Ubi Soft Entertainment is Europe's number 3 video game publisher and a world leader in a sector that is, in turnover, bigger than the movie industry. Given its strong growth performance over the last five years, +40% on average, its objective is to be among the top 5 independent game publishers worldwide by 2006. The group’s ambition relies on an internal growth that surpasses the average market growth as well as on strategic acquisitions.
Created in 1986, Ubi Soft deploys the talents of 1,900 people around the world. Today, the company is the world's second largest force in video game creation. Its studios have developed such original creations as Rayman® and hits based on famous licenses that include Batman™: Vengeance™ and Disney’s Tarzan™ Freeride. Ubi Soft is also the publisher of well-known game titles such as Myst®III: Exile, Battle Realms® and IL2 Sturmovik™. Sales of its products are assured worldwide through an efficient distribution network operating in 21 countries.
Supported by the experience of its studios, the creation and deployment of international brands, the successful integration of new acquisitions and a sound financial footing, the group's long-term growth prospects remain promising.
RAPPORT ANNUEL 2002 1 CHAIRMAN'S STATEMENT
Once again, our growth performance has been in line with forecasts. Up more than 40% in 2001-2002, it marks a success for all Ubi Soft teams.
At € 369 million, group sales increased Unrivalled development studios for strong brands We invested in our first design and development studios in 1994. 42% during the fiscal year. Internal growth Today we are the second largest force in video game creation worldwide. outperformed the market twofold, while Development teams are set up in 10 different countries throughout contributions from acquisitions exceeded North America, Europe and Asia. As a result of the combined contribution of forecasts. this extraordinary talent base and successful acquisitions, our core product catalogue now includes six leading brands. This sustained growth combined with effective Rayman®, with more than 12 million copies sold since its launch, cost containment has contributed to im- remains a major of the genre. It registered another successful year with the performance of its Game Boy® Advance release. proved financial ratios. Operating income is up In the area of strategic action games, the titles Tom Clancy's Rainbow Six® 292%, at € 31 million, while the net result and Tom Clancy’s Ghost Recon™ have quickly become market references. stands at € 8 million. Myst®III: Exile, the period's bestseller with over a million copies sold, and Chessmaster® benefit from their solid PC position as they expand to all gaming In addition, following successful operations to platforms. Settlers® and Prince of Persia® have already respectively sold more raise capital, we benefit from a solid financing than 3 million and 2 million copies, and the sequels currently under development capacity: € 150 million from convertible bonds are impatiently awaited by fans. To these must be added the strong licenses we acquire and develop year after year - licenses that continue to enrich our already and a € 130 million credit line under a comprehensive catalogue. Batman™: Vengeance and IL2 Sturmovik™ were syndicated loan. added last year, for example, and are among several others still to come… Finally, as highlighted in the US pro forma financial statements, our studios have Ubi Soft’s growth strategy is based on four achieved further gains in productivity. Starting this year, to facilitate comparison strategic pillars: of our performance with peer-group companies in our sector, we will provide our financial statement under US Gaap, too. 2 Targeted, rapidly integrated acquisitions Our strategy is supported by the acquisition of established brands, industry know-how and advanced technologies. We have successfully completed the integration of last year's acquisitions: Red Storm, Blue Byte, and the Entertainment division of The Learning Company. We have been able to integrate and deploy the new brands, and have laid the groundwork for sharing knowledge and effective collaboration with our studios. The addition of new talent and creativity has enriched our teams. These companies have thus contributed to the achievement of our goals, and our initial estimates have been well exceeded, representing sales of € 108 million.
Accelerated international expansion Since the founding of the company, our choice has been to create a powerful distribution network. More and more of our international development is effectively assured through a strengthened distribution network. We are directly present in 21 countries and ensure the distribution of our products in more than 50. In FY 2001/2002, Ubi Soft opened new distribution subsidiaries in Belgium, Holland, Canada and Switzerland. We added Korea and Finland in 2002. Sales in North America increased twofold. In Europe, sales also registered strong growth of approximately 21%, while sales in Asia expanded 55%. This large network ensures that we are always close to our customers and understand their demands.
Anticipating technological advances Thanks to our studios and research and development teams as well as to shrewd marketing choices, Ubi Soft has always been well positioned at the launch of new consoles. This year, we have released major titles for the launch of the Game Boy® Advance, GameCube™ and Xbox™. Ubi Soft is now taking the next step with its online gaming initiative : 80% of our PC games offer online multiplayer capabilities. This means we are already positioned for the next market evolution, and able to offer our customers a richer gaming experience. During the financial year, we launched ubi.com, the benchmark portal for fans of Ubi Soft games. This portal will strengthen our relationship with gamers while enabling them to participate in communities of users with like interests.
Ubi Soft's outlook remains particularly promising
Our goal is to pursue the internal development of bestsellers. We ensure that our creativity translates into concrete success, we place the consumer at the heart of all our activities. We remain attentive to their needs and expectations throughout the world thanks to our developers and publishing specialists, all devoted to gaming.
Our expertise is now well established and has received many awards and wide market recognition. Tom Clancy's Splinter Cell™, for example, obtained awards for Best Game(1) 2002, Best Action/Adventure Game and Best Xbox™(2) Game. More generally, the game has been widely acclaimed by the press.
The outlook for the new fiscal year, which began in April 2002, is particularly promising. Our next blockbusters will be Tom Clancy's Splinter Cell™, Tom Clancy's Rainbow Six®: Raven Shield™, Rayman®3: Hoodlum Havoc, XIII, Sum of All Fears™ and Tom Clancy's Ghost Recon™. The math is simple: 6 games = 6 million units to be sold.
In the meantime, our studios are already planning and developing AAA products for the years ahead. These include the next episodes of Myst® and Prince of Persia®, Project BG&E *, Settlers®V, Loose Cannon and others.
We are also pursuing our entry into the online gaming sector. Before the year's end, two massively multiplayer online (MMO) titles will be released. Shadowbane, one of the most awaited games in its category, will be launched in North America. In Europe, we will publish the most famous MMO, EverQuest®, in localized versions.
By 2006, we will be among the world's top 5 publishers. By achieving this objective, we will also further improve our financial ratios. I have no doubt that Ubi Soft has the strength and assets needed to succeed.
Sixteen years after the company's creation, our success continues to be driven by the tremendous motivation and talent of all our teams. I would like to once again express my gratitude for all their contributions and efforts. I also wish to thank our commercial and financial partners as well as our shareholders for the confidence they have continued to show in our company. Together, we will continue to work to move and shake the world of interactive entertainment products and video games, providing gamers with rich and unique entertainment experiences.
Yves Guillemot, Chairman and CEO
(1) ECTS, London, August 29-31, 2002. (2) Selected as Best Action/Adventure Game by journalists at the 2002 E3 Electronic Entertainment Exhibition, and Best Xbox™ Game of 2002 by Gamespot. * Working title. 3 Ubi Soft has achieved growth in consolidated sales of 40% on average over the last five financial periods. This sustained and managed growth has assured the group a solid groundwork and improvements in profitability.
A WINNING STRATEGY IN FIGURES
A DYNAMIC GROWTH PERFORMANCE Operating profit * In line with forecasts, (in millions of euros) for the 2001/2002 financial 35 year Ubi Soft registered a 42% 31 A SIGNIFICANT 30 increase in sales related IMPROVEMENT IN to the prior period, with 18% 25 PROFITABILITY attributable to internal growth. 20 Operating income surged Well exceeding targets, (+292%) in response to the contribution from 15 13.5 13.7 sustained growth in sales acquisitions in 2000/2001 10 combined with effective 8.1 7.9 was particularly significant, containment of operating 5 representing €108 million. expenses and further 0 Consolidated sales productivity gains. 97/98 98/99 99/00 00/01 01/02 (in millions of euros) As a result, sales per employee rose 38%, to € 194,000, Net income * following a 26% increase (in millions of euros) in the prior period. The effective 15 400 management of operating 13.4 369 expenses is highlighted 350 12 by their more modest increase 10.9 300 in relation to sales 259.8 9 250 (+34% versus +42%). 7.9
200 186.5 6.31 6 150 132.6 4.41
100 96.4 3
50 0 0 97/98 98/99 99/00 00/01 01/02 97/98 98/99 99/00 00/01 01/02 * Before depreciation of goodwill.
Annual growth has averaged 40% over the last five fiscal years 4 UBI SOFT ADAPTS ITS ACCOUNTING KEY FIGURES French Gap US Gaap pro forma TO INTERNATIONAL In millions of euros 01/02 00/01 01/02 00/01 REPORTING STANDARDS Sales 369.0 259,8 369.0 259.8 In conjunction with its Operating profit (before goodwill) 31.0 7,9 8,7 (19,1) consolidated financial statements Operating margin 8.4 % 3 % 2.4 % NS prepared according to French Consolidated net income (before goodwill) 13.4 6.0 (1.2) (12.5) accounting standards, Ubi Soft Consolidated net income (after goodwill) 8.0 3.6 (6.6) (13.9) also issues pro forma financial statements on the basis of US Earnings per share (before goodwill) * 0.77 0.30 (0.07) (0.74) Gaap. This latter presentation will Earnings per share (after goodwill) * 0.46 0.21 (0.38) (0.82) facilitate comparison with other major video game publishers. * In euros per share. Under US Gaap, internal research and development costs are recorded directly under expenses instead of being amortized over several financial periods, as is allowed under French standards. A NEW GENERATION OF HITS WINNING Ubi Soft has anticipated the A COMPLETE THE GAME AROUND development of new gaming RANGE OF GAME THE WORLD platforms with flagship titles PRODUCTS Ubi Soft has strengthened its adapted to each type of game Designing games in-house positions in key markets console. In conjunction with represents a major strategic by optimizing the performances the launching of new Xbox™ focus for Ubi Soft. The of existing structures, and GameCube™ game consoles, principal titles of the period opening new commercial offices several Ubi Soft titles were have been produced by its own and through acquisitions. among the first available. studios. Sales generated from Sales have increased twofold At the same time, PC game in-house production increased in North America, by over 20% sales have benefited from the by 6 percentage points in Europe and 55% success of Myst®III: Exile and in relation to the prior in the Asia-Pacific region. Tom Clancy's Ghost Recon™, fiscal year. to name a few.
Sales Sales by platform Sales by activity by region
Game Boy 19% Advance® Distribution 5% France 18% 12% - Germany
TM Rest of the world 1% Game Boy 42% PC Game Boy ColorTM 72% 5% Asia-Pacific 7% Publishing 23% Development region 11% (In-house & UK co-production) PlayStation® 11% 15 % PlayStation®2 USA/Canada 37% XboxTM 1% 3% GameCubeTM 16% Other European countries
5 Ubi Soft has been listed on the Euronext Paris stock exchange since 1996. Ubi Soft is included in the SBF120 index and has been a component of the Euronext Next Economy index since January 2002.
Today, four securities are listed on the Premier Marché of Euronext Paris:
UBI SOFT'S SHARE PERFORMANCE
SECURITY 3.80% OCEANE (Euroclear: 5447, CONVERTIBLE (Euroclear: 18 812) Reuters: UBIP.PA, BOND Issue price: € 47.50 (at Bloomberg: UBI FP) (Euroclear: 18 062) November 30, 2001) Shares listed as of March 31, Issue price: € 164.64 Maturity period: 5 years 2002: 17,368,732 (FF 1,080) per bond The annual rate of interest (at July 16, 1998). was set at 2.5%, payable (As a consequence when installments are due of the 5-for-1 stock split, on November 30 each year, one bond allows five shares plus a 2% premium per EQUITY to be subscribed with year, payable at maturity. WARRANTS a face value of € 0.31.) (Euroclear: 22,552) Maturity period: 7 years Issue price: € 136 Annual yield: 3.80% per (FF 892.10) year or € 6.26 per bond, Exercise Price: € 170 payable as of July 16 (FF 1115.13) of each year. Exercise period: November 3, 1999 to November 2, 2002 inclusive.
Shareholder information www.ubisoft.finance.com
6 SHARE PERFORMANCE MONTHLY AVERAGE (1) € € 100 100
Maximum Price (€)
80 Average Price (€) 80
Minimum Price (€)
60 60
40 40
20 20
0 0 Sept march Sept march Sept march Sept march Sept march Sept march 96 97 97 98 98 99 99 00 00 01 01 02
TRADING VOLUME AND TRADED CAPITAL MONTHLY AVERAGE (1) M€ 300 400,000
350,000 250
Trading capital (€ million) 300,000
200 Trading volume (by shares) 250,000
150 200,000
150,000 100
100,000
50 50,000
0 sept march sept march sept march sept march sept march sept march 96 97 97 98 98 99 99 00 00 01 01 02
(1) These dates factor in the 5-for-1 stock split on January 17, 2000.
BREAKDOWN OF Guillemot family 16% 5% Ubi Soft Entertainment S.A* SHARE CAPITAL 2% Gameloft S.A* On August 1, 2002, the Guillemot Family held 26% of voting rights. Public 77%
* Non-voting shares.
7 BRANDS
“Go globe-hopping with the latest gear and drink in some sweet new graphics as this series sets a new standard.” - PC Gamer Tom Clancy games are the second best-selling tactical shooting franchise of all times. The Rainbow Six® line has sold more than 7.5 million copies worldwide. TOM CLANCY’S RAINBOW SIX ® : RAVEN SHIELDTM
8 TOM CLANCY'S SPLINTER CELLTM
“The graphics are amazing and the gameplay is deep and challenging. This game is turning heads and is going to be a breakout hit on Xbox™.” – Microsoft Tom Clancy’s Splinter Cell™ takes the brand into a whole new genre: Third-Person Stealth Action. 9 The introduction of the new generation of gaming consoles on all international markets has strengthened the sector's growth. In 2001, revenue for the video game industry overtook box office sales. The increasing interest in gaming has strengthened Ubi Soft's growth potential. The interactive entertainment industry should represent US$22 billion in 2004, corresponding to annual growth exceeding 22%. VIDEO GAMES TAKE ON A WHOLE NEW DIMENSION
VIDEO GAMES: A WORLD WITHOUT BOUNDS Offering comparable core capabilities and each The gamer's world has changed significantly with different potential features, they have both in the last few months. Following the success won over the public. The first sales were in the of the handheld Nintendo Game Boy®Advance, US, with 1.5 million(2) gaming consoles sold at the launched in June 2001, which sold more end of 2001 for Microsoft's Xbox™ and 1.3 than 8 million units(1) worldwide in six months, million(3) units for the Nintendo GameCube™. These two new consoles were introduced at the end two new consoles were introduced in Europe in of the year: GameCube™ and Xbox™. the first half of 2002. Their penetration will accelerate at year's end, and the market in 2003- 04 should register growth in excess of 20%. This new installed base of gaming consoles will be
added to that of the PlayStation®2, marketed since 2000, which had a considerable lead with an installed base of 30 (4) million at the end of 2001. The PC segment in turn offers a solid, stable, highly profitable revenue base. It represented a market of US$2.7 billion in 2001(5). Growth in value terms increased 6% (4 percentage points) in the US. In Europe, the segment grew 7 percentage points while remaining stable in value terms. Growth for game software should range between 4% and 5% per year until 2005(6).
(1) (2) (3) (4) (5) (6) IDG, March 2002.
Sony PlayStation®2 Microsoft XboxTM Nintendo GameCubeTM launch date October 26, 2000 November 15, 2001 November 18, 2001 USA price at launch date $ 299 $ 299 $ 199 Stand E3 2002 - Ubi Soft - Los Angeles. current price* $ 199 $ 199 $ 149 (May 2002 launch date November 24, 2000 March 14, 2002 May 3, 2002 Europe price at launch date € 300 € 479 € 199 current price* € 259 (September 2002) € 249 (September 2002) € 199 launch date March 4, 2000 February 22, 2002 September 14, 2001 Japan price at launch date ¥ 29,800 ($ 222) ¥ 34,800 ($ 260) ¥ 25 000 ($ 185) current price* $ 230 $ 162 $162 10 * September, 2002. ENTERTAINMENT The value of the worldwide MMO market was FOR ALL PUBLICS estimated at US$200 million in the same year(9). The takeoff of the Xbox™ and GameCube™ was Between now and 2005, nearly 40% of all driven by a specific customer segment, that families will have access to broadband of hardcore gamers. Representing the first buyers connections in the US. 70% of current gamers of new consoles, this segment is made up of already have a broadbrand connection. hardcore, very demanding video game enthusiasts New online features for video games, meanwhile, aged 18 or older. They benefit from a significant should attract a whole new generation of budget devoted specifically to entertainment, players. Things are already off to a good start! and purchase on average between 6 and 12 games per year. The hardcore gamer assures the sale of the first million machines and the market success of games. Price reductions a few months after launch facilitated the introduction of new game consoles across markets, making it possible to broaden penetration from the initial segment of “experts” to a larger public. Following the past successes of PlayStation® and Nintendo 64, video games remain of great interest for the mass market segment. Indeed, interactive entertainment is a phenomenon that is reaching out to all market segments. The penetration of video games in the family entertainment segment has increased, including among adult users. There has been a growing interest within the segment of women users, for example, as shown by the success of Myst®, UBI SOFT, WELL POSITIONED Chessmaster®… IN A GROWTH MARKET In the United States, the benchmark market for Ubi Soft develops games in the most promising Europe, video games are the leading option for market niches and for the major gaming platforms. home entertainment(7) (for 35% of households), well By developing games for several platforms while ahead of television, films (19%) and reading (13%). rigorously managing the related additional costs, Among US households that own a console, 36% say sales are boosted and all customer segments that they purchase on average one game a month. can be targeted. A selection of hit titles for 2001/2002 A NEW GENERATIONS PC : Myst® III : Exile, Tom Clancy’s Ghost ReconTM, OF GAMERS Chessmaster®, Battle RealmsTM, Scrabble® With the development of online gaming (excluding USA), IL-2 SturmovikTM, Silent Hunter IITM, possibilities for consoles and the growing Pool of RadianceTM; availability of PC-based multiplayer online PS2 : Rayman®MTM, BatmanTM : Vengeance, Disney’s gaming, the world of interactive entertainment TarzanTM Freeride, Grandia TM II, is constantly expanding. Pro Rally 2002, Worms Blast, Ministry of Sound and others; Massively multiplayer online (MMO) games are TM TM TM playable on a permanent basis-24/7. They start GameCube et Xbox : Batman : Vengeance, Disney’s TarzanTM Freeride, Star WarsTM: Rogue on installation and exist independently of the LeaderTM: Rogue SquadronTM II and Disney Donald presence of the player. On average, more than Duck - Couak Attack (exclusively for Game Cube); 100,000 people play every day, at all hours of GameBoy® Advance : Rayman® Advance, the day, throughout the world. As broadband Tom Clancy’s Rogue SpearTM, Planet of ApesTM, access becomes increasingly available, Salt Lake 2002TM, Tom & Jerry : The Magic Ring, the MMO sector should see exponential growth. Ice AgeTM, ETTM The Extra Terrestrial, Breath of Fire MMO game sales for the first time exceeded one and others. million(8) units in 2001 in the US.
(7) Datamonitor, 2002. (8)(9) IDG - March 2002. 11 A game's quality is meaningful only if visible to the user. Gamer expectations are a critical factor in the design of games, the gaming world and the gaming experience, as well as for the choice of genres and the adaptation of games to different platforms. The consumer is at the heart of Ubi Soft's strategy and organization, from the design phase, through layout, to the game's final form. From the very start, Ubi Soft opted in favor of integrating game creation and development capabilities in its in-house studios. Today, in-house production accounts for 72% of total consolidated sales.
IN-HOUSE STUDIOS CREATING HITS
IN-HOUSE BRANDS AND THE STUDIOS: A SIGNIFICANT COMPETITIVE ADVANTAGE
Ubi Soft produces original trademarks. Today, the company develops its own strong international trademarks, created either in-house or added from acquisitions. Rayman®, Settlers®, Chessmaster®, Tom Clancy's Rainbow Six®, Tom Clancy's Ghost Recon™ and Tom Clancy's Splinter Cell™ are a few examples included in its extensive portfolio of titles, adapted to all gaming segments. From Montreal to Paris, Casablanca to Shanghai, Raleigh to San Francisco, 1,260 Ubi Soft specialists at 10 development sites devote their talent and expertise to the creative process. They share a common priority: the design of high-quality games and future worldwide hits, to provide maximum entertainment and gaming pleasure. Original and amazing brand creations such as Project BG&E* as well as games originating from superb licenses such as XIII or Batman™: Vengeance contribute to the growing renown of Ubi Soft studios. In addition, 2000/2001 acquisitions have constituted new genres and expertise. 12 * Working title. Their rapid integration has considerably increased the dimension of Ubi Soft’s creative resources, already enabling the group to offer new AAA products adapted to the new generation of gaming consoles this year. The synergies between Ubi Soft studios and Red Storm, for example, have benefited the Tom Clancy series - the leading tactical shooting game for PCs. This year, following the formidable success on PCs, Ghost Recon™ was launched for consoles. Tom Clancy’s: Raven Shield™, the third part of the famous Rainbow Six® series, was developed, and a new genre in the group brand portfolio – Third-Person Stealth Action – was created in Ubi Soft’s Montreal studios with Splinter Cell™.
AN IMPRESSIVE TRACK RECORD GAMES FOR ALL The quality and creativity of new Ubi Soft games PLATFORMS are consistently recognized each year at the Electronic In 2002, Ubi Soft had 150 titles in development. Entertainment Exhibition (E3), the major international event Ubi Soft’s strategy is now to focus its in-house of the video game industry held in Los Angeles: production resources on creating and strengthening Tom Clancy’s Splinter Cell™ existing brands and titles with high growth potential. Selected Best Action/Adventure game by journalists at E3 2002 In 2002/2003, 75 games are under development in Selected for best graphics in 2002 for Xbox™ by IGN.com its sites, new blockbusters are already in the planning Selected best Xbox™ game of the year, 2002 by Gamespot and development phase for 2004. Rayman®3: Hoodlum Havoc In addition, thanks to its expertise, Ubi Soft was Selected best game of 2002 for GameCube™ able to successfully position itself early on for new and Game Boy® Advance by IGN.com gaming consoles, to take advantage of this Tom Clancy's Rainbow Six®: Raven Shield™ platform’s expansion and adapt products to market Selected as best tactical simulation game by SimHQ developments. Ubi Soft studios are currently developing Best E3 2002 game in the First-Person/Tactical Shooters a number of console games in-house (34 for PS®2, category by Wargamer 26 for GameCube™, 21 for Xbox™, 20 for GBA and Lock On: Air Combat Simulation - Best simulation game 48 for PC). at E3 2002 (Wargamer); Nominated for best simulation game Ubi Soft’s 2002/2003 blockbusters include : (IGN.com) Tom Clancy’s Splinter CellTM, Disney’s Lilo & Stitch™ - Nominated in the category of ® Rayman®3 : Hoodlum Havoc, Best Graphics for Game Boy Advance (Europe only) (IGN.com) Tom Clancy’s Rainbow Six®: Raven ShieldTM, Far Cry™ - Nominated in categories Best Action Game, XIII, Technological Excellence and Maximum Surprise (IGN.com) ® Tom Clancy’s Ghost ReconTM, Larry Bond's: Harpoon - Best naval combat game (SimHQ) TM TM Sum of All Fears™. IL-2 Sturmovik : the Forgotten Battles - voted Best E3 Simulation Game 2002 (Wargamer) … to name just a few.
World’s second largest creative force
for video games 13 AN INTERNATIONAL SUCCESS
ATTRACT ALL PLAYERS, ALL AROUND THE WORLD
Ubi Soft's worldwide presence allows it to Strategically positioned for success precisely identify and understand what players Ubi Soft has established sales subsidiaries in want as well as to monitor evolving gaming such key markets as the US, the UK, Germany, preferences and trends. France, Japan and China.
The group's sales force is in direct contact with retailers in 21 countries, and indirectly in more than 50 countries. Through this distribution strategy, Ubi Soft overseas its local product sales and is widely present in retail displays. As a result, Ubi Soft has gained market share throughout the world. It ranks 6th in the PC segment in the US, and holds between 3rd and 5th place in Europe for all platforms combined. Ubi Soft is also the leading game publisher in China.
By maintaining close contact with gamers, it is strategically positioned to adapt each product and launch to specific markets. Ubi Soft localizes games in 25 languages, creating multilingual versions of games, packaging and user manuals.
Sales force in direct contact with retailers in 21 countries
14 PRESTIGIOUS LICENSES Licenses offer an excellent springboard for video games. Based on subjects benefiting from considerable public renown, including cult television series, movies and comics, licenses help to attract a broader number of players and boost sales. Ubi Soft capitalizes on the popularity of characters and invented worlds to develop hits. All games are custom-designed to identify the most suitable concept: one that is adapted to the chosen heroes' spirits and worlds. Its ability to build brands and sustain them over time is widely recognized, as is demonstrated by the confidence of major players:
CBS: Crime Scene Investigation; Dargaud: XIII; Dupuis: Largo Winch; Disney studios: Snow WhiteTM, Peter PanTM Return to Never Land, Lilo and StitchTM, Treasure Planet, and others; Fox Interactive: Ice AgeTM, Planet of the ApesTM, and more; Jim Henson: Bear in the Big Blue House, and others; Mattel: Scrabble® (excluding USA); Paramount Viacom: The Sum of All FearsTM; STRATEGIC MARKETING Sony Pictures: Charlie's Angels, AGREEMENTS Crouching Tiger and Hidden DragonTM; The visibility and long-term growth Viacom: Sabrina; prospects of Ubi Soft games are further Universal: The Mummy. strengthened by strategic agreements with multinationals. PARTNERSHIPS Consumer Products: BN (France), Burger TO LAUNCH NEW HITS King (USA), Dragon Optical (USA), Langer’s Ubi Soft's international position facilitates the Juice (USA), Kentucky Fried Chicken (UK), development of partnerships with major players who Kraft/Nabisco (USA), Nivea (Germany), have high visibility in the video game world. The group Oasis (Cadbury – France), Phoskitos regularly signs agreements with industry majors. (Nutrexpa – Spain), Rauch (Italy), Quick (France), Wendy’s (USA). Bethesda Softworks: MorrowindTM; Media: AOL(UK), Cartoon Network (USA), Capcom: Megaman 2, Street Fighter3 (GBA); Discovery Channel/Animal Planet (USA), Codemasters: Colin McRae Rally and Mike Tyson Fox (UK), Mirror (UK), T-Online (Germany). on Game Boy® Advance, and others; Publishing: Bayard Publishing (France), Crave Entertainment: Battle Realms™: Goldmann Publishing (Germany), Winter of the Wolf, UFC, along with 20 other titles; Group Correo publishing (Spain). Eidos: TombRaiderTM: The Prophecy (GBA); Entertainment: Futuroscope (France), NewKidCo: Tom & JerryTM, ETTM the Extra-Terrestrial; Panini (Europe), Universal Pictures (Europe), Sony Online: EverQuest®: Planes of Power; Universal Music (Germany), Team 17: Worms Blast®. Futuroscope (France).
15 BRANDS
Creating Original Brands
“...easily one of the most visually impressive games on the PlayStation® 2.” - GameSpot Michel Ancel, the father of Rayman®, unveils his latest creation to critical acclaim.
PROJECT BG&E*
* Working title.
16 RAYMAN ® 3 : HOODLUM HAVOC
Making Hits “Rayman® 3 is one of the best looking titles for all next- generation systems.”- IGN.com The Rayman franchise has sold more than 11 million copies worldwide. 17 The development of online games has modified the way video games are played. Online gaming provides players with new sensations, opens up new horizons and offers new challenges. The online multiplayer feature represents the addition of a totally new element to games, as was the case with the introduction of color, sound and 3D capabilities. The creation of the ubi.com portal in 2001 represented a significant move forward in this market and strengthened relations with players. Today, Ubi Soft is intensifying its online expansion as it aims to become one of the top 5 worldwide players in online gaming between now and 2006.
UBI.COM: PLAYING FOR THE FUTURE
UBI.COM: THE GAME HAS BEGUN Created in 2001, the ubi.com portal welcomes more than 2 million individual visitors per month, exceeding the 1-million-member mark in its very first year. Several thousand gaming enthusiasts are connected at any given time to play Ubi Soft games online. Through this portal, some 15 gaming communities have been created. The portal is dedicated to Ubi Soft’s main titles and provides direct contact with the group's flagship brands. This reinforced contact provides improved knowledge of gamers, opportunities for dialogue, an ability to better identify consumer demands and new information about Ubi Soft’s games. Currently, one of every two games developed in Ubi Soft's in-house studios offers online options. For PC games, this percentage is even higher (80% this year, as compared with 50% last year). Gaming consoles with Internet connections are also starting to offer online multiplayer capabilities. Tom Clancy’s Ghost Recon™ will be one of the first titles available on Microsoft’s XboxTM Live service, to be launched in November.
Shadowbane
18 FULL STEAM AHEAD IN THE MMO MARKET Massively multiplayer online (MMO) gaming is a separate segment in full expansion, especially in the US and Asia. Even if MMO gaming is still a niche market, it is the only online gaming sector providing additional recurrent revenue through a subscription system, in general monthly.
With the introduction of Shadowbane in North America, Ubi Soft has achieved a breakthrough in the MMO gaming market. Shadowbane, developed by Wolfpack Studios, is the leading massively multiplayer online game that combines the genres of medieval fantasy role-playing and strategy games. Players can physically modify the story, environment and political context of the game. Meanwhile, localized versions of EverQuest™, MYST ONLINE*: A WORLD which have been impatiently awaited by fans, UNLIKE ANY OTHER will be launched in Europe at the end of 2002 and Rand Miller, the co-creator of Myst®, has developed in China at the beginning of 2003. Ubi Soft signed an online adventure game based on a permanent publishing, localization and customer-support gaming world, which allows players to experience agreements with Sony Online Entertainment the extraordinary visual environment of Myst® online. for this well-known game. Ubi Soft, already the publisher of preceding titles in As a result, the most popular MMO game in the series, has acquired the global rights to the brand. the world, with currently 450,000 subscribers, The Myst® line has sold more than 11 million copies will for the first time be simultaneously worldwide for PCs. Myst® Online will undoubtedly available in Chinese, French and German. succeed in delighting hardcore enthusiasts of the With each new language, of course, comes Myst saga, and fans of the MMO version will the opportunity to develop new markets. appreciate its captivating atmosphere, aesthetic Ubi Soft has also acquired global rights quality and ease-of-use. to publish the future online version of Myst®, The game offers 3D graphics in extraordinary which will be launched at the end of 2003. real-time, rich intrigues and the possibility to chat with other players. Myst® Online will offer all players the chance to live a rich and intense experience in the Ages of Myst®.
* Working title.
Become one of the top 5 players in online entertainment by 2006
19 BRANDS
The Cult Series “The Settlers® is a great series that has gotten better with every new release...”- PC Format Over 3.5 million units from the series have been sold in the world.
THE SETTLERS® IV
20 CHESSMASTER® 9000 Owning a Genre “The Chessmaster® line is the only way to go if you’re looking for a chess program.” - GameSpot.com Chessmaster® is the dominant, best-selling brand in the chess category, selling more than 5 million copies worldwide.
21 The success of Ubi Soft games is based on the expertise of 1,900 men and women who share a commitment to excellence in their fields. Together, they devote their talent and enthusiasm to becoming one of the top 5 publishers worldwide by 2006. TOP TALENTS IN THE SERVICE OF A COMMON GOAL
THE PROFILE Ubi Soft recruits personnel with a high level OF THE UBI SOFT TEAMS of expertise in video game creation. Members of the Ubi Soft team are, first and In each specific field, new arrivals are drawn foremost, experts in their different fields. from the very best schools and backgrounds. With an average age of 29, the profile of New employees learn and progress alongside a Ubi Soft team menber is similar to his or colleagues with more seniority, while taking an her customer target. active part in the development of the company at their own level. They use and master the most recent technologies. Internal R&D teams develop tools that are best adapted to create and develop excellent games. As a result of the company's international presence, it is enriched by the culture and ingenuity of 22 different nationalities. This cultural diversity benefits both the customers and the teams alike. Committed to fostering the talent and initiative that assure its success on a daily basis, Ubi Soft enables all its employees to pursue professional projects in a stimulating environment.
UBI SOFT'S RESERVOIR OF TALENT More than 30 different fields of expertise are needed to create a video game. The creative teams include: 540 women, 1,360 men, 22 nationalities. Those who contribute to the production process include: graphic artists,game designers, sound designers, info-designers, IT specialists, animators, script writers, data managers, testers and others. Publishing involves: product managers, purchasing managers, management controllers and more.
1,900 men and women striving to create unparalleled entertainment 22 BRANDS
License to Thrill “Ubi Soft’s XIII is one of the most refreshing First-Person Shooters of this year.” - GameSpot.com XIII takes gamers on a hair-raising journey into a comic book world. XIII
23 BRANDS
One of the Best-Selling PC Franchises in the World “Myst® III has the same lush, hypnotic scenery as its best-selling predecessors.” - Time Magazine The Myst® series has already sold 11 million copies worldwide. MYST ® III : EXILE
24 2001/2002
FINANCIAL REPORT
25 F INANCIAL REPORT
1. History of the Group 28 1.1 Key dates and major developments 28 2. Financial Year 2001/2002 30 2.1 Highlights of the financial year 2001/2002 30 2.2 The Group’s organizational structure 33 2.3 Activity analysis 34 2.3.1 Annual and quarterly consolidated sales 34 2.3.2 Activity break-down 34 2.3.3 Production volumes evolution 35 2.3.4 Geographical sales break-down 35 2.3.5 Platform sales break-down 35 2.3.6 Main subsidiaries sales 36 2.4 Headcounts 36 2.5 Comments on earnings for the 2001/2002 financial year 37 2.6 General information and risks 38 2.6.1 Protection of trademarks 38 2.6.2 Investment policy 39 2.6.3 Research and development policy 39 2.6.4 Litigation 39 2.6.5 Risks 39 2.6.6 Commitments 40 2.6.7 Insurances 40 2.7 Recent developments 41 2.8 Outlook and strategy 42 2.8.1 Sectoral environment 42 2.8.2 The growth strategy 42 2.8.3 Outlook on 2002/2003 fiscal year 42 3. Accounts on March 31, 2002 43 3.1 Consolidated accounts on March 31, 2002 43 3.1.1 Consolidated balance sheet on March 31, 2002 43 3.1.2 Consolidated income statement on March 31, 2002 44 3.1.3 Consolidated cash flow statement on March 31, 2002 45 3.1.4 Explanatory notes on the Consolidated Accounts 46 3.2 Corporate accounts on March 31, 2002 68 3.2.1 Balance sheet on March 31, 2002 68 3.2.2 Income statement on March 31, 2002 69 3.2.3 Consolidated cash flow statement on March 31, 2002 70 3.2.4 Explanatory notes on the Corporate Accounts 71 3.2.5 Financial table (Article 135 of the Decree of March 23, 1967) 85 4. Report by the statutory auditors 86 4.1 Report on consolidated accounts – 86 financial year ending March 31, 2002 4.2 General report on the financial year ending March 31, 2002 87 4.3 Special statutory auditor’s report on regulated agreements 88 4.4 Report on remuneration 90
26 FINANCIAL REPORT Contents
5. Proposed resolutions submitted for approval to the combined ordinary and extraordinary general meeting on September 12, 2002 91 5.1 Agenda for the ordinary general meeting 91 5.2 Agenda for the extraordinary general meeting 92 6. General information 100 6.1 General information on Ubi Soft Entertainment S.A. 100 6.1.1 Company name and registered office 100 6.1.2 Legal status 100 6.1.3 Jurisdiction 100 6.1.4 Company founding and expiration dates 100 6.1.5 Objects of the company (Article 3 of the Articles of Association) 100 6.1.6 Trade and Companies Register 100 6.1.7 Location of legal documents regarding the company 100 6.1.8 Accounting period 101 6.1.9 Statutory distribution of profits (Article 17 of the Articles of Association) 101 6.1.10 General Meetings (Article 14 of the Articles of Association) 101 6.2 General information on the capital 102 6.2.1 Share capital 102 6.2.2 Conditions for amending the capital and the respective rights of the various categories of shares (Articles 7 and 8 of the Articles of Association) 102 6.2.3 Authorized unissued capital 103 6.2.4 Securities which do not represent the capital 105 6.2.5 Identification of major shareholders 105 6.2.6 Potential capital 105 6.2.7 Equity issue reserved for employees 105 6.2.8 Movements in share capital 108 6.3 Distribution of capital and voting rights as of August 1, 2002 110 6.4 Changes in capital and voting rights over the past three financial years 111 6.5 Securities market 113 6.6 Dividends 113 7. Corporate governance 114 7.1 Management 114 7.2 Board of Directors 115 7.3 Responsabilities held by the directors 116 7.4 Interests of directors 119 8. Persons responsible for the financial report and statutory auditors 120 8.1 Person responsible for the financial report 120 8.2 Declaration by the person responsible for the financial report 120 8.3 Declaration by the statutory auditors 121 8.4 Name and address of statutory auditors 122 8.5 Information policy 122 8.6 Schedule of financial communications for the 2002/2003 financial year 122 Glossary 123 Table of concordance 124
27 1 HISTORY OF THE GROUP
1.1 Key dates and major developments
KEY DATES: 1996: Ubi Soft S.A. becomes Ubi Soft 1986: Entertainment S.A. and is floated Creation of Ubi Soft S.A. on the Stock Exchange.
Five brothers, Claude, Michel, Yves, Gérard and Christian In July 1996, Ubi Soft Entertainment S.A. was floated on Guillemot, who were interactive entertainment enthusiasts, the Paris Bourse second securities market (SICOVAM set up Ubi Soft, a publisher and distributor of educational 5447). The initial public offering was subscribed more than software and video games. 75 times over. In December, the Guillemot family increased the company's Ubi Soft's beginnings were marked by: floating stock from 20% to 36%. the successful sales distribution of games for PC, AMSTRAD, In January 2000, Ubi Soft Entertainment S.A. shares were AMIGA and ATARI. transferred to the Paris Bourse Monthly Settlement listed securities market (“Premier Marché”). There was also a 5-for-1 the increasing share represented by the distribution of soft- stock split, which reduced the share face value to FF 2. ware from the largest US, British and German publishers, such Since August 2000, Ubi Soft Entertainment S.A. shares as Elite, Microprose, Electronic Arts, Sierra, LucasArts™, have been eligible for the French deferred settlement system Interplay, Software Toolworks and Novalogic®. (“SRD”) and are part of the SBF 120 index.
1989 /1990: 1999 /2000: Beginning of internationalization The Group restructured, into its current organization Ubi Soft set up marketing subsidiaries on the main interna- tional markets (UK, Germany and USA). The sale and distribution of products was divided between two geographic centers, EMEA (Europe, Middle East, Asia) 1991: and the USA. The launching of console products A corporate structure based in Montreuil, France, was set up to manage the distribution subsidiaries, the studios and Ubi Soft began distributing products for the rapidly-growing the product quality. market for Nintendo® and Sega® video game consoles.
1994 /1995: Establishement of the first developpement studios the launch of Rayman®
Ubi Soft opened its first in-house production studios in Montreuil, and set up a large, integrated organization to create and develop multimedia products. The first integrated studio abroad was set up in Rumania. In the fall of 1995, Ubi Soft launched the first game based on the exploits of the “armless and legless” character Rayman®.
28 FINANCIAL REPORT History of the Group
2000 /2001: Selective acquisitions In-house creative resources
First in-house production studios set up in 1994 in Montreuil, Ubi Soft Entertainment consolidated its international organi- then Rumania. zation and its portfolio of global brands by acquiring: New production units in China (Shanghai) in 1996 the production studios Sinister Games (United States) and and 1997, followed by Quebec (Montreal) and Morocco Grolier Interactive Ltd. (Great Britain); (Casablanca). Red Storm Entertainment, a US video game publisher with New design and production facilities in Barcelona, and Milan hits such as the Tom Clancy's Rainbow Six series, a product in 1999/2000. range with total sales of over five million copies; Production capacity increased by the acquisitions made Blue Byte Software, a German company that combines in 2000/2001. production, publishing and distribution activities for video games mainly intended for PC. Blue Byte created series such as: The Settlers Series® and The Battle Isle Series™, with worldwide sales of 2.7 million units and 650,000 units Catalogue enhanced by publishing respectively up to February 2001; and prestigious licensing agreements.
the Entertainment Division of The Learning Company. This 1991: The company negotiated its first licensing agreements acquisition gave the Group exclusive publishing rights to more with prestigious firms (Electronic Arts, Sierra, LucasArts than 80 titles, including: Prince of Persia®, Pool of Radiance™, etc.) and well-known personalities (Kick Off with Jean-Pierre Chessmaster®, and Myst®, the leading PC adventure game, Papin, Eric Cantona Football Challenge). with sales of over 10 million copies worldwide. 1997/1998: Agreement signed with Playmobil® for the exclusive development of virtual adventures of the firm's MAJOR DEVELOPMENTS: well-known characters. Ubi Soft adopted a product range-based philosophy, Internationalization releasing such products as the best-selling F1 Racing Simulation, the first in a line of Formula 1 racing games. In 1989/1990, Ubi Soft opened its first marketing subsidiaries in Europe (United Kingdom and Germany) and the United 1999/2000: Numerous licenses signed with organizations States. such as Disney, Warner Brothers and Sony Pictures.
Internationalization continued rapidly, with the setting up 2000/2001: licensing and publishing agreements with of marketing subsidiaries and the opening of distribution Crave Entertainment, Sony Online Entertainment/Verant, offices in Japan and Spain in 1994, Italy in 1995, Australia Sony Pictures, In Utero™, Codemasters and Capcom. in 1996, Hong Kong and Denmark in 1997/1998, and Brazil in 1999.
Ubi Soft further strengthened its distribution network with the purchase in Austria of Gamebusters (March 2000) and in Italy of 3D Planet SpA (July 2000). The group has also taken over the distribution of software from the Guillemot Corporation in Germany (May 2000), France (January 2001), Holland (March 2001), Belgium and Canada (April 2001). 29 2 FINANCIAL YEAR 2001/2002
2.1 Highlights of the financial year 2001/2002
April 2001 June 2001
Announcement of the new Rayman® M series, a new type Myst®III: Exile topped the sales charts in the United of multiplayer shooting and racing game. It will be available States according to PC Data and Amazon.com ratings. for PC and PlayStation®2, Xbox™ and GameCube™. According to Australia's Inform Official National Chart, the game was also at the top of the country's charts in the Opening of a new distribution subsidiary in Canada. Ubi Soft week of May 13th. acquired the Guillemot Corporation's interactive software distribution division for Canada. The main business of the Release of Rayman®Advance in the United States and new organization, which will employ about ten staff, will be Europe simultaneously with the launch of Nintendo's hand- the sale, distribution and promotion of products throu- held console. ghout Canada. Agreement signed with Capcom®, for seven Game Boy®Advance games. May 2001 These games include: Super Street Fighter II Turbo Revival, Street Fighter Alpha 3 (working title), Mega Man Battle Network, Breath of Fire and Final Fight One. Agreement signed with Sony Online Entertainment for the Ubi Soft will publish these games in Europe, Australia, publication of PlanetSide™, the first massively multiplayer New Zealand and Eastern Europe. online shooting game. This exclusive agreement covers Europe, Australia and Japan. It is scheduled for release in the second quarter of 2002. July 2001 Agreement signed with Crave Entertainment for the publi- cation of Battle Realms™ for PC. Ubi Soft and Ludigames announced the release of 15 games for PDAs (Personal Digital Assistants) for Worldwide agreement signed with Sony Pictures for the Christmas 2001. development of Crouching Tiger, Hidden Dragon™, a game inspired by the well-known movie that won four Worldwide publishing agreement signed with Team 17 for Oscars. The game is scheduled for release in spring 2003, the next Worms brand game for PlayStation®2, PC, and will be developed for PlayStation®2, PC, GameCubeTM, Game Boy®Advance and GameCubeTM. Game Boy®Advance and XboxTM.
Licensing agreement signed with Codemaster for three August 2001 games for Game Boy®Advance: Colin McRae RallyTM 2.0, Mike Tyson Boxing and TOCA World Touring Cars. Ubi Soft announced Shadowbane, a massively multiplayer Ubi Soft won several IGN awards at the E3 (Electronic online (MMO) game in North America, developed by Wolfpack Entertainment Expo) in Los Angeles: Studios (Texas). The game is scheduled for release in the • Rayman®Advance, award for the best performance and first semester of 2002. At the same time, Ubi Soft set graphics on handheld consoles; up a new division, ubisoft.com, to manage new games por- • IL 2 SturmovikTM, award for the best PC simulation tals and MMO “pay-per-play” games. game; Exclusive licensing agreement signed with Mattel to develop • Battle Realms™, award for the best PC strategy game; and publish its new interactive Scrabble® game. • Pool of Radiance™ II, award for the best role-playing This five-year agreement covers all existing games platforms game (RPG). and all territories with the exception of North America.
30 FINANCIAL REPORT Financial Year 2001/2002
Ubi Soft concluded a medium-term syndicated line of cre- Issuing of a bond with the option of conversion into and/or dit for 130 million Euros with a group of leading French and exchange for new or existing shares (OCEANE bond) to a international banks. This revolving line of credit has a value of 150 million Euros, with redemption scheduled for maturity of three years, which can be extended to five 2006. The annual rate of interest was set at 2.5%, payable years, and will build up the Group's resources so that it when installments are due on November 30 each year. The can fund its growth and develop its business. gross redemption yield will be 4.5%.
Agreement concluded between Sony Pictures Consumer September 2001 Products and Ubi Soft covering the license for Charlie's Angels. Ubi Soft acquired the exclusive right to develop Worldwide agreement concluded between Ubi Soft and publish “Charlie's Angels” video games worldwide for ® Advance, Microsoft Xbox™, Entertainment, Fox Interactive and Visiware covering the Nintendo GameCube™, Game Boy PlayStation®2 and PC. creation of video games based on the film Planet of the ApesTM for PC, Game Boy®Advance and GameTM Boy Color. Signing of an agreement covering the marketing of one of December 2001 the first role-playing games designed for the GameCubeTM, Evolution Worlds. Ubi Soft acquired the publishing rights for Ubi Soft signed a distribution agreement with Destination this game from Entertainment Software Publishing, Inc. The Software for 11 Game Boy®Advance games. These games game will be published worldwide, with the exception of Japan, include: Formula One, Tiger Woods, PGA Tour 2002, China, Korea and Taiwan, in the first half of 2002. Medal of Honor Underground, Johnny Bravo, etc. For the Exclusive publishing agreement concluded with Eidos majority of these titles, the agreement is valid for all countries that have adopted the PAL standard, with the Interactive for the marketing of the Game Boy® Advance exception of the United Kingdom. version of Salt Lake 2002TM, the official game of the Winter Olympics, under license from the IOC. On the occasion of the European release of Rayman®M™ for PC, Ubi Soft announced that 10.5 million copies of the Rayman® product range had been sold worldwide since the October 2001 first game was launched in 1995.
International licensing agreement concluded for the deve- Ubi Soft strengthened its presence in Europe by opening lopment of a video game based on well-known television a new distribution organization in Lausanne, Switzerland. series Bear in the Big Blue House, created by The Jim The new subsidiary will employ seven staff, who will be Henson Company. This series, which is broadcast every day responsible for selling, distributing and promoting Ubi Soft on Playhouse Disney, has just started its fourth season in products all over Switzerland. the United States, and has been distributed to several European countries. Ubi Soft Entertainment will develop the video game for the PlayStation®, Game Boy®Advance and January 2002 GameCubeTM consoles. Ubi Soft joined up with 20th Century Fox to adapt Ice Age™ for the Game Boy®Advance. This game, which has been November 2001 adapted from the animated feature film, is intended for the international market. Ubi Soft Entertainment launched ubi.com, a leading portal Exclusive European publishing contract concluded with for all game fans. This new game portal will revolutionize Bethesda Softworks® Inc. This agreement covers nine the way gamers use the Internet. Ubi.com will allow them to games, including The Elder Scrolls III: Morrowind™ for participate in online communities and play their favorite PC and Xbox™, and Sea Dogs™, which has won several games, all on the same website. awards.
31 Ubi Soft launched its amazing chess game, Chessmaster®, March 2002 for Game Boy®Advance. This game is aimed at both begin- ners and experts, and will be marketed worldwide in the Ubi Soft announced the development and publication of the first half of 2002. latest episode of the Tom Clancy's Rainbow Six® series,
® Ubi Soft announced that its game Tom Clancy's Ghost Tom Clancy's Rainbow Six : Raven Shield. The game will be Recon™ had been named PC game of the year by IGN.com released for PC and progressively for other platforms. This and the well-known American magazine PC Gamer. will be the third episode in the Rainbow Six product range, more than 6.7 million copies of which have been sold worldwide.
February 2002 It was announced that Rayman® 3 Hoodlum Havoc would be released in the United States and Europe during the Ubi Soft and the International Tennis Federation signed a 2002/2003 financial year. This game will be available for all licensing agreement for the development and publishing of new-generation consoles and for PC. games based on the Davis Cup. This license covers the whole world, and is exclusively for PC and gaming consoles. Ubi Soft increased its presence in Europe by opening a subsidiary in Finland. Ubi Soft is now present in 20 coun- A new agreement was signed with Disney Interactive. tries worldwide. The opening of this new subsidiary forms Ubi Soft will distribute three video games for Game part of a strategy of enhancing the Group's presence ® Boy Advance in Europe: Disney's Peter Pan™ - Return to locally so that it can continually improve its response to Never Land, Disney's Lilo & Stitch™ and Disney's Treasure the specific characteristics of each market and maintain Planet. close relationships with its customers.
Ubi Soft signed an exclusive licensing agreement with Ubi Soft signed an agreement to distribute a PC game Archie Comic Publications Inc., Viacom Consumer Products adapted from and inspired by Alfred Hitchcock, the mas- and Paramount Television's Licensing Division. Ubi Soft is ter of suspense. The adventure game Alfred Hitchcock - to develop and distribute a game based on the television the Final Cut, based on the film-maker's best films, will be series Sabrina, the Teenage Witch. This game for Game distributed in Canada and the United States. Boy®Advance will be available worldwide and will be marke- ted at the end of 2002. Ubi Soft announced that the game XIII would be available for PC, GameCubeTM, XboxTM and PlayStation®2 in the first Worldwide licensing agreement signed with Universal quarter of 2003. Studios to develop a game derived from the television TM series The Mummy. This game will be produced for Game Ubi Soft launched the E.T. the Extra-Terrestrial range of Boy®Advance. video games. This game will be available for consoles and PC.
th Ubi Soft signed an exclusive licensing agreement with CBS Ubi Soft announced a worldwide agreement with 20 Century Consumer Products® to design games derived from the Fox to develop the game for the Aliens VS Predator license, television series CSI: Crime Scene InvestigationTM for PC to which Ubi Soft has acquired the rights until 2003, for ® and consoles. The version for PC will be the first to be Game Boy Advance. marketed worldwide in the second half of 2003.
32 FINANCIAL REPORT Financial Year 2001/2002
2.2 The Group’s organizational structure
The group is organized around :
29 production sites around the world : France, Germany, 24 marketing subsidiaries located in 21 countries on the Canada, United States, China, Marocco… main markets for this sector : the United States, Japan, Europe (France, Germany, the United Kingdom, etc). Production is organised into “business units” and act as service providers for the Group’s design and marketing teams.
GameLoft. S.A. France 12,16% Administration Ubi Soft Holdings Inc. (USA) 100,00 % Ubi Books & Records SARL (France) 99,00% Ubi Administration SARL (France) 99,99%
Production Marketing
Ludimedia S.A. (France) 99,76% Ubi Soft France S.A. (France) 99,94% Ludi Factory SARL (France) 99,80% Ubi Soft Entertainment Ltd. (Unted Kingdom) 100,00% Ubi Game Design SARL (France) 99,00% Ubi Soft Entertainment GmbH (Germany) 100,00% Ubi Studios S.A. (France) 99,60% Ubi Soft S.A. (Spain) 99,95% Ubi Research & Development SARL (France) 99,80% Ubi Soft SpA (Italy) 99,99% Ubi Simulations SARL (France) 99,80% Ubi Soft Inc. (USA) 99,99% Ubi Soft Entertainment Inc. NY (USA) 100,00% Ubi Soft KK (Japon) 100,00% Ubi Pictures SARL (France) 99,00% Ubi Soft PTY Ltd. (Australia) 100,00% Ubi Animation SARL (France) 99,80% Ubi World S.A. (France) 99,88% Ubi Graphics SARL (France) 99,80% Ubi Marketing & Communication S.A. (France) 99,94% Ubi Sound Studio SARL (France) 99,00% Ubi Soft Entertainment Nordic A.S (Danemark) 99,50% Ubi Soft Divertissements Inc. (Canada) 100,00% Ubi Soft Entertainment SprL (Belgium) 99,33% Shanghai Ubi Computer Software Co Ltd .* (China) 100,00% Ubi Soft Entertainment Ltd. (China) 99,50% Ubi Soft Entertainment B.V. (Netherland) 99,98% Ubi Networks SARL (France) 99,98% Ubi Soft Entertainment Sweden A.B (Sweden) 98,00% Ubi Soft Entertainment SARL ((Marocco) 99,78% Gamebusters GesmbH (Austria) 100,00% Ubi Music Publishing Inc. (Canada) 100,00% Ubi Soft Entertainment Ltda ((Brazil) 99,00% Ubi Info Design SARL (France) 99,80% Ubi EMEA SARL (France) 99,99% Ubi World Studios SARL (France) 99,97% Ubi Soft Canada Inc. (Canada) 100,00% Ubi Productions France SARL (France) 99,80% Blue Byte Software Ltd. (Unted Kingdom) 100,00% Ubi Computer Software Beijing Co Ltd. (China) 100,00% Ubi soft Entertainment OY (Finland) 100,00% Ubi Studios Srl (Italy) 97,50% Ubi soft Entertainment Norway AS (Norvay) 98 ,00% Ubi Studios S.L (Spain) 99,95% Ubi Manufacturing SARL (France) 99,86% Ubi Color SARL (France) 99,80% Ubi soft Entertainment S.A. (Switzerland) 99,80% Ubi Soft S.R.L (Romania) 99,35% UBI Music Inc. (Canada) 100,00% Internet Ubi Studios Ltd. (Unted Kingdom) 100,00% Sinister Games Inc. (USA) 100,00% Ubi.com S.A. (France) 99,98% Red Storm Entertainment (1) (USA) 100,00% Ubi.com Inc. (USA) 99,50% Blue Byte Software Inc. (1) (USA) 100,00%
(1) These companies are held indirectly by Ubi Soft * production and distribution 33 The intra-Group relationships are as follows :
production companies bill their work according to how far Services rendered by the production and marketing companies their projects have advanced, are billed according to market conditions.
marketing companies are billed by Ubi Soft Entertainment Ubi Soft Entertainment does not own the premises it occupies S.A. on the basis of their sales volume. in any country.
2.3 Activity analysis
2.3.1 Annual and quarterly consolidated sales
Sales in € million
2001/2002 2000/2001 Growth
Fisrt quarter 60.3 23.0 162% Second quarter 53.1 42.9 24% First half year 113.4 65.9 72% Third quarter 165.1 114,4 45% Fourth quarter 90.5 79.5 14% Second half year 255.6 193.9 32% Total 369.0 259.8 42%
Ubi Soft's sales rose by 42% in the 2001/2002 financial year. Publishing covers revenue from titles designed and produced by third-party developers, for which Ubi Soft finances and On a like-for-like basis (i.e. excluding the acquisition of 3D supervises production in exchange for acquiring the license. Planet (Italy), Sinister Games (United States), and Red Storm Ubi Soft then handles localization and manufacturing, and of (United States), which have been consolidated since October 1, course marketing and sales distribution. The company receives 2000; Blue Byte (Germany), which has been consolidated revenue from product sales and pays royalties to the brand's since February 6, 2001; and the Entertainment Division of TLC, developers and/or owners. which was consolidated with effect from March 13, 2001), sales rose by 18%. Distribution sales correspond to revenue from sales of the products of publishers with whom Ubi Soft has concluded This growth in the organization's sales confirms Ubi Soft's distribution agreements, and for whom it handles marketing ability to outperform the market (which grew 10% in the and sales. Such agreements may be local, covering a limited United States and approximately 5% in Europe in 2001). geographic area, or may cover several regions.
2.3.2 Activity break-down 2001/2002 2000/2001 Ubi Soft sales are broken down into the Development, Publishing and Distribution of video games. Development 72% 66% Publishing 23% 31% Development covers revenue from titles developed, produced and marketed by Ubi Soft's in-house studios. Development Distribution 5% 3% also includes sales by third-party developers (Third Parties), for whom Ubi Soft provides supervision and co-production, and acts as guarantor of the quality of the final product.
34 FINANCIAL REPORT Financial Year 2001/2002
2.3.3 Production volumes evolution 2.3.5 Platform sales break-down
Number of titles produced in-house and in co-production (third-party): 2001/2002 2000/2001 PC 42% 27% 2001/2002 2000/2001 Play Station® 11% 27% Number of titles* 58 61 Play Station® Play Station 2 15% 9% * title = 1 game on several platforms (i.e. Batman™ Vengeance PS®2, Dreamcast/Nintendo 64 Ns 7% GameCube™, Xbox™ and GameBoy®Advance, four formats for one title). GameBoy/GameBoy™Color 7% 23%
® The company attaches strategic importance to its in-house GameBoy Advance 19% / development business, as this ensures: GameCube™ 3% / Xbox™ 1% / better game quality and rigorous control of timescales and Others 2% 7% budgets;
improved profitability, thanks to development for several Sales for the new platforms (Game Boy®Advance, PlayStation®2, formats, in particular for triple A titles; Nintendo GameCube™ and Xbox™) account for 38% of annual the development and creation of tools and technology which sales (9% in the previous year). Sales for PC, which were ® can be reused from one game to another. sustained in particular by the success of Myst III: Exile, Tom Clancy's Ghost ReconTM, account for 42% of annual sales. The slightly lower number of development titles confirms the Group's strategy of concentrating more on games with considerable potential, such as Myst®III: Exile 1,120,000 units of which have been sold, Rayman®Advance (770,000 units), Batman™: Vengeance (over 670,000 units) and the Tom Clancy's Ghost Recon™ series (over 760,000 units).
2.3.4 Geographical sales break-down
FY 2001/2002 2000/2001 Sales % Sales Sales % Sales
France 67.97 18% 61.13 24% Germany 43.89 12% 34.89 13% UK 41.46 11% 34.05 13% Rest of Europe 59.01 16% 45.89 18% Total 212.33 58% 175.95 68% USA/Canada 136.51 37% 64.41 27% Asia/Pacific 18.03 5% 11.64 4% Rest of the World 2.09 1% 7.81 3% Total 368.96 100% 259.82 100%
Sales in the North America region were €137 million for the The Asia-Pacific region accounted for 5% of annual sales, an year, and accounted for 37% of Group sales. increase of 55%.
The Europe region accounted for 58% of annual sales, at € 212 million (+21%), with Germany, Benelux and Scandinavia achieving the highest growth.
35 2.3.6 Main subsidiaries sales
Subsidiary in thousands €
Consolidate sales Profits Consolidate sales Profits Consolidate sales Profits 31.03.2002 31.03.2002 31.03.2001 31.03.2001 31.03.2000 31.03.2000 Ubi Soft Inc. (United States) 135 441 8 721 62,385 (6,994) 41,610 2,981 Ubi Soft Entertainment GmbH (Germany) 43 891 1 419 28,655 2,038 15,333 7,47 Ubi Soft Entertainment Ltd. (United Kingdom) 40 935 (425) 33,077 404 11,568 45
2.4 Heacounts
a) Personnel changes e) Flexible working hours and legal working week in France: On March 31, 2002, Ubi Soft had 1,901 employees, with an In Ubi Soft's French companies, introduction of the 35- average age of 29 years. In one year, personnel numbers hour work week low, has taken the form of either shorter increased by 3.5%, a slight increase caused by the growth working days or reduced hours by granting days off. of Ubi Soft's business and the setting up of new distribution subsidiaries. On 03.31.02 On 03.31.01 On 03.31.00 Production 1,259 1,234 1,160 b) Turn over Sales/Marketing/ There is no significant staff turnover. Administration 642 602 492 Total 1,901 1,836 1,652 c) Contracts Ubi Soft mainly employs staff under permanent contracts. However, situations may arise in which fixed-term and Breakdown of Ubi Soft Entertainment staff around the temporary contracts have to be concluded for specific world as of March 31, 2002: assignments. Country Personnel
Germany 86 d) Company spirit Australia 14 Ubi Soft hires experts in game creation, and its youngest Austria 9 Belgium 8 recruits have received the finest training available. They learn Brazil 3 and progress by working alongside the old-timers. Everybody Canada 369 plays an active role in the company’s development, to his or China 219 her own ability. All company personnel share values such as Denmark 16 curiosity, broadmindedness, a willingness to exchange ideas, Spain 64 United States 211 the ability to take initiative, and friendliness, with special France 603 emphasis placed on the development and sharing of knowledge. Great Britain 52 Ubi Soft’s multicultural diversity is proof of this. Thanks to Netherlands 7 its overseas subsidiaries and the variety of activities it Hong Kong 2 conducts, Ubi Soft offers many opportunities for mobility and Italy 81 Japan 13 career development. The company is open to initiative and Morocco 73 encourages each employee to carry out his or her professional Norway 1 projects in a stimulating work environment. Romania 63 Sweden 3 Switzerlands 4 Total 1,901
36 FINANCIAL REPORT Financial Year 2001/2002
2.5 Comments on earnings for the 2001/2002 financial year
Significant Rise in Profitability Steady Progress in Financial Ratios
During fiscal year 2001/2002, Ubi Soft’s sales, in line with its Ubi Soft’s financial ratios continued to improve. Thus, at forecasts, were up 42% from the previous year. Internal March 31, 2002, working capital requirement stood at 40% growth was 18%, twice that of the world video game market. of sales, a 5 point drop from the past year. Inventory decrea- The contribution of acquisitions in 2000/2001 was higher sed sharply to 3.8 months from the previous figure of 4.8. than the Group’s target. It represented 108 million Euros. In Days of sales outstanding were 105 days, down on 112 days the United States, in particular, sales increased 112% and last year. Finally, at 131.7 million Euros, net indebtedness now represent 37% of Ubi Soft’s business. Sales in Europe represents 42% of shareholders’ equity. were up 21%, and account for 57% of consolidated sales.
Gross margin has grown 50% in value terms. Expressed as a Pro Forma Presentation percentage of sales, it has risen by 3 points over 2000/2001. Operating income is up 292%, due to continued gains in pro- Along with its consolidated accounts pursuant to French ductivity and good control of operating expenses. Thus, sales accounting standards, Ubi Soft will present US Gaap pro per employee grew 38% to reach 194,000 Euros, after an forma accounts, in which internal development costs have increase of 26% between 1999/2000 and 2000/2001. Control been immediately expensed, as some American video-game of operating expenses is confirmed by their slower increase publishers do. (+34%) vs. sales growth (+42%).
The reduction in financial income is attributable mainly to Main differences between standards: greater indebtedness, following acquisitions made in 2000/2001, French standards or “French Gaap”: and to provisions for depreciation of minority interests (2 million • Immobilization, then amortization of in-house research Euros). The exceptional income is essentially due to a gain of and development expenses; 3.8 million Euros arising from litigation with the American • Since April 2001, the new Conseil National de la Comp- company Take 2, and to a 1.8 million Euro provision for bad tabilité (CNC) [French National Accountancy Council] debts written to account for the bankruptcy of the American standard governing the amortization of goodwill and distributor K Mart. business assets has been applied. Before amortization of goodwill and business assets, net inco- US Gaap pro forma standard me comes to 13.4 million Euros or +168% over fiscal year • In-house research and development costs entered in the 2000/2001. accounts as charges.
In accordance with the new accounting French standard set up by the French national accounting board (Bulletin 123, September 2001), Ubi Soft is now adding the amortization of business assets (2.1 million Euros) to that of goodwill (3.3 million Euros on a full year basis). The result is an increase of this item to 5.4 million Euros, up from 1.4 million Euro last year.
37 According to this pro forma presentation, the major impacts on the accounts are as follows:
In millions of €
2001/2002 2000/2001
Operating income (excluding amortization of goodwill and business assets) 8.7 (19.1) Net income (excluding amortization of goodwill and business assets) (1.2) (12.5) Net income (after amortization of goodwill and business assets) (6.6) (13.9)
In € per share
Net income per share (excluding amortization of goodwill and business assets) (0.07) (0.74) Net income per share (after amortization of goodwill and business assets) (0.38) (0.82)
Unaudited pro forma presentation
Impact of US GAAP pro forma presentation on operating income over the last five financial years:
In millions of €
2001/2002 2000/2001 1999/2000 1998/1999 1997/1998
Published operating income 31 7.9 13.7 13.4 8.1 - Capitalized R&D expenses (77) (60.7) (45.6) (33.7) (25.9) + Depreciation of intangible fixed assets 54.7 33.7 37.8 21.5 10.8 US GAAP pro forma operating income 8.7 (19.1) 5.9 1.2 (7.0)
Unaudited pro forma presentation
2.6 General information and risks
2.6.1 Protection of trademarks Ubi Soft Entertainment S.A. has not filed any patents and does not depend on any particular patent.
Ubi Soft Entertainment games are covered by intellectual Like all publishers of entertainment games, Ubi Soft property rights both in Europe and internationally (for France: Entertainment S.A. has to face the problem of piracy. It is Institut National de la Propriété Industrielle [French Patent a member of SELL (the French trade association of enter- Office], Paris; for Europe: Office for Harmonization in the tainment software publishers), and takes legal action in any Internal Market; internationally: the World Intellectual Property known cases of software counterfeiting in France and Organization; and finally, for the North American market, the abroad [by taking independent action where applicable, or Patent and Trademark Office in Washington D.C.). by any other means available under criminal or civil law]. At In addition, games designed by Ubi Soft Entertainment S.A. the same time, in the case of Internet piracy the company are covered by international copyright laws. systematically takes action against hackers to force them to withdraw games that are online illegally.
38 FINANCIAL REPORT Financial Year 2001/2002
2.6.2 Investment policy Our research efforts focus on innovation and functionality, while our technologies are geared towards generating a top- Since its early days as distributor, Ubi Soft has transformed quality product. Development efforts concentrate on the creative itself into an integrated company capable of carrying out each aspect of games, and aim to please gamers. stage in the production of a game, from design to distribution. The research and development costs are the costs of creating Today, its strategy centers on the production of triple-A tools, and are therefore immobilized and amortized over quality video games and “time to market” games. three years. No basic research is carried out.
The 2001/2002 financial year was marked by the consolidation The company has not applied for ISO certification (ISO 9000- of external growth activities, the most important of which 9001). were: Red Storm Entertainment (September 2000) and the Entertainment Division of The Learning Company (March 2001) in the United States, and Blue Byte Software in 2.6.4 Litigation Germany (February 2001). So far as the company is aware, there are no particular Investment in internal production: events or disputes that are likely to have or have recently had any significant impact on the business, earnings, financial The figures are expressed in millions € situation, or assets of Ubi Soft Entertainment and its sub- 2001/2002 2000/2001 1999/2000 sidiaries. 77 69 55
Estimated investment in production for the 2002/2003 financial year : between € 73 and € 78 million 2.6.5 Risks
Dependence on sub-contractors, suppliers and customers Investment in sales distribution: The company has no significant dependence on sub-contractors, Control over distribution ensures that Ubi Soft retains local suppliers or customers that could affect its development control of its products in a highly competitive environment. plan. Ubi Soft Entertainment has two types of distribution network: In 2001/2002, Ubi Soft incorporated distribution networks in Finland by setting up Ubi Soft Entertainment OY, and in the centralized Anglo-American model (USA, United Kingdom, Switzerland by setting up a subsidiary in Lausanne. Japan): the chain’s buyer makes centralized purchases of the products, which the chain then distributes to its own stores;
2.6.3 Research and development policy the decentralized European model (Germany, France, Switzerland, Benelux, Italy, Spain): the chain makes cen- In its constant efforts to develop excellent video games, Ubi tralized purchases of the items, but uses a distributor to Soft has developed a policy of researching and developing deliver them to each of its stores tools for each project, incorporating the latest technological developments. The selection of tools takes place at a very Ubi Soft’s ten largest customers account for 33.5% of the early stage in a project, because the decisions made then Group’s pre-tax sales. directly affect the investment required in terms of time, Dependence on manufacturers : Ubi Soft, like all publishers human resources and the overall funding of the game. of games for consoles, buys games cartridges and miscel- laneous accessories from console manufacturers. These sup- Thanks to the integration of its team of engineers, who plies are thus dependent on the manufacturer. There is no have a solid grasp of the best technology currently available, special dependency with regard to PC games. Ubi Soft now has a highly pragmatic approach to its projects: Depending on the problems involved in a game and the Risks relating to the departure of key personnel expected results, the tools selected will either be tools The company is now structured in order to minimize departure developed in-house specifically for the purpose, or commercial risks or long unavailability of our personnel or key managers. software, or a mixture of both. A conversion program and the share of expertise is, by exam- ple in development in our company, for the retention and the
39 transmission of knowledge in the company. Moreover, human 2.6.6 Commitments resources policy, common to all the group, is positioned on its ability to attract, train, retain and motivate staff with high The Group’s management has made no firm commitments on technical and managerial skill. future investments.
Risks relating to liquidity problems and exchange rate volatility 2.6.7 Insurances Euronext market (Paris Bourse) has experienced, last months, considerable fluctuations in prices and volume, The company does not carry business interruption coverage. which have had a considerable impact on the share prices of Furthermore, the group benefits from no special insurance a large number of companies. Sometimes these fluctuations coverage. were in no way linked to the operating performance of the companies concerned. The attention of investors is drawn to the fact that such major market fluctuations may adversely affect Ubi Soft's share price.
Risks relating to future acquisitions and integration of the companies acquired Ubi Soft may proceed to an external growth transaction in the medium and long term. The wholesome balance-sheet structure of the company and the recent raising of funds (a € 150 million bond convertible and a € 130 million medium- term syndicated line of credit) may minimize risks linked to these transactions. However, these risks may be: dilution of the company's current stock ownership, creation of long- term debt, possible losses, creation of provisions relating to either the need to report goodwill or to other intangible assets, or have a negative impact on the company's profitability.
Furthermore, any acquisition or merger involves a number of risks, in particular the possible departure of key staff in the company target. This loss may have a considerable negative impact on its sales, earnings or/and financial situation: neverthless, Ubi Soft has always demonstrated its ability to integrate acquisitions.
40 FINANCIAL REPORT Financial Year 2001/2002
2.7 Recent developments
April 2002 Ubi Soft won several awards in various categories at the E3 (Electronic Entertainment Expo) in Los Angeles: Worldwide licensing agreement signed with Viacom • Tom Clancy's Splinter CellTM, awards for Best Action/ Consumer Products to publish games derived from the film Adventure Game, Best Game for XboxTM and Best Graphics The Sum of All FearsTM, adapted from the well-known novel • Tom Clancy's Rainbow Six®: Raven shield™, Best Tactical by Tom Clancy. Simulation • Rayman® 3: Hoodlum Havoc - Nominated for the cate- May 2002 gory Best Platform Game for GameCube™ and Game When the Nintendo Gamecube™ console was released in Boy®Advance Europe, Ubi Soft was present with four titles: Star Wars™ • IL-2 SturmovikTM: the Forgotten BattlesTM - voted Rogue Leader™: Rogue Squadron™ II, Batman™: Vengeance, Best E3 Simulation Game 2002 by Wargamer Disney's Donald Quack Attack and Disney's TarzanTM Freeride. July 2002 Announcement of an exclusive agreement with Rage Software covering the publication of games based on the Final stage in development of the new edition of Chessmaster® well-known Rocky film series. The game will be available 9000, the internationally renowned chess game for PC. for all new-generation consoles, and will be launched in Worldwide release is scheduled for fall. North America this fall. August 2002 Exclusive licensing agreement signed with MGA Entertainment to adapt the Bratz dolls for PC and consoles. Announcement of first-quarter sales: 32 million Euros. In Exclusive agreement signed with Eidos Ltd. for the game the first quarter of the 2002-2003 financial year (April - June), Ubi Soft's consolidated sales came to 32 million Lara Croft Tomb RaiderTM - The Prophecy, which will be Euros, down 46.8% compared to the same period in the released for Game Boy®Advance at Christmas. previous financial year. This significant change is the result Exclusive worldwide contract signed with Cyan Worlds Inc. of an important base effect: sales in the first quarter of ® to publish and manage Myst On Line (working title), which 2001/2002 were up 162% as a result of the launch of two is to be launched in the second half of 2003. major titles, Rayman® Advance and Myst®III: Exile, which Major publishing and technical support contract signed represented 53% of sales for that period; 24 titles were with Sony On Line Entertainment for the game EverQuest®. marketed, compared to 32 the previous year. This agreement will allow localized versions of this game, one of the most popular massively multiplayer online September 2002 games in the world, to be launched in Europe. Conclusion of a distribution agreement with Microsoft, covering such major Microsoft titles as Age of Empires® June 2002 Gold Edition, Microsoft® Flight Simulator 98, Microsoft® Jacques Villeneuve, Ubi Soft and Weg Management gave Combat Flight Simulator 1 and Microsoft® Pandora’s Box. a preview of their new video game, Jacques Villeneuve All of these games will be available in stores this fall. The Racing Vision. agreement covers Europe (with the exception of the United Kingdom), Canada, Latin America, Australia and Opening of a new branch in Seoul, Korea in June 2002. The the Asia-Pacific region (with the exception of Korea and Group's aim here is to establish a presence in a rapidly Japan). expanding market. Ubi Soft is now present in 21 countries. Ubi Soft and Shanghai Animation Film Studio are to deve- As the creator of one of the most eagerly awaited games lop a PC game based on the well-known animated television of 2002, Ubi Soft is set to take the lead in the Action/ series Music Up. The game will be released in China in the Infiltration genre, one of the biggest segments of the Summer of 2002. video game market. Tom Clancy’s Splinter Cell™, just released from the Ubi Soft Montreal development studios, ® The Settlers V, a new episode is currently being develo- wins yet another award with its selection as Best Game at ped at Blue Byte, Ubi Soft's German studio. ECTS 2002 – the leading European video game trade show. 41 2.8 Outlook and strategy
2.8.1 Sector and competitive 2.8.2 The growth strategy environment Ubi Soft's aim is to be one of the top five publishers in the With the launch of 128-bit gaming consoles, the market world (excluding manufacturers), with a target of $1.5 billion entered a new cycle of growth. The three new consoles in sales in 2005/2006. The Group's growth strategy is dominated the market in a very short time. Since their based on building up a portfolio of strong in-house brands, launch in Europe and North America, the PS®2 has sold over such as Rayman®, Rainbow Six™, The Settlers™, Myst® and 12 million units, GameCubeTM 1,3 million and XboxTM 1.5 million *. Prince of Persia™, on the utilization of well-known licenses, and on a policy of targeted acquisitions. While the events of September 11, 2001 led to increased uncertainty in the stock markets, particularly in the tech- 2.8.3 Outlook on 2002/2003 fiscal year nology sector, the world market for video games is expec- ted to grow by 20% to 25% in 2002. Ubi Soft's studios around the world are currently developing Furthermore, the development of online gaming will be an and planning 75 titles for all platforms. attractive growth factor. The arrival of internet con- nections in consoles, which will become operational in the Leading titles for the year include: second semester of 2002, will also speed up growth in Tom Clancy's Splinter Cell™ the field of online games. Rayman® 3: Hoodlum Havoc
® The video game sector has experienced significant concen- Tom Clancy's Rainbow Six : Raven Shield™ tration over the last ten years. Competition between game Tom Clancy's Ghost Recon™ manufacturers is global. XIII Following several mergers and acquisitions, the number of The Sum of All Fears™ leading video game publishers** with more than 10 years of experience is limited: Activision, Electronic Arts, In the 2002/2003 financial year, seasonal variations between Infogrames Sega, THQ, and Ubi Soft. In contrast, a number the first and second quarters will be more pronounced than of major companies have disappeared or been absorbed. usual. In contrast with the 2001/2002 financial year, major These include such publishers as Broderbund, Sierra, titles will be released in the second semester. The Group's Cendant, GT Interactive, TLC, Time-Warner Interactive, business, excluding external growth, and at a constant and BMG Interactive. Several small-size production stu- exchange rate (up to June 2002), should grow by 17% to dios have also been bought up (such as Mindscape, Crystal 22%, generating sales of 430-450 million Euros over the Dynamics, Westwood, and Wizzards). financial year. Despite this, the market remains highly fragmented. In the United States, the top 8 publishers control only 63% of Ubi Soft is already well-positioned for the 2003/2004 financial the market. The sector should, however, experience further year: several major titles*** are scheduled or in preparation, concentration over the coming years. such as:
Project BG&E Prince of Persia® Tom Clancy's Ghost Recon™ 2 Crouching Tiger, Hidden Dragon™ Settlers® V Myst®On Line Far Cry™…
* Source : International Development Group, March 2002. ** Manufactures excluded. *** Working titles.
42 RAPPORT FINANCIER Consolidated accounts
3 ACCOUNTS ON MARCH 31, 2002 3.1 Consolidated accounts on March 31, 2002 3.1.1 Consolidated balance sheet on March 31, 2002
ASSETS In K€
03.31.02 03.31.02 03.31.02 03.31.01 03.31.01 03.31.00 Notes Gross Amort/ Net Net Net Net Depr Pro forma
Goodwill I 119,094 7,124 111,970 110,342 55,089 606 Intangible assets II 276,325 113,022 163,303 125,551 188,903 68,820 Tangible fixed assets III 34,284 20,931 13,353 12,465 12,465 9,990 Financial assets IV 23,459 2,963 20,496 11,415 11,415 7,077 Fixed assets 453,162 144,040 309,122 259,773 267,872 86,493 Inventory and work-in-progress V 49,714 1,069 48,645 46,674 46,674 13,449 Advances and installments paid VI 55,097 / 55,097 37,626 37,626 28,097 Trade receivables VII 109,092 2,614 106,478 79,991 79,991 87,524 Other receivables, prepayments VIII 70,176 / 70,176 52,323 52,409 36,551 and deferred income* Investment securities IX 40,365 / 40,365 51,195 51,195 103,754 Cash X 30,548 / 30,548 34,986 34,986 43,238 Current assets 354,992 3,683 351,309 302,795 302,881 312,613 Total Assets 808,154 147,723 660,431 562,568 570,753 399,106
Liabilities In K€
03.31.02 03.31.01 03.31.01 03.31.00 Notes Pro forma
Capital (1) 5,384 5,156 5,156 5,055 Premiums (1) 266,406 259,343 259,343 251,573 Consolidated reserves and earnings (2) 36,959 28,562 36,740 26,075 Other (3) 306 173 173 49 Share capital (Group share) XI 309,055 293,234 301,412 282,752 Minority interests / 203 211 0 Provisions for risks and charges XII 481 190 189 615 Borrowings (4) XIII 228,897 173,432 173,432 52,514 Current accounts of the partners 1,187 1,187 1,187 8,381 Advances and installments received 3,637 4,367 4,367 1,456 Trade creditors and other accounts payable 62,295 55,483 55,483 32,926 Sundry creditors and accrued expenses XIV 54,879 34,472 34,472 20,462 Total debts and accounts payable 350,895 268,941 268,941 115,739 Total Liabilities 660,431 562,568 570,753 399,106
(1) of the consolidated parent company (2) including net income for financial year 7,953 3,619 (3,327) 10,946 (3) including investment grants 306 173 173 49 (4) payable at less than one year: 38,015 131,928 131,928 10,689 payable at more than one year: 190,882 41,504 41,504 41,825
* including advances to related companies not consolidated by full or proportional integration at March 31, 2002: K € 114. 43 3.1.2 Consolidated income statement on March 31, 2002
In K €
03.31.02 03.31.01 03.31.01 03.31.00 Notes Pro forma
Sales I 368,961 259,815 283,646 186,527 Other operating income II 93,346 72,169 86,916 53,167 Cost of sales (151,941) (115,528) (122,831) (66,907) Wages and social security costs (93,012) (72,950) (81,119) (50,859) Other operating expenses III (116,200) (91,425) (117,508) (69,398) Tax and duty (3,477) (3,181) (3,325) (2,213) Depreciation and provisions IV (66,715) (40,968) (43,806) (36,598) Earnings before interest and tax V 30,962 7,932 1,973 13,719 Financial charges and income * VI (10,560) (3,140) (3,489) 431 Pre-tax profit of consolidated companies 20,402 4,792 (1,516) 14,150 Exceptional income/expense VII 2,177 (64) (91) (573) Corporate tax VIII (9,16) 302 1,013 (2,592) Net profit of consolidated companies 13,363 5,030 (594) 10,985 Share of earnings of equity affiliates / 0 / 0 Amortization of goodwill (5,410) (1,379) (2,698) (39) Total net profit of consolidated company 7,953 3,651 (3,292) 10,946 Minority interests /32360 Net profit (Group share) 7,953 3,619 (3,328) 10,946
Earnings per share 0.46 0.21 0.66 Fully diluted earnings per share (calculated using OEC opinion 27) 0.48 0.22 0.65
* including financial income for related companies not consolidated by full or proportional integration at March 31, 2002: K € 0.96.
N.B.: Pro forma accounts The pro forma accounts for the 2000/2001 financial year As no third-party companies were acquired, during financial included earnings from subsidiaries acquired during the year 2001/2002, no pro forma accounts have been prepared. financial year in the period from April 2000 to March 31, 2001, and were prepared in accordance with the Group's accounting principles.
This applies to Red Storm Entertainment, Ubi Soft Edutainment S.A., Ludimedia S.A, Ludi Factory SARL, 3D Planet SpA, Blue Byte Software Inc., Blue Byte Software Ltd., and Blue Byte Software GmbH&Co. KG.
44 FINANCIAL REPORT Consolidated accounts
3.1.3 Consolidated cash flow statement on March 31, 2002
In K €
03.31.02 03.31.01
Flows arising from operating activities Net income 7,953 3,619 Depreciation of tangible and intangible fixed assets 62,241 39,003 Net amortization of goodwill write backs 5,401 1,379 Changes in provisions 3,168 (208) Change in deferred taxation 6,347 (5,032) Grants (49) / Flows arising from the disposal of fixed assets 325 129 Total cash flow arising from operating activities 85,386 (38,890)
Increase in operating fund requirements (20,101) (14,513) Decrease in non-operational requirements 1,685 4,517 Total flows (18,416) (9,996)
Flows arising from investments Acquisitions of intangible assets (105,522) (134,975) Acquisitions of tangible assets (7,457) (6,826) Acquisition of equity holding (448) (5,058) Acquisition of other financial fixed assets (11,611) (310) Charges to be spread over several years (4,400) / Disposal of fixed assets 236 834 Proceeds from long-term loans and other financial assets 621 623 Change in consolidation structure (1) / (64,752) Total des flux liés aux investissements (128,581) (210,464)
Flows arising from financial transactions New long-and medium-term loans 166,550 39,288 Repayments of loans (56 671) (19,823) Increase in capital 141 101 Increase in issue premium 2,087 464 Increase in conversion premium 3,771 6,840 Increase in share issue premium 27 Increase in issue premium on shares with warrants 1,242 / Grants received 182 124 Reimbursement of shareholders’ current accounts / (7,196) Other flows (601) 430 Total flows arising from financial transactions 116,703 20,235
Impact of translation differential 168 (95)
Net cash flow 55,60 (161,430) Net cash position at the beginning of the financial year (17,637) 143,793 Net cash position at the end of the financial year 37,623 (17,637)
(1) including cash position of acquired companies / 5,363
45 3.1.4 Explanatory notes Equity affiliates on the Consolidated Accounts Companies on which Ubi Soft Entertainment S.A. exerts considerable influence because it holds, directly or indirectly, Highlights of the financial year 20 to 50% of the voting rights, are accounted for using the equity method. In the course of the financial year, Ubi Soft Entertainment As of March 31, 2001, all the companies in the Group are S.A. absorbed its Ubi Ventures subsidiary, of which it owned exclusively controlled by Ubi Soft Entertainment S.A., and are 100%, and transferred TLC's business assets to its subsi- therefore fully consolidated. diary Red Storm Entertainment Inc. Intra-Group transactions are eliminated for all the compa- It also acquired 40% of the company 3D Planet, and sold nies in the Group according to the applicable consolidation its shares in Blue Byte GmbH to its subsidiary Ubi Soft rules. Entertainment GmbH. All significant transactions between consolidated compa- Switzerland and Canada now handle distribution of their nies, and all unrealized internal profits included in the fixed products. assets and the stocks of consolidated companies have been In light of the position adopted by the Compagnie Nationale eliminated. des Commissaires aux Comptes (CNCC) [French Institute of Auditors] regarding the amortization of business assets b) Goodwill, business assets, trademarks acquired since regulation no. 99-02 came into force, the In accordance with the regulations on consolidated accounts, Group decided to amortize them over 20 years using goodwill is the difference between the acquisition price and the straight-line method, with effect from the 2001/2002 the assessment of the total assets and liabilities identified financial year. on the acquisition date. Goodwill is entered: The impact on consolidated earnings is € 2,021,000. where appropriate, to the various balance sheet items of the companies acquired, 3.1.4.1 Accounting principles as “goodwill” on the asset side of the balance sheet in the case of the sum remaining. The consolidated accounts were drawn up in accordance The latter is amortized over a period of no more than 20 with Accounting Standards Committee Regulation 99-02 for years using the straight-line method. the financial year commencing April 1, 2000. The implemen- tation of this new regulation had no significant impact on Goodwill is reviewed for each set of Annual Accounts in the the Group’s earnings compared with previous years. light of changes in the sales of the subsidiary and its contri- bution to the net income of the consolidated entity as a The figures in the notes and tables which follow are shown whole. Such goodwill may therefore be subject to exceptional in thousands of Euros. amortization or write-down where appropriate. The preferred methods recommended by Accounting Stan- As a precaution, negative goodwill is spread over the same dards Committee Regulation 99-02 were applied with the period as positive goodwill (20 years). exception of the evaluation of pension commitments and similar services, due to their non significant caracter. The business assets acquired include all the intangible elements (customers, know-how) needed for the company to do business Differences in exchange rates relating to a significant mone- and grow. The intangible elements are obtained from the tary element are essentially an integral part of the net average of productivity, sales and a sector-based multiple. investment of a subsidiary, they are entered as translation differentials. In the event that business assets are valued at less than their book value, a provision for depreciation will be applied. a) Consolidation methods According to CNCC bulletin no. 123 of September 2001, Full consolidation business assets must be amortized according to the same Companies are fully consolidated when exclusively controlled procedure as for goodwill. They are therefore amortized over as the result of Ubi Soft Entertainment S.A., directly or indi- 20 years using the straight-line method. rectly holding 50% of their voting rights or at least 40% if no other shareholder holds a larger percentage.
46 FINANCIAL REPORT Consolidated accounts
Any brands acquired are entered at their acquisition cost. In e) Financial fixed assets the case of brands which are created, the cost of registering The gross value of equity holdings corresponds to the cost them is immobilized. of acquisition or the payment in cash for the shares of non- Brands are reviewed for each set of Annual Accounts in the consolidated companies. light of changes in the potential sales they generate, and may The value of an equity holding is reviewed at the end of each be subject to exceptional amortization or write-down. financial year on the basis of the net position of the subsi- diary concerned on that date and its prospects for growth c) Intangible assets over the medium term. A provision for depreciation is made Intangible assets include the business assets, trademarks, if necessary. and office and commercial software. Distribution trademarks are not amortized. f) Fixed assets acquired through leasing arrangements Office software is amortized using the straight-line method Significant capital assets which are financed by leasing over a twelve-month period. agreements are restated in the Consolidated Accounts as if Software production costs are determined in accordance the Company had acquired the assets directly using loan with the guidelines issued by the Conseil National de la finance. Comptabilité [French National Accountancy Council] in April 1987. These costs are entered in the accounts under g) Inventory and work-in-progress “intangible assets” (account no. 232) as software develop- The inventories of all Group companies are valued, after ment in progress. From the date of their first commercial eliminating internal margins, on the basis of the cost prices release they are transferred to “Released softwares” or determined in normal trading. “External developments” (account no. 208). Parent software programs are amortized with effect from Inventory is valued using the moving-average method. The their commercial release date on the basis of the expected gross value of goods and supplies includes the purchase market life of the product concerned, as assessed at the price and related expenses. Financial costs are excluded account closing date. from inventory valuation in all cases. The amortization period is between 12 and a maximum of 36 A provision for depreciation is made where the probable months. Net sales of the various products until the end of net realizable value is less than the book their market life are estimated at K€ 742,652 (they came to K€ 643,526 on March 31, 2001). h. Advances and installments received This sum allows the corresponding parent software programs to be amortized. The system of amortization used is the Licenses cover distribution and reproduction rights acquired straight-line method. However, if sales are less than estima- from other publishers. The signing of licensing contracts ted, a supplementary amortization will be carried out. entails the payment of guaranteed amounts, recorded in Software tools, which are a set of complex development pro- account no. 409. grams that may be used for a number of products, are amor- At year end, the amonts remaning to be amortized are com- tized over a maximum of 36 months using the straight-line pared with sales projections. In case the sales are not suf- method. ficient a supplementary amortization will be undertaken. d) Tangible fixed assets i) Trade receivables Fixed assets are shown in the Balance Sheet at their acqui- Trade receivables are entered at their face value. Where sition cost. applicable, a provision for depreciation may be entered Depreciation, which is calculated using rates standardized according to the degree of certainty as to ultimate collec- throughout the Group, is determined on the basis of the tion existing at the account closing date. methods and periods of use set out below:
Equipment: 5 years (straight-line). j) Investment securities Fixtures and fittings: 5 and 10 years (straight-line); Investment securities consist of equity shares, investment Computer equipment: 3 years (diminishing balance); securities and short-term investments, which are booked at Office furniture: 10 years (straight-line). their purchase price or, whenever it is lower, their market price.
47 k) Cash This being the case, the monetary items in its balance sheet are converted at the closing rate, while the non-monetary Cash consists of cash and bank accounts. items are converted at the historical rate. The income sta- tement is converted at the average annual rate. l) Deferred taxation
Deferred taxes are entered in the income statement and n) Provisions for risks and charges the balance sheet to reflect the difference between financial Provisions for risks and charges are made when risks and years when certain expenditures and revenues are entered charges which relate to a clearly determined object, but which into the consolidated accounts and the financial years when are not certain to arise, are made more likely by events they are used to calculate taxable revenue. which have occurred or are in progress. Deferred taxes are entered in the income statement and As of March 31, 2002, provisions for risks and charges the balance sheet to reflect deficits carried forward in the covered: year when it seems likely they will be recovered. risks relating to a tax inspection, In accordance with the liability method of tax allocation, the risks relating to the closure of certain subsidiaries with effect of any changes in tax rates on deferred taxes recor- low levels of activity. ded earlier is entered into the income statement for the financial year in which the changes in rates become known. o) Fully diluted earnings per share
m) Conversion of items expressed in foreign currencies This figure is obtained by dividing:
Conversion into Euros of transactions of French net earnings before dilution, plus the amount after tax of companies carried out in foreign currencies any savings in financial costs resulting from the conversion Charges and revenue for foreign currency transactions are of the diluting instruments entered at their equivalent value on the transaction date. Assets and liabilities are usually converted at the closing by the average weighted number of ordinary shares in cir- rate, with any exchange variations resulting from this culation plus the number of shares which will be created conversion being recorded in the income statement. following the conversion of convertible instruments into shares and the exercising of rights. Conversion of the financial statements of foreign subsidiaries into Euros A distinction must be made according to whether the foreign subsidiary is autonomous or non-autonomous: A subsidiary is said to be autonomous: if it is economically and financially autonomous with respect to the consolidating company or the other consolidated companies, and if the monetary items in its balance sheet and most of its income statement relate to a currency other than the Euro. In such cases the closing rate method is used. This involves converting the assets and liabilities of foreign subsidiaries at the exchange rate in force at the closure of the financial year, while the income statement is converted at the average annual rate. Share capital is kept at the historical rate.
A subsidiary is considered to be non-autonomous if it consti- tutes an extension of the overseas activities of the consoli- dating subsidiary. This means that most of its commercial or financial activities are conducted with the consolidating company. In this case, the historical rate method is used.
48 FINANCIAL REPORT Consolidated accounts
3.1.4.2 Consolidation structure a) Companies included in the Group consolidated accounts of Ubi Soft Entertainment dated 31 March 2002
country Consolidated Controlling Method Activity Founded COMPANIES companies percentage
Ubi Soft Entertainment S.A. France Yes Parent company Full consolidation 1986 Ubi Soft Entertainment Ltd. United Kingdom Yes 100% Full consolidation Marketing 1989 Ubi Soft Inc. USA Yes 100% Full consolidation Marketing 1991 Ubi Soft Entertainment GmbH Germany Yes 100% Full consolidation Marketing 1991 Ubi Soft SRL Romania No 100% Not consolidated Engineering and marketing 1993 Ubi Studios S.A. France Yes 100% Full consolidation Engineering 1994 Ubi Soft S.A. Spain Yes 100% Full consolidation Marketing 1994
Ubi Soft KK Japan Yes 100% Full consolidation Marketing 1994 Ubi Pictures SARL France Yes 100% Full consolidation Graphics and 1995 computer graphics Ubi Soft SpA Italy Yes 100% Full consolidation Marketing 1995 Ubi Game Design SARL France Yes 100% Full consolidation Development, 1995 interactivity and ergonomics Ubi Sound Studio SARL France Yes 100% Full consolidation Voice, music, sound effects 1995 Ubi Books and Records SARL France Yes 100% Full consolidation Management 1995 and administration Ubi Research and Development SARL France Yes 100% Full consolidation Engineering 1996 Ubi Animation SARL France Yes 100% Full consolidation Animation 1996 and special effects studio Ubi Simulations SARL France Yes 100% Full consolidation Engineering 1996 Ubi Soft PTY Ltd. Australia Yes 100% Full consolidation Marketing 1996 Ubi Graphics SARL France Yes 100% Full consolidation Graphics and modeling 1996 Shanghai Ubi Computer Software Ltd. China Yes 100% Full consolidation Marketing and Engineering 1996 Ubi Soft Marketing France Yes 100% Full consolidation Marketing 1997 & communication S.A. Ubi Soft Divertissements Inc. Canada Yes 100% Full consolidation Engineering 1997 Ubi Networks SARL France Yes 100% Full consolidation Internet services 1998 Ubi World S.A. France Yes 100% Full consolidation Global marketing 1998 Ubi Soft Entertainment SARL Morocco Yes 100% Full consolidation Engineering 1998 Ubi Voices Inc. USA Yes 100% Full consolidation Copyright management 1998 Ubi Soft Entertainment Nordic AS Denmark Yes 100% Full consolidation Marketing 1998 Ubi Info Design SARL France Yes 100% Full consolidation Interactive 1998 script development Ubi Music Publishing Inc. Canada Yes 100% Full consolidation Creation of music 1998 Ubi Soft Entertainment Ltd. Hong Kong Yes 100% Full consolidation Marketing 1998 Ubi Soft Entertainment BV Netherlands Yes 100% Full consolidation Marketing 1998 Ubi Soft Entertainment Sprl Belgium Yes 100% Full consolidation Marketing 1998 Ubi Studios SL Spain Yes 100% Full consolidation Engineering 1998 Ubi Studios SrL Italy Yes 100% Full consolidation Engineering 1998 Ubi Soft France S.A. France Yes 100% Full consolidation Publishing and marketing 1998 Ubi Soft Entertainment Inc. USA Yes 100% Full consolidation Engineering 1998
49 country Consolidated Controlling Method Activity Founded COMPANIES companies percentage
Ubi Soft Entertainment Ltda Brazil Yes 100% Full consolidation Marketing 1999 Ubi Productions France SARL France Yes 100% Full consolidation Engineering 1999 Ubi World Studios SARL France Yes 100% Full consolidation Studio management 1999 Ubi Computer Software China Yes 100% Full consolidation Engineering 1999 Beijing Company Ltd. Ubi Soft Publishing OEM Inc. Canada Yes 100% Full consolidation Software distribution 1999 Ubi Studios KK Japan Yes 100% Full consolidation Engineering 1999 Ubi Soft Entertainment Sweden AB Sweden Yes 100% Full consolidation Marketing 1999 Ubi Color SARL France Yes 100% Full consolidation Graphic design 1999 Ubi Marketing Research SARL France Yes 100% Full consolidation Market research 1999 Ubi Digital Movies Inc. Canada No 100% Not consolidated Creation of digital images 1999 Ubi Music Inc. Canada Yes 100% Full consolidation Creation of music 1999 Ubi Studios Ltd. United Kingdom Yes 100% Full consolidation Engineering 2000 GameBusters GmbH Austria Yes 100% Full consolidation Marketing 2000 Ubi Soft Edutainment S.A. France Yes 100% Full consolidation Creation 2000 Ludimedia S.A. France Yes 100% Full consolidation Design and scenarios 2000 Ludi Factory SARL France Yes 100% Full consolidation Graphics 2000 and localization studio Sinister Games Inc. USA Yes 100% Full consolidation Creation and animation 2000 Ubi Emea SARL France Yes 100% Full consolidation Marketing 2000 Ubi Soft Holdings Inc. USA Yes 100% Full consolidation Management 2000 and administration Red Storm Entertainment USA Yes 100% Full consolidation Creation and animation 2000 Ubi Administration SARL France Yes 100% Full consolidation Management 2000 and administration Ubi Soft Canada Inc. Canada Yes 100% Full consolidated Marketing 2000 Blue Byte Software Inc. USA Yes 100% Full consolidation Creation and animation 2001 Blue Byte Software Ltd. United Kingdom Yes 100% Full consolidation Marketing 2001 Ubi SOFT Entertainment Norway AS Norway Yes 100% Full consolidation Marketing 2001 Ubi COM S.A. France Yes 100% Full consolidation Internet 2001 Ubi Manufacturing SARL France Yes 100% Full consolidation Manufacturing follow-up 2001 UBI.COM Inc. USA Yes 100% Full consolidation Internet 2002 Ubi Soft Entertainment S.A. Switzerland No 100% Not consolidated Marketing 20002 Ubi Soft Entertainment Finland OY Finland No 100% Not consolidated Marketing 2002
The financial year of all consolidated companies ends on March 31st. In the case of companies in which a majority of shares are held, the materiality thresholds are set at: € 76,000 of the "total balance sheet" in the case of production companies; € 305,000 of sales in the case of distribution companies.
50 FINANCIAL REPORT Consolidated accounts
b) Change in consolidation structure
New companies added to the consolidation structure on March 31, 2002:
UBI SOFT CANADA Inc. consolidation structure date : april 2001 UBI.COM S.A. acquisition date: june 2001 UBI SOFT ENTERTAINMENT NORWAY AS acquisition date: july 2001 UBI.COM Inc. acquisition date: august 2001 UBI MANUFACTURING SARL acquisition date: september 2001
Mergers realised during the fiscal year 2001/2002 :
UBI SOFT SPA (Italy) take over 3D Planet SPA on April 1st, 2001 UBI SOFT ENTERTAINMENT S.A. take over UBI VENTURES S.A. on April 1st, 2001 UBI SOFT ENTERTAINMENT GmbH take over BLUE BYTE SOFTWARE GmbH & Co.KG on October 1st, 2001
3.1.4.3 Notes on the balance sheet
I. GOODWILL, BUSINESS ASSETS, TRADEMARKS a) Goodwill
Goodwill breaks down as follows as of March 31, 2002:
Acquisition On 03.31.01 Acquisition On 03.31.02 Acquired company date Gross Increase Decrease costs Gross
UBI Studios S.A. 02.02.96 16 / / / 16 UBI Pictures S.A. 02.02.96 77 / / / 77 Ubi Soft Inc. 02.02.96 302 / / / 302 Ubi Soft Entertainment Ltd. 12.31.94 236 / / / 236 Ubi Soft Entertainment GmbH 08.01.95 153 / / / 153 Ubi Soft Holdings Inc. 09.28.00 / 95 95 Sinister Games Inc. 03.31.00 4,855 1,618 / (30) 6,443 3D Planet SPA 09.30.00 2,357 1,522 / (27) 3,852 Blue Byte Software Ltd. 02.06.01 1,082 / / 1,082 Blue Byte Software GmbH CO.KG 02.06.01 7,229 / (74) 7,155 Blue Byte Software Inc. 02.06.01 13,174 / / 13,174 Red Storm Entertainment 28.09.00 34,768 / (116) 34,652 Ubi Soft Canada Inc. 10.02.00 / 266 / 266 Total 64,249 3,406 / (152) 67,503
Goodwill is reviewed for each set of Annual Accounts in the light of changes in the net sales of a subsidiary and its contribution to the net income of the consolidated entity as a whole. Such goodwill may therefore be subject to exceptional amortization or write-down, where applicable.
51 On 03.31.01 On 03.31.02 Acquired company Depreciation Appropriation Adjustment difference Depreciation
UBI Studios S.A. 4 1 / 5 UBI Pictures S.A. 20 4 / 24 Ubi Soft Inc. 79 15 / 94 Ubi Soft Entertainment Ltd. 71 12 / 83 Ubi Soft Entertainment GmbH 43 7 / 50 Ubi Soft Holdings Inc. / 5 3 8 Sinister Games Inc. 243 322 / 565 3D Planet SPA 59 193 / 252 Blue Byte Software Ltd. 9 54 / 63 Blue Byte Software GmbH CO.KG 60 358 / 418 Blue Byte Software Inc. 110 658 / 768 Red Storm Entertainment 872 1,740 (3) 2,609 Ubi Soft Canada Inc. / 20 / 20 Total 1,570 3,389 / 4,959
Goodwill is amortized over 20 years.
b) Business assets
Business assets breaks down as follows as of March 31, 2002
On 03.31.01 On 03.31.02 Gross Increase Decrease Adjustment difference Gross
France 11,342 / / / 11,342 USA 26,301 8 / (10,000) 16,309 Germany 6,810 / / / 6,810 Belgium 1,556 / / / 1,556 Netherlands 1,144 / / / 1,144 Austria 509 / / / 509 Switzerland / 1,524 / / 1,524 Canada / 2,028 / / 2,028 Total 47,662 3,560 / (10,000) 41,222
On 03.31.01 On 03.31.02 Depreciation Increase Decrease Gross France / 594 / 594 USA / 788 / 788 Germany / 340 / 340 Belgium / 78 / 78 Netherlands / 57 / 57 Austria / 25 / 25 Switzerland / 38 / 38 Canada / 101 / 101 Total / 2,021 / 2,021
In the course of the 2001/2002 financial year, Ubi Soft strengthened its distribution network by taking over the distribution of software from the Guillemot Corporation in Switzerland and Canada.
Business assets are amortized over 20 years using the straight-line method. 52 FINANCIAL REPORT Consolidated accounts
c) Trademarks
Trademarks breaks down as follows:
On 03.31.01 On 03.31.02 Gross Increase Decrease Gross
Tradedmarks 104 10,268* 3 10.369 Total 104 10,268 3 10.369
* including €10,004,000 for reclassification of accounts to the accounts and mergers
On 03.31.01 On 03.31.02 Depreciation Increase Decrease Gross
Trademarks / 144* / 144 Total / 144 / 144
* reclassification of accounts to the accounts and mergers
II. INTANGIBLE FIXED ASSETS
Intangible assets breaks down as follows as of March 31,2002:
On 03.31.01 On 03.31.02 Intangible fixed assets Gross Increase Decrease Change in Gross consolidation structure
Released parent software programs 111,766 (1) 63,939* 17,456 158,249 111,766 External developments 5,098 (2) 15,758 6,263 14,594 5,098 Software in progress 65,493 80,440* 65,493 80,440 65,493 Software tools 19,153 (3) 3,181 7,537 14,797 19,153 Other licenses 894 519 3 1,409 894 Office software 3,337 (4) 1,333 252 4,418 3,337 Miscellaneous 107 / 107 / 107 Other 312 (5) 2,134 28 2,418 312 Total 206,160 167,304 97,139 276,325 206,160
(1) including € 58,943,000 for account to account reclassification (2) including € 7,720,000 for account to account reclassification (3) including € 2,281,000 for account to account reclassification (4) including € 40,000 for mergers and account to account reclassification (5) including € 28,000 for account to account reclassification This gives a net increase in mergers and account to account reclassification of € 98,292,000. * Software that has been released or is in production also include M€ 9 in external developments.
released software programs: software developed in-house and marketed external developments: software developed in collaboration with third parties and marketed software programs in progress: in-house and external developments not yet released on the market. The increase represents software which was in progress as of March 31, 2002. software tools: these consist of a set of complex development programs that are used for a number of products.
53 On 03.31.01 On 03.31.02 Depreciation Cumulative Increase Decrease Cumulative
Released software programs 63,824 50,178 17,317 96,685 External developments 2,313 1,945 690 3,568 Software tools 11,561 4,741 7,537 8,765 Other licenses 858 172 / 1,030 Office software 1,962 975 200 2,737 Other 195 72 30 237 Total 80,713 (1) 58,083 25,774 113,022
(1) including K€ 96 for reclassification of accounts to the accounts
All software currently being marketed is amortized over a maximum of 3 years as of March 31, 2002.
III. TANGIBLE FIXED ASSETS
Tangible fixed assets break down as follows:
On 03.31.01 On 03.31.02 Tangible fixed assets Gross Increase Decrease Change in Gross consolidation structure
Plant & machinery 4,873 (1) 2,158 1,122 (12) 5,897 Computer equipment and furniture 20,807 (2) 5,120 3,606 (23) 22,298 Transport equipment 131 (3) 67 57 (1) 140 Leased computer hardware 5,342 1,792 1,204 / 5,930 Fixed assets in progress / 57 38 / 19 Total 31,153 9,194 6,027 (36) 34,284
(1) including K€ 749 for reclassification of accounts to the accounts and mergers (2) including K€ 974 for reclassification of accounts to the accounts and mergers (3) including K€ 14 for mergers
On 03.31.01 On 03.31.02 Depreciation Gross Increase Decrease Change in Gross consolidation structure
Plant & machinery 1,913 909 808 / 2,014 Computer equipment and furniture 12,173 5,199 2,795 20 14,596 Transport equipment 70 57 43 / 84 Leased computer hardware 4,532 852 1,148 / 4,237 Total 18,688 (1) 7,017 4,794 20 20,931
(1) including K€ 1,262 for reclassification of accounts to the accounts and mergers
54 FINANCIAL REPORT Consolidated accounts
IV. FINANCIAL ASSETS
On 03.31.01 On 03.31.02 Tangible fixed assets Gross Increase Decrease Change differential Gross
Non-consolidated companies 10,799 448 23 / 11,224 Other fixed investments 4 / / / 4 Loans / 10,991 / / 10,991 Deposits and guarantees 1,239 620 598 (21) 1,240 Total 12,042 12,059 621 (21) 23,459
Au 31.03.01 On 03.31.02 Provisions Cumulative Increase Decrease Ubi Ventures Cumulative
Loans / 453 / / 453 Equity investments 627 2,031 205 57 2,510 Total 627 2 484 205 57 2,963
Percentage holdings in non-consolidated companies:
Value of share Percentage of Company acquisition (K€) holdings
Ubi Soft SRL (Rumania) 799 99.35% Ubi Digital Movies Inc. 1 100% GameLoft S.A. 4,947 8.31% Yaccom 646 12% Ludopia Interactive S.A. 1,257 18.45% S.A. Teamchman 3,049 20% Cybersearch 149 Ns GameLoft.com Ltda (Brazil) 1 1% Students-life.com 343 17.88% Ubi Soft Entertainment S.A. (Switzerland) 24 99.80% Ubi Soft Entertainment Finland OY 8 100% Total 11,224
Companies on which the Group does not exert any significant influence are not included in the consolidation structure. The companies concerned are Gameloft S.A., Yaccom, Ludopia, Chman, Cybersearch, Gameloft.com Ltda and Students-Life.com.
Other companies were excluded from the consolidation structure for the following reasons:
their timescales for drawing up accounts were incompatible with the deadlines for submitting the consolidated accounts to the Statutory Auditors (Ubi Soft SRL), they were in the process of being wound up (Ubi Digital Movies Inc.), they were in the process of being created (Ubi Soft Entertainment S.A., Ubi Soft Entertainment Finland OY).
55 General information on the main non-consolidated companies (in Euros)
Listed companies Gameloft S.A. Cyberseach
Book value on 03.31.02 4,946,836 65,520 Number of shares 5,225,323 24,000 Value of securities per share on 03.28.02 0.9285 2.04 Depreciation over the financial year 95,124 16,560
Share Earnings for Depreciation over Unlisted companies Accounts dated capital the financial year the financial year
Ubi Rumania 03.31.02 436,046 197,427 (128,491) (write-backs) S.A. Teamchman 10.31.01 2,388,125 (357,125) 1,928,690 (appropriations)
With effect from April 1, 2002, Ubi Soft Entertainment to the Guillemot Brothers holding company on the basis of has sold its minority holdings in Financière Yaccom, Ludopia their original purchase price, in exchange for shares in Interactive and Students-Life.com. These holdings were sold Gameloft.com S.A.
V. INVENTORY AND WORK-IN-PROGRESS
Inventory and work-in-progress break down as follows:
On 03.31.02 On 03.31.01 Gross Provision Net Net
Goods 49,714 1,069 48,645 46,674 Total 49,714 1,069 48,645 46,674
The slight increase in inventory on March 31, 2002 is linked to The low level of provisions for inventory is due to the fall in prices greater control of rotation timescales and to the staggering of for old-generation consoles, which is not likely to make our product launches over the whole year. games obsolete, and to a reduction in the Nintendo 64 and Dreamcast games in our inventory. Inventory is depreciated according to the age of the platform. Old-generation console products are provisioned in the amount of 50% for the Nintendo 64 and for Dreamcast.
VI. ADVANCES AND INSTALLMENTS PAID
These are essentially guaranteed advances paid on licensing These advances are taken to earnings in proportion to sales contracts totaling K€ 53,431. made of the licensed products.
VII. TRADE RECEIVABLES
Trade and other receivables break down as follows:
On 03.31.02 On 03.31.01 Gross Provisions Net Net
Trade receivables 109,092 2,614 106,478 79,991 Total 109,092 2,614 106,478 79,991
56 FINANCIAL REPORT Consolidated accounts
VIII. OTHER RECEIVABLES, PREPAYMENTS AND DEFERRED INCOME
Other receivables, prepayments and deferred income break down as follows:
03.31.02 03.31.01
Deferred tax on assets (ARD) 14,185 8,159 Deferred tax on assets, consolidation adjustments (1) 1,129 1,990 Current account advances 3,918 15,403 VAT 7,659 5,399 Other tax and social security liabilities 14,141 16,043 Credits receivable from suppliers 1,732 514 Suppliers – debit balances 4,376 1,447 Other 136 298 Prepaid expenses 3,424 2,400 Charges to be spread over several financial years 4,173 470 Translation differentials 9 15 Redemption premium (2) (*) 15,294 (**) 185 Total 70,176 52,323
All receivables have a maturity of less than one year.
(1) Leasing 88 Margin on inventory 1,041 (2) (*) The original amount of the redemption premium of the convertible exchangeable bonds (OCEANES) taken to assets is K€ 16,380. This premium is amortized over the term of the loan, i.e. K€ 1.086 as of March 31, 2002. (**) As a consequence of the conversion of 40,075 bonds and the accelerated redemption of 636 bonds during the financial year, the redemption premium was amortized to a value of €185,000 over the 2001/2002 financial year.
IX. INVESTMENT SECURITIES
Investment securities break down as follows:
Nature Gross value Net value
Equity shares 18,539 18,539 Investment funds 21,826 21,826 TOTAL 40,365 40,365
Number Av. price Gross value Provision Net value Percentage Nature € K€ K€ K€ of capital
Equity shares 568,141 32,63 18,539 / 18,539 3.27%
X. CASH
The “Cash” account showed a balance of cash and bank accounts in the amount of K€ 30,548 on March 31, 2002, compared with on K€ 34,986 31, March 2001.
57 XI. SHARE CAPITAL.
Capital
On March 31, 2002, Ubi Soft Entertainment S.A.'s capital consisted of 17,368,732 shares with a face value of € 0.31 each, i.e. € 5,384,307.
Maximum number of shares that may be created: 5,646,664 by bond conversion: 3,905,470 by exercise of stock options: 827,594 by exercise of warrants: 913,600
Change in share capital
Other Consolidated Income Grants Total share Nature Capital Premiums reserves received capital
Situation at March 31, 2000 5,055 252,138 25,509 49 282,751 Change in capital of the consolidating 101 7,205 7,306 company Consolidated income (Group share) 3,619 3,619 Change in translation differentials (579) (579) Grants received 124 124 Other movements 13 13 Situation on March 31, 2001 5,156 259,343 24,943 3,619 173 293,234 Conversion of capital into Euros 87 (87) / Allocation of Consolidated Earnings N-1 3,619 (3,619) / Change in capital of the consolidating 141 7,063 7,204 company Consolidated income (Group share) 7,953 7,953 Change in translation differentials 531 531 Grants received 133 133 Situation on March 31, 2002 5,384 266,406 29,006 7,953 306 309,055
Number of Ubi Soft Entertainment shares
On 04.01.2001 16,909,122
Exercised options 207,068 Bond conversion 205,470 Share subscription warrants exercised 65 Stock ownership plan 47,007 On 03.31.02 17,368,732
58 FINANCIAL REPORT Consolidated accounts
Share subscription warrants
November 3, 1999 share warrants
November 3, 1999 share warrants Initial number of warrants 372,058, 2 warrants needed to subscribe a share of face value € 1.52 As a consequence of the 5-for-1 stock split, two bonds allow five shares to be subscribed with a face value of € 0.31 Issue price: € 136 (FF 892.10). Strike period: from November 3, 1999 to November 2, 2002 Strike price: € 170 (FF 1,115.13). 26 warrants suscribed during the fiscal year. As of March 31, 2002, 340,516 warrants had still not been exercised.
March 12, 2001 share warrants
Number and face value: 53,266, 1 warrant needed to subscribe a share of face value € 0.31 (FF 2) Issue price: € 0.01 (FF 0.07) Strike period: from December 28, 2001 to March 11, 2006 Strike price: € 40.288 (FF 264.27). As of March 31, 2002, no warrants had been exercised.
March 19, 2001 share warrants
Number and face value: 9,044, 1 warrant needed to subscribe a share of face value € 0.31 (FF 2) Issue price: € 0.01 (FF 0.07) Strike period: from March 19, 2002 to March 18, 2006 Strike price: € 32.072 (FF 210.38). As of March 31, 2002, no warrants had been exercised.
Stock options
The capital increases and issue premiums during the past financial year were partly driven by the exercising of stock options. For the record, the exercise conditions of the stock option plans are as follows:
2nd Plan 3rd Plan 4th Plan 5 th Plan 6th Plan Initial number of shares: 250,000 250,000 40,471 400,000 44,605 Face value € 0.31 € 0.31 € 0.31 € 0.31 € 0.31 Subscription price: € 12.10 € 20.40 € 38 € 34.51 € 34.51 Date of validity 04.22.97 10.23.98 12.08.00 04.09.01 04.25.01 On 04.22.02 On 10.23.03 On12.08.05 On 04.09.06 On 04.24.06 Options not exercised as of March 31, 2002 97,793 244,725 40,471 400,000 44,605
New equity issue reserved for employees At its meeting on April 10, 2001, the Board of Directors used the authorization granted by the Combined Ordinary and The extraordinary portion of the Combined Ordinary and Extraordinary General Meeting of September 13, 2000, setting Extraordinary General Meeting of September 13, 2000, authorized the subscription price of the shares to be issued at 26.72 the Board of Directors to carry out a new UBI SOFT ENTER- euros each, and specified that these shares would be subscribed TAINMENT equity issue reserved for employees of the company by the Ubi Actions Company Investment Fund and its French subsidiaries, to a maximum of 2.5% of the total shares comprising the company's share capital at the time the The employees subscribed 47,007 shares via the Ubi Actions authorization was used, in particular by means of a Company FCPE. The Board of Directors took note of this equity issue on Investment Fund. July 13, 2001.
59 XII. PROVISIONS FOR RISKS AND CHARGES
Provisions for risks and charges break down as follows:
On 03.31.01 Increase Appropriation Write-downs On 03.31.02 Provisions for currency losses 15 / 71 15 71 Provisions for taxes / / 244 / 244 Negative goodwill 175 / / 9 166 Total 190 / 315 24 481
The negative goodwill was connected with the acquisition of As of March 31, 2002, provisions for risks and charges Ubi Studios Ltd. on February 1, 2000. break covered: As a precaution, it was decided to spread this difference risks relating to a tax inspection, over the same duration as the amortization of positive risks relating to the closure of certain subsidiaries with goodwill, i.e. 20 years. low levels of activity.
XIII. FINANCIAL DEBTS
Financial debts break down as follows:
03.31.02 03.31.01
Bond debentures 190,882 29,275 Borrowings from credit institutions 152 37,109 Accrued interest 2,118 1,104 Advances in foreign currencies 18,799 7,529 SPOT line of credit / 25,307 Medium-term syndicated line of credit / 37,498 Bank overdrafts 14,492 34,310 Borrowings resulting from restatement of leases 2,416 1,262 Advances by the State 38 38 Borrowings 228,897 173,432
< 1 year > 1 year and < 5 years > 5 years Maturities outstanding on 03/31/02 38,015 190,882 /
The Group's fixed rate and floating debts amounted to K€ 214,405 and K€ 14,492 respectively. 03.31.02 03.31.01 The leasing agreements primarily cover IT hardware, and are Financial debts State advances 228,859 173,394 for a period of no more than 3 years. Cash (30,548) (34,986) Bank overdrafts are used to finance temporary cash require- In vestment securities (40,365) (51,195) ments generated by changes in working capital require- Net Financial debts 157,946 87,213 ments.
At closure of the 2001/2002 financial year, net borrowings were K€ 157,946.
60 FINANCIAL REPORT Consolidated accounts
The breakdown of financial debts by currency is as follows:
03.31.02 03.31.01
French francs / 107,001 Euros 202,877 6,250 US dollars 24,296 55,044 Deutsche Mark / 3,510 Canadian Dollars 1,569 / Italian lira / 945 Austrian schilling / 319 Spanish peseta / 318 Pound sterling 153 45 RMB / / Others 2 / Borrowings 228,897 173,432
Chief characteristics of the first convertible bond issue:
Number and face value: 167,000 bonds with a face value of € 91.47 (FF 600) Issue price: € 91.47 (FF 600) per bond Due date and settlement day: October 10, 1997 Term of bond: 5 years and 173 days Annual yield: 2% per year, or € 1.83 (FF 12) per bond, payable on April 1 of each year starting April 1 1998 Gross redemption yield: 4.26% on October 10 1997 Normal redemption: redeemed in full by April 1 2003 by redemption at a price of FF 681.58, or 113.6% of the issue price On March 31, 2002 the convertible bond is closed. 166,364 bonds were converted, 40,075 during this year. Accelerated redemption of 636 bonds took place from May 21st to August 20, 2001.
Chief characteristics of the second convertible bond issue:
Number and face value: 314,815 bonds with a face value of € 164.64 (FF 1,080) As a consequence of the 5-for-1 stock split, one bond allows five shares to be subscribed with a face value of € 0.31 Issue price: € 164.64 (FF 1,080) per bond Due date and settlement day: July 16, 1998 Term of bond: 7 years Annual yield: 3.80% per year, or € 6.26 (FF 41.04) per bond, payable on July 16 of each year Gross redemption yield: 3.80% on July 16, 1998 Normal redemption: redeemed in full by July 16, 2005 by redemption at a price of € 164.64 (FF 1,080), or 100% of the issue price
163,721 bonds were converted, 1,019 during this year. 151,094 bonds remain to be exercised.
61 Chief characteristics of the third convertible bond issue, OCEANE (bond convertible/exchangeable into new and/or existing shares):
At its meeting on October 13, 2001, with the authorization granted by the Extraordinary General Meeting of October 19, 2001 the Board of Directors agreed to issue bonds with the option of conversion into and/or exchange for new or existing shares in the company to a total maximum value of about 172.1 million Euros.
Number and face value: 3,150,000 bonds with a face value of € 47.50 Each bond entitles the bearer to one share Issue price: € 47.50 per bond Due date and settlement day: November 30, 2001 Term of bond: 5 years from date of settlement Annual yield: 2.5% per year, payable on November 30, of each year. Gross redemption yield: 4.5% on date of settlement (if there is no conversion and/or exchange of shares, and if there is no accelerated amortization) Normal redemption: the bonds would be redeemed in full on October 30, 2006 by redemption at a price of € 52.70, or roughly 110.94% of their face value. On March 31, 2002 no convertible bond had been exercised.
XIV. SUNDRY CREDITORS AND ACCRUIED EXPENSES
Sundry creditors and acrrued expenses break down as follows :
03.31.02 03.31.01
Social security liabilities 9,293 8,106 Tax liabilities 20,818 13,622 Other debts* 19,539 8,198 Deferred income 5,229 4,546 Total 54,879 34,472
* Credits to be issued and credit balances for accounts receivable
62 FINANCIAL REPORT Consolidated accounts
Geographic breakdown of assets :
Assets in K€
Great Rest of United-States 03.31.02 France Germany Britain Europe Canada ROW Total
(net values) Goodwill/Business assets/Trademarks 25,347 11,816 3,053 69,629 2,125 111,970 Intangible,assets 150,906 138 214 10,953 1,092 163,303 Tangible assets 5,361 198 252 816 1,428 5,298 13,353 Financial assets 19,788 42 120 125 41 380 20,496 Fixed assets 201,402 12,194 372 4,208 82,051 8,896 309,122
Inventory,and work-in-progress 15,112 4,974 7,635 8,264 10,255 2,405 48,645 Advances and installments paid 53,548 1,056 324 1 102 66 55,097 Trade receivables 28,882 16,440 19,095 16,731 23,440 1,890 106,478 Other receivables, prepayments and deferred income 41,310 1,356 1,661 1,872 15,154 8,823 70,176 Investment securities 40,365 40,365 Cash 6,128 5,215 2,461 2,520 8,310 5,914 30,548 Current assets 185,345 29,041 31,176 29,389 57,260 19,098 351,309 Total assets 386,747 41,234 31,548 33,597 139,311 27,994 351,309
3.1.4.4 Notes on the income statement
I. SALES
Breakdown of sales by geographical area:
03.31.02 03.31.01 K€ %K€ %
Germany 43,892 12% 34,887 13% GB 41,458 11% 34,048 13% Scandinavia 13,230 4% 14,638 6% Italy 16,030 4% 13,130 5% France 67,975 19% 61,127 24% Other European Countries 29,775 8% 18,246 7% USA 137,955 37% 69,406 27% Rest of the world 18,646 5% 14,333 5% Total 368,961 100% 259,815 100%
Breakdown of sales by activity:
03.31.02 03.31.01 K€ %K€ %
Distribution 18,448 5% 8,470 3% Development 265,652 72% 170,828 66% Publishing 84,861 23% 80,517 31% Total 368,961 100% 259,815 100%
63 II. OTHER OPERATING INCOME V. FINANCIAL INCOME
Other operating income breaks down as follows: Net financial income breaks down as follows:
03.31.02 03.31.01 03.31.02 03.31.01
Capitalized production costs 77,001 60,723 Conversion differentials 1,283 1,662 Production subsidies 6,633 7,094 Interest and revenue from sales of assets (9,609) (3,918) Write-back of provisions 2,186 3,063 Net depreciation (2,234) (884) Transfer of expenses 875 824 Other income 6,651 465 Total financial income (10,560) (3,140) Total 93,346 72,169 The conversion differential caused by using the historic cost method is not significant. III. OTHER OPERATING EXPENSES The total conversion differential taken to share capital amounts to. K€ 531. Other operating expenses break down as follows: This total essentially reflects the fall in dollar values between 03.31.02 03.31.01 the historic value and the closing rate on March 31, 2002. Currency risk: Other external expenses 114,707 90,880 Other expenses 1,493 545 In order to hold down the Group’s foreign exchange risks, Ubi Soft Total 116,200 91,425 Entertainment covers currency risks in several ways : when the parent company loans foreign currency to its subsidiaries, Other external expenses consisted mainly of advertising expenses, royalties, and the rental of property and movables. it also takes out a loan in the same currency. Thus if the exchange rate rises or falls, any gain or loss on the loan is offset by a gain or loss on the parent company’s loan in the opposite direction. IV. DEPRECIATION AND PROVISIONS in the case of risks on currency sales associated with commercial Depreciation and provisions break down as follows: transactions, these are either automatically offset for the year by 03.31.02 03.31.01 other transactions in the opposite direction (purchases of goods in a foreign currency offset by royalty payments by subsidiaries in Depreciation of intangible the same currency) or covered by forward sales contracts. fixed assets 57,987 32,885 Depreciation of tangible fixed assets 5,755 6,045 Provisions for charges to be spread over several financial years 401 66 Provisions for current assets 2,572 1,972 Total 66,715 40,968
64 FINANCIAL REPORT Consolidated accounts
VI. EXCEPTIONAL INCOME/EXPENSE
Exceptional income breaks down as follows:
03.31.02 03.31.01
Exceptional income from management transactions 2,728 71 Exceptional income from capital transactions (276) (128) Depreciation and provisions (275) (7) Total net exceptional income 2,177 (64)
On March 31, 2002, exceptional income includes the accumulated income from companies that were formerly controlled, and were then integrated into the consolidation structure during the financial year, together with the bonus on the purchase of equity shares, the compensation paid by Take2 and bankruptcy of the customer Kmart.
VII. CORPORATE TAXE
Corporate tax breaks down as follows: Breakdown of deferred taxes by main category:
03.31.02 03.31.01 03.31.02 03.31.01
Current tax 2,869 4.730 Leasing 70 3 Deferred tax 6,347 (5,032) Realizable and liquid assets (7,695) (5,602) Total 9,216 (302) Margin on inventory 47 (1,021) Elimination of intercompany transactions 790 (24) Elimination of internal results (368) (165) Tax payable by French companies was calculated at the rate in force Standardization (13,425)* 1,500 on March 31, 2002, i.e. 33.33% plus 3%. Elimination of securities 78 277 Total 6,347 (5 032) 03.31.02 03.31.01 * including 8.6 for the transfer of TLC business assets to Red Storm and 3.9 for the Deferred tax assets 14,185 8,159 restatement of intangible assets Deferred tax liabilities 5,162 2,128
Reconciliation of taxation rates:
03.31.02
Pre-tax earnings, excluding goodwill 22,579 Theoretical tax (34.33%) 7,752 Réintégrations Ubi Soft Entertainment : 1,825*34.33% 627 Impact of tax rate difference for subsidiaries : Ubi Soft Inc.: 13,325* [41.76% - 34.33%] 990 Red Storm: (3,571)* [38.95% - 34.44%] (165) Other subsidiaries 12 Total 9,216
65 Deferred tax credits recorded /not recorded:
In K €
DTC recorded DTC not recorded Total
Ubi Soft Inc. 862 / 862 Ubi Soft Entertainment S.A. 10,835 / 10,835 Ludimedia S.A. 406 377 783 Ubi Studios Ltd. 693 3,769 4,462 Ubi.com S.A. 540 / 540 Ubi.com Inc. 374 / 374 Gamebusters GesmbH 277 / 277 Blue Byte Inc. 3,362 / 3,362 Red Storm 1,134 / 1,134 Canada Inc. 492 / 492 Ubi Soft Entertainment Ltd. 327 / 327 Other 80 / 80 Total 19,382 4,146 23,528
Total deferred tax credits not booked as of March 31, 2002: Ubi Studios Ltd.: K€ 3,769. As a precaution, and given the size of the deferred tax credits, it was decided to use the tax credits to K€ 693. Ludimedia S.A.: K€ 377.
VIII MISCELLANEOUS INFORMATION
1. Geographic breakdown of earnings
En K €
Great Rest of USA 03.31.02 France Germany Britain Europe Canada ROW Total
Sales 67,975 43,892 41,458 59,035 137,955 18,647 368,962 Other operating income 74,383 624 175 820 16,715 629 93,346 Purchases consumed and other operating expenses 95,997 18,295 16,609 21,926 106,841 8,473 268,141 Wages and social security cost 35,058 4,311 3,122 7,590 34,012 8,919 93,012 Tax and duty 1,743 537 116 220 383 478 3,477 Depreciation and provisions 60,042 752 147 957 3,635 1,182 66,715 Earning before interest and tax (50,482) 20,621 21,639 29,162 9,799 223 30,962
2. Off-balance sheet commitments
Guarantees given: K€ 18,897 Collateral for loans: none Guarantees received: none
66 FINANCIAL REPORT Consolidated accounts
Leasing Initial Depreciation Net value Payments Payments remaining Residual value made to be made value
< 1 year >1 year 5,928 5,099 828 934 643 499 32
The leasing agreements primarily cover IT hardware, and are Various products are marketed under licensing agreements for a period of no more than 3 years. signed by Ubi Soft Entertainment S.A. As of March 31, 2002, the commitments accepted by the company provided for the Discounted bills not due: K€ 1.568 payment of guaranteed minimum royalties. Retirement gratuities: because of the average age of the staff, At the closure of the financial year, commitments by virtue of retirement commitments are insignificant. this guaranteed minimum amounted to M€ 68,8.
3. Director’s remuneration
Total gross remuneration paid out during the financial year by the company and its subsidiaries to directors (L233-16 article) came to K€ 377. No attendance fees were paid.
Director identity Amount / Total remuneration Amount / Benefit in kind
GUILLEMOT Gérard € 89.336 € 914 GUILLEMOT Yves € 79.275 None GUILLEMOT Michel € 79.275 None GUILLEMOT Claude € 64.034 None GUILLEMOT Christian € 64.034 None
4. Events after closure of accounts 5. Personnel
On August 30, 2002 GUILLEMOT BROTHERS S.A. gave to As of March 31, 2002, employee numbers break down as follows: GUILLEMOT CORPORATION S.A. one million of shares for an amount of M€ 15. At this date GUILLEMOT CORPORATION Europe 934 S.A. hold 6.4% of capital and 6.6% of voting rights. Asia 234 Canada 369 On September 6, 2002, Ubi Soft, in accordance with Article USA 211 L 233-8 of the French Commercial Code, announced that, Morocco 73 owing to the loss by GUILLEMOT BROTHERS S.A. (formerly Romania 63 UBI PARTICIPATIONS SA) of part of its double voting rights Australia 14 on 30 August 2002, the total number of voting rights linked Brazil 3 to the 17,368,732 shares making up Ubi Soft’s capital Total 1 901 stock is now 16,839,671.
Ubi Soft® Entertainment announced on September 9, 2002 that it has redeemed 752,000 2.5% convertible bonds, for approximately 61% of their balance sheet value. The opera- tion, which took place in August, represents a substantial financial gain as well as a 14.2 million euro reduction in the company’s net debt.
67 3.2 Corporate accounts on March 31, 2002
3.2.1 Balance sheet on March 31, 2002
Assets in K€
03.31.02 03.31.02 03.31.02 03.31.01 03.31.00 Gross Amort/ Net Net Net dep
Intangible assets 258,055 105,927 152,128 124,343 68,870 Goodwill 12,867 / 12,867 37,042 / Tangible fixed assets 6,586 3,097 3,489 2,423 1,977 Financial assets 124,396 4,385 120,011 162,653 111,455 Fixed assets 401,904 113,409 288,495 326,461 182,302 Inventory and work-in-progress 15,904 792 15,112 18,465 10,078 Advances and installments paid 53,548 / 53,548 36,391 24,467 Trade receivables 100,213 405 99,808 69,418 68,677 Other receivables 48,318 2,445 45,873 80,518 52,553 Investment securities 40,365 / 40,365 9,476 13,706 Cash 4,866 / 4,866 13,107 23,371 Current assets 263,214 3,642 259,572 227,375 192,852 Redemption premium 15,294 / 15,294 185 200 Accrued expenses 6,622 / 6,622 2,608 1,538 Total Assets 687,034 117,051 569,983 556,629 376,892
Liabilities 1n K€
03.31.02 03.31.01 03.31.00
Capital 5,384 5,156 5,055 Premiums 266,406 259,343 251,573 Reserves 3,999 12,496 9,960 Earnings (24,390) (8,409) 3,102 Net investment grants 306 173 49 Equity capital 251,705 268,759 269,739
Provisions for risks and charges 522 498 422
Bond debentures 190,882 29,275 36,424 Debts (1) (2) 29,261 137,811 11,559 Miscellaneous financial debts (3) 3,261 49,606 8,419 Trade creditors and other accounts payable 52,262 37,154 26,128 Tax and social security liabilities 1,026 545 588 Debts on fixed assets 27,048 23,800 18,033 Other debts 13,217 8,020 3,643 Total debts 316,957 286,211 104,794 Accrued expenses 799 1,161 1,937 Total Liabilities 569,983 556,629 376,892
(1) payable at less than one year 17,013 126,099 6,757 payable at more than one year 12,248 11,712 4,802 (2) current bank credit facilities and credit balances 26,988 32,696 1,024 (3) including current accounts 3,261 49,568 8,419
68 FINANCIAL REPORT Corporate accounts
3.2.2 Income statement on March 31, 2002
en K€
03.31.02 03.31.01 03.31.00
Production in financial year 226,134 161,470 126,250 Other operating income and costs transferred 8,887 6,458 4,429 Total operating income 235,021 167,928 130,679
Costs of sales 107,703 97,117 61,458 Changes in inventory 3,127 (8,640) (4,395) Other purchases and external charges 86,499 51,221 36,562 Tax and duty 744 632 561 Wages and social security costs 393 87 326 Other costs 380 147 46 Depreciation and provisions 59,053 33,326 31,721 Total operating expenses 257,899 173,890 126,279
Earnings before interest and tax (22,878) (5,962) 4,400 Financial income from equity holdings 37 0 0 Income from other securities and claims on fixed assets 3,266 23 77 Other interest and related income (1) 3,188 2,951 1,184 Write-back of provisions 7,846 837 469 Unrealited exchange gains 322 18,693 7,234 Net proceeds from sales of transferable securities / 78 73 Total financial proceeds 14,659 22,582 9,037
Appropriations to provisions 7 ,075 2,943 1,352 Other interest and related expenses (2) 8,091 6,454 3,666 Unrealized exchange losses 4,630 15,593 4,927 Net interest disposal on war betable security 407 / / Total financial expenses 20,203 24,990 9,945
Net financial income/expense (5,544) (2,408) (908) Operating income less net financial income/expense (28,422) (8,370) 3,492 Exceptional income/expense 4,032 (39) (390) Income before tax (24,390) (8,409) 3,102 Corporate tax ///
Net income for financial year (24,390) (8,409) 3,102 (1) including revenue from affiliated companies 3,105 2,534 1,024 (2) including expenses from affiliated companies 25 615 /
69 3.2.3 Consolidated funds flow statement on March 31, 2002
in K€
03.31.02 03.31.01
Flows arising from operating activities Net profit (24,390) (8,409) Depreciation of tangible fixed assets 57,516 32,533 Changes in provisions 5,002 2,488 Grants (49) / Flows arising from the disposal of fixed assets 10 39 Total cash flow arising from operating activities 38,089 26,651
Increase in operating fund requirements 7,714 (35,715) Decrease in non-operational requirements 4,258 5,921 Total flow 11,972 29,794
Flows arising from investments Acquisitions of intangible assets (90,994) (123,581) Acquisitions tangible assets (2,388) (1,861) Acquisition of equity holding (55,215) (53,439) Acquisition of other financial fixed assets (11,160) (60) Charges to be spread over several years (4,388) (543) Disposal of fixed assets 39,331 7 Proceeds from long-term loans and other financial assets 10 431 Cancel of equity investment after merger 100,000 / Total flows arising from investments (24,804) (179,046)
Flows arising from financial transactions New long-and medium-term loans 164,300 17,575 Repayment of loans 52,149) / Increase capital 141 101 Increase in issue premium 2,087 464 Increase in conversion premium 3,771 6,841 Increase in issue premium on shares with warrants 2 7 Increase in issue premium on group savings scheme 1,242 / Repayment of current account (46,307) 41,187 Grants received 182 124 Total flows arising from financial transactions 73,269 66,299
Net cash flow 98,526 (115,890) Net cash position at the beginning of the financial year (80,257) 35,633 Net cash position at the end of the financial year 18,269 (80,257)
70 FINANCIAL REPORT Corporate accounts
3.2.4 Explanatory notes on the Corporate Accounts
The following notes and tables, in which figures are shown in Intangible assets thousands of Euros, are an integral part of the annual These mainly consist of software design expenses, i.e.: accounts for the year ending March 31, 2002, and form an commercial software programs which are in production or annex to the balance sheet (before distribution of earnings), being marketed; which totaled € 569.98 million, and to the income statement, software tools. which showed a loss of € 24.39 million. These assets are amortized over the following periods: The financial year covered a period of 12 months from April commercial software programs: 3 years maximum; 1, 2001 to March 31, 2002. software tools: 3 years.
Highlights of the financial year Software production costs are determined in accordance In the course of the financial year, Ubi Soft Entertainment with the guidelines issued by the Conseil National de la S.A. absorbed over its Ubi Ventures subsidiary, of which it Comptabilité [French National Accountancy Council] in April owned 100%, and transferred TLC's business assets to its 1987. These costs are entered in the accounts under subsidiary Red Storm Entertainment Inc. “intangible assets” (account no. 232) as software develop- It also acquired 40% of the company 3D Planet, and sold ment progresses. From the date of their first commercial its shares in Blue Byte GmbH to its subsidiary Ubi Soft release they are transferred to the “Released software Entertainment GmbH. programs” or “External developments” (account no. 208).
Parent software programs are amortized with effect from their commercial release date on the basis of the expected 3.2.4.1 Accounting principles market life of the product concerned, as assessed at the General accounting conventions were applied in compliance account closing date. with the principle of conservatism and the following funda- The amortization period is between 12 and a maximum of mental criteria: 36 months. Net pre-tax sales of the various products until the end of their market life are estimated at K€ 742.652 continuity; (they came to K€ 643.526 on 31 March 2001). This sum consistency of accounting methods from one financial allows the corresponding parent software programs to be year to the next; amortized. The system of amortization used is the straight-line time-period concept; method. However, if sales are less than estimated, a sup- and compliance with the general rules governing the drawing plementary amortization will be carried out. Software tools, up and the presentation of annual financial statements. which are a set of complex development programs that The historical cost principle was applied as the basic method may be used for a number of products, are amortized over for the valuation of items shown in the accounts. a maximum of 36 months using the straight-line method.
Tangible fixed assets 3.2.4.2 Accounting rules and methods These are shown at historical cost. The depreciation rates applied are as follows: Business assets The business assets acquired include all the intangible elements Equipment: 5 years (straight-line). (customer base, know-how) needed for the company to do Fixtures and fittings: 5 and 10 years (straight-line); business and grow. The intangible elements are obtained Computer equipment: 3 years (diminishing balance); from the average of productivity, sales and a sector-based Office furniture: 10 years (straight-line). multiple.
If the business assets were to be valued at less than their book value, a provision for amortization would be applied.
71 Financial fixed assets Conversion of accounts payable and receivable expressed Equity holdings are valued at their historical cost, excluding in foreign currencies acquisition fees. If the book value is lower than the gross These were converted at the rates applicable on March 31, value at the end of the year, a provision for depreciation is 2002. Any resulting unrealized exchange gains or losses made to cover the difference. are shown in the Balance Sheet under a specific heading. A provision for exchange risk is made in the accounts if The value of an equity holding is reviewed at the end of each conversion reveals the existence of underlying losses. financial year on the basis of the net position of the subsidiary concerned on that date and its prospects for growth over Provisions for risks and charges the medium term. Provisions for risks and charges are made when risks and charges which relate to a clearly determined object, but Inventory which are not certain to arise, are made more likely by Inventories are valued on the basis of cost prices based on events which have occurred or are in progress. normal trading, using the weighted average cost method. The gross value of goods and supplies includes purchase As of March 31, 2002, provisions for risks and charges price and related expenses. Financial costs are excluded covered : from inventory valuation in all cases. the exchange risks relating to discounting of claims and A provision for depreciation is made where the probable net debts denominated in foreign currencies. realizable value is less than the book value. risks relating to a tax inspection, risks relating to the closure of certain subsidiaries with Trade receivables low levels of activity. These are valued at their face value. Where applicable, receivables may be depreciated by way of a provision when their inventory value is less than their book value.
3.2.4.3 Explanatory notes on the Balance Sheet
I. INTANGIBLE ASSETS
Intangible assets break down as follows:
Intangible fixed assets
On 03.31.01 On 03.31.02 Gross Increase Decrease Gross
Released software programs 108,542 (1) 60,697 16,448 152,791 External developments 4,846 (2) 8,923 6,121 7,648 Software programs in progress 65,494 80,383 65,494 80,383 Software tools 19,153 (3) 3,182 7,538 14,797 Other licenses 642 86 / 728 Others intangible assets in progress / 1,636 / 1,636 Other 15 57 / 72 Total 198,692 154,964 95,601 258,055
(1) including K€ 58 943 for reclassification of accounts to the accounts (2) including K€ 4 269 for reclassification of accounts to the accounts (3) including K€ 2 281 for reclassification of accounts to the accounts
72 FINANCIAL REPORT Corporate accounts
Depreciation
On 03.31.01 On 03.31.02 Cumulative Increase Decrease Cumulative
Released parent software programs 60,197 49,267 16,309 93,155 External developments 2,061 1,946 549 3,458 Software tools 11,561 4,742 7,538 8,765 Other licenses 530 19 / 549 Total 74,349 55,974 24,396 105,927
Business assets
Nature On 03.31.01 On 03.31.02 Cumulative Increase Decrease Cumulative
Distribution in France 11,342 / / 11,342 TLC 25,700 / 25,700 / LOGICO / 1,525 / 1,525 Total 37,042 1,525 25,700 12,867
II. TANGIBLE FIXED ASSETS
Tangible fixed assets
On 03.31.01 On 03.31.02 Gross Increase Decrease Gross
Fittings 1,695 741 118 2,318 Transport equipment 8 / / 8 Computer equipment and furniture 3,795 1,636 1,183 4,248 Tangible fied assets in progress / 11 / 11 Total 5,498 2,388 1,301 6,585
Depreciation
On 03.31.01 On 03.31.02 Cumulative Increase Decrease Cumulative
Fittings 630 169 118 681 Transport equipment 8 - - 8 Computer equipment and furniture 2,437 1,154 1,183 2,408 Total 3,075 1,323 1,301 3,097
73 III. FINANCIAL ASSETS
Financial assets break down as follows:
Tangible fixed assets
On 03.31.01 On 03.31.02 Gross Increase Decrease Gross
Equity holdings 164,893 55,215 107,100 113,008 Other fixed investments 4 / / 4 Loans / 10,991 / 10,991 Deposits and guarantees 235 169 11 393 Total 165,132 66,375 107,111 124,396
The increase in equity holdings is primarily the result of the The reduction equity holdings is due to the merger between equity issues by Ubi Soft Inc. (San Francisco) and Ubi Holding Ubi Soft Entertainment S.A. and Ubi Ventures S.A, together Inc., totaling M€ 14,3 and M€ 21,8 respectively. with the transfer of Blue Byte GmbH shares to Ubi Soft GmbH.
Provisions
On 03.31.01 On 03.31.02 Cumulative Increase Decrease Cumulative
Equity holdings 2,478 113 2,933* 1,592 Loans / / 453 / Total 2,478 113 3,386 1,592
* Provisions essentially relate to Teamchman Inc. shares for M€ 1,9.
IV. INVENTORY AND WORK-IN-PROGRESS
Inventory and work-in-progress break down as follows:
On 03.31.02 On 03.31.01 Gross Provisions Net Net
Goods 15,904 792 15,112 18,465 Total 15,904 792 15,112 18,465
The increase in inventory is linked to the growth in business and the releasing of products during the last month of the financial year.
V. ADVANCES AND INSTALLMENTS PAID
These are primarily guaranteed advances paid on licensing These advances are taken to earnings in proportion to sales contracts totaling K€ 53,431. made of the licensed products.
74 FINANCIAL REPORT Corporate accounts
VI. TRADE RECEIVABLES
Trade and other receivables break down as follows:
On 03.31.02 On 03.31.01 Gross Provisions Net Net
Trade receivables 100,213 405 99,808 69,418 Total 100,213 405 99,808 69,418
The growth of this item is justified by the activity increase.
VII. STATEMENT OF CLAIMS AND DEBTS
STATEMENT OF CLAIMS Gross amount < 1 year > 1 year
Claims on fixed assets Loans 10,991 10,991 Other financial assets 394 394
Claims on current assets Doubtful debts 485 485 Trade receivables 99,728 99,728 State (VAT credit, other) 6,758 6,758 Group and partners 33,284 33,284 Advances and installments 53,548 53,548 Other debtors 8,276 8,276 Prepaid expenses 2,025 2,025 Total 215,489 215,095 394
STATEMENT OF DEBTS Gross amount < 1 year > 1 year
Convertible bond debentures 190,882 190,882 Borrowings from credit institutions 29,261 17,013 12,248 Trade payables 52,262 52,262 Tax and social security liabilities 1,026 1,026 Other debts 13,217 13,217 Debts on fixed assets 27,048 27,048 Group and partners 3,261 3,261 Total 316,957 113,827 203,130
Bond debentures subscribed during the financial year 166,005 (including 16,380 in redemption premiums) Borrowings taken out during the year 14,675 Bond debentures converted during the financial year 4,397 (including 455 by charging to redemption premiums) Borrowings repaid during the year 48,206 Debt taken out from individuals 1,186
75 VIII. INCOME RECEIVABLE
Credits receivable from suppliers 2,513 Products not yet billed 5,048 Interest receivable 53 Total 7,614
IX. INVESTMENT SECURITIES
Investment securities are booked at acquisition cost. At the closure any capital losses are provisioned.
Number Ave. price Gross value Provision Net value Percentage Nature € K€ K€ K€ of capital
Equity shares 568,141 32,6317 18,539 / 18,539 3.27% UCITS 8,039 2,714.96 21,826 / 21,826 / Total 40 ,365 40,365
X. CHARGES TO BE SPREAD OVER SEVERAL YEARS
The “Charges to be spread over several years” item consists of the costs of convertible bond debentures, amortized over the term of the bond, plus the costs of acquiring fixed assets, amortized over three years.
Nature On 03.31.01 On 03.31.02 Cumulative Increase Decrease Cumulative
Costs of issuing of debt securities and OCEANE bond 357 4,388 638 4,107 Costs of acquiring business assets 491 / 182 309 Total 848 4,388 820 4,416
XI. SHARE CAPITAL
en K€
Balance on Appropriation Capital Earnings Balance Proposed Balance 03.31.01 of FY 00/01 increase 01/02 on appropriation on 03.31.02 Earnings in cash 03.31.02 of FY01/02 after and by bond earnings appropriation conversion of FY01/02 earnings
Capital 5,156 228 5,384 5,384 premium 259,343 7,063 266,406 266,406 Legal reserves 505 505 505 Regulated reserves 238 238 238 Other reserves 11,753 (88) 11,665 11,665 Carrying forward debitor / (8,409) (8,409) (24,390) (32,799) Earnings (8,409) 8,409 (24,390) (24,390) 24,390 / Investment grants 173 133 306 306 Total 268,759 0 7,336 (24,390) 251,705 0 251,705
76 FINANCIAL REPORT Corporate accounts
NEW SHARES
November 3, 1999 share warrants
Initial number of warrants 372,058, 2 warrants needed to subscribe a share of face value € 1.52 (FF 10) As a consequence of the 5-for-1 stock split, two bonds allow five shares to be subscribed with a face value of € 0.31 Issue price: € 136 (FF 892.10). Strike period: from 3 November 1999 to November 2, 2002 Strike price: € 170 (FF 1,115.13). 26 warrants had been exercised during the fiscal year. As of March 31, 2002, 340,542 warrants had still not been exercised.
March 12, 2001 share warrants
Number and face value: 53,266, 1 warrant needed to subscribe a share of face value € 0.31 Issue price: € 0.01 (FF 0.07) Strike period: from 28 December 2001 to March 11, 2006 Strike price: € 40.288 (FF 264.27). As of March 31, 2002, no warrants had been exercised.
March 19, 2001 share warrants
Number and face value: 9,044, 1 warrant needed to subscribe a share of face value € 0.31 Issue price: € 0.01 (FF 0.07) Strike period: from March 19, 2002 to March 18, 2006 Strike price: € 32.072 (FF 210.38). As of March 31, 2002, no warrants had been exercised.
Company Savings Scheme Number of Ubi Soft Entertainment shares
The extraordinary portion of the Combined Ordinary and Extra- On 04.01.01 16,909,122 ordinary General Meeting of September 13, 2000, authorized the Board of Directors to carry out a new UBI SOFT ENTER- Exercised options 207,068 TAINMENT equity issue reserved for employees of the company Bond conversion 205,470 and its French subsidiaries, to a maximum of 2.5% of the total Share subscription warrants exercised 65 shares comprising the company's share capital at the time the Subscription Company Savings Scheme 47,007 authorization was used, in particular by means of a Company On 03.31.02 17,368,732 Investment Fund.
At its meeting on 10 April 2001, the Board of Directors used On March 31, 2002, the share capital consisted of 17,368,732 the authorization granted by the Combined Ordinary and Extra- shares with a face value of € 0.31, i.e. € 5,384,307. ordinary General Meeting of 13 September 2000, setting the subscription price of the shares to be issued at 26.72 Euros each, and specified that these shares would be subscribed by the UBI ACTIONS Company Investment Fund. The employees subscribed 47,007 shares via the Ubi Actions FCPE. The Board of Directors took note of this equity issue on July 13, 2001.
Number of shares created 47,007 Face value € 0.31 Subscription value € 26.72 Subscription period 06.05.01 to 06.25.01
77 The capital increases and issue premiums during the past financial year were partly driven by the exercise of stock options. For the record, the exercise conditions of the stock option plans are as follows:
2th Plan 3rd Plan 4th Plan 5th Plan 6th Plan
Initial number of shares 250,000 250,000 40,471 400,000 44,605 Face value € 0.31 € 0.31 € 0.31 € 0.31 € 0.31 Subscription price € 12.10 € 20.40 € 38 34.51 F € 34.51 Date of validity 04.22.97 10.23.98 12.08.00 04.09.01 04.25.02 to to to to to 04.22.02 10.23.03 12.08.05 04.09.06 04.24.06
Options still not exercised as of March 31, 2002 97,793 244,725 40,471 400,000 44,605
XII. PAYABLES XIII. ITEMS RELATING TO AFFILIATED COMPANIES
Interest on borrowings from credit institutions 1,956 Current assets Bank charges payable 152 Equity investments 101,785 Total borrowings & financial debts 2,108 Trade receivables 80,032 Trade payables, invoices not yet received 18,609 Other receivables 30,281 Credits to be issued 6,312 Accounts Payable Tax and social security liabilities 631 Miscellaneous borrowings & financial debts 2,067 Total 27,660 Trade creditors and other accounts payable 20,360 Debts on fixed assets 17,443 Other debts 1,406
Financial income 2,544 Financial charges 32
XIV. PROVISIONS ON THE BALANCE SHEET
On 04.01.01 Ubi Ventures Year provisions Year reversals On 03.31.02
Provisions for risks For currency risks 498 / 181 498 181 Other provisions for risks and charges / / 341 / 341 Total 498 / 522 498 522
Provisions for depreciation Of equity investments 2,478 113 2,933 1,592 3,932 Of other long term investment / / 453 / 453 Of inventory 566 / 791 565 792 Of trade receivables 524 / 182 302 404 Of other receivables 121 / 2,324 / 2,445 Of investment securities 190 636 / 826 / Total 3,879 749 6,683 3,285 8,026
Total 4,377 749 7,205 3,783 8,548
78 FINANCIAL REPORT Corporate accounts
XV. Financial Debts
Financial Debts break down as follows:
03.31.02 03.31.01
Bond debentures (1) 190,882 29,275 Borrowings from credit institutions (1) 152 33,683 Accrued interest 2,108 1,099 Advances in foreign currencies 18,674 70,334 Bank overdrafts 8,289 32,696 Advances by the State 38 38 Financial Debts 220,143 167,125 (1) fixed rate < 1 year > 1 year and < 5 years > 5 years Maturities still payable on 03/31/02 17,013 203,130 /
The breakdown of financial debts by currency is as follows:
03.31.02 03.31.01
French francs - 105,884 Euros 195,705 6,250 US dollars 24,285 54,989 Pound sterling 153 2 Financial debts 220,143 167,125
79 The company has made three convertible bond issues with the following characteristics:
Chief characteristics of the first convertible bond issue: Number and face value: 167,000 bonds with a face value of € 91.47 (FF 600) Issue price: € 91.47 (FF 600) per bond Due date and settlement day: October 10, 1997 Term of bond: 5 years and 173 days Annual yield: 2% per year, or € 1.83 (FF 12) per bond, payable on April 1 of each year starting April 1, 1998 Gross redemption yield: 4.26% on October 10, 1997 Normal redemption: redeemed in full by April 1, 2003 by redemption at a price of FF 681.58, or 113.6% of the issue price
On March 31,2002 the convertible bond is closed. 166,364 bonds were converted, 40,075 during this year. 636 bonds have been repaid early, from May 21 to August 20, 2001.
Chief characteristics of the second convertible bond issue: Number and face value: 314,815 bonds with a face value of € 164.64 (FF 1,080) As a consequence of the 5-for-1 stock split, two bonds allow five shares to be subscribed with a face value of € 0.31 Issue price: € 164.64 (FF 1,080) per bond Due date and settlement day: July 16, 1998 Term of bond: 7 years Annual yield: 3.80% per year, or € 6.26 (FF 41.04) per bond, payable on July 16 of each year Gross redemption yield: 3.80% on July 16, 1998 Normal redemption: amortized in full by July 16, 2005 by redemption at a price of € 164.64 (FF 1,080), or 100% of the issue price 163,721 bonds were converted, 1,019 during this year. 151,094 remain to be exercised.
Chief characteristics of the third convertible bond issue O.C.E.A.N.E. (bond convertible / exchangeable into new and/or existing shares):
Number and face value: 3,150,000 bonds with a face value of € 47.50. Each bond give you the right to obtain a share
Issue price: € 47.50 per bond Due date and settlement day: November 30, 2001 Term of bond: 5 years Annual yield: 2.50% per year, or € 1.1875 per bond, payable on November 30 of each year Gross redemption yield: 4.50% on November 30, 2001 Normal redemption: amortized in full by November 30, 2006 by redemption at a price of € 52.70, or 110.94% of the issue price
None bond had been exercised during this year.
80 FINANCIAL REPORT Corporate accounts
3.2.4.4 Notes on the Income Statement
I. SALES II. DEPRECIATION AND PROVISIONS
The breakdown of sales in percentage terms, as of March 31, Depreciation and provisions break down as follows: 2002, is as follows : 03.31.02 03.31.01 03.31.02 03.31.02 Depreciation of intangible assets 55,974 31,065 Distribution 6% 11% Depreciation of tangible assets 1,324 1,416 Development 59% 52% Costs to be carried forward 523 53 Publishing 35% 37% Provisions 1,232 792 Total 100 % 100 % Total 59,053 33,326
The breakdown of sales by geographic area, as of March 31, 2002, is as follows :
K€ % Germany 33,976 15 UK 30,943 14 Scandinavia 8,259 4 Italy 9,901 4 France 50,952 23 Rest of Europe 25,426 11 USA 56,139 24 Reste of the world 10,538 5 Total 226,134 100%
III. NET FINANCIAL INCOME/EXPENSE
Net financial income breaks down as follows:
03.31.02 03.31.01
Financial income: Income from other securities and claims on fixed assets 37 23 Other interest and related income 3,266 2,951 Write-back of provisions 3,188 837 Unrealized exchange gains 7,846 18,693 Net proceeds from sales of investment securities 322 78 14,659 22,582 Financial charges: Appropriations to provisions 7,075 2,943 Other interest and related expenses 8,091 6,454 Unrealized exchange losses 4,630 15,593 Net charges from sales of investment securities 407 / 20,203 24,990
Net financial income/expense (5,544) (2,408)
81 Foreign exchange risk in the case of risks on currency sales associated with In order to limit the Group's foreign exchange risks, Ubi Soft commercial transactions, these are either automatically Entertainment has several ways of covering the risk of exchange offset during the year by other transactions in the rate fluctuations: opposite direction (purchases of goods in a foreign currency offset by royalty payments by subsidiaries in when it makes a loan in a foreign currency to its subsi- the same currency), or covered by forward sales diaries, the parent company also takes out a loan in the contracts. same currency. Thus if the exchange rate rises or falls, any gain or loss on the loan is offset by a gain or loss on the parent company's loan in the opposite direction.
IV. EXCEPTIONAL INCOME/EXPENSE
Exceptional income breaks down as follows :
03.31.02 03.31.01
Exceptional income: Exceptional income from management transactions 4,242 / Exceptional income from capital transactions 39,380 7 43,622 7 Exceptional charges: Exceptional charges from management transactions 4 1 Exceptional charges from capital transactions 39,341 45 Depreciation and provisions 245 / 39,590 46
Total exceptional income/expense 4,032 (39)
On March 31, 2002, the exceptional income essentially consists of the bonus for the merger with Ubi Ventures (M€ 1.2) and profit made on share buyback (M€ 2.8).
V. CORPORATE TAX
03.31.02 03.31.02
Current income before tax (28,422) (8,370) Exceptional income/expense 4,032 (39) Income before tax (24,390) (8,409) Tax basis (23 527) (7 809)
82 FINANCIAL REPORT Corporate accounts
3.2.4.5 Other Information
I. PERSONNEL
As of March 31, 2002, the work force consisted of 5 executives.
II. FINANCIAL COMMITMENTS AND OTHER INFORMATION
Guarantees given: K€ 18 897 Collateral for loans: none Guaranteed received: none
Leasing (K€): Initial value Depreciation Net value Payments made Payments remaining to be made Residual value < 1 year >1 year 5,899 5,087 812 924 641 489 18
Leased assets consist primarily of IT hardware.
Discounted bills not due: K€ 1,568. III. DIRECTORS’ REMUNERATION
Retirement gratuities: because of the average age of the Directors’ remuneration during the 2001/2002 financial staff, retirement commitments are insignificant. year came to K€ 275.
Various products are marketed under licensing agreements signed by Ubi Soft Entertainment S.A. As of March 31, IV. SUBSIDIARIES AND AFFILIATED COMPANIES 2002, the commitments accepted by the company provided ON MARCH 31, 2002 for the payment of guaranteed minimum royalties. No events likely to have an impact on the financial statements At the closure of the financial year, commitments by virtue have occurred to date. of this guaranteed minimum amounted to M€ 68,8.
Next year, the reductions (increases: none) in future tax liability will be as follows:
organic 98 exchange rate fluctuations 799 K€ 897
Ubi Soft Entertainment S.A. undertakes to provide financial support to its subsidiaries to meet their cash requirements.
83 V. SUBSIDIARIES AND AFFILIATED COMPANIES ON MARCH 31, 2002
Country Currency Capital Reserves Share of Book Loans and Total Net Net Dividends and equity value of advances collateral sales income collected amounts capital securities granted by and (excl. for last carried held held the company guarantees tax) complete forward and not yet provided year before repaid by the allocation company (€ 1000) (currency (currency (currency (currency (currency 1000) 1000) Gross Net 1000) 1000) 1000)
SUBSIDIARIES - AT LEAST 50% OF CAPITAL HELD
UBI SOFT Germany Euro 8,820 2,600 100% 9,057 9,057 3,124 10,226 47,666 1 419 / ENTERTAINMENT GmBH
UBI SOFT HOLDINGS Inc. USA Dollar 47,137 / 100% 54,725 54,725 5 / / (2) /
SINISTER GAMES Inc. USA Dollar 86 796 100% 7,171 7,171 / / 1,927 50 /
UBI SOFT SPA Italy Euro 241 969 100% 4,555 4,555 1,327 / 23,632 (419) /
UBI SOFTInc. USA Dollar 14,000 (1,771) 100% 15,489 15,489 9,040 1,790 121,643 7,708 /
UBI SOFT Canada Inc. Canada Canadian 2,501 (1,020) 100% 1,743 1,743 2,500 / 16,575 (239) / Dollar Subtotal 92,740 92,740
Other subsidiaries
French subsidiaries Euro 2,186 1,548 821
Foreign subsidiaries Euro 7,690 6,523 11,745
Subtotal 9,876 8,071
CAPITAL HOLDINGS OF BETWEEN 10 AND 50%
French subsidiaries Euro 5,295 3,366 419
CAPITAL HOLDINGS LESS THAN 10%
French interests Euro 5,096 4,900 3,385
Foreign interests Euro 1
Subtotal 5,097 4,900
GENERAL TOTAL 113,008 109,077
84 FINANCIAL REPORT Corporate accounts
3.2.5 Financial table (Article 135 of the Decree of March 23, 1967)
Financial year 97/98 98/99 99/00 00/01 01/02
Share capital 3,390,989 3,423,781 5,054,712 5,155,558 5,384,307 Ordinary shares outstanding 2,224,343 2,245,853 (1) 16,578,368 16,909,122 17,368,732 Preferred shares outstanding / / / / / Maximum number of shares 264,957 608,262 (1) 2,698,235 2,870,262 5,646,664 that may be created • by bond conversion 167,000 464,503 1,215,750 964,120 3,905,470 • by exercise of stock options 97,957 143,759 630,940 992,477 827,594 • by exercise of warrants / / 851,545 913,665 913,600
Sales (K€) 81,241 102,895 126,250 161,470 226,134 Pre-tax income, profit sharing, 16,035 30,482 35,812 26,651 33,101 appropriation (K€) Corporate tax (K€) 1,978 3,158 / / / Employee profit-sharing / / / / / Income after tax, profit-sharing, 2,383 4,223 3,102 (8,409) (24,390) appropriations (K€) Distributed earnings / / / / / Net earnings per share before 6.32 12.17 2.16 1.58 1.91 appropriations (K€) Net earnings per share 1.07 1.88 0.19 (0.50) (1.40) after tax and appropriations (K€)
Dividend per share / / / / / Average workforce 44 25 5 5 5 Payroll (K€) 1,825 1,124 240 66 275 Social security contributions and welfare benefits (K€) 748 411 86 21 119
(1) 5-for-1 stock split.
85 REPORT 4 BY THE STATUTORY AUDITORS
4.1 Report on consolidated accounts – financial year ending March 31, 2002
Pursuant to the assignment allocated to us by your General Meetings, we have audited the consolidated accounts of UBI SOFT ENTERTAINMENT S.A. for the financial year to March 31, 2002, as appended to this report.
The annual accounts have been prepared by the Board of Directors. It is our task to express an opinion on these accounts in the light of our audit.
We conducted our audit in accordance with accepted professional standards applied in France. These standards require due diligence in order to ascertain with reasonable certainty that the annual accounts contain no material anomalies. An audit consists of the examination, on a sampling basis, of evidence relevant to the amounts and to the disclosures made in the financial statements. It also involves an assessment of the accounting principles applied, of the significant estimates made in the preparation of the financial statements and of their overall presentation. It is our view that the audit we have carried out forms a true and fair basis for the opinion expressed below.
We hereby certify that, from the point of view of French accounting rules and principles, the consolidated accounts are honest and in order, and present an accurate picture of the assets, financial situation and income of the consolidated corporate entity and its constituent companies.
Without wishing to cast doubt upon the opinion expressed above, we would draw your attention to the following point, which is explained in the paragraph devoted to the major events of the financial year in the introduction to the appendix containing the consolidated accounts. Your company decided, with effect from the financial year ending March 31, 2002, to amortize business assets acquired since CRC regulation no. 99-02 on consolidated accounts came into force over a period of 20 years. This being the case, the company entered an appropriation of K€ 2,021 in the accounts for this financial year.
We have also checked the information provided in the report on the Group’s management. With the exception of the consequences of the actions described above, we have no further comments to make concerning the accuracy of this information or its consistency with the consolidated accounts.
Rennes and Paris, August 26, 2002
BY THE STATUTORY AUDITORS
COMPAGNIE CONSULAIRE CABINET ANDRE METAYER D’EXPERTISE COMPTABLE JEAN DELQUIE André METAYER Benoît FLECHON
86 FINANCIAL REPORT Report by the Statutory Auditors
4.2 General report on the financial year ending March 31, 2002
Dear Sir or Madam:
Pursuant to the assignment vested in us by your General Meetings, we hereby present our report on the financial year ended March 31, 2002 concerning:
the examination of the UBI Soft Entertainment S.A. annual accounts, as appended to this report, including the specific checks and information required by law.
The annual accounts have been prepared by the Board of Directors. It is our task to express an opinion on these accounts in the light of our audit.
I – OPINION ON THE ANNUAL ACCOUNTS
We conducted our audit in accordance with accepted professional standards applied in France. These standards require due diligence in order to ascertain with reasonable certainty that the annual accounts contain no material anomalies. An audit consists of the examination, on a sampling basis, of evidence relevant to the amounts and to the disclosures made in the financial statements. It also involves an assessment of the accounting principles applied, of the significant estimates made in the preparation of the financial statements and of their overall presentation. It is our view that the audit we have carried out forms a true and fair basis for the opinion expressed below.
We hereby certify that the financial statements, which have been drawn up in accordance with the current accounting rules and principles in France, give a true and fair view of the results obtained for the period in question and of the financial situation and assets of the Company at the end of this accounting period.
II – SPECIFIC CHECKS AND INFORMATION
In accordance with accepted professional standards, we have also carried out the specific checks required by law.
We have no comments to make concerning the accuracy of the information given in the Board of Directors' report, or in the documents sent to shareholders concerning the financial situation and annual accounts, or their consistency with the annual accounts.
In accordance with the law, we have satisfied ourselves that the various notices relating to acquisition of equity holdings and control and to the identity of the holders of share capital were given to you in the management report.
Rennes and Paris, August 27, 2002
BY THE STATUTORY AUDITORS
COMPAGNIE CONSULAIRE CABINET ANDRE METAYER D’EXPERTISE COMPTABLE JEAN DELQUIE André METAYER Benoît FLECHON
87 4.3 Special statutory auditor’s report on regulated agreements
FINANCIAL YEAR ENDING MARCH 31, 2002
Dear Sir or Madam:
In our capacity as the Statutory Auditors of your company, we hereby present our report on regulated agreements.
Pursuant to Article L.225-40 of the Commercial Code, we have been advised of the agreements for which prior authorization was given by your Board of Directors.
It is not our responsibility to look for other agreements that may exist, but to inform you, on the basis of the information given to us, of the essential features and details of the agreements of which we have been advised, but without passing judgment on their usefulness and validity.
According to the provisions of Article 92 of the decree of March 23, 1967, it is your responsibility to assess whether it is in your interests to enter into these agreements before approving them.
We have carried out our work in accordance with accepted professional standards. These standards require due diligence in order to ascertain that the information provided to us agrees with the basic documents from which it was derived.
1- AGREEMENTS MADE DURING THE YEAR FOR WHICH PRIOR AUTHORIZATION WAS GIVEN
1-1 WITH UBI PARTICIPATIONS Agreement authorized by the Board of Directors on January 31, 2002. Acquisition of 89,950 shares in UBI SOFT EDUTAINMENT S.A., for a total of 137,127.89 Euros.
1-2 WITH GAMELOFT FRANCE S.A. Agreement authorized by the Board of Directors on August 20, 2001. Acquisition of all shares comprising the share capital of GAMELOFT S.A. (Lausanne), a company under Swiss law, for the sum of 24,000 Euros.
1-3 WITH LUDIMEDIA Agreement authorized by the Board of Directors on December 31, 2001. Acquisition of 499 shares of LUDI FACTORY Ldt. for a total of 381,123 Euros.
1-4 WITH UBI SOFT ENTERTAINMENT G.M.B.H. Agreement authorized by the Board of Directors on February 22, 2002. Sale of all the shares of BLUE BYTE SOFTWARE GMBH & CO. KG for a total of 7,089,880 Euros.
1-5 WITH UBI SOFT DIVERTISSEMENT Inc. Agreement authorized by the Board of Directors on January 14, 2002. Loan granted to the subsidiary on January 18,2002 in the amount of CAD 2,000,000 and repaid at the LIBOR CAD rate plus 1.75% annually. Interest for the exercise amount to 4,964.13 Euros. The directors involved in the above agreements were: Yves GUILLEMOT, Michel GUILLEMOT, Claude GUILLEMOT, Gérard GUILLEMOT and Christian GUILLEMOT.
88 FINANCIAL REPORT Report by the Statutory Auditors
1-6 WITH MRS. YVETTE GUILLEMOT AND MESSRS YVES, MICHEL, CLAUDE, GÉRARD AND CHRISTIAN GUILLEMOT
Agreement authorized by the Board of Directors on July 9, 2001. Acquisition of six shares in UBI VENTURES for a total of 6 Euros, in order to gain ownership of the entire share capital of the said company with a view to its merger with/takeover by your company.
1-7 WITH RED STORM ENTERTAINMENT, Inc.
Agreement authorized by the Board of Directors on March 7, 2002. Sale of “TLC” shares for a total of twenty-four million dollars (24,000,000 USD). Director involved: Mr. Yves Guillemot.
2- AGREEMENTS REACHED DURING THE PREVIOUS FINANCIAL YEAR WHICH REMAINED IN FORCE DURING THIS FINANCIAL YEAR.
Moreover, pursuant to the decree of March 23, 1967, we have been informed that the following agreement, which was approved during a previous financial year, remained in force during the past financial year:
WITH LUDIMEDIA
Directors concerned: Messieurs Michel GUILLEMOT, Claude GUILLEMOT, Gérard GUILLEMOT, and Christian GUILLEMOT.
Agreement authorized by the Board of Directors on December 1, 1998. Under a license agreement for educational and cultural software, your company paid a total of 791,518.35 Euros (excluding tax) during the financial year ended March 31, 2002.
Rennes and Paris, August 26, 2002
BY THE STATUTORY AUDITORS
COMPAGNIE CONSULAIRE CABINET ANDRE METAYER D’EXPERTISE COMPTABLE JEAN DELQUIE André METAYER Benoît FLECHON
89 4.4 Report on remuneration
Article L.225-115-4° of the code de commerce. On the basis of our audit report on accounts closed on the 03/31/2002, we certify that the total of all remuneration, to the highest-paid employees of the company, amounted to € 275.331. This amount correspond to the amount registered in the accounts.
The Board of Directors
Rennes and Paris, August 26, 2002
BY THE STATUTORY AUDITORS
COMPAGNIE CONSULAIRE CABINET ANDRE METAYER D’EXPERTISE COMPTABLE JEAN DELQUIE André METAYER Benoît FLECHON
90 RAPPORT FINANCIER Resolutions
PROPOSED RESOLUTIONS SUBMITTED 5FOR APPROVAL TO THE COMBINED ORDINARY AND EXTRAORDINARY GENERAL MEETING ON SEPTEMBER 12, 2002
5.1 Agenda for the ordinary general meeting
FIRST RESOLUTION FOURTH RESOLUTION (Approval of the Company's financial statements for the (Allocation of net earnings for the financial year ended March financial year ended March 31, 2002) 31, 2002)
The General Meeting, having heard the Annual Report of the The General Meeting hereby resolves that the loss for the Board of Directors and the general report of the Statutory period to March 31, 2002, in the amount of € 24,389,657.33, Auditors, hereby approves the Company's financial statements should be carried forward. to March 31, 2002 as submitted to the meeting, in addition The General Meeting also notes that no dividends have to the transactions reflected in the statements or described been paid out during the preceding three financial years. in the reports.
SECOND RESOLUTION FIFTH RESOLUTION (Full and final discharge to be given to the Directors) (Approval of the consolidated financial statements for the year ended March 31, 2002) The General Meeting hereby gives its full and final discharge to the Directors for their management during the financial The General Meeting, having heard the Annual Report of the year ended March 31, 2002. Board of Directors and the general report of the Statutory Auditors, hereby approves the consolidated financial state- ments to March 31, 2002 as submitted to the meeting, in SIXTH RESOLUTION addition to the transactions reflected in the statements or (Appointment of a new alternate Statutory Auditor to replace described in the reports. Mr. Jean Delquie)
The General Meeting hereby resolves to appoint Mr. Le THIRD RESOLUTION Dorze of 90 Rue de Chateaugiron, 35000 Rennes, France, (Approval of contractual agreements of the types specified as alternate Statutory Auditor to replace Mr. Jean Delquie, in Articles L 225-38 and L 225-42 of the Code du Commerce) now standing down, for the duration remaining to run on the term of office of the latter, that is to say until the Annual The General Meeting, having heard the special report of the General Meeting called to approve the financial statements Statutory Auditors, hereby approves the contractual for the period to March 31, 2007. agreements of the types specified in Articles L 225-38 and L 225-42 of the Code du Commerce, and approves the conclusions reached. SEVENTH RESOLUTION (Authorization for the Company's purchase and sale of its own shares)
The General Meeting, proceeding in accordance with the conditions of quorum and majority laid down for Ordinary General Meetings, and having taken note of the report of the
91 Board of Directors and the prospectus approved by the This authorization shall remain valid for a maximum period of Commission des Opérations de Bourse, hereby authorizes 18 months from the date of the present General Meeting. the Board of Directors, in accordance with the provisions of It cancels and supersedes the authorization previously granted Article L 225-209 of the Code du Commerce, to trade in its to the Board of Directors by the Ordinary General Meeting own shares on the stock market. of September 29, 2001.
The purchase, sale or transfer of such shares may be effected In order to ensure proper implementation of the present by any means on the stock market or by private transaction, resolution, all necessary powers are vested in the Board of and may notably involve blocks of shares (without limit as to Directors for that purpose: volume), on one or more occasions and, where applicable, in for the drawing up of all and any prospectuses, the making the event of a public takeover bid. of all and any declarations and the performance of all and The maximum purchase price per share is hereby set at € 50.00 any formalities with respect to the Commission des and the minimum sale price per share at € 8.00. Opérations de Bourse and the Conseil des Marchés Financiers; The General Meeting hereby authorizes the Board of Directors to redeem shares in the Company up to a maximum of 10% to give all and any stock market orders and to enter into of the registered share capital, this being equal at the date all and any agreements to that effect; hereof to a maximum of 1,736,873 shares, with a maximum to carry out all and any other formalities, and generally to nominal stock value of € 86,843,650, as based on the maxi- do all things necessary. mum purchase price of € 50.00 authorized above.
The objectives of such trading would be, in order of priority, and depending on the opportunities arising, as follows: EIGHTH RESOLUTION (Ratification of the relocation of the principal place of business stabilization of the market price for the Company's stock of the Company in accordance with Article L 225-36 of the by systematic intervention against the dominant market Code du Commerce) trend for that stock; purchase and sale of shares to reflect the changing market situation; The General Meeting hereby ratifies, in accordance with Article L225-36 of the Code du Commerce, the relocation, delivery of shares on exercise of rights attaching to secu- as from January 2, 2002, of the Company's principal place rities conferring such entitlement on the holder, by repay- of business from 61 Rue Saint Hélier, Rennes (35000), ment, conversion, exchange, presentation of a voucher or France to 107 Avenue Henri Fréville BP 10704, 35207 Rennes any other manner; cedex 2, France, as determined by the Board of Directors at delivery of shares as payment or exchange of value in its meeting of January 2, 2002. connection with operations for growth by acquisition;
allocation to employees or officers of the Company and NINTH RESOLUTION affiliated entities, enabling them to benefit from the (Vesting of powers for legal formalities) Company's growth, of an option plan for the purchase or subscription of shares, or a corporate savings plan; The General Meeting hereby vests all necessary powers in the bearer of a copy or extract of the minutes of the present in order to facilitate the unblocking of cross equity holdings; General Meeting for the purpose of carrying out all and any cancellation of shares. filings or other formalities required by law.
Shares acquired in this way may be retained, sold, transferred or cancelled in accordance with the terms of authorization granted by the eleventh resolution on the agenda for the extraordinary business of the General Meeting.
92 FINANCIAL REPORT Resolutions
5.2 Agenda for the extraordinary general
FIRST RESOLUTION SECOND RESOLUTION (Partial transfer of assets to UBI EMEA SARL) (Partial transfer of assets to UBI EMEA SARL)
The General Meeting, having taken note of the agreement The General Meeting hereby places on record that the for the partial transfer of assets, the report of the Board transfer of that part of the assets of the Company forming of Directors, and the report of the official auditor appointed its business divisions relating to the production of video for the corporate split, proceeding under the conditions of games and their distribution in Europe, Asia and the Middle quorum and majority laid down for Extraordinary General East to UBI EMEA, shall be deemed effective only on completion Meetings, hereby declares that it approves all the provisions of the Extraordinary General Meeting of shareholders in UBI contained in the aforementioned agreement signed with UBI EMEA approving such transfer and effecting the associated EMEA, along with all its annexes, determining the transfer increase in that company's share capital. As a consequence, to the latter, the General Meeting hereby makes the continuing validity of the first resolution above dependent after adoption on the firstly, of the complete, independent division of the business satisfaction of this condition before March 31, 2003. relating to video game production, for which the assets thus transferred are valued at € 1,689,141.27, with associated € liabilities also transferred estimated at 1,476,998.49 and, THIRD RESOLUTION secondly, the complete, independent division of the business (Partial transfer of assets to UBI SOFT FRANCE SA) relating to video game sales distribution in Europe, Asia and The General Meeting, having taken note of the agreement the Middle East, for which the assets thus transferred are for the partial transfer of assets, the report of the Board valued at € 68,366,629.17, with associated liabilities also of Directors, and the report of the official auditor appointed transferred estimated at € 13,427,872.21, provided however for the corporate split, proceeding under the conditions of that it has been expressly agreed that UBI SOFT ENTER- quorum and majority laid down for Extraordinary General TAINMENT offers no joint and several guarantee for the Meetings, hereby declares that it approves all the provisions liabilities associated with the two aforementioned divisions, contained in the aforementioned agreement signed with UBI such liabilities having been entirely taken over by UBI EMEA, SOFT FRANCE, along with all its annexes, determining the and transfer to the latter of the complete, independent division of the business relating to video game sales distribution in that all transactions completed since April 1st, 2002 in connec- France, for which the assets thus transferred are valued at tion with the transferred divisions shall be deemed to have € 24,807,861.94, with associated liabilities also transferred been conducted, whether the result is in debit or credit, for estimated at € 2,088,288.88, provided however that it has the account and on behalf of UBI EMEA. been expressly agreed that UBI SOFT ENTERTAINMENT The General Meeting hereby notes that the above partial offers no joint and several guarantee for the associated transfer of assets shall be remunerated by means of the liabilities, these having been entirely taken over by UBI SOFT issuance by UBI EMEA of 11,952,104 new shares each with FRANCE, and a nominal value of 1 euro, all entirely paid up and all allocated to that all transactions completed since April 1st, 2002 in UBI SOFT ENTERTAINMENT with an effective date retroactive connection with the transferred division shall be deemed to to April 1st, 2002. have been conducted, whether the result is in debit or credit, The General Meeting hereby specifically approves the level of for the account and on behalf of UBI SOFT FRANCE. the premium on the above transfer of assets, in the amount The General Meeting hereby notes that the above partial of € 43,198,795.74. transfer of assets shall be remunerated by means of the The General Meeting hereby vests all necessary powers in issuance by UBI SOFT FRANCE of 1,342,335 new shares the bearer of a copy or extract hereof for the purpose of each with a nominal value of € 15.25, all entirely paid up, and carrying out all and any formalities required by law. all allocated to UBI SOFT ENTERTAINMENT with an effective date retroactive to April 1st, 2002.
93 The General Meeting hereby specifically approves the level of SIXTH RESOLUTION the premium on the above transfer of assets, in the amount (Empowerment of the Board of Directors to make increases € of 2,248,964.31. in the share capital, with accompanying maintenance of The General Meeting hereby vests all necessary powers in preferential share subscription rights, up to a maximum € the bearer of a copy or extract hereof for the purpose of nominal amount of 8,000,000) carrying out all and any formalities required by law. The General Meeting, proceeding under the conditions of quorum and majority laid down for Extraordinary General Meetings, having taken note of the report of the Board of FOURTH RESOLUTION Directors drawn up in accordance with the provisions of (Partial transfer of assets to UBI SOFT FRANCE S.A.) Article L 225-129 III of the Code du Commerce: The General Meeting hereby stipulates that the partial transfer to UBI SOFT FRANCE of the assets of the Company forming 1- Hereby empowers the Board of Directors to effect, on its complete and independent business division relating to one or more occasions, in the proportions and on the video game sales distribution in France shall be deemed effective dates it shall judge to be appropriate, the issuance, with only on completion of the Extraordinary General Meeting of accompanying maintenance of the preferential subscription shareholders in UBI SOFT FRANCE approving such transfer rights of the shareholders, both in France and abroad, of and effecting the associated increase in that company's share the following: capital. As a consequence, the General Meeting hereby makes (a) shares to which may nor may not be attached the continuing validity of the third resolution above dependent warrants for the purchase of stock in the Company, after adoption on the satisfaction of this condition before March 31, 2003. (b) securities giving a right, by subscription, conversion, exchange, redemption, presentation of a warrant, a combination of these means or in any other way, to the FIFTH RESOLUTION allocation, at any time or on a fixed date, of securities (Ratification of the stock option plan of October 25, 2001) representing a share in the company's capital and issued or to be issued for this purpose. Such securities The General Meeting, having taken note of the report of may be issued in any form compatible with the legislation the Board of Directors, proceeding under the conditions of in force, and notably those forms designated in Articles quorum and majority laid down for Extraordinary General L 225-150 to L 225-176 of the Code du Commerce and Meetings, hereby approves all provisions of the option plan Article L 228-91 of that same Code; for the subscription of stock as instituted, under the autho- rization by the Extraordinary General Meeting of October 19, (c) warrants granting their holders the right to sub- 2001, by the Board of Directors at its meeting of October scribe securities representing a share in the company's 25, 2001, in order that said plan may meet the conditions capital, and authorizes the Board of Directors to laid down by the Security Exchange Commission for qualification increase the share capital to permit said warrants to as an Incentive Stock Option by the American authorities and be exercised. The issuance of such warrants may be thus be eligible to benefit from the favorable treatment effected by means of a subscription offer subject to extended to this type of plan. the conditions stipulated above, or by allocation free of charge to the holders of existing stock, pursuant to The General Meeting hereby notes that the Company has Article L 228-95 of the Code du Commerce. granted under the aforementioned plan 44,605 share subscription options to officers and employees of the US- 2- Hereby resolves that the maximum total nominal value registered companies SINISTER GAMES Inc. and UBI SOFT of such increases in share capital which may be effected ENTERTAINMENT Inc., at a subscription price of € 34.51, immediately and/or at a future date by virtue of the powers € available for exercise, in a number of brackets, from April 25, delegated above, shall not be greater than 8,000,000, 2002 to April 24, 2006 inclusive. not including adjustments which may be made pursuant to legal requirements. The securities to which reference is made in paragraphs (a), (b) and (c) above, as issued under the present resolution, may be issued in foreign currencies, Euros or any monetary unit defined by reference to several currencies.
94 FINANCIAL REPORT Resolutions
3- Hereby decides that the amount of the immediate or The Board of Directors shall enjoy all powers, including deferred authorized capital increases carried out by virtue that of delegating same to its Chairman, subject to the of the powers delegated by the General Meeting to the conditions laid down in law, for the implementation of the Board of Directors pursuant to this resolution shall be present authority, most notably for the purpose of deter- charged to the total nominal amount of € 8,000,000 mining the dates and terms governing issues, the form provided for in this resolution. and characteristics of the securities involved, the governing prices and conditions, the amounts to be issued, the 4- Hereby decides that the shareholders may exercise subscription and effective dates, even where retroactive, their pre-emptive right as shareholders of record in accor- for the securities, the manner in which the issued shares dance with the law. In addition, the Board of Directors is or other securities are to be paid up, and, where applicable, hereby empowered to confer upon shareholders the right to define the terms on which they may be redeemed on to enter applications for the subscription of an adjusta- the stock market, and generally to take all relevant steps ble number of shares above their basic fixed entitlement, and to enter into any and all agreements in furtherance in proportion to the latter, and, in any event, up to the of the due completion of the planned issues, to place on limit of the application made. record the increases in share capital resulting from If adjustable subscription applications, and, if applicable, issues effected pursuant to the powers conferred hereun- applications for basic fixed entitlement do not take up der, and to make the corresponding amendments to the the total number of shares or other securities as defined Bylaws of the Company. In addition, the Board of Directors above, the Board may exercise one and/or other of the powers or its Chairman is empowered, where applicable, to charge described below, in the order it deems appropriate: to the issue premium(s) all and any costs, and notably limitation of the issue to the amount subscribed, subject expenses, dues and fees arising from the completion of to the condition that such amount must be equal to at the issues. least three-quarters of the planned issue; In the event of the issuance of debt securities, the Board of the freely determined allocation of all or part of the shares Directors shall enjoy all powers, including that of delegating and/or other securities not subscribed; same to its Chairman, notably to determine whether such the public offering of all or part of the shares and/or instruments are to be subordinated or not, to set their rate other securities not subscribed. of interest, their term, the repayment price, whether fixed or variable, with or without premium, the manner of their 5- Hereby stipulates that where applicable the above de- amortization in accordance with market conditions, and the legation of powers shall automatically entail, for the benefit terms on which such securities may grant entitlement to of holders of securities which may be issued with accom- stock in the Company. panying deferred entitlement to stock in the Company, the express relinquishment by the shareholders to their 8- Hereby resolves that the present empowerment shall preferential rights of subscription to which such securi- cancel any and all prior authority given for the issuance, ties entitle them. whether immediate and/or deferred, of stock in the Company with accompanying maintenance of preferential stock sub- 6- Hereby resolves that the maximum amount of debt scription rights. securities issues shall not exceed € 300,000,000, or a value equivalent to this in the event of issuance in a foreign currency or an accounting unit defined with reference to SEVENTH RESOLUTION several foreign currencies, at the date of the decision to (Empowerment of the Board of Directors to make increases proceed with the issue; provided however that such maxi- in the share capital of the Company with accompanying mum amount shall include all debt securities for the issuance cancellation of preferential stock subscription rights, up to of which powers have been delegated to the Board of a total nominal amount of € 8,000,000). Directors by the present General Meeting. The General Meeting, proceeding under the conditions of 7- Hereby resolves that the present powers are confer- quorum and majority laid down for Extraordinary General red upon the Board of Directors, in compliance with the Meetings, having taken note of the report of the Board of provisions of L 225-129 of the Code du Commerce, for a Directors and the special report of the Statutory Auditors, period of twenty-six months. drawn up in accordance with the provisions of Article L 225- 129 III of the Code du Commerce:
95 1- Hereby empowers the Board of Directors to effect, on scription of all or part of the issue during a period and on one or more occasions, in the proportions and on the the terms it shall determine. Such priority right of sub- dates it shall judge to be appropriate, the issuance, with scription shall not entail the creation of negotiable rights, accompanying cancellation of the preferential subscription but may, if the Board of Directors considers it appro- rights of the shareholders, both in France and abroad, of priate, be exercised on the basis of applications for both the following: basic fixed entitlement and additional adjustable amounts of stock. (a) shares to which may nor may not be attached warrants for the subscription of stock in the Company; 5- Hereby resolves that if subscription applications from existing shareholders and the general public do not take (b) securities giving a right - by subscription, conversion, up the total quantity of shares or other securities to be exchange, redemption, presentation of a warrant, a issued under the terms set forth above, the Board may combination of these means or in any other way - to exercise one and/or other of the powers described below, the allocation, at any time or on a fixed date, of in the order it deems appropriate: securities representing a share in the company's capital and issued or to be issued for this purpose. Such securities may be issued in any form compatible limitation, where applicable, of the issue to the amount with legislation in force, and notably those forms subscribed, subject to the condition that such amount designated in Articles L 225-150 to L 225-176 of must be equal to at least three-quarters of the planned the Code du Commerce and Article L 228-91 of that issue; same Code; the freely determined allocation of all or some of the shares and/or other securities not subscribed; (c) warrants granting their holders the right to subscribe securities representing a share in the company's capital, the public offering of all or some of the shares and/or and, in order to permit said warrants to be exercised, other securities not subscribed. hereby authorizes the Board of Directors to increase the 6- Hereby stipulates that, where applicable, the above Company's share capital. The issuance of such warrants empowerment shall automatically entail, for the benefit of may be effected either on the basis of a subscription holders of securities which may be issued with accom- offer subject to the conditions set forth here in above, or panying deferred entitlement to stock in the Company, by allocation free of charge to the holders of existing the express relinquishment by the shareholders of their stock, pursuant to Article L 228-95 of the Code du preferential rights of subscription to which such securities Commerce. entitle them. 2- Hereby resolves that the maximum total nominal value 7- Hereby resolves that the maximum principal amount of of such increases in share capital which may be effected debt securities issued cannot exceed € 300,000,000, or immediately and/or at a future date by virtue of the a value equivalent to this in the event of issuance in a foreign powers conferred as described above, shall not be greater currency or an accounting unit defined with reference to than € 8,000,000, not including adjustments which may several foreign currencies, at the date of the decision to be made pursuant to legal requirements. The securities proceed with the issue, provided however that such maxi- to which reference is made in paragraphs (a), (b) and (c) mum amount shall include all debt instruments for the above, as issued under the present resolution, may be issuance of which the Board of Directors has been empo- issued in Euros, foreign currencies or any monetary unit wered by the present General Meeting. defined by reference to several currencies. 8- Hereby resolves that the present empowerment of the 3- Hereby decides that the amount of the immediate or Board of Directors shall, in compliance with the provisions deferred authorized capital increases carried out by virtue of L 225-129 of the Code du Commerce, remain in force of the powers delegated by the General Meeting to the for a period of twenty-six months. Board of Directors pursuant to this resolution shall be charged to the total nominal amount of € 8,000,000 The Board of Directors shall enjoy all powers, including that provided for in this resolution. of delegating same to its Chairman, subject to the condi- 4- Hereby resolves to cancel the preferential subscription tions laid down in law, for the implementation of the present rights for shareholders with respect to the securities to authority, most notably for the purpose of determining the be issued, it being understood that the Board of Directors dates and terms governing issues, the form and characte- may grant shareholders an entitlement to priority sub- ristics of the securities involved, the governing prices and
96 FINANCIAL REPORT Resolutions
conditions, the amounts to be issued, the subscription and This maintenance of the powers conferred on Board of Directors effective dates, even where retroactive, for the securities, in the event of a public takeover bid involving the acquisition the manner in which the issued shares or other securities or exchange of Company stock, shall be valid as from the are to be paid up, and where applicable to define the terms date hereof and remain valid until the next Annual General on which they may be redeemed on the stock market, and Meeting of shareholders of the Company called to approve generally to take all relevant steps and to enter into all and the financial statements of the current financial year. any agreements in furtherance of the due completion of the planned issues, to place on record the increases in share capital resulting from issues effected pursuant to the NINTH RESOLUTION powers conferred hereunder, and to make the correspon- (Empowerment of the Board of Directors to issue stock in ding amendments to the Bylaws of the Company. In addition, connection with the Ubi Soft corporate savings plan) the Board of Directors or its Chairman is empowered, where The General Meeting, having taken note of the report of the applicable, to charge to the issue premium(s) all and any Board of Directors and the special report of the Statutory costs, notably expenses, dues and fees, entailed by the due Auditors, hereby authorizes the Board of Directors, subject completion of the issues concerned. to Article L 225-138 of the Code du Commerce, to increase In the event of the issuance of debt securities, the Board of the total amount of share capital on one or more occasions, Directors shall enjoy all powers, including that of delegating by issuance of shares payable in cash, the subscription of same to its Chairman, notably to determine whether such which shall be reserved for members of the salaried staff of instruments are to be subordinated or not, to set their rate the Company and affiliated companies under the conditions of interest, their term, the repayment price, whether fixed laid down in Article L 225-180 of the Code du Commerce, or variable, with or without premium, the manner of their where such employees are members of a corporate group amortization in accordance with market conditions and the savings plan. terms on which such securities may grant entitlement to The total number of shares which may be subscribed pursuant stock in the Company. to the present resolution on the date of the decision taken 9- Hereby resolves that the present empowerment shall by the Board of Directors shall not exceed 2.5% of the total cancel all and any prior authority given for the issuance, amount of stock comprising the share capital of the Company. whether immediate and/or deferred, of stock in the Company The present resolution automatically entails shareholders' with accompanying cancellation of preferential stock relinquishment of preferential subscription rights to the subscription rights and the power to grant periods for subscription of the shares to be issued pursuant to the priority subscription entitlement. above authorization.
This authorization shall be valid for two (2) years from the present General Meeting. EIGHTH RESOLUTION (Maintenance of authorizations for the issuance of securities All necessary powers are hereby vested in the Board of granting entitlement to stock in the Company in the event Directors, including that of delegating same to its Chairman, of a public takeover bid involving the acquisition or exchange subject to the conditions laid down in law, for the following of Company stock) purposes: to determine, in connection with each such increase in The General Meeting, proceeding under the conditions of share capital, whether the stock is to be subscribed quorum and majority laid down for Extraordinary General directly by the employees in the savings plan, or sub- Meetings, having taken note of the report of the Board of scribed through a mutual investment fund; Directors, and in accordance with the provisions of Article L 225-129 IV, hereby expressly resolves that the empowerment to determine all the terms and conditions governing the of the Board under the sixth and seventh resolutions above operations to be conducted, and notably the subscription for the purpose of increasing the share capital of the price for the new shares in accordance with Article Company shall remain in force in the event of the making of L. 443-5 of the Code du Travail; a public takeover bid involving the acquisition or exchange of to perform all and any procedures and formalities required stock in the Company. for the placing on public record of the increase(s) in share capital effected under the present authorization, to amend the Bylaws accordingly and more generally to do all things relevant and necessary.
97 TENTH RESOLUTION with regard to options for the purchase of stock: - the (Empowerment of the Board of Directors to grant options for price shall not be less than 80% of the average purchase the subscription and/or purchase of stock) price for shares held by Company under Articles L. 225- 208 and L. 225-209 of the Code du Commerce. The General Meeting, having taken note of the report of the Board of Directors and the special report of the Statutory The price set for the subscription or purchase of stock may Auditors, proceeding under the conditions of quorum and not be modified during the term of the option, other than to majority laid down for Extraordinary General Meetings, hereby effect the adjustments which must be performed by the authorizes the Board of Directors, pursuant to Articles Board of Directors in the various cases specified in Article L 225-177 et seq. of the Code du Commerce to grant, on L. 225-181 of the Code du Commerce. one or more occasions, to the employees and executives of Such options cannot be granted by the Board of Directors: the Company and affiliated companies, subject to the conditions during the period defined by the ten trading sessions laid down in Article L. 225-180 of the Code du Commerce, preceding and following the date on which the consoli- options granting entitlement to the subscription of stock in dated financial statements, or failing these the annual the Company (stock subscription options) and the purchase company financial statements, are published; of stock in the Company (stock purchase options): during the period between the date on which the mana- to make use of the present authorization within a maximum gement of the Company becomes aware of information period of thirty-eight months from the date of the present which, if it were in the public domain, could have a signi- General Meeting; ficant impact on the market price for stock in the to stipulate that the present authorization automatically Company, and a date ten trading sessions after that on entails, for the benefit of those granted subscription which such information is effectively made public. options, the express relinquishment by shareholders of The General Meeting hereby grants all necessary powers to their preferential rights to the subscription of the shares the Board of Directors to set the maximum period for the issued as and when the subscription options are exercised. exercise of options, which shall not exceed ten (10) years It is made clear however that the Board of Directors may from the date of allocation, and the period from the date of not grant options to the officers or employees of the exercise of the option during which the stock must be retained Company or affiliated companies subject to the conditions by the beneficiaries, which shall not exceed three (3) years laid down in Article L. 225-180 of the Code du Commerce, from the date of exercise. where they hold more than 10% of the total share capital, in accordance with the provisions of Article L 225-182 of In accordance with Article L 225-184 of the Code du Commerce, the Code du Commerce. the Board of Directors shall inform the shareholders each year, in a report to the Annual General Meeting, of all opera- The total number of new shares which may be subscribed or tions conducted under the terms of the present resolution. purchased by the beneficiaries of the options granted by the Board of Directors shall not exceed 2.5% of the total In the event that the options for the subscription and/or the amount of stock comprising the share capital of the Company purchase of stock are allocated to individuals domiciled or at the date of allocation of such options by the Board and resident abroad, or to individuals domiciled or resident in prior to the inclusion of the shares possibly issued following France but subject to foreign tax regimes, the Board may the exercise of the stock subscription options granted, amend the terms applicable to such subscription and/or taking into account any adjustments which may be made. purchase options in order to ensure that they comply with the provisions of governing foreign law and ensure the most The subscription or purchase price to be paid by beneficiaries favorable tax treatment possible. To this end the Board of the options shall be set by the Board of Directors on the may, at its sole discretion, adopt one or more sub-plans for date on which it grants such options, subject to the following: each category of employees which are subject to foreign with regard to options for the subscription of stock: - law. Some of these options may, most notably, be intended the price of subscription options shall not be less than as Incentive Stock Options in the meaning of the United State 80% of the average opening price during the twenty trading Internal Revenue Code and may be made subject to further sessions preceding the day of the Board meeting at which conditions compliant with the spirit of this type of plan in such options are granted; order to meet the requirements of this specific regime.
98 FINANCIAL REPORT Resolutions
The increase in the share capital of the Company resulting TWELFTH RESOLUTION from the exercise of subscription options shall be deemed to (Ratification of the amendment made to Article 2 of the have been duly effected on the sole basis of the declaration Bylaws regarding the principal place of business, following of exercise of the option, accompanied by the subscription its relocation as determined by the Board of Directors at its form and payment of the applicable amount either in cash or meeting on January 2, 2002) by offset against debts due. The General Meeting hereby ratifies the amendment made All necessary powers are hereby granted to the Board of to Article 2 of the Bylaws regarding the principal place of Directors for the performance of the required formalities business, following its relocation as determined by the Board and to make the corresponding amendments to the Article of Directors at its meeting on January 2, 2002. in the Bylaws specifying the amount of the Company's share capital. THIRTEENTH RESOLUTION (Vesting of powers for legal formalities) ELEVENTH RESOLUTION The General Meeting hereby vests all necessary powers in (Empowerment of the Board of Directors to reduce the the bearer of a copy or extract of the minutes of the present share capital of the Company by the cancellation of stock) General Meeting for the purpose of carrying out all and any filings or other formalities required by law. The General Meeting, having taken note of the report of the Board of Directors and the special report of the Statutory Auditors, hereby authorizes the Board of Directors: to cancel shares acquired under the authorization given to it under the sixth resolution on the agenda for the ordinary business of the Meeting, up to a limit equal to 10% of the total share capital in any period of twenty- four months, and to make corresponding reductions in the share capital by charging to available premiums and reserve funds the difference between the redemption value of the cancelled stock and its nominal value;
to make such reductions, to place on record reductions in share capital entailed by cancellations of stock autho- rized by the present resolution, to make corresponding amendments to the Bylaws and, more generally, to carry out all and any necessary formalities.
The present authorization is hereby given for a maximum period of eighteen months.
99 6 GENERAL INFORMATION
6.1 General information on Ubi Soft Entertainment S.A.
6.1.1 Company name and registered the distribution of all kinds of multimedia and audiovisual office products, especially through new communication techno- logies such as networks and on-line services; The Extraordinary General Meeting held on March 20, 1996 the purchase, sale and trading in general, in all its forms, replaced the previous company name, Ubi Soft S.A., with Ubi both import and export, through rental or otherwise, of any Soft Entertainment S.A. computer and word-processing hardware with their acces- The Extraordinary General Meeting of February 15, 1999 sories, as well as any hardware or products for reproducing transferred the registered office to 61, rue St Hélier in Rennes sound and pictures; (35000). The business address of the company is 28, rue Armand Carrel the marketing and management of all data processing and 93100 Montreuil, France. word processing computer programs;
support, assistance and training relating to the above- mentioned fields; 6.1.2 Legal status the investment of the company in any operation which may A limited liability company governed by the Commercial Code. relate to its objects by creating new companies, subscribing to or purchasing shares or corporate rights, by mergers or by other means, 6.1.3 Jurisdiction and in general any operation related directly or indirectly Company subject to French law. to the above objects or similar or related purposes likely to promote the growth of the company.
6.1.4 Company founding and expiration dates 6.1.6 Trade and Companies Register
The company was founded on March 28, 1986 for a term of The company is registered in the Trade and Companies Register 99 years, expiring on April 9, 2085, unless it is extended or under the number RENNES: B 335 186 094 wound up earlier. APE code: 921 G
6.1.5 Objects of the company 6.1.7 Location of legal documents (Article 3 of the Articles regarding the company of Association) The Articles of Association, financial statements and reports, Ubi Soft Entertainment S.A. has the following objects in France and minutes of General Meetings may be consulted at the and abroad, directly and indirectly: abovementioned registered business office.
the creation, publishing and distribution of all kinds of multimedia, audiovisual and computer products, especially 6.1.8 Accounting period video games, educational and cultural software, cartoons and literary, cinematographic and televisual works on any The company’s accounting period starts on April 1 and ends media, current or future; on March 31 each year.
100 FINANCIAL REPORT General Information
6.1.9 Statutory distribution The General Meetings shall be held at the registered office of profits (Article 17 of or at any other place specified in the calling notice. the Articles of Association) They shall be chaired by the Chairman of the Board of Directors or, failing this, by a director appointed for the purpose by the The income from the financial year, once operating expenses, General Meeting. depreciation and provisions have been deducted, constitutes the earnings. The following items are deducted from the profits Every shareholder has the right, upon proof of his or her for the financial year after deducting losses carried forward identity, to take part in General Meetings by attending in from pre-vious years where appropriate: person, by returning a postal voting form, or by appointing a proxy, subject to the following conditions: the sums to be allocated to reserves in accordance with the law or the Articles of Association and, in particular, holders of registered shares or voting rights certificates at least 5% to make up the statutory reserve fund. This must be registered by name in the company register; allocation is no longer obligatory when the said fund reaches holders of bearer shares must deposit, in the places specified an amount equal to one-tenth of the share capital. It is in the calling notice, a certificate issued by an authorized resumed if for any reason the statutory reserve falls intermediary to the effect that their shares held on the below this fraction; accounts will be unavailable until the date of the Meeting. any amounts which the General Meeting, in response to a These formalities shall be completed at least five days before proposal by the Board of Directors, deems necessary to the Meeting. allocate to extraordinary or special reserves or to carry forward. Only individuals owning at least ten shares may attend Ordinary General Meetings. Several shareholders may pool The balance shall be distributed to the shareholders. their shares to meet this minimum requirement and be However, unless there is a reduction in capital, no distribution represented by one of their number. may be made to shareholders where the equity capital is, or would be if such distribution were to take place, less than In all General Meetings, voting rights attached to shares the amount of the capital plus the reserves, which by law or which include the right of usufruct shall be exercised by the under the terms of the Articles of Association, may not be usufructuary. distributed. The General Meeting may, in accordance with the provisions Passing of threshold (Article 6 of the Articles of Association) of Article 351 of the Commercial Code (formerly Article 361 Any shareholder, acting alone or in concert, subject to the of Law no. 66-537 of July 24, 1966), grant each shareholder thresholds covered by Article -7-1 paragraph 1 of the Com- the option of receiving all or part of the dividends to be mercial Code, who holds directly or indirectly at least 1% of distributed or the interim dividends in cash or in the form of the company’s share capital or voting rights, or a multiple shares. of this percentage which shall be less than or equal to 4%, shall be required to notify the company thereof in a letter 6.1.10 General Meetings sent by recorded delivery within the period laid down in Article (Article 14 of the Articles L.233-7 (formerly Article 356-1 of the Law of July 24, 1966). of Association) The notification required under the previous paragraph for any passing of the threshold of a multiple of 1% of the capital General Meetings shall consist of all the shareholders, with or voting rights is also required whenever such a share in the exception of the company itself, Ubi Soft Entertainment the capital or voting rights drops below the above-mentioned S.A. They shall represent the totality of shareholders. threshold.
General Meetings shall be called and held in accordance with Failure to report any such passing of both legal and statu- the conditions set by the Commercial Code and by the tory thresholds shall result in the withdrawal of voting Companies Act of March 23, 1967. rights under the conditions laid down in Article L.233-14 of
101 the Commercial Code (formerly Article 356-4 of the Law of grant stock options to the employees and/or officers of July 24, 1966) if requested by one or more shareholders the company and/or its Group. who together hold at least 5% of the capital or voting rights As part of this share buyback program, by August 1st, 2002 of the company. the company had acquired 858,141 of its own shares, representing 4.941% of the share capital. Buyback program
A share buyback program was authorized by the combined Consent clause Ordinary and Extraordinary General Meeting of September The Articles of Association of Ubi Soft Entertainment S.A. 29, 2001. In accordance with Articles L 225-209 et seq. do not contain any consent clause. of the Commercial Code the objectives of this program are, in order of priority, to: stabilize the company's stock price; hold and dispose of the shares purchased; deliver shares in payment or exchange for the purposes of external growth;
6.2 General information on the capital
6.2.1 Share capital Voting rights which are double those conferred on other shares based on the proportion of the corporate assets As of March 31, 2002 the total share capital was € 5,384,306.92 which they represent shall be attributed to all fully paid-up representing a total of 17,368,732 shares of the same category, shares which are proved to have been registered for at least each with a face value of € 0.31. two years in the name of the same shareholder.
In the event that the company assets are increased by the 6.2.2 Conditions for amending incorporation of reserves, profits or issue premiums, this the capital and the respective right is also conferred, upon issue, on registered shares rights of the various categories awarded free of charge to a shareholder on the basis of old of shares (Articles 7 and 8 shares by virtue of which he/she enjoys this right. of the Articles of Association)
Each share shall give rights to ownership of a share of the corporate assets and any liquidating dividends equal to the proportion of the share capital which it represents.
Whenever it is necessary to own several shares in order to exercise a right of any kind, especially in the event of the exchanging, consolidation or allocation of shares, or following an increase or reduction in share capital, whatever the proce- dures adopted, or a merger or any other transaction, holders of shares which are fewer in number than that required may only exercise their rights on condition that they arrange for themselves to be part of a group, or for the purchase or sale of the number of shares or rights which constitute the necessary odd lots.
102 FINANCIAL REPORT General information on the capital
6.2.3 Authorized unissued capital a) At a meeting on September 29, 1997, the Board of Directors used the authorization granted by the combined Ordinary and Extraordinary General Meeting of September 2, 1997 in order to issue convertible bonds without subscription right to a value of M€ 15.275 (FF 100.2 million).
Chief characteristics of the first bond issue:
Number and face value: 167,000 bonds with a face value of € 91.47 (FF 600) Issue price: € 91.47 (FF 600) per bond Due date and settlement day: October 10, 1997 Term of bond: 5 years and 173 days Annual yield: 2% per year, or € 1.83 (FF 12) per bond, payable on April 1 of each year starting April 1, 1998 Gross redemption yield: 4.26% on October 10, 1997 Normal redemption: redeemed in full by April 1, 2003 by redemption at a price of € 103.91 (FF 681.58), or 113.6% of the issue price On March 31, 2002 the first bond is closed. 166,364 bonds were converted in the 2001-2002 financial year, with 40,075 bonds remaining to be converted. 636 bonds have been repaid early, from May 21 to August 20 2001. b) The meeting of the Board of Directors of June 30, 1998 made use of the authorization from the Extraordinary General Meeting of the same date to issue convertible bonds without subscription right to a value of M€ 51.83 (FF 340 million).
Chief characteristics of the second convertible bonds issue:
Number and face value: 314,815 bonds with a face value of € 164.64 (FF 1,080) Issue price: € 164.64 (FF 1,080) per bond As a consequence of the 5-for- 1 stock split, two bonds allow five shares to be subscribed with a face value of € 0.31 Due date and settlement day: July 16, 1998 Term of bond: 7 years Annual yield: 3.80% per year, or € 6.26 (FF 41.04) per bond, payable on July 16 of each year starting July 16, 1999 Gross redemption yield: 3.80% on July 16, 1998 Normal redemption: redeemed in full by July 16, 2005 by redemption at a price of € 164.64 (FF 1,080) per bond, or 100% of the issue price
163,721 bonds were converted, 1,019 in the 2001-2002 financial year. 151,094 bonds remaining to be converted.
103 c) At its meeting on November 13, 2001, with the authorization granted by the Extraordinary General Meeting of October 19, 2001 the Board of Directors agreed to issue bonds with the option of conversion into and/or exchange for new or existing shares in the company to a total maximum value of about 172.5 million Euros.
Chief characteristics of the 1999 equity warrants:
Number and face value : 3,150,000 bonds with a face value of € 47.50 Issue price: € 47.50 Due date and settlement day : November 30, 2001 Term of bond : 5 years Annual yield: 2.50% per year, payable on November 30 of each year. Gross redemption yield: 4.50% on November 30, 2001 (if there is no conversion and/or exchange of shares, and if there is no accelerated amortization). € Normal redemption: redeemed in full by November 30, 2006 by redemption at a price of € 52.70 (FF 1,080) per bond, or 110.94% of the issue price.
€ As of March 31, 2002, no bond had been exercised.
d) During its meeting on October 19, 1999, the Board of Directors used the authorization granted by the combined Ordinary and Extraordinary General Meeting held on 30 June 1998 to issue 372,058 shares with equity warrants to a value of M€ 50.61 (FF 332 million).
Chief characteristics of the 1999 equity warrants:
Initial number of warrants: 372,058 Issue price: € 136 (FF 892.10) Strike price: € 170 (FF 1115.13) Strike period: November 3, 1999 to November 2, 2002
Warrants not exercised by the end of this period will lose all value and be cancelled. As of 03/31/02, 340,516 warrants remained to be exercised.
e) During its meeting on March 12, 2001, the Board of Directors used the authorization granted by the Extraordinary General Meeting held on March 9, 2001 to issue 53,266 equity warrants with a face value of € 16,240.70 (FF 106,532).
Chief characteristics of the March 12, 2001 equity warrants:
Initial number of warrants: 53,266 Issue price: € 0.01 Strike price: € 40.29 Strike period: from December 28, 2001 to March 11, 2006
Warrants not exercised by the end of this period will lose all value and be cancelled. As of March 31, 2002, no equity warrant had been exercised.
104 FINANCIAL REPORT General information on the capital
f) During its meeting on March 19, 2001, the Board of Directors used the authorization granted by the Extraordinary General Meeting held on March 9, 2001 to issue 9,044 equity warrants with a face value of € 2803.64 (FF 18,088).
Chief characteristics of the March 19, 2001 equity warrants:
Initial number of warrants: 9,044 Issue price: € 0.01 Strike price: € 32.072 Strike period: March 19, 2002 through March 18, 2006 Warrants not exercised by the end of this period will lose all value and be cancelled. As of March 31, 2002, no equity warrant had been exercised.
6.2.4 Securities which do not grant employee stock options for 250,000 shares on represent the capital October 23rd, 1998, Not applicable grant employee stock options for 40,471 shares on December 8th, 2000, grant employee stock options for 400,000 shares on 6.2.5 Identification of holders April 9th, 2001, of securities grant Incentive Stock Options for 44,605 shares to the Article 5 of the Articles of Association authorizes the company employees of the American subsidiaries on October 25, to set up a procedure for identifying holders of its securities. 2001. On March 31, 2002, 827,594 options entitling the grantees to the same number of Ubi Soft shares were still unexercised. 6.2.6 Potential capital
The Extraordinary General Meeting of June 15, 1996 and 6.2.7 Equity issue reserved the combined Ordinary and Extraordinary General Meeting of for employees September 2, 1997 authorized the Board of Directors to grant stock options to employees of the Ubi Soft Group, The extraordinary portion of the Combined Ordinary and entitling them to subscribe for a total of no more than Extraordinary General Meeting of September 13, 2000, 1,000,000 shares with a face value of FF 2, giving a maximum authorized the Board of Directors to carry out a new UBI SOFT total increase in capital of FF 2 million in face value. ENTERTAINMENT equity issue reserved for employees of the The Extraordinary General Meeting of September 13, 2000 company and its French subsidiaries, to a maximum of 2.5% authorized the Board of Directors to grant stock options to of the total shares comprising the company's share capital employees of the Group, entitling them to subscribe for a at the time the authorization was used, in particular by total number of shares not exceeding 2.5% of the total shares means of a Company Investment Fund (hereafter referred to comprising the company's share capital at the time the as “FCPE”). authorization was used by the Board of Directors. At its meeting on April 10, 2001, the Board of Directors Using the authorizations granted by the Extraordinary used the authorization granted by the Combined Ordinary General Meeting of June 15, 1996, by the Extraordinary and Extraordinary General Meeting of September 13, 2000, portion of the Combined Ordinary and Extraordinary General setting the subscription price of the shares to be issued at Meeting of September 2, 1997, and by the Extraordinary 26.72 Euros each, and specified that these shares would be portion of the Combined Ordinary and Extraordinary General subscribed by the Ubi Actions Company Investment Fund. Meeting of September 13, 2000, the company's Board of The employees subscribed 47,007 shares via the Ubi Directors resolved to: Actions FCPE. The Board of Directors took note of this equity grant employee stock options for 250,000 shares on issue at its meeting on July 13, 2001. June 15th, 1996, grant employee stock options for 250,000 shares on April 22nd, 1997,
105 1st Plan 2nd Plan 3rd Plan 4th Plan 5th Plan 6th Plan
Date of the General Meeting 06.15.96 09.02.97 09.02.97 09.13.00 09.13/00 10.25.01 Date of Board of Directors’ meeting 06.15.96 04.22.97 10.23.98 12.08.00 04.09/01 04.24.06
SHARE SUBSCRIPTION OR PURCHASE OPTIONS GRANTED DURING THE FINANCIAL YEAR
Total number of options granted 250,000 250,000 250,000 40,471 400,000 44,605 including members of the executive committee 0 0 0 0 0 0 Start date for exercising options 06.15.97 04.22.01 10.23.02 12.08.01 04.09.02 04.25.02 Expiration date for options 06.15.01 04.22.02 10.23.03 12.08.05 04.09.06 04.24.06 Option prices FF 36 FF 79.40 FF 133.80 € 38 € 34.51 € 34,51 Arrangements for exercising the options 25% / / 25% 25% 25% per year per year per year per year
SHARE SUBSCRIPTION OR PURCHASE OPTIONS EXERCISED DURING THE FINANCIAL YEAR Total number of options exercised 56,431 148,457 2,180 0 0 0 as of March 31, 2002
SHARE SUBSCRIPTION OR PURCHASE OPTIONS CANCELLED DURING THE FINANCIAL YEAR
Total number of options cancelled 0 0 0 0 0
OPTIONS DE SOUSRIPTION OU D’ACHAT D’ACTIONS RESTANTES
Total number of remaining options 0 97,795 244,725 40,471 400,000 44,605
106 FINANCIAL REPORT General information on the capital
Number Expiry Price Plan no date
SHARE SUBSCRIPTION OR PURCHASE OPTIONS GRANTED DURING THE FINANCIAL YEAR
Options granted to corporate officers 0 Options granted to the ten non-officer employees with the highest number of options: - 1 employee 18,000 04.09.06 € 34.51 5 - 1 employee 13,500 04.29.06 € 34.51 6 - 2 employees (information for each) 9,000 04.09.06 € 34.51 5 - 1 employee 5,000 04.24.06 € 34.51 6 - 1 employee 5,400 04.09.06 € 34.51 5 - 2 employees (information for each) 4,500 04.09.06 € 34.51 5 - 2 employees (information for each) 3,600 04.09.06 € 34.51 5
SHARE SUBSCRIPTION OR PURCHASE OPTIONS EXERCISED DURING THE FINANCIAL YEAR Shares subscribed for purchased per each corporate officer 0 exercising options held Subscribed or purchased shares exercising the options held by each of the ten non-officer employees with the highest number of purchased or subscribed shares: - 1 employee 14,840 06.15.01 € 5.49 1 - 1 employee 12,250 06.15.01 € 5.49 1 - 1 employee 8,340 06.15.01 € 5.49 1 - 3 employees (information for each) 6,000 04.22.02 € 12.10 2 - 2 employees 2,505 06.15.01 € 5.49 1 - 5 employees (information for each) 2,250 04.22.02 € 12.10 2
107 6.2.8 Movements in share capital
Date Number Number Amount of increase Share Issue Accumulated Nature of transaction of shares of shares in capital face premium amounts (cumulative) value in capital (in FF) * (in FF) * (in FF) *
by cash by contribution capitalization (in FF) * (in FF) *
03/1986 Formation of the company 2,500 2,500 100 - 250,000
09/1990 Increase in share capital through 22,500 25,000 2,250,000 100 - 2,500,000 incorporation of reserves
09/1991 Increase in share capital through 25,000 50,000 2,500,000 100 - 5,000,000 incorporation of reserves
02/1993 Increase in share capital through 30,000 80,000 3,000,000 100 - 8,000,000 incorporation of reserves
01/1994 Increase in share capital through 20,000 100,000 2,000,000 100 - 10,000,000 incorporation of reserves
03/1996 Increase in share capital through 50,000 150,000 5,000,000 100 - 15,000,000 incorporation of reserves
03/1996 Increase in share capital through 50,000 200,000 5,000,000 100 - 20,000,000 cash contributions
03/1996 Split of the FF100 security to FF 10 2,000,000 10 - 20,000,000
06/1996 Increase in share capital 222,300 2,222,300 2,223,000 10 53,352,000 22,223,000 through introduction
03/31/97 Increase in share capital following 818 2,223,118 8,180 10 139,060 22,231,180 exercise of subscription options
03/31/98 Increase in share capital following 1,225 2,224,343 12,250 10 208,250 22,243,430 exercise of subscription options
03/31/99 Increase in share capital following 21,510 2,245,853 215,100 10 11,005,610 22,458,530 exercise of subscription options and conversion of bonds
11/03/99 Capital increase following issue 399,328 2,645,181 3,993,280 10 343,205,937 26,451,810 of shares with warrants, conversion of stock options and conversion of bonds
01/17/00 13,225,905 2 26,451,810 5-for-1 stock split
01/17/00 Capital increase following conversion of stock options, 191,270 13,417,175 2 18,879,641 26,834,350 bonds and warrants.
108 FINANCIAL REPORT General information on the capital
Movements in share capital (follows)
Date Number Number Amount of increase Share Issue Accumulated Nature of transaction of shares of shares in capital face premium amounts (cumulative) value in capital (in FF) * (in FF) * (in FF) *
by cash by contribution capitalization (in FF) * (in FF) *
03/14/00 Capital increase following issue 2,725,363 16,142,538 13,626,815 2 1,190,520,727 32,285,076 of shares and conversion of stock options, bonds and warrants
03/31/00 Capital increase following 435,830 16,578,368 2,179,150 2 92,594,390 33,156,736 conversion of stock options, bonds and warrants
04/11/01 Capital increase following 330,754 16,909,122 661,508 2 47,956,367 33,818,244 conversion of stock options and bonds and the exercising of warrants
07/13/01 Equity issue reserved for employees 181,543 17,090,665 25,941,828 2 25,578,742 34,181,330 (PEE), conversion of stock options and bonds, and exercising of warrants
10/19/01 Conversion of share capital € 87,195.98 € 0,31 € 5,298,106.15 into Euros (increase in face value of share)
22/04/02 Equity issue as a result 278,067 17,368,732 € 4,292,812.97 € 0,31 € 4,206,612.20 € 5,384,306.92 of the conversion of stock options and bonds and the exercising of warrants
* On October 19, 2001 capital converted in Euro.
109 6.3 Distribution of capital and voting rights as of August 1, 2002
Capital Voting rights Numbe % Number of % of shares voting rights
Guillemot Brothers S.A.* 1,915,227 11.027% 3,830,529 21.123% Claude Guillemot 147,772 0.857% 148,772 0.820% Yves Guillemot 204,671 1.178% 204,671 1.129% Michel Guillemot 164,674 0.948% 164,674 0.908% Gérard Guillemot 164,666 0.948% 164,666 0.908% Christian Guillemot 132,006 0.760% 132,006 0.728% Other Guillemot family members 40,875 0.235% 40,875 0.225% UBI Soft Entertainment S.A. 858,141 4.941% / / Gameloft S.A. 301,933 1.738% / / Public** 13,437,767 77.368% 13,447,848 74.159% Total 17,368,732 100% 18,134,041 100%
* Guillemot Brothers S.A. (formerly Ubi Participations S.A.) took over Guillemot Participations S.A on July 22, 2002. Ownership structure of Guillemot Brothers S.A. (oldly Ubi Participations S.A.).
Name Number % Number % of shares of voting rights Claude Guillemot 17,674,320 20% 17,674,320 20% Yves Guillemot 17,674,320 20% 17,674,320 20% Michel Guillemot 17,674,320 20% 17,674,320 20% Gérard Guillemot 17,674,320 20% 17,674,320 20% Christian Guillemot 17,674,320 20% 17,674,320 20% Marcel Guillemot 311 ns 311 ns Yvette Guillemot 311 ns 311 ns Total 88,372,222 100% 88,372,222 100%
** the shares and voting rights held by the Group's employees represent a very small percentage.
The percentage of the capital held by the entities on the Board On June 15, 2001, Guillemot Brothers S.A. acquired a double of Directors is 4.691%. voting right for the pure registered shares, which it had held The percentage of voting rights held by the entities on the Board for two years. of Directors is 4.493%. There is no shareholder's pact between Guillemot Brothers, The change in ownership structure was caused by the various Claude, Michel, Yves, Gérard, Christian, Marcel and Yvette equity issues, which resulted in a dilution of stock ownership, and Guillemot, nor is there any agreement between the above- to the transfer of shares by the Guillemot brothers and Ubi mentioned shareholders and outside shareholders. Participations, in particular as part of acquisitions.
110 FINANCIAL REPORT Information
The following shareholders held more than 1% of the share capital:
Oppenheimer Funds Inc. 10,54% Société Générale Asset Management 3,90% Invesco Asset Management Ldt. 3,89% Etoile Gestion 2,02% Finama Asset Management 1,84% AGF Asset Management 1,63% Royal London Asset Management 1,49% Ecureuil Gestion 1,20% BNP PARIBAS Asset Management 1,05% CIC gestion S.A. 1,03%
The voting right percentages are similar to the percentages of the capital owned.
6.4 Changes in capital and voting rights over the past three financial years
03.31.99 Capital Voting rights Number % Number % of shares of voting rights
Claude Guillemot 235,399 10.481% 465,141 13.657% Michel Guillemot 237,799 10.588% 469,941 13.798% Yves Guillemot 235,395 10.481% 465,137 13.657% Gérard Guillemot 237,799 10.588% 469,941 13.798% Christian Guillemot 235,449 10.484% 460,191 13.510% Suzanne Guillemot 2,400 0.107% 4,800 0.141% Nathalie Guillemot 2,400 0.107% 4,800 0.141% Joëlle Guillemot 2,400 0.107% 4,800 0.141% Yvette Guillemot 2,400 0.107% 4,800 0.141% Total for Guillemot Family 1,191,441 53.051% 2,349,551 68.984% Public and Group employees 1,054,412 46.949% 1,056,687 31.016% Total 2,245,853 100% 3,406,238 100%
111 03.31.99 Capital Voting rights Number % Number % of shares of voting rights
Ubi Participations S.A. 4,206,263 25.371% 4,206,263 24.386% Claude Guillemot 152,045 0.917% 293,979 1.704% Michel Guillemot 152,024 0.917% 284,002 1.647% Yves Guillemot 152,044 0.917% 284,022 1.647% Gérard Guillemot 152,036 0.917% 284,014 1.647% Christian Guillemot 152,280 0.919% 284,258 1.648% Suzanne Guillemot 12,000 0.072% 12,000 0.069% Nathalie Guillemot 12,000 0.072% 12,000 0.069% Joëlle Guillemot 12,000 0.072% 12,000 0.069% Yvette Guillemot 12,000 0.072% 12,000 0.069% Total for Guillemot family 5,014,692 30,246% 5,684,538 32.955% Public and Group employees 11,563,676 69,754% 11,563,900 67.045% Total 16,578,368 100% 17,248,438 100%
08.09.01 Capital Voting rights (following acquisition of the double voting right by UBI PARTICIPATIONS S.A
Number % Number % of shares of voting rights
Ubi Participations S.A. 2,693,302 15.76% 5,065,179 27.03% Claude Guillemot 147,873 0.87% 147,873 0.79% Michel Guillemot 159,873 0.87% 159,873 0.79% Yves Guillemot 145,853 0.94% 147,853 0.85% Gérard Guillemot 159,865 0.94% 159,865 0.85% Christian Guillemot 148,108 0.87% 148,108 0.79% Other members of Guillemot Family 48,000 0.28% 48,000 0.25% Total for Guillemot family 3,504,874 20.51% 5,876,751 31.358% Ubi Soft Entertainment S.A. 392,068 2.29% - - Ubi Ventures S.A. 338,480 1.98% - - Ludigames S.A. 74,365 0.44% 74.365 0.40% Gameloft.com S.A.* 74,365 0.44% 74.365 0.40% Public and Group employees 12,706,513 74.32% 12.715.058 67.85% Total 17,090,665 100% 18.740.539 100%
* Gameloft S.A took over Ludigames S.A on March 29, 2002.
112 FINANCIAL REPORT Information
6.5 Securities market
General information on the market for the issuers’ securities
Euroclear code: 5447 (Bloomberg : UBI.FP ; Reuters : UBIP.PA) Listing market: Euronext-Paris - Premier Marché (Main Market) Shares listed on 03/31/02: 17,368,732 Market capitalization on 03/28/02: 590 million Euros at the closing market price (€ 33.98). Introduction price: FF 250 (€ 38.11) before the 5-for-1 stock split on january 17, 2000.
Month Maximum price Minimum price Average price (1) Trading volume Traded capital (€) (€) (€) (€ million)
April 2001 46.90 32.39 38.04 580,976 22.995 May 2001 48.09 41.60 44.68 1,446,101 64.846 June 2001 45.98 37.10 41.42 993,085 40.215 July 2001 42.84 36.10 39.12 927,798 36.293 August 2001 47.25 39.25 41.96 2,161,650 92.779 September 2001 40.64 22.20 30.82 1,332,758 38.622 October 2001 37.80 26.50 33.00 1,469,570 49.158 November 2001 43.45 35.62 39.52 3,019,739 118.051 December 2001 41.80 35.65 38.31 1,586,511 62.249 January 2002 37.98 35.80 37.36 1,325,931 49.521 February 2002 39.97 29.46 33.06 2,685,186 88.479 March 2002 35.50 32.40 33.79 1,504,640 50.721 April 2002 31.92 31.04 31.48 1,829,034 57.311 May 2002 30.80 29.73 30.25 2,764,658 83.475 June 2002 25.29 23.54 24.41 2,508,602 55.815 July 2002 15.06 13.73 14.39 2,248,903 32.513 August 2002 15.54 14.51 15.02 1,618,505 24.218
Source: Euronext Paris (1) Monthly average, weighted to reflect the trading volumes at the closing price.
6.6 Dividends
The society has paid no dividends for the last three financial years, and does not expect to pay any in the short to medium term.
113 7 CORPORATE GOVERNANCE
7.1 Management
Chairman and CEO Yves Guillemot
Vice-Presidents Claude Guillemot Michel Guillemot Gérard Guillemot Christian Guillemot
Name
Appointment Appointment renewal date date
Yves Guillemot Chairman and CEO February 26, 1988 Renewal of mandate on September 29, 1989
Claude Guillemot January 9, 1996
Michel Guillemot January 9, 1996
Gérard Guillemot January 9, 1996
Christian Guillemot January 9, 1996
Others informations on management:
Managing Director EMEA Territories: Alain Corre
Managing Director for North American territories: Laurent Detoc
Chief Financial Officer: Alain Martinez
Managing Director International Production: Christine Burgess-Quemard
Editor in Chief: Serge Hascoet
114 FINANCIAL REPORT Corporate governance
7.2 Board of Directors
Name
Appointment Appointment renewal Appointment expiration date date date
Yves Guillemot February 28, 1988 Ordinary General Meeting Ordinary General Meeting called Director of September 29, 1989 to vote on the financial statements Chairman of the Board Ordinary General Meeting for the financial year ended of Directors of September 8, 1995 March 31, 2007 Ordinary General Meeting of September 29, 2001
Claude Guillemot February 28, 1988 Ordinary General Meeting Ordinary General Meeting called Director of September 29, 1989 to vote on the financial statements Ordinary General Meeting for the financial year ended of September 8, 1995 March 31, 2007 General Meeting of September 29, 2001
Michel Guillemot February 28, 1988 Ordinary General Meeting Ordinary General Meeting called Director of September 29, 1989 to vote on the financial statements Ordinary General Meeting for the financial year ended of September 8, 1995 March 31, 2007 Ordinary General Meeting of September 29, 2001
Gérard Guillemot February 28, 1988 Ordinary General Meeting Ordinary General Meeting called Director of September 29, 1989 to vote on the financial statements Ordinary General Meeting for the financial year ended of September 8, 1995 March 31, 2007 Ordinary General Meeting of September 29, 2001
Christian Guillemot February 28, 1988 Ordinary General Meeting Ordinary General Meeting called Director of September 29, 1989 to vote on the financial statements Ordinary General Meeting for the financial year ended of September 8, 1995 March 31, 2007 Ordinary General Meeting of September 29, 2001
Yvette Guillemot January 25,1996 Ordinary General Meeting Ordinary General Meeting called Director of September 29, 2001 to vote on the financial statements for the financial year ended March 31, 2007
The Board of Directors met about twenty times during FY01/02. No committees have been set up by the management team or executive bodies. The Board of Directors as a whole have not been granted options on the stock of the company or its tier-one or tier-two subsidiaries.
115 7.3 Offices held by the directors
Mr Yves GUILLEMOT Manager Ubi Administration SARL Director and Chairman of the Board of Ubi Soft Entertainment S.A. Ubi Books & Records SARL His term of office will expire at the Ordinary General Meeting Ubi Manufacturing SARL convened to vote on the financial statements for the year to Ubi Pictures SARL March 31, 2007. LUDIFACTORY SARL Ubi Emea SARL OTHER FUNCTIONS: Ubi Research & Development SARL Chairman and CEO Ubi Simulations SARL Ubi Soft France S.A. Ubi Animation SARL Ubi World S.A. Ubi Color SARL Ubi Soft Marketing & Communication S.A. Ubi Game Design SARL Ubi.com S.A. Ubi Graphics SARL Ubi Info Design SARL Chairman Ubi Networks SARL Ubi Soft Entertainment Norway A/S Ubi Sound Studio SARL Ubi Soft Entertainment (Swizerland) Ubi World Studios SARL Ubi Soft Entertainment OT (Finland) Ubi Productions France SARL GameBusters GmbH (Austria) Ubi Soft Entertainment SPRL (Belgium) Ubi Soft Spa (Italy) Ubi Soft Entertainment BV (Holland) Ubi Soft S.A. (Spain) Ubi Soft Entertainment SARL (Morocco) Ubi Soft Entertainment Ldt. (Hong Kong) Ubi Computer Software Beijing Company Ldt. (Beijing) Managing Director Ubi Soft Divertissements Inc. (Canada) Ubi Soft Entertainment GmBH (Germany) Ubi Soft Canada Inc. (Canada) Ubi Soft Entertainment nordic A.S. (Denmark) Ubi Soft Inc. (San Francisco) Ubi Studios Ltd. (great britain) UbiI Soft Holdings Inc. (San Francisco) Ubi Soft Entertainment Ltd. (Great Britain) UBI. COM Inc. (San Francisco) Ubi Soft Pty Ltd. (Australia) Red Storm Entertainment Inc. Ubi Soft Entertainment Sweden AB (Sweden) Blue Byte Software Inc. Director Ubi STUDIOS KK (Japan) Ludigames France S.A.
Vice-Chairman Director and Vice-President Shanghai UBI Computer Software Company Ltd. Gameloft.Com S.A. Guillemot Corporation S.A. Guillemot Brothers S.A.
116 FINANCIAL REPORT Corporate governance
Mr Gérard GUILLEMOT Mr Michel GUILLEMOT Director and Vice-President of Ubi Soft Entertainment S.A. Director and Vice-President of Ubi Soft Entertainment S.A. His term of office will expire at the Ordinary General Meeting His term of office will expire at the Ordinary General Meeting convened to vote on the financial statements of the year to convened to vote on the financial statements of the year to March 31, 2007. March 31, 2007.
Chairman and CEO Director and Chairman and CEO Ludimedia S.A. Gameloft S.A. Chairman Ubi Studios S.A. Ubi Voices Inc. (San Francisco) Director Ubi Music Publishing Inc. (Canada) Ludimedia S.A. Ubi Music Inc. (Canada) Ubi Soft France S.A. Ubi Soft Entertainment Inc. (New York) Ubi Soft Marketing & Communication S.A. Director Ubi World S.A. Ubi Studios S.A. UBI. COM S.A. Ubi Soft France S.A. Ubi Soft SpA (Italy) Ubi World S.A. Ubi MUSIC Inc. (Canada) Ubi Soft Marketing & Communication S.A. Ubi Soft Canada Inc. (Canada) Ubi Soft Divertissements Canada (Canada) Chairman and CEO Ubi Soft Canada Inc. (Canada) Ludigames France S.A. Ubi Soft SpA (Italy) Manager Manager Ubi Studios SRL (Italy) Ludi Factory SARL Ubi Studios SL (Spain) Managing Director Ubi Soft SRL (Romania) Ubi Soft Entertainment Ldt. (Hong Kong) Managing Director Ubi Soft Studios KK (Japan) Ubi Soft S.A. (Spain) Shanghai Ubi Computer Software Company Ldt. (China) Ubi Soft KK (Japan) Ubi Soft Inc. (San Francisco) Shanghai Ubi Computer Software Company Ltd. (China) Ubi Holdings Inc. (San Francisco) Ubi Computer Software Beijing Company Ltd. (Beijing) Ubi Soft S.A. (Spain) Ubi Soft Entertainment Ltd. (Hong Kong) Director and Vice-President Ubi Soft Inc. (San Francisco) Gameloft S.A. Ubi Holdings Inc. (San Francisco) Guillemot Brothers S.A. Chairman Guillemot Corporation S.A. Ubi Soft Divertissements Inc. (Canada)
Director and Vice-President Guillemot Corporation S.A. Guillemot Brothers S.A.
117 Mr Claude GUILLEMOT Mr Christian GUILLEMOT
Director and Vice-President of Ubi Soft Entertainment S.A. Director and Vice-President of Ubi Soft Entertainment S.A. His term of office will expire at the Ordinary General Meeting His term of office will expire at the Ordinary General Meeting convened to vote on the financial statements of the year to convened to vote on the financial statements of the year to March 31, 2007. March 31, 2007.
Director Director Ludimedia S.A. Ludimedia S.A. Ubi Studios S.A. Ubi Studios S.A. Ubi Soft France S.A. Ubi Soft France S.A. Ubi World S.A. Ubi World S.A. Ubi Soft Marketing & Communication S.A. Ubi Soft Marketing & Communication S.A. Ludigames France S.A. Ubi.Com S.A. Ubi Soft Divertissements Inc. (Canada) Ludigames France S.A. Ubi Soft Canada Inc. (Canada) Ubi Soft Divertissements Inc. (Canada) Ubi Music Inc. (Canada) Ubi Music Inc. (Canada) Ubi Soft SpA (Italie) Ubi Soft Canada Inc. (Canada) Managing Director Ubi Soft SpA (Italie) Ubi Soft Entertainment Ltd. (Hong Kong) Managing Director Shanghai Ubi Computer Software Company Ldt. (China) Ubi Soft Entertainment Nordic AS (Denmark) Ubi Soft Inc. (San Francisco) Ubi Soft Entertainment Ldt. (Great Britain) Ubi Holdings Inc. (San Francisco) Ubi Soft Entertainment Ldt. (Hong Kong) Ubi Soft Entertainment Nordic A/S (Denmark) Shanghai Ubi Computer Software Company Ldt. (China) Ubi Soft Entertainment Sweden AB (Sweden) Ubi Soft Entertainment Norway A/S (Norway) Ubi Soft Entertainment Inc. (New York) Ubi Soft Inc. (San Francisco) Ubi Studio Ltd. (Great Britain) Ubi Holdings Inc. (San Francisco) Chairman and CEO Ubi.Com Inc. (San Francisco) Guillemot Corporation S.A. Ubi Soft Entertainment NY Inc. (New York) Ubi Soft Entertainment Sweden AB (Sweden) Director and Vice-President Guillemot Brothers S.A. Director and Vice-President Gameloft.Com S.A. Gameloft S.A. Guillemot Corporation S.A.
Director and Chairman and CEO Guillemot Brothers S.A.
Mrs Yvette GUILLEMOT
Director of Ubi Soft Entertainment S.A. Her term of office will expire at the Ordinary General Meeting convened to vote on the financial statements of the year to March 31, 2007
Director Ubi World S.A. Ludigames France S.A.
Managing Director Shanghai Ubi Computer Software Company Ltd. (China)
118 FINANCIAL REPORT Corporate governance
7.4 Interests of Directors
Remuneration of directors and members of the Board of Directors
Cf. table (section 3, page 67).
Stock purchase and subscription options
The Directors and the members of the Board of Directors do not have any stock purchase or subscription options.
Information on transactions concluded with the members of the executive and management bodies
Cf.Special statutory auditor’s report on regulated agreements (section 4.3, page 88).
Loans and guarantees granted to or arranged for the executive and management bodies
Not applicable.
119 PERSONS RESPONSIBLE 8 FOR THE REFERENCE DOCUMENT AND STATUTORY AUDITORS
8.1 Person responsible for the reference document
Yves Guillemot Chairman and CEO
8.2 Declaration by the person responsible for the reference document
To the best of my knowledge the data in this reference document correspond to the facts. They include all the information investors need to assess the net worth, activity, financial position, results and prospects for Ubi Soft Entertainment S.A.; there is no omission that would alter the conclusions.
Yves GUILLEMOT
120 FINANCIAL REPORT Persons responsible for the reference document
8.3 Declaration by the statutory auditors
In our capacity as statutory auditors of Ubi Soft Entertainment and in accordance with COB regulation 98-01, we have verified the information concerning the financial position and accounts given in this reference document in accordance with current professional standards in France.
This reference document was drawn up under the responsibility of Mr Yves Guillemot, Chairman of the Board of Directors. It is our responsibility to state an opinion on whether the information it contains presents an accurate picture of the financial position and the accounts.
Our due diligence consisted of ensuring, in accordance with current professional standards in France, that the information on the financial position and the accounts presents an accurate picture and verifying that it agrees with the accounts that have already been the subject of a report. It was also our responsibility to read other information contained in the reference document in order to identify any significant inconsistency with information on the financial position in the accounts and to report any manifestly incorrect information which came to light based on the general understanding of the company which we acquired in the course of our work. In the case of isolated projections which resulted from formulated calculations, we took account of the assumptions made by the directors and their conversion into numerical form.
The annual corporate and consolidated accounts for the financial years ending on March 31, 2000, 2001,and 2002 which were approved by the Board of Directors, were audited by us in accordance with current professional standards in France. They are certified without reservation and without comment.
We have no comments to make regarding the accuracy of the information concerning the financial situation and the accounts as set out in this reference document.
Rennes and Paris, August 29, 2002
BY THE STATUTORY AUDITORS
COMPAGNIE CONSULAIRE CABINET ANDRE METAYER D’EXPERTISE COMPTABLE JEAN DELQUIE André METAYER Benoît FLECHON
121 8.4 Name and address of statutory auditors
Date of first Expiration date of Name appointment current term
Incumbent: André Métayer Cabinet André Métayer 5, rue Marie Alizon 35000 Rennes 1986 2004
Alternate: Pierre BORIE 15, rue Charles Le GOFFIC 35700 Rennes 1996 2004
Incumbent: Compagnie Consulaire d'Expertise Comptable Jean Delquié 1996 2007 Manager: Benoît Fléchon 84, boulevard de Reuilly 75012 Paris
Alternate 1996 2007 Jacques Le Dorze 90, rue de Châteaugiron 35000 Rennes
8.5 Information policy
PERSON RESPONSIBLE FOR INFORMATION:
Yves Guillemot Chairman and CEO 28, rue Armand Carrel 93108 Montreuil-sous-Bois Cedex Tel.: 01.48.18.50.00 www.ubisoft.com
8.6 Schedule of financial communications for the 2002/2003 financial year:
Date
First quarter sales Friday, August 2, 2002 Half-year sales Wednesday, October 30, 2002 Half-year earnings meeting Thursday, December 12, 2002 Third quarter sales Wednesday, February 5, 2003 Annual sales Wednesday, May 7, 2003 FY meeting Wednesday, June 25, 2003
122 GLOSSARY
AAA (triple A): designation awarded to a video game when MMO (massively multiplayer on line): term used to describe it achieves a score of 95% in the trade press, and when it has "massively multiplayer online" games that can be played via sold more than a million units worldwide. an Internet connection, the special feature being that the game never stops. Blockbuster: game which is a high success sale and/or is at the top of the sales charts. N64 (Nintendo 64): 64-bit game console designed by Nintendo in 1995 as part of the “new generation” (64-bit CD-Rom: abbreviation of Compact Disc Read Only Memory. A consoles). computer medium with a compact optical disc format used to store 650 MB of multimedia data and read by a laser beam. Pay to play: system which allows gamers to play on line by paying a subscription (the most monthly). The system, Game console: dedicated game computer without keyboard. therefore, don’t avoid the purchase of the game. Their specialization means that they are generally high- performance machines. Third-generation consoles with 128- Platform: a unit consisting of an operating system and hard- bit processors appeared in 2000. They can be connected to ware. This may be a console or a PC. the Internet for online playing and are equipped with DVD Player matching: operation in which gamers are brought drives. together to play the same game online. Dreamcast: Sega game console. It has a 128-bit processor PlayStation®: Sony’s 32-bit game console, also called PSX, and was the first console with a built-in 56 KB modem for which came out in 1995. It uses CDs for games (unlike online play (via the Internet). cartridge consoles). Engine: a software kernel which cannot function without a PlayStation®2: Sony game console which replaced the more or less independent front end. This is the heart of the PlayStation. It was launched in Japan in November 1998 and system, which allows all the animations, graphics and sound to in October and November 2000 in the United States and function and be used, and ensures the software’s interactivity. Europe respectively. It is based on a 128-bit processor GameBoy®: Nintendo handheld console. This was the first on called the “Emotion Engine” and a DVD-ROM drive. the market, and years later it is still around, with its 8-bit Porting: the action of porting a program, in other words processor and its small black-and-white screen. It has since adapting an application to a system different to that on been produced with a color screen, Game Boy Color (GBC). More which the program was originally developed (and for which it than 100 million of these handheld consoles have been sold. was designed), from one environment to another. GameBoy® Advance: new Nintendo handheld console with a 32-bit processor. It hit the market in March 2001 in Japan, Production: period during which the software is developed and 700,000 units were sold in the first week. Sales in the (animation of characters, integration of data into the engine, United States and Europe began in June 2001. etc).
GameCube™: new Nintendo console which will hit the market XboxTM: Microsoft’s game console, equipped with a 128-bit in September 2001 in Japan, November in the United States processor. Launch is scheduled for November 2001 in the and March 2002 in Europe. It is targeted at 12 to 18 year- United States and spring 2002 in Japan and Europe. olds and will be compatible with GameBoy®Advance.
Game play: the features included a game (scenarios, riddles, actions) to make it sufficiently interesting but not so dif- ficult as to discourage the player.
Hit: highly successful video game, with sales of several hundred thousand units.
Localization: linguistic and cultural adaptation of software for a foreign country.
Sources: Sciences-en-Ligne “Editions de l'Analogie”, a scientific and technological terminology glossary based on the “Dictionnaire interactif des Sciences et Techniques” by P and J ROBERT. (www.sciences-en-ligne.com) - Le Jargon Français v 3.2.119, by Roland Trique (www.linux-France.org/prj/jargonf.) - Ubi Soft Entertainment, 2002. 123 TABLE OF CONCORDANCE
This document has been prepared in accordance with Regulation financial instruments for which admission to trading on a 98-01 of the Commission des Opérations de Bourse, which regulated market is requested, and in accordance with the specifies the information to be disclosed on admission to a application instruction issued pursuant to this regulation. regulated market for financial instruments and when issuing
Headings of the application instruction in COB regulation 98-01 Company Report Page 2001/2002
Section 1 PERSONS RESPONSIBLE Section 8 120 FOR THE COMPANY REPORT AND STATUTORY AUDITORS 1.1 Person responsible for the Company Report 8.1 120 1.2 Declaration by the person responsible for the Company Report 8.2 120 1.3 Name and address of statutory auditors 8.4 122 1.4 Declaration by the statutory auditors 8.3 121 1.5 Information policy 8.5 122
Section 2 SECURITIES ISSUES Not applicable /
Section 3 UBI SOFT ENTERTAINMENT AND ITS CAPITAL Section 6 100
3.1 General information on Ubi Soft Entertainment S.A. 6.1 100 3.2 General information on the capital 6.2 102 3.3 Distribution of capital and voting rights 6.3 110 3.4 Changes in capital and voting rights over the past three financial years 6.4 111 3.5 Securities market 6.5 113 3.6 Proposed resolutions submitted for approval to the combined Ordinary Section 5 91 and Extraordinary General Meeting on 12 Sept 02
Section 4 ACTIVITIES OF UBI SOFT ENTERTAINMENT S.A. Section 1 28 Section 2 30
4.1 The Company and the Group Section 1 28 Activity in 2001/2002 Section 2 30 Personnel 2.4 36 4.2 Other information on the Company 2.6 38 Protection of trademarks 2.6.1 38 Dependence of Ubi Soft Entertainment on particular contracts - Main 2.6.5 39 customers 2.6.4 39 Litigation 2.6.6 40 Commitments 4.3 Investment policy 2.6.2 39 Research policy 2.6.3 39
Section 5 ASSETS - FINANCIAL SITUATION - RESULTS Section 3 43 5.1 Consolidated accounts 3.1 43 5.2 Corporate accounts 3.2 68
Section 6 BOARD OF DIRECTORS AND MANAGEMENT TEAM Section 7 114 OF THE UBI SOFT ENTERTAINMENT GROUP
Section 7 RECENT DEVELOPMENTS AND OUTLOOK
7.1 Recent developments 2.7 41 7.2 Outlook and strategy 2.8 42
124