Ubisoft 2014 Annual Report Download

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2014
ANNUAL REPORT

Table of contents

  • Page 1
    2014 ANNUAL REPORT

  • Page 2
    ... our total revenues, compared to 12% in 2012-13. These figures attest to a rise in digital distribution and the sale of items and downloadable content, as well as progress made on PC and mobile Free-to-Play segments. Increased consumer engagement. Ubisoft teams have reinforced our presence on social...

  • Page 3
    ...seize these opportunities: has been a historic launch for Ubisoft with more than four million copies sold in the first week on the market. PC Free-to-Play and mobile games. We will capitalize on investments made over the past years and expect strong progress on this segment. Recent releases such as...

  • Page 4
    ...-3 of the Autorité des Marchés Financiers General regulation (The French Securities and Exchange Commission). This document is a translation of the Reference document of the Ubisoft group for the year ended March 31, 2014.. Its purpose is to assist English speaking readers. The greatest attention...

  • Page 5
    ... MANAGEMENT REPORT ...3 1 2 3 4 The Group's business activities and results for financial year 2013/2014 ...2 Comments on the Ubisoft Entertainment SA Financial Statements for the year ended March 31, 2014 ...56 Information on the Company and its capital ...58 Corporate governance ...75 FINANCIAL...

  • Page 6
    ... and financial performance. Management uses them to run the Group's business as they are the best reflection of its recurring performance and exclude the majority of non-operating and non-recurring items. "Non-IFRS operating income/(loss)", "Non-IFRS net income/(loss)" and "Non-IFRS earnings/(loss...

  • Page 7
    ...of developing owned brands ® ® ® Tom Clancy's Ghost Recon , Prince of Persia and Tom Clancy's Splinter Cell launched; acquisition ® ® of Driver and Far Cry franchises. 2007-2013: A true creator and development of online gaming Ubisoft builds on its reputation as a key player : the Group becomes...

  • Page 8
    ... division in Montreal Establishment of an online gaming operations division for America and infrastructure for its global network in Montreal. October 2013 - Acquisition of Future Games of London Acquisition of the FGOL studio, specializing in free-to-play mobile games and creators of the...

  • Page 9
    ... expenses Non-IFRS current operating income Stock-based compensation Other non-current operating income and expenses Operating income Net financial income Share in profit of associates Income tax (credit) Net income (Group share) Equity Investment expenditure on internal game production Staff 03/31...

  • Page 10
    Management Report 2014 Non-IFRS cash flow statement (unaudited) In thousands of euros 03/31/14 03/31/13 Adjusted cash flows from operating activities Consolidated net earnings +/- Share in profit of associates +/- Depreciation on internal & external games & movies +/- Other depreciation +/- ...

  • Page 11
    ... Report 2014 1.2 ANALYSIS OF BUSINESS ACTIVITIES AND COMMENTS ON RESULTS FOR FINANCIAL YEAR 2013/2014 1.2.1 QUARTERLY AND ANNUAL CONSOLIDATED SALES Sales 2013/2014 in millions of euros Q1 Q2 Q3 Q4 Financial year total 76 217 520 194 1,007 131 148 802 175 1,256 2012/2013 Change at current exchange...

  • Page 12
    ... 100% 2012/2013 1% 11% 30% 2% 34% 16% 4% 2% 100% Launched in November 2013, the PS4 and Xbox One already represent 15% of total sales. 1.2.5 SALES BY GEOGRAPHIC REGION The breakdown of Group sales by geographic region is as follows: Financial year In millions of euros France Germany United Kingdom...

  • Page 13
    Management Report 2014 1.2.6 CHANGES IN THE INCOME STATEMENT The gross profit margin remained at a high level as a percentage of sales at 71.7% (â,¬721.8 million), which represents a slight drop compared with the gross profit margin of 72.7% (â,¬913.5 million) in 2012/2013. This drop is due to a ...

  • Page 14
    ...: In millions of euros United Kingdom Germany 03/31/2014 5.8 (0.3) 03/31/2013 (0.3) 1.5 03/31/12 10.2 6.8 03/31/11 15.8 12.6 03/31/10 19.8 20.4 Total 5.5 1.2 17.0 28.4 40.2 During the financial year, the Company financed its peak cash requirements using confirmed credit facilities of â,¬289...

  • Page 15
    ... the development of digital activity, which is expected to grow from 19% of sales in 2013/2014 to approximately 25% in 2014/2015, should relieve financing requirements associated with the physical production of marketed products. Accordingly, in the financial year 2013/2014, the Company's net cash...

  • Page 16
    ... credit lines are as follows: 2013/2014 Net debt restated for assigned receivables/equity restated for goodwill < Net debt restated for assigned receivables/EBITDA < 0.8 1.5 For the financial year 2014/2015, and unless the Company makes a major acquisition, Ubisoft should be able to finance...

  • Page 17
    ... EMPLOYEE-RELATED, ENVIRONMENTAL AND SOCIAL REPORTING 1.4.1.1 INDICATOR FRAMEWORK Ubisoft based its framework on: The new regulatory requirements in France established or reinforced by article 225 of the Grenelle II law and its implementing decree (Decree no. 2012-557 of April 24, 2012, on corporate...

  • Page 18
    .... Specifications on the methods for collecting data:  As regards employee-related indicators, these are collected: either directly, using the Business Object reporting tool, which makes it possible to exploit data from the human resources management software program (HRTB) used by all the...

  • Page 19
    ... during the financial year are taken into account, irrespective of the length of the training. In order to determine the number of employees trained, an employee who takes part in several training programs is counted as one.  As regards environmental data:  Environmental reporting does not...

  • Page 20
    ... on the market, compared with 8,277 at the end of March 2013. In the 2013/2014 financial year, the headcount therefore increased by 1,004 employees, i.e. more than 12%. This trend is due firstly to the integration of certain teams, Related Designs Software GmbH (59 employees), Digital Chocolate Inc...

  • Page 21
    ... Report 2014 1.4.2.1.2 Hires and redundancies/dismissals Ubisoft is a growing company that manages a high volume of recruitments each year. 89% of recruitments relate to Production compared with 87% in the previous financial year. Hires and redundancies/dismissals Total number of external hires...

  • Page 22
    ... video game production, which primarily attracts men. Women hold 37% of the business-related positions (marketing, sales, etc.) within the Group and represent 28% of (1) top management employees. Men and women are given the same level of access to training and skills development. The male-female pay...

  • Page 23
    Management Report 2014 1.4.2.2.2 Helping young people find employment Ubisoft has an active policy of supporting young people during their initial training or as a complement to this. The number of interns taken on each year is on the increase. During the year under review, 619 interns completed ...

  • Page 24
    Management Report 2014 1.4.2.2.4 The Group's international presence 1 Ubisoft is present in 30 countries across all continents. With 93 different nationalities , Ubisoft cultivates the cultural mix required for a good understanding of the gamer and improved adaptation of games to cultural ...

  • Page 25
    ... business activities are becoming increasingly digitalized. The training policy aims to support this transformation. Ubisoft provides its teams with training to help them develop the new digital skills they need to reap all the benefits offered by connected platforms. As a true entertainment Company...

  • Page 26
    ..., organization and structure of key information (from creation to archiving) in order to make it easier to access and share this information within teams. The Group's internal sites are grouped together in Ubisoft's social network , which is developing interactive collaborative spaces to facilitate...

  • Page 27
    ... work environment. The Group also vows to prioritize sites with open-plan offices as much as possible, which encourages collaborative working and facilitates communication, where managers are available to their teams and HR managers are in close contact with daily operations. 92% of employees said...

  • Page 28
    ...Company, career management, internal collaboration and communication. The results are distributed within the Group to enable direct discussion with employees and give rise to targeted action plans. Lastly, the corporate social network encourages exchanges at all levels of the Group. It is a platform...

  • Page 29
    ...61.5% of Group staff (2) Occupational accident = fatal and non-fatal accidents occurring during or due to work (3) Number of occupational accidents with time off/total per company (average annual headcount * theoretical number of annual hours worked per employee) x 1,000,000 (4) Number of days lost...

  • Page 30
    ... section 1.4.2.4.3). Employees in France benefit from the Syntec collective agreement, which regulates the working conditions of employees and the related social-security regimes. 1.4.2.5.2 Elimination of discrimination in employment and occupation To make the best games on the market, Ubisoft must...

  • Page 31
    ...They conducted nine information campaigns at Ubisoft sites during the 2013/2014 financial year, raising awareness of environmental issues among more than 3,800 employees. The main activities carried out were as follows: The Shanghai studio organized an e-mail campaign before employees go on leave to...

  • Page 32
    ... cover potential environmental risks, or pay any compensation in this regard during the financial year. 1.4.3.2 POLLUTION AND WASTE MANAGEMENT 1.4.3.2.1 Emissions into the air, water and soil Since the Group does not manufacture the video games (and associated ancillary products) it publishes and...

  • Page 33
    ... the video games (and associated ancillary products) it publishes and distributes, its direct impact on the environment in terms of noise pollution, olfactory pollution and other forms of pollution is low. 9 10 11 Representing 77% of Group staff Representing 24.8% of Group staff Representing...

  • Page 34
    ..., Australia, France and Sweden. 12 Data for 25 sites, representing 51.5% of Group staff. The scope for this indicator is limited because most sites did not have precise information as at the closing date, due to the fact that their water consumption is included in service charges managed by lessors...

  • Page 35
    ... Canada, France, Romania and China, have data centers that use large amounts of electricity. Some of the electricity used by the Ubisoft Group comes from renewable energies, which helps to limit its environmental impact. The Montreal and Quebec studios, which account for 32.8% of total Ubisoft staff...

  • Page 36
    Management Report 2014 - - - Other sites are also equipped with switches fitted with photocells in order to reduce consumption of electricity due to lighting as much as possible (Buccinasco (Italy), Montreuil (France), De Meern (Netherlands), Casablanca, Montreal, San Francisco). Some sites also...

  • Page 37
    Management Report 2014 In 2013, the number of business trips totaled 16,186, which break down as follows: Number of trips per year and by type in 201318 Plane Train 10,765 5,421 The vast majority of sites have travel policies that encourage employees to prioritize the most environmentally-friendly...

  • Page 38
    Management Report 2014 1.4.4 SOCIAL INDICATORS 1.4.4.1 TERRITORIAL, ECONOMIC AND SOCIAL IMPACT OF THE COMPANY'S ACTIVITIES 1.4.4.1.1 Employment and regional development The Group measures its territorial, economic and social impact in terms of regional development and job creation. Ubisoft ...

  • Page 39
    ... a 10-month training program with three different areas of specialization (Programming, Game Design and Art). The Canadian sites in Montreal and Quebec have just as much to offer when it comes to supporting local development. In 2012, Ubisoft Montreal launched Academia, a group of programs with the...

  • Page 40
    ... become ongoing actions, such as the "U -Care" program, initiated in 2009 by Ubisoft Shanghai and Ubisoft Chengdu in response to the earthquake that hit the area of Sichuan (China). In the 2013/2014 financial year, these teams once again sold apples in support of the charity "The Children of Madaifu...

  • Page 41
    ...,000. The Toronto studio organized a drive to collect video games for hospitalized children in several regions of Canada, collecting a total of 7 consoles and 300 games. Lastly, the San Francisco office got involved in events concerning the video game industry and technological entertainment. For...

  • Page 42
    ... their safety. The production and distribution teams work closely with ratings and consumer protection organizations, the most important of which are: PEGI (Pan European Game Information) for Europe ESRB (Entertainment Software Rating Board) for the United States OFLC (Office of Film and Literature...

  • Page 43
    ... and Microsoft. The Shanghai studio has also integrated an anti-addiction system into its Football City Stars game, which is linked to the gamer's login details and connection time. ® 1.4.4.5 OTHER ACTIONS TAKEN TO PROTECT HUMAN RIGHTS To date, neither the Group nor its sites have engaged in other...

  • Page 44
    ... 2013, Ubisoft Ltd acquired a 100% shareholding in the studio Future Games of London Ltd, specializing in the development of free-to-play games for mobiles and tablets. Legal reorganizations: - March 2014: merger of Quazal Technologies Inc. and Ubisoft Divertissements Inc. 1.5.2 BUSINESS ACTIVITIES...

  • Page 45
    ... Report 2014 Main distribution subsidiaries: Subsidiary (in thousands of euros) IFRS financial statements Ubisoft Inc. (United States) Ubisoft Ltd (United Kingdom) Ubisoft Divertissements Inc. (Canada)* Ubisoft GmbH (Germany) Ubisoft France SAS Sales 449,160 98,127 03/31/14 Operating profit (loss...

  • Page 46
    ... Pictures Far Cry SAS Ubisoft Motion Pictures Splinter Cell SAS Ubisoft Motion Pictures Ghost Recon SAS Script Movie SARL GERMANY Blue Byte GmbH Related Designs Software GmbH M ARKETING FRANCE Ubisoft Emea SAS Ubisoft France SAS BULGARIA Ubisoft EooD CANADA Ubisoft Entertainment Inc. (Montreal...

  • Page 47
    Management Report 2014 1.6 GENERAL INFORMATION 1.6.1 INVESTMENT EXPENDITURE POLICY Ubisoft continued its investment expenditure policy to enable the Company to gain traction in new platforms, develop its online activities and more generally increase its market share. Accordingly, in 2013/2014, ...

  • Page 48
    Management Report 2014 These initiatives allow Ubisoft to complement its internal software developments while still encouraging openness to the many technological fields that now comprise the creation of interactive experiences and content, which are increasingly advanced and immersive. Thanks to ...

  • Page 49
    ... LINKED TO THE BUSINESS AND THE VIDEO GAMES MARKET 1.7.1.1 RISKS ASSOCIATED WITH PRODUCT STRATEGY, POSITIONING AND BRAND MANAGEMENT Ubisoft, like all publishers, is dependent on the success of its product catalogue and the suitability of its offering with regard to consumer demand. In order to meet...

  • Page 50
    ... and the Company's profitability. Ubisoft ensures that it renegotiates these agreements on a regular basis and does not foresee any risk over the next few years. Size of the video games market in 2013 Physical game sales: â,¬17.6 billion Digital and online sales: â,¬27.1 billion 1 Main competitors...

  • Page 51
    ... production activities All of the programs established by Human Resources at local and international levels are first and foremost designed to attract, train, retain and motivate employees with strong technical and/or managerial skills: development opportunities, share purchase plans, stock option...

  • Page 52
    ... International SAS for the period from April 1, 2008, to March 31, 2012. Proposed adjustments have been received. The Company wholeheartedly contests these proposed adjustments and, consequently, no provision has been recognized in the financial statements. A tax audit is underway at Ubisoft France...

  • Page 53
    Management Report 2014 Ubisoft is a member of the ESA (Entertainment Software Association) in the United States and Canada, the ISFE (Interactive Software Federation of Europe) and the SELL (Syndicat des Éditeurs de Logiciels de Loisirs) in France, and agreed to the PEGI (Europe) and ESRB (United ...

  • Page 54
    ... its growth plan. Share of the main customers in the Group's sales ex-VAT: Share in % Top customer Top 5 customers Top 10 customers 2013/2014 10% 32% 47% 2012/2013 13% 35% 47% 2011/2012 10% 39% 50% Moreover, in order to protect themselves against the risk of default, the Group's main subsidiaries...

  • Page 55
    Management Report 2014 Ubisoft Entertainment SA's terms for trade payables: Pursuant to the provisions of articles L 441-6-1 paragraph 1 and D 441-4 of the French Commercial Code, please note that the Company's liabilities to suppliers at the close of the last two financial years break down by due ...

  • Page 56
    ... of Ubisoft data. Ubisoft continues to adapt and improve its approach to risk management in order to meet future challenges in an environment where technologies are constantly evolving. 1.7.3.5 RISKS ASSOCIATED WITH INFRASTRUCTURE FAULTS The increased significance of online games means that...

  • Page 57
    ...operating income/loss(1) 1,444 560 (1,141) In thousands of euros for the financial year 2013/2014 Impact of a (+/-1%) variation in the main currencies on goodwill and brands Currency USD GBP CAD (1) Impact on shareholders' equity (1) 601 113 70 In thousands of euros FINANCING AND LIQUIDITY RISK...

  • Page 58
    ... were used essentially to finance the high year-end working capital requirements relating to the highly seasonal nature of the business. The sensitivity of debt to a change in interest rates is described in Note 14 to the consolidated financial statements. 1.7.4.2 COUNTERPARTY RISK The Group is...

  • Page 59
    ... appropriate, trading loss ï,§ Vehicles ï,§ Employee health risks and employee benefits ï,§ Business travel ï,§ Expatriate cover ï,§ Etc. There were no major losses in the financial year 2014. Total premiums paid on insurance policies valid during the financial year ended March 31, 2014, amounted...

  • Page 60
    ...platforms sas was the case for the successful The Settlers Online for the PC. Ubisoft is also launching new creations in the online and mobile segment, in particular the free-to-play mobile games TM Trials Frontier and CSI: Hidden Crimes. 1.8.2 MARKET OUTLOOK In 2013, the console and PC video games...

  • Page 61
    Management Report 2014 2 COMMENTS ON THE UBISOFT ENTERTAINMENT SA FINANCIAL STATEMENTS FOR THE YEAR ENDED MARCH 31, 2014 Sales (in thousands of euros) Sales basically consist of intra-group invoicing of royalties. In thousands of euros Production/sales Operating income Net financial income Pre-tax...

  • Page 62
    Management Report 2014 Income statement for the last five years Financial year Share capital (â,¬) Number of ordinary shares Number of preference shares Maximum number of shares to be created: through the exercise of stock options through the allocation of bonus shares through the exercise of ...

  • Page 63
    Management Report 2014 3 INFORMATION ON THE COMPANY AND ITS CAPITAL 3.1 INFORMATION ABOUT THE COMPANY CORPORATE NAME REGISTERED OFFICE LEGAL FORM UBISOFT ENTERTAINMENT 107, avenue Henri Fréville - BP 10704 - Rennes (35207) Cedex 2 French corporation (Société Anonyme) with a Board of Directors, ...

  • Page 64
    ... via the capitalization of reserves, earnings or issue premiums. GENERAL MEETINGS (article 14 of the Articles of Association) The shareholders' General Meetings shall consist of all the shareholders of Ubisoft Entertainment SA, with the exception of the Company itself. They represent the totality of...

  • Page 65
    ...-up shares with a par value of â,¬0.0775 each, for a share capital of â,¬8,200,040.41. The following table outlines the number of shares created between April 1, 2013, and March 31, 2014: At April 1, 2013 Exercise of subscription options Bonus share grants Group savings plan (PEG) Share subscription...

  • Page 66
    ... 27, 2013 (23rd resolution). (4) (5) Subscription period from Monday June 17, 2013, to Monday July 1, 2013. I.e. 0.2% of the number of shares on the day of the Board of Directors' meeting. Subscription period: Monday June 16, 2014, to Monday June 30, 2014. Issue of shares over the year ending March...

  • Page 67
    Management Report 2014 3.3.4 BONUS SHARE GRANTS (PLANS OPEN AS AT MARCH 31, 2014) Date of the General Meeting Date of the Board of Directors Total number of beneficiaries Date of acquisition of the shares End date of the retention period Performance conditions and criteria Total number of shares ...

  • Page 68
    Management Report 2014 3.3.5 SUBSCRIPTION OPTIONS AND STOCK OPTIONS (PLANS OPEN AS AT MARCH 31, 2014) Plan Date of Meeting Date of Board meeting Number of options granted of which officers Yves Guillemot Claude Guillemot Michel Guillemot Gérard Guillemot Christian Guillemot Start of exercise period...

  • Page 69
    ...16/19 Options exercised during the financial year between April 1, 2013, and March 31, 2014 N/A At its meeting of March 17, 2014, the Board of Directors exercised the authorization from the General Meeting of September 24, 2012, by allocating share subscription options to corporate officers in the...

  • Page 70
    ... to a savings plan of the Group, an associated company and/or companies within the meaning of article L. 225-180 of the French Commercial Code, within the limit of 0.2% of the total amount of shares comprising the share capital at the time of its use by the Board of Directors, in particular via...

  • Page 71
    ... the number of shares issued and the subscription price. 3.3.8 SECURITIES NOT REPRESENTING CAPITAL BONDS ISSUE Ubisoft Entertainment SA has successfully placed two bonds: ï,§ December 19, 2012 Term: Total nominal amount: Interest: Number of bonds: Par value: ISIN code: Bond seniority: 6 years â,¬20...

  • Page 72
    Management Report 2014 3.3.9 CHANGE IN COMPANY CAPITAL OVER THE PAST THREE FINANCIAL YEARS (1) Date of Board meeting (2) Type of transaction Number of securities issued 58,218 67,574 Amount (in cash) â,¬369,688.34 â,¬373,493.36 â,¬42,307.08 â,¬42,800.24 â,¬7,853.12 â,¬59....

  • Page 73
    Management Report 2014 3.3.10 SHARE BUYBACK PROGRAM 3.3.10.1 AUTHORIZATION IN PLACE AT THE TIME OF THIS REPORT LEGAL FRAMEWORK The Combined General Meeting of June 27, 2013, renewed the authorization previously granted to the Board of Directors by the Combined General Meeting of September 24, 2012,...

  • Page 74
    ...share buyback program that will be submitted for the approval of the Combined General Meeting of July 1, 2014. Shares concerned: ordinary shares in Ubisoft Entertainment SA, listed on Euronext Paris, division A, ISIN code FR0000054470. Maximum percentage of capital: 10% of the total number of shares...

  • Page 75
    Management Report 2014 Total flows (*) Purchases Sales Transfers Positions open as at March 31, 2014 Open buy positions Purchased stock options Open sell positions Forward sales Forward Sold purchases stock options Number of securities Average maximum (1) term Average transaction price Average ...

  • Page 76
    Management Report 2014 3.3.11.3 CHANGE IN THE SHARE PRICE OVER THE LAST 24 MONTHS Month 2012 May 2012 June 2012 July 2012 August 2012 September 2012 October 2012 November 2012 December 2012 2013 January 2013 February 2013 March 2013 April 2013 May 2013 June 2013 July 2013 August 2013 September 2013 ...

  • Page 77
    ...for at least two years. (3) 8,372,597 shares created following the exercise between April 10, 2012, and October 10, 2013, of 92,098,567 share subscription warrants granted free of charge. 3.3.12.2 BREAKDOWN OF CAPITAL AND VOTING RIGHTS AS AT APRIL 30, 2014 Capital Number of shares 7,231,092 917,783...

  • Page 78
    Management Report 2014 3.3.12.3 SHAREHOLDINGS EXCEEDING 5% OF SHARE CAPITAL AS AT MARCH 31, 2014 (1) Shareholder BlackRock Inc. FMR LLC (1) (2) (2) % capital 5.520% 11.199% % gross voting rights 4.828% 9.783% % net voting rights 4.846% 9.831% Information provided on the basis of statements made ...

  • Page 79
    ... there are no disclosed or undisclosed shareholder agreements concerning Ubisoft shares. 3.3.12.7 CONDITIONS REGARDING ALL VESTING RIGHTS OR REQUIREMENTS ASSOCIATED WITH SUBSCRIBED CAPITAL NOT PAID UP N/A 3.3.12.8 SHARE CAPITAL OF UBISOFT GROUP COMPANIES SUBJECT TO AN OPTION OR IN RESPECT OF WHICH...

  • Page 80
    ... GROUP MANAGEMENT 4.2.1 MEMBERSHIP COMMITTEES Name Position in the Company OF THE BOARD OF DIRECTORS AND ITS Audit Committee Compensation Committee Date of birth Date of taking office Expiry at AGM approving financial statements for FY ended Number of shares at March 31, 2014 Directors...

  • Page 81
    ... OF MEMBERS OF THE BOARD OF DIRECTORS Following the recommendations of the AFEP-MEDEF Code and in application of article 9 of the Company's Articles of Association, the term of office for directors is four years, with a system of staggered renewals to ensure a smooth transition and avoid an ad hoc...

  • Page 82
    .... As a result, Yves Guillemot, as Chairman of the Board of Directors, is legally responsible for representing the Company's Board of Directors, organizing its work and reporting on it to the Shareholders' General Meeting, overseeing the smooth operation of the Company's corporate bodies and ensuring...

  • Page 83
    ... Guillemot are brothers and are members of the Management and Board of Directors of Gameloft SE and Ubisoft Entertainment SA. In this respect, there may be potential conflicts of interest when these two companies collaborate on certain projects. The two companies are most notably linked by a license...

  • Page 84
    ...the Board of Directors. The main tasks of these Committees are presented below: AUDIT COMMITTEE Examining, analyzing, monitoring and providing advice on: ï,§ The process used to prepare financial information: examining annual and interim financial statements ï,§ The effectiveness of internal control...

  • Page 85
    ...), Future Games of London (United Kingdom) OTHER POSITIONS OUTSIDE THE GROUP AS AT MARCH 31, 2014 FRANCE ï,§ EXECUTIVE VICE-PRESIDENT AND DIRECTOR of Gameloft SE, Guillemot Corporation SA ï,§ DIRECTOR of Rémy Cointreau SA ABROAD ï,§ DIRECTOR of Gameloft Divertissements Inc. (Canada), Guillemot Inc...

  • Page 86
    ... GROUP AS AT MARCH 31, 2014 FRANCE ï,§ CHAIRMAN of Ludigames SAS, Gameloft Partnerships SAS, Gameloft France SAS ï,§ MANAGER OF Gameloft Rich Games Production France SARL ï,§ EXECUTIVE VICE PRESIDENT AND DIRECTOR OF Guillemot Corporation SA ABROAD ï,§ CHAIRMAN of Gameloft Software (Beijing) Company...

  • Page 87
    ... University (Montreal/Canada) OTHER POSITIONS OUTSIDE THE GROUP AS AT MARCH 31, 2014 N/A EXPIRED POSITIONS OUTSIDE THE GROUP (last 5 financial years) N/A Laurence Hubert-Moy  Director since 06/27/13  Expiry of term of office 03/31/17  Main position in the Company: Director  Main position...

  • Page 88
    ... 2014 4.5 MANAGEMENT COMPENSATION In accordance with article L. 225-102-1, paragraphs 1 and 2 of the French Commercial Code, a breakdown of the total compensation and benefits of any kind paid to corporate officers over the financial year appears below. This section includes all information required...

  • Page 89
    ... Committee, the Board of Directors of December 12, 2013, also took the decision to fix the amount of directors' fees for members of the Committee on the basis of a maximum amount per meeting with a maximum of four meetings per financial year. It also decided to grant an annual fixed amount to...

  • Page 90
    ...is envisaged for financial year 2015 (1) Allocation of 60,000 stock options (18th resolution of the combined general meeting of September 24, 2012) Subscription price : 11.92â,¬ without discount 100% of the grant is subject to the completion of performance conditions based on an objective of average...

  • Page 91
    ... stock options (18th resolution of the combined General Meeting of September 24, 2012) Subscription price : 11.92â,¬ without discount 100% of the grant is subject to the completion of performance conditions based on an objective of average EBIT appraised on the basis of the financial accounts ending...

  • Page 92
    ... stock options (18th resolution of the combined General Meeting of September 24, 2012) Subscription price : 11.92â,¬ without discount 100% of the grant is subject to the completion of performance conditions based on an objective of average EBIT appraised on the basis of the financial accounts ending...

  • Page 93
    ... stock options (18th resolution of the combined General Meeting of September 24, 2012) Subscription price : 11.92â,¬ without discount 100% of the grant is subject to the completion of performance conditions based on an objective of average EBIT appraised on the basis of the financial accounts ending...

  • Page 94
    ... stock options (18th resolution of the combined General Meeting of September 24, 2012) Subscription price : 11.92â,¬ without discount 100% of the grant is subject to the completion of performance conditions based on an objective of average EBIT appraised on the basis of the financial accounts ending...

  • Page 95
    ... controlled by any other company within the meaning of article L. 233-16. The total gross compensation paid by the Company to corporate officers during the financial year amounted to â,¬721 thousand. During the 2013/2014 financial year, members of the Board of Directors received â,¬331 thousand in...

  • Page 96
    Management Report 2014 SUMMARY OF COMPENSATION, STOCK OPTIONS AND SHARES GRANTED TO EACH MANAGER 03/31/14 Gérard Guillemot, Executive Vice President Ubisoft Other companies Ubisoft Table 1 Compensation due for the financial year (1) Valuation of multi-annual variable compensation granted during the...

  • Page 97
    ... Report 2014 Table 2 SUMMARY OF THE COMPENSATION OF MANAGERS HOLDING CORPORATE OFFICES PAID BY THE ISSUER AND BY ANY COMPANY (Article L. 233-16 of the French Commercial Code) Amounts paid (1) in euros 24,000 15,000 25,000 64,000 Amounts paid in euros Gross fixed compensation before tax Annual...

  • Page 98
    ... them in line with the closing dates. Transition year: variable portion paid in July 2013 based on Board members attending meetings held between July 1, 2012, and June 30, 2013, and in March 2014 based on members of the Board of Directors attending meetings held between July 1, 2013, and March 31...

  • Page 99
    Management Report 2014 4.5.4 SHARE PURCHASE AND SUBSCRIPTION OPTION PLANS Table 4 SHARE PURCHASE AND SUBSCRIPTION OPTIONS AWARDED TO EACH MANAGER HOLDING CORPORATE OFFICE BY THE ISSUER OR ANY COMPANY IN THE GROUP DURING THE YEAR Valuation of options Number of according to the options Plan number ...

  • Page 100
    Management Report 2014 4.5.6 COMPENSATION AND BENEFITS OWED DUE TO CORPORATE OFFICERS LEAVING THEIR POSITION Corporate office combined with employment contract Compensation or benefits due or likely to be due as a result of individuals leaving or changing positions Yes No Compensation relating to a...

  • Page 101
    ...,620.20 â,¬44,330 â,¬31,134.75 â,¬24,120 â,¬20,599.59 â,¬13,170 â,¬23,310 â,¬11,202.90 â,¬7,510 â,¬13,381.93 â,¬11,165 GUILLEMOT CORPORATION SA related legal person managed by Claude GUILLEMOT, Executive Vice President of UBISOFT ENTERTAINMENT SA 96

  • Page 102
    ...Futures contract Acquisition Disposal Exercise Exercise GUILLEMOT BROTHERS SE related legal person managed by Christian GUILLEMOT, Executive Vice President of UBISOFT ENTERTAINMENT SA...,100 Shares Shares Shares BSA BSA BSA BSA Shares Shares Shares Shares Shares Shares Shares Shares Shares Shares 09/...

  • Page 103
    FINANCIAL STATEMENTS

  • Page 104
    ... statements 2014 1 CONSOLIDATED FINANCIAL STATEMENTS AS AT MARCH 31, 2014 1.1 BALANCE SHEET ASSETS in thousands of euros Goodwill Other intangible assets Property, plant and equipment Investments in associates Non-current financial assets Deferred tax assets Non-current assets Inventory Trade...

  • Page 105
    Financial statements 2014 1.2 CONSOLIDATED INCOME STATEMENT In thousands of euros Sales Cost of sales Gross profit R&D expenses Marketing expenses Administrative and IT expenses Operating income from continuing operations Current operating income before stock-basedcompensation stock-based-...

  • Page 106
    ... Total equity Position at March 31, 2012 Net profit (loss) Other comprehensive income Profit (loss) Allocation of consolidated earnings in N-1 Change in the share capital of the parent company Options on ordinary shares issued Sales and purchases of own shares Position at March 31, 2013 Net profit...

  • Page 107
    Financial statements 2014 1.5 CASH FLOW STATEMENT In thousands of euros Cash flows from operating activities Consolidated earnings Share in profit of associates Net amortization and depreciation on property, plant and equipment and intangible assets * Net provisions Cost of stock-based-compensation ...

  • Page 108
    ... Board of Directors, which authorized their publication on May 15, 2014. They will be presented for approval at the General Meeting on July 1, 2014. 1.6.2 FINANCIAL YEAR HIGHLIGHTS April 2013: Acquisition of 70% of the remaining capital in the studio Related Designs Software GmbH On April 1, 2013...

  • Page 109
    ... 2013: Acquisition of studio Future Games of London Ltd On October 1, 2013, Ubisoft acquired a 100% shareholding in the studio Future Games of London Ltd, specializing in the development of free-to-play games for mobiles and tablets. October 2013: Announcement of delays to Watch Dogs and The Crew...

  • Page 110
    ... impact on the Group's consolidated financial statements. October 2013: Acquisition of studio Future Games of London Ltd On October 1, 2013, Ubisoft acquired a 100% shareholding in the studio Future Games of London Ltd, specializing in the development of free-to-play games for mobiles and tablets...

  • Page 111
    ... 2010-2012 Annual Improvements 2011-2013 Amendment to IAS 19 IAS 27 (revised) Improvements to International Financial Reporting Standards Improvements to International Financial Reporting Standards Defined Benefit Plans: Employee Contributions Separate Financial Statements (effective for annual...

  • Page 112
    ... in the 2012/2013 financial year (THQ "Toy Head -Quarters" Montreal) and business combinations in the 2013/2014 financial year (Future Games of London Ltd) have no material impact on the comparability of the Group's financial statements. Therefo re no pro forma financial information is required...

  • Page 113
    ... over which Ubisoft Entertainment SA exercises significant influence on the financial and operational policies but no control. The consolidated financial statements include the Group share in the total amount of profits and losses recognized by the associates, using the equity accounting method...

  • Page 114
    ... of Group companies whose operating currency is not the euro are translated into euros at the exchange rate prevailing at the end of the accounting period. The income and expenses of these companies, along with their cash flows, are translated at the average exchange rate over the year. Differences...

  • Page 115
    ... recorded in profit or loss. When rights to share-based payment (replacement award) shall be given in exchange for rights held by employees of the acquired company (rights granted by the acquired company) and are attributable to past service, then all or part of the amount of human replacement buyer...

  • Page 116
    Financial statements 2014 Development costs relate to the development of commercial software (video games) and are capitalized as described below. Development costs of commercial software, whether produced in-house or outsourced, are recognized in "in-house software and external software development...

  • Page 117
    ... by management of the Group in terms of variation of sales, level of profitability, and in particular foreign exchange. These are considered reasonable and consistent with market data available at the time of preparation of the Group's financial statements. The discount rate applied to future cash...

  • Page 118
    ... Investments in associates include the Group's share of the equity held in companies accounted for under the equity method, together with any related goodwill. Inventory and work in progress Inventory is measured at the lower of cost or net realizable value. Cost includes the purchase price plus...

  • Page 119
    ... be lower than the balance sheet value, and at least on each balance sheet date. ï,· Grants (loans and receivables category) In some countries, video game production operations qualify for public grants. These grants are presented as a reduction in research and development costs and a reduction of...

  • Page 120
    ... present negligible risks of change in value. Short-term investments are measured at net asset value at each balance sheet date. Changes in this market value are recognized in financial profit or loss. Bank overdrafts repayable on demand are an integral part of the Group's cash management, and are...

  • Page 121
    ... on the balance sheet; - the ineffective portion of the change in fair value is recognized in financial income. When the hedging instrument no longer meets the criteria for hedge accounting, reaches maturity, is sold, cancelled or exercised, hedge accounting is no longer applied. The profit or loss...

  • Page 122
    ... a risk-free discount rate, the estimated dividend rate and the likelihood of staff remaining in the Group until they can exercise their rights. Group employee savings plan: The accounting expense is equal to the discount granted to employees, i.e. the difference between the share subscription price...

  • Page 123
    ... of gaming software is recorded on the date the products are delivered to customers. A provision for estimated returns is recorded for the net amount of the sale as a decrease in revenues. Under the terms of its contracts with customers, the Group does not have to accept returns, but it may exchange...

  • Page 124
    ... trade receivables), income and expenses linked to the discounting of assets and liabilities, and foreign exchange gains and losses on unhedged items. The impact on profit and loss of measuring financial instruments used in the management of foreign exchange risks is recognized in operating income...

  • Page 125
    ...to Group sales. Other subsidiaries and ad hoc entities whose contribution is not significant are not included in this list. COMPANY UBISOFT ENTERTAINMENT SA UBISOFT LTD UBISOFT INC. UBISOFT GMBH UBISOFT SRL UBISOFT DIVERTISSEMENTS INC. UBISOFT FRANCE SAS SHANGHAI UBI COMPUTER SOFTWARE CO.LTD UBISOFT...

  • Page 126
    ... constant exchange rates, can be attributed to the acquisition of Related Designs Software GmbH, Future Games of London Ltd and Digital Chocolate Inc. These effects are offset by the price adjustment following the completion of estimates of future results at the level of the "Edition/Production" CGU...

  • Page 127
    ... company Future Games of London Ltd & the company Digital Chocolate Inc. The increase in commercial software in production of â,¬354,410 thousand and in released commercial software of â,¬10,016 thousand can be explained by the capitalized production costs of â,¬365,613 thousand to which are added...

  • Page 128
    Financial statements 2014 Depreciation and amortization Released commercial software Released external software developments Commercial software in production External software developments in progress Office software Brands Movies Other Total at 03/31/14 Total at 03/31/13 Opening Increase ...

  • Page 129
    Financial statements 2014 Depreciation and amortization Buildings Fixtures and fittings Computer hardware and furniture Development kits Transport equipment Total at 03/31/14 Total at 03/31/13 Opening balance 658 17,163 57,270 17,213 285 92,589 76,283 Increase 163 3,718 12,276 1,879 73 18,109 14,...

  • Page 130
    ... the risk of default of the assigned debtor. Consequently, 85% of these grants were derecognized as at March 31, 2014. Note 8. Current financial assets 03/31/14 Impairment 03/31/13 Net 1,236 514 5,100 6,850 Current financial assets Foreign exchange derivatives* Stock futures Gameloft shares** TOTAL...

  • Page 131
    ... Change 497 497 Foreign exchange derivatives whose market value at the year-end is positive are reported at fair value (level 2, IFRS 7 hierarchy), (see analysis in Note 15). ** Fair value of Gameloft shares classified as "held-for-sale financial assets": All of the Gameloft shares were disposed of...

  • Page 132
    ... at the date of issue on registered shares granted free of charge to a shareholder on the basis of old shares that enjoyed this right. Number of Ubisoft Entertainment SA shares: At 04/01/13 Option exercises Bonus share grants Share subscription warrant exercises Group savings scheme Reserved capital...

  • Page 133
    ...April 1, 2008, to March 31, 2012. Proposed adjustments have been received. The company contests all the proposed adjustments and, thus, no provision has been recognized in the financial statements. A tax audit is underway at Ubisoft France SAS for the period from April 1, 2010, to March 31, 2013. No...

  • Page 134
    ..., 2014, and are shown in the statement of changes in equity presented in section 1.4. Stock options The fair value of share subscription or purchase options, subject to satisfaction of presence and performance requirements for corporate officers and a presence requirement for employee beneficiaries...

  • Page 135
    Financial statements 2014 Subscription options 11th plan Total number of shares granted Start of exercise period End of exercise period Strike price of options (1) Maturity (years) Volatility Risk-free interest rate Estimated dividend rate Annual turnover rate Fair value of options after stock split...

  • Page 136
    Financial statements 2014 24th plan Total number of shares granted Start of exercise period End of exercise period Strike price of options (1) Maturity (years) Volatility Risk-free interest rate Estimated dividend rate Annual turnover rate Fair value of options after stock split (â,¬/share) Options ...

  • Page 137
    .../15/2010 4 years 9.54 100% 197,197 197,197 03/31/2012 Grant date Maturity - vesting period (in years) Fair value of the instrument in â,¬ per share * Percentage of operating targets reached Number of instruments as at April 1, 2013 Number of instruments granted during the period Number of cancelled...

  • Page 138
    ... French employees. 03/31/14 Grant date Subscription price (in euros) Data at date of announcement to employees: Share price (in euros) Number of shares subscribed Fair value of the benefit in â,¬ per share 03/26/2014 10.13 10.67 96,587 0.54 06/17/2013 6.237 10.30 95,415 4.06 03/31/13 07/19/2012 4.48...

  • Page 139
    ..., 2014, the Group's debt included bonds, loans, commercial papers and bank overdrafts, which were used essentially to finance the high year-end working capital requirements relating to the highly seasonal nature of the business. Analysis of variable-rate net debt's sensitivity to interest-rate risk...

  • Page 140
    ... statements, only with standard banking institutions. These are top tier banking institutions. Also, given the seasonal nature of the Group's business activities, there is a limited number of open positions at the balance sheet date. As a result, the debit value adjustment (entity's own risk...

  • Page 141
    ... on credit risk. Given the large number of customers in many different countries, and their presence in the mass retail sector, the Company believes the counterparty risk on trade accounts is limited. Ubisoft's largest customer, the North America distribution zone, accounts for 10% of Group sales...

  • Page 142
    ...derecognized from the balance sheet of the group. Following an amendment made in March 2014, Ubisoft Divertissements Inc. receives 85% of the sale price of the receivables transferred at the transfer date. The remaining 15% is collected at the time of actual payment of the grant by Investissement Qu...

  • Page 143
    Financial statements 2014 The risks and benefits associated with 15% of transferred receivables retained by the Group, a portion of 15% of outstanding claims relating to unvested rights of the organization Investissement Québec under the so-called "CTMM" grant remains the balance sheet of the Group...

  • Page 144
    Financial statements 2014 Reconciliation by accounting class and category 03/31/14 Amortized cost 03/31/13 Amortized cost Hierarchy Notes Assets recognized at fair value Foreign exchange derivatives Stock futures Gameloft shares Equity investments in non-consolidated companies Net investment ...

  • Page 145
    ... respectively - Rental debt at Ubisoft Studio Saint Antoine Inc. amounting to â,¬1.4 million - 1.6.8 NOTES TO INCOME STATEMENT Note 18. Sales In millions of euros Core games Casual games TOTAL 03/31/14 758 249 1,007 03/31/13 928 328 1,256 At current exchange rates, sales have fallen by 19.9%. At...

  • Page 146
    ... France Research tax credit Video game tax credit Tax credit for competitiveness and employment ** Audiovisual tax credit Other Singapore Economic Development Board tax credit Abu Dhabi Other TOTAL * The payment of certain grants and tax credits is contingent upon the generation of taxable income...

  • Page 147
    .... Other non-current operating income and expenses 03/31/14 (16,047) (6,580) (22,627) 03/31/13 (3,612) (681) (4,293) Goodwill Brands TOTAL A partial write-off and depreciation on goodwill and brands have been recorded further to a review of operating activities on March 31, 2014. As those expenses...

  • Page 148
    ... created and acquired during the financial year. As at March 31, 2014, the tax group's loss carryforwards totaled â,¬569,596 thousand, including â,¬474,933 thousand in accelerat ed depreciation relating to the application of Article 236 of the CGI (General Tax Code) for software development expenses...

  • Page 149
    ... activities Theoretical tax (38%) Payments of tax deferred from previous years: Impact of change in the rate on Ubisoft Entertainment Impact of changes in the rate on the tax basis Other Impact of permanent differences between net income and consolidated earnings: Cancellation of studio margin...

  • Page 150
    ... tax on the balance sheet and income statement: 03/31/13 Change in income Change in other comprehensive income Foreign exchange losses/gains Other reclassific ations 03/31/14 Intangible assets Elimination of margin on intangible assets Available-for-sale financial assets Capitalized losses and tax...

  • Page 151
    ... of euros Capitalized losses Noncapitalized losses 441 TOTAL Capitalize d losses 03/31/13 Noncapitalized losses 441 TOTAL Tax group France (1) Hybride Technologies Inc. Ubisoft Music Publishing Inc. Shanghaï Bi Han Ubisoft Nordic A/S Ubisoft Motion Pictures Ubisoft Mobile Games Ubisoft SA (Spain...

  • Page 152
    ... on a financial year basis. The Company recognizes a future tax liability for this item. Accelerated depreciation (Article 236 of the CGI) As permitted under the provisions of Article 236 of the French General Tax Code, Ubisoft Entertainment SA opted to immediately expense software development costs...

  • Page 153
    ...Latin America) 03/31/14 Edition/Production Sales Cost of sales Gross margin R&D costs Marketing costs Administrative and IT costs Intersegment* Current operating income before stock-basedcompensation Stock-based-compensation ** Operating profit (loss) from continuing operations 35,838 (3,155) 32,683...

  • Page 154
    ... for the financial year for share-based payments calculated in accordance with IFRS2 Section 4.5 of the Management Report contains a detailed description of the pay and benefits granted to the corporate officers of the Group. In accordance with Article L.225-43 of the French Commercial Code, no...

  • Page 155
    ... of development contracts to Gameloft SA, AMA Studios SA, AMA Ltd and Longtail Studios Inc. totaling â,¬3,924 thousand. The payable balance at the balance sheet date is â,¬691 thousand. The amount of the assets in the balance sheet is â,¬14,415 thousand. Ubisoft Entertainment SA has not bought back...

  • Page 156
    .... - Operating leases: These primarily include â,¬24,116 thousand in property leases, none of which exceed 10 years. OTHER COMMITMENTS The Group has no other material off-balance sheet commitments. 1.6.9.4 STAFF Permanent staff broke down as follows at March 31, 2014: Americas EMEA/Pacific TOTAL 03...

  • Page 157
    ... in accordance with Article L. 222-8 of the General Regulations of the AMF) In thousands of euros MB Audit Amount (excluding tax) 2013/2014 2012/2013 % 2013/2014 2012/2013 Audit - Statutory audit, certification, review of the separate and consolidated financial statements â-¦ Issuer â-¦ Fully...

  • Page 158
    ... applicable in France. Dear Shareholders, Pursuant to the assignment entrusted to us by your General Meeting, we hereby present our report for the fiscal year ended March 31, 2014 with regard to the following: ï,· the audit of consolidated financial statements of Ubisoft Entertainment S.A, as...

  • Page 159
    ...out the specific verification required by law of the information provided in the Management report of the Group. We have no comments regarding the accuracy of this information and its consistency with the consolidated financial statements. By the statutory auditors Nantes, May 28 , 2014 KPMG Audit...

  • Page 160
    ... 3 CORPORATE FINANCIAL STATEMENTS OF UBISOFT ENTERTAINMENT SA FOR THE YEAR ENDED MARCH 31, 2014 3.1 UBISOFT ENTERTAINMENT SA BALANCE SHEET ASSETS In thousands of euros Intangible assets Property, plant and equipment Non-current financial assets Non-current assets Advances and prepayments made Trade...

  • Page 161
    Financial statements 2014 3.2 UBISOFT ENTERTAINMENT SA INCOME STATEMENT In thousands of euros Production for the period Other operating income and reinvoiced costs Total operating income Other purchases and external expenses Taxes and duties Employee benefits expenses Other expenses Depreciation, ...

  • Page 162
    Financial statements 2014 3.3 STATEMENT OF CHANGES IN EQUITY In thousands of euros Balance at 03/31/13 Allocation of 2012/2013 earnings Capital increase: cash contribution 732 (10,273) 64,613 Capital increase by deduction from premiums 27 (27) Earnings 2013/2014 Provision for regulated provisions ...

  • Page 163
    ...activities Capital increase Increase in issue premium New long-term borrowings Deferred expenses Change in current accounts Net cash generated by financing activities Net change in cash and cash equivalents Net cash position at beginning of the fiscal year Net cash position at end of the fiscal year...

  • Page 164
    ... with French accounting standards. The financial year is a 12-month period from April 1, 2013, to March 31, 2014. 3.5.1 FINANCIAL YEAR HIGHLIGHTS 3.5.1.1 ACQUISITION/CREATION OF SUBSIDIARIES October 2013, the subsidiary Ubisoft Mobile Games SARL in France became operational. March 2014, creation of...

  • Page 165
    ... developments, - Information system costs, - Office software, - Acquired brands, - Logo. Accounting and subsequent valuation: Brands: Any brands acquired are recognized at cost. Commercial software and external software developments: Commercial software is developed by the Group's own studios...

  • Page 166
    ...below the net accounting value of the software, impairment is recognized. Office software Information system costs Commercial software 1 year, straight-line 5 years, straight-line 1 or 2 years, straight-line, starting on the commercial release date Engines and tools External software developments...

  • Page 167
    ...market capitalization at the balance sheet date if the company is listed and/or its medium-term earnings prospects. If applicable, the provisional data utilized are updated using a rate based on a valuation of the average cost of capital, which stood at 8.89% at March 31, 2014. Own shares are valued...

  • Page 168
    Financial statements 2014 Foreign exchange hedges Ubisoft uses financial derivatives to reduce its exposure to market risks linked to movements in exchange rates. For purposes of the hedging thus established, income and expenses on financial derivatives are recognized as financial income and are ...

  • Page 169
    Financial statements 2014 3.5.5 NOTES TO THE BALANCE SHEET Note 1. Intangible assets At 03/31/14 Gross Released commercial software Released external software developments Commercial software in progress External software developments in progress Brands and operating licenses Other TOTAL 702,112 96...

  • Page 170
    Financial statements 2014 Note 2. Property, plant and equipment At 03/31/14 Gross Buildings Fixtures and fittings Transport equipment Computer hardware and furniture Non-current assets in progress TOTAL 765 7,802 20 788 4 9,379 Opening balance 765 8,535 20 806 8 10,134 8,551 Opening balance 11 4,637...

  • Page 171
    ... Trade receivables TOTAL 69,816 69,816 Provision Net 69,816 69,816 At 03/31/13 Net 42,423 42,423 Trade receivables basically consist of intra-group receivables. Note 6. Other receivables At 03/31/14 Gross Suppliers - credit notes to receive Government (VAT credit, tax) Associated current account...

  • Page 172
    ...VAT credit, sundry) Group and associates Other miscellaneous debtors Prepaid expenses TOTAL STATEMENT OF LIABILITIES Bonds Bank borrowings and debts Other borrowings and financial liabilities Trade payables Fiscal and social liabilities Other liabilities Liabilities on non-current assets TOTAL Gross...

  • Page 173
    ... to Gameloft SA for â,¬650 thousand over the fiscal year, - amounts invoiced in respect of development contracts with AMA Studios SA, AMA Ltd, Longtail Studios Inc. and Gameloft SA, totaling â,¬3,924 thousand. Trade payables amounted to â,¬691 thousand at the balance sheet date. Balance sheet assets...

  • Page 174
    Financial statements 2014 Note 13. Equity Capital At March 31, 2014, Ubisoft Entertainment SA had equity of â,¬8,200,040.41 divided into 105,806,973 shares. Number of Ubisoft Entertainment SA shares At 04/01/13 Option exercises Bonus share grants Share subscription warrant exercises Group savings ...

  • Page 175
    Financial statements 2014 19th plan Total number of shares granted (1) Start of exercise period End of exercise period Strike price of options (1) Options at April 1, 2013(1) 
 2,708,676 Options granted during the period Options exercised during the period Options cancelled during the period ...

  • Page 176
    ... Number and subscription price adjusted following issuance of share warrants on April 10, 2012 The Company has not recorded a liability because the exercise price exceeds the cost of shares allocated to plan coverage. Bonus share grants settled in cash In the first half of the 2013 financial year...

  • Page 177
    ... of share warrants on April 10, 2012 03/31/13 Grant date Maturity - Vesting period (in years) Number of instruments as at April 1, 2013 Number of instruments granted during the period Number of cancelled instruments during the period Number of instruments exercised during the period Number of...

  • Page 178
    ... of 15% versus the average opening price over the 20 trading days prior to the Board of Directors' meeting that approved the capital increase. The lock-in period is five years for French employees. 03/31/14 Grant date Subscription price (in euros) Number of shares subscribed 1.1.1 03/26/14 1.1.2 10...

  • Page 179
    ..."miscellaneous financial liabilities" in the balance sheet consists of current account advances by subsidiaries to the parent company, which are due in less than one year, a participatory loan with Oseo of â,¬3 million and commercial papers of â,¬63 million. Note 16. Other liabilities 03/31/14 Trade...

  • Page 180
    Financial statements 2014 3.5.6 NOTES TO INCOME STATEMENT Note 18. Production for the period Production for the period comprises: - Revenue, essentially made up of intra-group invoicing of royalties, - Capitalized production reflecting development costs outsourced to subsidiaries and external ...

  • Page 181
    ...for risks TOTAL 715 38 633 40 4 13 609,370 596 11 552 29 4 556,843 * Net reversals (see Note 19) on internal and external commercial software developments therefore amount to â,¬319,982 thousand and â,¬31,679 thousand respectively. Note 22. Net financial income 03/31/14 Financial income Financial...

  • Page 182
    ... depreciation on development expenditure for software. Note 24. Income tax At March 31, 2014, the tax group incorporates Ubisoft Entertainment SA (holding company) and all subsidiaries whose registered office is in France, with the exception of those created or acquired during the fiscal year. Any...

  • Page 183
    ...(General Tax Code). 3.6 OTHER INFORMATION 3.6.1 STAFF At March 31, 2014, the staff consisted of five corporate officers. 3.6.2 FINANCIAL COMMITMENTS AND OTHER INFORMATION 3.6.2.1 OFF-BALANCE SHEET COMMITMENTS RELATED TO COMPANY FINANCING Type Commitments given by Ubisoft Entertainment SA Financial...

  • Page 184
    ...EBITDA < 0.80 1.5 2012/2013 0.80 1.5 All covenants are calculated on the basis of the consolidated annual financial statements under IFRS. As at March 31, 2014, the Company was in compliance with all these ratios and expects to remain so during the 2014/2015 financial year. Other borrowings are not...

  • Page 185
    ... SA has committed to provide financial support to its subsidiaries in order to meet their cash flow requirements. There are no finance leases. 3.6.3 MANAGEMENT COMPENSATION Ubisoft Entertainment SA paid â,¬721 thousand in compensation to its corporate officers during the financial year 2013/2014...

  • Page 186
    ... of euros Revenue excludin g VAT Earning s for the last financial year In thousand s of currency units Dividends received In thousan ds of currenc y units SUBSIDIARIES AT LEAST 50% OF CAPITAL HELD UBISOFT INC. UBISOFT EMEA SAS UBISOFT INTERNATIONAL SAS UBISOFT FRANCE SAS UBISOFT GMBH UBISOFT...

  • Page 187
    ... applicable in France. Dear Shareholders, Pursuant to the assignment entrusted to us by your General Meeting, we hereby present our report for the fiscal year ended March 31, 2014, with regard to the following:  the audit of the annual financial statements of Ubisoft Entertainment S.A., as...

  • Page 188
    ...professional standards applicable in France. We have no comments regarding the accuracy of the information provided in the management report prepared by the Board of Directors or in the documents sent to shareholders concerning the financial position and annual financial statements, or regarding the...

  • Page 189
    GOVERNANCE AND INTERNAL CONTROL 184

  • Page 190
    ...OF DIRECTORS ON CORPORATE GOVERNANCE, INTERNAL CONTROL AND RISK MANAGEMENT This report, prepared in accordance with the provisions of article L. 225-37 of the French Commercial Code, was made available to the Audit Committee on May 14, 2014, and approved by the Board of Directors at its meeting held...

  • Page 191
    ...the future of the company's executive management." 14. Duration of the Directors' term of office Item relating to the number of shares to be held by the directors "Even though it is not required by law, it is imperative that the articles of association or the internal rules of the Board of Directors...

  • Page 192
    ...presented in 4.5 of the management report, due in particular to the directors' excellent rate of attendance at Board meetings. Within the context of the granting of stock options to the Chairman and Chief Executive Officer and the Executive Vice Presidents, the percentage of shares that must be held...

  • Page 193
    ... Crespel. - The composition of the Board of Directors and its development during the financial year ended March 31, 2014, is contained in section 4.2.1 of the management report. The internal rules of the Board of Directors, published on the Company's website, set all the principles, which, without...

  • Page 194
    ... the employees (as provided in article L. 225-23 of the French Commercial Code) has not been reached to date. Number of shares to be held by the directors Pursuant to article 9 of the Company's articles of association, each director must hold at least one share in the Company. The number of shares...

  • Page 195
    ...of the corporate financial statements, consolidated financial statements and the management report. The Board's powers and responsibilities In accordance with the provisions of article L. 225-35 of the French Commercial Code and the provisions of its internal rules, the Board of Directors lays down...

  • Page 196
    ... with article L. 823-17 of the French Commercial Code, the auditors were invited to attend the Board meetings approving or examining the financial statements. The Board of Directors met 13 times during the 2013/2014 financial year, with an attendance rate of 92.31%. Information to directors The...

  • Page 197
    ... expertise required to undertake their responsibilities. Responsibilities The Audit Committee is responsible for monitoring the preparation of accounting and financial information, the effectiveness of internal control and risk management systems, statutory audits of the annual financial statements...

  • Page 198
    ... year (between November 20, 2013, and March 31, 2014), in particular to review key balance sheet and income statement items, tax items, financing and liabilities, and to look at internal control and risk management and prepare associated action plans. The attendance rate at this committee meeting...

  • Page 199
    ...business lines. ï,§ ï,§ Work during the 2013/2014 financial year The Compensation Committee met three times during the last financial year, mainly to discuss the composition of the Ubisoft teams as at the end of 2013, possibilities of retaining key people and ensuring their loyalty in a market...

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    ... IN THE EVENT OF A PUBLIC OFFERING This report refers to section 3.3 of the management report for the year ended March 31, 2014, as regards the publication of information referred to in article L. 225-100-3 of the French Commercial Code relating to the Company's capital structure and matters likely...

  • Page 201
    ... aims to help the Company maintain control over its activities, the efficiency of its operations and efficient use of its resources, while enabling it to adequately take into account significant operational, financial or compliance risks. Therefore, the internal control system plays a key role in...

  • Page 202
    ... team and is responsible for implementing the strategies designed to ensure that these goals are achieved.  Operational management: In collaboration with general management , operational managers are collectively involved in setting the key accounting, finance, legal, tax, IT and human resources...

  • Page 203
    ...and apply the Group's policies on improving collective and individual performance through regular appraisals, development plans, appropriate training, stock options, employee share subscription plans, etc. Adapted solutions and operating methods The IT teams provide the different business lines with...

  • Page 204
    ...risks were grouped into five categories: - Risks linked to the business and the video games market - Legal risks (lawsuits, regulatory environment, intellectual property, licensing agreements) - Operational risks (associated with dependence on customers and suppliers, information security, financial...

  • Page 205
    ... and smooth interaction of exchange rate and liquidity risk management policies, as well as the publication of financial information, and also manages off-balance sheet commitments (bank guarantees relating to purchase financing or L/Cs, comfort letters, share price guarantees, deposits, etc.). It...

  • Page 206
    ... Department. This software supports automatic verification and consistency checking of flows, the balance sheet, specific line items in the income statement, etc. It also allows fast, reliable data reporting and is designed to make the consolidated financial statements secure. The Company has taken...

  • Page 207
    ... of accounting processes. The consolidation and management forecasting applications are used by all Group companies, providing an exhaustive and standardized view of business activities, and accounting and financial data. They thus help improve the effectiveness of information processing. Similarly...

  • Page 208
    ... financial year ended March 31, 2014. It is the responsibility of the Chairman to draw up and submit to the approval of the Board of Directors a report describing the internal control and risk management procedures implemented by Ubisoft Entertainment SA and providing the other information required...

  • Page 209
    ...Company's internal control procedures for preparing and processing accounting and financial information, as contained in the Chairman's repor t , established in accordance with Article L. 225-37 of the French Commercial Code. Further information We attest that the report of the Chairman of the Board...

  • Page 210
    CORPORATE INFORMATION 205

  • Page 211
    ... THE SHAREHOLDERS' MEETING Regulated agreements and commitments authorized during the past financial year In accordance with article R.225-40 of the French Commercial Code, we were informed of the following agreements and commitments, which were previously authorized by your Board of Directors. 206

  • Page 212
    ... 20, 2013, your Board of Directors authorized your Company to grant to Gameloft st S.E., with a retroactive effect as of April 1 , 2013, an exclusive trademark license agreement enabling Gameloft S.E. to market and promote some of the Company's video games' trademarks on mobile phones named "feature...

  • Page 213
    ... Executive Officer of Ubisoft Entertainment SA, - Joint general manager of Ubisoft Entertainment SÃ rl 2014 ï,· Nature and purpose: On March 14, 2011, your Board of Directors authorized your Company to conclude retroactively as of 1 April, 2010, an intellectual property license agreement relating...

  • Page 214
    ... 18, 2003, your Board of Directors authorized your company to sign an exclusive licensing agreement for current and future brands with Gameloft S.E. for the development of interactive video games for telephone, fax and telecommunications devices, personal digital assistants (PDAs) and interactive...

  • Page 215
    Corporate Information ï,· Conditions : 2014 The term of the remuneration achieves to each guarantee due date. The financial revenue as of March 31, 2014 totaled â,¬346,420 excluding tax. Nantes, May 28, 2014 KPMG Audit a division of KPMG S.A. Rennes, May 28, 2014 MB Audit Franck Noël Partner ...

  • Page 216
    ...social information consolidated for the year ended March 31, 2014, presented in the management report (hereinafter the "CSR Information"), pursuant to the provisions of Article L.225-102-1 of the French Commercial Code. Responsibility of the Company The Board of Directors of Ubisoft Entertainment SA...

  • Page 217
    ... consequences of the activities of the company and its societal commitments and, where appropriate, actions or programs that result. We compared the CSR information presented in the management report with the list provided for in Article R.225-105-1 of the French Commercial Code. In the absence...

  • Page 218
    ... «Future Game of London Ltd» (99% of Group staff) 40 sites representing 88% of Group staff 2 Ubisoft Divertissement Inc., Ubisoft Entertainment SA, Ubisoft EMEA, Ubisoft France, Ubisoft International, Ubisoft Mobile Games, Ubisoft Motion Pictures, Ubisoft Motion Pictures Rabbid, Ubisoft Paris...

  • Page 219
    ... 2014 Qualitative information Employee-related issues Organization of social dialogue Collective agreements Training and information for employees regarding environmental protection Recycling of produced Waste Electrical and Electronic Equipment (WEEE) Use of renewable energy Taken into account...

  • Page 220
    ... for members of a savings plan of the Group Delegation of authority to the Board of Directors to issue shares reserved for employees and corporate officers of subsidiaries of the Company, as defined by Article L. 233-16 of the French Commercial Code, whose registered office is located outside France...

  • Page 221
    ... quorum and majority requirements for ordinary general meetings and having considered the Board of Directors' report, hereby resolves to allocate the loss for the financial year ended March 31, 2014, as follows: ï,§ Loss Credit of the "Premium" account ï,§ Balance of "Premium" account - â,¬184,120...

  • Page 222
    ... special report on the regulated agreements and commitments governed by articles L. 225-40 et seq. of the French Commercial Code, hereby approves the new agreement authorized by the Board of Directors, which was concluded during the financial year ended March 31, 2014, and duly notes the information...

  • Page 223
    ... over time, to the Company's share capital, - to grant shares to employees and corporate officers of the Ubisoft Group under any arrangement authorized by law and, in particular, via a company profit-sharing scheme, any company savings scheme, any bonus share grant plan, or any stock option plan for...

  • Page 224
    ... provided for by law, of shares acquired for various pursued objectives. The General Meeting grants all powers to the Board of Directors, with the option to sub-delegate, under the conditions provided for by law, to place all stock exchange or off-market orders, conclude all agreements, prepare all...

  • Page 225
    ...start date for subscriptions, it being understood that the Board of Directors may reduce this discount where it sees fit, particularly in the event that members of a company savings plan are offered shares on the international market and/or abroad in order to meet applicable local legal requirements...

  • Page 226
    ... of authority to the Board of Directors to issue shares reserved for employees and corporate officers of subsidiaries of the Company, as defined by Article L. 233-16 of the French Commercial Code, whose registered office is located outside France) The General Meeting, acting in accordance with...

  • Page 227
    ... right for subscription to shares to be issued in favor of employees and corporate officers of Subsidiaries. approves, in compliance with Section 423 of the US Internal Revenue Code, the plan adopted by the Board of Directors on February 11, 2014, and confirmed by the Board of Directors on March...

  • Page 228
    ... context of bonus shares granted to employees or corporate officers of the Company and to directly or indirectly associated companies or groups in accordance with the provisions of articles L.225-197-1 et seq. of the French Commercial Code, the conversion date shall be directly linked to the vesting...

  • Page 229
    ... with a nominal value of â,¬0.0775. Pursuant to legal and regulatory conditions, preference shares may be created and issued in accordance with articles L 228-11 et seq. of the French Commercial Code; the specific rights of which are defined in these Articles of Association. ï,§ Several categories...

  • Page 230
    ... time, in accordance with legal and regulatory provisions, request information from the French securities clearing organization (SICOVAM) in order to allow the Company to identify shareholders granted either immediate or future voting rights in shareholders' general meetings, as well as the number...

  • Page 231
    ... shareholders having fewer than the required number of shares may only exercise their rights on the condition that they make it their own business to group together and, if applicable, purchase or sell the required number of shares or fractional shares or rights. ARTICLE 8: II. Other rights attached...

  • Page 232
    ... bonus shares granted to employees and/or corporate officers of the Company and directly or indirectly associated companies or groups - in accordance with the provisions of articles L.225-197-1 et seq. of the French Commercial Code, the conversion date ("Conversion Date") shall be directly linked to...

  • Page 233
    ...price of ordinary shares on Euronext Paris on the date of allocation of preference shares by the Board of Directors (" Daily Price"), ï,§ or the average opening price of ordinary shares of the Company over the twenty trading days prior to the allocation of preference shares by the Board of Directors...

  • Page 234
    .... The Board of Directors must duly note, where applicable, the number of preference shares bought back and cancelled during said financial year and shall make the subsequent amendments to the clauses of the Articles of Association relating to the amount of share capital and the number of shares this...

  • Page 235
    ... date of this Meeting. FIFTEENTH RESOLUTION (Authorization granted to the Board of Directors to allocate ordinary and/or preference shares of the Company free of charge as referred to in Articles L. 225-197-1 et seq. of the French Commercial Code in favor of the employees and/or corporate officers...

  • Page 236
    ...not be less than two years from the definitive allocation of said shares. However, the General Meeting authorizes the Board of Directors, insofar as the vesting ...legal and regulatory conditions - 30 ordinary shares for 1 preference share for a target objective of 150% of the initial price on the date...

  • Page 237
    ... financial years linked to the sales and the current operating income of the UBISOFT Group before stockbased compensation, with the exception of shares allocated within the context of global plans or allocated to employees and corporate officers of associated companies who have subscribed to shares...

  • Page 238
    ...of the number of ordinary shares that comprise the share capital of the Company on the date of the Board of Directors' allocation decision, whereby this limit is deducted from that given in the fifteenth resolution, it being understood that: (i) this limit is fixed and takes into account the nominal...

  • Page 239
    ...the issuance, listing and financial servicing of the shares issued by virtue of this resolution, and to do all that is useful and necessary within the context of the law and regulations in force. The Board of Directors shall inform the Ordinary General Meeting each year, in accordance with legal and...

  • Page 240
    INFORMATION ABOUT THE COMPANY 235

  • Page 241
    ...the Company 2014 1 PERSONS RESPONSIBLE FOR THE REFERENCE DOCUMENT 1.1 PERSON RESPONSIBLE FOR THE REFERENCE DOCUMENT Yves GUILLEMOT, Chief Executive Officer 1.2 NAMES, ADDRESSES AND PROFESSIONAL FEES OF THE AUDITORS Name Date of 1st appointment Expiration of current term Primary auditor KPMG SA...

  • Page 242
    ... at the company's registered office or business address (28, rue Armand Carrel - 93100 Montreuil-sous-Bois, France). In addition, some of these documents are available on the company's website ( www.ubisoftgroup.com), which also contains the group's press releases and financial information. This...

  • Page 243
    ... about the Company 2014 © 1995-2014 Ubisoft Entertainment. All Rights Reserved. Rayman, Driver, Just Dance, Tom Clancy, Ghost Recon, Splinter Cell, The Settlers, Far Cry, Anno, Assassin's Creed, Watch Dogs, Football City Star, The Crew logo, The Division, Ubisoft and the Ubisoft logo are trademarks...