Equity (group share) Minority interests Provisions for risk and charges Borrowings* Advances and...

  • Page 51
    ... as of March 31, 2004 Allocation of consolidated earnings N-1 Change in capital of mother company Fiscal year earnings (group share) Change in exchange gains & losses1 Grants Increase in capital for companies using the equity method of accounting (not subscribed) Other Situation as of March 31, 2005...

  • Page 52
    ... cash flow from operating activities Inventory Trade receivables Advances Sundry assets Trade payables Sundry liabilities Total change in working capital requirement Investing activities 50 UBISOFT > 2005 FINANCIAL REPORT Acquisition of intangible assets Acquisition of tangible assets Acquisition...

  • Page 53
    ... REPORT FOR THE FISCAL YEAR ENDING MARCH 31, 2005 2 Statement of changes in cash flow for comparison with other industry firms â,¬K Operating activities Net income Share in results of companies using the equity method of accounting Depreciation of game software (internal and external production...

  • Page 54
    ... Financial Reporting Standards". The general restatement principle is that the accounting principles used to prepare the provisional IFRS financial information be applied retrospectively to the opening balance sheet. The impact of these adjustments is recorded directly through equity. The group...

  • Page 55
    ...and brands at the closing rate as of the opening balance sheet. This impact has been related on the dollar rate fall since 2000 and 2001, acquisition years of the Red Storm Entertainment Inc. and Blue byte Software Inc. firms. -1,583 1,697 -8,940 284,709 2.1.5.2.2. Description of the principal IAS...

  • Page 56
    ... Taking into account the change in fair value of the redeemable share warrants, the after-tax impact on opening equity is -â,¬753 thousand. d) Equity swaps (IAS 39) IAS 39 requires that equity swaps be recorded as "Financial assets or financial liabilities through profit or loss". An equity swap is...

  • Page 57
    ... of a business combination. - New companies founded On March 24, 2005, Red Storm Entertainment Inc. created a subsidiary, Blue Byte GmbH, to which it contributed the assets of its branch, Blue Byte Software Inc., for their net accounting value as of March 31, 2005. The shares of Blue Byte GmbH were...

  • Page 58
    ...Released parent software programs" or "External developments" accounts (208 accounts). Commercial software is amortized over three years using the straight-line method, beginning on the date of its commercial release. The production costs for outsourced software are posted to Account 232 or advances...

  • Page 59
    ...-year inflation rate no longer exceeds 100%; The central bank no longer intervenes to control the price of the national currency. Advances and installments paid Advances and installments primarily involve distribution and reproduction rights (licenses) acquired from other publishers. The signing...

  • Page 60
    ... Weighted average number of shares after exercise of rights relating to diluting instruments Diluted earnings per share on March 31, 2005 = â,¬1.02 Kâ,¬ 20,022 Kâ,¬ 2,781 Kâ,¬ 1,693 Kâ,¬ 396 Kâ,¬ 24,892 17,778,855 2,532,020 784,272 1,814,025 1,516,939 24,426,111 58 UBISOFT > 2005 FINANCIAL REPORT

  • Page 61
    ...Finland UBISOFT ENTERTAINMENT SA South Korea GAMELOFT SA France TIWAK SAS France BLUE BYTE GmbH Germany FC = Full consolidation EA = Equity affiliate The fiscal year of all consolidated companies ends on March 31 of each year, except Ubisoft SRL (Romania) and Gameloft SA, which close their accounts...

  • Page 62
    ...60 UBISOFT > 2005 FINANCIAL REPORT Companies Share acquisition value â,¬K 27 665 32 724 Net accounting value â,¬K 20 395 32 447 Controlling percentage Percentage interest Equity as of 3.31.05 â,¬K Earnings as of 3.31.05 â,¬K -1 8 1 8 Ubisoft Music Publishing Inc. Ubi Soft Entertainment Ltda...

  • Page 63
    ... Games Inc. Blue Byte Software Inc. Red Storm Entertainment Inc. Wolfpack Studios Inc. Distribution in the US Ubisoft SpA Ubisoft Canada Inc. Gameloft SA Tiwak SAS Ubisoft Divertissements Inc. Blue Byte GmbH Ubisoft France SAS Ubisoft SPRL Ubisoft BV Ubisoft Warenhandels GmbH Ubi Games SA Total...

  • Page 64
    ... 62 UBISOFT > 2005 FINANCIAL REPORT Gameloft SA Tiwak SAS Ubisoft Divertissements Inc. Blue Byte GmbH Ubisoft France SAS Ubisoft SPRL Ubisoft BV Ubisoft Warenhandels GmbH Ubi Games SA Total Goodwill is amortized over 20 years via the straight-line method (Tiwak SAS and Microïds Canada Inc...

  • Page 65
    ...547 UBISOFT > 2005 FINANCIAL REPORT Released commercial softwares1 External commercial softwares Office software Leased office software Logo Other Total 1- Released software programs now include software tools and localization. 2- Includes â,¬51.6 million of additional amortization, reflecting the...

  • Page 66
    ... Total As of 3.31.04 Cumulative 3,693 200 3,893 Increase 81 81 Decrease 3,497 200 3,697 Change in scope As of 3.31.05 Cumulative 277 0 277 The decrease in provisions reflects provision write-backs for Teamchman SA and Cybersearch SA, which were liquidated during the course of the fiscal year...

  • Page 67
    ... and â,¬57 thousand on the share of equity capital. Gameloft SA's contribution to Ubisoft Entertainment SA's earnings was â,¬314 thousand as of March 31, 2005. Note 6 Inventory and work-in-progress Inventory and work-in-progress break down as follows: As of 3.31.05 Gross Goods Total 24,272 24,272...

  • Page 68
    ... FINANCIAL REPORT 1- Includes fiscal losses of â,¬1,906 thousand by Ubisoft France SAS and â,¬1,516 thousand by Ubisoft EMEA SARL generated in the course of fiscal integration. The change in tax credits is principally the result of: the reconstitution of â,¬4.4 million at Red Storm Entertainment...

  • Page 69
    ... Group savings plan As of March 31, 2005 17,582,304 46,888 20 45,596 370,032 18,044,840 Maximum number of shares that may be created: 7,172,031 by bond conversion by exercise of stock options by exercise of subscription warrants 2,598,297 2,041,714 2,532,020 UBISOFT > 2005 FINANCIAL REPORT Open...

  • Page 70
    ... of September 12, 2003, authorized the Board of Directors, at its sole initiative, 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...

  • Page 71
    ... are as follows: 69 UBISOFT > 2005 FINANCIAL REPORT Italy 1.50% 4.50% 33 years 5% France 3-6% 4.50% 33 years 5% Miscellaneous Our Canadian subsidiary, Ubisoft Divertissements Inc., has received an audit notification letter relating to the transfer price for the year 1999, involving approximately...

  • Page 72
    ... by changes in working capital requirements. They may be offset with existing liquid assets at other group companies as part of a notional cash pooling system. 70 UBISOFT > 2005 FINANCIAL REPORT Leasing Leases mainly cover IT hardware leased under contracts of a maximum of three years. New...

  • Page 73
    ...% of the issue price. 71 UBISOFT > 2005 FINANCIAL REPORT 163,732 bonds were converted, four during this fiscal year. As of March 31, 2005, 151,083 bonds remain to be converted. Chief characteristics of the OCEANE (bonds convertible/exchangeable into new and/or existing shares) Number: 3,150,000...

  • Page 74
    ... â,¬538 thousand million in sales during the 2004/2005 fiscal year. At the current rate, sales increased 6% over the 2003/2004 fiscal year; at a constant rate, growth in sales was 8%. Breakdown of sales by activity is as follows: 3.31.05 Kâ,¬ Development Publishing Distribution Total 468,102 53,805...

  • Page 75
    ... 179 25 836 560 1,034 3,555 111 1,345 131,365 73 UBISOFT > 2005 FINANCIAL REPORT 1- Released software programs now include software tools and localization. 2- Includes â,¬51.6 million of additional amortization reflecting the shortfall in estimated sales and projected operating income on certain...

  • Page 76
    ...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 77
    ...support development costs (depreciation of games, internal and external development, royalties) and head office costs. 2. Geographic breakdown of assets NET ASSETS Goodwill Intangible assets Tangible assets Financial assets Equity in subsidiaries Fixed assets Inventory and work-in-progress Advances...

  • Page 78
    ... Forward sale and swap 36,073 17,232 8,452 2,383 982 76 UBISOFT > 2005 FINANCIAL REPORT Sureties and guarantees given: Debtor Ubisoft Divertissements Inc. Ubisoft GmbH Ubisoft Entertainment SA Ubisoft Divertissements Inc. Ubisoft EMEA SARL Ubisoft Inc. Ubisoft Inc. Ubisoft EMEA SARL Ubisoft Nordic...

  • Page 79
    ... the group's workforce breaks down as follows: 3.31.05 Europe Asia Canada USA Morocco Romania Australia Total 915 353 1,110 321 42 218 13 2,972 3.31.04 911 234 719 307 52 114 15 2,352 The average number of staff during the 2004/2005 fiscal year was 2,705 persons. There is no employee profit-sharing...

  • Page 80
    ... Business assets Tangible assets Financial assets Fixed assets Inventory and work-in-progress Advances and installments paid Trade receivables Other receivables Investment securities Cash Current assets Bond redemption premium Other receivables and adjustment accounts Total assets 1 78 UBISOFT...

  • Page 81
    ... and related expenses2 Negative exchange differences Net expenses on sales of investment securities Total financial expenses Financial result Operating result Extraordinary result Earnings before tax Income tax Net income for fiscal year 1- Including revenue from affiliated companies 2- Including...

  • Page 82
    ... on shares with warrants Increase in issue premium on group savings plan Variation in current accounts Total cash flow from financing activities Net change in cash flow Net cash position at the beginning of the fiscal year Net cash position at the end of the fiscal year 1- Including change in equity...

  • Page 83
    ...of the shares in Blue Byte GmbH initially held by its subsidiary Red Storm Entertainment Inc. for the amount of â,¬412.6 thousand. Asset purchases On October 25, 2004, Ubisoft Entertainment SA acquired the technology, tools and source codes for team sports games of the Microsoft Corporation for the...

  • Page 84
    ... production costs. Commercial software is amortized over three years using the straight-line method, beginning on the date of its commercial release. The production costs for outsourced software are posted to Account 232 or advances and installments in accordance with the rules defined by France...

  • Page 85
    ... to the Swiss subsidiary, Ubi Games SA, on March 31, 2005, for their purchase price. The selling price was reduced by rents billed by Ubisoft Entertainment SA since the purchase of the Guillemot business assets in September 2001 (with the rents considered advance payments toward the acquisition...

  • Page 86
    ...in the following companies: GmbH, â,¬2,000 thousand; - Ubisoft Warenhandels GmbH, â,¬920 thousand; - Shanghai Ubi Computer Software Co. Ltd, â,¬1,571 thousand; - Ubisoft the acquisition of 6,284,876 shares in Gameloft SA for â,¬18,791 thousand as well as the acquisition of Blue Byte GmbH for â,¬413...

  • Page 87
    FINANCIAL REPORT FOR THE FISCAL YEAR ENDING MARCH 31, 2005 2 General information on the listed company: Listed company Book value as of 3.31.05 (â,¬) Number of shares Value of one share as of 3.31.05 (â,¬) Write-back over the fiscal year Depreciation over the fiscal year Gameloft SA 32,183,525 18,...

  • Page 88
    ... 3,513 62 6,194 Credits receivable from suppliers Sales not yet billed Interest receivable Total 3,620 12,953 18 16,591 Note 8 Nature Own shares Mutual fund Investment securities Name Ubisoft Entertainment SA Étoile MONE EURIBOR CPR CASH SI SOGEMONE Number Average purchase price, â,¬ 44.107 101...

  • Page 89
    ...The buy-back of 1,400,699 bonds over the previous fiscal years ...Credits to be issued Tax and social security liabilities Total 1,456 231 1,687 18,485 9,260 545 29,977 3.31.04 1,452 264 1,716 9,827 8,908 1,572 22,023 87 UBISOFT > 2005 FINANCIAL REPORT Note 12 Items relating to affiliated companies...

  • Page 90
    ... provisions FY write-backs As of 3.31.05 Note 14 Equity Capital On March 31, 2005, Ubisoft Entertainment SA's capital consisted of 18,044,840 shares with a face value of â,¬0.31 each, i.e., â,¬5,593,900.40. Number of Ubisoft Entertainment SA shares 88 UBISOFT > 2005 FINANCIAL REPORT As of April...

  • Page 91
    ... by the Ubi Actions FCPE. The Board of Directors took note of this equity issue at its meeting on March 1, 2005. Employees subscribed 270,405 shares via the Ubi Actions FCPE. 89 UBISOFT > 2005 FINANCIAL REPORT Note 15 Financial debts Financial debt breaks down as follows: 3.31.05 Bond debentures...

  • Page 92
    ... account advances made by subsidiaries to the parent company. These advances have a maturity of less than one year. The breakdown of financial debt by currency is as follows: 3.31.05 Euros US dollars Pounds sterling Canadian dollars Yen Australian dollars Swiss francs Danish krone Other Financial...

  • Page 93
    ...of bilateral lines of credit, the company is required to respect certain financial ratios (known as covenants). All covenants are calculated on the basis of the annual consolidated accounts (see Note 14 in the explanatory notes on the consolidated accounts). 91 UBISOFT > 2005 FINANCIAL REPORT Note...

  • Page 94
    ... 3.31.05 Write-back of depreciation and provisions Transfer of expenditures Other current operating income Total 703 11,548 461 12,712 3.31.04 679 12,838 728 14,245 92 UBISOFT > 2005 FINANCIAL REPORT Transfer of expenditures primarily relates to the rebilling of group companies for overhead costs...

  • Page 95
    ...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 96
    ...31.04 -7,672 9,073 1,401 3,027 94 UBISOFT > 2005 FINANCIAL REPORT Extraordinary result Pre-tax profit (loss) Fiscal result The income tax charge consists of the annual flat-rate corporation tax for 2002 of â,¬30 thousand. A tax debt related to the research tax credit was entered in the amount of...

  • Page 97
    ...the sale price (â,¬18.66) of one euro would be â,¬918,137. Crédit Lyonnais may transfer all or a portion of these shares in advance at Ubisoft's request. 2. Financial leasing (in â,¬K) Initial value Depreciation Net value Payments made Payments remaining to be made - -1 year +1 year Residual value...

  • Page 98
    ... their employer's approval. Full-time employees enjoy the right to between 20 and 21 hours of training each year, in accordance with the union provisions applicable within each firm. These hours may be accrued for up to six years; 2.2.6.3 Compensation of corporate officers Ubisoft Entertainment SA...

  • Page 99
    ... AUDITORS 3.1 Report on the consolidated account statements for the fiscal year ending March 31, 2005 3.2 General report on the fiscal year ending March 31, 2005 3.3 Special report on regulated agreements for the fiscal year ending March 31, 2005 98 99 100 97 UBISOFT > 2005 FINANCIAL REPORT

  • Page 100
    ... end of the accounting period. II - Basis for assessment Pursuant to the provisions of Article L. 225-235 of France's Commercial Code regarding the basis for an assessment, we call your attention to the following items: Goodwill and brands 98 UBISOFT > 2005 FINANCIAL REPORT The note relating to...

  • Page 101
    ...," relating to the modification in the development costs presentation billed by the subsidiaries of Ubisoft Entertainment in the income statement of your firm. 99 UBISOFT > 2005 FINANCIAL REPORT II - Basis for assessment Pursuant to the provisions of Article L. 225-235 of France's Commercial Code...

  • Page 102
    ... EMEA and Ubisoft GmbH; 2. Purchase of Gameloft shares held by GUILLEMOT BROTHERS SA Directors concerned: Messrs. Yves, Michel, Gérard, Claude et Christian GUILLEMOT Nature and purpose: your company has authorized the purchase of 6,284,876 Gameloft shares held by Guillemot Brothers SA for a total...

  • Page 103
    ...GUILLEMOT Nature and purpose: your company authorized the sale of 3,098,107 shares held in Ubi.com SA to Ubisoft EMEA SARL for a total selling price of â,¬300,439.42. This agreement was approved at the Board meeting held on January 3, 2005. 5. Sale of the swiss business assets to Ubi GAMES Director...

  • Page 104
    102 UBISOFT > 2005 FINANCIAL REPORT

  • Page 105
    ...12 General management functions (Article 13 of the Articles of Association) 4.1.13 Share buy-back program 4.1.14 Consent clause 104 104 104 104 104 104 104 104 104 104 105 105 105 105 106 103 UBISOFT > 2005 FINANCIAL REPORT 4.2 General information on the capital 4.2.1 Share capital 4.2.2 Rights...

  • Page 106
    ..., 2004 changed the company's name to Ubisoft Entertainment SA. The company's registered office is located at 107 Avenue Henri Fréville, BP 10704, Rennes, France (35207 Cedex 2). 4.1.2 Legal status 4.1.6 A French société anonyme with a Board of Directors, governed by the French Commercial Code...

  • Page 107
    ...to grant stock options to the company's employees and managers or acquire shares under the conditions stipulated in Articles 443-1 et seq. of the French Labor Code and the second paragraph of Article L 225-191 of the French Commercial Code. UBISOFT > 2005 FINANCIAL REPORT General Meetings comprise...

  • Page 108
    .... 4.1.14 Consent clause Ubisoft Entertainment SA's Articles of Association do not contain a consent clause. 4.2 4.2.1 General information on the capital Share capital attributed to all fully paid-up shares that are shown to have been registered for at least two years in the name of the same...

  • Page 109
    ...of the total shares comprising the share capital as of the date on which the authorization is used by the Board of Directors 107 UBISOFT > 2005 FINANCIAL REPORT Authorization granted to the Board of Directors to grant employees and company managers options giving a right to new shares and/or stock...

  • Page 110
    ... and/or the subscription for new shares in May 2003, one bond entitles its holder to subscribe for 1.037 shares, each with a par value of â,¬0.31. 108 UBISOFT > 2005 FINANCIAL REPORT Nominal issue price: Dated date and settlement date: Term of bond: Annual yield: Gross yield to maturity: Normal...

  • Page 111
    ... and/or the subscription for new shares of May 14, 2003: Initial number of warrants: Strike price: Term: 17,540,082 (15 SPWs entitle the holder to one share) â,¬28 May 14, 2002 to May 14, 2006, inclusive The 1,169,733 stock warrants allocated to Ubisoft Entertainment SA were cancelled. 710,580...

  • Page 112
    ...) Options held against the issuer and the above companies exercised during the fiscal year by the ten employees having the largest number of shares thus subscribed (global information) Number Weighted average price Plan No. and expiration dates Plan No.11 Expiration 10.13.14 221,800 â,¬ 14...

  • Page 113
    ... equity issue was announced by the Board of Directors on March 1, 2005. Employees subscribed for 270,405 shares through the Ubi Actions FCPE. 4.2.7 Article 5 of the Articles of Association authorizes the company to set up a procedure for identifying security holders. 111 UBISOFT > 2005 FINANCIAL...

  • Page 114
    ... into euros (increase in share par value) 04.22.02 112 UBISOFT > 2005 FINANCIAL REPORT Equity issue following conversion of stock options and bonds and the exercise of warrants 278,067 17,368,732 12.20.02 Equity issue reserved for employees (PEE), conversion of stock options and bonds and...

  • Page 115
    GENERAL INFORMATION 4 Amount of the equity issue Share par value (in FrF, then â,¬) Issue premium (in FrF,...298,106.15 â,¬4,292,812.97 â,¬0.31 â,¬4,206,612.20 â,¬5,384,306.92 113 UBISOFT > 2005 FINANCIAL REPORT â,¬1,390,358.85 â,¬0.31 â,¬1,337,240.35 â,¬5,437,425.42 â,¬283,015.68 â,¬0....

  • Page 116
    ... Corporation SA In concert Ubisoft Entertainment SA Gameloft SA Public and group employees Total 915,227 141,463 291,797 167,665 403,007 99,697 40,875 1,111,545 3,171,276 1,169,733 264,923 12,934,150 17,540,082 114 UBISOFT > 2005 FINANCIAL REPORT As of 03.31.04 Number of shares Guillemot Brothers...

  • Page 117
    ... UBISOFT > 2005 FINANCIAL REPORT Guillemot Brothers SA1 Claude Guillemot Yves Guillemot Michel Guillemot Gérard Guillemot Christian Guillemot Other members of the Guillemot family Guillemot Corporation Guillemot Suisse SA In concert Ubisoft Entertainment SA Public and group Total 1- This company...

  • Page 118
    ... next 12 months: Electronic Arts Inc. is acting alone; Electronic Arts Inc. may engage in purchases (including a takeover) or sales of Ubisoft Entertainment SA shares; Electronic Arts Inc. may ask to be represented on Ubisoft Entertainment SA's corporate bodies." 116 UBISOFT > 2005 FINANCIAL REPORT

  • Page 119
    ... General information concerning the issuer's securities market Euroclear code: FR0000054470 Listing market: Euronext - Paris - Eurolist - Segment B Number of listed shares as of March 31, 2005: 18,044,840 Market capitalization as of March 31, 2005: â,¬543 million based on the closing share price...

  • Page 120
    118 UBISOFT > 2005 FINANCIAL REPORT

  • Page 121
    CORPORATE GOVERNANCE 5 5 5 CORPORATE GOVERNANCE 5.1 The group's management 5.2 Composition and functions of the Board of Directors 5.3 Other offices held by the directors 5.4 Interests of the officers 120 120 121 124 119 UBISOFT > 2005 FINANCIAL REPORT

  • Page 122
    ...rard Guillemot (Publishing and Marketing) Mr. Christian Guillemot (Administration) Additional information concerning the group's management Managing Director, EMEA Territories Managing Directors for North American Territories Chief Finance Officer Managing Director International Production Editor...

  • Page 123
    ...the fiscal year ended March 31, 2007. 121 UBISOFT > 2005 FINANCIAL REPORT Other positions: France Director and Vice-President Gameloft SA Guillemot Brothers SA Guillemot Corporation SA Abroad Director Ubisoft Nordic AS (Denmark) Ubisoft Pty Ltd (Australia) Ubisoft Sweden AB (Sweden) Guillemot Inc...

  • Page 124
    ...Officer Gameloft SA Manager Gameloft Rich Games Production France SARL Chairman and Chief Executive Officer Guillemot Corporation SA Abroad Director Ubi Computer Software Beijing Company Ltd (China) Ubisoft Ltd (Hong-Kong) Ubisoft Canada Inc. (Canada) Ubisoft Divertissements Inc. (Canada) Ubisoft...

  • Page 125
    ...Great Britain) 123 UBISOFT > 2005 FINANCIAL REPORT Other positions: France Director and Vice-President Gameloft SA Guillemot Brothers SA Guillemot Corporation SA Director Ubisoft Canada Inc. (Canada) Ubisoft Divertissements Inc. (Canada) Ubi Soft Entertainment Ltd (Hong-Kong) Ubisoft Holdings Inc...

  • Page 126
    Mrs. Yvette GUILLEMOT Director of Ubisoft Entertainment SA. Her term of office will expire at the Ordinary General Meeting convened to approve the financial statements for the fiscal year ended March 31, 2007. Other position: Abroad Director Shanghaï Ubi Computer Software Company Ltd (China) 5.4...

  • Page 127
    ... with the last paragraph of Article L. 225-235 of the French Commercial Code, on the report of the Chairman of the Board of Directors of Ubisoft Entertainment SA concerning the internal control procedures related to the preparation and treatment of accounting and financial information 131 131

  • Page 128
    ...in accordance with Article L. 225-38 of the French Commercial Code. The Board met approximately 20 times during the fiscal year and the average attendance rate was 70%. 126 UBISOFT > 2005 FINANCIAL REPORT 6.1.2 Information about the Directors The Chairman and Chief Executive Officer provides the...

  • Page 129
    ..., mainly in France and United Kingdom. Most sales are made to so-called "major accounts". The risk of non-payment by these clients is relatively low. Moreover, the main subsidiaries, which represent more than 89% of group sales, are covered by credit insurance 127 UBISOFT > 2005 FINANCIAL REPORT...

  • Page 130
    ... and authorizations. The Financial Communications department provides the financial information required for a proper understanding of the group's strategy to shareholders, financial analysts, investors and so on. The Information Technology department (ITD) manages the development of specific tools...

  • Page 131
    ... relating to the preparation of financial and accounting information Monthly reporting The group has implemented a procedure for monitoring operations on the basis of monthly reporting. A budget plan is prepared by the subsidiaries for the coming year based on anticipated product release dates...

  • Page 132
    ...the comparison of information. All of the computing procedures implemented are designed to promote greater data integration. the group's accountants for the impact of this transition to the IFRS standards. A User guide has been developed for the subsidiaries in question. The accounting software has...

  • Page 133
    ...the last paragraph of Article L. 225-235 of the French Commercial Code, on the report of the Chairman of the Board of Directors of Ubisoft Entertainment SA concerning the internal control procedures related to the preparation and treatment of accounting and financial information Ladies and Gentlemen...

  • Page 134
    132 UBISOFT > 2005 FINANCIAL REPORT

  • Page 135
    ... position and the past and present accounts provided in this Reference document 7.3 Names, addresses and professional fees of the statutory auditors 7.4 Information policy 7.5 Schedule of financial communications for fiscal year 2005/2006 134 134 135 136 136 133 UBISOFT > 2005 FINANCIAL REPORT

  • Page 136
    ...statutory auditors for Ubisoft Entertainment SA, and in accordance with Articles 211-1 to 211-42 of the AMF's internal regulations and with the accounting standards applicable in France, we have verified the information concerning the financial position and past and present accounts provided in this...

  • Page 137
    ...-235 of the French Commercial Code, regarding Ubisoft Entertainment SA's Chairman's report describing the internal control procedures related to the preparation and treatment of accounting and financial information. 7.3 Names, addresses and professional fees of the statutory auditors Date of first...

  • Page 138
    ... January 23, 2006 Week of April 24, 2006 Week of June 5, 2006 First-quarter sales 136 UBISOFT > 2005 FINANCIAL REPORT Second-quarter sales Half-yearly results Third-quarter sales Annual sales Year-end results These dates are provided for information purposes only and will be confirmed during the...

  • Page 139
    ...into the driver etc.). UBISOFT > 2005 FINANCIAL REPORT Time to market: a video game is called "time to market" when its development cycle guarantee a profitable and precise release date (for example to coincide with a pictures' release or a sport event,...). Xbox®: Microsoft game console, equipped...

  • Page 140
    ... 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 141
    ... and members of their networks Pro forma financial information 2004/2005 Annual Report Page 2.1 2.1.9 7.3 1.2.9 2.1.6.4 2.2 5.1 to 5.3 5.4 4.2.4 3.3 1.9.1 1.9.2 48 76 135 32 61 78 120 to 121 Regulatory prudential ratios (for banks, insurance companies and brokers) Corporate accounts and notes...

  • Page 142
    ... is a Ubisoft Entertainment company. Developed by Blue Byte Software / Cold Fear™ © 2005 Ubisoft Entertainment. All Rights Reserved. Cold Fear, Ubisoft and the Ubisoft logo are trademarks of Ubisoft Entertainment in the US and/or other countries. Developed by Darkworks / Peter Jackson's King Kong...

  • Page 143
    ...: +32 (2) 788 23 61/62 JAPAN CANADA 5505 boulevard Saint-Laurent Suite 5000 Montreal H2T 1S6, Quebec Tel: +1 (514) 490 2000 Fax: ...274 •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 ...