table of contents 02 STRATEGY 16 > CLOSE TO THE CONSUMER 18 > TALENTED PEOPLE 20 > A PASSION FOR INNOVATION

Transcription

1 ANNUAL REPORT 2007

2 UBISOFT 2007 ANNUAL REPORT table of contents O1 PROFILE 02 > CORPORATE MILESTONES: > CHAIRMAN AND CEO S STATEMENT 06 > TOP MANAGEMENT 08 > KEY FIGURES 10 > AN ORGANIZATION WITH A GLOBAL REACH 12 > A DYNAMIC MARKET AT THE HEART OF ENTERTAINMENT TODAY 02 STRATEGY 16 > CLOSE TO THE CONSUMER 18 > TALENTED PEOPLE 20 > A PASSION FOR INNOVATION Ubisoft s cult character since 1995, Rayman has been helping to rid the world of raving rabbids, and in 2007 he will face off once again against these formidable opponents. RAYMAN 03 BRANDS 24 > CREATING STRONG BRANDS 26 > SOMETHING FOR EVERYONE 28 > BRANDS: FRONT AND CENTER 31 > FINANCIAL REPORT

3 MORE THAN 20 YEARS OF GROWTH AND ENTERTAINMENT PROFILE PROFILE 01 A leading developer, publisher and distributor of video games, ubisoft has grown at an astonishing pace. From start-up distributor to industry trendsetter, the group s success can be attributed to the consistent application of a long-term strategy centered upon strong brands, worldwide direct distribution, talented people and innovation. This year, Ubisoft s audacious next-gen strategy translated into concrete gains with annual sales totaling 680 million and an increased market share in key territories, all of which enabled the group to hold fast to its position of 4 th independent publisher worldwide.* With the second largest internal creative workforce in the industry, Ubisoft has the means to bring great games to life and to continue enchanting players all over the globe. * Excluding Japan.

4 UBISOFT 2007 ANNUAL REPORT table of contents O1 PROFILE 02 > CORPORATE MILESTONES: > CHAIRMAN AND CEO S STATEMENT 06 > TOP MANAGEMENT 08 > KEY FIGURES 10 > AN ORGANIZATION WITH A GLOBAL REACH 12 > A DYNAMIC MARKET AT THE HEART OF ENTERTAINMENT TODAY 4 th INDEPENDENT PUBLISHER WORLDWIDE (EXCLUDING JAPAN) 10 MULTIMILLION UNIT-SELLING FRANCHISES 680 MILLION IN SALES ,950 TALENTED PEOPLE ACROSS THE GLOBE (3,200 DEDICATED TO CREATION) 21 DISTRIBUTION OFFICES AND 15 STUDIOS IN 23 COUNTRIES WORLDWIDE 02 STRATEGY 16 > CLOSE TO THE CONSUMER 18 > TALENTED PEOPLE 20 > A PASSION FOR INNOVATION 03 BRANDS 24 > CREATING STRONG BRANDS 26 > SOMETHING FOR EVERYONE 28 > BRANDS: FRONT AND CENTER 31 > FINANCIAL REPORT

5 PROFILE PROFILE 01 A leading developer, publisher and distributor of video games, ubisoft has grown at an astonishing pace. From start-up distributor to industry trendsetter, the group s success can be attributed to the consistent application of a long-term strategy centered upon strong brands, worldwide direct distribution, talented people and innovation. This year, Ubisoft s audacious next-gen strategy translated into concrete gains with annual sales totaling 680 million and an increased market share in key territories, all of which enabled the group to hold fast to its position of 4 th independent publisher worldwide.* With the second largest internal creative workforce in the industry, Ubisoft has the means to bring great games to life and to continue enchanting players all over the globe. * Excluding Japan

6 UBISOFT 2007 ANNUAL REPORT corporate milestones: hroughout the 2006/07 fiscal year, ubisoft continued to bolster its track record with new success stories. a stellar line-up for nintendo s wii, increased market share and strategic acquisitions Tare just a few of the highlights of this past year UBISOFT IS BORN The five Guillemot brothers join forces to found an edutainment and video game publishing and distribution company UBISOFT GOES ABROAD The USA, Germany and the UK become home to Ubisoft s first international distribution subsidiaries. IN-HOUSE CREATION TAKES FRONT-STAGE Ubisoft opens internal development studios in France and Romania, thus sowing its first creative seeds UBISOFT GOES PUBLIC AND TO ASIA With a listing on the Paris stock exchange, Ubisoft opens up new doors for its development. The same year, the group also decides to expand its production activities into China RAYMAN HITS THE MARKET Since its European début, the Rayman franchise has garnered support from gamers all across the globe, selling more than 20 million units worldwide INTERNAL GROWTH COUPLED WITH STRATEGIC ACQUISITIONS Ubisoft confirms its internal growth strategy by opening up new studios in 6 different cities, including Montreal, and by further strengthening its global distribution network. The group acquires Red Storm, Blue Byte and The Learning Company's games division adding new hit brands to its catalog. In 2001, Ubisoft is catapulted into the Top 10 independent publishers worldwide.

7 PROFILE BRAND BUILDING PAYS OFF Ubisoft more than doubles its number of hit brands from 3 to 8, increasing its market share in key territories UBISOFT TURNS 20 AND TAKES THE NEXT-GEN HEAD ON Ubisoft celebrates its 20 th anniversary and starts to see the positive results of its early positioning on nextgeneration consoles. The group quickly establishes its leadership on Microsoft s Xbox 360 video game and entertainment system successfully launching four titles, including Tom Clancy s Ghost Recon Advanced Warfighter, and climbing to the top of the charts UBISOFT KICKS IT UP A NOTCH With seven titles available for the launch of the Wii and seven released during the fourth quarter of fiscal , Ubisoft offers consumers the largest third-party line-up of games available for Nintendo s revolutionary console. Ubisoft acquires the rights to the acclaimed Driver franchise, and welcomes the team from Reflections Interactive, giving the group a direct point of entry into the lucrative driving games segment. The acquisition of the rights related to the best-selling Far Cry brand, as well as the Far Cry engine, adds yet another proprietary brand to the Ubisoft catalog. Ubisoft concludes a deal with German publisher Sunflowers to acquire the company and all of its franchises, including the strategy brand, Anno. Armed with The Settlers and Anno, Ubisoft reinforces its position of leadership on the German market, dominating the strategy games segment. Ubisoft sees its market share rise in all key markets, ranking #4 worldwide (excluding Japan), #5 in the United States and #2 in Europe. Ubisoft expands its global operations into two new territories by opening a business office in Mexico City, Mexico and a production studio in Sofia, Bulgaria. Ubisoft is ranked second leading international publisher by Game Informer, the world s leading computer and video game magazine.

8 UBISOFT 2007 ANNUAL REPORT chairman and chief executive officer s statement This past year, a successfully executed strategy, coupled with many highly acclaimed games for new consoles, made it possible for Ubisoft to outperform the market with annual sales totaling 680 million, an increase of 24.4% compared to the previous fiscal year and 27% at constant exchange rates. Our net income also increased more than 300%, totaling 40.5 million. In North America, we gained one point compared with last year, ranking 5 th in the United States with 5.5% market share and 3 rd in Canada with 6.8%. In Europe, the group held fast to the #2 position with 7% market share. This year, we won more than 40 prestigious awards, a testament to the high quality and entertainment value of our games and also to the respect that Ubisoft commands within the industry. Most notably, Tom Clancy s Ghost Recon Advanced Warfighter was chosen 2006 Game of the Year at the BAFTA (British Academy of Film and Television Arts) Awards Ceremony and Game Informer, the leading industry magazine, ranked Ubisoft 2 nd independent publisher worldwide, just behind Nintendo. 2006/07: MISSIONS ACCOMPLISHED These excellent results stem from the successful execution of seven strategic priorities identified last year: Position our brands early on next-gen consoles The investments we made in next-gen development starting back in 2004 have paid off: 60% of our sales this year came from games designed for these consoles. As a result, we became the #1 independent publisher for the Wii in Europe and the United States, as well as the #2 independent publisher for Xbox 360 in Overall, Ubisoft games accounted for 29% of all Wii games sold in Europe and 18% of Wii games sold in the U.S. On Xbox 360, our games represented 14% of overall platform sales. Expand our revenue sources by working with 3 rd party partners Our publishing and 3 rd party activities registered a 10-point growth and represent 24% of sales this year, in comparison to 14% in We plan to reinforce this trend in the coming year with games like Brothers in Arms Hell s Highway and Haze. Reinforce our financial capacities Our net cash flow from operating activities has sharply risen to 53.2 million, reflecting strong operational improvements. Moreover, our positive net cash position reached 55 million as of March 31, In addition to the increased cash flow, this million improvement can be attributed to two important capital increases: the conversion of a part of convertible bonds (Océanes) in November 2006 and of 92% of the 2008 warrant issue in February This strong financial position gives Ubisoft the means and the opportunity to invest in new projects. Enrich our catalogue and continue to develop strong brands We pursued our strategy of brand creation this year with the release of Red Steel, Heroes of Might & Magic, Dogz, Catz and Horsez. In addition to the launch of these new franchises, we continued to enrich our existing brands with must-have new titles, such as Rayman Raving Rabbids and Tom Clancy s Rainbow Six Vegas. Reinforce our reputation as a partner of choice for Hollywood Following the success of Peter Jackson s King Kong: The Official Game of the Movie, Ubisoft s relationship with Hollywood continued to mature this year with the production of games inspired by films like Open Season, Teenage Mutant Ninja Turtles and Star Wars. Furthermore, we are in the process of producing the video game version of Robert Zemeckis s new feature-length film, Beowulf, which is set to come out at the end of the year. Additionally, in order to better understand and exploit the synergies that exist between video games and cinema, Ubisoft opened a studio in Montreal last February dedicated to CGI (Computer Generated Images) movies. Attract new talents With 3,950 employees across the globe (3,200 of whom are dedicated to production), Ubisoft continues to grow and recruit new talents progressively across all of its sites: 450 people have joined our team this year alone. Most notably, we opened a studio in Sofia, Bulgaria and a distribution office in Mexico City, Mexico. The Sofia studio should make it possible for us to attract new talents while controlling our development costs and our presence in Mexico City will enable us to capitalize on a highpotential market. Make strategic acquisitions to enter into new segments The acquisition of the Driver franchise and the integration of the talented people from Reflections Interactive enable us to enter the highly popular driving games segment. Our objective is to use this hit brand and our team s know-how to bring Driver to next-gen consoles. Furthermore, Ubisoft concluded an agreement

9 05 YVES GUILLEMOT PROFILE with the German publisher Sunflowers to acquire the rights associated with the historic real-time strategy brand Anno. Coupled with The Settlers, Anno makes Ubisoft the uncontested leader on the largest segment of the German market strategy games. Finally, we strengthened our portfolio of strong brands by purchasing the rights to Far Cry from Crytek. 2007/08: NEW CHALLENGES AND POSSIBILITIES FOR GROWTH For the upcoming year, Ubisoft has identified five priorities: Create and launch new brands while developing existing ones This year, seven of our franchises will make highly anticipated returns, and we will also be launching six new IPs (Intellectual Properties) including Assassin s Creed, Tom Clancy's EndWar and Haze. Assassin s Creed and Haze are already creating a big media buzz, and customers are anxiously awaiting the release of Tom Clancy s EndWar. We re also aiming to develop brands that are specifically designed for certain consoles, as we did last year with Red Steel for the Wii. Position Ubisoft as a reference in the casual games market The success of the Wii, the DS, and Xbox Live have opened up our market to audiences such as female gamers. These new audiences, which also include seniors, are drawn to the fun and intuitive aspects of gaming, as well as the ability to learn while playing. Our objective is to have 20% of sales come from this market next year (as opposed to 10% last year) by releasing new targeted titles such as My Life Coach and by continuing to build off the success of the Petz brand. Remain on the cutting-edge of technology through R&D investments The opening of our first CGI studio illustrates our desire to always be at the forefront of innovation and creativity. In the beginning, this studio will be devoted to producing short films inspired by our brands. The technology and the creative knowhow that we will gain from these projects will allow us to enrich our characters and scenes as well as the quality of our game graphics. In the long-term, our goal is to produce a featurelength Ubisoft animated film. In addition, our teams are already working on internally-developed 2 nd and 3 rd generation game motors, in order to fully exploit the capacities of next-gen consoles. Improve accessibility of our games Our objective is to obtain 100% consumer satisfaction. Our games should be accessible to beginners, all the while offering challenges for more experienced players. In order to do this, we constantly seek to improve our gaming experiences by studying the attitudes and behaviors of different types of gamers as well as the best ways to provide technical support. We have already started putting this philosophy into practice with Tom Clancy s Ghost Recon Advanced Warfighter 2, a title whose variety of approaches enables everyone to enjoy the game and find challenges at their level. Continue to build up our production teams while maintaining competitive production costs Honing the skills of our teams and attracting hundreds of new talents each year is necessary to achieve our ambitions. We plan to continue growing our existing studios in terms of size and skills, making education and training a priority. We re also looking into the possibility of opening new operations in territories that will allow us to keep production costs low. LOOKING FORWARD TO TOMORROW We are evolving to keep up with a market that is moving fullspeed ahead is going to be a year of extraordinary market expansion toward new audiences, and also a year that will be marked by the astounding increase in the power of next-gen consoles: the Wii, DS, Xbox 360 and PlayStation 3. Our company is well-positioned to continue growing and to take advantage of major industry evolutions. This year, Ubisoft will benefit from one of its most impressive line-ups, enabling us to meet objectives of 800 million in sales and an EBIT of at least 8%. In closing, I would like to thank all of the gamers who drive us to constantly exceed our own expectations. Thank you also to our shareholders and our commercial and financial partners who believe in our strategic vision and provide us with invaluable support. Finally, I would like to extend a special thanks to all of the Ubisoft teams, who by their passion and perseverance, have made Ubisoft the success it is today. YVES GUILLEMOT CHAIRMAN & CEO

10 UBISOFT 2007 ANNUAL REPORT top management Experience, imagination and energy - ubisoft's top management team has proven its ability to anticipate major industry changes, enabling the company to always stay one step ahead of the game. YVES GUILLEMOT CHAIRMAN & CEO The advent of next-gen consoles gives our industry an opportunity to open up to new audiences and new gaming experiences. Consumers are becoming real content creators and are searching for new channels through which to express themselves. Their quest for interactive experiences prompts them to make videos for community websites, write articles on Wiki sites and use game creation systems. It is up to our industry the ultimate of interactive entertainment to offer unique products that appeal to this new audience and satisfy emerging expectations. CHRISTINE BURGESS-QUÉMARD EXECUTIVE DIRECTOR, WORLDWIDE STUDIOS I am convinced that in-house development is essential to Ubisoft s growth and success. This strategy has been proven time and again. As a result, the future will see us continue investing in our internal studios, as well as acquiring and establishing new ones when opportunities arise. We will also increasingly apply our internal production processes to our games developed by external studios, ensuring that the Ubisoft label represents an expected level of quality regardless of the studio behind the title. " People appreciate titles that are both challenging and fun to play. " SERGE HASCOËT CHIEF CREATIVE OFFICER Ubisoft s unique approach to game development will continue to enable it to do what it does best offer immersive gaming experiences that tap into people s raw emotions. We will continue to build major brands and explore new genres. At the same time, as video games gain in mainstream popularity, we will reach out to new audiences, creating entertainment experiences that appeal to our children, our parents and even our grandparents! No matter what public or what type of game, people appreciate titles that are both challenging and fun to play. That is exactly what we intend to do, and without losing sight of our commitment to highquality entertainment.

11 PROFILE 07 " The Ubisoft label represents an expected level of quality regardless of the studio behind the title. " ALAIN CORRE EXECUTIVE DIRECTOR, EMEA TERRITORIES Underlying Ubisoft s success is the group s ability to seize good opportunities at the right time. Throughout the EMEA territories, the market is following an impressive growth trajectory, expected to continue over the next five years. As video games and new consoles, like the DS, manage to convert more and more people to casual games, Ubisoft will reap the benefits of an expanding consumer base. Our remarkable work has enabled the group to get the best out of each market and defend its title of 2 nd independent publisher across all EMEA territories over the last 16 months. With a rich and well-balanced portfolio that includes hardcore AAAs, such as Assassin s Creed, Hollywood licenses, such as Lost, and games for everyone, such as Jam Sessions, the future indeed belongs to us! LAURENT DETOC EXECUTIVE DIRECTOR, NORTH AMERICA The North American market performed exceptionally in Nintendo made a phenomenal comeback with the introduction of the Wii and generated mass market interest in video games fueling market expansion and propelling Ubisoft to the top of the charts as the leading third-party publisher for the console s launch. Microsoft s Xbox 360 asserted its commercial dominance and the PS 2 surprised experts with its staying power. All of these trends and more gave Ubisoft the opportunity to show that our strategy to lead the next generation of video games is the right one. In fiscal year 2007/08 Ubisoft has high hopes for our always innovative Tom Clancy franchises and for the launches of new industry-leading brands, such as Assassin s Creed. This year we ll also leverage our early start on the casual gamer segment by lauching new product lines that appeal to a broader group of consumers. Ubisoft s future looks bright! ALAIN MARTINEZ CHIEF FINANCIAL OFFICER Fiscal year 2007 was marked by dramatic increases in Ubisoft s financial position. The sharp upturn in activity, coupled with the conversion of the share subscription warrants issued in 2003, the 2006 convertible exchangeable bonds (OCÉANES) and the 2008 redeemable share subscription warrants totaling 98.2 million, enabled Ubisoft to finish the year with an increase in equity from 139 million to 521 million and a net financial position of 55 million, a striking improvement compared with its 65 million in net debt the previous year. This performance is all the more remarkable given that it was achieved in a context of a 22% increase in R&D investments.

12 UBISOFT 2007 ANNUAL REPORT key figures As the industry prepared itself for yet another year of significant change, ubisoft witnessed the return on its next-gen r&d investments. titles like tom clancy s ghost recon advanced warfighter or rayman raving rabbids propelled the group to the top of the charts, ranking #1 independent publisher on the wii and #2 on the xbox 360 for 2006/07. the group managed not only to outperform its own growth forecasts, but also the market, registering an overall sales progression of 24.4%. consequently, ubisoft posted improved financial earnings and succeeded in ending the fiscal year with a 55 million net cash position. 2006/2007 AT A GLANCE SALES 680 million % OF SALES ON NEXT-GENERATION PLATFORMS 60% NET INCOME 40.5 m CURRENT OPERATING INCOME 38.3 million TOTAL DEVELOPMENT EXPENSES 233 million 3,950 EMPLOYEES IN 23 COUNTRIES OF WHOM 3,200 EMPLOYED IN PRODUCTION 4 th INDEPENDENT PUBLISHER WORLDWIDE (EXCLUDING JAPAN)

13 09 EVOLUTION OF SALES ( MILLION) EVOLUTION OF NUMBER OF EMPLOYEES PROFILE , , ,000 3,5003,950 GEOGRAPHIC BREAKDOWN OF SALES BREAKDOWN OF SALES BY PLATFORM NORTH AMERICA 45% EUROPE 49% OLD GENERATION CONSOLES 24% NEXT-GENERATION CONSOLES 60% REST OF THE WORLD 6% PC 16% FINANCIAL POSITION ( MILLION) ,8 50 % ,6 381,3 40 % 30 % 20 % SHAREHOLDER S EQUITY NET DEBT/NET CASH , ,3 03/31/ /31/ /31/ % 0 20 %

14 UBISOFT 2007 ANNUAL REPORT an organization with a global reach with subsidiaries in 23 countries and a distribution network spanning more than 50 territories, ubisoft has built up a powerful multinational organization. On the development side, Ubisoft possess the second largest production force in the industry with 15 studios spread across 11 countries. Ubisoft s far-reaching, international organization constitutes a real competitive advantage, for it enables the group to hire the best talents the world over, benefit from lower cost structures, directly establish valued commercial relationships with retailers and better understand and anticipate the local needs of its consumers. Ubisoft is currently 3950-people strong and growing. rd independent publisher CANADA north america 1,923 USA Development studios Business offices th independent publisher Number of employees (2) per country/region (1) Excluding Japan. Source: NPD, Chart Track, Media Control, GFK, in value terms, calendar year (2) As of March 31, 2007.

15 PROFILE 11 NORWAY FINLAND SWEDEN DENMARK europe + north africa 1,600 UNITED KINGDOM NETHERLANDS BELGIUM GERMANY HQ Paris FRANCE SWITZERLAND AUSTRIA ROMANIA EUROPE SPAIN ITALY BULGARIA SOUTH KOREA JAPAN MOROCCO CHINA asia pacific 411 2nd independent publisher AUSTRALIA 4 th INDEPENDENT PUBLISHER IN THE WORLD (1)

16 UBISOFT 2007 ANNUAL REPORT a dynamic market at the heart of entertainment today Long gone are the days when video games were on the margins of the entertainment industry. today they stand proudly alongside films and music and, in 2006, the industry registered sales of $28.47 billion (1). seldom is a blockbuster movie released without planning for its video game tie-in. the synergies between media are increasing, making for an exciting and dynamic market. BREAKDOWN OF GAMERS BY PLATFORM OLD GENERATION CONSOLES 59% NEXT-GENERATION CONSOLES 23% HANDHELD CONSOLES 40% Source: New Platform Quantitative US, April THE EXPLOSION OF NEXT-GEN CONSOLES The long-awaited and highly-anticipated next generation is finally upon us and promises to fuel a strong growth cycle. Hardware manufacturers and software developers alike are optimistic about potential gains from the cycle and early forecasts predict overall market growth (hardware and software combined) of 17% (2). This year, Microsoft s Xbox 360 and Nintendo s DS continued to gain ground while Sony s PS 3 and Nintendo s Wii made their market début. From this transition emerged two strikingly different, yet equally innovative, approaches to gaming. On the one hand, Microsoft and Sony engineered technological powerhouses capable of delivering stunning graphic realism and strong online capabilities. On the other hand, Nintendo designed a deceptively simple machine, offering unparalleled gameplay possibilities. The Xbox 360 and PS 3, the two machines at higher price points, have fared well in key markets, with the Xbox 360 registering particularly strong sales in North America (installed base of 4,975,000) (3), and Great Britain (installed base of 1,099,000) (4), and the PS 3 quickly gaining ground throughout Europe and Japan. Nintendo has performed consistently across all markets as have handheld consoles, whose sales have been on the rise. As for the software market, early figures show that it is growing at an encouraging pace, up 6% (5) compared to last year, which bodes well for the future. ONLINE GAMING: A FAST-GROWING PHENOMENON The Internet has undergone remarkable evolutions over the past few of years with the arrival of Web 2.0 and the widespread adoption of broadband online connections for PC, making it easier for users not only to share information, but also create (1) Source: Report from the International Group The PC & Video Game Markets : North America, Europe, Japan (April 2007). (2) Source: NPD, March (3) Source: Ibid.

17 13 AVERAGE TIME GAMERS SPEND PLAYING PER WEEK PROFILE HANDHELD GAMES 5 hours PC GAMES 7 hours CONSOLE GAMES 8 hours ALL PLATFORMS COMBINED 10.5 hours Source: New Platform Quantitative US, April The Nintendo Wii a revolution in gaming Nintendo has been a mainstay of the video game industry for as long as anyone can remember. This year, with the arrival of the Wii and the rising popularity of the DS, Nintendo proved that, even after all these years, it is a force to be reckoned with. Innovative and intuitive, the Nintendo Wii and DS, with their promise of new opportunities for gameplay, have managed to capture casual and hardcore gamers alike. With the Wii s revolutionary controller that detects gamers every movement and the DS s double-screen and stylus, gamers are enjoying new types of games in new ways. Whether standing up, sitting down or alongside friends and family, people are rediscovering the joys of sports or uncovering new games, such as language learning, pet simulation and brain teasers. Judging from the commercial success that both of these machines have encountered (2 million Wii units and 10 million DS units sold as of April 2007 (8) in the US), traditional gamers, as well as people who didn t even know they were gamers, are embracing this change. content. With these two evolutions, a whole new era of web communications is ushered in, carrying with it implications for the world of gaming. Public interest in various forms of online gaming has flared up considerably over the past year. Women are among some of the most avid online players, representing 60% of the total online population (6). The number of subscribers on platforms such as Xbox Live has also exploded over the past year (6 million subscribers as of March 2007 (7) ). Massive Multiplayer Online Games (MMOs), which bring together thousands of players simultaneously via the Internet, represent one such form of online gaming. Despite the significant personal investment of time, and sometimes money, that MMOs and online gaming in general require, the possibility to compete and interact with people from around the world has converted a large number of Internet-users. EMERGING PROFILES Over the past 25 years, we have seen the market go from niche to mainstream as gamer demographics continue to become more diverse. The growing perception of video games as a mass-market form of entertainment has allowed consoles to occupy a more central place in the home. Simultaneously, new gamer profiles have emerged; according to recent studies, 40% of today s gamers are female and 21% of American gamers are over the age of 46 (9). As they search for more casual gaming experiences, these new consumers are leading manufacturers and developers to change their approach to hardware and software conception and development. (4) Source: Chart Track, March (5) Source: NPD, Fiscal Year 2006/2007. (6) Source: New Platform Quantitative US, April (7) Source: "Xbox (R) Live (TM) tops six million users" March 6, (8) Source: NPD, March (9) Source: New Platform Quantitative US, April 2007.

18 UBISOFT 2007 ANNUAL REPORT STRATEGY For over twenty years, fueled by its strategic vision, ubisoft has managed to thrive within a challenging industry and benefit from strong growth cycles.

19 Ubisoft s new action/adventure brand from the group s award-winning ASSASSIN S CREED development teams promises an awe-inspiring gaming experience. STRATEGY 15 While Ubisoft has always remained faithful to the main pillars of its strategy, it has also known how to adapt to shifting market realities so as to always stay close to its consumers and provide them with games that exceed expectations. Through an unwavering commitment to favoring in-house development and global direct distribution, recruiting the best and the brightest, fostering creativity and innovation and building strong brands, Ubisoft has established itself as an industry groundbreaker. The group is well on its way to reaching its objective of doubling revenues and tripling net income between 2006 and 2010 and will continue to relentlessly pursue its winning strategy.

20 UBISOFT 2007 ANNUAL REPORT STRATEGY For over twenty years, fueled by its strategic vision, ubisoft has managed to thrive within a challenging industry and benefit from strong growth cycles. " We continue to believe that Ubisoft is a compelling investment. If our assumptions about market-share gains and contribution margin over the next three years are correct, we think that the company could substantially exceed our expectations each of the next 12 quarters, driving its share price even higher. " MICHAEL PACHTER, RESEARCH ANALYST, WEDBUSH MORGAN SECURITIES, MAY

21 STRATEGY 15 While Ubisoft has always remained faithful to the main pillars of its strategy, it has also known how to adapt to shifting market realities so as to always stay close to its consumers and provide them with games that exceed expectations. Through an unwavering commitment to favoring in-house development and global direct distribution, recruiting the best and the brightest, fostering creativity and innovation and building strong brands, Ubisoft has established itself as an industry groundbreaker. The group is well on its way to reaching its objective of doubling revenues and tripling net income between 2006 and 2010 and will continue to relentlessly pursue its winning strategy.

22 UBISOFT 2007 ANNUAL REPORT close to the consumer All along the chain of operations, from market analysis to creation to after-sales service, ubisoft teams never lose sight of their ultimate goal deliver novel gaming experiences. Ubisoft market research teams have made particular strides in understanding non-traditional gamers. UNDERSTANDING CONSUMERS Ubisoft is constantly striving to meet consumer expectations. In order to remain close to gamers, the group relies upon a team of experienced marketing research experts whose work, particularly in the domain of consumer studies, helps teams to better understand the perceptions and desires of consumers and anticipate their future needs. These teams gather consumer feedback at several stages before, during and after the development process using a variety of research methods, both qualitative and quantitative. Recently, Ubisoft market research teams have made particular strides in understanding non-traditional gamers, such as women, girls and seniors. IN THE RIGHT PLACES AT THE RIGHT TIMES Ubisoft s business organization is also made up of some of the industry s foremost operational marketing and distribution teams, who play a crucial role in maintaining consumer proximity. These teams are consistently recognized for the quality of their work, receiving awards in numerous countries. For example, the UK Trade Marketing team was honored at this year s MCV Industry Excellence Awards, in London. US Marketing teams brought home eight awards at this year s MI6 Awards Show organized by the Association of Electronic Interactive Marketers (AEIM), including the Most Innovative Marketing Strategy Award for Tom Clancy s Rainbow Six Vegas Save-Vegas Viral Campaign. Working hand-in-hand with marketing teams, Ubisoft s distribution network is responsible not only for ensuring that the games make it into the stores, but also for building close relationships with retailers and communicating their learnings to other departments within the group.

23 STRATEGY 17 Ubisoft, virtually everywhere Today, Ubisoft considers its virtual presence to be as important as its physical one, for many consumers form their first impression of the group s games via this medium. The number and frequency of visitors on ubi.com, the company s online gaming portal, reached new heights this year with an average of 1.4 million unique visitors per month. This portal is not only used to promote and sell games, but also to collect gamer feedback via forums and surveys, and to provide new downloadable content. Building strong relationships with retailers is a key to maintaining consumer proximity. SERVICE EVERY STEP OF THE WAY Ubisoft takes a long-term approach to service, convinced that the customer relationship continues long after the conclusion of a sale. Quality after-sales service is among the factors that players take into consideration when making a purchase decision. Ubisoft has been tackling this issue in a proactive fashion. Today, the group offers multi-channel support including a hotline, webmail service and a free online FAQ system with round the clock self service technical support in 5 languages. Aware of the unique benefits offered by this channel, such as the ability to form lasting and cost-effective customer relationships, foster valuable interactions with gamers and improve brand loyalty, Ubisoft intends to continue integrating online operations into its overall business strategy.

24 UBISOFT 2007 ANNUAL REPORT talented people Ubisoft operates in a talentbased industry where success depends upon people and their capacity to innovate. it is for that reason that the group has always placed human resources at the heart of its strategy. ubisoft is committed to fostering an environment where its teams not only feel challenged, but are also happy to come to work every day. PASSIONATE EXPERTS Ubisoft teams are stationed in 22 countries, carefully selected for their talent pools and beneficial cost structures. These international and strategic locations enable the group to attract the best talents from all corners of the globe and to form talented teams whose members are all driven by the same passion. 81% of Ubisoft employees work in production, bringing together their creative talent and technological expertise to create games that will become landmarks in the industry. Video game creation requires a multitude of specialized skills. Highly qualified technical experts and computer scientists are just as important as avantgarde artists who know how to anticipate future trends. The programmer who develops artificial intelligence has to innovate and find novel solutions to stand out from the competition, just as the scriptwriter must stay on the cutting-edge of narrative techniques through a constant examination of emotional cycles, such as those found in Hollywood s hit TV series. AN EXPANDING ORGANIZATION This past year, Ubisoft continued to grow and recruit new talents. Most of these recruitment efforts were focused in Canada, France and Romania. The group saw 450 people join its ranks, a 15% increase compared to the previous fiscal year. Next year, the group will continue to recruit at the same pace, integrating approximately 500 people across all of its sites. The Ubisoft Campus in Montreal plays an important role in supporting this growth strategy. Founded in May 2005, this campus offers college- and university-level training programs covering all main aspects of video game development. The mission of the campus is to attract a talent pool for the video game industry in Quebec and provide educational foundations for future industry professionals. In 2005/06, 69 students from the first graduating class successfully completed the program and received a government-recognized

25 STRATEGY 19 One of Ubisoft's French offices. Food Force: where video games and the fight against hunger meet Food Force, developed by the United Nations World Food Program (WFP), the world s largest humanitarian agency, is the first free educational video game about global hunger. In search of support to create a French version of the game, the WFP turned to Ubisoft. Teams were so motivated to have the opportunity to localize a project for such a worthy cause that they even volunteered to help the WFP promote and distribute its title, making it available for free download directly on the Ubisoft website. Since its launch in October 2006, Food Force has already encountered a widespread success with more than 100,000 downloads in France alone. According to Neil Gallagher, WFP s director of communications: Food Force is clear evidence that with the right medium an issue as distant and invisible as hunger can trigger interest. diploma. 39 of those highly trained graduates went on to work at Ubisoft. For the academic year, Ubisoft launched an additional diploma in game design. With financial support both from the Quebec government and Ubisoft, the campus expects to train more than 500 people over the next 5 years. As the number one video game employer in China, Quebec, France and Romania, Ubisoft has developed strong ties with local governments and educational institutions to promote the industry and ensure its continued growth in these countries. A PLACE TO LEARN AND GROW In the video game industry, innovation and technical expertise are essential to staying ahead of the competition, which is why the group has made the development of skills and knowledge a priority. Internal and external training programs are becoming increasingly formalized and opportunities for knowledge exchange are increasing. For example, international seminars (based on job function or other specific subjects), collaborative work spaces, and employee visits to other Ubisoft locations have all contributed to this process. Furthermore, the possibilities for career development are numerous throughout the group (local promotions, transversal moves) and also include international opportunities. Employees benefit from a friendly work environment, which is one of the strengths of Ubisoft s corporate culture. This group dynamic is most notably cultivated by the close ties that are formed within teams (85% of locations have fewer than 200 employees). Moreover, employees benefit from autonomy in their work and are agents in the development of the company. They are informed on a regular basis about Ubisoft s strategy and current events. The group thus strives to create a working environment propitious to the development and motivation of its teams. According to a recent internal survey, close to 90% of the group s employees consider Ubisoft to be a good place to work.

26 UBISOFT 2007 ANNUAL REPORT a passion for innovation Ubisoft s award-winning development teams are consistently recognized for the quality of their creations. a passion for innovation, combined with cuttingedge technology, and knowledgesharing are what enable ubisoft teams to continue producing some of the best games in the industry. TECHNOLOGICAL TOOLS TO FUEL CREATIVE MINDS Ubisoft believes that the ability to make calculated R&D investments with long-term profit potential is one of the keys to innovation. Ubisoft therefore provides its teams with the means to stay on the cutting-edge of technology. Nearly twenty years of development experience has taught the group how to master and exploit new technologies to their fullest potential. Ubisoft was one of the first publishers to prepare for and anticipate the potential challenges brought about by the transition to new consoles. Targeted recruitment in internal production studios and smart investments in next-gen technology have enabled the company to continually deliver high-quality, innovative products. The group s strong collaboration with console manufacturers also played an important role in maintaining its technological lead. All throughout the development process, manufacturers provided Ubisoft teams with invaluable technological support. For example, when Ubisoft teams were working on the development of Red Steel, Nintendo provided them with a reference library of different gestures, which made it possible to develop a hit for the Wii. All of the group s investments in R&D have made it possible for in-house programmers to continually push the technological limits. In recent years, the group has both developed a certain number of proprietary engines and benefited from external tools, which can be customized internally for use on different titles. The fact that Ubisoft has provided itself with the means to create its own tools renders the group less reliant on external companies to keep up with constantly evolving technologies. Assassin s Creed is a recent example of how Ubisoft teams have once again succeeded in pushing the technological limits. The crowd scenes in this game represent a significant advancement in terms of artificial intelligence both for Ubisoft and the industry as a whole. Nearly twenty years of development experience has taught the group how to master and exploit new technologies to their fullest potential.

27 STRATEGY 21 Ubisoft s Shanghaï Studio Lights, Camera, Action! Ubisoft takes its brands to the big screen The synergies between the film and video game industries have increased notably over the years. With the arrival of the new generation of consoles, and their unparalleled graphic realism, the cross-over has become all the more apparent. Today Ubisoft is determined to learn from the cinema and acquire new skills, which can be used to enrich its video game universes. Last February, the group announced the opening of a new studio in Montreal, specialized in the creation of digital cinema content (CGI movies), thus positioning itself at the heart of this major industry movement. The studio s primary mission will be to produce short films inspired by games of Ubisoft brands. A first 8-minute film based on the highly anticipated Assassin s Creed is already underway. To be continued MANAGING THE COMPANY S KNOW-HOW In the video game industry, knowing how to leverage the knowledge and skills of each individual and ensuring they are transferred from one person to another is fundamental. At Ubisoft, teams are constantly looking to improve collaborative processes to ensure that budding ideas become reality. To support Ubisoft s knowledge management strategy, asset databases (sound, textures, graphics, etc.) and web-based collaborative work spaces have been set up to facilitate information sharing and help the group realize important productivity gains. The Academy of Experts, an internal think-tank that draws upon the knowledge of the company s many experts, is another example of collaboration and sharing at Ubisoft. Meetings are organized on an ad hoc basis to address a wide variety of topics from technical difficulties encountered in development to organizational challenges. Participants have the opportunity to exchange best practices and experiences.

28 UBISOFT 2007 ANNUAL REPORT BRANDS Ubisoft s remarkable ability to consistently create strong brands constitutes one of its main competitive advantages. TOM CLANCY S SPLINTER CELL CONVICTION is Ubisoft s latest installment in the Splinter Cell franchise, a break-through in the stealth genre. Discover Sam Fisher like you've never seen him before.

29 BRANDS 23 Today, the group possesses one of the industry s largest portfolios of proprietary brands including franchises such as Brothers in Arms, Far Cry, Prince of Persia, Rayman, Tom Clancy s Rainbow Six, and Tom Clancy s Ghost Recon. The company s multimillion unit-selling brands generate two-thirds of the group s annual turnover, helping to ensure recurrent revenue. Ubisoft is firmly positioned in military/tactical shooters and action/adventure, and has successfully established itself in other segments, such as strategy and casual games. Hollywood movie and TV licenses have also helped to continue balancing out the catalog, and last year, 17% of the group s sales revenue was generated from license-based titles. With the goal of creating three new brands every two years, Ubisoft will actively pursue the development of established brands as well as new intellectual properties.

30 UBISOFT 2007 ANNUAL REPORT BRANDS " " [Ubisoft] has amassed a number of top brands in recent years and is arguably one of the premier publishers in today s video game market. FEBRUARY 14, Ubisoft s remarkable ability to consistently create strong brands constitutes one of its main competitive advantages.

31 BRANDS 23 Today, the group possesses one of the industry s largest portfolios of proprietary brands including franchises such as Brothers in Arms, Far Cry, Prince of Persia, Rayman, Tom Clancy s Rainbow Six, and Tom Clancy s Ghost Recon. The company s multimillion unit-selling brands generate two-thirds of the group s annual turnover, helping to ensure recurrent revenue. Ubisoft is firmly positioned in military/tactical shooters and action/adventure, and has successfully established itself in other segments, such as strategy and casual games. Hollywood movie and TV licenses have also helped to continue balancing out the catalog, and last year, 17% of the group s sales revenue was generated from license-based titles. With the goal of creating three new brands every two years, Ubisoft will actively pursue the development of established brands as well as new intellectual properties.

32 UBISOFT 2007 ANNUAL REPORT creating strong brands Brand creation lies at the heart of ubisoft s editorial strategy. in less than 10 years, the number of multimillion unit-selling brands in ubisoft s catalog has grown from 1 to 10. BUILDING BRANDS PEOPLE WANT TO PLAY By offering lively characters, compelling storylines, breathtaking environments and innovative gameplay, Ubisoft strives to totally immerse gamers in its creative universes. This past year, the highly anticipated IPs being developed internally included Red Steel and Assassin s Creed, both of which were hailed for their originality. Red Steel, designed specifically for the Nintendo Wii, has already sold one million units in just under six months. Assassin s Creed brings gaming to the next level through its unprecedented freedom of action and highly realistic environments and was recognized with 5 awards at the 2006 edition of E3. INVESTING IN EXISTING FRANCHISES The company seeks to further build its established brands by producing innovative sequels that live up to consumer expectations. This year, Ubisoft once again proved its expertise in this domain through the renewal of several classic franchises. Games such as Rayman Raving Rabbids, Tom Clancy s Ghost Recon Advanced Warfighter 2 and Tom Clancy s Rainbow Six Vegas were warmly received by critics and gamers. PLATFORM-ADAPTED GAMES Ubisoft teams work closely with manufacturers to develop and commercialize games that respect and optimize the specificities and novel features offered by each platform. Red Steel was designed especially to take advantage of the Wii capabilities and had much success with fans of that console. While single-platform approaches have proven useful in certain instances, the group also continues to pursue its multi-platform approach, enabling it to reach an ever-increasing number of consumers without a proportional increase in production costs. As of March 2007, Teenage Mutant Ninja Turtles was launched on eight platforms and has collectively sold more than 1.1 million units.

33 BRANDS 25 Rayman : Champion for children Recently, UNICEF spearheaded a three-year general action plan for the schooling of children in Brazil, a country where approximately 60% of children are not enrolled in school. This past year, within the framework of the group s corporate citizenship program, Ubisoft decided to support this worthy cause. Rayman, who conjures up notions of youth, education and fun, was judged an ideal mascot for this program. From now on, in addition to being the conqueror of the raving rabbids, Rayman will also be known as the first virtual ambassador of free speech and children s rights. Tom Clancy EndWar explores uncharted territory Tom Clancy's Endwar is the first new game under the Tom Clancy brand to be launched since Splinter Cell in 2003, and this ambitious project will bring the franchise to a place it has never been. Developed by a team of experts in Ubisoft s Shanghai studio and overseen by strategy veteran Michael de Plater, Tom Clancy s EndWar is being developed to take advantage of the power of next-gen consoles, packing the gaming experience with enough fucntions and features to rival any conventioned PC-based strategy game. Set on the battlefields of World War III, Tom Clancy's EndWar offers not only stunning visuals and a world-wide battle of epic proportions, but also a unique approach to gaming. Ubisoft s key creative decisions, such as providing a voice command system feature and allowing players to lead their own armies against hundreds of others online, have put Tom Clancy's EndWar in a position to redefine and defy the norms of current strategy gameplay as we know it. By taking this innovative approach, Tom Clancy's EndWar pushes the limits of strategy games and launches the genre into the future.

34 UBISOFT 2007 ANNUAL REPORT something for everyone As the number of gamers continues to grow and their profiles become increasingly varied, ubisoft reaches out to these audiences by diversifying its portfolio, entering new domains and developing license-based titles inspired by the entertainment hits of today. this year in particular saw the company expand its catalog into familyoriented games. Ubisoft has strengthened its presence in the family segment. BRANCHING OUT Through a combination of new intellectual property (IP) and license-based games, such as Rayman Raving Rabbids, Open Season and the Petz series, Ubisoft has strengthened its presence in the family segment. Cosmic Family offers a virtual space adventure for children. Composed of early-learning mini-games, this title exploits the Wii 's novel features and provides concrete benefits for children such as helping them to improve their memory, hand-eye coordination, creativity and imagination. Games based on film and television licenses also played an important role in helping the group reinforce its position in the family-friendly segment and further strengthen ties with Hollywood, generating 17% of the group s total revenue this year. An exclusive worldwide licensing agreement between 4Kids Entertainment, Mirage Group and Ubisoft made it possible for the popular Teenage Mutant Ninja Turtles brand to hit movie theaters and consoles simultaneously. In order to seduce both old and new generations of Turtle fans, game developers remained faithful to the tone and spirit of the original comic book series. Building upon the success of Open Season, Ubisoft s collaboration with Sony Pictures Animation continues this year with Surf s Up, a penguin arcade surfing game based on the movie from the directors of Tarzan and Toy Story 2. The upcoming release of Naruto on the Xbox 360, based on the smash-hit Japanese anime TV series, also illustrates how Ubisoft is arming itself with the right titles to ensure the successful diversification of its portfolio.

35 BRANDS 27 Games for everyone Male or female, young or old, hardcore or novice, Ubisoft believes that video games are for everyone. This year, the group brought together a team of specialized experts to work on developing more games for the casual market. For Ubisoft, these games are characterized by their broad appeal, ease of play, flexible duration and concrete benefits; in other words, they enable players not only to have fun with family and friends, but also to grow and feel even better about themselves. The Petz series, which has sold 3.5 million units in the past fiscal year, is a testament to the potential of this segment. In the coming year, Ubisoft will commercialize many casual titles, including Jam Sessions, a game that gives people the experience of being a musician, and the My Coach series, which provides players with a wide variety of learning experiences. The first title to be released in the series is My Word Coach, a spelling and vocabulary brain teasing game. Ubisoft goes full-speed ahead with Driver Ubisoft is making a successful entry into the driving games segment by relying on a talented team and a cult brand. With more than 14 million units sold throughout the world, Driver is one of the most successful brands in the history of video games. This past year, Ubisoft acquired the rights to Driver and integrated the teams from its developer, Reflections Interactive. Driver 76, the first title under the Ubisoft label, was released in January 2007 for the PS P system and is a game that remains faithful to the brand s original spirit. The group looks forward to leveraging its knowledge in game development and brand creation to ensure that the Driver brand continues to live up to its reputation and succeeds in winning over next-gen gamers.

36 brands: front and center Unique gameplay and charismatic characters are at the heart of ubisoft s interactive universes. DARK MESSIAH MIGHT & MAGIC Action/Adventure RED STEEL Action/Adventure NEW BRAND FAR CRY Shooter HEROES OF MIGHT & MAGIC Strategy NEW BRAND MULTI MILLIONAIRE

37 BROTHERS IN ARMS Shooter MULTI MILLIONAIRE RAYMAN Family TOM CLANCY S RAINBOW SIX Shooter MULTI MILLIONAIRE ASSASSIN S CREED Action/Adventure NEW BRAND MULTI MILLIONAIRE

38 HAZE Shooter NEW BRAND THE SETTLERS Strategy MULTI MILLIONAIRE DRIVER Action/Driving MULTI MILLIONAIRE TOM CLANCY S GHOST RECON Shooter MULTI MILLIONAIRE

39 TOM CLANCY S SPLINTER CELL Action/Adventure MULTI MILLIONAIRE BLAZING ANGELS Simulation PRINCE OF PERSIA Action/Adventure MULTI MILLIONAIRE SILENT HUNTER Simulation

40 licences with a portfolio so wide-ranging that it reaches from the skate park to the stars, from the crime lab to the beach, and all across the globe, Ubisoft truly offers something for everyone. CSI: CRIME SCENE INVESTIGATION TV Series NARUTO Anime TV LOST TV Series TMNT TEENAGE MUTANT NINJA TURTLES Animated Movie SURF S UP Animated Movie SHAUN WHITE Extreme Sports STAR WARS Science Fiction Movie

41 FINANCIAL REPORT 2007 <

42 UBISOFT FINANCIAL REPORT the group's activity and results for fiscal year 31 Introduction Significant events of the fiscal year Analysis of activity and comments on results for fiscal year 2006/ Cash assets and capital Human resources Social service activities Environmental data Subsidiaries and equity interests General information Risk factors Commitments Insurance Recent events, outlook and strategies 52 Consolidated financial statements as of March 31, Consolidated balance sheet Consolidated income statement Consolidated statements of changes Consolidated cash flow statement Notes to the consolidated financial statements Report for the consolidated account statements for the fiscal year ending March, 31, Corporate accounts of Ubisoft Entertainment SA as of March 31, Ubisoft Entertainment SA balance sheet Ubisoft Entertainment SA income statement Corporate statements of changes Cash flow statement Notes to the corporate accounts Other information General report on the fiscal year ending March 31, Special Auditor s report fiscal year ended March 31, 2007 on regulated agreements 114 information on the company General information on the company Additional information on the company 118 Corporate governance Members of the group's Board of Directors and management Rules applicable to the appointment and replacement of the members of the Board of Directors Functioning of the Board of Directors Absence of fraud conviction, association with a bankruptcy or public incrimination and/or sanction Loans and guarantees granted to members of the Board of Directors Other offices held by the Directors Compensation of managers Services contract with the issuer and its subsidiaries Operations referred to in Article L of the French Monetary and Financial Code and Article of the AMF s internal regulations 141 Report of the chairman of the board of Directors drawn up in accordance with article L of the french commercial code, concerning the conditions under which the board s work is prepared and organized and the internal control procedures implemented by the company Conditions under which the Board s work is prepared and organized Internal control procedures Outlook Limitations on the powers of the Chief Executive Officer Auditor s report, prepared pursuant to Article L of the French Commercial Code, on the report of the Chairman of the Board of Directors of Ubisoft Entertainment S.A. concerning the internal audit procedures used to prepare and process accounting and financial information 151 Text for draft resolutions subjected to the vote of the Combined General Meeting on July 4, Resolutions under the authority of the ordinary general meeting Resolutions under the authority of the extraordinary general meeting 156 persons responsible for the reference document and for the audit of the accounts Person responsible for the reference document Declaration of the person responsible for the reference document Names, addresses and professional fees of the auditors Documents available to the public Schedule of financial communications for fiscal year 2007/ glossary 171 Concordance Table 172 sommaire

43 131 THE GROUP'S ACTIVITY AND RESULTS FOR FISCAL YEAR The group s activity and results for fiscal year 2006/2007 Introduction Significant events of the fiscal year Analysis of activity and comments on results for fiscal year 2006/ Key figures Quarterly and annual consolidated sales Breakdown of sales by activity Change in production volumes Sales by platform Sales by destination Changes in the income statement Change in working capital requirement (WCR) and debt Asset financing policy Cash assets and capital Changes in equity Cash flow Borrowing terms and financing structure Human resources A motivating, friendly work environment Direct communication involving each individual in the company s day-to-day life Teams with a wide range of profiles Close contact and a friendly environment Valuing performance and autonomy Individual autonomy and initiative International growth opportunities Compensation that seeks to recognize performance and commitment Skills development: a priority Ubisoft has opted for in-house production An innovative training program adapted to employees needs Continuous emulation thanks to dialogue among the group s experts Employment at Ubisoft in France Work environment and working conditions Skills development Employment and non-discrimination Compensation Social service activities Environmental data Recycling Destruction of non-marketable products Power consumption Water consumption Environmental risks Subsidiaries and equity interests Organizational structure at March 31, Equity interests during the fiscal year Activities of subsidiaries General information Investment policy Research and development policy Real estate, plants and equipement Risk factors Risk related to product strategy and brand positioning and management Risk related to market developments and the success of next-gen consoles Risk related to a top game being delayed or getting off to a poor start Risk related to recruitment and retention of talented employees Risk related to the termination of a contract with a licensing partner Risk related to intellectual property Legal and arbitration proceedings Risk related to dependence on suppliers and subcontractors Risk related to customer dependence Risk related to computer security Financial risk Risk related to future acquisitions and integration of acquired companies Commitments Insurance Recent events, outlook and strategies Recent developments Market outlook 52

44 UBISOFT FINANCIAL REPORT 2007 Introduction Ubisoft is one of the leading developers and publishers of interactive game software worldwide. In 2006, Ubisoft was the fifth-largest independent publisher in the United States and was ranked second in the PAL zone, which includes Europe, Australia and New Zealand, making it the fourth largest independent publisher in both regions combined (sources NPD, Chart Track, Media Control, GFK). Founded in 1986, Ubisoft has experienced strong and continued expansion by implementing a strategy of both internal growth and carefully targeted acquisitions with high growth potential. Since its listing on the stock exchange in 1996, the group has increased its sales seventeen-fold. It currently has an extensive catalogue of strong brands, recognized by both industry professionals and consumers. The group's business is organized into three major fields of activity: development (the creation of game software), publishing (the acquisition of game rights and external licenses, as well as product marketing) and distribution (the physical delivery of the final product to retailers). Over time, Ubisoft has successfully implemented these three activities at 15 production sites around the world, where the talent and creativity of Ubisoft's workforce have produced numerous strong brands. This workforce comprises 3,934 individuals, all working toward a common goal: the creation of extremely high-quality games for a growing and increasingly demanding audience of gamers. 1.1 Significant events of the 2006/2007 fiscal year May million equity increase following the conversion of warrants issued in Ubisoft emerges victorious from the 2006 E3, with Assassin s Creed winning the Best Action/Adventure Game as part of the Game Critics Awards: Best of E3 2006; Brothers in Arms Hell s Highway recognized as Best First Person Shooter for Xbox 360 ; and Tom Clancy s Rainbow Six Vegas picking up the title of Overall Best First Person Shooter awarded by IGN. June 2006 Ubisoft opens a production studio in Sofia, Bulgaria. July 2006 Ubisoft acquires the Driver franchise for 19 million, giving the Group a direct point of entry into the key driving games segment. This prestigious brand has already sold more than 14 million units throughout the world. Ubisoft announces on July 18, 2006 the election by ratification of Mr. Marc Fiorentino as independent director. August 2006 Ubisoft announces 7 titles for the launch of Nintendo Wii including Red Steel and Rayman Raving Rabbids. Tom Clancy s Ghost Recon Advanced Warfighter is ranked number one for solo and multiplayer games on the on-line games service Xbox Live. This data is based on the number of unique players during the second quarter of calendar 2006 according to Microsoft. October 2006 A new commercial subsidiary opens its doors in Mexico to reinforce Ubisoft s position on a growing market. November million equity increase following the conversion of a portion of the Group's 2006 OCEANE bonds. December 2006 A two-for-one stock split is carried out on December 11, Game Informer, the world s number one computer and video game magazine with a circulation of over two million, ranks Ubisoft as the second leading international publisher and names Ubisoft Montreal as the fourth leading development studio for January 2007 During the fiscal third quarter, Ubisoft ranked no. 1 independent publisher for Wii in Europe and the U.S. with market shares of 29.2% and 18% respectively. Rayman and Red Steel positioned number two and three in terms of sales. Ubisoft ranked no. 2 independent publisher for the Xbox 360 system in Europe and the U.S., with market shares of 14.6% and 13.4% respectively: - Tom Clancy s Rainbow Six Vegas was the third bestseller in December in the United States; - Tom Clancy s Splinter Cell Double Agent was the leading seller in October; - Tom Clancy s Ghost Recon Advanced War Fighter was the third best-seller in the United States for the full calendar year 2006.

45 133 THE GROUP'S ACTIVITY AND RESULTS FOR FISCAL YEAR February 2007 Ubisoft is honored at the 10 th Academy of Interactive Arts & Sciences Achievement Awards (AIAS), winning the award for the First-Person Shooter of the Year for Tom Clancy s Rainbow Six Vegas. Ubisoft announces its new expansion plan in Quebec with the objective of creating 1,000 additional jobs by 2013 and opening a studio specialized in the creation of digital cinema content. 50 million capital increase following the conversion into shares of 92% of Ubisoft s 2008 warrants (BSAR) Analysis of activity and comments on results for fiscal year 2006/2007 Key figures The following selected financial information related to the fiscal years ended March 31, 2006 and March 31, 2007 is taken from the consolidated financial statements and presented in accordance with IFRS standards In K In K Sales 680, ,070 Operating result 34,579-1,391 Financial Result 18,047-9,110 Share in earnings of associates 3,149 19,109 Income tax expense - 15,217 3,324 Net earnings (Group share) 40,558 11,932 Equity 521, ,258 Investment related to production 161, ,475 Personnel 3,934 3,441

46 UBISOFT FINANCIAL REPORT 2007 Statement of changes in cash flow for comparison with other industry firms K K Cash flow from operating activities Consolidated net income 40,558 11,932 +/- Share in earnings of associates - 3,149-19,109 +/- Depreciation of game software 214, ,100 +/- Other depreciation 15,619 12,692 +/- Provisions 884 2,776 +/- Cost of share-based payments 3,344 2,692 +/- Capital gains or losses /- Other income and expenses /- Internal development and license development expenses - 226, ,459 (2) Operating cash flow 45,768-26,397 Inventory - 1,914-2,873 Trade receivables ,688 Other assets - 34,830-7,048 Trade payables 11,539-32,204 Other liabilities 33,429-18,434 +/- Change in working capital requirement 7,382-5,871 Cash from operating actvities 53,150-32,268 - Purchases of tangible & intangible assets - 43,394-18,407 (2) + Sales of tangible and intangible assets /- Purchases/sales of financial assets - 15,778-4,227 +/- Other cash flow related to investment operations Proceeds from loans and other financial assets 16,078 3,787 +/- Partial sale of associates (1) ,691 Cash from investment activities - 42,982 3,831 Cash flow from financing activities + New financial leasing loans New long- and medium-term loans 30,740 7,537 - Repayment of financial leasing loans ,040 - Repayment of loans - 151,933-24,875 - Accrued interest Proceeds from issue of capital 106,551 40,786 +/- resales/purchases of own shares /- Other cash flows Cash from financing activities - 15,036 21,383 Net change in cash and cash equivalents - 4,868-7,054 Net cash and cash equivalents at the beginning of the fiscal year 80,894 90,493 Exchange gains/losses on cash 2,627-2,545 Net cash and cash equivalents position at the end of the fiscal year 78,653 80,894 (1) Including cash position of companies purchased and sold ,697 (2) Adjustment at 31 march 2006 of 1,5 M corresponding to the acquisition of Far Cry from the line Internal development expenses to the line Purchases of tangible & intangible assets.

47 135 THE GROUP'S ACTIVITY AND RESULTS FOR FISCAL YEAR Quarterly and annual consolidated sales Sales Change at current Change at constant (in M ) exchange rates exchange rates First quarter % + 64% Second quarter % - 4% Third quarter % + 27% Fourth quarter % + 42% Total fiscal year % + 27% At current rates, sales increased by 24% over FY 2006/2007; at constant rates, growth was 27% Breakdown of sales by activity The Ubisoft group s sales are distributed over the three core activities of the video game industry: development, publishing and distribution. Development covers revenues from titles developed, produced and marketed by Ubisoft's in-house studios. It also includes sales coming from tittles created by third-party developers for which Ubisoft provides supervisory and coproduction services and acts as guarantor of the final product s quality. Publishing covers revenues from titles designed and produced by third-party developers for which Ubisoft finances and supervises production in exchange for acquiring the license. Ubisoft then handles localization and manufacturing and is, of course, responsible for marketing and sales. The company receives revenue from product sales and pays royalties to the brand's developers and/or owners. Distribution sales correspond to revenue from the sale of products from publishers with which Ubisoft has signed distribution agreements and for which it handles marketing and sales. Such agreements may be local, covering a limited geographical area, or may encompass several regions. Breakdown of sales by activity is as follows: Breakdown of sales by activity (%) Change in volume Development 76% 85% - 11% Publishing 18% 10% + 124% Distribution 6% 5% + 86% Total 100% 100% The sharp increase in publishing and distribution activities illustrates the company s enhanced ability to attract more external studios and publishers thanks to the quality of its distribution network and the expansion of its publishing teams.

48 UBISOFT FINANCIAL REPORT 2007 Change in production volumes Number of titles produced in-house, co-productions (with third parties), publishing and distribution: Number of titles* Development In-house production Co-production Publishing Distribution Total * A title is a single game that runs on one or more platforms. For example, Rayman Raving Rabbids PlayStation 2, Xbox360, Nintendo Wii, PC, and Nintendo DS constitute five products but just one title. The strong growth of publishing and distribution titles is demonstrated by the sharp growth in distribution activities, and is a result of gains in market share made by the group, which now position it as a major player in most countries. In 2007/2008, the number of titles marketed is expected to exceed 70 and the number of products should be significantly higher. Sales by Platform CD-ROM PC 16% 16% Xbox % 14% Nintendo Wii 14% 0% PlayStation 3 2% 0% PlayStation 2 16% 27% DS 11% 6% PSP 5% 9% Game Boy Advance 5% 7% Xbox 1% 17% G-CUBE 1% 3% Miscellaneous 0% 1% Total 100% 100% The company enjoyed an early positioning on new consoles, which accounted for 60% of the year s sales: Nintendo DS and Sony PSP portable consoles, represented all together 16% of sales during the year. Growth was particularly high for Nintendo DS, which benefited from the success of the Petz range and, more generally, from that of the platform itself, while sales on Sony PSP held steady. Microsoft s Xbox 360 : this platform benefited from the success of the games under the Tom Clancy brand, in particular as a result of their online gameplay. Wii : the success of games like Rayman Raving Rabbids and Red Steel have enabled the group to establish itself as a leader on this console Sales by destination Fiscal year (in M ) % % France % % Germany % % United Kingdom % % Rest of Europe % % Total % % United States/Canada % % Asia-Pacific % % Rest of the world % 7 1.2% Total % % The geographic breakdown of 2006/2007 sales is in line with that of the previous year and attests to the group s ability to develop on an equal basis in its two major regions, namely Europe and North America. Thus, whereas North America has the benefit of advance launches of new machines and stronger growth, Europe is helped by the emergence of new territories.

49 137 THE GROUP'S ACTIVITY AND RESULTS FOR FISCAL YEAR Changes in the income statement The gross margin was 66.5% of sales compared to 66% in FY 2005/2006. This slight increase resulted from a high percentage of sales (60%) on next-gen consoles, which offset the customary fall in prices of games on previousgeneration consoles. It also stems from the growth in online revenue which, although modest (accounting for less than 1% of sales), generates a margin of close to 100% and is expected to increase in the future. Current operating result before share-based payments was 38.2 million versus 3.1 million in 2005/2006. This increase is the result of: a 91 million increase in the gross margin tied to the sharp growth in sales (+ 133 million), an 11 million reduction in marketing and structural expenses, which represent less than 26% of sales compared with 34% the previous year, a 67 million increase in development expenses, which represent 35% of sales, up nearly 4 points. Financial result breaks down as follows: 7.3 million in financial costs, 1.7 million in foreign exchange losses, 27 million positive impact linked to the equity swap. The 3.1 million profit pertaining to the associates represents the share in Gameloft SA s earnings. The company recognized a tax expense of 15.2 million, which includes research tax credits in the amount of 1.9 million. Net income was 40.6 million which translates into net earnings per share of Change in working capital requirement (WCR) and debt Working capital requirement fell in absolute value to 66 million compared to 79 million last year, justified by a 7 million improvement and a 6 million foreign exchange impact. Given the growth in commercial activity, this represents only 9.7% of sales compared with 11% the previous year. The net financial position is now positive by 55 million versus net debt of 65 million in This 120 million improvement can be attributed to a number of factors: operating cash flow of 46 million, improvement in working capital requirement of 7 million, share capital increases in the amount of 107 million essentially resulting of conversion of OCEANE and warrants, investments totaling 43 million, 25 million of which was used to acquire the Far Cry and Driver brands Asset financing policy The company does not use securitization contracts, transfers of receivables pursuant to France s Dailly Law, or sales with the option to repurchase, but does rely on factoring and discounts, primarily in Germany and the UK. It also uses confirmed lines of credit totaling 130 million (including a 100 million syndicated loan) and short-term lines of credit to finance its cash requirements at peak times Cash assets and capital Changes in equity The video game business requires investments in development in excess of 30% of sales. Publishers must be able to finance these investments, which cover average periods of around 18 to 24 months, using their equity. Moreover, publishers must launch new licenses regularly, the success rate of which is not guaranteed. For these reasons, strong capitalization is essential to ensure the financing of regular investments and to deal with the unpredictability of a given title s success or failure without jeopardizing the company s continued existence. With 522 million in equity, up by 141 million, Ubisoft easily finances its game investments, which total 226 million. In FY 2006/2007, this equity again increased through the exercise of the 2003 share subscription warrants and a portion of the 2006 OCEANE and 2008 redeemable share subscription warrants (BSAR), which brought in 96 million. It also rose by 10 million as a result of increases tied to the stock option plans and the company employees savings plan.

50 UBISOFT FINANCIAL REPORT Cash flow Publishers have two types of cash flow: cash flows needed to finance development costs are spread out evenly over an 18 to 24-month period, bearing in mind that each project intensifies gradually but that teams are allocated to several projects. This cash flow amounted to more than 226 million in 2006/2007; cash flows needed for the marketing of games are characterized by strong seasonal trends (25% of sales are realized during the first half of the calendar year and 75% during the second) and a gap between production costs and the collection of revenues. Indeed, the company must first finance the manufacture of products, which represent 35% of sales and are payable within 30 days on average, and also finance marketing expenses (approximately 12% of sales) before collecting revenue an average of 80 days after the products are made available in stores. For this reason, the company must finance major cash-flow peaks around Christmas and experiences an increase in cash flow between February and March. This pattern may change if the fourth quarter of the fiscal year is very strong since the working capital requirement may then be greater. Thus in fiscal year 2006/2007, the company s net debt ranged from - 55 million to 100 million, with the peak debt period occurring between November and January Borrowing terms and financing structure In 2006/2007, most of the financing used resulted from the 2006 OCEANE bond ( 89 million) and the OBSAR bond ( 52 million). Since both these bonds combined represent more than the company s net debt, Ubisoft has not had to use the 100 million syndicated loan obtained in May 2005 or the bilateral lines of credit issued by banks, and has invested cash surpluses on a regular basis. The average cost of borrowing is 6.29%, as explained in detail in section There are no financial covenants limiting the use of the OCEANE, which was redeemed in November The covenants that must be respected with regard to the OBSAR, which was redeemed in February 2007, the syndicated loan, and the bilateral lines of credit obtained in 2006/2007 for 20 million are as follows: 2007/ /2007 Net debt restated to reflect assigned receivables/equity restated to reflect goodwill < Net debt restated to reflect assigned receivables/ebitda < Furthermore the company signed in 2006/2007 a 10 M credit line which uses the same covenants but with a net debt to equity ratio of 0.9. For FY 2007/2008, and barring a major acquisition, Ubisoft should be able to finance its operations using its cash flow and the various lines of credit extended to it, including 130 million in confirmed lines ( 100 million of which is from the syndicated loan) and 93 million in short-term lines. 1.4 Human resources Ubisoft key figures at March 31, ,934 employees (average staff during the year: 3,734), nearly a 15% increase since March 31, Ubisoft employees in 22 countries. 81% in production activities and 19% in business activities. An average age of 31 years. Average seniority of 3.5 years.

51 139 THE GROUP'S ACTIVITY AND RESULTS FOR FISCAL YEAR Distribution of staff by activity (1) Activity At At At Production 3,194 2,729 2,274 Business Total 3,934 3,441 2,972 Distribution of staff by region Country Employees Employees Employees at at at North America 1,923 1,795 1,431 Europe and North Africa 1,600 1,188 1,175 Asia-Pacific Total 3,934 3,441 2,972 (1) These include only permanent employees. The total number of employees therefore excludes trainees and temporary employees: intermittent and short-term staff A motivating, friendly work environment Direct communication involving each individual in the company s day-to-day life The teams are regularly informed of the company s strategy and new developments in several ways: a group portal, local intranets, a monthly group newsletter, internal meetings at all the subsidiaries and team workshops. An in-house survey is conducted every two years, on average, to poll all employees on the company s main strategic choices and to determine the teams level of satisfaction (80% participation in the most recent survey conducted in April 2007). Initiatives and programs are put in place based on the survey results and are made known to employees at regular intervals Teams with a wide range of profiles By definition, the process of creating a game implies strong collaboration among the teams involved, since all technical and artistic areas interact from start to finish. The diversity of the employees profiles is, in fact, one of the strengths of the company, where multiculturalism and open-mindedness are part of everyday life: there are some 30 job categories at Ubisoft, ranging from creative personnel to programmers, game designers and product managers, all of whom are united through their passion and shared objectives; Ubisoft s teams work in 22 countries, which means that the group boasts at least as many different nationalities. Since video games are products that continue to appeal primarily to men, it makes sense that women represent only 20% of Ubisoft s employees (versus 80% for men). It should be noted, however, that women account for 39% of senior management and 41% of business personnel Close contact and a friendly environment Ubisoft is committed to ensuring close contact among its employees by implementing, as much as possible, reasonably-sized structures (85% of the sites have fewer than 200 employees), with HR managers who are in touch with the staff and team managers who are available to their team members. More generally, the friendliness of the work environment continues to be a strong point of the group s culture, as noted by 94% of the group s employees during the last inhouse survey. With regard to working conditions, Ubisoft complies with all statutory requirements related to health and safety at its establishments. In addition, employees are subject to limited occupational hazards Valuing performance and autonomy Individual Autonomy and Initiative Employees enjoy a high degree of autonomy in their work, as demonstrated by the results of the last in-house survey, in which 91% indicated that they could take initiative in their day-to-day work. Employee autonomy is also encouraged through the gradual implementation of IT systems that include useraccessible web tools at all subsidiaries to allow employees to manage their own absences, expense accounts, professional data and so on.

52 UBISOFT FINANCIAL REPORT International growth opportunities Each employee is assessed at least once a year by his or her manager, and this annual meeting is an opportunity to review, together with the HR manager, potential areas for development. In addition to mobility across departments and promotions on-site, there are many international career paths: in FY 2006/2007, there were 181 international transfers, the countries receiving the most expatriates are France, China and Canada, there are currently 117 expatriates working around the world Compensation that seeks to recognize performance and commitment Ubisoft has introduced a bonus policy that reflects its desire to reward individual and group performance: the production teams receive a bonus that is based on the game s profitability and the employee s individual contribution, the business teams receive a bonus that is calculated according to their attainment of quantifiable results established at the beginning of the year. Employee stock ownership plans are also an excellent way for all Ubisoft employees to enjoy a share of the company s success. Share capital increases reserved for employees were carried out in France a regular occurrence since 2001 and in the USA in September The Board of Directors has scheduled a share capital increase reserved for Canadian employees by the end of July Indirect employee shareholding via a company mutual fund (FCPE) today represents 0.924% of capital and, in light of information known as of March 31, 2007, the total registered shares owned by Ubisoft employees are estimated to comprise less than 1% of capital. Finally, stock options are granted on a discretionary basis to employees who have regularly out- performed against their targets. At March 31, 2007, all plans combined, nearly 15% of the group s employees had received stock options Skills development: a priority Ubisoft has opted for in-house production Despite an increasingly competitive market, Ubisoft has actively pursued its internal growth strategy: 493 employees joined the group during the year, an increase of nearly 15%. Most recruitment took place in Quebec, Romania, France and China, where Ubisoft is the largest employer in the video game sector. Ubisoft has the second largest in-house design team in the industry. The international and strategic placement of its 15 production sites enables it to build talented teams by attracting the most qualified people from around the world. To support this growth, Ubisoft acquired the Reflections Interactive Ltd studio in the UK and opened a studio in Bulgaria. At March 31, 2007, these studios employed 73 and 35 people, respectively. In Montreal, Ubisoft also relies on the Campus created in May 2005, at which young recruits are trained in video game disciplines. Of the first class of 69 students trained at the campus, 39 graduates have joined the group. More than 600 candidates applied for the second graduating class that includes 116 students who had the opportunity this year to enroll in a new Game Design curriculum. This past year, the group opted to consolidate its US development teams at the Red Storm Entertainment Inc. studio in North Carolina by closing Wolfpack Studios Inc. in Austin, Texas. Ubisoft occasionally uses freelancers (particularly for artistic services), intermittent workers and temporary employees. In some countries, auxiliary services (e.g. security, cleaning, and IT maintenance) are provided by outside companies An innovative training program adapted to employees needs In a sector where innovation and technical expertise are necessary to continuously maintain a technological advantage, it is only natural that training is a very high HR priority. The training programs that took place in FY 2006/2007 were characterized as follows: 9,730 days of training were offered by the group, which represents an annual average of 2.5 days per employee, a large part of these training programs (47%) focused on technical skills required for production activities and 31% on language instruction (French and English), the budget allocated to training during the period (excluding salaries) was 1,405,551. The aim is to empower employees and to give them the means to play an active role in their own development. Thus, various local programs are structured in a way that gives teams a certain degree of flexibility, such as in choosing training topics. In Montreal, for example, employees enroll online and have year-round access to the course list and schedule by job. They also have online access to training materials Continuous emulation thanks to dialogue among the group s experts The group makes every effort to create an environment that allows and encourages its teams to share their expertise to best advantage: new employee integration and sponsorship programs exist at most of the large subsidiaries;

53 141 THE GROUP'S ACTIVITY AND RESULTS FOR FISCAL YEAR multi-site collaboration projects that involve shared production are being developed, requiring even greater dialogue among the studios (e.g. Tom Clancy s Ghost Recon Advanced Warfighter 2, which was developed at two sites); international meetings related to a specific activity or a specific topic take place on a regular basis; the Academy of Experts, which meets several times a year and is a sort of internal think tank, has a two-fold mission: to allow the sharing of information among the development studios and to solve complex technical problems; collaborative workspaces and databases are increasing in number. Their aim is to facilitate collaboration and the organization and sharing of key information concerning teams, projects, jobs, sites, etc. 300 new collaborative web workspaces were created this year. The group portal, the display of which is customized according to the activity, is an entry point through which employees can exchange information and best practices with their peers; exchanges of expertise among sites are on the rise as a result of trips made by certain employees on short- or long-term assignments, which increased by 74% over the previous year (181 assignments during the past fiscal year); Associations with related industries (music, film, television, etc.) continue to grow: in February 2007, Ubisoft announced the opening in Montreal of a new production center that specializes in the creation of digital content for the film industry. Its main purpose is to produce short films based on the various games to which Ubisoft owns the rights; exchanges with experts in these industries are also taking place. The form these exchanges take include collaborations on some of our games, such as on development of the Lost game, between the producers of the TV show and the teams at the Montreal studio; In terms of human resource management, Ubisoft continues to implement tools and programs firmly aimed at developing and motivating its teams. According to the latest in-house survey, nearly 90% of the group s employees feel that Ubisoft is a good company to work for Employment at Ubisoft in France an average workforce of 755 employees during the year, 71% men and 29% women, 64% in production activities and 36% in business and support activities, an average age of 32 years, average seniority of five years Work environment and working conditions Work hours Full-time employees work 35 hours per week. Work schedules vary depending on each activity s requirements and on employees preference for a five-day work week or for the granting of overtime compensation days (RTT). 2.2% of employees work part time. Overtime hours during the course of the fiscal year were worked in accordance with current legal and union provisions. The absenteeism rate in 2006/2007 was 1.5% (1) and breaks down as follows: 80% due to illness, 15.5% due to exceptional leave, (2) 4.5% due to work-related accidents. (1) The absenteeism rate excludes maternity and paternity leave. (2) These include time off for a birth, marriage, moving, etc. Entertainment The entertainment department offers shows at reduced prices (a 40% discount on 2,025 tickets provided by Ubisoft to its teams in 2006/2007), leisure weekends, events, etc. Its annual budget, excluding salaries of the entertainment coordinators, is 400,000. A sports room open only to employees offers fitness activities and group classes Skills development Ubisoft has incorporated the individual right to training (DIF) into its occupational training policy. During the period, the budget allocated to training (excluding salaries) increased by nearly 27% compared with the previous year, for a total of 792,045. Ubisoft also offered positions to several interns and apprentices during FY 2006/2007. Internships are often a bridge to employment. In France, for example, one-third of the junior employees hired this year had previously completed an internship at Ubisoft Employment and non-discrimination Information concerning employment and non-discrimination in France is presented below: 69% of Ubisoft s workforce in France comprises management-level staff, women account for 29% of all employees, and 78% of them hold management positions, in terms of compensation, gender equality is respected, 75% of personnel are employed under open-ended agreements, employees at Ubisoft in France have representation, in FY 2006/2007, Ubisoft had two disabled employees and contributed 82,700 toward the integration of disabled people into the workforce.

54 UBISOFT FINANCIAL REPORT Compensation In France, compensation consists of a fixed amount and a variable amount (cf. Section 1.4.2). Moreover, under the Group Saving Plans set up since 2001, French employees also receive an additional contribution from the company. The Board of Directors also approved the terms of a share capital increase in connection with this plan (with an additional contribution and discount) which will take place in the summer of Social service activities Ubisoft organizes special events for its employees on a regular basis and offers them numerous benefits, particularly in the areas of sports and entertainment. The group also participates in charitable actions through its corporate citizenship program - Sharing more than games. In line with the group s corporate values and core business, this program aims to help disadvantaged or ailing young people through access to games, education and culture. Since the creation of this program last year, the group has spearheaded several important philanthropic campaigns around the world. In late 2006, for example, Ubisoft learned of UNICEF s three-year general action plan for schooling of children in Brazil, a country where approximately 60% of school-aged children are not enrolled in school. The group decided to partner with UNICEF to support this plan, offering both financial support and the chance to use the group s cult character, Rayman, as a virtual ambassador for free speech and children s rights. Shortly thereafter, Ubisoft s French subsidiary identified another opportunity to support UNICEF in conjunction with the launch of a new product line Rêves de filles. Designed for girls aged 8 to 12, this line is composed of video games that promote values such as respect for nature, sharing and creativity. From February 15 th to April 15 th, for every purchase of a Rêves de filles game, Ubisoft donated 1 to UNICEF, amounting to a total donation of 67,094 to support a preschool program in Bangladesh. This year, Ubisoft had the opportunity to collaborate with the United Nations World Food Program (WFP) on the localization of an educational video game designed to sensitize children about the issue of global hunger. Teams from Ubisoft Montreal were also active this year through their continued support of the Centraide organization, which funds approximately 350 groups and projects serving the city s most disadvantaged populations. 1.6 Environmental data Ubisoft does not manufacture the video games that it publishes and distributes. It therefore has a very low impact on the environment, whether in terms of air, water, soil, noise or odor pollution. The main manufacturing facilities of Ubisoft s suppliers and assemblers are ISO 9001 certified and therefore comply with this standard s safety and the environment process. One facility is even certified compliant with the environmental standard. In France, Ubisoft contributes to the eco-packaging tax based on each package (identified by category: paper, cardboard or plastic) placed on the French market. Ubisoft actively recycles used computer, electrical, and electronic equipment, as well as waste paper Recycling The group is mindful of its responsibility concerning the recycling of its used computer equipment and waste paper. Used computer equipment In order to recycle its computer equipment in France, Ubisoft has contracted with a company that specializes in the processing of electrical and electronic waste and the recovery of computer monitors to salvage, disassemble and recycle used equipment. To ensure compliance with current laws regarding waste reduction and materials recovery, the company de-manufactures equipment so that it can be sorted and isolated and each component reclaimed. This disassembly process makes it possible to isolate toxic materials so they can be packaged and routed to specific treatment facilities. During the past year, Ubisoft s French subsidiaries recycled some 12 tonnes of computer equipment. The French subsidiaries collaborate with an association of victims of non-work related accidents for the recycling of portable telephones and/or used Blackberrys. At the same time, foreign subsidiaries have made efforts to recycle their computer equipment (for example, in Germany, the US, the UK and Italy). In general, the Ubisoft group is working to combat waste by

55 143 THE GROUP'S ACTIVITY AND RESULTS FOR FISCAL YEAR donating equipment to charitable organizations or selling it to wholesalers or employees instead of discarding it. Our Ubisoft Divertissements subsidiary gives some of its used equipment to a social services company that works in the IT field and helps troubled young adults enter the workforce. This company recycles, refurbishes and resells the equipment to social service organizations. For the most part, cartridges and toner are returned to suppliers. Waste paper In terms of paper recycling, the subsidiaries either: take advantage of municipal or government programs to recycle their paper via selective sorting or collection centers, as is the case in Germany, Korea, Italy, Switzerland and the UK; or rely on specialized outside firms, as is the case in Canada, the US (cartons, boxes) and France. Nearly one out of every two sites recycles its paper. In France, a work group mindful of the issue of environmental protection called RECYCLONS! (Let s recycle) has been in existence for several years. Its goal is to promote recycling at Ubisoft s French subsidiaries through the recycling of paper products, the purchase of recycled paper for printers and copiers, the distribution of non-disposable plastic cups, and the inclusion of recycled office supplies in the standard catalogue provided to group subsidiaries in France. As in France, the Canadian studio set up an environment committee this past year in an effort to implement practical, environmentally-friendly solutions. Recycling in some countries complies with strict standards set out by environmental regulations: in Germany, Ubisoft holds a Green License in connection with the EU directive on packing supplies Destruction of non-marketable products Each subsidiary is directly responsible for disposing of inventories at distribution platforms. During the fiscal year, Ubisoft destroyed approximately 165 tonnes of non-marketable products. The various products were destroyed (by crushing and compacting) under the supervision of official bodies and sent to outside companies to be: burned (in Japan, for anything that cannot be recovered, and in the Netherlands), or buried (in Italy and the US), or recycled (in the UK, Germany, Australia, Canada, France and Japan). In France, products are destroyed by a company specializing in the recycling of CDs, DVDs, computer disks and plastic electronic media of all kinds. Products are crushed and sorted before being transformed into fine particles that are resold to the plastics processing sector Power consumption The group consumed approximately 13.8 million KWh in FY 2006/2007 for a total cost of roughly 930 thousand versus 11.2 million KWh in FY 2005/2006 totaling about 870 thousand. The countries with the highest consumption levels were as follows: CANADA FRANCE UNITED STATES CHINA ROMANIA KWh (in thousands) 03/31/2007 6,743 2,767 1, KWh (in thousands) 03/31/2006 4,778 3,064 1, Water consumption Ubisoft s amount of water consumption is not significant Environmental risks The group has no knowledge to date of any environmental risks. Ubisoft has not set up any provisions or taken out any coverage on potential environmental risks. It did not pay any indemnities in this regard during the fiscal year.

56 UBISOFT FINANCIAL REPORT Subsidiaries and equity interests Organizational structure at March 31, 2007 Ubisoft Entertainment SA Production Ubisoft World Studios SAS (France) 100% Ludi Factory SAS (France) 100% Ubisoft Design SAS (France) 100% TIWAK SAS (France) 100% Ubisoft Computing SARL (France) 100% Ubisoft Simulations SAS (France) 100% Ubisoft Pictures SAS (France) 100% Ubisoft Graphics SAS (France) 100% Ubisoft Divertissements Inc (Canada) 100% Shanghai Ubi Computer Software Co.Ltd (China) 100% Ubisoft SARL (Morocco) 99.86% Ubisoft Music Publishing Inc (Canada) 100% Ubisoft Productions France SAS (France) 100% Ubisoft Studios SRL (Italy) 97.50% Ubi Studios SL (Spain) 99.95% Ubisoft SRL (Romania) 99.35% Ubisoft Music Inc (Canada) 100% Red Storm Entertainment Inc (1) (United States) 100% Blue Byte GmbH (Germany) 100% Ubisoft Development SARL (France) 100% Ubisoft Editorial SARL (France) 100% Ubisoft Support Studios SARL (France) 100% Ubisoft Production Montpellier SARL (France) 100% Ubisoft Production Annecy SARL (France) 100% Ubisoft Paris Studio SARL (France) 100% Ubisoft Castelnau SARL (France) 100% Ubisoft Entertainment LTD (UK) 100% Ubisoft Eood (Bulgaria) 100% Marketing Ubisoft France SAS (France) 100% Ubisoft Ltd (UK) 100% Ubisoft GmbH (Germany) 100% Ubisoft SA (Spain) 99.97% Ubisoft SpA (Italy) 99.99% Ubisoft Inc (1) (United States) 100% Ubisoft KK (Japan) 100% Ubisoft PTY Ltd (Australia) 100% Ubisoft Nordic AS (Denmark) 100% Ubisoft Ltd (Hong Kong) 99.50% Ubisoft BV (Netherlands) 99.98% Ubisoft Sweden AB (Sweden) 98% Ubisoft Warenhandels GmbH (Austria) 100% Ubisoft EMEA SAS (France) 100% Ubisoft Canada Inc (Canada) 100% Ubisoft Finland OY (Finland) 100% Ubisoft Norway AS (Norway) 100% Ubisoft Entertainment SA (S. Korea) (branch) Ubi Games SA (Switzerland) 99.99% Ubi Soft Entertainment Ltda (Brazil) 99% Support Ubisoft Books and Records SAS (France) 100% Ubisoft Holdings Inc (United States) 100% Ubisoft Organisation SAS (France) 100% Ubisoft World SAS (France) 100% Ubisoft Manufacturing et Administration SAS (France) 100% Ubisoft Marketing international SARL (France) 100% Mobile Telephony Gameloft SA (France) 18.89% Digital Animation Ubisoft Digital Arts Inc (Canada) 100% (1) These companies are indirectly held by Ubisoft Entertainment SA.

57 145 THE GROUP'S ACTIVITY AND RESULTS FOR FISCAL YEAR Equity interests during the fiscal year Activities of subsidiaries Creation of companies - May 2006, creation of Ubisoft Entertainment Ltd (United Kingdom), wholly-owned subsidiary of Ubisoft Ltd, following the acquisition of Reflections Interactive Ltd s assets and entire development studio staff. - Creation of the following French companies: April 2006: Ubisoft Editorial SARL and Ubisoft Production Montpellier SARL, May 2006: Ubisoft Support Studios SARL and Ubisoft Production Annecy SARL, July 2006: Ubisoft Paris Studio SARL and Ubisoft Castelnau SARL, January 2007: Ubisoft Marketing International SARL. - June 2006, creation of Ubisoft EOOD (Bulgaria), whollyowned subsidiary of Ubisoft Entertainment SA. - February 2007, creation of Ubisoft Digital Arts SA (Quebec), wholly-owned subsidiary of Ubisoft Divertissements Inc. Share capital increase In February 2007, Ubisoft Entertainment SA increased its equity ownership of Ubi Games SA through the capitalization of the current account totaling CHF 2.5 million or 1.5 million. Liquidation January 2007, liquidation of Ubi Computer Software Beijing Company Ltd. (China). The impact of this liquidation on equity is 170 thousand. Production subsidiaries These subsidiaries are responsible for software design and development. Their business has expanded substantially as a result of the increasing number of projects completed inhouse and a larger workforce. Marketing subsidiaries These subsidiaries, which are responsible for distributing Ubisoft products throughout the world, have experienced significant growth in America as a result of the advance release of new consoles. Parent company-subsidiary relations The existence of these subsidiaries involves: billing of the parent company by the production subsidiaries for development costs based on the progress of their projects. These costs are capitalized at the parent company and amortized starting on the date of the product s commercial release; billing of the distribution subsidiaries by the parent company in order to contribute to the development costs. The parent company also centralizes certain costs that it later distributes to its subsidiaries, including for: IT projects, purchases of computer equipment, overhead costs, financial costs, current account interest and cash pooling interest. Main subsidiaries Subsidiary Sales Operating Net Sales Operating Net Sales Operating Net (in K ) result income result income result income Ubisoft Inc. (United States) 287,402 8,631 6, ,601 7,480 3, ,959 6,878 3,888 Ubisoft Ltd (UK) 110,571 2,090 1,140 94,675 1, ,709 1, Ubisoft GmbH (Germany) 56,847 1, ,309 1, ,601 2, Ubisoft France SAS* 64,129 1,212 1,399 48, , * IFRS accounts.

58 UBISOFT FINANCIAL REPORT General information Investment policy Ubisoft has maintained its investment policy momentum in order to gain a foothold on new platforms, create new licenses in different genres and, more generally, increase its market share. Thus, in FY 2006/2007, in-house production costs increased by 24%, rising from 131 million to 161 million. Production-related investment 2006/ / / million 131 million 100 million % of total pre-tax sales 2006/ / / % 23.85% 18.80% Investment related to average workforce 2006/ / / ,531 52,159 50,890 Research and development policy In an ongoing effort to create top-quality video games, Ubisoft has developed a policy of researching and developing tools for each project, incorporating the latest technological advances. Indeed, the selection of engines, tools and development process take place at a very early stage in each project, because decisions made at that point directly affect the innovation potential and the investment required in terms of time, human resources and the game s overall financing. Thanks to its in-house team of engineers, who have a solid grasp of the best technology currently available, Ubisoft now has a highly pragmatic approach to its projects. Depending on the problems involved in a game and the expected results, the tools selected will either be developed in-house with a specific purpose in mind or using commercial software, or a combination of the two. Research is therefore focused on innovation and functionality based on technologies suited to a high-quality product. Development is focused on producing creative games that offer gamers a total entertainment experience. Research and development expenses are capitalized and amortized over a three-year period along with additional depreciation to follow the product life-cycle of the product. During the year under review, these depreciations totaled 162 thousand. No basic research is conducted Real estate, plants and equipement Ubisoft does not own the buildings it occupies in any country.

59 147 THE GROUP'S ACTIVITY AND RESULTS FOR FISCAL YEAR Risk factors Identified risks are as follows (in order of importance): Risk related to product strategy and brand positioning and management Risk related to market developments and the success of next-gen consoles Like all publishers, Ubisoft depends on the success of its product catalogue. In order to minimize this risk, Ubisoft is particularly careful to develop its product catalogue by emphasizing the creation of innovative, riveting games. In addition, Ubisoft s strategy focuses on its own brands and in-house production, which allows it to maintain control over most of the design/development/duplication/manufacturing/delivery chain and to guard against inaccurate projections regarding a product's release date. This strategy, based on strong brands, enables the group to minimize its game-related risks since such brands ensure that the group will receive regular income over the long term. Today, innovation is a key element of the video games market. Ubisoft s goal is to continuously surprise gamers, thereby increasing its games chances of success. On the strength of its experience and its knowledge of the markets and consumers, Ubisoft is acquiring the resources it needs to win over other high-potential segments, such as car games, that will enhance its catalogue. Hollywood and TV licenses are strengthening the group s brand creation strategy. In the same way, occasional gamers have become an important target for the group. DS and Wii have attracted a new generation of consumers, which includes children, women and senior citizens. Understanding their expectations in order to develop games that everyone can enjoy is one of the group s top priorities. Ubisoft continuously diversifies and enhances its game catalogue and brand portfolio in an effort to minimize its risks. Finally, the company makes full usage of the marketing and sales resources it needs to boost the profile of its products. Its distribution network in more than 50 countries is made up of multi-cultural teams. The group s ranking as the second largest independent publisher in Europe, and fifth in the United States, ensures effective distribution of its catalogue and allows it to maximize the success of its products. Like all publishers, Ubisoft is reliant on advances in technology, which impact both changes in consumer demand and publishers product offerings. In particular, when a new console is introduced on the market, sales of previous-generation consoles slow down until the new console is made available and gradually picks up the slack. This temporary cyclical impact has now ended with the arrival of Xbox 360, Nintendo Wii and PlayStation 3, and the video games market has clearly shown its responsiveness to the introduction of next-gen consoles, which promises a period of steady growth in the years ahead. At the same time, publishers must plan ahead to adapt their games to the latest technology and make major investments in research and development in order to develop titles for next-gen consoles. Indeed, all these new consoles promise very high performance and high-definition graphics, but also require much larger teams to take full advantage of their technical capabilities. In this respect, it is critical that a publisher be able to foresee and therefore select the proper format in which to develop a game. This strategic decision is very important given the level of investment required. An inappropriate choice, or a delay in the release of a console for which a game was developed, could have a negative impact on projected sales. In addition, to manage these cost-related risk factors and the temporary slowdown in business, a publisher must have adequate financial resources. For Ubisoft, this period has been a real opportunity to expand its market share in new consoles and to penetrate market segments in which the group was not yet present. Ubisoft has a first-rate design staff operating in development studios in Canada, China and Romania, where production costs are lower. As a result, and thanks to its teams performance, the group has managed to maintain its standing in the face of competitive pressures that are constantly increasing. Finally, Ubisoft has a firm command of the necessary technology and the resources it needs to adapt to future technological advances. The group s large initial investment will pay off over the medium term.

60 UBISOFT FINANCIAL REPORT Risk related to a top game being delayed or getting off to a poor start In an intensely competitive and highly seasonal industry that is increasingly driven by the need to release hit products, any announcement of a delay in the launch of an anticipated game can have a negative impact on the group s share price, revenue and future earnings. The difficulty in forecasting the exact amount of time needed to develop or test a game may delay its release. In a market made cyclical by the emergence of new technologies and penalized by a short product lifespan, it is essential that games get off to a good start. The term target is appropriate in many senses. Whether in the organization of its development teams, the monitoring of external production or the quality control of its games, Ubisoft banks on the effectiveness of its internal expertise. The priority is to develop high-quality games that live up to gamers expectations in terms of functionality while meeting objectives related to costs and delivery times. Despite this, some games may not immediately achieve their anticipated success. Some may make only a minor impact when released, and then find success later on. By the same token, once a title has gained recognition, the company can release follow-up products whose success can be predicted Risk related to recruitment and retention of talented employees The group s success is based on such factors as the performance and training of its production teams. The development of new technology and the desire to produce more creative and innovative games demand increasingly specific expertise, particularly as development of games for next-gen consoles requires the participation of up to several hundred people over several months. Ubisoft could face difficulties in recruiting experienced personnel to its studios who have the specialized technical expertise to ensure the company s growth. A lack of resources could also lead to delays in the release of games. Competition in terms of recruitment exists but varies: the group is less affected in countries where it established an early presence. Moreover, thanks to the reputation of its studios and active recruiting efforts at colleges and universities, the group has consistently managed to attract the best talent to enhance its development teams. Over the past three years, the company has hired nearly 1,600 people, thereby expanding its workforce by 68%. Along the same lines, the group is boosting its training efforts in order to facilitate recruitment. For example, the Campus in Montreal, established in collaboration with Cegep de Matane and the University of Sherbrooke, which offers a series of vocational and university-level training programs in key aspects of video game development, saw its number of students increase from 69 in 2005/2006 to 116 in 2006/2007. The aim of the Ubisoft Campus is to train young recruits in video game disciplines. All these measures will allow Ubisoft to attain its objective of hiring 500 to 600 people per year. This past year, 493 employees joined the group. The company is currently organized in such a way as to minimize risk related to the departure or extended unavailability of key employees or managers. Among the measures taken in this regard are the development of tools to ensure the preservation and transfer of know-how, such as databases, collaborative sites, etc. In addition, the primary goal of all the programs introduced by Human Resources at the group level is to attract, train, retain and motivate employees who have strong technical and managerial skills. These programs include stock option plans, group savings plans and development plans Risk related to the termination of a contract with a licensing partner Each year, Ubisoft signs numerous partnership contracts, often with prestigious partners such as Sony Pictures Consumer Products, LucasArts, Universal Studios Consumer Products Group, Touchstone Television and MGM Interactive Inc. These contracts allow the company to expand its game catalogue and increase its sales. In this way, Ubisoft can use its partners reputations to ensure that each game has excellent sales potential. The potential termination of certain partnerships for any reason either at Ubisoft s initiative or that of its partners could have a negative impact on the company's future revenue and operating income, to the extent that this impact is not offset by other new licenses Risk related to intellectual property Ubisoft brands are protected by registrations both in Europe and internationally (for France: the Institut National de la Propriété Industrielle [French Patent Office] in Paris; for Europe: the Office for Harmonization in the Internal Market; internationally: the World Intellectual Property Organization; and finally, for North America: the Patent and Trademark Office in Washington, D.C.). In addition, games designed by Ubisoft are covered by international copyright laws. The AAA games are also registered with the US Copyright Office. Ubisoft has not filed any patents and does not depend on any particular patent. Like all game publishers, Ubisoft faces the problem of piracy. The company is a member of the Syndicat des Editeurs de Logiciels de Loisirs (SELL - French trade asso-

61 149 THE GROUP'S ACTIVITY AND RESULTS FOR FISCAL YEAR ciation of entertainment software publishers) and pursues all known cases of software piracy both in France and abroad (through criminal prosecution, if applicable, or by any other existing criminal or civil remedy). It is also a member of the ESA (Entertainment Software Association), the North American equivalent to the SELL. Moreover, with regard to piracy over the Internet, the company routinely takes legal action against hackers in order to force the withdrawal of games that have been illegally placed online Legal and arbitration proceedings The lawsuit which pended between the company and a licensee since October 2003 concerning breach of license agreement has been handed down in Ubisoft Entertainment SA favor. The total amount will be known in the next few months. To the best of the company s knowledge, there are no other exceptional events or lawsuits that are likely to have or have recently had a significant impact on the business, results, financial position or assets of Ubisoft Entertainment SA or its subsidiaries, other than that recognized in the consolidated financial statements and mentioned in part 2.5.4, note 13 Provisions Risk related to dependence on suppliers and subcontractors The company has no significant financial dependence on suppliers or subcontractors that could affect its development plan. Ubisoft and its subsidiaries primarily use the products and services of such suppliers as integrators (printers that produce manuals and package products; CD-ROM and DVD- ROM suppliers that provide these media and subcontract their duplication; and assemblers), as well as firms that provide technology and licensing or maintenance services as part of their business. In addition, despite the fact that 67% of the company s sales are generated by games developed in-house, the company also makes regular use of the services of outside studios. These studios can either carry out projects on a traditional subcontracting basis by providing an additional and/or specialized production capacity, or take on original projects in which they have specific skills. These independent studios sometimes have limited financial resources which can jeopardize the successful completion of a project. For this reason, the company limits the number of games assigned to a particular studio and sees to it that all or some of the technology they use is integrated. The company is, however, dependent on manufacturers to some extent. Like all publishers of console games, Ubisoft purchases game cartridges and media from console manufacturers. Supply therefore hinges on prior approval by manufacturers, the production of these media in sufficient quantities, and the agreement of royalties. For PC games, there is no specific dependence Risk related to customer dependence The company has no significant dependence on customers that could affect its development plan. Ubisoft's distribution network is increasingly centralized. In fact, in most European countries as well as in the United States and Japan, distribution is centralized, and Ubisoft delivers its products directly to local retail chains, which in turn redistribute products to their stores. Only the smallest independent resellers are supplied through distributors or wholesalers, mainly in France and the UK. Most sales are made to so-called key accounts. The risk of non-payment by these clients is relatively low. Moreover, the main subsidiaries, which represent some 92% of group sales, are covered by credit insurance. Ubisoft's 10 largest customers account for 49% of the group's pre-tax sales Risk related to computer security Despite the numerous integrated security systems deployed, Ubisoft is not totally protected from computer abuse, intrusion, problems with network user identification, and so on. Changes in legislation, the implementation of new mobility solutions, the spread of viruses and the increased use of the Internet are all factors that support the adoption of comprehensive security solutions. Information is a strategic resource of considerable value, and must therefore be protected in an appropriate manner. Information system security protects information from these threats to ensure business continuity. Security measures are aimed at guaranteeing the confidentiality, integrity and availability of information Market risk Financial risk The group limits its market involvement to the management of positions resulting from its commercial activities and does not engage in any speculative transactions. Risk management is centralized and handled exclusively by the staff of the group s Finance department on the basis of guidelines approved by the CEO. To limit interest rate and foreign exchange risk resulting from business financing needs and international activities, the group uses certain financial instruments, as described below. Interest rate risk The management of interest rate risk is aimed mainly at minimizing the cost of the group's borrowings and at reducing exposure to this risk. To do this, the group gives prio-

62 UBISOFT FINANCIAL REPORT 2007 rity to fixed-rate loans for long-term financing needs and variable-rate loans to finance specific needs related to an increase in working capital during particularly busy periods. At March 31, 2007, the group's net debt consisted of a variable-rate loan and bank overdrafts which, given its positive net cash flow position, are mainly intended to finance the group s high year-end capital requirement linked to the strong seasonal variation in its business. Based on its financial position at March 31, 2007, the group s sensitivity to changes in interest rates is as follows: Debts and cash availability at variable rates (In K ) Variable-rate debt Effective Nominal Annual interest Annual interest Difference interest rate with a change of 1% Bank Ioan 4.18% 20, , Cash 3.99% - 55,281-2, , Investments 3.98% - 30,786-1, , Total - 66,067-2, , Foreign exchange risk The group is exposed to foreign exchange risk on its operating cash flow and its investments in its foreign subsidiaries. The group protects only its positions related to its operating cash flow in the major currencies (i.e. the US dollar, Canadian dollar, pound sterling and Australian dollar). The strategy is to hedge one fiscal year at a time, which means that the hedge period does not exceed 15 months. The group relies mainly on natural hedges resulting from two-way transactions (i.e. development expenses in foreign currencies offset by royalties received from subsidiaries in the same currency). For non-hedged balances and noncommercial transactions (i.e. internal loans in foreign currencies), the parent company borrows in these currencies or sets up forward sales contracts or options. At March 31, 2007, the company had hedged GBP 5 million and CAD 17.8 million through forward sales contracts and loans in foreign currencies. Impact of a change of ±1% in the principal foreign currencies on sales and operating income in thousands of euros for FY 2006/2007: Currency Impact on sales Impact on operating income in K in K USD 2, GBP 1, CAD AUD DKK JPY Equity price risk The company has four main types of equity investments. Long-term strategic investments in sectors related to video games, such as the investment in Gameloft SA, in which Ubisoft owns 13,367,923 shares, i.e % of capital. This investment is valued at 34 million on the company s consolidated balance sheet, while the fair market value of these shares was 67 million as of March 31, Stocks held directly under a market-making and liquidity contract signed with Exane BNP: these purchases are governed by a market-making contract pursuant to current regulations and are intended to ensure liquidity on stock sales and purchases. At March 31, 2007, Ubisoft held 22,059 of its own shares valued at 795 thousand. Money market funds: these funds involve temporary investments of liquid assets. They are therefore invested in products offering a high degree of security and very low volatility. Equity swap contract: this derivative is recorded at its fair value on the balance sheet. Any variations in the share price in relation to the sale price of 9.33 are recorded on the income statement. Given the 1,436,274 shares sold under the equity swap contract at March 31, 2007, the impact of a reduction in the share price of one euro would be 1,436 thousand. Liquidity risk At March 31, 2007, the group's financial debt was 71 million and its net cash flow position (reflecting liquid assets and short-term investment securities) was 55 million.

63 151 THE GROUP'S ACTIVITY AND RESULTS FOR FISCAL YEAR With the exception of a loan in the amount of 20 million, financial debt consists mainly of intra-group cash pooling transactions as shown in the accounts. In order to finance temporary needs related to the increase in working capital during especially busy periods, the group has a syndicated loan in the amount of 100 million, confirmed lines of credit for 30 million, and other lines of credit with banking institutions totaling 93 million at March 31, The syndicated loan and the confirmed bank loans are governed by financial covenants that are based on the ratio of net debt to equity and that of net debt to cash flow from operating activities Risk related to future acquisitions and integration of acquired companies of 55 million and the level of available capital (including a syndicated loan of 100 million and 30 million in confirmed lines of credit) should minimize the risks related to these operations. However, there is a possibility of certain risks: the dilution of current share ownership as a result of a share-based acquisition, the creation of significant long-term debt, possible losses that could have a negative impact on profitability, the setting aside of provisions for goodwill and other intangible assets. The possible loss of key staff at the target company must be considered among the risks related to mergers and acquisitions. Such a loss could have a negative effect on the acquired company s sales, earnings and/or financial position. Ubisoft has, however, always demonstrated a high level of proficiency in integrating its acquired companies. The company may undertake external growth operations in the medium and/or long term. The company s sound balance sheet, which shows a positive net financial position 1.10 Commitments On April 6, 2007, acquisition of the Anno TM brand through the buyout of the German publisher Sunflowers Interactive Entertainment Software GmbH for 14.2 million. Through the transaction, Ubisoft will acquire a 30% stake in Related Designs Software GmbH, which developed Anno Ubisoft reinforces its position in the real-time strategy market. Anno TM, along with Ubisoft s The Settlers, is one of the most well known franchises in Germany. The group s management has made no firm commitments on other future investments Insurance Description of insurance The group carries third-party liability insurance held by Ubisoft Entertainment SA which covers the entire world except the United States, Canada and Japan. Each subsidiary has coverage for: risks related to property damage, vehicles, apartments rented to employees on assignment, inventory, transport provided to customers, etc. Foreign subsidiaries adapt and manage their local coverage based on their business activity and each country s specific requirements. Ubisoft has signed a personal assistance contract for employees on business-related assignments in France and abroad. This contract covers all employees of French sites who require assistance and foreign repatriation. The group s business operations do not in themselves pose an exceptional risk with regard to work-related accidents. Certain companies, particularly those in the US, the UK, Italy and Denmark, are insured against loss of business continuity.

64 UBISOFT FINANCIAL REPORT 2007 Coverage Summary of coverage limits for each type of insurance carried by the principal entities: Coverage limits France United States Canada China in K in KUSD in KCAD in KCNY General liability 3,049 4,450 18, Property insurance 3,712 8,179 29,071 6,000 Inventory insurance 3,000 7,000 1, Recent events, outlook and strategies Recent developments Market outlook April 2007 Sales in Europe for the first quarter 2007 rose by 31% in a market that has grown by 15%. Ubisoft is the second largest independent publisher and has a market share of 8.6% compared to 7.6% the previous year. Ubisoft is the number one independent publisher on Wii, DS and Xbox 360. On the same period sales in the United States rose by 41% in a market that has grown by 28%. Ubisoft is the third largest independent publisher and has a market share of 6.7% compared to 6.1% the previous year. Ubisoft is the leading independent publisher on Wii and the second on DS and Xbox 360. Ubisoft acquired the Anno brand. With 5 million units sold worldwide, Anno is one of the most successful strategy games and one of the best-selling games in the German market. As a result of this acquisition, Ubisoft will also hold a 30% interest in Related Designs, the company that developed Anno 1701, the latest game in the series, and is currently working on a sequel. Ubisoft announced the creation of a new Tom Clancy brand, Tom Clancy s EndWar. Under the supervision of strategy game veteran Michael de Plater, Tom Clancy s EndWar is being developed at Ubisoft Shanghai by an experienced team whose members have worked on such prestigious licenses as Tom Clancy s Ghost Recon, Tom Clancy s Rainbow Six and Tom Clancy s Splinter Cell. Tom Clancy s EndWar on next-gen consoles is scheduled to be released some time in fiscal year 2007/2008. May 2007 Ubisoft develops the video game adapted from Beowulf, a film by Paramount Pictures, Shangri-La Entertainment and Warner Bros. Entertainment, to be released in November 2007 which is directed by Robert Zemeckis and stars Angelina Jolie, Anthony Hopkins and John Malkovich. The year 2006 saw the release of Nintendo and Sony nextgen consoles Wii and PS3 following the launch in late 2005 of Microsoft s Xbox 360. In this context marked by a transition between two generations, the video game market fared extremely well with 5% growth in Europe, North America, Australia and New Zealand. This growth far exceeded the expectations of industry professionals, thanks in particular to the enormous success of Nintendo DS, Nintendo s portable console, which enjoyed an annual growth rate of 202%. The market was also helped by the very strong performance of PlayStation 2, which was less affected by the arrival of PS3 than anticipated, and by the solid performance of Xbox 360 in the US and UK markets. In 2007, the market is expected to grow by at least 12%, with next-gen consoles picking up speed and accounting for 43% of total sales compared with 14% in With the success of Wii and DS, in 2006 the market opened its doors to a new category of gamer. The ease of use of these consoles is attracting new market segments, including women and older people, for whom video games offer the chance to live out their dreams (for instance, taking care of animals) or develop their mental faculties. These easily accessible games are providing new opportunities for game developers like Ubisoft, as well as new growth prospects. With regard to industry players, as in previous years FY 2007 saw a number of acquisitions of studios and brands by major publishers. Ubisoft, for its part, purchased the assets of the Reflections Interactive Ltd studio and the Driver brand from Infogrames. Activision bought the Guitar Hero brand and MTV acquired Harmonix, the studio that develops this brand. Electronic Arts acquired the Mythic studio, creator and owner of the massively multiplayer game Warhammer Online: Age of Reckoning. Activision was also an active player in technology through the purchase of Demonware, a company that specializes in middleware for PC and consoles, with a focus on online applications.

65 CONSOLIDATED FINANCIAL STATEMENTS AS OF MARCH 31, consolidated financial statements as of march 31, Consolidated balance sheet Consolidated income statement Consolidated statements of changes Consolidated cash flow statement Notes to the consolidated financial statements Highlights of the fiscal year Significant accounting policies Statement of conformity Basis of preparation Principles of consolidation Scope of consolidation Notes to the balance sheet Notes to the income statement Appendix notes Segment information Business combinations Transactions with related parties Off-balance-sheet commitments Employees Potential assets and liabilities Events after closing of accounts Report for the consolidated account statements for the fiscal year ending March, 31,

66 UBISOFT FINANCIAL REPORT Consolidated balance sheet ASSETS Notes Net Net in thousands of euros Goodwill 1 77,374 80,032 Other intangible assets 2 264, ,959 Tangible assets 3 25,510 22,276 Investments in associates 4 33,998 30,034 Financial assets 5 2,458 2,702 Deferred income tax assets 6 37,630 42,321 Non-current assets 440, ,324 Inventory and work-in-progress 7 24,794 23,716 Trade receivables 8 87,857 91,246 Other receivables 9 73,959 62,290 Current financial assets 10 19, Current income tax assets 10,605 5,708 Cash and cash equivalents , ,991 Current assets 342, ,272 Total assets 783, ,596 LIABILITIES Notes in thousands of euros Capital 7,037 6,025 Additional paid-in capital 435, ,065 Equity component - 8,204 Consolidated reserves 38,990 30,032 Consolidated earnings 40,558 11,932 Equity (group share) 521, ,258 Minority interests - - Total equity , ,258 Provisions 13 1,952 4 Employee benefits 14 1,205 1,156 Borrowings 15 22,706 54,981 Deferred tax liabilities 16 28,214 22,854 Non-current liabilities 54,077 78,995 Borrowings 15 48, ,354 Trade creditors and related accounts payable 17 81,178 71,033 Sundry creditors 18 75,895 52,073 Financial liabilities - 1 Current income tax liabilities 2, Current liabilities 208, ,343 Total liabilities 783, ,596

67 2.2 Consolidated income statement CONSOLIDATED FINANCIAL STATEMENTS AS OF MARCH 31, in thousands of euros Notes Sales , ,070 Other operating income , ,965 Cost of sales -229, ,623 Inventory changes in finished products and work-in-progress 2,037 1,186 Wages and social security costs , ,674 Other operating expenses , ,883 Tax and duty -5,950-4,906 Depreciation ,113-81,302 Provisions 23-2,568-79,440 Current operating result 34, Other operating income and expenses ,784 Operating result 34,579-1,391 Cash and cash-equivalent income 1,476 2,183 Cost of gross financial debts -7,067-10,693 Net borrowings costs -5,591-8,510 Financial income 38,201 17,369 Financial expenses -14,563-17,969 Financial result 25 18,047-9,110 Share in earnings of associates 26 3,149 19,109 Income tax expense 27-15,217 3,324 Profit for the year 40,558 11,932 Attributable to minority interests share - - Group 40,558 11,932 Net earnings per share Net earnings per share following the 2-for-1 stock split on December 11, Diluted net earnings per share Diluted net earnings per share following the 2-for-1 stock split on December 11,

68 UBISOFT FINANCIAL REPORT Consolidated statements of changes in thousands of euros Capital Additional Equity paid-in component capital of financial instruments Situation as of March 31, , ,018 10,651 Allocation of consolidated earnings N-1 Fiscal year earnings (Group share) Tax on items recorded directly as equity or transferred directly from equity Income/expense from the depreciation and sale of own shares Profit (loss) resulting from the valuation and recorded as equity Dilution in equity of associates Other results recorded directly in equity Total recognized income and expenses for the period Change in capital of mother company ,355 Options on ordinary shares issued 2,692 Exchange rate differences resulting from translation of foreign activities Reclassification of exchange rate differences of merged companies Reclassification related to the end of convertible bonds -2,447 Position at March 31, , ,065 8,204 Allocation of consolidated earnings N-1 Fiscal year earnings(group share) Tax on items recorded directly as equity or transferred directly from equity Income/expense from the depreciation and sale of own shares Profit (loss) resulting from the valuation and recorded as equity Dilution in equity of associates Other results recorded directly in equity Total recognized income and expenses for the period Change in capital of mother company 1, ,357 Options on ordinary shares issued 3,344 Exchange rate differences resulting from translation of foreign activities (1) Conversion of OBSAR and OCEANE 1,468 Change in scope of consolidation Other changes Reclassification related to the end of convertible bonds -8,204 Situation as of March 31, , ,234 - (1) Translation differences primarily reflect the fall in the US dollar between the closing rate of March 31, 2006 ( 1 = US$ ) and the closing rate of March 31, 2007 ( 1 = US$ ), i.e. - 9,665 thousand, and the fall in the Canadian dollar between the closing rate of March 31, 2006 ( 1 = CDN$ ) and the closing rate of March 31, 2007 ( 1 = CDN$ ), i.e. - 1,488 thousand.

69 CONSOLIDATED FINANCIAL STATEMENTS AS OF MARCH 31, Consolidated Translation Fiscal Total Minority Total reserves reserves year equity interests equity earnings Group share 32,453-37,813 24, , ,635 24,732-24, ,932 11,932 11, ,932 12,157 12, ,370 40,370 2,692 2,692 8,410 8,410 8,410-4,143 4, , ,298-25,266 11, , ,258 11,932-11, ,558 40,558-40, ,441 40,558 41,999-41, , ,252 3,344-3,344-11,344-11, ,344-1, , ,598-36,608 40, , ,819

70 UBISOFT FINANCIAL REPORT Consolidated cash flow statement in thousands of euros Cash flow from operating activities Consolidated net income 40,558 11,932 +/- Share in earnings of associates -3,149-19,109 +/- Depreciation 230, ,792 +/- Provisions 884 2,776 +/- Cost of share-based payments 3,344 2,692 +/- Flows from disposal of fixed assets /- Other calculated income and expenses interest paid 4,678 5,934 + income tax paid 7,129 5,018 Inventory -1,914-2,873 Trade receivables ,688 Other assets -34,830-7,048 Trade payables 11,539-32,204 Other liabilities 33,429-18,434 +/- Change in working capital requirement 7,382-5,871 Cash flow from operating activities 290, ,143 - interest paid -4,678-5,934 - income tax paid -7,129-5,018 Net cash flow from operating activities 279, ,191 Cash flow from investment activities - Purchases of tangible and intangible assets -269, ,866 + Sales of tangible and intangible assets Purchases of financial assets -15,778-4,227 +/- Other flow related to investment operations Proceeds from loans and other financial assets 16,077 3,787 +/- Change in scope of consolidation (1) ,691 Cash flow from investment activities (1) -268, ,628 Cash flow from financing activities + New finance leasing loans New long- and medium-term loans 30,740 7,537 - Repayment of finance leasing loans ,040 - Repayment of loans -151,933-24,875 + Accrued interest Proceeds from issue of capital 106,551 40,786 +/- Resales/purchases of own shares /- Other flows Cash flow from financing activities -15,036 21,383 Net change in cash and cash equivalents -4,868-7,054 Cash and cash equivalents at the beginning of the fiscal year 80,894 90,493 Exchange gains/losses on cash 2,627-2,545 Cash and cash equivalents at the end of the fiscal year 78,653 80,894 (1) Including cash position of companies purchased and sold ,697

71 2.5 CONSOLIDATED FINANCIAL STATEMENTS AS OF MARCH 31, 2007 Notes to the consolidated financial statements The figures in the following notes and statements are shown in thousands of euros unless otherwise indicated Highlights of the fiscal year Significant accounting policies Change in the percentage holding in Gameloft SA Following the exercise of options by Gameloft SA employees, Ubisoft Entertainment SA s percentage of interest decreased from % to % at March 31, Sale of assets On April 1, 2006, Ubisoft Warenhandels GmbH sold its business assets to Ubisoft GmbH. Conversion of share subscription warrants issued in May 2003 In April and May 2006, increase in Ubisoft Entertainment SA s share capital of 24 million as a result of the conversion of 12,767,115 of the share subscription warrants issued in May Acquisition On August 3, 2006, acquisition from Atari Inc. and Reflections Interactive Ltd of the intellectual property and technology rights to the Driver franchise, as well as most of the assets and all of the staff of the Reflections Interactive Ltd development studio for US$ 24 million. 2-for-1 stock split On December 11, 2006, 2-for-1 stock split of Ubisoft Entertainment SA shares from 0.31 to Performance of Ubisoft's share and unrealized equity swap gain Despite the 2-for-1 stock split in December 2006 through an increase in the number of shares, the share price rose by 92% between March 31, 2006 and March 31, This explains the increase in the unrealized equity swap gain of 25.2 million, this despite the sale of 200,000 shares which resulted in a capital gain of 1.9 million. Conversion of some of the OCEANE In November 2006, 24.2 million increase in Ubisoft Entertainment SA s equity through the conversion of 459,013 OCEANE bonds into 475,998 new shares with a face value of 0.31 at a rate of Creation of a new studio in Quebec In February 2007, opening of a new studio Ubisoft Digital Arts Inc. specializing in the creation of digital content for the film industry. Early conversion of 92% of the 2008 BSAR In February 2007, 50 million increase in Ubisoft Entertainment SA s equity through the conversion of 1,313,907 BSAR into 69 shares with a face value of 0.31 and 2,627,676 shares with a face value of at a rate of Ubisoft Entertainment SA is a company domiciled in France. The company's consolidated financial statements for the fiscal year ended March 31, 2007 include the company and its subsidiaries (together called the Group ) and group shares in associates. The financial statements have been approved for issue by the Board of Directors on May 29, Statement of conformity The consolidated financial statements to March 31, 2007 have been prepared in accordance with the IFRS international accounting standards ( International Financial Reporting Standards ) applicable at March 31, 2007, as approved by the European Union. New standards, amendments to standards and interpretations are not yet in effect for the fiscal year ending March 31, 2007 and have not been applied in preparing the consolidated financial statements. IFRS 7 Financial Instruments: Disclosures and amendment to IAS 1 Presentation of Financial Statements: Capital Disclosures IFRIC 7 Applying the Restatement Approach under IAS 29 Financial Reporting in Hyperinflationary Economies IFRIC 8 Scope of IFRS 2, Share-Based Payments IFRIC 9 Reassessment of Embedded Derivatives IFRIC 10 Interim Financial Reporting and Impairment The application of these new standards should have no impact on the consolidated financial statements Basis of preparation The financial statements have been prepared under the historical cost convention, with the exception of the following assets and liabilities, which are evaluated at fair value: Derivative financial instruments, financial instruments held for transaction purposes and financial instruments treated as available for sale. Non-current assets intended for sale are valued at their accounting value or fair value less the costs of the sale, whichever is less. Preparation of consolidated financial statements according to IFRS requires that the group s management make estimates and assumptions that impact the application of the accounting methods and the amounts recorded in the financial statements. These estimates and underlying assumptions are established and reviewed continuously based on past experience and other factors considered reasonable in light of the

72 UBISOFT FINANCIAL REPORT 2007 circumstances. They therefore serve as a basis for the exercise of judgment made necessary for the determination of the accounting values of assets and liabilities that cannot be obtained from any other sources. Actual values can differ from estimated values. Given that the decisions made by management when applying the IFRS can have a significant impact on the financial statements and that the estimates pose a serious risk of variations during subsequent periods, these decisions and estimates are explained in notes concerning impairment tests on goodwill, other intangible assets and tangible assets. The accounting methods described below have been applied consistently to all the periods presented in the consolidated financial statements. The accounting methods have been applied consistently by the Group entities Principles of consolidation Subsidiaries A subsidiary is an entity controlled by Ubisoft Entertainment SA. Control exists when the company has the power to manage, either directly or indirectly, the entity s financial and operational policies in order to obtain benefits from its activities. To assess control, potential voting rights that are currently exercisable or convertible are taken into account. Subsidiaries financial statements are included in the consolidated financial statements from the date on which control is transferred to the Group up to the date at which it ceases. Associates Associates are entities in which Ubisoft Entertainment SA exercises significant influence on the financial and operational policies but no control. The consolidated financial statements include the group share in the total amount of profits and losses recorded by the associates, using the equity accounting method, starting from the date when significant influence was exercised up to the date at which it ended. As of March 31, 2007, the companies controlled by the Group are fully consolidated; only Gameloft SA, where the percentage held is 18.89%, is consolidated by the equity method. Transactions eliminated in the consolidated financial statements The balances, losses and unrealized gains, revenue and expenses resulting from transactions between group companies are eliminated during the preparation of the consolidated financial statements. The unrealized gains resulting from transactions with associates and entities under joint control are eliminated in proportion to the group interests in the entity. Unrealized losses are eliminated in the same way as unrealized gains, but only to the extent that they are not representative of a loss in value. Translation of foreign currency transactions Transactions in foreign currency are measured by applying the exchange rate prevailing at the date of the transaction. At year-end, the monetary assets and liabilities denominated in foreign currency are translated into euros at the exchange rate at closing. Any exchange rate differences that result are recognized in the income statement. The non-monetary assets and liabilities denominated in foreign currency, and measured at historical cost, are translated by using the exchange rate at the transaction date. The non-monetary assets and liabilities denominated in foreign currency, and measured at market value, are translated using the exchange rate prevailing at the time the market value was determined. Translation of foreign subsidiaries financial statements into euros The assets and liabilities of foreign subsidiaries, including goodwill, are translated into euros by using the closing exchange rate. The items in the income statement are translated into euros at a rate approximating the exchange rate at the transaction date. Equity are kept at the historical rate. The resulting exchange rate differences are booked to the translation reserves, as a distinct component of equity. Goodwill All companies reorganizations are recorded using the acquisition method. Goodwill result from the acquisition of subsidiaries, associates and joint enterprises and correspond to the difference between the acquisition cost and the fair value of the assets, liabilities and contingent liabilities identified at the date of acquisition. Positive goodwill are not amortized but are subject to impairment tests at each year-end closing. The recoverable value of goodwill is then estimated based either on fair value or value in use. The value in use is defined as the present value related to the cash-flow generating units with which the goodwill are associated. When the market value or the value in use is less than the accounting value, a depreciation is recorded and is irreversible. The cash-flow generating units used to calculate the impairment tests correspond to the subsidiaries present in a single country, with the exception of goodwill related to the acquisition of companies whose acquired brands are distributed by all the group s subsidiaries (Redstorm Entertainment Inc. (US) or Blue Byte) where the cash-flow generating unit corresponds to the Group s consolidated financial statements. The discount rate used is the treasury bond rate adjusted to exclude market risks related to Ubisoft Entertainment SA and tax. Negative goodwill (which, according to IFRS 3, are defined as the excess of the cost over the acquirer's interests in the net fair value of the identifiable assets, liabilities and contingent liabilities acquired ) are booked immediately in the results. Since business assets entered in the corporate accounts are of the same nature as goodwill, they are treated as goodwill in the consolidated financial statements.

73 CONSOLIDATED FINANCIAL STATEMENTS AS OF MARCH 31, Business assets are therefore not amortized but, like goodwill, are subjected to impairment tests at each year-end closing. Brands Trademarks and patents are recorded at their fair value by applying IFRS 3 concerning business combinations. They are not amortized, but annual impairment tests are conducted. The recoverable value of the brand is then estimated either on the basis of fair value or on the basis of value in use. The value in use is defined as the present value relative to the cash-flow generating units with which the trademark is associated. When the fair value or the value in use is less than the accounting value, a depreciation is booked. Other intangible assets The other intangible assets that were acquired by the group are recorded at their cost minus the total of amortization and losses in value (amortization). In accordance with IAS 38 Intangible assets, only elements whose cost can be determined reliably and for which it is probable that future benefits exist are recorded as fixed assets. No borrowing costs are included as costs of fixed assets. The group companies do not conduct any basic research. Development costs correspond to the development of commercial software (video games) and are activated as described below. The production costs for commercial software, whether produced internally or outsourced, are entered in the accounts under Intangible assets in progress as the software development advances. Upon the software s first commercial release, it is transferred to the Released software programs or External developments accounts. Other intangible assets are amortized over their expected useful life: office software: amortized over 1 year (straight-line), ERP-related expenditures: amortized over 5 years (straight-line), commercial software: amortized over 3 years (straightline) with additional amortization to adapt to the products life cycles, external developments: amortized based on the products life cycles. Commercial software and external developments are amortized starting on the date of the product s commercial release. At the close of each fiscal year and for each program, when there are indicators of a loss of value (basically when sales are lower than forecast), the present forecast cash flows are calculated (over a maximum period of three years). When the latter are below the net book value of the commercial software, a depreciation is applied. nature of the fixed assets held, no distinct component of the main fixed assets was noted. No borrowing costs are included in the costs of fixed assets. Depreciation, which is calculated using rates standardized throughout the group, is determined on the basis of the methods and periods of use set out below: equipment: 5 years (straight-line), fixtures and fittings: 5 and 10 years (straight-line), computer equipment: 3 years (straight-line), office furniture: 10 years (straight-line). Fixed assets acquired through direct finance leasing arrangements Lease contracts that transfer nearly all risks and benefits inherent to ownership of the asset are considered direct finance lease arrangements. Capital assets financed through leasing agreements are restated in the consolidated financial statements as if the company had acquired the assets directly using loan financing. The amount recorded as an asset is equal to the fair value of the goods leased or, if this value is less than the present value of the minimum lease payments, the fair value less depreciation cost and the sum of the losses in value. Deferred taxes related to the restatement of finance lease contracts are activited. Investments in associates Investments in associates include the Group share of equity held in associates, as well as any related goodwill. Inventory and work-in-progress Inventory is valued at cost or net realizable value, whichever is lower. Cost includes purchase price plus accessory expenses. Inventory is valued using the FIFO method. Net realizable value is the estimated selling price in the normal course of activity less estimated completion costs and estimated selling costs, which include marketing and distribution costs. No borrowing costs are included in the costs of inventories. A provision for depreciation is recorded when the probable net realizable value is less than the book value. Writebacks of inventory depreciation are recognized as a reduction of the amount of inventory recorded as an expense during the fiscal year in which the write-back occurs. 61 Tangible assets The gross value of tangible assets includes the cost of acquisition, minus cash discounts and any investment grants allowed. This is then reduced by the sum of the depreciations and of losses in value (see the accounting method described in the note on goodwill). Given the Trade receivables Trade receivables are measured at fair value when they are initially recorded. Since receivables are due in less than one year, they are not discounted. Where applicable, a provision for depreciation is recorded based on the degree of certainty that recovery will ultimately be made.

74 UBISOFT FINANCIAL REPORT 2007 Financial assets and liabilities Financial assets and liabilities consist of assets available for sale, loans and receivables, cash and cash equivalents, derivative instruments and borrowings. Assets available for sale Non-consolidated securities are classified as assets available for sale since they do not meet the definition of other categories of financial assets. They are shown on the balance sheet at their fair value and changes in fair value are posted directly to equity. Loans and receivables Loans and receivables include deposits and guarantees, as well as subsidies to be received from the Canadian government. Cash and cash equivalents Cash and cash equivalents include cash on hand and deposits held at call with banks, with maturity of generally less than three months, which can be easily liquidated or saleable on very short notice, can be converted into cash and do not have significant risk of loss in value. They are valued based on the category of assets measured at market value based on earnings. Reimbursable bank overdrafts that are an integral part of the group s cash flow management constitute a component of cash and cash equivalents for the purposes of the cash flow statement. Derivative instruments In order to limit the Group's foreign exchange risk, Ubisoft Entertainment SA uses forward sales contracts and foreign currency options to hedge the risk of exchange rate fluctuations. As transactions do not meet the criteria of the hedge accounting method, they are recorded as transaction instruments. These derivative instruments are shown on the balance sheet at their fair value as of the transaction date under current financial assets or liabilities. The profit or loss resulting from the revaluation at fair value is recorded immediately in the income statement. The company has set up an equity swap contract. This contract is a derivative instrument. It is shown on the balance sheet at its fair value as of the transaction date under current financial assets or liabilities. Changes in fair value are recorded in the income statement. Borrowings and other financial liabilities These include borrowings and bank overdrafts. Bond debentures related to the OCEANE (bonds convertible/exchangeable into new or existing shares) and OBSAR (bonds with redeemable share subscription warrants) are compound financial instruments that consist of a liability component and an equity component. The liability component is valued at amortized cost based on the effective interest rate method. The equity component is determined by the difference between the total value of the compound instrument and the value assigned to the liability component. Accrued interest is recognized based on an actuarial rate yield to maturity that includes the costs, fees and redemption premiums. Own shares Own shares are recognized at their acquisition cost as a deduction from equity. The results of the sale of these shares are applied directly to the equity and do not affect the profit or loss for the period. Employee benefits Retirement benefit costs Ubisoft participates in retirement, social security and pension plans in accordance with the laws and practices of each country. These benefits can vary according to a range of factors, including seniority, salary and payments to compulsory general schemes. These plans may be either defined-contribution plans or defined-benefit plans: in defined-contribution plans, the pension supplement is determined by the total capital that the employee and the company have paid into external funds. The charges correspond to contributions paid over the course of the fiscal year. The Group has no subsequent obligations to its employees. For Ubisoft, this generally involves public retirement plans and specific defined-contribution plans (such as a 401k plan in the United States); in a defined-benefit plan, the employee receives a fixed pension benefit from the group, determined on the basis of several factors, including age, years of service and compensation level. Within the group, such plans are used in France, Italy and Japan. The employer s future obligations are valued on the basis of an actuarial calculation called the projected unit credit method, in accordance with each plan s operating procedures and the data provided by each country. This method involves determining the value of probable discounted future benefits of each employee at the time of his/her retirement. The assumptions used as of March 31, 2007 are as follows: Japan Italy France Rate of salary change 5% 1.50% 3-6% Discount rate 4.49% 4.49% 4.49% Average remaining years of service 23 years 29 years 31.5 years

75 CONSOLIDATED FINANCIAL STATEMENTS AS OF MARCH 31, Share-based payments Stock option plans allow the Group s staff members to purchase the company s shares. The fair value of the options granted is recognized in wages and social security costs as an offset of an increase in equity. The fair value is measured at the grant date and spread out over the entire vesting period. The fair value of the options is measured using a binomial model based on the terms and conditions of the options defined at the grant date: stock option plans: this compensation is recorded in the income statement and spread out over the vesting period; however, the straight-line method is not used, in accordance with the vesting terms defined in Ubisoft s plan rules; group savings plan: the accounting expense is equal to the discount granted to employees, i.e., the difference between the share subscription price and the share price at the grant date. This expense is recorded immediately as of the plan subscription date. Individual right to training France's law of May 4, 2004, grants French employees an individual right to training. Under this law, employees may receive training at their initiative, with their employer's approval. Full-time employees acquire a right to between 20 and 21 hours of training each year, in accordance with the labor agreements applicable within each firm. The rights acquired annually may be accrued for up to six years. The assumption made at March 31, 2007 for recognition of these rights is: 15% of the valuation of the hours acquired at March 31, 2007 (with social security taxes) of companies that are members of FAFIEC (organization that provides professional training) are recorded as a provision. Provisions A provision is recorded when: the company has a current obligation (legal or implicit) resulting from a past event; it is probable that an outflow of resources representing economic benefits will be required to settle the obligation; the amount of the obligation can be measured reliably. If these conditions are not met, no provision is recorded. When the effect of the time value is material, the provision amount is determined by discounting expected future cash flows using a pre-tax discount rate that reflects the current market assessments of the time value of money and, where appropriate, the risks specific to the liability. Trade creditors and related accounts payable Trade creditors and related accounts are valued at amortized cost. Sales Proceeds from the sale of goods are recognized in the income statement when the significant risks and benefits inherent to ownership of the goods have been transferred to the purchaser. All sales are measured at the fair value of the consideration received or to be received, less rebates, reductions, trade, volume and financial discounts and provisions for returned merchandise. Current operating result Current operating result includes gross margin, administrative and commercial expenses, pension and retirement costs, and the cost of share-based payments. Other operating income and expenses Other operating income and expenses are items that are few in number and correspond to infrequent events. Financing costs and other financial income and expenses Financial result consists of the cost of net borrowings and other financial income and expenses. The cost of net borrowings includes: income from cash and cash equivalents, which includes profit on sales of investment securities, interest income and the impact of hedging operations, the cost of gross borrowings, which includes all interest charges on financing transactions. Other financial income and expenses include income on sales of non-consolidated securities, changes in fair value of financial instruments (assets, liabilities and derivatives), foreign exchange results and other financial income and expenses. Income taxes Income tax (income or expense) includes current tax expense (income) and deferred income tax expense (income). Tax is recorded in the income statement, unless it refers to items that are recognized directly in equity, in which case it is recognized in equity. Current tax Current tax is the estimated amount of tax owed on taxable income for an accounting period. It is determined using the tax rates applicable at the balance sheet date. Deferred income tax Deferred income tax is measured using the asset-liability approach of tax allocation for all timing differences between the book value of the assets and liabilities and their tax basis. Valuation of deferred tax assets and liabilities depends on the way in which the group expects to recover or settle the book value of the assets and liabilities using the tax rates applicable at the balance sheet date. A deferred tax asset is recognized only if it is probable that the group will have future taxable profit against which the asset may be utilized. Deferred tax assets are reduced to the extent that it is no longer probable that sufficient taxable profit will be available. The effect of possible changes in tax rates on previously recorded deferred taxes is recognized in equity. 63

76 UBISOFT FINANCIAL REPORT 2007 Deferred taxes are shown on the balance sheet as separate items from current tax assets and liabilities and are classified as non-current items. Segment information In light of the group's organizational structure and the commercial links among the various subsidiaries, we proceed on the basis that the group operates in a single market in several geographic areas. Dividends No dividends were paid at March 31, 2007 on 2005/2006 earnings. Earnings per share Earnings per share This figure is the ratio of net income to the weighted average number of outstanding shares less own shares held. Fully diluted earnings per share This figure is obtained by dividing: - net earnings before dilution, plus the after-tax amount of any savings in financial costs resulting from the conversion of the diluting instruments, - by the weighted average number of ordinary outstanding shares, less directly own shares, plus the number of shares that would be created as a result of the conversion of convertible instruments into shares and the exercise of rights. Net result at March 31, 2007: 40,558 K Dividends paid to shareholders: 0 K After tax financial costs relating to bond debenture: 984 K Restated net result 41,542 K Weighted average number of outstanding shares: 42,481,273 Potential shares: Stock options 3,020,002 Weighted average number of shares after exercise of rights relating to diluting instruments 45,501,275 Diluted net earnings per share at March 31, 2007 = 0.91

77 2.5.3 Scope of consolidation CONSOLIDATED FINANCIAL STATEMENTS AS OF MARCH 31, Companies included in the Ubisoft Group consolidated financial statements at March 31, 2007 Company Country Controlling Percentage Method Activity Founded or percentage held acquired UBISOFT ENTERTAINMENT SA France Parent company Parent company FC 1986 UBISOFT Ltd United Kingdom 100% 100% FC Marketing 1989 UBISOFT INC. United States 100% 100% FC Marketing 1991 UBISOFT GmbH Germany 100% 100% FC Marketing 1991 UBISOFT SRL Romania 100% 99.35% FC Development and marketing 1993 UBISOFT SA Spain 100% 99.97% FC Marketing 1994 UBISOFT KK Japan 100% 100% FC Marketing 1994 UBISOFT PICTURES SAS France 100% 100% FC Graphics and 1995 computer graphics UBISOFT SpA Italy 100% 99.99% FC Marketing 1995 UBISOFT DESIGN SAS France 100% 100% FC Interactivity and ergonomics 1995 UBISOFT BOOKS AND RECORDS SAS France 100% 100% FC Management 1995 and administration UBISOFT COMPUTING SARL France 100% 100% FC Development 1996 UBISOFT SIMULATIONS SAS France 100% 100% FC Development 1996 UBISOFT PTY Ltd Australia 100% 100% FC Marketing 1996 UBISOFT GRAPHICS SAS France 100% 100% FC Graphics and modeling 1996 SHANGHAI UBI COMPUTER SOFTWARE Co LTD China 100% 100% FC Marketing and development 1996 UBISOFT DIVERTISSEMENTS Inc. Canada 100% 100% FC Development 1997 UBISOFT ORGANISATION SAS France 100% 100% FC Computing services 1998 UBISOFT WORLD SAS France 100% 100% FC Global marketing 1998 UBISOFT SARL Morocco 100% 99.86% FC Development 1998 UBISOFT NORDIC AS Denmark 100% 100% FC Marketing 1998 UBISOFT LIMITED Hong Kong 100% 99.50% FC Marketing 1998 UBISOFT BV Netherlands 100% 99.98% FC Marketing 1998 UBI STUDIOS SL Spain 100% 99.95% FC Development 1998 UBISOFT STUDIOS SrL Italy 100% 97.50% FC Development 1998 UBISOFT France SAS France 100% 100% FC Marketing 1998 UBISOFT PRODUCTIONS France SAS France 100% 100% FC Development 1999 UBISOFT SWEDEN AB Sweden 100% 98% FC Marketing 1999 UBISOFT MUSIC INC. Canada 100% 100% FC Creation of music 1999 UBISOFT WARENHANDELS GmbH Austria 100% 100% FC Marketing 2000 UBISOFT WORLD STUDIOS SAS France 100% 100% FC Design and storyline 2000 LUDI FACTORY SAS France 100% 100% FC Graphics and 2000 localization studio UBISOFT EMEA SAS France 100% 100% FC Marketing 2000 UBISOFT HOLDINGS INC. United States 100% 100% FC Management and 2000 administration RED STORM ENTERTAINMENT INC. United States 100% 100% FC Creation and animation 2000 UBISOFT Canada INC. Canada 100% 100% FC Marketing 2000 UBISOFT NORWAY AS Norway 100% 100% FC Marketing 2001 UBISOFT MANUFACTURING ET ADMINISTRATION SAS France 100% 100% FC Manufacturing workflow 2001 UBI GAMES SA Switzerland 100% 99.99% FC Marketing 2002 UBISOFT FINLAND OY Finland 100% 100% FC Marketing 2002 UBISOFT ENTERTAINMENT SA Korea 100% branch FC Marketing 2003 GAMELOFT SA France 16.77% 18.89% EA Mobile telephony 2003 TIWAK SAS France 100% 100% FC Development 2003 BLUE BYTE GmbH Germany 100% 100% FC Development 2005 UBISOFT DEVELOPMENT SARL France 100% 100% FC Development 2006 UBISOFT EDITORIAL SARL France 100% 100% FC Development 2006 UBISOFT SUPPORT STUDIOS SARL France 100% 100% FC Development 2006 UBISOFT PRODUCTION MONTPELLIER SARL France 100% 100% FC Development 2006 UBISOFT PRODUCTION ANNECY SARL France 100% 100% FC Development 2006 UBISOFT PARIS STUDIO SARL France 100% 100% FC Development 2006 UBISOFT CASTELNAU SARL France 100% 100% FC Development 2006 UBISOFT ENTERTAINMENT LTD United Kingdom 100% 100% FC Development 2006 UBISOFT EOOD Bulgaria 100% 100% FC Development 2006 UBISOFT MARKETING INTERNATIONAL SARL France 100% 100% FC International marketing 2007 UBISOFT DIGITAL ARTS INC Canada 100% 100% FC Digital animation 2007 FC = Full consolidation EA = Equity affiliate The fiscal year of all consolidated companies ends on March 31 of each year, with the exception of Shanghai Ubi Computer Software Co. Ltd. (China), Ubisoft SRL (Romania), Ubisoft EOOD (Bulgaria) and Gameloft SA, which close their accounts on December 31. No ad hoc company belongs to the Ubisoft group.

78 UBISOFT FINANCIAL REPORT 2007 Change in scope of consolidation Change in percentage of holding in Gameloft SA - Change in percentage of interest in Gameloft SA Following the exercise of options by Gameloft SA employees, Ubisoft Entertainment SA s percentage of interest decreased from % to %. The effects of the change in scope of consolidation are explained in section Note 4 and section Note 26. Creation of new companies - May 2006, creation of Ubisoft Entertainment Ltd (United Kingdom), wholly-owned subsidiary of Ubisoft Ltd, following the acquisition of Reflections Interactive Ltd s assets and entire development studio staff. - Creation of the following French companies April 2006: Ubisoft Editorial SARL and Ubisoft Production Montpellier SARL, May 2006: Ubisoft Support Studios SARL and Ubisoft Production Annecy SARL, July 2006: Ubisoft Paris Studio SARL and Ubisoft Castelnau SARL, January 2007: Ubisoft Marketing International SARL. - June 2006, creation of Ubisoft EOOD (Bulgaria), wholly-owned subsidiary of Ubisoft Entertainment SA, - February 2007, creation of Ubisoft Digital Arts Inc (Quebec), wholly-owned subsidiary of Ubisoft Divertissements Inc. Liquidation - January 2007, liquidation of Ubi Computer Software Beijing Company Ltd. (China). The impact of this liquidation on equity is 170, thousand Notes to the balance sheet Note 1 Goodwill Goodwill breaks down as follows, as of March 31, 2007: Change in gross goodwill Existing company As of Increases Decreases Exchange rate As of differences Gross Gross Ubisoft Inc Ubisoft Ltd 1, ,027 Ubisoft GmbH 12,805 12,805 Red Storm Entertainment Inc. 45,538-4,150 41,388 Ubisoft Spa 3,215 3,215 Ubisoft Canada Inc. 1, ,748 Tiwak SAS Ubisoft Divertissements Inc Blue Byte GmbH 3 3 Ubisoft France SAS 10,103 10,103 Ubisoft BV 2,294 2,294 Ubisoft Warenhandels GmbH Ubi Games SA 1, ,270 Ubisoft Entertainment Ltd (1) - 1, ,819 Total 80,032 1,823-4,368 77,487

79 CONSOLIDATED FINANCIAL STATEMENTS AS OF MARCH 31, Amortization of goodwill 67 Existing company As of Increases Decreases Exchange rate As of differences Amortization Amortization Red Storm Entertainment Inc Total Following the closing of Wolfpack Studios Inc., goodwill was fully amortized at March 31, At March 31, 2007, impairment tests did not result in the recording of any provisions. Net Goodwill Existing company Acquired Date As of company holdings were acquired Net Ubisoft Inc. Ubisoft Inc. February Ubisoft Ltd Ubisoft Ltd December Blue Byte Software Ltd February Ubisoft GmbH Ubisoft GmbH August Blue Byte Software GmbH CO.KG February ,929 Distribution in Germany May ,789 Red Storm Entertainment Inc. Sinister Games Inc. March ,723 Blue Byte Software Inc. February ,031 Red Storm Entertainment Inc. September ,558 Distribution in the USA March ,963 Ubisoft SpA 3D Planet SPA September ,215 Ubisoft Canada Inc. Ubisoft Canada Inc. October Distribution in Canada December ,559 Tiwak SAS Tiwak SAS December Ubisoft Divertissements Inc. Microïds Canada Inc. March Blue Byte GmbH Blue Byte GmbH March Ubisoft France SAS Distribution in France December ,103 Ubisoft BV Distribution in Belgium April ,322 Distribution in the Netherlands January Ubisoft Warenhandels GmbH Distribution in Austria April Ubi Games SA Distribution in Switzerland September ,270 Ubisoft Entertainment Ltd (1) Ubisoft Entertainment Ltd August ,819 Total 77,374 (1) Cf. details in Note Business combinations.

80 UBISOFT FINANCIAL REPORT 2007 Note 2 Other intangible assets Software breaks down as follows as of March 31, 2007: Fixed assets As of Increases Decreases Reclassifications of Other Exchange As of Gross software programs reclas- rate in progress sifications differences Gross Released commercial software 252, , , ,992 External commercial software 90,076-2,226 54, ,955 Commercial software and external commercial software in progress 115, , , , ,603 Office software 12,758 2,085 1, ,390 Leased office software Others intangible assets in progress 768 2, ,775 Brands (1) 11,307 21,532 (2) ,411 31,428 Other Total 483, , , , ,915 Software production costs of 161,196 thousand consist therefore of an increase of 164,913 thousand in released commercial software, minus 184 thousand in external commercial software, 3,118 thousand for the acquisition of Driver developments and 415 thousand in exchange rate differences. Reclassifications between accounts are attributable to the transfer of intangible fixed assets in progress. (1) This entry primarily includes brands obtained from the acquisition of TLC ( 8 million), Far Cry ( 9 million) and Driver ( 14 million). As of March 31, 2007, impairment tests conducted on the brands held by the group s companies did not result in the recording of any provisions. (2) Acquisition of the Far Cry trademark for 7.5 million and the Driver trademark for 14 million. Amortization As of Net Other Exchange rate As of Cumulative Increases Decreases reclassifications differences Released commercial software 189, , , ,973 External commercial software 53,467 52,285 2, ,508 Office software 6,156 4,368 1, ,902 Leased office software Other Total 249, , , ,889 No intangible assets were used as a guarantee for debts. As of March 31, 2007, impairment tests did not result in the recording of any provisions. Note 3 Tangible assets Tangible assets break down as follows: Fixed assets As of Increases Decreases Reclassifications Exchange rate As of Gross differences Gross Plant & machinery 8,581 1, ,569 Computer equipment and furniture 22,652 7,861 1, ,533 27,205 Development kits 2,764 6, ,935 Transportation equipment Leased computer hardware and transportation equipment 1, ,076 Fixed assets in progress Total 35,457 15,932 2, ,021 47,040

81 CONSOLIDATED FINANCIAL STATEMENTS AS OF MARCH 31, Depreciation As of Increases Decreases Reclassifications Exchange rate As of Cumulative differences Cumulative 69 Plant & machinery 2,054 1, ,439 Computer equipment and furniture 8,896 6,937 1, ,625 Development kits 1,273 2, ,429 Transportation equipment Leased computer hardware and transportation equipment Total 13,181 10,991 1, ,530 No tangible assets were used as a guarantee for debts. At March 31, 2007, impairment tests did not result in the recording of any provisions. Note 4 Investments in associates Fixed assets As of Increases Decreases Exchange rate As of Gross differences Gross Goodwill 25, ,654 Share of equity 4,315 4, ,344 Total equity in subsidiaries 30,034 3, ,998 Increase Following the exercise of options by Gameloft SA employees, Ubisoft Entertainment SA s percentage of interest decreased from % to % at March 31, The 3,964 thousand impact on equity in subsidiaries breaks down as follows: thousand dilutive effect - 3,149 thousand share of earnings - 1,090 thousand portion of share capital increase Gameloft SA s contribution to Ubisoft Entertainment SA's earnings was 3,149 thousand as of March 31, General information concerning Gameloft SA related to the accounts closed at December 31, 2006: in thousands of euros Total assets/liabilities 58,390 Sales 68,421 Net income 16,258 Note 5 Financial assets Fixed assets As of Increases Decreases Exchange rate As of Gross differences Gross Assets available for sale Other financial assets Deposits and guarantees 2, ,813 Other long-term receivables 1 15,391 15,390-2 Total 2,878 15,931 16, ,660 The increase of 153 thousand in other financial assets pertains to the capitalization of professional fees concerning the acquisition of Sunflowers Interactive Entertainment Software GmbH (cf. section Events after closing of accounts). The change in other long-term receivables reflects the purchases and sales of securities under the liquidity contract. Due dates of financial assets as of March 31, 2007: short-term: 338 thousand long-term: 2,322 thousand

82 UBISOFT FINANCIAL REPORT 2007 Provisions As of Increases Decreases As of Cumulative Cumulative Assets available for sale Total The increase in provisions pertains to the change in value of Ubi Soft Entertainment Ltda (Brazil). This change in value is a result of equity movements. No financial assets were used as a guarantee for debts. Note 6 Deferred income tax assets Activated losses 16,865 21,365 Temporary tax differences 18,906 19,450 Elimination of studios internal margin 1,303 1,008 Elimination of other internal results Other restatements with regard to consolidation Total 37,630 42,321 The expiry dates of tax deficits break down as follows: - less than 1 year: 117 thousand - 1 to 5 years: 88 thousand - more than 5 years: 214 thousand - unlimited: 16,446 thousand Due dates of deferred tax assets at March 31, 2007: - short-term: 16,199 thousand - long-term: 21,431 thousand Deferred income tax assets are recognized if their recovery is probable, particularly when taxable profit is expected during the period of validity of the deferred tax assets. Because of a transfer price policy implemented at the Group, retail companies systematically report an operating profit; similarly, the studios invoice salaries with a margin that includes their costs structure. There is therefore a real probability of recovery of carryover losses for all the companies; only Ubisoft World Studios SAS has no sufficient short-term guarantees. Activated/non-activated losses: in thousands of euros Activated Non-activated Total Activated losses losses losses Ubisoft Entertainment SA 15,521 (1) - 15,521 (1) 18,693 Ubisoft EMEA SAS Ubisoft World Studios SAS Ubisoft Warenhandels GmbH Red Storm Entertainment Inc Ubisoft Holdings Inc Ubisoft Computing SARL Ubisoft GmbH Ubisoft BV Shanghai Ubi Computer Software Ltd Tiwak SAS Other Total 16, ,736 21,365 (1) Ubisoft Entertainment SA s activated losses before fiscal integration came to 4,626 thousand. The 4.5 million decrease in tax assets was tied mainly to use of deferred depreciation as follows: - 1 M by Ubisoft Entertainment SA, M by Ubisoft EMEA SAS, M by the France tax group.

83 CONSOLIDATED FINANCIAL STATEMENTS AS OF MARCH 31, Note 7 Inventory and work-in-progress Inventory and work in progress breaks down as follows: 71 The provision for inventory decreased from 4.1 million at March 31, 2006 to 3.9 million at March 31, The are no guarantee on inventory. Note 8 Trade receivables Trade receivables break down as follows: As of As of Gross Provision Net Net Goods 28,699 3,905 24,794 23,716 Total 28,699 3,905 24,794 23,716 As of As of Gross Provision Net Net Trade receivables 88, ,857 91,246 Total 88, ,857 91,246 Since trade receivables are due in less than one year, the impact of discounting is not significant and not recognized. The provision decreased from 2 million at March 31, 2006 to 1 million at March 31, Note 9 Other receivables Other receivables break down as follows: As of As of Gross Provision Net Net Advances and installments received ,305 Current account advances VAT 32,710-32,710 21,239 Subsidy to be received 34,732-34,732 34,124 Other tax and social security liabilities Other 1,273-1, Pre-paid expenses 4,027-4,027 4,262 Total 73,959-73,959 62,290 All other receivables are due in less than one year, with the exception of Canadian subsidies in the amount of 7.2 million, which will be charged against payment of tax. Note 10 Current financial assets Current financial assets break down as follows: Net Net Derivatives on exchange rate transactions (1) Equity Swap contract (2) 19, Total 19, In order to limit the group's foreign exchange risk, Ubisoft Entertainment SA uses forward sales contracts and options contracts to hedge the risk of exchange rate fluctuations. These derivative instruments are shown on the balance sheet at their fair value under current financial assets or liabilities. Losses and gains reflecting a change in the market value of non-hedge derivatives at the balance sheet date are reported on the income statement.

84 UBISOFT FINANCIAL REPORT 2007 (1) Fair value of financial instruments Transaction Due Mark to Mark to date date Market Market Forward sales/purchasese Australian dollars - 1 Canadian dollars January 2007 Sept February 2007 Sept US dollars 63 Pounds sterling 117 Forward purchases/sales Canadian dollars Mars 2007 April Forward sales Pounds sterling Dec 2006 April January 2007 April Total The change in value recorded on the income statement is - 45 thousand. (2) Fair value of the equity swap Expiration date Fair value 39,095 17, Margin call received - 20,094-17,710 Total 19, At March 31, 2006, since the fair value of the equity swap was very close to the margin calls, the difference shown on the balance sheet was very low. At March 31, 2007, given that the margin calls are limited to 20 million and that the share increased significantly, the amount of financial assets was 19 million. Equity swap contract The equity swap contract signed with Calyon on September 30, 2003 was extended until February 28, On that date, Calyon will be able to sell its 1,436,274 Ubisoft Entertainment SA shares. The equity swap contract is recognized at its fair value on the balance sheet and changes in fair value are recorded on the income statement. The change in value recorded on the income statement is 25,171 thousand. A gain of 1,886 thousand was recognized following the sale of 200,000 shares in October 2006, which reduced the number of shares to 1,436,274. The overall impact was 18,038 thousand after tax. In light of the shares sold, the impact of a reduction of one euro in regards to the sale price ( 9.33) would be 1,436 thousand (1,436,274 shares after sale and 2-for-1 stock split). Note 11 Cash and cash equivalents The cash and cash equivalents item includes: Cash and cash equivalents Cash on hand (1) 95,766 99,732 Investment securities (2) 30,786 37,259 Total 126, ,991 (1) Cash on hand Cash on hand includes balances of cash and bank accounts in the net amount of 95,766 thousand on March 31, 2007, compared to 99,732,000 at March 31, (2) Investment securities made up of UCITS and open-ended investment trusts

85 CONSOLIDATED FINANCIAL STATEMENTS AS OF MARCH 31, Type Name Number Gross value Fair value Gain/loss Fair value K K K K Mutual fund UCITS liquidity contract 654 1,354 1, Mutual fund Etoile MONE EURIBOR ,040 21,040-7,030 Open-ended investment trust CPR CASH SI 257 5,197 5, ,503 Mutual fund CENTRALE PIBOR ,498 Mutual fund UCITS ,545 Mutual fund SECURITE PLUS 8 1,931 1, ,910 Mutual fund SGAM 12 1,256 1,256-1,014 Total - 30,778 30, , The change in net cash flow breaks down as follows: During the fiscal year ended March 31, 2007, 851,141 shares with a face value of 0.31 were created following the exercise of 12,767,115 share subscription warrants. Cash breakdown Cash and cash equivalents 126, ,991 Foreign currency advances - 6,508-5,432 Bank overdrafts and short-term loans - 41,391-50,665 Total 78,653 80,894 Note 12 Equity Number of Ubisoft Entertainment SA shares Capital The company s share capital on March 31, 2007 was 7,036,577.78, consisted of 45,397,276 shares with a face value of 0.155, each fully paid up. Each share gives a right to ownership of the corporate assets and the liquidating dividend equal to the proportion of the equity that it represents. Voting rights double those conferred on other shares, based on the proportion of the share capital they represent, are attributed to all fully paid-up shares that are proved to have been registered for at least two years in the name of the same shareholder. In the event of a share capital increase by the capitalization of reserves, profits or issue premiums, this right is also conferred at the date of issue on registered shares allotted free of charge to a shareholder in exchange for old shares for which this right was enjoyed. As of ,434,336 Exercice of options 445,953 Conversions of OBSAR 69 Conversions of OCEANE 475,998 Exercise of subscription warrants 851,141 Group/company savings plan/ Equity issue Reserved share capital increase 46,691 Subtotal (before 2-for-1 stock split*) 21,254,188 Subtotal (after 2-for-1 stock split*) 42,508,376 Exercice of options 261,224 Exercise of BSAR 2,627,676 As of ,397,276 (*) On December 5, 2006, the Board of Directors decided to carry out a 2-for-1 split of Ubisoft s share effective December 11, The number of potential shares that may be created by the exercise of financial instruments is as follows: 3,020,002 by exercise of stock options. Stock purchase warrants Stock purchase warrants for existing shares and/or subscription warrants for new shares at May 14, 2003 Number: 17,540,082, with 15 warrants needed to subscribe for one share with a face value of Exercise period: May 14, 2002 through May 14, 2006 inclusive Strike price: 28 The option to exercise the share subscription warrants expired on May 14, 2006.

86 UBISOFT FINANCIAL REPORT 2007 Stock options The capital increases and issue premiums during the past fiscal year were partly driven by the exercise of stock options. The exercise conditions of the stock option plans are as follows: 5 th 6 th 7 th 8 th 9 th Plan Plan Plan Plan Plan Total number of share alloted (2) 641,852 89, , ,362 18,440 Start date for exercising options Expiration date for options Options price (2) Options on April 1, 2006 (2) 153,870 13, , ,676 13,080 Options exercised during the fiscal year 100,950 12, , ,657 2,800 Options cancelled during the fiscal year 52,920 1,772-16,130 - Options not yet exercised at March 31, , ,889 10, th 11 th 12 th 13 th Plan Plan Plan Plan Total number of share alloted (2) 143, , ,100 1,355,892 Start date for exercising options Expiration date for options (1) (1) Options price (2) (France) (Italy) (USA) Options on April 1, 2006 (2) 52, , ,558 1,355,892 Options exercised during the fiscal year 41, ,204 99,320 48,782 Options cancelled during the fiscal year 450 1,656 6,820 - Options not yet exercised at March 31, , , ,418 1,307,110 (1) Limitation of the exercise period approved by the Board of Directors on November 2, 2005 to ensure compliance with the maximum period allowed by US law. (2) As a result of the 2-for-1 stock split on December 11, 2006, the total number of shares allotted and the number of options at April 1, 2006 doubled and the price of the options was reduced by one-half. The average price of options exercised during the period was The impact of share-based payments on the accounts was as follows: Own shares As of March 31, 2007, the company held 22,059 of its own shares. These shares are valued at an average price of and were booked as a deduction from equity Wages and social security costs 3,344 2,692 Stock options 3,318 2,662 Group Savings Plan - 30 USA Savings Plan 26 - Equity 11,564 8,220 The assumptions used for the calculation of the fair value of the options are as follows: - volatility rate: 30% - dividend rate: 0% - turnover rate of beneficiaries: 3% - risk-free interest rate: yield rate of zero-coupon bonds with five- or ten-year maturit, based on the plan maturity.

87 CONSOLIDATED FINANCIAL STATEMENTS AS OF MARCH 31, Consolidated reserves and translation reserves The reserves break down as follows: 75 Like the capital, the legal reserve constitutes a guarantee for third parties dealing with the company. Because of this, it cannot be distributed to shareholders. Note 13 Provisions The provisions break down as follows: Legal reserve Other reserves 65,237 53,025 Translation reserves - 36,608-25,266 Own shares held Consolidated reserves and translation reserves 28,339 27,585 As of Appropriations Write-backs Write-backs Exchange As of (provision (provision rate used) not used) differences Provisions for litigation Provisions for tax risk - 2, ,952 Total 4 2, ,952 Impact Current operating result 2, Financial result Ubisoft Divertissements Inc (Canada) received a notification project of a significant adjustment from Canadian tax authorities relating to fiscal years 1999 to The subsidiary, strengthened by its consultants and lawyer, estimates that the risk is restricted to CAD 3 million, i.e. 2 million corresponding to the provision for risk recorded in the Canadian subsidiary accounts. Note 14 Employee benefits As of Appropriations Write-backs Exchange rate As of differences Provisions for retirement 1, ,205 Total 1, ,205 The definition and the accounting and valuation principles are presented in section Principles of consolidation Employee benefits.

88 UBISOFT FINANCIAL REPORT 2007 Note 15 Borrowings Borrowings break down as follows: Bond debentures - 141,933 OCEANE - 89,854 OBSAR - 52,079 Accrued interest 286 1,150 Foreign currency advances 6,508 5,432 Bank overdrafts and short-term loans 41,391 50,664 Bank loans 23,254 2,840 Borrowings resulting from restatement of leases Borrowings 71, ,335 Fixed-rate debt 6,649 90,859 Variable-rate debt 61, ,636 Zero-rate debt 3,254 2,840 Long-term debt 22,706 54,981 Short-term debt 48, ,354 To limit interest rate and exchange rate risks resulting from the financing needs of its activities, the group uses certain financial instruments: Interest rate risk The management of interest rate risk is aimed mainly at minimizing the cost of the group's borrowings and at reducing exposure to this risk. In this regard, the group gives priority to fixed-rate loans for long-term financing needs and variable-rate loans to finance specific needs related to an increase in working capital during particularly active periods. Foreign exchange risk The group is exposed to foreign exchange risk on its operating cash flow and its investments in its foreign subsidiaries. The group protects only its positions related to its operating cash flow in the major currencies (i.e. the US dollar, Canadian dollar, pound sterling and Australian dollar). The strategy is to hedge one fiscal year at a time, which means that the hedge period does not exceed 15 months. The group relies mainly on natural hedges resulting from two-way transactions (i.e. development expenses in foreign currencies offset by royalties received from subsidiaries in the same currency). For non-hedged balances and noncommercial transactions (i.e. internal loans in foreign currencies), the parent company borrows in these currencies or sets up forward sales contracts or options. Covenants Under the terms of the syndicated loan and bilateral line for 20 million, the company is required to respect certain financial ratios (known as covenants). The following covenants must be respected: 2007/ /2007 Net debt restated to reflect assigned receivables/equity restated to reflect goodwill < Net debt restated to reflect assigned receivables/ebitda < Besides, the company signed in 2006/2007, a bilateral line for 10 million which has to respect the same covenants but with a different ratio of 0.9 for net debt on equity. All covenants are calculated on the basis of the consolidated year-end financial statements based on IFRS as of March At March 31, 2007, the company was in compliance with all of these ratios and expected to remain so during the 2007/2008 fiscal year.

89 CONSOLIDATED FINANCIAL STATEMENTS AS OF MARCH 31, Bank overdrafts Bank overdrafts are used to finance temporary cash requirements generated by changes in working capital requirements. They may be offset with existing liquid assets at other group companies as part of a notional cash pooling system. Leasing Leases mainly concern computer equipment leased under contracts of a maximum of three years. During the fiscal year, new borrowings totaled 60 thousand and repayments totaled 230 thousand. Net financial surplus At March 31, 2007, the net financial surplus was 54,972 thousand. The financial position improved by 120,316 thousand over the fiscal year. The breakdown of borrowings by currency is as follows: Euros 61, ,949 US dollars Canadian dollars 9,826 8,277 Pounds sterling 3 17 Other 2 13 Borrowings 71, , Borrowings 71, ,335 Cash on hand - 95,766-99,732 Net investment securities - 30,786-37,259 Financial surplus - 54,972 65,344 Chief characteristics of OCEANE (bonds convertible/exchangeable into new and/or existing shares) Number: 3,150,000 bonds. As a result of the adjustment made in connection with the issue of warrants for the purchase of existing shares and/or the subscription of new shares in May 2003, one bond entitles its holder to subscribe for 1,037 shares, each with a face value of Nominal issue price: Dated date and settlement date: November 30, 2001 Bond term: Five years from the settlement date. Annual yield: 2.5% per year, payable in arrears on November 30 of each year. Gross redemption yield: 4.5% on the settlement date (if no conversion into and/or exchange for shares and no early redemption). Normal redemption: Redemption in full on November 30, 2006, at a price of 52.70, or % of face value. The settlement date was November 22, During the fiscal year, 475,998 shares with a face value of 0.31 were created following the conversion of 459,013 OCEANE, and 1,290,288 OCEANE were redeemed.

90 UBISOFT FINANCIAL REPORT 2007 Chief characteristics of the OBSAR (bonds with redeemable share subscription warrants): At its meeting of November 3, 2003, the Board of Directors used the authorization granted by the Combined General Meeting of September 12, 2002 to issue OBSAR bonds (bonds with redeemable share subscription warrants). Characteristics of the bonds Number: 716,746 bonds. Nominal issue price: Bond term: Five years from the settlement date. Nominal rate, yield: The bonds will bear interest at a variable rate payable quarterly in arrears. The annual nominal rate is based on the 3-month Euribor. Normal redemption: The bonds will be redeemed on a single redemption date December 2, 2008 at the par rate of per bond. Characteristics of the BSAR (redeemable share warrants) Number of BSAR: 1,433,492 (two BSAR are attached to each bond). Parity: One BSAR entitles its holder to subscribe for one new share with a face value of Strike price: Exercise period: The BSAR can be exercised between December 3, 2003 and December 2, 2008, subject to the provisions governing the early redemption of BSAR at the option of the issuer and those concerning circumstances under which the exercise of BSAR may be suspended. At its meeting of January 19, 2007, the Board of Directors voted in favor of the early redemption on February 26, 2007 of the outstanding BSAR and bonds, in accordance with the provisions of Articles and of securities note of November 14, 2003 approved by the Autorité des Marchés Financiers. The early redemption of the BSAR resulted in the redemption of the outstanding bonds. During the fiscal year ended March 31, 2007, following the exercise of 1,313,907 BSAR: 69 shares with a face value of 0.31 and 2,627,676 shares with a face value of were created. Note 16 Deferred tax liabilities Subsidies (1) 10,810 10,922 TLC brands 3,190 3,510 Equity Swap 13,032 5,934 Bond debentures - 1,112 Other 1,182 1,376 Total 28,214 22,854 (1) The Canadian subsidiary benefits from multimedia credits. As these credits are taxable in the year in which they are used but are recorded on a fiscal year basis, the company recognizes a future tax liability for this item. Due date of deferred tax liabilities: - short-term: 997 thousand - long-term: 27,217 thousand Note 17 Trade creditors and related accounts payables Trade creditors break down as follows: Trade payables 78,589 65,305 Debts on fixed assets 2,589 5,728 Total 81,178 71,033 All trade payables have a due date of less than one year. As the above amount is short-term and does not bear interest, a change in interest rates does not pose a significant interest rate risk.

91 CONSOLIDATED FINANCIAL STATEMENTS AS OF MARCH 31, Note 18 Sundry creditors Other debts breaks down as follows: Advances and installments received 1, Social security liabilities 27,320 18,199 Other tax debts 33,168 19,640 Other debts Deferred income 13,511 (1) 13,992 Total 75,895 52,073 (1) Unearned income includes Canadian subsidies totaling 7.8 million, a 0.5 million incentive linked to a lease in Canada and prepaid sales in the amount of 5 million. Other debts have a due date of less than one year Notes to the income statement Note 19 Sales The group had 680 million in sales during the 2006/2007 fiscal year. At current exchange rates, sales increased by 24.4% over the 2005/2006 fiscal year; at constant exchange rates, growth in sales was 27.2%. The breakdown of sales by activity is as follows: Sale of goods 654, ,599 Licences 16,340 18,466 Services 9,046 14,005 Total 680, ,070

92 UBISOFT FINANCIAL REPORT 2007 Note 20 Other operating income Other operating income breaks down as follows: Capitalized commercial software production costs 161, ,475 Capitalized production costs on other software 1, Write-back of provisions 1, Litigation 5 - Doubtful debts 1, Intangible assets Other income 2,139 1,137 Total 166, ,965 Note 21 Wages and social security costs Wages and social security costs break down as follows: Salaries and social security taxes 199, ,034 Individual right to training 56 - Subsidies - 31,464-31,052 Share-based payments 3,344 2,692 Total 171, ,674 The expenses resulting from defined-contribution schemes totaled 5,290 thousand. A provision for individual rights to training was recognized in the accounts of March 31, 2007 for 56 thousand. The Canadian subsidies break down as follows: - multimedia credit for 25,398 thousand, representing 50% of the wages related to production activity, - an R&D tax credit for 3,567 thousand, representing 50% of R&D costs, - a subsidy of 1,773 thousand for a portion of training costs, - miscellaneous subsidies for 726 thousand. The payment of certain subsidies is conditional upon taxable income being generated. Note 22 Other operating expenses Other operating expenses break down as follows: Other external expenses 170, ,880 Other expenses 3,439 3,003 Total 174, ,883 Other external expenses consist mainly of advertising expenses, royalties and leasing of fixed assets and movables.

93 CONSOLIDATED FINANCIAL STATEMENTS AS OF MARCH 31, Note 23 Depreciation and provisions Depreciation and provisions break down as follows: 81 Depreciation Depreciation of intangible assets 219,122 72,981 Released software programs 162,214 48,794 External developments 52,398 19,816 Office software 4,369 4,188 Leased office software Other Depreciation of tangible assets 10,991 8,321 Plant & machinery 1,722 1,223 Computer equipment and furniture 6,937 5,857 Development kits 2, Transportation equipment Leased computer hardware and transportation equipment Total 230,113 81,302 Provisions Provisions for intangible assets - 77,755 Released software programs - 69,293 External developments - 8,462 Provisions for trade receivables 460 1,266 Provisions for sundry current assets - - Provisions for risks and charges 2,053 - Provision for retirement benefit costs Total 2,568 79,440 Note 24 Other operating income and expenses Other operating income and expenses break down as follows: Sales of fixed assets Other operating expenses 117 1,658 Total 360 1,784 The other operating expenses in the amount of 117 thousand correspond to impairment of Wolfpack Studios Inc. s goodwill (cf. section Notes to the balance sheet - Note 1 Goodwill).

94 UBISOFT FINANCIAL REPORT 2007 Note 25 Financial result Financial result breaks down as follows: Cost of net borrowings - 5,591-8,510 Interests earned on placements 1,521 1,764 Interest paid on financing operations - 7,067-10,693 Income/expenses from cash hedging operations Financial income 38,201 17,369 Dividends - - Exchange gains 11,108 9,850 Change in fair value and sale of the equity swap 27,057 7,519 Other financial incomes 36 - Financial expenses - 14,563-17,969 Exchange losses - 12,807-16,531 Other financial expenses - 1,756-1,438 Total 18,047-9,110 Foreign exchange risk In order to limit the group's foreign exchange risk, Ubisoft Entertainment SA hedges exchange rate fluctuations in several ways: - when the parent company makes a loan in a foreign currency to its subsidiaries, 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; - the distribution subsidiaries pay a royalty to the parent company as compensation for the development costs incurred by the latter. Moreover, Ubisoft EMEA SAS centralizes the purchases of finished products for the entire region and then resells them in local currencies to the subsidiaries. At the same time, Ubisoft Entertainment SA finances all the production studios around the world and most of the licensing and external development agreements. In this way, all of the foreign exchange risk is centralized at Ubisoft EMEA SAS and Ubisoft Entertainment SA. When foreign exchange risk exists with regard to a single currency in opposite directions (for example, royalties received and cost of a studio in the same currency), the group offsets this by using foreign currency advances or investments to manage the time lags. Amounts that cannot be offset are hedged by forward sales contracts and option contracts (for contract details, cf. section Notes to the balance sheet - Note 10. Current financial assets). Note 26 Share in earnings of associates The net income/expenses of associates break down as follows: Share in earnings 3, Result of dilution - 2,576 Result of sales - 15,826 Total 3,149 19,109 Note 27 Income tax expense Income tax expense breaks down as follows: Current tax Tax owed by French companies was calculated at the rate in force at March 31, 2007, i.e %. There are two tax integration groups: - in France, the group includes nine companies: Ubisoft Entertainment SA, Ubisoft EMEA SAS, Ubisoft France SAS, Ubisoft Books and Records SAS, Ubisoft Graphics SAS, Ubisoft Organisation SAS, Ubisoft World SAS, Ludi Factory SAS and Ubisoft Manufacturing et Administration SAS. At March 31, 2007, the tax group had written back deferred tax assets in the amount of 2,153 thousand; however, any tax savings arising from the use of losses at the tax group s member companies will only be temporary, since the company in question may use them at any time for its own purposes; - in the United States, the group includes three companies: Ubisoft Holdings Inc., Red Storm Entertainment Inc. and Ubisoft Inc. At March 31, 2007, the tax group had a tax expense of 1,951 thousand. Deferred tax Current tax - 7,129-5,018 Deferred tax - 8,088 8,342 Total - 15,217 3, Deferred tax assets (see details in Note 6) 37,630 42,321 Deferred tax liabilities (see details in Note 16) 28,214 22,854

95 CONSOLIDATED FINANCIAL STATEMENTS AS OF MARCH 31, Tax proof Consolidated earnings, excluding GW, tax and profit/loss of associates 52,743 Theoretical tax (33.33%) 17,581 Adjustments of deferred taxes from previous fiscal years: Variance between the accounting records and tax returns Effect of permanent differences between company earnings and consolidated earnings: IFRS2 wage complement 1,115 Cancellation of provisions for impairment of goodwill Deductibility of the bond redemption premium related to OCEANE - 2,236 Misc. add-backs 464 Other 511 Research tax credit France - 1,570 United States Taxation of foreign companies at different rates 107 Other restatements 187 Total income tax 15,217 Actual tax rate 28.85% 83 Adjustments recognized during the fiscal year for tax due from previous years and entered as equity Following the tax adjustments for previous years, the amount impacting equity is thousand.

96 UBISOFT FINANCIAL REPORT Appendix notes Segment information In light of the group's organizational structure and the commercial links among the various subsidiaries, we proceed on the basis that the group operates in a single market in several geographic areas. 1. Breakdown of result by geographic area France Germany UK Rest of United States Rest of Europe Canada world Total Sales 71,183 56, ,452 97, ,150 32, ,348 Other operating income 58,622 2,467 4,239 11,116 74,518 15, ,467 Costs of sales -119,657-3, ,421-90,810-6, ,969 Inter-company flows (1) 85,252-14,955-37,442-32,369 5,019-5,505 - Inventory changes in finished products and work-in-progress , ,037 Wages and social security costs -63,940-4,566-6,530-14,577-68,916-12, ,038 Other operating expenses -53,159-12,227-18,057-18,207-63,555-9, ,275 Tax and duty -3, , ,950 Depreciation and provisions -220, ,164-1, ,681 Reinvoiced contributions (2) 263,546-21,705-49,443-31, ,506-11,923 - Current operating result 17,316 1,070 2,201 2,172 10,593 1,587 34,939 Other operating income and expenses Operating result 17,309 1,070 2,115 2,175 10,445 1,465 34,579 Cash and cash-equivalent income 1, ,476 Cost of gross financial debts -6, ,067 Net borrowings costs -4, ,591 Other financial income and expense 23, ,638 Inter-company flows 1, , Financial result 20, , ,047 Share in earnings of associates 3, ,149 Income tax expense -10, , ,217 Profit for the year 30, ,149 1,185 5, ,558 Attributable to minority interests share Group 30, ,149 1,185 5, ,558 (1) Invoicing of products purchased on behalf of subsidiaries and reinvoiced at their acquisition cost. (2) The parent company, like Ubisoft EMEA SAS, invoices subsidiaries for a contribution in the form of royalties that serve to support development costs (depreciation of games, internal and external development, royalties) and head office costs.

97 CONSOLIDATED FINANCIAL STATEMENTS AS OF MARCH 31, Breakdown of balance sheet by geographic area Net assets France Germany UK Rest of United States Rest of Europe Canada world Total 85 Goodwill 21,972 10,840 1,451 3,564 39,547-77,374 Other intangible assets 222, , ,026 Tangible assets 9, ,064 11,333 2,622 25,510 Investments in associates 33, ,998 Financial assets 1, ,458 Inter-company flows 116,588-13, ,168-85,342-4,923 - Deferred income tax assets 14, ,122 19,397 1,593 37,630 Non-current assets 420,941-1,464 1,259-6,145 25, ,996 Inventory and work-in-progress 2,856 1,447 4,050 4,366 11, ,794 Trade receivables 6,115-5,265 6,706 17,122 56,438 6,741 87,857 Other receivables 19,717 8,819 6,846 1,210 37, ,959 Inter-company flows 34,405 11,363 21,704-11,108-50,954-5,410 - Current financial assets 19, ,183 Current income tax assets 4, , ,605 Cash and cash equivalents 106, ,436 6,118 3, ,552 Current assets 193,480 16,715 39,352 21,720 65,299 6, ,950 Total assets 614,421 15,251 40,611 15,575 91,060 7, ,946 Liabilities France Germany UK Rest of United States Rest of Europe Canada world Total Capital 7, ,037 Additional paid-in capital 435, ,234 Equity component Consolidated reserves 8,534 3,278 4,457 2,843 18,381 1,497 38,990 Consolidated earnings 30, ,148 1,184 5, ,558 Equity (group share) 481,713 4,181 5,605 4,027 23,942 2, ,819 Minority interests Total equity 481,713 4,181 5,605 4,027 23,942 2, ,819 Provisions ,952 1,952 Employee benefits 1, ,205 Borrowings , ,603-22,706 Deferred tax liabilities 13, , ,214 Non-current liabilities 14, , ,133 2,052 54,077 Borrowings 46, ,874 Trade creditors and related accounts payables 42,504 1,886 5,193 4,921 24,483 2,191 81,178 Sundry creditors 28,387 9,147 9,596 4,697 22,512 1,556 75,895 Financial liabilities Current income tax liabilities ,103 Current liabilities 118,010 11,068 15,007 11,357 48,031 4, ,050 Total liabilities 614,421 15,252 40,612 15,575 89,106 8, ,946

98 UBISOFT FINANCIAL REPORT Breakdown of investments by geographic area Investissements France Germany UK Rest of United States Rest of Europe Canada world Total Released commercial software 161, , ,913 External commercial software 58, ,826-61,094 Office software , ,085 Others intangible assets in progress 2, ,009 Brands 7, ,032-21,532 Other intangible assets Plant & machinery ,685 Computer equipment and furniture 1, ,171 1,146 7,861 Development kits 6, ,171 Transportation equipment Leased computer hardware and transportation equipment Fixed assets in progress Total 238, ,099 1, , Business combinations On August 3, 2006, the group acquired from Atari Inc. and Reflections Interactive Ltd the intellectual property and technology rights to Driver, as well as most of the assets and all of the staff of the Reflections Interactive Ltd studio for an acquisition price of US$ 24 million. The net assets acquired and goodwill are detailed below: Amount paid in cash 18,117 US$ 24 million Direct costs related to the acquisition 368 Total acquisition cost 18,485 Fair value of the net assets acquired 16,666 US$ 22 million Goodwill 1,819 The US$ 22 million in assets related to this acquisition correspond to: - the Driver brand 13,516 thousand (US$ 18 million) - software 3,003 thousand (US$ 4 million) - computer equipment and furniture 147 thousand Total 16,666 thousand Transactions with related parties 1. Compensation of managers at the company and at the controlling and/or controlled companies The Guillemot brothers are compensated for their duties as CEO and Executive Vice Presidents. They are paid a fixed amount and are not employed under work contracts. The total gross compensation paid to managers during the fiscal year by the company, by controlled companies as defined by Article L and by the company controlling the one at which they held office was thousand including 546 thousand paid by Ubisoft Entertainment SA. In only partial compensation for their work and the time spent in preparing for, and actively participating in, meetings of the Board, the General Meeting of September 25, 2006 authorized the company to pay directors fees totalling 250 thousand per year maximum. During the 2006 fiscal year the Members of the Board of Directors received 135 thousand in directors fees.

99 CONSOLIDATED FINANCIAL STATEMENTS AS OF MARCH 31, Name of manager Total gross fixed Directors Total variable Benefits Total gross fixed Total variable Benefits compensation fees compensation in kind compensation compensation in kind paid on paid paid on paid on paid paid Mr Yves Guillemot 214,800 22,500 None None 204,000 None None Mr Gérard Guillemot 182,518 22,500 None None 200,200 None None Mr Michel Guillemot 251,575 22,500 None None 204,000 None None Mr Claude Guillemot 214,800 22,500 None None 204,000 None None Mr Christian Guillemot 214,800 22,500 None None 204,000 None None 87 Following the resignation of Ms. Yvette Guillemot on June 23, 2006, Mr. Marc Fiorentino was co-opted by the Board of Directors on July 10, This cooption was approved at the General Meeting of September 25, No obligation has been undertaken by the company in favour of its corporate officers related to their termination or change in employment, such as in the event of a takeover bid. No loans or advances were made to the company s managers as provided by Article L of the French Commercial Code. The members of the Board of Directors did not receive any stock options or share subscriptions during the fiscal year just ended. 2. Transactions with other related parties The transactions with Gameloft SA are related to the reinvoicing of licenses and services: Ubisoft Entertainment SA did not buy back any of its own shares from related parties Customer balance 968 Supplier balance 792 Revenues 2,295 Expenses 2, Off-balance-sheet commitments 1. Sureties and guarantees Due date Sureties and guarantees given 50,566 25,209 Debtor (1) Type of guarantee Ubisoft Divertissements Inc. Loan repayment guarantee 2,603 Sept 2007 Ubisoft Ltd Loan guarantee 20, Ubisoft Inc. Guarantee of commercial commitments 2,252 End of commercial relationship Ubisoft Ltd Lease payment guarantee 3,161 June 2016 Red Storm Entertainment Inc. Lease payment guarantee Ubisoft Divertissements Inc. Lease payment guarantee 573 End of lease contract Ubisoft Inc. Stand-by letter 2, Ubisoft Inc. Stand-by letter 6, Ubisoft Emea SAS Stand-by letter 3, Ubisoft Emea SAS Stand-by letter 3, Ubisoft Emea SAS Stand-by letter 6, Collateral for loans None None Notes receivable discounted None 1,000 (1) Only commitments of more than 500 thousand are detailed.

100 UBISOFT FINANCIAL REPORT Leasing - Finance leasing arrangements: Initial value Amortization Net value Payments made Payments still to be made Residual value - 1 year + 1 year Finance leasing arrangements mainly concern computer hardware leased under contracts of a maximum of three years. - Simple leases: these mainly involve leases related to property for 10,523 thousand for which the term of the lease is at most 10 years. 3. Authorizations Lines of credit used amount to 30 million and short-term bilateral lines of credit total 93 million. They are unconfirmed and revocable with 30 days prior notice. The syndicated loan is confirmed in the amount of 100 million and had not been used at March 31, Other commitments Future guarantee payments Various products are marketed under licensing contracts signed by the group. At March 31, 2007, the commitments made by the group provided for the future payment of guaranteed minimum royalties. The commitments made by virtue of this guaranteed minimum amounted to 41.2 million. There were no other significant off-balance-sheet commitments Potential assets and liabilities Deposition The lawsuit which pended between the company and a licensee since October 2003 concerning breach of license agreement has been handed down in Ubisoft Entertainment SA favor. The total amount will be known in the next few months Events after closing of accounts Acquisition On April 6, 2007, acquisition of the Anno TM brand through the buyout of the German publisher Sunflowers Interactive Entertainment Software GmbH for 14.2 million. Through the transaction, Ubisoft will acquire a 30% stake in Related Designs Software GmbH, which developed Anno Ubisoft reinforces its position in the real-time strategy market. Anno TM, along with Ubisoft s The Settlers, is one of the most well known franchises in Germany Employees As of March 31, 2007, the number of permanent employees was as follows: North America 1,923 1,795 Europe and North Africa 1,600 1,188 Asia-Pacific Total 3,934 3,441 The average number of employees during the 2006/2007 fiscal year was 3,734. There is no employee profit-sharing or shareholding system within the group

101 CONSOLIDATED FINANCIAL STATEMENTS AS OF MARCH 31, Report for the consolidated account statements for the fiscal year ending March, 31, Dear Shareholders, Pursuant to the assignment entrusted to us by your General Meeting, we have audited the consolidated financial statements of Ubisoft Entertainment SA for the fiscal year ended March 31, 2007, as attached to this report. The consolidated financial statements have been prepared by the Board of Directors. It is our task to express an opinion on these financial statements on the basis of our audit. I - Opinion regarding the consolidated financial statements We have conducted our audit in accordance with accepted professional standards in France. These standards require due diligence in order to ascertain with reasonable certainty that the consolidated financial statements contain no material anomalies. An audit consists in examining, on a test basis, evidence relevant to the information contained in the financial statements. It also involves assessing the accounting principles applied, the significant estimates made in preparing the financial statements and their overall presentation. It is our view that the audit we conducted forms a true and fair basis for the opinion expressed below. We hereby certify that, from the standpoint of IFRS standards as adopted in the European Union, the consolidated financial statements give a true and fair view of the assets, financial position and results of the group comprising the consolidated persons and entities. II - Basis for assessment Pursuant to the provisions of Article L of the French Commercial Code regarding the basis for assessment, we call your attention to the following items: Commercial software The note relating to Other intangible assets in the section of the notes entitled Consolidation principles describes the accounting principles for the recognition and amortization of commercial software. As part of our assessment of the accounting rules and principles applied by your company, we have verified the appropriateness of the accounting methods indicated above and of the information provided in the notes, and have ensured their correct application. Goodwill and brands The notes relating to Goodwill and Brands in the section of the notes entitled Consolidation principles describes the accounting principles for the recognition and amortization of these intangible assets. As part of our assessment of the accounting rules and principles applied by your company, we have reviewed the procedures for conducting this impairment test, as well as the cash flow forecasts and assumptions used, and verified that the above notes provide appropriate information. Provision for tax risk Ubisoft Divertissements Inc. is subject to a tax inspection under the conditions described in Note 13 Provisions of the notes to the consolidated financial statements. The company, which objected to the tax adjustment, set up a provision in the amount of the estimated risk at closing. As part of our assessment of the significant estimates used to prepare the financial statements, we: - examined the reasons for the adjustment; - reviewed the opinion of the experts and attorneys justifying the grounds for the objection made to the administration. Our assessments were made within the context of our audit of the consolidated financial statements as a whole, and therefore provided a basis for the opinion expressed in the first part of this report.

102 UBISOFT FINANCIAL REPORT 2007 III - Specific verification We have also verified, in accordance with accepted professional standards in France, the information provided in the report concerning the group s management. We have no comments regarding the accuracy of this information and its consistency with the consolidated financial statements. Rennes, June 14, 2007 By the auditors KPMG Audit A division of KPMG S.A. Laurent Prévost Partner Audit AMLD André Métayer Partner

103 CORPORATE ACCOUNTS OF UBISOFT ENTERTAINMENT SA AS OF MARCH 31, Corporate accounts of Ubisoft Entertainment SA as of March 31, Ubisoft Entertainment SA balance sheet Ubisoft Entertainment SA income statement Corporate statements of changes Cash flow statement Notes to the corporate accounts Highlights of the fiscal year Comparability of accounts Accounting principles Accounting method changes Accounting rules and methods Notes to the balance sheet Notes to the income statement Other information Personnel Financial commitments and other information Compensation of managers Potential assets and liabilities Events after closing of accounts Subsidiaries and affiliated company (March 31, 2007) General report on the fiscal year ending March 31, Special Auditors report fiscal year ended March 31, 2007on regulated agreements. 114

104 UBISOFT FINANCIAL REPORT Ubisoft Entertainment SA balance sheet Assets 03/31/ /31/ /31/ /31/ /03/05 Notes Gross Amort/dep Net Net Net K K K K K Intangible assets 1 426, , , , ,426 Business assets Tangible assets 2 6,419 4,521 1,898 1,952 2,259 Financial assets 3 241,228 20, , , ,297 Fixed assets 674, , , , ,982 Advances and installments paid 4 29,898-29,898 9,039 15,520 Trade receivables 5 63,538-63,538 55, ,271 Other receivables 40,792-40,792 37,785 32,038 Investment securities 8 30,779-30,779 37,255 60,859 Cash 34,701-34,701 26,217 39,897 Current assets 199, , , ,585 Bond redemption premium ,132 2,825 Adjustment accounts 10 1,150-1,150 3,908 2,791 Total assets 875, , , , ,183 Liabilities Notes 03/31/ /31/ /03/05 K K K Capital 7,037 6,025 5,594 Premiums 420, , ,795 Reserves - 6,507 6,306-13,185 Income for Fiscal Year 16,047-12,813 20,085 Equity , , ,289 Provisions for risks and charges Bond debentures , ,494 Borrowings (1) (2) 15 44,685 53, ,209 Miscellaneous financial debts (3) 15 69,095 32,442 50,831 Trade creditors and related accounts payables 35,917 35,324 20,421 Tax and social security liabilities 5,480 3,266 9,894 Debts on fixed assets 2,604 5,626 20,239 Other debts 16 20,150 17,710 12,811 Total debts 177, , ,899 Accrued expenses (adjustments accounts) 17 3,918 4,133 3,967 Total liabilities 619, , ,183 (1) due in less than one year: 44,685 53, ,209 (2) current bank credit facilities and credit balances: 44,685 53, ,209 (3) current accounts

105 3.2 CORPORATE ACCOUNTS OF UBISOFT ENTERTAINMENT SA AS OF MARCH 31, 2007 Ubisoft Entertainment SA income statement 3 93 Notes 12-month fiscal 12-month fiscal 12-month fiscal year ended year ended year ended 03/31/ /31/ /31/2005 K K K Sales , , ,529 Other operating income and transfers of expenditures 19 17,223 13,495 12,712 Total operating income 452, , ,241 Purchases stored and other procurement Other purchases and external charges , , ,285 Tax and duty 1,163 1,118 2,088 Wages and social security costs Other expenses , Depreciation and provisions , , ,798 Total operating expenses 443, , ,181 Operating result 8,835-16,766 19,060 Financial income from equity holdings 25,618 1, Income from other securities and claims on fixed assets Other interest and related income (1) 3,992 2,550 1,348 Write-back of provisions 2, ,024 Positive exchange differences 8,842 8,089 8,910 Net proceeds from sales of investment securities 380 1, Total financial income 41,632 13,824 22,617 Provisions 23,019 2,906 2,396 Other interest and related expenses (2) 7,923 7,551 11,026 Negativ exchange differences 10,399 15,620 7,055 Total financial expenses 41,341 26,077 20,477 Net financial result ,253 2,140 Ordinary result 9,126-29,019 21,200 Extraordinary result 24 6,832 18,509-2,375 Result before income tax 15,958-10,510 18,825 Corporate tax ,303-1,260 Net earnings for financial year 16,047-12,813 20,085 (1) including revenue from affiliated companies: 3,147 1,777 1,121 (2) including expenses related to affiliated companies: 2,658 1,

106 UBISOFT FINANCIAL REPORT Corporate statements of changes In thousands of Balance as of Allocation of Capital 2006/07 Balance as of 03/31/ /06 increase earnings 03/31/2007 earnings in cash and by bond conversion Capital 6,025-1,012-7,037 Issue premium 315, , ,775 Legal reserve Regulatory reserves Other reserves 6, ,394 Profit and loss account reserve brought forward , ,406 Net earnings for Fiscal Year - 12,813 12,813-16,047 16,047 Total 314, ,368 16, ,352

107 3.4 CORPORATE ACCOUNTS OF UBISOFT ENTERTAINMENT SA AS OF MARCH 31, 2007 Cash flow statement /31/ /31/2006 K K Flows from operating activities Net earnings 16,047-12,813 Depreciation of tangible and intangible assets 200, ,004 Changes in provisions 22,624 2,266 Flows from the disposal of fixed assets ,473 Total cash flow from operating activities 239, ,984 Trade receivables - 7,744 68,477 Advances - 5,559 6,481 Sundry assets ,433 Trade payables - 2, Sundry liabilities 2,823-1,595 Total change in working capital requirement - 13,237 66,220 Flows from investments Acquisitions of intangible assets - 209, ,194 Acquisitions of tangible assets Acquisition of equity securities - 1, Acquisition of other financial fixed assets - 26,226-4,816 Charges to be spread over several years Disposal of fixed assets - 24,939 Proceeds from long-term loans and other financial assets 26,125 4,129 Other restatements (1) Total cash flow from investments - 211, ,743 Flows from financial transactions Repayment of long- and medium-term loans - 147,162-24,875 Capital increase 1, Increase in issue premium 8,594 12,174 Increase in issue premium of share subscription warrants 23,568 4,222 Increase in issue premium on group savings plan 1,557 - Increase in bond redemption premium 71,637 24,228 Variation in current accounts 36,652-18,389 Total cash flow from financial transactions - 4,142-2,209 Net change in cash flow 10,916 17,252 Net cash position at the beginning of the fiscal year 10,143-7,109 Net cash position at the end of the fiscal year 21,059 10,143 (1) Restatement of brands for 593 thousand.

108 UBISOFT FINANCIAL REPORT Notes to the corporate accounts The following notes and tables, presented in thousands of euros, are an integral part of the annual financial statements for the fiscal year ended March 31, 2007 and constitute an appendix to the balance sheet. The fiscal year covered a period of 12 months from April 1, 2006 to March 31, Highlights of the fiscal year - 2-for-1 stock split: On December 5, 2006, the Board of Directors decided to carry out a 2-for-1 split of Ubisoft s share effective December 11, Share capital increases: In February 2007, Ubisoft Entertainment SA increased its equity ownership of Ubi Games SA through the capitalization of the current account totaling CHF 2,500 thousand or 1,537 thousand. - Own shares: In October 2006, 200,000 shares were sold by Calyon under the equity swap contract. - Other items: In January 2007, Ubi Computer Software Beijing Company Co. Ltd. was liquidated. The OCEANE bond reached maturity on November 22, The bond was settled through the redemption of 1,290,288 OCEANE and the conversion of 459,013 OCEANE, which resulted in the creation of 475,998 new shares with a face value of On February 19, 2007, the Board of Directors authorized the early redemption of outstanding BSAR and bonds. During the fiscal year, 1,313,907 BSAR were exercised, resulting in the creation of 69 shares with a face value of 0.31 and 2,627,676 shares with a face value of The share subscription warrants issued on May 14, 2003 expired on May 14, During the fiscal year, 12,767,115 warrants were exercised, resulting in the creation of 1,702,282 new shares with a face value of for a share capital increase of 24 million Comparability of accounts Since the creation of the liquidity contract on December 22, 2005, own shares are recognized as other long-term investments, whereas they were shown under investment securities at March 31, Accounting principles General accounting conventions were applied in accordance with the principle of conservatism and the following basic rules: - operational continuity, - time-period concept, - fair presentation, regularity and accuracy, - prudence, and in accordance with the general rules governing the preparation and presentation of annual financial statements. The historical cost principle was applied as the basic method for the valuation of items shown in the accounts. The accounting methods applied are consistent with industry practice. Ubisoft Entertainment SA s annual financial statements comply with the provisions relating to individual accounts contained in Regulation 99-03, approved by the decree of June 22, Accounting method changes The changes in accounting methods resulting from the application of CRC Regulations and as of January 1, 2005 are described below: Recognition of brands: Brand registration costs have been recorded as expenses since April 1, Breakdown and depreciation of fixed assets: In view of the nature of the assets, no component was identified. Furthermore, since the service life previously used to calculate depreciation is identical to the useful life, the change in accounting regulations has no effect on earnings for the fiscal year and equity at the start of the year Intangible assets Accounting rules and methods Intangible assets include: - logos - office software: amortized over 1 year (straight-line), - ERP-related expenditures: amortized over 5 years (straight-line), - commercial software: amortized over 3 years (straightline) with additional amortization to adapt to the products life cycles. - external developments: amortized based on the products lifecycles.

109 CORPORATE ACCOUNTS OF UBISOFT ENTERTAINMENT SA AS OF MARCH 31, Commercial software: Development costs of commercial software, whether produced in-house or outsourced, are recognized in the Intangible assets in progress item (account 232) as development progresses. Once marketing begins, these costs are transferred to the "Released software" or External developments accounts (accounts 208). Development costs of outsourced commercial software are recognized under account 232 or advances and installments, in accordance with the rules defined by France s Conseil d Etat (CE of February 12, 1988, and CE of November 25, 1989) when they do not come under the definition of an asset. Development costs subcontracted to group subsidiaries are recorded as subcontracting expenses and transferred to fixed assets via a self-constructed assets account. Commercial software and external developments are amortized starting on the date of the product s commercial release. When actual sales are less than projections and expected return on sales, a provision for impairment is recorded. Return on sales is determined on the basis of operating result restated to reflect operating depreciation. Brands: Any brands acquired are recognized at their acquisition cost. Brands are not amortized. Impairment tests are performed on brands at the close of each fiscal year, or more often if there are indications of impairment. The recoverable value of brands is then estimated on the basis of the change in sales for the business division in question, its contribution to the consolidated group s income and its updated cash flow. When this value is less than the book value, amortization is recorded. Tangible assets These are shown at historical cost. The depreciation rates applied are as follows: - equipment: 5 years (straight-line), - fixtures and fittings: 5 and 10 years (straight-line), - computer equipment: 3 years (straight-line), - office furniture: 10 years (straight-line). Advances and installments paid Advances and installments primarily involve distribution and reproduction rights (licenses) acquired from other publishers. The signing of licensing contracts entails the payment of guaranteed amounts, These amounts are recorded in account 409 at their net value (under Conseil d Etat rules of February 12, 1988, and of November 25, 1989). These advances and installments are reported on the income statement based on the contracts signed with publishers (either by the unit or based on gross margin or sales) or, in the case of flat fees, amortized using the straight-line method. At the end of the fiscal year, the net book value is compared with sales projections in light of the terms and conditions of the contract. If projected sales are insufficient, amortization will be recorded on the income statement accordingly. Trade receivables Trade receivables are valued at their face value. Where applicable, a provision for depreciation is recorded based on the likelihood of their collection at the balance sheet date. Investment securities Investment securities consist of interests in investment funds and short-term investments, which are valued at their purchase price or at their market value when this is lower. Conversion of debts and accounts receivable expressed in foreign currencies These were converted at the rates in effect at March 31, Any resulting translation gains or losses are shown on the balance sheet under a specific heading. A provision for foreign exchange risk is recorded if conversion reveals the existence of unrealized losses. Foreign exchange hedges Since hedges are not allocated to specific transactions, Ubisoft Entertainment SA has chosen not to use hedge accounting to hedge its foreign exchange risk. 97 Financial assets Securities are valued at historical cost, excluding acquisition expenses. The inventory value of the security is reviewed at the end of each fiscal year based on the net position of the subsidiary in question on that date, the stock market valuation on the closing date if the company is listed on the stock exchange, and/or on its medium-term profitability prospects. A provision for depreciation is set up if necessary. Directly held stocks are valued at their purchase price or at market value if this is lower. Deposits and guarantees are recognized on the basis of the amounts paid. Provisions for risks and charges Provisions for risks and charges are recorded when risks and charges that have a clearly defined object, but which are not certain to arise, are made likely by events that have occurred or are in progress. At March 31, 2007, provisions for risks and charges pertained only to foreign exchange risk related to discounting of receivables and debts expressed in foreign currencies.

110 UBISOFT FINANCIAL REPORT Notes to the balance sheet Note 1. Intangible assets Intangible assets break down as follows: Fixed assets As of 03/31/2006 As of 03/31/2007 Gross Increases Decreases Reclassification Gross Released commercial software 289, , , ,176 External commercial software 47,326-4,064 28,090 71,352 Software programs in progress 103, , , ,805 ERP 8, ,743 Production licenses 1,803 7,501 (1) - - 9,304 Other intangible assets in progress 16,244 2, ,476 2,775 Other Total 468, , ,066-15, ,593 (1) balance of the acquisition of the Far Cry brand. Depreciation As of 03/31/2006 As of 03/31/2007 Cumulative Increases Decreases Cumulative Released commercial software 224, , , ,328 External commercial software 35,273 31,567 4,064 62,776 Office software 4,970 1, ,697 Production licenses Other Total 264, , , ,245 Note 2. Tangible assets Tangible assets break down as follows: Fixed assets As of 03/31/2006 As of 03/31/2007 Gross Increases Decreases Reclassification Gross Fixtures and fittings 3, ,680 Transportation equipment Computer equipment and furniture 2, ,728 Tangible fixed assets in progress Total 6, ,419 Depreciation As of 03/31/2006 As of 03/31/2007 Cumulative Increases Decreases Cumulative Fixtures and fittings 1, ,821 Transportation equipment Computer equipment and furniture 2, ,692 Total 4, ,521

111 CORPORATE ACCOUNTS OF UBISOFT ENTERTAINMENT SA AS OF MARCH 31, Note 3. Financial assets Financial assets break down as follows: 99 Fixed assets Gross As of Increases Decreases Gross As of 03/31/ /31/2007 Equity holdings 238,529 1, ,098 Other long-term investments ,151 26, Deposits and guarantees Total 239,558 27,965 26, ,228 The increase in securities is primarily due to the share capital increase of Ubi Games SA (Switzerland) in the amount of 1,537 thousand. It is also linked to the capitalization of professional fees concerning the acquisition of Sunflowers Interactive Entertainment Software GmbH in the amount of 153 thousand. The decrease is related to the liquidation of the Ubi Computer Software Beijing Co. Ltd subsidiary in China. The change in other long-term investments reflects the purchases and sales of directly held stocks under the liquidity contract (cf. section 3.5.2). General information on the listed company Gameloft SA: Listed company Gameloft SA Book value at 03/31/07 ( ) 27,343,883 Number of shares held by Ubisoft Entertainment SA 13,367,923 Value of one share at 03/31/07 ( ) 5.03 Balance sheet date December 31 Write-back over fiscal year - Depreciation over fiscal year - Provisions As of 03/31/2006 As of 03/31/2007 Cumulative Increases Decreases Cumulative Equity holdings , ,794 Own shares Total , ,807 The increase in provisions of equity holdings is primarily due to the decrease of the value in use of the securities of Ubisoft EMEA SAS, based on the present value of the cash flows realised on out of group sales and on net cash position at the end of fiscal year. Note 4. Advances and installments paid These are primarily guaranteed advances paid on licensing contracts. As of 03/31/2006 New Reclassification Depreciation As of 03/31/2007 Net guarantees Net Licenses 9,039 26,065 15,476 (1) 20,682 29,898 Total 9,039 26,065 15,476 20,682 29,898 (1) The reclassification pertains to outstanding amounts of at 03/31/2006. Note 5. Trade receivables The trade receivables item breaks down as follows: As of 03/31/2007 As of 03/31/2006 Gross Provision Net Net Trade receivables 63,538-63,538 55,794 Total 63,538-63,538 55,794 The trade receivables item consists mainly of intra-group receivables.

112 UBISOFT FINANCIAL REPORT 2007 Note 6. Statements of receivables and debts Statements of receivables Gross amount < 1 year > 1 year Receivables on fixed assets Other financial assets 1,117-1,117 Receivables on current assets Trade receivables 63,538 63,538 - Government (VAT credit, misc.) 3,356 3,356 - Group and partners 36,606 36,606 - Advances and installments 29,898 29,898 - Other debtors Prepaid expenses Total 135, ,711 1,117 Statements of debts Gross amount < 1 year > 1 year Convertible bond debentures Borrowings and debts with credit institutions 44,685 44,685 - Miscellaneous borrowings 69,095 69,095 - Trade creditors and related accounts 35,917 35,917 - Tax and social security liabilities 5,480 5,480 - Other debts 20,150 20,150 - Debts on fixed assets 2,604 2,604 - Deferred income 3,857 3,857 - Total 181, ,788 - Bank loans taken out during the year 10,000 Buy-back of OCEANE convertible bonds during the year 24,190 Bank loans repaid during the year 132,970 Amount of current account debts contracted - Note 7. Accrued receivables 03/31/ /31/2006 Credits receivable from suppliers 4,230 1,798 Income not yet billed 34,430 20,394 Interest receivable on current account 70 - Interest receivable Total 38,825 22,257 Note 8. Investment securities Type Name Number Average Gross value Closing Provision Net value purchase K price K K price ( ) Mutual fund UCITS liquidity contract 654 2, ,354 2, ,354 Mutual fund Etoile MONE EURIBOR , , , ,041 Open-ended investment trust CPR CASH SI , ,197 20, ,197 Mutual fund SGAM , , , ,256 Mutual fund SECURITE PLUS 8 241, , , ,931 Total 30,779-30,779

113 CORPORATE ACCOUNTS OF UBISOFT ENTERTAINMENT SA AS OF MARCH 31, Note 9. Bond redemption premium The initial amount of the OCEANE redemption premium recorded as assets was 16,380 thousand. This premium is amortized in proportion to accrued interest, i.e. 1,132 thousand at March 31, The settlement of the OCEANE on November 22, 2006 resulted in a write-back of the amortization of the redemption premium on the converted OCEANE, i.e. 2,387 thousand. 101 Note 10. Accrued expenses (adjustments accounts) As of 03/31/2006 As of 03/31/2007 Cumulative Increases Decreases Cumulative Prepaid expenses 2, , Costs of issuing debentures and OCEANE Deferred charges on syndicated loan Exchange conversion adjustments to assets Total 3, ,621 1,150 Note 11. Payables 03/31/ /31/2006 Interest on bond debentures Bank charges payable Total borrowings and financial debts 265 1,089 Trade payables, invoices pending 19,367 12,611 Credit notes to be issued 13,137 8,951 Tax and social security liabilities Total 33,519 23,256 Note 12. Items relating to affiliated companies 03/31/ /31/2006 Current assets Securities 239, ,290 Trade receivables 63,755 54,913 Other receivables 36,572 35,461 Debts Miscellaneous borrowings 69,095 32,442 Trade creditors and related accounts 25,163 26,934 Debts on fixed assets Financial income 3,147 1,777 Financial expenses 2,658 1,511

114 UBISOFT FINANCIAL REPORT 2007 Note 13. Provisions on the balance sheet As of 03/31/2006 FY FY As of 03/31/2007 provisions write-backs Provisions for risks For exchange risks Total Provisions for depreciation Of equity holdings , ,794 Of own shares Total , ,807 Total , ,130 Note 14. Equity Capital At March 31, 2007, Ubisoft Entertainment SA s capital consisted of 45,397,276 shares each with a face value of 0.155, i.e. 7,036, Number of Ubisoft Entertainment SA shares As of 01/04/06 19,434,336 Exercise of options 445,953 Conversions of OBSAR 69 Conversions of OCEANE 475,998 Exercise of subscription warrants 851,141 Group/company savings plan/ Equity issue reserved 46,691 Subtotal (before 2-for-1 stock split*) 21,254,188 Subtotal (after 2-for-1 stock split*) 42,508,376 Exercise of options 261,224 Exercice of BSAR 2,627,676 At 03/31/07 45,397,276 (*) On December 5, 2006, the Board of Directors decided to carry out a 2-for-1 split of Ubisoft s share effective December 11, Maximum number of shares that may be created by exercise of stock options: 3,020,002 Share subscription warrants Chief characteristics of the warrants for the purchase of existing shares and/or the subscription of new shares of May 14, 2003: Initial number of warrants: 17,540,082 (15 warrants entitle the holder to one share). Strike price: 28 Term: May 14, 2002 through May 14, Transactions completed during the fiscal year ended March 31, 2007: The option to exercise the share subscription warrants expired on May 14, During the fiscal year ended March 31, 2007, 851,141 shares with a face value of 0.31 were created following the exercise of 12,767,115 warrants.

115 CORPORATE ACCOUNTS OF UBISOFT ENTERTAINMENT SA AS OF MARCH 31, Stock options The increases in share capital and issue premiums during the past fiscal year were partly driven by the exercise of stock options. For the record, the exercise conditions of the stock option plans are as follows: th 6 th 7 th 8 th 9 th Plan Plan Plan Plan Plan Total number of shares allotted (**) 641,852 89, , ,362 18,440 Start date for exercising options 09/04/02 25/04/02 19/01/05 16/10/03 29/01/04 Expiration date for options 08/04/06 24/04/06 15/08/12 15/10/07 28/01/08 Option price (**) ,13 Options at 04/01/2006 (**) 153,870 13, , ,676 13,080 Options exercised during the fiscal year 100,950 12, , ,657 2,800 Options canceled during the fiscal year 52,920 1,772-16,130 - Options not yet exercised at March 31, , ,889 10, th 11 th 12 th 13 th Plan Plan Plan Plan Total number of shares allotted (**) 143, , ,100 1,355,892 Start date for exercising options 28/10/03 14/10/05 17/11/05 17/11/05 01/07/05 23/02/07 Expiration date for options 15/06/07* 13/10/14 16/11/14 16/11/14 15/06/09* 22/02/11 Option price (**) (France) (Italy) (USA) Options at 04/01/2006 (**) 52, , ,558 1,355,892 Options exercised during the fiscal year 41, ,204 99,320 48,782 Options canceled during the fiscal year 450 1,656 6,820 - Options not yet exercised at March 31, , , ,418 1,307,110 (*) Limitation of the exercise period approved by the Board of Directors on November 2, 2005 to ensure compliance with the maximum period allowed by US law. (**) As a result of the 2-for-1 stock split on December 11, 2006, the total number of shares allotted and the number of options at April 1, 2006 doubled and the price of the options was reduced by one-half. Own shares As of March 31, 2007, the company held 22,059 of its own shares. Note 15. Borrowings Borrowings break down as follows: 03/31/ /31/2006 Bond debentures - 147,162 OCEANE - 92,188 OBSAR - 54,974 Accrued interest 265 1,089 Foreign currency advances 6,508 5,432 Bank overdrafts 37,912 47,898 Borrowings 44, ,581 Fixed-rate debt 25 92,915 Variable-rate debt 44, ,666 < 1 year 1 to 5 years > 5 years Amounts payable at March 31, , Other borrowings, which total 69,095 thousand on the balance sheet, consist of current account advances made by subsidiaries to the parent company. These advances are due in less than one year.

116 UBISOFT FINANCIAL REPORT 2007 The breakdown of borrowings by currency is as follows: 03/31/ /31/2006 Euros 37, ,117 US dollars 18 - Pounds sterling Canadian dollars 7,093 5,436 Danish kroner Borrowings 44, ,581 Bond debentures: Bond debenture - Bonds convertible/exchangeable into new and/or existing shares (OCEANE) Chief characteristics of this bond debenture: Maximum amount: million Number: 3,150,000 bonds (as a result of the adjustment made in connection with the issue of warrants for the purchase of existing shares and/or the subscription of new shares in May 2003). One bond entitles its holder to subscribe for 1,037 shares. Nominal issue price: Dated date and settlement date: November 30, 2001 Bond term: Five years from settlement date. Expiration date: November 30, 2006 Annual yield: 2.5% per year, payable in arrears on November 30 of each year Gross redemption yield: 4.5% on the settlement date (if no conversion into and/or exchange for shares and no early redemption) Normal redemption: Redemption in full on November 30, 2006 at a price of 52.70, i.e % of face value. Transactions completed during the fiscal year ended March 31, 2007: The settlement date was November 22, During the fiscal year ended March 31, 2007, 475,998 shares with a face value of 0.31 were created following the conversion of 459,013 OCEANE, and 1,290,288 OCEANE were redeemed. OBSAR (bonds with redeemable share subscription warrants). Characteristics of the bonds: Number: 716,746 bonds Nominal issue price: Bond term: Five years from the settlement date. Nominal rate, yield: The bonds will bear interest at a variable rate payable quarterly in arrears. The annual nominal rate is based on the 3-month Euribor. Normal redemption: The bonds will be redeemed on one occasion on December 2, 2008 by redemption at par, i.e per bond. Characteristics of the BSAR (redeemable share subscription warrants): Number of BSAR: 1,433,492 BSAR (two BSAR are attached to each bond). Parity: One BSAR entitles its holder to subscribe for one new share with a face value of Strike price: Exercise period: The BSAR may be exercised between December 3, 2003 and December 2, 2008, subject to the provisions governing the early redemption of BSAR at the discretion of the issuer and the provisions concerning circumstances under which the exercise of BSAR may be suspended.

117 CORPORATE ACCOUNTS OF UBISOFT ENTERTAINMENT SA AS OF MARCH 31, Transactions completed during the fiscal year ended March 31, 2007: At its meeting of January 19, 2007, the Board of Directors voted in favor of the early redemption on February 26, 2007 of the outstanding BSAR and bonds, in accordance with the provisions of Articles and of securities note of November 14, 2003 approved by the Autorité des Marchés Financiers. The early redemption of the BSAR resulted in the redemption of the outstanding bonds. During the fiscal year ended March 31, 2007, following the exercise of 1,313,907 BSAR: 69 shares with a face value of 0.31 and 2,627,676 shares with a face value of were created. 105 Note 16. Other debts 03/31/ /31/2006 Other debts 20,150 17,710 These consist primarily of margin calls on the equity swap contract (cf. Note Off-balance-sheet commitments). Note 17. Accrued expenses (adjustments accounts) As of 03/31/2006 As of 03/31/2007 Cumulative Increases Decreases Cumulative Unearned income* 3, ,857 Exchange conversion adjustments to liabilities Total 4, ,918 (*) Corresponds to deferred sales Notes to the income statement Note 18. Sales The breakdown of sales by geographic area is as follows: 03/31/ /31/2006 K percentage K percentage Europe 115,051 43% 87,082 48% USA 133,280 50% 80,502 44% Canada 19,641 7% 14,384 8% Rest of the world - - Sales 267, ,968 Capitalized production costs 167, ,260 Total 435, ,228 Capitalized production costs as of March 31, 2007 totaled 167,218 thousand and corresponded to development costs subcontracted to subsidiaries. As of March 31, 2006, capitalized production costs totaled 132,260 thousand.

118 UBISOFT FINANCIAL REPORT 2007 Note 19. Other operating income and transfers of expenditures 03/31/ /31/2006 Write-back of depreciation and provisions Transfer of expenditures 15,779 13,097 Other current operating income 1, Total 17,223 13,495 Transfers of expenditures pertain mainly to the reinvoicing of group companies for overhead costs, travel, trade shows, and so on. Note 20. Other purchases and external charges 03/31/ /31/2006 Other purchases and external charges 240, ,725 Total 240, ,725 Other external charges consist mainly of advertising expenses, royalties and leasing of fixed assets and movables. At March 31, 2007, external charges included intra-group services totaling million. Production services subcontracted to subsidiaries represented 167,218 thousand as of March 31, 2007 and 132,260 thousand as of March 31, Note 21 Other operating expenses Other operating expenses break down as follows: 03/31/ /31/2006 Other operating expenses 192 2,632 Total 192 2,632 As of March 31, 2006, other operating expenses include the payment of a guarantee to Rubicon Inc, on the share subscription warrants price granted during a previous acquisition. Note 22 Amortization, depreciation and provisions Depreciation and provisions break down as follows: 03/31/ /31/2006 Depreciation of intangible assets 200, ,865 Depreciation of tangible assets Total 200, ,269

119 CORPORATE ACCOUNTS OF UBISOFT ENTERTAINMENT SA AS OF MARCH 31, Note 23 Net financial result The net financial result breaks down as follows: /31/ /31/2006 Financial income: Financial income from equity holdings 25,618 1,338 Income from other securities and receivables from fixed assets Other interest and related income 3,992 2,550 Write-back of provisions 2, Positiv exchange differences 8,842 8,089 Net proceeds from sales of investment securities 380 1,192 41,632 13,824 Financial expenses: Depreciation and provisions 23,019 2,906 Other interest and related expenses 7,923 7,551 Negativ exchange differences 10,399 15,620 41,341 26,077 Financial result ,253 Financial income from equity interests mainly include dividends received by Ubisoft Entertainment SA during the fiscal year. They break down as follows: - Ubisoft EMEA SAS: 25,000 thousand. - Other subsidiaries: 618 thousand. Foreign exchange risk In order to limit the group's foreign exchange risk, Ubisoft Entertainment SA hedges exchange rate fluctuations in several ways: - When the parent company makes a loan in a foreign currency to its subsidiaries, 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. - The distribution subsidiaries pay a royalty to the parent company as compensation for the development costs incurred by the latter. Moreover, Ubisoft EMEA SAS centralizes the purchases of finished products for the entire region and then resells them in local currencies to the subsidiaries. At the same time, Ubisoft Entertainment SA finances all the production studios around the world and most of the licensing and external development agreements. In this way, all of the foreign exchange risk is centralized at Ubisoft EMEA SAS and Ubisoft Entertainment SA. When foreign exchange risk exists with regard to a single currency in opposite directions (for example, royalties received and cost of a studio in the same currency), the group offsets this by using foreign currency advances or investments to manage the time lags. Amounts that cannot be offset are hedged by forward sales contracts and option contracts. At March 31, 2007, the hedged amounts resulting in purchases and sales of currencies was 16,090 thousand (cf. Note Off-balance-sheet commitments). Note 24. Extraordinary result Extraordinary result is income not related to the company s normal operations (French decree of 11/29/1983, Article 14). It breaks down as follows: 03/31/2007 Extraordinary income: Extraordinary income from management transactions 7,082 Extraordinary income from capital transactions 2 Extraordinary expenses: Extraordinary expenses from management transactions 143 Extraordinary expense rom capital transactions 109 Exceptional result 6,832 As of March 31, 2007, extraordinary result consisted mainly of the profit on the sale of 200,000 shares under the equity swap contract in the amount of 5,764 thousand.

120 UBISOFT FINANCIAL REPORT 2007 Note 25. Corporate tax As of March 31, 2007, the following companies belonged to the tax group: - Ubisoft Entertainment SA (head of the group) - Ubisoft France SAS - Ludi Factory SAS - Ubisoft Graphics SAS - Ubisoft EMEA SAS - Ubisoft Books and Records SAS - Ubisoft Organisation SAS - Ubisoft World SAS - Ubisoft Manufacturing & Administration SAS The tax savings arising from the use of losses at the tax group s member companies will only be temporary, since the company in question may use them at any time for its own purposes. The data for Ubisoft Entertainment SA, independent of the tax group, are as follows: 03/31/ /31/2006 Current result before tax 29,404-29,019 Extraordinary result 6,832 18,509 Result before tax 36,236-10,510 Corporate tax -89 2,303 Taxable result ,669 Corporate tax consists of the additional 2006 contribution ( 54 thousand) and the tax revenue from the subsidiaries ( 143 thousand). Under the tax integration scheme, after allocating the fiscal year result to prior year tax losses, the following remained: - Preintegration losses charged to Ubisoft Entertainment SA: 13.9 million. - Losses carried forward that were generated by the tax group: 32.7 million. The last tax inspection of Ubisoft Entertainment SA dates back to 2003 (for the period from April 1, 2000 to March 31, 2003) Other information Personnel As of March 31, 2007, the workforce consisted of five executive officers Financial commitments and other information 03/31/2007 Expiration 03/31/2006 Sureties and guarantees given 49,608 22,091 Debtor Type of guarantee Ubisoft Divertissements Inc. Loan repayment guarantee 2,603 09/30/2007 Red Storm Entertainment Inc. Lease payment guarantee /31/2009 Ubisoft Divertissement Inc. Lease payment guarantee 573 End of lease Ubisoft Inc. Guarantee of commercial commitments 2,252 End of commercial relationship Ubisoft Ltd Loan guarantee 20,000 12/29/2011 Ubisoft Ltd Lease payment guarantee 3,161 06/15/2016 Ubisoft Inc. Stand-by letter 2,253 09/30/2007 Ubisoft Inc. Stand-by letter 6,007 04/30/2007 Ubisoft EMEA SAS Stand-by letter 3,000 05/31/2007 Ubisoft EMEA SAS Stand-by letter 3,000 06/30/2007 Ubisoft EMEA SAS Stand-by letter 6,000 07/31/2007 Collateral for loans None None Foreign exchange hedges 16,090 82,238 Pounds sterling Forward sale 7,448 April 2007 Canadian Dollar Forward sale 8,642 September 2007 Notes receivable discounted None None

121 CORPORATE ACCOUNTS OF UBISOFT ENTERTAINMENT SA AS OF MARCH 31, / Equity swap contract: Under the terms of the transaction concluded with Calyon on September 30, 2003 and extended on February 28, 2006 for two years, Calyon will sell its shares at the end of the transaction on February 28, As a result of the 2-for-1 stock split, the contractual sale price was set at 9.33 (versus the original price of 18.66) and the number of shares increased to 1,836,274. Any fluctuations in the share price in relation to the sale price of 9.33 will be fully recognized by Ubisoft Entertainment SA (changes between the signature date of the contract and the expiration date are recorded in temporary accounts pending a final adjustment. Unrealized gains are not recorded in the income statement. A provision for risks and charges must be recorded for any unrealized gains). At March 31, 2007, unrealized gains totaled 39,095 thousand. During the fiscal year, 200,000 shares were sold under the equity swap contract, which reduced the number of shares to 1,436,274. In light of the shares sold (1,436,274 shares), the impact of a reduction in the sale price ( 9.33) of one euro would be 1,436 thousand. Calyon may transfer all or a portion of these shares in advance at Ubisoft Entertainment SA s request. 2/ Authorizations Short-term bilateral lines of credit amount to 93 million; they are unconfirmed and revocable with 30 days prior notice. A syndicated loan has been confirmed in the amount of 100 million; it was not in use as of March 31, The revolving loan in the amount of 10 million is confirmed but had not been used at March 31, / Other commitments - Since the personnel consists of officers of the company, no retirement benefits are owed. - Various products are marketed in accordance with licensing contracts signed by Ubisoft Entertainment SA. The commitments made by the company provide for the payment of guaranteed minimum royalties. At March 31, 2007, commitments made by virtue of this guaranteed minimum amounted to 37.8 million. - France's law of May 4, 2004 grants French employees an individual right to training. Under this law, employees may receive training at their initiative, with their employer's approval. Full-time employees acquire a right to between 20 and 21 hours of training each year, in accordance with the labor agreements applicable within each firm. The rights acquired annually may be accrued for up to six years. - During the next fiscal year, reductions in the calculation of income tax will be as follows (no increases have been identified): - Organic 118 thousand - Exchange rate fluctuations 868 thousand 986 thousand - Ubisoft Entertainment SA has pledged to provide financial support to its subsidiaries to meet their cash requirements Compensation of managers Ubisoft Entertainment SA paid 546 thousand to its corporate officers during the 2006/07 fiscal year in compensation. In only partial compensation for their work and the time spent in preparing for, and actively participating in, meetings of the Board, the General Meeting of September 25, 2006 authorized the company to pay directors fees totalling 250 thousand per year maximum. During the 2006 fiscal year the Members of the Board of Directors received 135 thousand in directors fees. Following the resignation of Ms. Yvette Guillemot on June 23, 2006, Mr. Marc Fiorentino was co-opted by the Board of Directors on July 10, This co-option was approved at the General Meeting of September 25, No obligation has been undertaken by the company in favour of its corporate officers related to their termination or change in employment, such as in the event of a takeover bid. No loans or advances were made to the company s managers as provided by Article L of the French Commercial Code. The members of the Board of Directors did not receive any stock options or share subscriptions during the fiscal year just ended Potential assets and liabilities - Deposition: The lawsuit which pended between the company and a licensee since October 2003 concerning breach of license agreement has been handed down in Ubisoft Entertainment SA favor. The total amount will be known in the next few months Events after closing of accounts - Acquisition: On April 6, 2007, acquisition of the Anno brand through the buyout of the German publisher Sunflowers Interactive Entertainment Software GmbH for 14.2 million. Through the transaction, Ubisoft will acquire a 30% stake in Related Designs Software GmbH, which developed Anno Ubisoft reinforces its position in the real-time strategy market. Anno, along with Ubisoft s The Settlers, is one of the most well known franchises in Germany. 109

122 UBISOFT FINANCIAL REPORT Subsidiaries and affiliated company (March 31, 2007) Country Currency Capital Reserves and amounts Percentage carried forward before of capital allocation of earnings held In thousands of In thousands of currency units currency units SUBSIDIARIES AT LEAST 50% OF CAPITAL HELD UBISOFT HOLDINGS INC. United States US dollar 90, % UBISOFT EMEA SARL France Euro 11,960 13, % UBISOFT FRANCE SAS France Euro 20,623-2, % UBISOFT GMBH Germany Euro 9,320 8, % UBISOFT DIVERTISSEMENTS INC. Canada Canadian dollar 1,000 17, % Total Currency Gross Net Loans and value value advances OTHER SUBSIDIARIES French subsidiaries Euro 3,125 3,125 - Foreign subsidiaries Euro 21,393 20,876 7,205 Subtotal 24,518 24,001 7,205 EQUITY INTERESTS BETWEEN 10 AND 50% OF CAPITAL HELD Equity interests in French companies Euro 27,344 27,344 - Subtotal 27,344 27,344 - GRAND TOTAL 51,862 51,345 7,205 Proposed allocation of earnings The Board of Directors proposes allocating the fiscal year earnings, which total 16 million forty-seven thousand four hundred and two euros ( 16,047,402) as follows: - 13,406,663 to settlement of the losses carried forward account ,186 to the legal reserve, bringing it to 10% of the legal minimum. - 2,442,553 to the Other Reserves account.

123 CORPORATE ACCOUNTS OF UBISOFT ENTERTAINMENT SA AS OF MARCH 31, Book value of Loans and advances Sales Net income Dividends securities held granted by the company excluding for last collected and not yet repaid tax complete year in thousands of euros In thousands of In thousands of In thousands of gross net currency units currency units currency units 96,991 96,991 18, none 55,158 55, ,431 6,758 25,000 22,872 22,872-71,319 1,390 none 12,573 12,573 1,772 56, none , , none 188, ,235 25,000

124 UBISOFT FINANCIAL REPORT General report on the fiscal year ending March 31, 2007 Dear Shareholders, Pursuant to the assignment entrusted to us by your General Meeting, we hereby present our report for the fiscal year ended March 31, 2007, with regard to the following: the audit of the annual financial statements of Ubisoft Entertainment S.A., as attached to this report; the basis for our assessment; the specific verifications and information required by law. The annual financial statements have been prepared by the Board of Directors. It is our task to express an opinion on these financial statements on the basis of our audit. I - Opinion regarding the annual financial statements We have conducted our audit in accordance with accepted professional standards in France. These standards require due diligence in order to ascertain with reasonable certainty that the annual financial statements contain no material anomalies. An audit consists in examining, on a test basis, evidence relevant to the information contained in the financial statements. It also involves assessing the accounting principles applied, the significant estimates made in preparing the financial statements and their overall presentation. It is our view that the audit we conducted forms a true and fair basis for the opinion expressed below. We hereby certify that, from the standpoint of French accounting rules and principles, the annual financial statements give a true and fair view of the results obtained for the fiscal year in question and of the company s financial position and assets at the end of this year. II - Basis for assessment Pursuant to the provisions of Article L of the French Commercial Code regarding the basis for an assessment, we call your attention to the following items: Securities The note relating to Financial assets in the section of the notes entitled Accounting rules and methods describes the accounting principles for the valuation and depreciation of securities. As part of our assessment of the accounting rules and principles applied by your company, we have verified the appropriateness of the accounting methods indicated above and of the information provided in the notes, and have ensured their correct application. Commercial software The note relating to Commercial software in the section of the notes entitled Accounting rules and methods describes the accounting principles for the recognition and amortization of commercial software. As part of our assessment of the accounting rules and principles applied by your company, we have verified the appropriateness of the accounting methods indicated above and of the information provided in the notes, and have ensured their correct application. Our assessments were made within the context of our audit of the annual financial statements as a whole, and therefore provided a basis for the opinion expressed in the first part of this report.

125 CORPORATE ACCOUNTS OF UBISOFT ENTERTAINMENT SA AS OF MARCH 31, III - Specific verifications and information In accordance with accepted professional standards in France, we have also carried out the specific verifications required by law. We have no comments regarding: the accuracy of the information provided in the management report prepared by the Board of Directors or in the documents sent to shareholders concerning the financial position and annual financial statements, or regarding the consistency of this information with the annual financial statements. the accuracy of the information provided in the management report regarding the compensation and benefits paid to the corporate officers in question and the commitments made in their favor at the time of the assumption, termination or change in employment or subsequent thereto. As required by law, we have ensured that the various information relating to acquisitions of equity holdings and control and to the identity of the holders of share capital was provided to you in the management report. Rennes, June 14, 2007 By the statutory auditors KPMG Audit A division of KPMG S.A. Laurent Prévost Partner Audit AMLD André Métayer Partner

126 UBISOFT FINANCIAL REPORT Special Auditors report fiscal year ended March 31, 2007 on regulated agreements Dear Shareholders: In our capacity as auditors of your company, we hereby present our report on regulated agreements and commitments. I - Agreements and commitments authorized during the fiscal year Pursuant to Article L of the French Commercial Code, we have been advised of the agreements and commitments for which prior authorization was granted by your Board of Directors in fiscal year 2006/07. It is not our responsibility to look for other agreements and commitments that may exist, but to inform you, on the basis of the information provided to us, of the basic features and terms of those of which we have been advised, without passing judgment on their usefulness and validity. According to the provisions of Article R of the French Commercial Code, it is your responsibility to assess whether it is in your interest to enter into these agreements and commitments before approving them. We have carried out our work in accordance with accepted professional standards in France. These standards require due diligence in order to ascertain that the information provided to us is consistent with the source documents from which it was derived. 1) Authorization to lease and construction permit Persons concerned: Messrs. Yves and Christian Guillemot, Directors Nature and purpose: On May 31, 2006, your Board of Directors authorized your company to guarantee commitments made by its subsidiary, Ubisoft Ltd., with Sun Life Pension Management Limited in connection with the lease of the premises located at Chertsey Gate, East London Street, Chertsey, Surrey, England, and the construction permit related to said premises. Terms: The surety bond issued by your company totaled 3,160,791 at March 31, ) Authorization related to commitments made by Ubisoft Entertainment SA for Ubisoft EMEA SARL and Ubisoft Inc. Persons concerned: Messrs. Yves, Michel, Christian, Gérard and Claude Guillemot, Directors Nature and purpose: On November 13, 2006, your Board of Directors authorized your company to guarantee commitments made by: Ubisoft Inc. with Nintendo of America Inc., Sony Disc Manufacturing and Microsoft Licensing Inc, companies formed under US law. Ubisoft EMEA SARL with Nintendo of Europe GmbH, a company formed under German law, Sony DADC Austria AG, a company formed under Austrian law, and Microsoft Licensing Inc., a company formed under US law. Terms: The limit of the guarantees was set at a combined total of 40,000,000 for both companies. The authorization is valid for 18 months.

127 CORPORATE ACCOUNTS OF UBISOFT ENTERTAINMENT SA AS OF MARCH 31, II - Agreements and commitments approved in previous fiscal years and remaining in force during the past fiscal year Moreover, pursuant to the French Commercial Code, we have been informed that the following agreements, approved during previous fiscal years, remained in force during the past fiscal year. 1) Brand licensing agreement with Gameloft SA Nature and purpose: Your company signed an exclusive licensing agreement for current and future brands with Gameloft S.A. for the development of interactive video games for telephone, fax and telecommunications devices, personal digital assistants (PDAs) and interactive television. Terms: The term of the agreement is 10 years starting on April 1, Royalties invoiced by your company for fiscal year 2006/07 totaled 637,340, excluding tax. Executed in Rennes on June 14, 2007 By the statutory auditors Audit AMLD André Métayer Partner KPMG Audit A division of KPMG S.A. Laurent Prévost Partner

128 UBISOFT FINANCIAL REPORT 2007

129 INFORMATION ON THE COMPANY information on the company 4.1 General information on the company Company name and registered office Legal status Applicable legislation Company founding date and term Trade and Companies Register Site for consultation of legal documents regarding the company Accounting period Additional information on the company Incorporating document and Articles of Association Corporate purpose (Article 3 of the Articles of Association) Statutory distribution of profits (Article 17 of the Articles of Association) General Meetings (Article 14 of the Articles of Association) Provision establishing the threshold over which shareholdings must be disclosed (Article 6 of the Articles of Association) Rights attached to shares (Articles 7 and 8 of the Articles of Association) Provision delaying a change in control Consent clause Provision governing changes in capital when said conditions are stricter than the law Amendment of the Articles of Association Share capital Subscribed capital Comparison between the number of outstanding shares on the start and end dates of the fiscal year Share buyback program Authorized unissued capital Convertible securities, exchangeable securities and securities with share subscription warrants Share subscription warrants Employee stock ownership under the Company Mutual Fund (hereafter FCPE ) Securities not representing capital Right to acquire or obligation attached to subscribed capital not yet paid up Option or unconditional agreement on a member of the group Identification of shareholders Market in which the company s stock is traded Dividends Establishment providing securities services Main shareholders Changes in the distribution of capital during the last three fiscal years Distribution of capital and voting rights as of April 30, Shareholders agreement 130

130 UBISOFT FINANCIAL REPORT General information on the company Company name and registered office Trade and Companies Register The company name is Ubisoft Entertainment. The company s registered office is located at 107 Avenue Henri Fréville, BP 10704, Rennes, France (35207 Cedex 2) Legal status A limited liability Company (société anonyme) with a Board of Directors, governed by the French Commercial Code Applicable legislation The company is subject to French law Company founding date and term The company is registered with the Trade and Companies Register of Rennes under No APE code: 722 A Site for consultation of legal documents regarding the company The Articles of Association, financial statements and reports, and minutes of General Meetings may be consulted at the business address (28 Rue Armand Carrel, Montreuil sous Bois) or at the registered office Accounting period The 12-month accounting period begins on April 1 and ends on March 31 of each year. The company was founded on March 28, 1986 for a term of 99 years, unless it is extended or dissolved at an earlier date Additional information on the company Incorporating document and Articles of Association Corporate purpose (Article 3 of the Articles of Association) Ubisoft Entertainment SA s purpose in France and abroad, whether direct or indirect, is as follows: - the creation, publishing and distribution of all types of multimedia, audiovisual and computer products, especially video games, educational and cultural software, cartoons and literary, cinematographic and televisual works on any platform, current or future; - the distribution of all types of multimedia and audiovisual products, especially through new communication technologies such as networks and online services; - the purchase, sale and trading in general, in all forms, including both import and export, through rental or otherwise, of any computer and word-processing equipment along with their accessories, as well as any equipment or products for reproducing sound and pictures; - the marketing and management of all data processing and word or text processing computer programs; - consulting, support and training related to any of the above areas;

131 INFORMATION ON THE COMPANY 4 - the company s participation in any operations that may be related to its corporate purpose through the creation of new companies, the subscription or purchase of shares or ownership interests, mergers or other means ; - and, in general, operations of any kind related directly or indirectly to the above corporate purpose or any similar or related purpose likely to promote the company s growth Statutory distribution of profits (Article 17 of the Articles of Association) The proceeds from the fiscal year, minus operating expenses, depreciation and provisions, constitute the income. The following sums are deducted from the fiscal year income, minus any losses carried forward from previous years, where applicable: - the sums added to reserves as required by law or by the Articles of Association and, in particular, at least 5% to form the legal reserve fund. This deduction ceases to be compulsory when said fund reaches an amount equal to 1/10 th of the share capital. If, for any reason, the legal reserve falls below this percentage, the deduction is again made, - any sums that the General Meeting, on the recommendation of the Board of Directors, deems necessary to allocate to any extraordinary or special reserve or to carry forward. The balance is distributed to shareholders. However, except in case of a reduction in capital, no distribution may be made to shareholders if, following this distribution, the equity is or would be less than the amount of capital plus reserves which, by law or according to the Articles of Association, may not be distributed. The General Meeting may, in accordance with the provisions of Article L of the French Commercial Code, grant each shareholder the option of receiving all or part of the dividend distributed or the interim dividends in cash or in shares General Meetings (Article 14 of the Articles of Association) General Meetings comprise all the shareholders of Ubisoft Entertainment SA, with the exception of the company itself. They represent the totality of shareholders. They are called and deliberate under the conditions stipulated by the French Commercial Code. General Meetings are held at the registered office or at any other place specified in the notice of meeting. They are chaired by the Chairman of the Board of Directors or, in his absence, by a director appointed for this purpose by the General Meeting. All shareholders have the right, upon proof of identity, to take part in General Meetings by attending in person, by appointing a proxy or by absentee voting, including by electronic means, subject to the following conditions: - holders of registered shares or voting certificates must be listed in the company s share register under their own name, - for holders of bearer shares, a certificate issued by an authorized agent certifying that said listed shares are not transferable up to the meeting date must be filed at the place indicated in the notice of meeting. These formalities must be completed prior to a date set by the Board of Directors in the meeting notice, which may not be more than five (5) days prior to the meeting date. However, any shareholder who has requested an admission card or already voted by absentee ballot (by mail or electronically) or has granted a proxy by presenting a shareholding certificate issued by the custodian of the shares may dispose of any or all of the shares for which the vote or proxy was sent, provided that the shareholder sends to the agent authorized by the company, by no later than 3:00 p.m. (Paris time) of the day before the meeting, the information needed to cancel his vote or proxy or to change the number of shares and corresponding votes. The deadline for returning absentee voting ballots and proxies is set by the Board of Directors and announced in the notice of meeting published in the Bulletin of Mandatory Legal Notices. The Board of Directors may decide that the vote taking place during the meeting may be cast remotely under the conditions set out in the applicable regulations Provision establishing the threshold over which shareholdings must be disclosed (Article 6 of the Articles of Association) Any shareholder acting alone or in concert, without prejudice to the thresholds defined in Article L of the French Commercial Code, who comes to hold, directly or indirectly, at least 4% of the company s capital or voting rights, or a multiple thereof up to and including 28%, must inform the company, by registered letter with acknowledgment of receipt sent to its registered office and within the period stipulated in Article L of the French Commercial Code, of the total number of shares, voting rights and securities granting future access to the company s capital that said shareholder holds directly, indirectly or in concert. The notification referred to in the preceding paragraph for exceeding the threshold by a multiple of 4% of the capital or voting rights also applies if the share of capital or voting rights falls below any of the aforementioned thresholds. Failure to declare the attainment of the statutory thresholds shall result in the loss of voting rights under the conditions set forth in Article L of the French Commercial Code, at the request, recorded in the minutes of the General Meeting, of one or more shareholders who together hold at least 5% of the company s capital or voting rights Rights attached to shares (Articles 7 and 8 of the Articles of Association) Each share shall give a right to ownership of the corporate assets and the liquidating dividend equal to the proportion of the share capital that it represents. Whenever it is necessary to own several shares in order to exercise a right of any kind, such as in the case of a share-forshare exchange or a consolidation or allotment of shares, or following an equity issue or reduction in capital, regardless of the terms and conditions thereof, a merger or any other operation, the owners of fewer shares than the number required may exercise their rights only if they take it upon 119

132 UBISOFT FINANCIAL REPORT 2007 themselves to pool their shares and, if necessary, to purchase or sell the number of shares or rights forming the odd lot needed. Voting rights double those conferred on other shares, based on the proportion of the share capital they represent, shall be attributed to all fully paid-up shares that are proved to have been registered for at least two years in the name of the same shareholder. In the event of an equity issue by the capitalization of reserves, profits or issue premiums, this right is also conferred at the time of issue on registered shares allotted free of charge to a shareholder in exchange for old shares for which this right was enjoyed. It should be noted that Article L of the French Commercial Code stipulates that double voting rights are automatically revoked for shares which are converted to bearer shares or for which ownership is transferred, with the exception of transfer of ownership between registration accounts resulting from succession, inter-family gifts or liquidation of communal property Provision delaying a change in control None Consent clause None Provision governing changes in capital when said conditions are stricter than the law None Amendment of the Articles of Association The Articles of Association may be amended based on a decision by the Extraordinary General Meeting Share capital Subscribed capital As of March 31, 2007, the share capital was 7,036, representing 45,397,276 shares. At its meeting on December 5, 2006, the Board of Directors decided, pursuant to powers delegated by the Extraordinary General Meeting of September 25, 2006, first, to make a 2-for-1 split in the nominal value of each share with effect from December 11, 2006, and second, to delete the reference in the Articles of Association to the nominal value of a share Comparison between the number of outstanding shares on the start and end dates of the fiscal year As of ,434,336 Exercised options 445,953 Bond conversions 69 OCEANE conversions 475,998 Subscription conversions 851,141 PEG-PEE/Increase in capital reserves 46,691 Subtotal (before 2-for-1 split in nominal value*) 21,254,188 Subtotal (after 2-for-1 split in nominal value*) 42,508,376 Exercised options 261,224 Exercise of BSAR 2,627,676 As of ,397,276 * On December 5, 2006, the Board of Directors of Ubisoft decided to make a 2-for-1 split in the nominal value of a Ubisoft share with effect from December 11, Share buyback program Authorizations Legal framework The Ordinary General Meeting of September 25, 2006, in Resolution Seven, authorized the Board of Directors to launch a share buyback program pursuant to Article L of the French Commercial Code. Features of the Share Buyback Program The Share Buyback Program was adopted for a period of 18 months from the date of the meeting, ie. until March Pursuant to that authorization, the maximum price was fixed at 35 euros (following the halving of the share value) and the number of shares available to be acquired under the Share buyback Program was fixed at 10% of the capital at the date of the meeting. The various objectives of the Share Buyback Program are defined as follows, in conformity with the applicable laws and the market practices accepted by the French Stock Exchange Commission (AMF): - The completion of sales or purchases of shares as part of a liquidity contract made with an investment service provider, in accordance with a code of professional ethics recognized by the AMF. - The delivery of shares in connection with the exercise of rights attached to securities granting entitlement by any means, either immediately or subsequently, to the company s capital. - The allotment of shares to employees and corporate officers of the Ubisoft Entertainment group, including as part of (i) a company gainsharing plan, (ii) any employee stock purchase plan or stock allotment plan under the conditions established by law, and specifically by Articles L & seq. of the French Labor Code, or (iii) any stock option plan for the benefit of some or all employees or corporate officers.

133 INFORMATION ON THE COMPANY 4 - The retention of shares for delivery at a later date in exchange or as payment for future external growth operations up to the limit of 5% of the existing capital. - The cancellation of shares. - The implementation of any practice that may be recognized by law or by the AMF. Pursuant to Article of the General Rules of the AMF as referred to in Article of the General rules of the AMF, a summary of the share buyback program was published online on the company s website and on the website of the AMF Liquidity contracts The company awarded a liquidity contract to Exane BNP PARIBAS, which adheres to the AFEI code of ethics recognized by the AMF, with effect from January 2, 2006 for a term of one year renewable by tacit agreement. The company allocated a sum of 1,500,000 to implement this contract during the fiscal year just ended Situation as of March 31, 2007 Percentage of capital held directly and indirectly 0.049% Number of shares cancelled in the last 24 months Number of shares held in the portfolio (a) 22,059 Book value of the portfolio 795, Market value of the portfolio (b) 806,256 (a) All shares were acquired under the liquidity contract made with Exane BNP PARIBAS. (b) closing price at March 31, 2007: NONE Authorized unissued capital Status of current authorizations to the Board of Directors to increase the capital showing their use during the fiscal year ended on March 31, 2007 Type of authorization Meeting date Term - Expiration Authorized amounts Use of the authorization during the fiscal year Authorization granted to the Board of Directors to issue shares to employees in connection with the company savings scheme September 25, 2006 Resolution 9 26 months (November 24, 2008) 1% of the amount of the share capital as of the date the authorization used 1 by the Board of Directors NONE Authorization granted to the Board of Directors to grant employees options giving a right to new shares and/or stock options September 25, 2006 Resolution months (November 24, 2009) 3.5% of the number of shares existing as of the date the authorization used NONE Delegation of authority to the Board of Directors to proceed with an equity issue reserved for employees of company subsidiaries headquartered outside France September 25, 2006 Resolution months (March 24, 2008) 1% of the amount of the share capital as of the date of the decision by the Board of Directors 1 NONE 2 Authorization granted to the Board of Directors to issue ordinary shares and securities as compensation for contributions in kind made to the company and consisting of equity and/or investment securities granting entitlement to the capital September 25, 2006 Resolution months (November 24, 2008) 10% of the company s capital as of the date of the meeting (4,120, 471 shares) NONE General authorization granted to the Board of Directors to carry out equity issues with preemptive rights September 25, 2006 Resolution months (November 24, 2008) Total face value of the shares or securities that can be issued: 2,000,000 3 Face value of the debt securities that can be issued: 100,000,000 NONE General authorization granted to the Board of Directors to carry out equity issues without preemptive rights September 25, 2006 Resolution months (November 24, 2008) Total face value of the shares or securities that can be issued: 2,000,000 3 Face value of the debt securities that can be issued: 100,000,000 NONE (1) Charging to the overall ceiling of 2,000,000 fixed by the General Meeting of September 25, 2006 (Resolution 14) authorizing equity issues without pre-emptive rights (2) On August 31, 2006 the Board of Directors, pursuant to the similar authorization voted by the General Meeting of September 21, 2005 (superseded by the authorization voted by the General Meeting in its Resolution 11) decided to issue equity with a nominal amount of 7, (3) Charging to the overall ceiling of 4,000,000 fixed by the General Meeting of September 25, 2006 (Resolution 15)

134 UBISOFT FINANCIAL REPORT 2007 Use made by the Board of Directors since the closing of the fiscal year ended on March 31, 2007 Nature of authorization Meeting date Resolution Term - Expiration Authorized amounts Implemented in financial year Authorization granted to the Board of Directors to issue shares to employees in connection with the company savings scheme Authorization granted to the Board of Directors to grant employees options giving a right to new shares and/or stock options September 25, 2006 Resolution 9 September 25, 2006 Resolution months (November 24, 2008) 38 months (November 24, 2009) 1% of the amount of the share capital as of the date authorization used 3.5% of the number of shares existing as of the date authorization used by the Board of Directors At its meeting of April 26, 2007, the Board of Directors approved a capital increase in the maximum amount of 70, ,588,904 share subscription options granted by the Board of Directors on April 26, Convertible securities, exchangeable securities and securities with share subscription warrants At its meeting on December 5, 2006 the Board of Directors decided, pursuant to the authorization granted by the Extraordinary General Meeting of September 25, 2006, first, to make a 2-for-1 split in the nominal value of a share with effect from December 11, 2006, and second, to delete the reference to the nominal share value in the Articles of Association. Potential capital The number of options open but not exercised as of March 31, 2007 was 3,020,002. If all these options were to be exercised, the capital of Ubisoft Entertainment SA would increase as follows: Potential capital (6.24% dilution) Number of shares as of ,397,276 Capital as of ,036, Options to subscribe as of ,020,002 Potential increase 468, Potential shares as of ,417,278 Potential capital as of ,504, Bond Debentures- Bonds with the option of conversion into and/or exchange for new or existing shares of the company (OCEANE) Chief characteristics of this bond debenture: Total maximum amount: M Number: 3,150,000 bonds (as a result of the adjustment made in connection with the issue of warrants for the purchase of existing shares and/or the subscription of new shares in May 2003) one bond entitles its holder to subscribe for shares. Nominal issue price: Dated date and settlement date: November 30, Term of bond: Five years from settlement date. Annual yield: 2.5% per year, payable in arrears on November 30 of each year. Gross redemption yield: 4.5% on the settlement date (if no conversion into and/or exchange for shares and no early redemption). Normal redemption: Redemption in full on November 30, 2006 at a price of 52.70, i.e % of face value. Bonds exercised during the fiscal year ended March 31, 2007: The closing date was November 22, During the fiscal year ended on March 31, 2007, 475,998 shares with a nominal value of 0.31 were created following the conversion of 459,013 OCEANE, and 1,290,288 OCEANE were redeemed.

135 INFORMATION ON THE COMPANY 4 Issue and allocation, free of charge, of warrants for the purchase of existing shares and/or the subscription of new shares to all shareholders on May 14, 2003 (BSA). Chief characteristics of the warrants for the purchase of existing shares and/or the subscription of new shares of May 14, 2003: Initial number of warrants: 17,540,082 (15 BSA entitle the holder to one share). Strike price: 28. Term: May 14, 2002 to May 14, 2006, inclusive. Warrants exercised during the fiscal year ended on March 31, 2007: The closing date for exercise of BSA was May 14, During the fiscal year ended on March 31, 2007, 851,141 shares with a nominal value of 0.31 were created following the exercise of 12,767,115 BSA. 123 OBSAR bonds (bonds with redeemable share subscription warrants). Characteristics of the bonds: Number: 716,746 bonds. Nominal issue price: Term of bond: Five years from the settlement date. Nominal rate, yield The bonds will bear interest at a variable rate payable quarterly in arrears. The annual nominal rate is based on the 3-month Euribor. Normal redemption: The bonds will be redeemed on one occasion on December 2, 2008 by redemption at par, i.e per bond. Characteristics of the BSAR (redeemable share subscription warrants): Number of BSAR: 1,433,492 BSAR (two BSAR are attached to each bond). Parity: 1 BSAR entitles the holder to subscribe for one new share with a nominal value of Strike price: Exercise period: The BSAR may be exercised between December 3, 2003 and December 2, 2008, subject to the provisions governing the early redemption of BSAR at the discretion of the issuer and the provisions concerning circumstances under which the exercise of BSAR may be suspended. Warrants exercised during the fiscal year ended on March 31, 2007: At its meeting of 19 January 2007, the Board of Directors decided that the BSAR and bonds in circulation would be subject to early redemption on February 26, 2007, in accordance with Articles and of Operational notice dated November 14, 2003 by the AMF. The early redemption of the BSAR led to the redemption of the bonds in circulation. During the fiscal year ended on March 31, 2007, following the exercise of 1,313,907 BSAR, 69 shares with a nominal value of 0.31 and 2,627,676 shares with a nominal value of were created.

136 UBISOFT FINANCIAL REPORT Share subscription warrants Meeting date Plan number Date of Board of Total number of No. of options Start date for Directors meeting options granted granted to exercising options (1) corporate officers , , , , , , , ,100 0 (France, Italy) (United States) ,355, (1) Nominal value was subject to 2-for-1 split with effect from December 11, 2006 (2) Period for exercise limited by decision of the Board of Directors on November 2, 2005 to bring it into compliance with the maximum allowed by US law. Stock options granted to the 10 non-officer employees receiving the most options, and options exercised by them Number Weighted average price Plan no. and expiration date Options granted during the fiscal year by the issuer and any company authorized to grant the issuer s options having the largest number of options thus granted (global information) - - Options held against the issuer and the aforementioned companies exercised during the fiscal year by the 10 employees having the largest number of shares thus subscribed for (global information) 443, Plan no. 5 Expiration Plan no. 7 Expiration Plan no 8 Expiration Plan no. 10 Expiration Plan no. 11 Expiration Plan no. 12 Expiration No stock options were granted or exercised by the corporate officers of the firm during the fiscal year.

137 INFORMATION ON THE COMPANY 4 Expiration Terms and conditions Strike Number of options (1) date of exercise Price Exercised during Cancelled during Outstanding (1) the year the year as of 03/31/ %/year ,950 52, %/year ,000 1, % on 01/19/ , ,855 75% on 08/16/05 100% on 08/16/ %/year ,657 16, , %/year , , (2) 25%/year , , % at the end ,204 1, ,824 of 1 year then 2% per month (France, Italy) (France, Italy) ,320 6, , % at the end (France) of 1 year 7.74 then 2% per month (Italy) (United States) (2) (United States) % then by lots (US) of 12 at 13% every 6 months % per year , ,307,110 after Employee stock ownership under the Company Mutual Fund (hereafter FCPE ) As of March 31, 2006, employees held 419,416 shares (0.924% of share capital) through the Ubi Actions FCPE. The extraordinary portion of the Combined General Meeting of September 25, 2006 authorized the Board of Directors to proceed, on its own initiative, with an equity issue reserved for French employees, up to a limit of 1% of the total shares comprising the share capital at the time of use of the authorization by the Board of Directors, specifically by means of an FCPE. The Board of Directors did not use this authorization during the financial year ended on March 31, Securities not representing capital None Right to acquire or obligation attached to subscribed capital not yet paid up None Option or unconditional agreement on a member of the group None Identification of shareholders Article 5 of the Articles of Association authorizes the company to implement a procedure for identifying shareholders.

138 UBISOFT FINANCIAL REPORT 2007 Growth in the company s capital over the last three fiscal years Date Type of operation Number of Amount of Issue Share Total Total share shares issued equity issue premium face number of capital by cash value shares contribution Before the 2-for-1 split with effect from December 11, 2006 (Board of Directors meeting of December 5, 2006) Equity issue on 22, , , ,582,304 5,450, through exercised options Equity issue 101,089 1,381, ,349, ,683,393 5,481, on following the exercise of options and subscription of the Ubi Actions FCPE Equity issue on 357,557 5,142, ,032, ,040,950 5,592, through exercised options, conversion of securities and subscription of the Ubi Actions FCPE Equity issue as 3,890 37,788 34, ,044,840 5,593, of following the exercise of options Equity issue as 1,017,129 31,406, ,091, ,061,969 5,909, of through exercised options and conversions of BSA, BSAR and 3.8% convertible bond Equity issue as 372,367 9,650, ,534, ,434,336 6,024, of following exercises of options and conversions of BSA, BSAR and 3.8% convertible bond Equity issue as 1,114,634 29,814, ,459, ,578,970 6,379, of following the equity issue reserved for US employees, exercises of options and conversions of BSA, BSAR and subscription of Ubi Actions FCPE Equity issue as 675,218 24,100, ,891, ,254,188 6,588, of following conversions of OCEANE and exercises of options After the 2-for1 split with effect from December 11, 2006 (Board of Directors meeting of December 5, 2006) Equity issue as 2,889,900 52,444, ,996, ,397,276 7,036, of following exercises of options and conversions of BSA and BSAR

139 INFORMATION ON THE COMPANY Market in which the company s stock is traded Ubisoft share fact sheet ISIN code FR Listing market Euronext - Paris - Eurolist - Segment B Par value Number of outstanding shares as of 03/31/07 45,397,976 Closing price as of 03/31/ Market capitalization as of 03/31/07 1,659,296, Initial listing price on July 1, (before the 5-for-1 stock split on January 11, 2000 and the 2-for-1 split on December 11, 2006) 127 Month Highest price* Lowest price* Trading volume* (in euros) (in euros) (in shares) June ,575,552 July ,241,458 August ,762,672 September ,150,868 October ,215,438 November ,928,868 December ,253,618 January ,725,914 February ,798,250 March ,863,364 April ,218,042 May ,540,384 June ,586,322 July ,160,776 August ,192,550 September ,050,842 October ,666,466 November ,745,352 December ,138,953 January ,062,659 February ,310,927 March ,078,429 April ,201,874 May 2007 * 2-for-1 split with effect from December 11, 2006 (Source Euronext) Dividends The company has not distributed dividends during the last three fiscal years and currently does not plan to distribute dividends in the short or medium term Establishment providing securities services BNP PARIBAS Securities Services Issuers Department Immeuble Tolbiac Paris Cedex 09, France

140 UBISOFT FINANCIAL REPORT Main shareholders Changes in the distribution of capital during the last three fiscal years As of (*) Capital Voting rights Number of shares % Number of voting rights % Guillemot Brothers SA 3,851, % 5,671, % Claude Guillemot 328, % 506, % Yves Guillemot 328, % 506, % Michel Guillemot 350, % 528, % Gérard Guillemot 306, % 483, % Christian Guillemot 249, % 403, % Other members of the Guillemot family 71, % 73, % Guillemot Corporation SA 400, % 400, % Guillemot Suisse SA 76, % 76, % In Concert 5,962, % % Ubisoft Entertainment SA 5, % - - Public and Group employees 30,120, % 30,277, % Total 36,089,80 100% 38,926, % As of (*) Capital Voting rights Number of shares % Number of voting rights % Guillemot Brothers SA 3,848, % 5,846, % Claude Guillemot 328, % 611, % Yves Guillemot 328, % 612, % Michel Guillemot 317, % 539, % Gérard Guillemot 306, % 566, % Christian Guillemot 249, % 452, % Other members of the Guillemot family 71, % 105, % Guillemot Corporation SA 400, % 400, % Guillemot Suisse SA 76, % 76, % In Concert 5,927, % % Ubisoft Entertainment SA 41, % - - Public and Group employees 32,900, % 33,003, % Total 38,868, % 42,214, % As of Capital Voting rights Number of shares % Number of voting rights % Guillemot Brothers SA 3, % 5,814, % Claude Guillemot 328, % 611, % Yves Guillemot 404, % 688, % Michel Guillemot 321, % 543, % Gérard Guillemot 266, % 526, % Christian Guillemot 249, % 452, % Other members of the Guillemot family 77, % 110, % Guillemot Corporation SA 543, % 543, % Guillemot Suisse SA 81, % 81, % In Concert 6,089, % 9,372, % Ubisoft Entertainment SA 22, % - - Public and Group employees 39,285, % 39,377, % Total 45,397, % 48,749, % The group, consisting of Guillemot Brothers SA, Guillemot Suisse SA, Guillemot Corporation SA and the Guillemot family, held 3,283,166 double voting rights as of March 31, (*) 2-for-1 split with effect from December

141 INFORMATION ON THE COMPANY Distribution of capital and voting rights as of April 30, 2007 Capital Voting rights 129 Number of shares % Number of voting rights % Guillemot Brothers SA( 1) 3,859, % 5,857, % Claude Guillemot 342, % 625, % Yves Guillemot 418, % 701, % Michel Guillemot 335, % 557, % Gérard Guillemot 279, % 540, % Christian Guillemot 263, % 466, % Other members of the Guillemot family 77, % 110, % Guillemot Corporation SA 431, % 431, % Guillemot Suisse SA 81, % 81, % In Concert 6,089, % 9,372, % Ubisoft Entertainment SA 24, % - - Public and Group employees 39,298, % 39,390, % Total 45,412, % 48,762, % (1) Company 100% owned by the Guillemot family Shareholders holding more than 5% of the capital of the company as of March 31, 2007 (2) Name of shareholder % capital % voting rights Electronic Arts Inc % % FMR Corp and Fidelity International Limited (FIL) (3) % 9.555% (2) Information based on statements made to the company (3) Acting on behalf of mutual funds managed by their subsidiaries The US Company Electronic Arts Inc, holder as of March 31, 2006 of 17.99% of the capital and 16.56% of voting rights in the company, informed the company on November 9, 2006 that following the publication by the company on September 21, 2006 of the number of shares and voting rights, it had fallen below the 16% threshold for voting rights and held as of that date 16.95% of the capital and 15.97% of the voting rights. FMR Corp and Fidelity International Limited (FIL), acting on behalf of the mutual funds managed by their subsidiaries, informed the AMF that as a result of share acquisitions - on May 16, 2006 they had exceeded the 5% capital threshold and held, as of that date, 5.04% of the capital and 4.55% of the voting rights, - on May 18, 2006 they had exceeded the 5% voting rights threshold and held, as of that date, 5.57% of the capital and 5.04% of the voting rights - on October 10, 2006 they had exceeded the 10% capital threshold and held, as of that date, 10.60% of the capital and 9.80% of voting rights, - on October 11, 2006, they had exceeded the 10% voting rights threshold of Ubisoft entertainment, and held, as of that date, 11.13% of the capital and 10.29% of the voting rights. In addition to their declaration of exceeding the 10% capital threshold, and pursuant to Article L of the French Commercial Code, FMR Corp and Fidelity International Limited (FIL) made the following declaration of intent: FMR Corp and Fidelity International Limited (FIL) make the present notification on behalf of their mutual funds and management companies. The acquisitions were made for portfolio investment purposes. FMR Corp and Fidelity International Limited (FIL) may in future, depending on market conditions, make further acquisitions or sell shares in Ubisoft Entertainment SA. FMR Corp and Fidelity International Limited (FIL) do not intend to acquire shares or voting rights in Ubisoft Entertainment SA in order to take control thereof or be represented on its Board of Directors. FMR Corp and Fidelity International Limited (FIL), acting on behalf of the mutual funds managed by their subsidiaries, informed the AMF that - on November 22, 2006 they had fallen below the 10% voting rights threshold and held, as of that date, 10.64% of the capital and 9.84% of voting rights as a result of the sale of shares, - on November 27, 2006 they had fallen below the 10% capital threshold and held, as of that date, 9.79% of the capital and 9.07% following the increase in the company s capital.

142 UBISOFT FINANCIAL REPORT 2007 FMR Corp and Fidelity International Limited (FIL), acting on behalf of the mutual finds managed by their subsidiaries, informed the AMF that following share acquisitions, they had exceeded the threshold of 10% for capital on February 28, 2007, and the 10% threshold for voting rights on March 1, 2007, and held, as of then, 10.92% of the capital and 10.12% of voting rights. In addition to their declaration of exceeding the thresholds, and pursuant to Article L of the French Commercial Code, FMR Corp and Fidelity International Limited (FIL) made a declaration of intent in similar terms to that of October 2006 referred to above. Following a change to the number of shares in the company s capital, the Caisse des Dépôts et Consignations (CDC), which as of March 31, 2006 held 5.08% of the capital of the company, fell below the threshold of 5% of the capital on September 14, 2006, holding as of that date 4.74% of the capital and 4.39% of voting rights. Following a change to the number of voting rights in the company, the Caisse des Dépôts et Consignations (CDC) informed the company by letter of December 8, 2006, that it had on December 8, 2006, fallen below the threshold in the Articles of 4% of the voting rights in the company, and held as of that date 4.30% of the capital and 3.98% of the voting rights. As of March 31, 2007, the Caisse des Dépôts et Consignations (CDC) held 4.018% of the capital and 3.742% of the voting rights in the company. Morgan Stanley & Co. International Ltd. stated that it had: - on July 31, 2006 exceeded and on August 1, 2006 fallen below the 5% threshold of capital in the company, and held 5.26% of the capital as of July 31, 2006 and 4.52% of the capital as of August 1, 2006; - on September 4, 2006 exceeded and on September 5, 2006 fallen below the 5% threshold of capital in the company, and held 5.27% of the capital as of September 4, 2006 and 4.06% of the capital as of September 5, As of March 31, 2007, Morgan Stanley & Co. International Ltd held 3.478% of the capital and 3.239% of the voting rights in the company. Guillemot Brothers SA informed the company that it had: - fallen below the 10% capital threshold on April 21, 2006, following an equity issue, and as of that date held 9.902% of the capital and % of the voting rights; - fallen below the 12% threshold in the Articles of voting rights in the company on March 16, 2007, following the sale of shares, and as of that date held 8.474% of the capital and % of the voting rights; - on April 17, 2007, following the repayment in Ubisoft Entertainment shares of the debt to it on the books of Guillemot corporation, exceeded the 12% threshold in the Articles for voting rights and as of that date it held 8.502% of the capital and % of voting rights. As of March 31, 2007, Guillemot Brothers held 8.408% of the capital and % of the voting rights. The group (consisting of Guillemot Brothers SA, Guillemot Suisse SA, Guillemot Corporation SA and the Guillemot family) informed the AMF that: - October 18, 2006 it had fallen below the 15% capital threshold and held as of that date % of the capital and % of voting rights, - March 14, 2007, following the monthly publication of the number of shares and voting rights in the company, it had fallen below the 20% voting rights threshold, and held as of that date % of the capital and % of voting rights. As of March 31, 2007, the group held % of the capital and % of the voting rights Shareholders agreement To the company s knowledge, there is no declared or undeclared shareholders agreement concerning Ubisoft shares.

143 CORPORATE GOVERNANCE Corporate governance 5.1 Members of the group's Board of Directors and management Rules applicable to the appointment and replacement of the members of the Board of Directors Functioning of the Board of Directors Absence of fraud conviction, association with a bankruptcy or public incrimination and/or sanction Loans and guarantees granted to members of the Board of Directors Other offices held by the Directors Offices held as of March 31, Expired terms (last five fiscal years) Compensation of managers Compensation of managers and members of the Board of Directors Stock option and share subscription plan Services contract with the issuer and its subsidiaries Operations referred to in Article L of the French Monetary and Financial Code and Article of the AMF s internal regulations 141

144 UBISOFT FINANCIAL REPORT Members of the group's Board of Directors and management Name Date of birth Date of hiring Expiration Number Job title 1 date of Ordinary of shares Meeting closing books as of Yves Guillemot ,608 Director Chief Executive Officer Claude Guillemot ,926 Director Executive Vice President Operations Michel Guillemot ,796 Director Executive Vice President Strategy and Finance Gérard Guillemot ,214 Director Executive Vice President Publishing and Marketing Christian Guillemot ,394 Director Executive Vice President Administration Marc Fiorentino Administrateur 1 The functions and powers each of these directors carries out in each company are set forth in Marc Fiorentino, independent director, was co-opted by the Board of Directors on His co-option was ratified by the General Meeting on Subject to renewal by the General Meeting on July 4, 2007 Each Board Member is obliged to hold at least one share in the company. The members of the Board of Directors have taken steps to reinforce the transparency of the management, including the following: - introducing a variable portion of director s fees to which new obligations attach; - appointment of an independent Board Member. In order to comply with requirements as to corporate governance, the Members of the Board are carrying out a study of the practices and in particular the working methods of the Board, and an assessment whether the way it is organized is best suited for its purposes. The Board of Directors is pursuing its process in order to comply with corporate governance principles set out in the Bouton's report. To the company s knowledge, there is no conflict of interest among the Members of the Board of Directors as regards to their personal interests or other obligations. Additional information concerning the group s management: Managing Director EMEA Territories: Mr. Alain Corre Managing Director for North American Territories: Chief Finance Officer: Managing Director International Production: Editor-in-Chief: Mr. Laurent Detoc Mr. Alain Martinez Ms. Christine Burgess-Quemard Mr. Serge Hascoet

145 5.2 Rules applicable to the appointment and replacement of the members of the Board of Directors CORPORATE GOVERNANCE During the life of the company, directors are appointed or re-appointed by the Ordinary General Meeting; however, in case of a merger or spin-off, appointments may be made by the Extraordinary General Meeting called to approve the operation. In the event of a vacancy occuring through death or resignation between two Ordinary Meetings, the Board of Directors may make temporary appointments, subject to ratification by the next Meeting. When, pursuant to the laws and regulations in effect, a director is appointed to replace another director, he/she performs his/her functions only for the remainder of his/her predecessor s term. A director s functions cease at the end of the Ordinary General Meeting that is called to approve the financial statements of the previous year and held during the year in which his/her term expires Functioning of the Board of Directors The Board of Directors is vested with the fullest powers to determine the policies guiding activities and ensures that they are implemented within the limits of the corporate purpose and the powers expressly granted by law to General Meetings. Pursuant to Article L of the French Commercial Code, the Board of Directors. at its meeting of October , established the manner in which the company s general management would carry out its duties. It decided not to separate the Chairman of the Board of Directors duties from those of its general management. As a result, the statutory role of Mr. Yves Guillemot, as Chairman of the Board of Directors, is to represent the company s Board of Directors, organize its work and report on its work to the General Shareholders Meeting, ensure the proper functioning of the company s corporate bodies and, in particular, see to it that the directors are fully capable of performing their duties. As a member of general management, conditional upon the powers granted by law to General Shareholders Meetings and to the Board of Directors, he is vested with the fullest powers to act in all situations on the company s behalf and to represent it in its relations with third parties. At its meeting of July 27, 2004, the Board of Directors adopted its rules of procedure enabling it, among other things, to use videoconferencing equipment to conduct its meetings. The Board of Directors met 12 times during FY Absence of fraud conviction, association with a bankruptcy or public incrimination and/or sanction To the company s knowledge, over the last five years: none of the members of the Board of Directors has been convicted of fraud; none of the members of the Board of Directors has been associated with a bankruptcy, receivership or liquidation while serving on an administrative, management or supervisory body; no official public incrimination and/or sanction has been delivered against any of the members of the Board of Directors. 5.5 Loans and guarantees granted to members of the Board of Directors The company has not issued any loans or granted any guarantees to members of the Board of Directors.

146 UBISOFT FINANCIAL REPORT Other offices held by the Directors Offices held as of March Yves Guillemot france President - Ubisoft France SAS - Ubisoft World SAS - Ubisoft World Studios SAS - Tiwak SAS President/CEO - Ubisoft Entertainment SA which is itself President of: - Ludifactory SAS - Ubisoft Books and Records SAS - Ubisoft Design SAS - Ubisoft Emea SAS - Ubisoft Graphics SAS - Ubisoft Manufacturing & Administration SAS - Ubisoft Organisation SAS - Ubisoft Pictures SAS - Ubisoft Productions France SAS - Ubisoft Simulations SAS Director and Executive Vice President - Gameloft SA - Guillemot Corporation SA - Guillemot Brothers SA Manager - Ubisoft Computing SARL - Ubisoft Development SARL - Ubisoft Production Montpellier SARL - Ubisoft Production Annecy SARL - Ubisoft Editorial SARL - Ubisoft Paris Studios SARL - Ubisoft Support Studios SARL - Ubisoft Castelnau SARL - Ubisoft Marketing International SARL Germany/Austria Manager - Ubisoft GmbH - Blue Byte GmbH - Ubisoft Warenhandels GmbH Australia Director - Ubisoft Pty Ltd Canada President and Director - Ubisoft Divertissements Inc - Ubisoft Canada Inc - Ubisoft Music Inc - Ubisoft Music Publishing Inc Director - Gameloft Inc - Guillemot Inc China Vice President and Director - Shanghai Ubi Computer Software Company Ltd United States Vice President and Director - Ubisoft Inc President and Director - Ubisoft Holdings Inc - Red Storm Entertainment Inc Director - Gameloft Inc - Guillemot Inc Spain President and Director - Ubisoft SA Great Britain President and Director - Ubisoft Ltd Director - Ubisoft Entertainment Ltd - Red Storm Entertainment Ltd - Guillemot Ltd - Advanced Mobile Applications Ltd Hong Kong President and Director - Ubisoft Ltd Italy President and sole Director - Ubisoft SpA Japan President and Director - Ubisoft KK Morocco Manager - Ubisoft SARL The Netherlands Manager - Ubisoft BV

147 CORPORATE GOVERNANCE 5 Scandinavia President and Director - Ubisoft Nordic AS (Denmark) President - Ubisoft Norway AS - Ubisoft Finland OY Director - Ubisoft Sweden AB Switzerland President - UBI Games SA Claude Guillemot france CEO - Guillemot Corporation SA Director and Executive Vice President - Gameloft SA - Guillemot Brothers SA President - Hercules Thustmaster SAS Germany Manager - Guillemot GmbH canada President and Director - Guillemot Inc - Guillemot Recherche et Développement Inc Vice President - Ubisoft Digital Arts Inc Director - Gameloft Inc - Ubisoft Canada Inc - Ubisoft Music Inc - Ubisoft Music Publishing Inc Director and Vice Pesident - Ubisoft Divertissements Inc Belgium Director - Guillemot SA China Director - Shanghaï Ubi Computer Software Company Ltd United States President and Director - Guillemot Inc Director - Ubisoft Holdings Inc - Gameloft Inc - Ubisoft Inc Spain Director - Gameloft Iberica SA Great Britain Director - Advanced Mobile Applications Ltd - Guillemot Ltd - Gameloft Ltd - Ubisoft Entertainment Ltd hong kong Director - Guillemot Corporation (HK) Ltd - Ubisoft Ltd italy Director - Guillemot Srl Romania Director - Guillemot Romania Srl Scandinavia Director - Ubisoft Sweden AB (Sweden) - Ubisoft Nordic AS (Denmark) Michel Guillemot france CEO and Director - Gameloft SA President - Gameloft Partnerships SAS Director and Executive Vice President - Guillemot Corporation SA - Guillemot Brothers SA Manager - Gameloft Rich Games Production France SARL - l Odyssée Interactive Games SARL Germany Manager - Gameloft GmbH Argentina President and Director - Gameloft Argentina SA Bulgaria Manager - Gameloft EOOD canada President and Director - Gameloft Inc Director - Guillemot Inc China President - Gameloft Software (Beijing) Company Ltd - Gameloft Software (Shanghai) Company Ltd - Gameloft Software (Chengdu) Company Ltd 135

148 UBISOFT FINANCIAL REPORT 2007 Director - Shanghaï Ubi Computer Software Company Ltd - Ubi Computer Software Beijing Company Ltd Hong Kong Director - Ubisoft Ltd Korea President and Director - Gameloft Co Ltd United States President and Director - Gameloft Inc Director - Guillemot Inc - Ubisoft Inc - Ubisoft Holdings Inc Spain Director - Ubisoft SA Manager - Ubi Studios SL President and Director - Gameloft Iberica SA Great Britain President and Director - Gameloft Ltd Director - Advanced Mobile Applications Ltd - Guillemot Ltd hong kong Director - Ubisoft Ltd India President and Director - Gameloft Private India Italy Manager - Gameloft Srl - Ubisoft Studios Srl Japan President and Director - Gameloft KK Director - Ubisoft KK Mexico Manager - Gameloft S. de R.L de C.V Romania President - Gameloft Srl vietnam President and Director - Gameloft Company Ltd Gérard Guillemot france Director - Gameloft SA Director and Executive Vice President - Guillemot Corporation SA - Guillemot Brothers SA canada Director - Gameloft Inc - Guillemot Inc China Director - Shanghaï Ubi Computer Software Company Ltd United States President - Longtail Studios Inc Director - Gameloft Inc - Ubisoft Inc - Ubisoft Holdings Inc - Guillemot Inc Spain Director - Ubisoft SA Great Britain Director - Advanced Mobile Applications Ltd Director - Guillemot Ltd hong kong Director - Ubisoft Ltd japan Director - Ubisoft KK Christian Guillemot france CEO - Guillemot Brothers SA Director and Executive Vice President - Gameloft SA - Guillemot Corporation SA Manager - Guillemot Administration et Logistique SARL Ukraine Manager - Gameloft TOB Belgium Director - Guillemot SA

149 CORPORATE GOVERNANCE 5 canada Director - Guillemot Inc - Guillemot Recherche et Développement Inc - Gameloft Inc china Director - Shanghaï Ubi Computer Software Company Ltd spain Director - Gameloft Iberica SA United States Director - Ubisoft Inc - Ubisoft Holdings Inc - Gameloft Inc - Guillemot Inc Great Britain President and Director - Advanced Mobile Applications Ltd Director - Guillemot Ltd - Ubisoft Ltd - Gameloft Ltd hong kong Director - Ubisoft Ltd - Guillemot Corporation (HK) Ltd scandinavia Director - Ubisoft Nordic AS (Denmark) - Ubisoft Sweden AB (Sweden) Marc Fiorentino france Director - Prosodie - Olivier SA Group - Jafics SARL CEO and Director - Euroland Finance - TFJ Expired terms (last five fiscal years) Yves Guillemot france President and Director - Ubi.com SA President - Ubisoft Marketing & Communication SAS Director - Jeuxvideo.com SA - Ludimédia SA - Guillemot France SA - Hercules Technologies SA - Thrustmaster SA - Ubi World SA Director and CEO - Ubi Ventures SA - Ludigames SA Co-manager - Ludi Factory SARL Manager - Ubisoft Graphics SARL - Ubisoft Organisation SARL - Ubisoft Simulations SARL - Ubisoft Emea SARL - Ubi Color SARL - Ubi Animation SARL - Ubi Administration SARL - Ubi Research & Development SARL - Ubi Marketing Research SARL - Ubi Info Design SARL - Ubi Sound Studio SARL - Ubi World Studios SARL - Ubisoft Books & Records SARL - Ubisoft Manufacturing & Administration SARL - Ubisoft Pictures SARL - Ubisoft Design SARL - Ubisoft Productions France SARL Belgium Manager - Ubisoft SprL China President and Director - Ubi Computer Software Beijing Company Ltd United States President and Director - Wolfpack Inc - Blue Byte Software Inc Director - Hercules Technologies Inc - Thrustmaster Inc - Ubi.com Inc - Sinister Games Inc - Guillemot Online.com Inc - Ludiwap Inc Great Britain Director - Blue Byte Software Ltd - Ubi Studios Ltd Claude Guillemot france President - Hercules Technologies SAS - Thrustmaster SAS 137

150 UBISOFT FINANCIAL REPORT 2007 Director and CEO - Ludigames SA Director - Ubi Soft France SA - Ludimédia SA - Ubi Studios SA - Ubi World SA Manager - Guillemot Support Technique SARL - Guillemot Studio Graphique SARL - Guillemot Recherche et Développement SARL United States President and Director - Guillemot Online.com Inc - Hercules Technologies Inc - Thrustmaster Inc Director - Ludiwap Inc spain Director - Guillemot SA Great Britain Director - Gameloft.com Ltd - Ubi Studios Ltd italy Director - Ubisoft SpA The Netherlands Director - Guillemot B.V. Michel Guillemot france CEO - Ludigames SA Director - Jeuxvideo.com SA - Ubi Soft France SA - Ubi.com SA - Ubi World SA - Guillemot France SA - Hercules Technologies SA - Ubi Soft Marketing & Communication SA - Thrustmaster SA canada Vice President and Director - Ubisoft Divertissements Inc Director - Ubisoft Canada Inc China Director - Ubi Computer Software Beijing Company Ltd United States President - Ludiwap Inc Director - Guillemot Online.com Inc - Hercules Technologies Inc - Thrustmaster Inc Italy Manager - Ludigames Srl Director - Ubisoft SpA Gérard Guillemot france Executive Vice President - GameLoft SA Director and CEO - Ludigames SA President - Ludimédia SAS Director - Guillemot France SA - Hercules Technologies SA - Thrustmaster SA - Ubi Soft France SA - Ubi Studios SA - Ubi World SA - Jeuxvideo.com SA Co-manager - Ludi Factory SARL germany President - Gameloft AG australia Director - Gameloft.com Pty Ltd canada Director - Ubisoft Divertissements Inc - Ubisoft Canada Inc President and Director - Ubisoft Music Inc. - Ubisoft Music Publishing Inc denmark President - Gameloft.com AS united-states President and Director - Ubi Soft Entertainment Inc - Ubi Voices Inc Director - Guillemot Online.com Inc - Hercules Technologies Inc

151 CORPORATE GOVERNANCE 5 - Thrustmaster Inc - Ludiwap Inc spain President and Director - Gameloft.com Espana great-britain Director - Gameloft.com Ltd italy Director - Ubisoft SpA sweden President - Gameloft.com AB Christian Guillemot france Director and Executive Vice President - Guillemot France SA Director and CEO - Hercules Technologies SA - Thrustmaster SA Manager - Guillemot Administration SARL - Guillemot Logistique SARL - Guillemot Conditionnement SARL - Guillemot Logistique France SARL Director - Jeuxvideo.com SA - Ubisoft France SA - Ludimédia SA - Ubi Studios SA - Ubi World SA - Ubi.com SA germany Director - Gameloft AG australia Director - Gameloft.com Pty Ltd canada President and Director - Guillemot Logistique Inc. Director - Ubisoft Divertissements Inc - Ubisoft Canada Inc - Ubisoft Music Inc china Director - Guillemot Logistics Ltd spain Director - Gameloft.com Espana United States Director - Guillemot Online.com Inc - Hercules Technologies Inc - Thrustmaster Inc - Sinister Games Inc - Ubi.com Inc - Ludiwap Inc italia Director - Ubisoft SpA scandinavia Director - Gameloft.com AS (Denmark) - Gameloft.com AB (Sweden) Marc Fiorentino France Manager - V-Prod 139

152 UBISOFT FINANCIAL REPORT Compensation of managers Compensation of managers and members of the Board of Directors The Guillemot brothers are compensated for their duties as CEO and Executive Vice Presidents. They are paid a fixed amount and are not employed under work contracts. The total gross compensation paid to managers during the fiscal year by the company, by controlled companies as defined by Article L and by the company controlling the one at which they held office was thousand including 546 thousand paid by Ubisoft Entertainment SA. In only partial compensation for their work and the time spent in preparing for, and actively participating in, meetings of the Board, the General Meeting of September 25, 2006 authorized the company to pay directors fees totalling 250 thousand per year maximum. During the 2006 fiscal year the Members of the Board of Directors received 135 thousand in directors fees. Manager Total Directors Total Benefits Total Total Benefits gross fixed fees variable in kind gross fixed variable in kind remuneration remuneration remuneration remuneration Mr Yves GUILLEMOT 214,800 22,500 Nil Nil 204,000 Nil Nil Mr Gérard GUILLEMOT 182,518 22,500 Nil Nil 200,200 Nil Nil Mr Michel GUILLEMOT 251,575 22,500 Nil Nil 204,000 Nil Nil Mr Claude GUILLEMOT ,500 Nil Nil 204,000 Nil Nil Mr Christian GUILLEMOT 214,800 22,500 Nil Nil 204,000 Nil Nil Following the resignation of Mrs. Yvette Guillemot on June 23, 2006, Mr Marc Fiorentino was co-opted by the Board of Directors on July 10, This co-option was ratified by the General Meeting of September 25, No obligation has been undertaken by the company in favour of its corporate managers related to their termination or change in employment, such as in the event of a takeover bid. No loans or advances were made to the company s managers as provided by Article L of the French Commercial Code Stock option and share subscription plan The members of the Board of Directors did not receive any stock options or share subscriptions during the fiscal year just ended. 5.8 Services contract with the issuer and its subsidiaries There is no service contract made between the members of the Board of Directors and the issuer or any of the group s subsidiaries under which benefits are granted.

153 5.9 CORPORATE GOVERNANCE Operations referred to in Article L of the French Monetary and Financial Code and Article of the AMF s internal regulations Operations involving securities and/or financial instruments Name, first name Type of Date of Number Price per unit Amount of title at the date of the operation operation operation of shares operation Operations by managers involving securities Michel Guillemot Souscription , ,924 Director (exercise of BSA) Executive Vice President Yvette Guillemot 1 Subscription , ,848 Director (exercise of BSA) Yves Guillemot Purchase , ,651,860 Director CEO Gérard Guillemot Sale , ,346,400 Director Executive Vice President Operations by related persons involving securities Nathalie Guillemot Subscription ,400 (exercise of BSA) Tiphaine Guillemot Subscription ,208 (exercise of BSA) Joëlle Guillemot Subscription ,400 (exercise of BSA) Guillemot Brothers Company managed by Christian Guillemot, Executive Vice President of Ubisoft Entertainment SA Subscription (exercise of BSA) ,676 Sale , , Sale , , Sale , , Sale , , Sale , , Sale , , Mrs Yvette Guillemot resigned as a Director on June 23, Operations achieved before the 2-for-1 stock split (Board of directors meeting on December 5,2006 with effect from December 11,2006)

154 UBISOFT FINANCIAL REPORT 2007

155 REPORT OF THE CHAIRMAN OF THE BOARD OF DIRECTORS REPORT OF THE CHAIRMAN OF THE BOARD OF DIRECTORS DRAWN UP IN ACCORDANCE WITH ARTICLE L OF THE FRENCH COMMERCIAL CODE, CONCERNING THE CONDITIONS UNDER WHICH THE BOARD S WORK IS PREPARED AND ORGANIZED AND THE INTERNAL CONTROL PROCEDURES IMPLEMENTED BY THE COMPANY 6.1 Conditions under which the Board s work is prepared and organized Composition and organization of the Board Information about directors Powers of the Board Rules and principles adopted by the Board of Directors to determine the compensation and benefits of any kind granted to the company s officers Rules of procedure Main topics discussed during the fiscal year Internal control procedures Definition and objectives of internal control Principal risks Scope of internal control Components of internal control General organization of internal control procedures at the group level Implementation of resources Processes related to the organization and preparation of published financial and accounting information Financial Control procedures Accounting and financial information control procedures Cash and financial control procedures Other procedures Outlook Limitations on the powers of the Chief Executive Officer Auditor s report, prepared pursuant to Article L of the French Commercial Code, on the report of the Chairman of the Board of Directors of Ubisoft Entertainment S.A. concerning the internal audit procedures used to prepare and process accounting and financial information 151

156 UBISOFT FINANCIAL REPORT 2007 This report, prepared pursuant to Articles L paragraph 6 and L of the French Commercial Code, introduced by the Financial Security Act and amended by Law of July 26, 2005 for economic confidence and modernization, reports on the conditions under which the work of the Board of Directors is prepared and organized, as well as the internal control procedures implemented by the company. 6.1 Conditions under which the Board s work is prepared and organized The Board of Directors is composed of six members, four of whom are also Vice Presidents who assist the Chief Executive Officer. On October 22, 2001, the Board of Directors decided not to separate the functions of Chairman of the Board of Directors from those of general management. Complete details regarding the composition of the Board of Directors can be found in a table that appears in section 5.1. The Board of Directors consists of five members of the Guillemot family and one independent director. "Independent director means any person who is not associated with Ubisoft Entertainment SA or a related company, either by an employment contract or by a service, assistance or other agreement, or through any other position of subordination or dependence vis-à-vis the group or its managers. Each director must own at least one share. Directors are appointed for a term of six years, which may be renewed. They may not be more than 80 years of age Information about directors The Chief Executive Officer provides the directors with all information and documents required for the performance of their duties and for the preparation of deliberations, pursuant to Article L of the French Commercial Code. Directors may also obtain additional information, at their own initiative, and the Chief Executive Officer is available at all times to provide significant explanations and information to the Board of Directors. The directors are bound to secrecy with regard to information of a confidential nature and provided as such by the Chairman of the Board of Directors Composition and organization of the Board Powers of the Board Thus, the Board of Directors: defines the group s objectives and strategy in accordance with its culture and values; determines general management s form of organization (separation of the functions of Chairman and Chief Executive Officer or concurrence of these functions); oversees management and ensures the quality of the information provided to shareholders and the markets through the financial statements or at the time of major transactions. The Board of Directors determines the company's policies and ensures that they are implemented. It meets as often as the company's interests may require, at the registered office or at any other location chosen by the Chairman; the meeting notices need not take any special form. Its deliberations commit all the directors as it is a collegial member Rules and principles adopted by the Board of Directors to determine the compensation and benefits of any kind granted to the company s officers As (very partial) compensation for the responsibilities assumed, as well as for the time spent in preparing for Board meetings and their active participation, the company was authorized by the General Meeting of September 25, 2006 to pay directors up to a total o f 250,000 per year in directors fees. At its meeting of December 5, 2006, the Board of Directors decided to establish rules for distributing directors fees and to amend the rules of procedure accordingly. The Board of Directors also decided, as of said date, to use only 72% of the total budget allowance established by the General Meeting. In case of departure the corporate managers don t receive any compensation or advantage. The functions of the Board of Directors are defined by the laws and statutes and by its own rules of procedure, which specify the directors rights and obligations.

157 REPORT OF THE CHAIRMAN OF THE BOARD OF DIRECTORS Rules of procedure The Board of Directors adopted its rules of procedure at its meeting of July 27, These procedures provide, among other things, for the ability to use videoconferencing. The videoconferencing equipment used must have technical features that ensure genuine participation in the Board meeting and allow the Board s deliberations to be broadcast continuously. The rules of procedure were amended on December 5, 2006 in order to add a compensation article concerning directors fees. The rules of procedure may be consulted by shareholders at the company s business address or at the registered office Internal control procedures Main topics discussed during the fiscal year The work of the Board of Directors during the fiscal year primarily consisted of the following: reviewing and approving the half-yearly and annual financial statements for the fiscal year ended March 31, 2006; reviewing and approving the forecast financial statements; reviewing the Ubisoft group s strategic issues; reviewing collective agreements in accordance with Article L of the French Commercial Code. In accordance with Article L of the French Commercial Code, the auditors were invited to attend Board meetings at which the accounts were drawn up and reviewed. The Board met 12 times during FY 2006/ Definition and objectives of internal control Ubisoft has adopted the definition of internal control contained in the AFEP/MEDEF report on corporate governance in France. According to this definition, the objective of internal control is to: ensure that the actions taken and operations carried out by the company s management, as well as the conduct of individuals, comply with the existing laws and regulations, the policies established by the corporate bodies and the company's own values, standards and rules; ensure the accuracy and reliability of the accounting, financial and management data conveyed to the corporate bodies; prevent and manage risk resulting from the company's activity and the risk of error or fraud. The procedures put in place form an internal operational framework which the company can develop into real risk management tools. The objective of risk management and internal control procedures is to: identify potential risks that can impact the company s performance and undermine its strategic and financial objectives, assess the actions that must be taken to control these risks, monitor the actions taken and measure their effectiveness. The main risks identified by general management (cf. 6.2 below) have been mapped out based on the following steps: identification of all the company s activities; assessment of risks and of their impact on each of the company s activities; classification of risks by priority; assessment of the quality of the controls and preventative measures. This descriptive analysis is part of a dynamic process that, in the long run, will enable Ubisoft to assess the relevance and effectiveness of its internal control procedures. The group drew on the recommendations made by the Autorité des marchés financiers (AMF) in its report published on January 22, 2007 and on the internal control guidelines for listed companies. The preparation of this report is based on the control methods described below and on the verifications carried out at the request of the group s general management by the Internal Audit Department and other support departments Principal risks In carrying out its activities, the group is exposed to a number of risks. An analysis of the principal risks, their impact on the company s accounts and the main measures taken to manage them is presented in the chapter of the reference document entitled Risk Factors. These risks include: 1 Risk related to product strategy and brand positioning and management 2 Risk related to market developments and the success of next-gen consoles 3 Risk related to a top game being delayed or getting off to a poor start 4 Risk related to recruitment and retention of talented employees

158 UBISOFT FINANCIAL REPORT Risk related to the termination of a contract with a licensing partner 6 Risk related to intellectual property 7 Legal and arbitration proceedings 8 Risk related to dependence on suppliers and subcontractors 9 Risk related to customer dependence 10 Risk related to computer security 11 Financial risk 12 Risk related to future acquisitions and integration of acquired companies Accounting, financial and IT risk will be explained in greater detail in this report Scope of internal control The Ubisoft group is made up of 25 French companies and 32 foreign companies, broken down as follows: 20 distribution companies, 28 production companies, seven support companies, one mobile phone company and one digital animation company. Major strategies and objectives are determined by general management (represented by the Board of Directors) and the subsidiaries management bodies. Each subsidiary has its own management and management team. The strategies aimed at ensuring attainment of the objectives thus defined are implemented at each subsidiary, even though oversight and audits of internal control and risk management are centralized functions performed by the head office teams Components of internal control General organization of internal control procedures at the group level The organization and role of the various bodies that contribute to internal control are described below: Chairman and CEO Ubisoft Entertainment SA Defines and guides the group s strategy. He is responsible for developing the procedures and resources put in place to ensure the proper functioning and monitoring of internal control. Board of Directors Determines the company's policies and ensures that they are implemented. It oversees management, particularly by drawing up the annual financial statements and reviewing the half-yearly financial statements. It has access to all the documents and reports needed to do so. Directors may also obtain additional information, at their own initiative, and the Chief Executive Officer is available at all times to provide significant explanations and information to the Board of Directors. Group Internal Audit Department This department, which reports to general management, conducts regular audits at the subsidiaries and verifies the quality of the controls in an effort to formalize the internal control process and establish a framework for clarifying operational and financial practices at every level. It analyzes risks and makes recommendations concerning internal control. Accounting and Finance Departments These include staff departments that perform a two-fold mission of expert assessment and control. These departments are present at all of the group's companies. Each subsidiary s Financial Control Department supplies relevant numeric data (sales, margins, costs, etc.) to operations managers, enabling them to make management decisions for the subsidiary. The Group Financial Control Department coordinates the network of management controllers for the subsidiaries, sets up projected monthly reporting tools adapted to the various levels of responsibility, and analyzes discrepancies between objectives and achievements. It is responsible for compiling the budget by cost center and profit center. Budget objectives are defined on an annual basis by general management. Each Accounting Department manager prepares monthly accounts on the ninth business day of the following month; the consolidation reporting package is completed on a half-yearly basis. The accounting managers at the subsidiaries send the accounts to the Audit Departments, which oversee the preparation, audit and review of the accounts to ensure that they accurately reflect the financial position. These departments may also oversee and approve the analysis and formalization of the organizational and computer processes. The Consolidation Department, which reports to Administrative Management, prepares the group s monthly consolidated financial statements on the 18 th business day of the following month. This department is the central point of all the group s expertise in terms of preparing and analyzing the monthly accounts. It publishes the accounting procedures used by the group, particularly via the manual concerning group accounting principles. It ensures compliance with the existing standards and regulations in order to present an accurate picture of the group s activity and financial position. The Tax Department, which also reports to Administrative Management, assists and advises the group s French and foreign companies in analyzing the tax aspects of their projects. Together with the various internal departments, it ensures the group s tax security by organizing risk prevention, identification and management. Its function also includes optimizing the group s tax expense by collaborating in particular with the Consolidation Department. It

159 REPORT OF THE CHAIRMAN OF THE BOARD OF DIRECTORS 6 provides fiscal oversight and organizes knowledge sharing among the group s other departments. The Cash Management and Finance Department handles operations involving exchange rate derivatives and coordinates cash management for the French and foreign subsidiaries. It ensures that policies governing the management of interest rate risk, foreign exchange risk and liquidity risk are consistent with published financial information. It is the central point for and verifies delegation of authority to a limited number of employees, who alone are empowered by general management to process certain financial transactions, in accordance with predefined thresholds and authorizations. The Financial Communications Department provides the financial information required for a proper understanding of the group's strategy to shareholders, financial analysts, investors and so on. All financial announcements (as well as press releases) are reviewed and approved by general management. Financial information is published in strict compliance with the markets operational rules and the principle of equality of treatment of shareholders. Human Resources and Benefits departments The role of the Human Resources and Benefits Departments is to ensure compliance with the provisions of the French Labor Code and to apply the group s policies regarding improvement of professional and personal performance through regular job evaluations, a development plan, allocation of stock options, enrollment in the group savings plan, training programs and so on. Each year, the international HR departments collect data on a number of indicators (training programs, staff, etc.) from the subsidiaries in order to measure progress made in the area of human resources and supply the required information to the other departments. Each subsidiary s HR department is responsible for developing and implementing its own HR policy, programs and tools aimed at satisfying recruitment needs, in accordance with the group s HR guidelines, helping local teams create value for the group, and contributing to the development of each employee s potential at the subsidiary. The group s Legal Departments (corporate law, contract law, litigation and intellectual property) assist and advise the subsidiaries on legal matters. They coordinate common studies, or studies of interest to the group as a whole, and provide support to local entities in the area of legislation to optimize the management of a variety of risks. The Information Technology Department (ITD) Oversees the development of specific tools for all subsidiaries and participates in the selection of IT solutions. It is responsible for implementing, coordinating and developing ERP (Enterprise Resource Planning) within the group. It regularly monitors progress on IT projects and ensures that the projects satisfy the needs of line personnel. It also provides the technical infrastructure and office software required for the various business functions Implementation of resources An approach focused on product integration As a part of overall ERP operations, the purchasing management module is a good example of the integration of company data. In terms of operations (sales and manufacturing), this module has become the common platform used by the EMEA team (Europe/Middle East/Asia Zone) and the zone's distribution subsidiaries. PeopleSoft is a centralized application built on a single database used by all subsidiaries, which allows them to share the same product database, customer and supplier files and, most importantly, the same transaction formats. This software has multi-language and multi-currency capabilities. This arrangement offers more reliable information for all participants in the supply chain. Computer data security Ubisoft implements an extensive automation policy. In the area of accounting, the automation of data exchanges (interfaces between accounting systems and consolidation system, daily integration of banking transactions, automated payment processing, etc.) makes processing more secure. Particular attention is paid to the security of computer data and data processing (physical and logical access control, back-ups, updates, etc.). Controls are required to achieve a satisfactory level of security in the management and maintenance of computer networks. These controls must guarantee: security of data transmitted across the networks, protection of connected departments against unauthorized access, separation of operational responsibility for networks from responsibility for IT operations, definition of the responsibilities of those involved, development of management procedures for remote equipment, controls that may be required to ensure the confidentiality, integrity and authenticity of data transmitted across public networks and to protect connected systems, availability of services and connected systems. Ubisoft s Security Department is responsible for ensuring and organizing the protection of the information system in terms of application security, server architecture, facilities and organization at the group level. The group has also introduced guidelines concerning the use of IT resources for all its employees in France and Canada to ensure that all employees are aware of their rights and obligations with regard to these resources, the network and Internet services. More than a mere user manual, these guidelines serve as a code of ethics designed to inform all employees of their responsibilities. As a result, the concepts of confidentiality, intellectual property, data protection, resource integrity and so on are no longer just words but values to be embraced. The group protects itself internally so as to better safeguard its information systems. In order for it to be applied worldwide in the short term, this charter is adapted to reflect local laws as changes are made to it. 147

160 UBISOFT FINANCIAL REPORT 2007 Ongoing improvements to applications The ITD monitors projects from the analysis phase to implementation, including application development. Regular meetings (usually monthly) are organized in order to monitor these projects. They are attended by the manager of the area in question (project owner) and the manager of the implementation team (project manager), as well as the managers of the various functional departments (Finance, Administration, Financial Control, HR, Business Planning and Sales, depending on the topic). A medium-term project plan was recently developed along with a two-year budget. The estimated cost of this plan will be assessed twice a year and the plan will be reviewed periodically to take into account local priorities and actual requirements (new developments, changes in priorities, problems, etc.). Decisions concerning information system upgrades are also approved at budget meetings with the Chairman and the functional departments affected by the most costly aspects of short-term projects. A joint self-evaluation project Since the second half of 2006, the organization of internal control between the local and group accounting and finance departments has been supplemented by the organization of internal control of a more operational nature through the creation of the Group Internal Audit Department. The Group Internal Audit Department has implemented an audit and risk management process. It has also launched a comprehensive internal control project aimed at informing management and all operations managers of this process and getting them involved in it. Presented in the form of standard self-evaluation questionnaires, its goal is not only to assist in the development and updating of procedures but, more importantly, to help managers ask themselves basic questions concerning the effectiveness of the processes and related controls. This comprehensive, formalized approach to internal control will make it possible to: understand the quality of controls at all the subsidiaries, improve operational and financial practices through corrective and optimization measures aimed at remedying any problem areas identified, effectively monitor compliance with these controls and procedures. This process entails regular, targeted reviews at the subsidiaries. The recommendations and observations made by the Internal Audit Department in connection with these reviews are routinely monitored and updates are given regularly on the progress of the action plans. Some of the topics covered by these reviews include insurance coverage, cash management and purchase authorizations, IT application project management, etc. Shared and published documentation In terms of internal control, the group uses a formalized documentation system that can be accessed by all the group s employees via the intranet in order to facilitate knowledge sharing and discussion in any of the following areas: Operations: work areas intended for sharing and communicating inter-site information on projects, developments, studies, business and analyses; IT: a shared database for retrieving functional and technical documentation for each development; Human Resources: a shared area for all HR departments worldwide; Legal: a common document database shared with line personnel or staff personnel, depending on the jobs concerned; Accounting, finance and financial control: a shared database accessible to all concerned employees provides such information as procedures manuals, group contacts and reporting information (rates, schedules, chart of accounts, glossaries, IT projects, etc.); Internal audit: a site that provides information on internal control as well as targeted access to reports and recommendations. To ensure uniform implementation of group procedures at the local level, managers of support functions (Consolidation, Accounting, Internal Audit, Financial Control, Finance, Human Resources, Legal Services, Taxation and IT Department) are responsible for periodically reviewing and updating the procedures at all levels of their functional hierarchy. Training and information sessions are organized periodically by the various departments to ensure disclosure of information. Coordination with the auditors Administrative Management works together with the auditors to coordinate the year-end closing process in terms of schedule and expected significant accounting treatments. Pre-closing activities are therefore scheduled based on the latest developments Processes related to the organization and preparation of published financial and accounting information Internal control procedures related to the preparation and processing of financial and accounting information are, for the most part, implemented by the various accounting and finance departments Financial Control procedures Monthly reporting The group has implemented a procedure for monitoring operations on the basis of monthly reporting. The budget plan is prepared by the subsidiaries for the coming year based on anticipated product release dates. This plan is reviewed monthly based on the latest information made available by the market and staff.

161 REPORT OF THE CHAIRMAN OF THE BOARD OF DIRECTORS 6 This reporting procedure also makes it possible to measure each subsidiary s performance and contribution to the group s results. For certain operational information, management has daily access to data. Meetings of the group s general management, which are attended by the Administrative, Finance and Financial Control departments, among others, are held to review the various reporting indicators, analyze discrepancies between the actual accounts and initial forecasts, and finetune the half-yearly and annual forecasts on the basis of actual results. Responsibilities are distributed among these three divisions in order to facilitate quality control of accounting and financial data. A forecasting tool to support performance The HFM consolidation tool is used for financial forecasting. Each of the group entities earnings forecasts are consolidated in a centralized application to allow: analysis at the entity level or for a specific line item, comparisons between actual results and forecasts, monthly, quarterly or other analyses. The tool is used by all the group s entities, which allows a comprehensive view of the group. The subsidiaries are responsible for sending the group reliable reports that comply with the procedures related to the requested financial information Accounting and financial information control procedures Reliability of accounting and financial information Ubisoft's accounting and financial information is prepared by Administrative Management under the control of the Chief Executive Officer, with final approval being the prerogative of the Board of Directors. Each subsidiary s accounts are prepared by the local accounting departments under their director s supervision. The half-yearly financial statements are subject to a limited review and the year-end closing is audited by the auditors of each entity. Accounting information is sent to the Consolidation Department on the basis of a timetable defined by Administrative Management. The company has invested in resources to simplify and increase the reliability of the process of producing the consolidated financial statements. The group uses Hyperion s HFM tool for the collection and monthly reconciliation of the subsidiaries accounting data. This tool is used to automatically perform checks and tests of reasonableness on cash flows, the balance sheet, certain income statement accounts, and so on. It allows fast, reliable data transmission and helps optimize the security of the consolidated financial statements. The consolidated financial statements are subject to a limited review on September 30 and an audit on March 31 by the group's auditors. Periodic reviews throughout the fiscal year allow a preliminary analysis of specific accounting issues. This systematic review process facilitates the early detection of any problems prior to the year-end closing, and reduces the time needed to prepare the consolidated financial statements. In an ongoing effort to improve the performance of its information system and meet the needs of a fast-growing group in terms of efficiency, responsiveness and reliability, the group is considering implementing a new version of the consolidation software in the near future. The Consolidation Department has defined procedures to allow the subsidiaries to better understand the tools and use them more effectively: establishment of a group-wide chart of accounts, implementation of automatic mapping between the corporate accounts and the consolidated financial statements, creation of a user manual for the consolidation reporting package, development of a consolidation manual, development of a manual of accounting principles. All the significant subsidiaries are integrated under PeopleSoft/Oracle. The group continues to look for solutions that will eventually allow it to integrate an accounting ERP system at the other foreign subsidiaries. This deployment is designed to standardize and formalize the various accounting systems and is in keeping with our commitment to optimize the efficiency and reliability of strategic information processing. This system addresses the local needs of the subsidiaries and complies with the group s standards. It provides the ability to access and compare information at every level and to manage cash flows, thereby improving coordination among the departments. Each subsidiary must apply the existing group-wide procedures as regards monthly reporting, entry of accounting data, year-end and half-year closings (schedule and format) and quarterly forecasts. The objective of all the IT procedures implemented is to ensure data integration. The Consolidation Department also collects and verifies the accounting data mentioned in the group s financial announcements as well as data pertaining to the consolidated financial statements. This data is verified by the company and the auditors. The group provides quarterly reports on sales and halfyearly reports on results. Accounting standards Application of the IFRS standards is mandatory for annual financial statements published as of January 1, 2005 for listed EEC companies. For Ubisoft, presentation of the consolidated financial statements in accordance with the IAS/IFRS standards applies as of the fiscal year ended March 31, 2006 and includes a comparison with the fiscal year ended March 31, Starting on April 1, 2006, the subsidiaries monthly reports are sent in accordance with IFRS and the consolidation reporting packages are audited according to these same standards. 149

162 UBISOFT FINANCIAL REPORT Cash and financial control procedures Strict authorization rules The group has established strict rules at both its French and foreign subsidiaries concerning managers authority with regard to customer receipts and supplier payments (a double signature procedure, secure tools for payment facilities, a regularly updated system of authorizations and signatures, computer access control procedures, etc.). This means that each significant subsidiary has local internal control procedures at its own level (delegation of signing authority for banking transactions, control of current operations, segregation of duties between the signatory and the preparer of the payment ensuring effective prevention against fraud, and so on). Centralized decisions and controls with subsidiaries The Cash Management Department is responsible for all financing needs of the subsidiaries, many of which benefit from a cash-pooling system. This system centralizes cash management and supports the optimization of financial resources within the group. By the same token, the group cash management software provides centralized management of the group s cash assets by optimizing liquidity management on a day-to-day basis, thus providing a clearer picture of the subsidiaries cash flows and forecasts. Off-balance sheet commitments (bank guarantees to finance purchases, letters of credit, comfort letters, price guarantees, surety bonds, etc.) are managed by the group Finance Department. Bank guarantees allow subsidiaries to place orders with their main suppliers by directly committing the parent company. Acquisitions are managed by the Acquisitions Department, which reports to the Finance Department. It reviews and evaluates the strategic interest of a proposed full or partial acquisition of a company and submits its assessment to the group s general management, which makes the final decision. None of the group s subsidiaries can make this decision on their own Other procedures A number of procedures for French subsidiaries exist in the following areas: Purchasing Management and accounting of purchases, placement of purchase orders, tracking of items in stock, fixed assets, management of disposals of computer equipment and furniture, physical inventory of furniture and equipment, travel expenses. Travel guidelines have been introduced at the group. Purchases are made based on project requirements. Each request must be approved by the manager. Inventory General inventory procedures (internal procedures). Customers Invoicing of subsidiaries (studios, distribution subsidiaries) and customers outside France, creation of customer accounts, resolution of disputes regarding customer deliveries, collection procedures and customer reporting. Corporate Payroll preparation and processing of post-payroll procedures. The aim of all these procedures is to define the principles of authorization and approval, and to highlight the principles of segregation of duties and, therefore, control in all areas. Several other procedures are in the process of being finalized or have been proposed for 2007/08 for both the French and foreign subsidiaries. 6.3 Outlook The group plans to continue to map out its risks, implement any new action plans that may be needed, and identify and document control procedures. The group s goal is to develop a dynamic approach to risk and control analysis in order to offer managers effective management tools. The objective is therefore to reevaluate risk analysis each year based on changes in the industry and the company s strategy. 6.4 Limitations on the powers of the Chief Executive Officer You are informed that the Chief Executive Officer exercises his functions without any particular limitations, subject to the powers expressly granted by law and the Articles of Association to the Board of Directors.

163 REPORT OF THE CHAIRMAN OF THE BOARD OF DIRECTORS Auditor s report prepared pursuant to Article L of the French Commercial Code, on the report of the Chairman of the Board of Directors of Ubisoft Entertainment S.A. concerning the internal audit procedures used to prepare and process accounting and financial information 151 Dear Shareholders, In our capacity as auditors of Ubisoft Entertainment SA and pursuant to the provisions of Article L of the French Commercial Code, we hereby present our report on the report prepared by the Chairman of your company's Board of Directors in accordance with the provisions of Article L of the French Commercial Code for the fiscal year ended March 31, The Chairman is required to give an account in his report of, among other things, the conditions under which the Board of Directors work was prepared and organized and of the internal control procedures implemented at the company. Our task is to offer our observations in response to the information provided in the Chairman s report regarding the internal control procedures used to prepare and process accounting and financial information. We have carried out our work in accordance with accepted professional standards in France. These standards require due diligence in order to assess the accuracy of the information provided in the Chairman s report concerning the internal audit procedures used to prepare and process accounting and financial information. Specifically, this due diligence includes: - Acquiring an understanding of the objectives and general organization of internal control and of the internal control procedures used to prepare and process accounting and financial information, as described in the Chairman's report. - Acquiring an understanding of the work on which the information provided in the report is founded. On the basis of this work, we have no comments regarding the information provided about the company s internal control procedures used to prepare and process accounting and financial information, as contained in the report of the Chairman of the Board of Directors, prepared pursuant to the provisions of the last paragraph of Article L of the French Commercial Code. AUDIT AMLD André METAYER Partner Executed in Rennes on June 14, 2007 By the auditors KPMG Audit A division of KPMG S.A. Laurent PREVOST Partner

164 UBISOFT FINANCIAL REPORT 2007

165 TEXT FOR DRAFT RESOLUTIONS SUBJECTED TO THE VOTE OF THE COMBINED GENERAL MEETING ON JULY 4, TEXT FOR DRAFT RESOLUTIONS SUBJECTED TO THE VOTE OF THE COMBINED GENERAL MEETING ON JULY 4, Resolutions under the authority of the ordinary general meeting Resolutions under the authority of the extraordinary general meeting 156

166 UBISOFT FINANCIAL REPORT Resolutions under the authority of the ordinary general meeting FIRST RESOLUTION (Approval of the corporate accounts for the fiscal year ended March 31, 2007 and final discharge granted to the directors) The General Meeting, having met the quorum and majority conditions for Ordinary General Meetings and having read the Board of Directors management report and the statutory auditors report, approves the corporate accounts for the fiscal year ended March 31, 2007, as presented (including the balance sheet, income statement and appendix), showing a profit of 16,047,402.52, as well as the transactions recorded in these accounts or summarized in these reports. It therefore grants the Directors full and unqualified discharge of their duties for the fiscal year ended March 31, SECOND RESOLUTION (Allocation of profit for the fiscal year ended March 31, 2007) The General Meeting, having met the quorum and majority conditions required for Ordinary General Meetings and having read the Board of Directors report, resolves to allocate the profit for the fiscal year ended March 31, 2007 as follows: - to profit 16,047, to settlement of the losses carried forward account - 13,406, Balance 2,640, to the legal reserve up to an amount of - 198, thus amounting to 10% of the legal minimum Balance posted to the Other Reserves account 2,442, The General Meeting also notes that no dividends have been paid out during the preceding three fiscal years. THIRD RESOLUTION (Approval of the consolidated financial statements for the fiscal year ended March 31, 2007) The General Meeting, having met the quorum and majority conditions for Ordinary General Meetings and having read the Board of Directors report regarding the group s management and the auditors report regarding the consolidated financial statements, approves the consolidated financial statements for the fiscal year ended March 31, 2007, as presented (including the balance sheet, income statement and appendix), as well as the transactions recorded in these accounts or summarized in these reports. FOURTH RESOLUTION (Approval of the agreements and commitments stipulated in Articles L and seq. of the French Commercial Code) The General Meeting, having met the quorum and majority conditions required for Ordinary General Meetings and having read the special auditors report concerning the agreements and commitments stipulated in Articles L and seq. of the French Commercial Code and relating to the fiscal year ended March 31, 2007, notes the conclusions of said report and approves the new agreements made during the fiscal year ended March 31, 2007 and the agreements that continued to be performed during the previous fiscal year, as cited therein. FIFTH RESOLUTION (Renewal of the term of a director) The General Meeting, having met the quorum and majority conditions for Ordinary General Meetings and having noted that the term of Mr. Yves Guillemot, Director, is expiring at the end of this meeting, resolves to renew said term for six years, which will expire at the end of the Ordinary General Meeting of Shareholders convened to vote on the accounts of the fiscal year ended March 31, SIXTH RESOLUTION (Renewal of the term of a director) The General Meeting, having met the quorum and majority conditions for Ordinary General Meetings and having noted that the term of Mr. Michel Guillemot, Director, is expiring at the end of this meeting, resolves to renew said term for six years, which will expire at the end of the Ordinary General Meeting of Shareholders convened to vote on the accounts of the fiscal year ended March 31, SEVENTH RESOLUTION (Renewal of the term of a director) The General Meeting, having met the quorum and majority conditions for Ordinary General Meetings and having noted that the term of Mr. Claude Guillemot, Director, is expiring at the end of this meeting, resolves to renew said term for six years, which will expire at the end of the Ordinary General Meeting of Shareholders convened to vote on the accounts of the fiscal year ended March 31, EIGHTH RESOLUTION (Renewal of the term of a director) The General Meeting, having met the quorum and majority conditions for Ordinary General Meetings and having noted that the term of Mr. Gérard Guillemot, Director, is

167 TEXT FOR DRAFT RESOLUTIONS SUBJECTED TO THE VOTE OF THE COMBINED GENERAL MEETING ON JULY 4, expiring at the end of this meeting, resolves to renew said term for six years, which will expire at the end of the Ordinary General Meeting of Shareholders convened to vote on the accounts of the fiscal year ended March 31, NINTH RESOLUTION (Renewal of the term of a director) The General Meeting, having met the quorum and majority conditions for Ordinary General Meetings and having noted that the term of Mr. Christian Guillemot, Director, is expiring at the end of this meeting, resolves to renew said term for six years, which will expire at the end of the Ordinary General Meeting of Shareholders convened to vote on the accounts of the fiscal year ended March 31, TENTH RESOLUTION (Renewal of the term of a director) The General Meeting, having met the quorum and majority conditions for Ordinary General Meetings and having noted that the term of Mr. Marc Fiorentino, Director, is expiring at the end of this meeting, resolves to renew said term for six years, which will expire at the end of the Ordinary General Meeting of Shareholders convened to vote on the accounts of the fiscal year ended March 31, ELEVENTH RESOLUTION (Renewal of the term of a primary auditor) The General Meeting, having met the quorum and majority conditions for Ordinary General Meetings and having noted that the term of the primary auditor KPMG SA, represented by Laurent Prévost, 15, rue du Professeur Jean Pecker - CS Rennes cedex, is expiring at the end of this meeting, resolves to renew said term for six years, i.e. until the end of the Ordinary General Meeting of Shareholders convened to vote on the accounts of the fiscal year ended March 31, TWELFTH RESOLUTION (Appointment of an alternate auditor) The General Meeting, having met the quorum and majority conditions for Ordinary General Meetings and having noted that the term of Mr. Pierre Berthelot, alternate auditor, is expiring at the end of this meeting, resolves to appoint as his replacement Mr. Prashant Shah 7, boulevard Einstein BP Nantes Cedex 3, for a term of six years, i.e. until the end of the Ordinary General Meeting convened to vote on the accounts of the fiscal year ended March 31, THIRTEENTH RESOLUTION (Authorization for the purchase, retention or sale of Ubisoft Entertainment shares) The General Meeting, having met the quorum and majority conditions required for Ordinary General Meetings and having read the Board of Directors report, authorizes the Board of Directors, with the right of delegation under the conditions provided by law pursuant to Articles L et seq. of the French Commercial Code and in accordance with the applicable provisions of European Regulation 2273/2003 of December 22, 2003 and the General Regulations of the Autorité des Marchés Financiers (AMF), to purchase, retain and sell shares in the company up to a limit of 10% of the share capital existing at any time, with said percentage applying to capital adjusted on the basis of the transactions affecting it subsequent to this meeting. It is understood that the maximum buyback percentage of shares acquired by the company for the purpose of their retention and delivery at a later date in exchange or as payment for external growth operations is limited to 5% of the capital, as provided by law. These share purchases and sales may be made for the purpose of any allocation allowed by law and the regulations in force either now or in the future, and particularly in the following cases: - to ensure the liquidity of Ubisoft Entertainment S.A. s share and to stimulate it on the secondary market through an investment service provider acting independently, in accordance with the code of ethics recognized by the AMF; - the delivery of shares in connection with the exercise of rights attached to securities granting entitlement by any means, either immediately or subsequently, to the company s share capital; - the allotment of shares to employees and corporate officers of the Ubisoft group in any format allowed by law, including as part of any company gainsharing plan, employee savings plan, bonus issue of shares or stock option plan for the benefit of some or all of the group s employees or corporate officers; - the retention of shares for delivery at a later date in exchange or as payment for future external growth operations, up to a limit of 5% of the existing capital; - the cancellation of shares, subject to the adoption of the Fifteenth Resolution of this General Meeting; - the performance of any market practice that may come to be recognized by law or by the Autorité des Marchés Financiers. The maximum authorized unit purchase price, excluding expenses, is 70, or a maximum total of 317,887,276 based on the share capital as of April 30, 2007, with the understanding that in the event of a share capital increase through the capitalization of reserves, the allocation of bonus shares and/or a stock split or consolidation, the maximum unit purchase price and the maximum program price will be revised accordingly. Use of the authorization may not result in the number of shares held directly or indirectly by the company exceeding 10% of the number of shares comprising the share capital. Shares may be bought, sold or transferred by any means. These means include private transactions, sales of blocks of shares, sales with the option to repurchase, the use of any derivative financial instrument negotiated on a regulated market or by private agreement, and the implementation of operational strategies. Said shares may be bought, sold or transferred on one or more occasions and at any time, except during public offerings of company shares. 155

168 UBISOFT FINANCIAL REPORT 2007 The Board of Directors will inform shareholders at each annual General Meeting of share purchases, transfers or cancellations thus completed and of the allocation or, where applicable, the reallocation, under the conditions provided by law, of the shares acquired to the various desired objectives. The General Meeting grants all powers to the Board of Directors, with the right of delegation under the conditions provided by law, to place any stock exchange or offmarket orders, sign any agreements, prepare any documents including those required for informational purposes, allocate or re-allocate shares acquired in accordance with legal requirements, carry out any formalities and make any declarations to any agency and, in general, take whatever action may be necessary. In addition, in the event that the authorized objectives of share buyback programs are expanded or supplemented by legislation or by the Autorité des Marchés Financiers, the General Meeting grants all powers to the Board of Directors to prepare an amended program description that includes these modified objectives. This authorization is granted for a period of 18 months from the date of this General Meeting. With regard to the unused portion, it immediately terminates the authorization granted by the Combined General Meeting of September 25, 2006 to purchase company shares. FOURTEENTH RESOLUTION (Vesting of powers for legal formalities) The General Meeting, having met the quorum and majority conditions required for Ordinary General Meetings, grants the bearer of a copy or except of the minutes of this meeting full powers to file all documents and carry out all formalities required by law wherever necessary. 7.2 Resolutions under the authority of the extraordinary general meeting FIFTEENTH RESOLUTION (Authorization granted to the Board of Directors to reduce the company's share capital via the cancellation of shares) The General Meeting, having met the quorum and majority conditions for Extraordinary General Meetings and having read the Board of Directors report and the auditors special report, and ruling in accordance with Article L of the French Commercial Code, authorizes the Board of Directors to proceed, based solely on its decisions and on one or more occasions, with the reduction of share capital, up to a maximum of 10% of the company s capital in any 24-month period, via the cancellation of shares which the company holds or may hold as a result of purchases resulting from share purchase programs authorized by the thirteenth resolution submitted to this meeting or prior or subsequent to the date of this meeting. The General Meeting grants all powers to the Board of Directors, with the right of delegation under the conditions provided by law, to carry out these transactions within the limits and at the times it determines, establish the terms and conditions thereof, make the necessary charges against any reserve, earnings or premium account, record the completion thereof, amend the Articles of Association accordingly and, in general, make all decisions and complete all formalities. This authorization is granted for a period of eighteen months from the date of this General Meeting. With regard to the unused portion, the General Meeting immediately terminates the authorization granted by the Combined General Meeting of September 25, SIXTEENTH RESOLUTION (Delegation of authority to the Board of Directors to increase the share capital through the issue, with preemptive rights, of shares and/or any securities granting entitlement to the company s capital) The General Meeting, having met the quorum and majority conditions required for Extraordinary General Meetings and having read the Board of Directors report and the auditors special report: 1 ) Authorizes the Board of Directors, in accordance with the applicable laws and regulations and in particular Articles L , L and L through L of the French Commercial Code, to issue, on one or more occasions, in the proportions and at the times it deems appropriate, with pre-emptive rights of shareholders, both in France and abroad: (a) shares in the company, with or without share subscription warrants; (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 allocation, at any time or on a fixed date, of securities representing a share in the company's capital and issued or to be issued for this purpose; (c) warrants granting their holders the right to subscribe for securities representing a share in the company's capital, and authorizes the Board of Directors to increase the share capital to permit said warrants to be exercised. Said warrants may be issued by subscription offer under the above conditions or in the form of bonus shares issued to shareholders of record.

169 TEXT FOR DRAFT RESOLUTIONS SUBJECTED TO THE VOTE OF THE COMBINED GENERAL MEETING ON JULY 4, Securities other than shares issued pursuant to this resolution may be issued either in euros or in a foreign currency or in any other currency unit established with reference to several currencies. 2 ) Resolves that the maximum nominal amount of share capital increases that may be carried out immediately and/or subsequently by virtue of this authorization may not exceed 2,000,000, with the understanding (i) that this maximum amount is set without regard to the number of ordinary shares that may be issued to reflect any adjustments made, in accordance with the law and applicable contractual provisions, to preserve the rights of holders of securities or other rights granting entitlement to the company s shares, and (ii) that the maximum nominal amount of the share capital increases that may be carried out immediately and/or subsequently by virtue of this resolution will be included in the total maximum of 4,000,000 set out in this meeting s twenty-third resolution. 3 ) Resolves that shareholders may exercise their preemptive rights, under the conditions provided by law, on a non-reducible basis. In addition, the Board of Directors will be authorized to grant shareholders the right to subscribe, on a reducible basis, for a number of shares above their basic fixed entitlement, in proportion to the subscription rights they hold and, in any event, up to the limit of their application. If subscriptions on a non-reducible and, where applicable, reducible basis do not absorb the entire issue of shares or securities as stipulated above, the Board may use one or more of the following options in the sequence it considers the most appropriate: - it may limit the issue to the amount of the subscriptions, provided that said amount reaches at least three-fourths of the approved issue; - it may freely allocate all or some of the shares and/or other securities not subscribed for; - it may make a public offering of all or some of the shares and/or other securities not subscribed for. 4 ) Notes that, where applicable, the above authorization automatically entails, in favor of holders of securities that may be issued granting future entitlement to the company s shares, shareholders express waiver of their preemptive rights to which such securities give a right. 5 ) Resolves that the maximum principal nominal amount of debt securities granting entitlement to the capital may not exceed 100,000,000, or its equivalent value if issued in a foreign currency or any currency unit established with reference to several currencies as of the date on which the issue is approved, with the understanding that said amount applies to all debt securities whose issue is delegated to the Board of Directors by this General Meeting. 6 ) Resolves that this authorization is, in accordance with the provisions of Article L of the French Commercial Code, granted to the Board of Directors for a period of 26 months and supersedes any previous authorization having the same purpose. The Board of Directors will have full powers, with the right of delegation under the conditions provided by law, to use this authorization, and in particular to determine the dates and procedures for such issues, as well as the form and characteristics of the securities to be created; to approve the prices and terms of the issues; to set the amounts to be issued; to set the subscription dates and dated dates of the securities to be issued, including retroactively; to define the method of payment for the shares or other securities issued, the listing of the shares created, the servicing of the new shares and the exercise of rights attached thereto; where applicable, to define their buyback terms on the stock exchange; in general, to take any necessary action and to sign any agreements needed to successfully complete said issues; to note the share capital increase(s) resulting from any issues completed under this authorization, and to amend the Articles of Association accordingly. In addition, the Board of Directors or its Chairman is empowered, where applicable, to charge to the issue premium(s) all and any costs, and notably expenses, dues and fees arising from the completion of the issues. In case of issues of debt securities, the Board of Directors will have full powers, including the right of delegation to the Chairman, to decide whether said securities will be subordinated or not, to set their interest rate, term, fixed or variable redemption price, with or without premium, amortization terms based on market conditions, and the conditions under which such securities will give their holders a right to the company's shares. SEVENTEENTH RESOLUTION (Delegation of authority to the Board of Directors to increase the share capital through the issue, without pre-emptive rights, of shares and/or any securities granting entitlement to the company s capital) The General Meeting, having met the quorum and majority conditions required for Extraordinary General Meetings and having read the Board of Directors report and the auditors special report: 1 ) Authorizes the Board of Directors, in accordance with applicable laws and regulations and in particular Articles L , L , L , L and L through L of the French Commercial Code, to issue, on one or more occasions, in the proportions and at the times it deems appropriate, without preemptive rights of shareholders, both in France and abroad: (a) shares to which share subscription warrants for the company s shares may nor may not be attached; (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 allocation, at any time or on a fixed date, of securities representing a share in the company's capital and issued or to be issued for this purpose; (c) warrants granting their holders the right to subscribe for securities representing a share in the company's capital, and authorizes the Board of Directors to increase the company s share capital to permit said warrants to be exercised. Said warrants may be issued by subscription offer under the above conditions or in the form of bonus shares issued to shareholders of record. Securities other than shares issued pursuant to this resolution may be issued either in euros or in a foreign currency or in any other monetary unit established with reference to several currencies. 157

170 UBISOFT FINANCIAL REPORT ) Resolves that the maximum nominal amount of share capital increases that may be carried out immediately and/or subsequently by virtue of this authorization may not exceed 2,000,000, with the understanding (i) that this maximum amount is set without regard to the number of ordinary shares that may be issued to reflect any adjustments made, in accordance with the law and applicable contractual provisions, to preserve the rights of holders of securities or other rights granting entitlement to the company s shares, and (ii) that the maximum nominal amount of the share capital increases that may be carried out immediately and/or subsequently by virtue of this authorization will be included in the total maximum of 4,000,000 set out in the twenty-third resolution. 3 ) Resolves to cancel the pre-emptive right of shareholders to the securities to be issued, with the understanding that the Board of Directors may grant the shareholders a preferred subscription right to any part of the issue, for the period and under the conditions set by the Board. This preferred right will not create negotiable rights; however, if the Board of Directors so decides, it may be exercised on both a reducible and non-reducible basis. 4 ) Resolves that, if subscriptions by the shareholders and the public do not absorb the entire share or securities issue as stipulated above, the Board of Directors may use one or more of the following options in the sequence it considers most appropriate: - where applicable, limit the issue to the amount of the subscriptions if the conditions provided by law have been met, - freely allocate all or some of the shares and/or other securities not subscribed for. 5 ) Notes that, where applicable, the above authorization automatically entails, in favor of holders of securities that may be issued granting future entitlement to the company s shares, shareholders express waiver of their preemptive rights to which such securities give a right. 6 ) Resolves that the sum accruing to or that should accrue to the company for each of the shares and securities granting entitlement to the capital that are or will be issued under the above authorization will, after inclusion of the warrant issue price in the case of share subscription warrants, be at least equal to the minimum price stipulated by applicable laws and regulations as of the date of the issue, regardless of whether the securities to be issued immediately or subsequently are comparable to shares issued previously. 7 ) Resolves that the maximum principal amount of debt securities will not exceed 100,000,000, or its equivalent value if issued in a foreign currency or a currency unit established by reference to several currencies as of the date on which the issue is approved, with the understanding that said amount applies to all debt securities whose issue is delegated to the Board of Directors by this General Meeting. 8 ) Resolves that the Board of Directors may use this authorization to issue, on one or more occasions, shares and/or securities granting immediate or deferred entitlement to a portion of the company s share capital in payment of securities contributed to a takeover bid initiated by the company, pursuant to Article L of the French Commercial Code, involving the exchange of company stock for the securities of another company listed on one of the stock exchanges referred to in said Article L of the Commercial Code, and resolves to eliminate, in favor of the holders of these securities, the shareholders pre-emptive right to said shares and securities. This authorization includes an express waiver by shareholders of their pre-emptive right to the shares to which the securities may entitle them, which will be in the form of convertible bonds and share subscription warrants issued autonomously. The Board of Directors may, with the right of delegation under the conditions provided by law: - establish the exchange parity and, where applicable, the amount of the balance to be paid in cash; - record the number of shares exchanged; - establish the amounts to be issued and determine the terms of the issue and the form of the securities; - post the difference between the issue price of the new shares and their face value to a share premium account on the liabilities side of the balance sheet, to which the rights of all shareholders will apply; - if necessary, charge all costs and fees generated by the authorized transaction to this share premium account; - in general, take all necessary action and sign all agreements to ensure that the authorized transaction is successfully completed. 9 ) Resolves that this authorization, in accordance with the provisions of Article L of the French Commercial Code, is granted to the Board of Directors for a period of 26 months and supersedes any previous authorization having the same purpose and option of granting a preference period to shareholders. The Board of Directors will have full powers, with the right of delegation, under the conditions provided by law, to use this authorization, and in particular to determine the dates and procedures for such issues, as well as the form and characteristics of the securities to be created; to approve the prices and terms of the issues; to set the amounts to be issued; to set the subscription dates and dated dates of the securities to be issued, including retroactively; to define the method of payment for the shares or other securities issued, the listing of the shares created, the servicing of the new shares and the exercise of rights attached thereto; where applicable, to define their buyback terms on the stock exchange; in general, to take any necessary action and to sign any agreements needed to successfully complete said issues; to note the share capital increase(s) resulting from any issues completed under this authorization, and to amend the Articles of Association accordingly. Furthermore, the Board of Directors or its Chairman may, where appropriate, charge all costs to the issue premium(s), including the expenses, dues and fees generated by such issues. In case of issues of debt securities, the Board of Directors will have full powers, including the right of delegation to the Chairman, to decide whether said securities will be subordinated or not, to set their interest rate, term, fixed or variable redemption price, with or without premium, amortization terms based on market conditions, and the conditions under which such securities will give their holders a right to the company's shares.

171 TEXT FOR DRAFT RESOLUTIONS SUBJECTED TO THE VOTE OF THE COMBINED GENERAL MEETING ON JULY 4, EIGHTEENTH RESOLUTION (Delegation of authority to the Board of Directors to increase the share capital through the issue of shares reserved for current and former employees enrolled in a Group savings plan) The General Meeting, having met the quorum and majority conditions for Extraordinary General Meetings and having read the Board of Directors report and the auditors special report, and in accordance with the provisions of Articles L , L , L and L of the French Commercial Code and Articles L et seq. of the French Labor Code: 1 ) Authorizes the Board of Directors to increase the share capital at its sole discretion, on one or more occasions and at the times and according to the procedures determined by it, under the conditions established by law, through the issue of ordinary shares or securities granting entitlement to the company s existing ordinary shares or those to be issued, to be subscribed for in cash and reserved for current and former employees of the company and affiliated companies or groups, as defined in Article L of the French Commercial Code, who are enrolled in a group savings plan. 2 ) Resolves (i) that the nominal amount of any immediate or subsequent increase in the company s share capital resulting from all issues carried out by virtue of this authorization is set at 0.05% of the total share capital as of the day on which the decision is made by the Board of Directors, with the understanding that this maximum amount is defined without regard to the face value of the ordinary company shares that may be issued to reflect adjustments made, in accordance with the law and applicable contractual provisions, to protect the rights of holders of securities or other rights granting entitlement to the capital, and (ii) that the nominal amount of any immediate or subsequent increase in the company s share capital resulting from issues carried out by virtue of this authorization is included in the maximum of 4,000,000 set out in the twenty-third resolution. 3 ) Resolves to eliminate, in favor of current and former employees enrolled in a group savings plan, the shareholders pre-emptive right to ordinary shares or securities granting entitlement to ordinary shares issued under this authorization. 4 ) Resolves that the subscription price of the shares or securities issued will be determined under the conditions set forth in Article L of the French Labor Code. 5 ) Resolves to set the maximum discount offered under a savings plan at 15% of the average opening price of Ubisoft Entertainment S.A. stock on the Euronext Eurolist market during the 20 trading sessions preceding the day of the decision establishing the subscription start date, with the understanding that the Board of Directors may reduce this discount as it deems appropriate, and specifically in the event that those enrolled in a company savings plan are offered securities on the international and/or foreign market in order to meet the requirements of applicable local laws. 6 ) Also resolves that the Board of Directors may, pursuant to Article L of the French Labor Code, provide for the bonus issue of shares or other securities granting entitlement to the company s capital under the conditions provided by law and the regulations. Each share capital increase may be conducted only up to the number of shares subscribed for by the current and former employees, either individually or through company mutual funds or open-ended investment companies governed by Article L of the French Monetary and Financial Code. The Board of Directors will have full powers, with the right of delegation under the conditions provided by law, to use this authorization in accordance with the conditions that have been defined, and in particular to: - define the characteristics, amount and procedures of any issue; - decide whether the shares may be subscribed for directly by current and former employees enrolled in a savings plan or through company mutual funds or open-ended investment companies governed by Article L of the French Monetary and Financial Code; - determine the companies and current and former employees concerned; - determine the nature of and procedures for the share capital increase, as well as the procedures for the issue; - where applicable, define the seniority conditions that must be met by recipients in order to subscribe for new ordinary shares or securities issued as a result of the share capital increases covered by this resolution; - determine the amounts of these issues and define the subscription prices, conditions and procedures for any issue of shares or securities completed by virtue of this authorization, including the dated date and payment and delivery procedures; - define the start and end dates of the subscriptions; - note the completion of the share capital increase through the issue of ordinary shares up to the amount of ordinary shares that will actually be subscribed for; - at its own discretion and as it deems necessary, charge the cost of the share capital increases against the amount of the premiums relating thereto and deduct from this amount the sums needed to ensure that the legal reserve is equal to one-tenth of the new capital after each increase; - in general, carry out all acts and formalities, take all measures or decisions and sign all appropriate or necessary agreements in order to (i) ensure that the issues under this authorization are successfully completed, specifically as regards the issue, subscription, delivery, start of dividend entitlement and listing of the shares created, the servicing of the new shares and the exercise of rights attached thereto; (ii) note the final completion of the share capital increase(s) and amend the Articles of Association accordingly to reflect these share capital increases; and (iii) carry out the formalities related to the completion of the share capital increases and, in general, take whatever action may be necessary. This authorization is valid for 26 months following the date of this General Meeting and supersedes any previous authorization having the same purpose. 159

172 UBISOFT FINANCIAL REPORT 2007 NINETEENTH RESOLUTION (Authorization given to the Board of Directors to grant options to subscribe for and/or purchase ordinary shares) The General Meeting, having met the quorum and majority conditions required for Extraordinary General Meetings and having read the Board of Directors report and the auditors special report: 1 ) Authorizes the Board of Directors, pursuant to Articles L et seq. of the French Commercial Code, to grant, on one or more occasions, to the staff members chosen by it from among the employees and officers of the company or of affiliated companies under the conditions set out in Article L of the French Commercial Code, options to subscribe for or purchase ordinary shares in the company, with the understanding that, pursuant to the provisions of Article L of the Commercial Code, the Board of Directors may not grant options to officers and employees of the company or affiliated companies under the conditions set out in Article L of the Commercial Code who hold more than 10% of the share capital. 2 ) Resolves (i) that the number of ordinary shares that may be subscribed for or purchased by those exercising the options granted by the Board of Directors under this authorization may not exceed 3.5% of the number of ordinary shares existing on the date of the Board of Directors grant decision, with the understanding that this maximum is set without regard to the face value of the company s ordinary shares that may be issued to reflect adjustments made, in accordance with the law and applicable contractual provisions, to protect the rights of holders of securities or other rights granting entitlement to the capital, and (ii) that the nominal amount of the increase in the company s share capital resulting from subsequent issues of ordinary shares carried out by virtue of this authorization is included in the maximum of 4,000,000 set out in the twenty-third resolution. 3 ) Resolves that the subscription or purchase price of the ordinary shares paid by those receiving the options will be set by the Board of Directors on the date on which it grants the options to the recipients, subject to the following limitations: - with regard to options to subscribe for ordinary shares, the subscription price of the ordinary shares may not be less than the applicable limit set out in Article L of the French Commercial Code as of the grant date; - with regard to options to purchase ordinary shares, the purchase price of the ordinary shares may not be less than the applicable limit set out in Articles L and L of the French Commercial Code as of the grant date. The price set for the subscription or purchase of ordinary shares may not be modified during the term of the option, other than for adjustments that must be made by the Board of Directors pursuant to applicable laws and regulations. 4 ) Notes that the options may not be granted by the Board of Directors: during the 10 trading sessions preceding and following the date on which the consolidated financial statements, or failing these, the annual company financial statements are published; during the period between the date on which the company s corporate officers become privy to information that, if it were made public, could have a significant impact on the market price of the company s shares and the date 10 trading sessions after that on which such information is made public; within 20 trading sessions after a coupon entitling its holder to a dividend or share capital increase is detached from the shares. 5 ) Resolves that the options to subscribe for and purchase ordinary shares granted under this authorization must be exercised within a maximum of 10 years from the grant date. 6 ) Notes that, under this authorization, the shareholders explicitly waive their pre-emptive right to subscribe for the ordinary shares that will be issued as the stock options are exercised by the recipients thereof. The share capital increase resulting from the exercise of stock options will be deemed to have been duly effected on the sole basis of a statement that the option was exercised, accompanied by the application form and payment of the respective amount either in cash or offset against debts due. The General Meeting grants full powers to the Board of Directors, with the right of delegation under the conditions provided by law, to: - set, under the conditions and within the limits established by law, the dates on which the options will be granted; - determine the list of option recipients, the number of options granted to each recipient, and the conditions under which the options may be exercised; - define the validity period of the options, with the understanding that the options must be exercised within a maximum period of 10 years; - define the date(s) or period(s) for exercising the options, with the understanding that the Board of Directors may (a) move the dates or exercise periods of the options forward, (b) ensure that the options can continue to be exercised, or (c) modify the dates or periods during which the shares obtained by exercise of the options may not be sold or converted to bearer shares; - define the conditions under which the options may be exercised and, in particular, limit, suspend, restrict or prohibit (a) exercise of the options or (b) transfer of the ordinary shares obtained through exercise of the options during certain periods or as of certain events; this decision may (i) apply to any or all of the options and (ii) concern any or all of the option recipients. These conditions may include clauses prohibiting the exercise of the options during one or more periods, as well as clauses prohibiting the immediate resale of any or all of the ordinary shares, but may not require that the shares be retained for more than three years following the exercise date; - fix the dated date, including retroactively, of the new ordinary shares resulting from the exercise of the stock options; - take the necessary steps, in the cases provided by law, to protect the interests of option recipients under the conditions set out in Article L of the French Commercial Code; - more generally, sign all agreements, prepare all documents, note all share capital increases resulting from the

173 TEXT FOR DRAFT RESOLUTIONS SUBJECTED TO THE VOTE OF THE COMBINED GENERAL MEETING ON JULY 4, exercise of options, amend the Articles of Association accordingly, where appropriate, complete all formalities required for the listing of the shares thus issued, make all declarations to agencies, and take whatever action may otherwise be necessary. The Board of Directors, with the right of delegation under the conditions provided by law, will, where relevant and under the conditions prescribed by law, note the number and amount of ordinary shares issued as a result of the exercise of stock options and make any necessary amendments to the Articles of Association concerning the amount of share capital and the number of ordinary shares comprising it, and, if applicable, request that the new ordinary shares be admitted for trading on the Euronext Eurolist market or any other regulated market; complete all formalities and make all declarations to agencies; at its sole discretion and as it deems necessary, charge the cost of the share capital increases against the amount of the premiums related to these transactions and deduct from this amount the sums to be allocated to the legal reserve; and, more generally, take whatever action may be necessary. In the event that options to subscribe for and/or purchase ordinary shares are granted to persons having legal domicile or residing abroad, or to persons having legal domicile or residing in France but who are subject to a foreign tax system, the Board of Directors may amend the conditions applicable to the stock options in order to ensure that they comply with the provisions of the respective foreign law and allow for the most favorable tax treatment possible. To this end, the Board of Directors may, at its sole discretion, adopt one or more sub-plans for each category of employees subject to foreign law. In accordance with Article L of the French Commercial Code, the Board of Directors will inform the shareholders annually, in a special report to the Annual General Meeting, of all transactions carried out pursuant to Articles L et seq. of the French Commercial Code. This authorization is granted for a period of 38 months from the date of this General Meeting. Effective immediately, the General Meeting cancels the unused portion of the authorization granted by the Combined General Meeting of September 25, TWENTIETH RESOLUTION (Authorization granted to the Board of Directors to issue ordinary shares of the company free of charge) The General Meeting, having met the quorum and majority conditions for Extraordinary General Meetings and having read the Board of Directors report and the auditors special report, and in accordance with Articles L et seq. of the French Commercial Code: 1 ) Authorizes the Board of Directors to issue free of charge, on one or more occasions, existing or new shares of the company to staff members or members of certain categories of staff of its choice from among the eligible employees and corporate officers of the company or affiliates, as provided by Article L of the French Commercial Code. 2 ) Resolves that the Board of Directors will issue the shares and determine the identity of the recipients, as well as the conditions and criteria governing the issue of the shares, where applicable. 3 ) Resolves: (i) that the bonus issues of shares carried out under this authorization may not concern a number of existing or new shares in excess of 0.5% of the number of shares comprising the company s capital on the date of the Board of Directors decision to issue shares, with the understanding that this maximum is set without regard to the face value of the company s ordinary shares that may be issued to reflect adjustments made, in accordance with the law and applicable contractual provisions, to protect the rights of holders of securities or other rights granting entitlement to the capital, and (ii) that the nominal amount of the increase in the company s share capital resulting from issues of ordinary shares carried out under this authorization is included in the maximum of 4,000,000 set out in the twenty-third resolution. 4 ) Resolves that the issue of these shares will become final at the end of a purchase period, the length of which will be set by the Board of Directors; it is understood that this period may not be less than two years and that the recipients must retain said shares for a period set by the Board of Directors, with the stipulation that the retention period may not be less than two years from the final issue date of said shares. However, if the purchase period for any or all of one or more issues is at least four years, the General Meeting authorizes the Board of Directors to refrain from imposing a retention period for the shares in question. Where appropriate, the Board of Directors may stipulate purchase and retention periods that are longer than the minimum periods indicated above. 5 ) Resolves that, if the recipient sustains a category two or category three disability, as provided by Article L of the French Social Security Code, the bonus shares will be issued to said recipient prior to the expiration of the remainder of the purchase period and will be immediately transferable. 6 ) Notes that this authorization automatically entails, in favor of the recipients, the shareholders waiver of their pre-emptive rights to the shares issued under this resolution. 7 ) Delegates full powers to the Board of Directors, with the right of delegation under the conditions provided by law and the regulations, to use this authorization, under the above conditions and within the limits authorized by the laws in force, and in particular to: define, where appropriate, the terms and conditions of the bonus issues of shares carried out under this authorization; determine the conditions under which the shares are issued and the dated date of the new shares to be issued; set the dated dates of the new shares; note the completion of the share capital increases; amend the Articles of Association accordingly; where appropriate, make adjustments during the purchase period to the number of shares related to any transactions involving the company s capital in order to protect the rights of the recipients, and, more generally, complete all formalities required for the issue, listing and servicing of the shares issued under this resolution and take whatever action is appropriate and necessary pursuant to the laws and regulations in force. Under the conditions provided by law and the regulations and pursuant to Article L of the French Commercial Code, the Board of Directors will inform the Ordinary General Meeting annually of the transactions 161

174 UBISOFT FINANCIAL REPORT 2007 carried out pursuant to this resolution. This authorization is granted for a period of 38 months from the date of this General Meeting. TWENTY-FIRST RESOLUTION (Delegation of authority to the Board of Directors to issue shares reserved for the employees and corporate officers of the company s subsidiaries, as provided by Article L of the French Commercial Code, that have their headquarters outside of France) The General Meeting, having met the quorum and majority conditions for Extraordinary General Meetings and having read the Board of Directors report and the auditors special report, and in accordance with Articles L and L of the French Commercial Code: 1 ) Authorizes the Board of Directors to issue, on one or more occasions, ordinary shares of the company, which may be subscribed for solely by the employees and corporate officers of the company s subsidiaries, as provided by Article L of the French Commercial Code, that have their headquarters outside of France (hereinafter the Subsidiaries ) and for which payment may either be made in cash or offset against debts owed. 2 ) Resolves (i) that the nominal amount of an increase in the company s share capital carried out under this authorization is set at 0.5% of the total share capital as of the date of the Board of Directors decision establishing the start of the subscription period, with the understanding that this maximum is defined without regard to the face value of the ordinary shares of the company that may be issued to reflect adjustments made, in accordance with the law and applicable contractual provisions, to protect the rights of holders of securities or other rights granting entitlement to the capital, and (ii) that the nominal amount of an increase in the company s share capital resulting from issues carried out under this authorization is included in the maximum of 4,000,000 set out in the twenty-third resolution. 3 ) Notes that the Board of Directors may issue shares reserved for employees of Subsidiaries together with or independently of one or more issues open to shareholders, employees enrolled in the group savings scheme or third parties. 4 ) Resolves that the subscription price of new shares will be set by the Board of Directors on the date on which it sets the subscription start date, according to one of the following two methods, at the Board of Directors discretion: - subscription price equal to the average opening price of Ubisoft Entertainment SA s share on the Euronext Eurolist market during the 20 trading sessions preceding the Board of Directors decision, reduced, if applicable, by a maximum discount of 15%, or - subscription price equal to the opening price of Ubisoft Entertainment SA s share on the Euronext Eurolist market on the date of the Board of Directors decision, reduced, if applicable, by a maximum discount of 15%, with the understanding that the method adopted or the discount amount may vary depending on the share capital increases or the recipients. 5 ) Resolves to cancel shareholders pre-emptive rights to the shares issued to the Subsidiaries employees and corporate officers. 6 ) Resolves that the Board of Directors will have full powers, with the right of delegation under the conditions provided by law, to use this authorization, particularly for the following purposes: - to define the dates, terms and conditions of the issue(s), with or without a premium, and to determine the total number of shares to be issued; - to draw up the list of recipients among the Subsidiaries employees and corporate officers and to determine the number of shares that each of them may subscribe for; - to establish the share subscription price, according to the terms and conditions stipulated in paragraph 4 of this resolution; - to decide on the terms and conditions of payment of the shares within the statutory limits; - to determine the dated date of the shares to be issued; - to charge, where appropriate, all expenses to the issue premium(s) and, in particular, those generated by the issues; - to request, if applicable, that the new shares be admitted for trading on the Euronext Eurolist market or any other regulated market; - to sign any agreements needed to successfully complete said issues and to amend the Articles of Association accordingly; - to protect the rights of holders of securities granting future entitlement to the company s capital, in compliance with applicable laws and regulations; - and, more generally, to determine the terms and conditions governing transactions carried out under this resolution, to note the completion of the share capital increase, and to complete all legal formalities, pursuant to Articles L and L of the French Commercial Code. 7 ) Resolves that this authorization is valid for a period of 18 months following the date of this General Meeting and supersedes any previous authorization having the same purpose. TWENTY-SECOND RESOLUTION (Delegation of authority to the Board of Directors to issue ordinary shares, without shareholders preemptive rights, to former holders of 2008 BSAR, which were redeemed early on February 26, 2007) The General Meeting, having met the quorum and majority conditions for Extraordinary General Meetings and having read the Board of Directors and auditors reports, and in accordance with Articles L and L of the French Commercial Code: 1 ) Authorizes the Board of Directors to issue, on one or more occasions, ordinary shares of the company solely to former holders of 2008 BSAR, which were redeemed early on February 26, ) Resolves (i) that the share capital increases that may be approved by the Board of Directors under this authorization may not result in the issue of a number of ordinary shares (each with a face value of 0.155) that exceeds

175 TEXT FOR DRAFT RESOLUTIONS SUBJECTED TO THE VOTE OF THE COMBINED GENERAL MEETING ON JULY 4, ,762 (two hundred thirty-eight thousand seven hundred sixty-two) shares, with the understanding that this maximum is set without regard to the number of ordinary shares that may be issued to reflect adjustments made, in accordance with the law and applicable contractual provisions, to protect the rights of holders of securities or other rights granting entitlement to the company s capital, and (ii) that the nominal amount of any immediate or subsequent increase in the company s share capital resulting from issues carried out under this authorization is included in the maximum of 4,000,000 set out in the twenty-third resolution. 3 ) Resolves that the subscription price of new shares will be set by the Board of Directors on the date on which it sets the subscription start date and will, without the subscription price set by the Board of Directors being less than 19.18, be equal to the closing price of Ubisoft Entertainment s share on the Euronext Eurolist market on the date of the Board of Directors decision, reduced by a maximum discount of ) Resolves to cancel shareholders pre-emptive rights to the ordinary shares to be issued to former holders of 2008 BSAR, which were redeemed early on February 26, ) Delegates full powers to the Board of Directors, with the right of delegation under the conditions provided by law, to use this authorization, particularly for the following purposes: - to determine the terms and conditions of the issue(s) and the total number of shares issued; - to draw up the list of recipients from among the former holders of 2008 BSAR that were redeemed early on February 26, 2007 and to determine the number of ordinary shares that each of them may subscribe for; - to establish the share subscription price, according to the terms and conditions stipulated in paragraph 3 of this resolution; - to decide on the terms and conditions of payment of the shares to be issued within the statutory limits; - to determine the dated date of the shares to be issued; - to limit the amount of the share capital increase(s) carried out pursuant to this resolution to the actual amount of the subscriptions within the limits provided by law; - to charge, where appropriate, all expenses to the issue premium(s) and, in particular, those generated by the issues; - to preserve the rights of holders of securities granting future entitlement to the company s capital, in compliance with applicable laws and regulations; - and, more generally, to note the completion of the share capital increase(s), to amend the Articles of Association accordingly, to complete all legal formalities, to take all measures and to complete all formalities required for admission of the new shares to trading on the Euronext Eurolist market or any other regulated market. 6 ) Resolves that this authorization is valid for a period of three months from the date of this meeting. TWENTY-THIRD RESOLUTION (Total maximum of share capital increases) The General Meeting, having met the quorum and majority conditions required for Extraordinary General Meetings and having read the Board of Directors report, and acting in accordance with Article L of the French Commercial Code, sets the total maximum of the share capital increase that may result, immediately or subsequently, from all issues carried out under the authorizations described in this General Meeting s sixteenth, seventeenth, eighteenth, nineteenth, twentieth, twenty-first and twenty-second resolutions at a nominal amount of 4,000,000, with the understanding that, within the limit of this maximum amount: - the issue(s) of ordinary shares or securities, with shareholders pre-emptive rights, as described in this General Meeting s sixteenth resolution, may not result in a maximum nominal amount of a share capital increase in excess of 2,000,000; - the issue(s) of ordinary shares or securities granting entitlement to the capital, without shareholders preemptive rights, as described in the seventeenth resolution, may not result in a maximum nominal amount of a share capital increase in excess of 2,000,000; - the issue(s) of ordinary shares or securities granting entitlement to the capital, without shareholders preemptive rights, to current and former employees enrolled in a savings plan, as described in the eighteenth resolution, may not result in a maximum nominal amount of a share capital increase in excess of 0.05% of the share capital on the date of the Board of Directors decision; - the number of ordinary shares that may be subscribed for or purchased by recipients of options to subscribe for or purchase shares, as described in the nineteenth resolution, may not exceed 3.5% of the number of ordinary shares existing on the date of the Board of Directors grant decision; - the number of ordinary shares that may be issued free of charge to recipients of bonus shares, as described in the twentieth resolution, may not exceed 0.5% of the number of ordinary shares existing on the date of the Board of Directors grant decision; - the issue(s) of ordinary shares or securities granting entitlement to the capital, without shareholders preemptive rights, to employees and corporate officers of the company s subsidiaries, as provided by Article L of the French Commercial Code, that have their headquarters outside of France, as described in the twenty-first resolution, may not result in a maximum nominal amount of a share capital increase in excess of 0.5% of the share capital on the date of the Board of Directors decision establishing the start of the subscription period; - the issue(s) of ordinary shares or securities granting entitlement to the capital, without shareholders preemptive rights, to former holders of 2008 BSAR that were redeemed early on February 26, 2007, as described in the twenty-second resolution, may not result in the issue of a number of ordinary shares that exceeds 238,

176 UBISOFT FINANCIAL REPORT 2007 It is stipulated that the aforementioned total does not include the nominal amount of shares that may be issued to reflect adjustments made, in accordance with the law and applicable contractual provisions, to protect the rights of holders of securities granting entitlement to the company s capital. TWENTY-FOURTH RESOLUTION (Amendment of Article 6 of the Articles of Association regarding exceedance of thresholds) The General Meeting, having met the quorum and majority conditions required for Extraordinary General Meetings and having read the Board of Directors report, resolves to amend Article 6 as follows: Old version Any shareholder acting alone or in concert, without prejudice to the thresholds defined in Article L of the French Commercial Code, who may come to hold, directly or indirectly, at least 4% of the share capital or voting rights of the company, or any multiple thereof up to and including 28%, is required to inform the company, by registered letter with acknowledgment of receipt sent to its headquarters within the period stipulated in Article L of the French Commercial Code, of the total number of shares, voting rights or securities granting future entitlement to the company s capital, whether said shareholder holds them directly or indirectly or in concert. The notification referred to in the preceding paragraph for exceeding the threshold by a multiple of 4% of the capital or voting rights also applies if the share of capital or voting rights falls below any of the aforementioned thresholds. Failure to report the attainment of these statutory thresholds will result in the withdrawal of voting rights under the conditions set out in Article L of the French Commercial Code, at the request, recorded in the minutes of the General Meeting, of one or more shareholders who together hold at least 5% of the capital or voting rights of the company. New version Any shareholder acting alone or in concert, without prejudice to the thresholds defined in Article L of the French Commercial Code, who may come to hold, directly or indirectly, at least 2% of the share capital or voting rights of the company, or any multiple thereof, is required to inform the company, by registered letter with acknowledgment of receipt sent to its headquarters within the period stipulated in Article L of the French Commercial Code, of the total number of shares, voting rights or securities granting future entitlement to the company s capital, whether said shareholder holds them directly or indirectly or in concert. The notification referred to in the preceding paragraph for exceeding the threshold by a multiple of 2% of the capital or voting rights also applies if the share of capital or voting rights falls below any of the aforementioned thresholds. Failure to report the attainment of these statutory thresholds will result in the withdrawal of voting rights under the conditions set out in Article L of the French Commercial Code, at the request, recorded in the minutes of the General Meeting, of one or more shareholders who together hold at least 5% of the capital or voting rights of the company. TWENTY-FIFTH RESOLUTION (Amendment of Article 14 of the Articles of Association regarding shareholders meetings aimed at bringing the rules governing participation in shareholders meetings in line with Article R of the French Commercial Code (formerly 136 of Decree of March 23, 1967 introduced by Decree of December 11, 2006) The General Meeting, having met the quorum and majority conditions required for Extraordinary General Meetings and having read the Board of Directors report, resolves to amend Article 14 of the Articles of Association. Consequently, paragraphs 4 to 7 of Article 14 of the Articles of Association, which currently read as follows: All shareholders have the right, upon proof of their identity, to take part in General Meetings by attending in person, by appointing a proxy or by voting by absentee ballot, including electronically, subject to the following conditions: for holders of registered shares or voting certificates, the shareholder must be listed in his/her name in the company s share ledgers; for holders of bearer shares, a certificate issued by an authorized agent certifying that the listed shares are not transferable up to the meeting date must be filed at the place indicated in the meeting notice. These formalities must be completed prior to the date set by the Board of Directors in the meeting notice; said date may not be more than five days prior to the date of the meeting. However, any shareholder who has requested an admission card or has already voted by absentee ballot (by mail or electronically) or has granted a proxy by presenting a share-blocking certificate issued by the custodian of the shares may dispose of any or all of the shares for which the vote or proxy was sent, provided that the shareholder sends to the agent authorized by the company, by no later than 3:00 p.m. (Paris time) of the day before the meeting, the information needed to cancel the vote or proxy or to change the number of shares and corresponding votes. The deadline for returning absentee voting ballots and proxies is set by the Board of Directors and announced in the notice of meeting published in the Bulletin of Mandatory Legal Notices. will be replaced by the paragraph that read as follows: The right to participate in meetings is contingent upon compliance with the formalities stipulated in the regulations in force. TWENTY-SIXTH RESOLUTION (Vesting of powers for legal formalities) The General Meeting, having met the quorum and majority conditions required for Ordinary General Meetings, grants the bearer of a copy or excerpt of the minutes of this meeting full powers to file all documents and complete all formalities required by law wherever necessary.

177 TEXT FOR DRAFT RESOLUTIONS SUBJECTED TO THE VOTE OF THE COMBINED GENERAL MEETING ON JULY 4,

178 UBISOFT FINANCIAL REPORT 2007

179 PERSONS RESPONSIBLE FOR THE REFERENCE DOCUMENT AND FOR THE AUDIT OF THE ACCOUNTS PERSONS RESPONSIBLE FOR THE REFERENCE DOCUMENT AND FOR THE AUDIT OF THE ACCOUNTS 8.1 Person responsible for the reference document Declaration of the person responsible for the reference document Names, addresses and professional fees of the auditors Documents available to the public Schedule of financial communications for fiscal year 2007/08 170

180 UBISOFT FINANCIAL REPORT Person responsible for the reference document Mr. Yves Guillemot, Chairman of the Board of Directors. 8.2 Declaration of the person responsible for the reference document After taking all reasonable measures in this regard, I certify that, to the best of my knowledge, the information contained in this reference document is fair and accurate and that nothing has been omitted that could affect its scope. I have obtained an audit completion letter from the statutory auditors, in which they indicate that they have verified the information concerning the company s financial position and the accounts provided in this reference document, and that they have read the reference document in full. Chief Executive Officer, Yves Guillemot 8.3 Names, addresses and professional fees of the auditors NAME Date of 1 st appointment Expiration of current term Primary auditor: Audit AMLD SARL represented by Mr. André Métayer A Boulevard Solferino Rennes, France Alternate auditor: Mr. Pierre Borie , rue Charles Le Goffic Rennes, France Primary auditor: KPMG SA represented by Mr. Laurent Prévost (1) 15, rue du Professeur Jean Pecker CS Rennes Cedex, France Alternate auditor: Mr. Pierre Berthelot (1) 15, rue du Professeur Jean Pecker CS Rennes Cedex, France (1) Renewal submitted to the General Meeting of July 4, 2007

181 PERSONS RESPONSIBLE FOR THE REFERENCE DOCUMENT AND FOR THE AUDIT OF THE ACCOUNTS 8 Professional fees of the statutory auditors and members of their networks (Document prepared in accordance with Article L of the internal regulations of the Autorité des marchés financiers - AMF) Fiscal years covered: April 1, 2005 to March 31, In thousands of euros Audit AMLD Amount (excluding tax) % Audit - Statutory audit, certification, review of the individual and consolidated financial statements Issuer % 62% Fully consolidated subsidiaries % 38% - Other verifications and services directly related to the auditor s work Issuer Fully consolidated subsidiaries Subtotal % 100% Other services rendered by the networks of the fully consolidated subsidiaries - Legal, tax, social Other (> 10% of audit fees) Subtotal Total % 100% In thousands of euros Audit KPMG Amount (excluding tax) % Audit - Statutory audit, certification, review of the individual and consolidated financial statements Issuer % 54% Fully consolidated subsidiaries % 46% - Other verifications and services directly related to the auditor s work Issuer Fully consolidated subsidiaries Subtotal % 100% Other services rendered by the networks of the fully consolidated subsidiaries - Legal, tax, social Other (> 10% of audit fees) Subtotal Total % 100%

182 UBISOFT FINANCIAL REPORT Documents available to the public During the validity period of this reference document, the company s Articles of Association, minutes of general meetings, auditors reports, valuations and declarations drawn up, where applicable, at the company s request, some of which are included or referred to in this reference document, historical financial information of the company and its subsidiaries for each of the two fiscal years preceding the publication of this reference document and, more generally, all documents that must be sent or made available to shareholders as provided by the laws in effect may be consulted at the company s registered office or business address (28, rue Armand Carrel Montreuil-sous-Bois, France). In addition, some of these documents are available on the company s website ( which also contains the group s press releases and financial information. This reference document may also be consulted on the AMF website ( Regulatory information is available on the company s website ( Person responsible for information: Yves Guillemot Chief Executive Officer 28 rue Armand Carrel Montreuil-sous-Bois Cedex, France Tel.: (33) Schedule of financial communications for fiscal year 2007/08 Date First quarter sales Tuesday July 24, 2007 Second quarter sales Week of October 22, 2007 Half-yearly results Week of November 26, 2007 Third quarter sales Week of January 21, 2008 Annual sales Week of April 21, 2008 Year-end results Week of May 26, 2008 These dates are provided for information purposes only and will be confirmed during the year.

183 PERSONS RESPONSIBLE FOR THE REFERENCE DOCUMENT AND FOR THE AUDIT OF THE ACCOUNTS Glossary Blockbuster: A game that has been highly successful and/or shows very strong sales potential (several million units) Next Generation Game console: Home consoles or handled consoles. Microsoft's XBOX360 was the first Next Gen home console to be launched at the end of 2005, while Sony's PLAYSTATION 3 was launched in December 2006 in the U.S.A. & Japan and in March 2007 in Europe and Nintendo's WII was launched worldwide at the end of The Sony's PSP and Nintendo's DS (including the new DS Lite) are the Next Gen handled consoles. Franchise: Owned intellectual property declined in sequels though many years with more than 1 million units sold each time. Franchises bring visibility and profitability. Nintendo DS (Dual Screen): Nintendo s newest portable console, which was introduced in the United States and Japan in late 2004 and in Europe in March Pay to play: A system in which players can play online only after paying a subscription (usually by the month). They then become part of an international community of fellow players. Players must generally purchase the game package beforehand. PlayStation Portable (PSP): The first portable console manufactured by Sony, which was introduced in the United States and Europe beginning of PLAYSTATION 3 (PS3): Sony's Next Gen console launched in the U.S.A. at the end of 2006 and in Europe in March Porting: The process of porting a program, i.e. adapting a program to a system other than the one for which it was originally developed (and designed) and moving it from one environment to another. Production: The period during which a game is developed (character animation, integration of the data into the driver etc.). Time to market: A video game is called time to market when its development cycle guarantee a profitable and precise release date (for example to coincide with a pictures release or a sport event, ). Xbox360 : Microsoft's Next Gen console. It was launched worldwide end of WII : Nintendo's Next Gen console with a worldwide launch at the end of 2006.

184 UBISOFT FINANCIAL REPORT 2007 Concordance Table This document have been prepared in accordance with provisions of Appendix Nr 1 from Regulations CE 809/2004 "prospectus", with the CESR s recommendations and with interpretations and recommendations of AMF published on 01/27/ /2007 Annual Report Page 1. PERSONS RESPONSIBLE STATUTORY AUDITORS SELECTED FINANCIAL INFORMATION KEY FIGURES RISKS FACTORS INFORMATION CONCERNING THE ISSUER 5.1. History and Growth the company Registered name and trade name The Company registered address and registration numbers Company creation date and term Registered office, legal status, applicable legislation, original country, address and phone number 4.1 and & Historical background 1.1 and the 1 st part of the report 01 & Investments OVERVIEW OF OPERATIONS 6.1. Main operations to Main Markets to Exceptional events influencing main operations and main markets and 1.9.1/2 37 & Dependence related to some contracts Competitive position Introduction ORGANIZATIONAL STRUCTURE 7.1. Description and situation of the company in the Group Main subsidiaries REAL ESTATE, PLANTS AND EQUIPMENTS 8.1. Major existible capital investment Capital assets and environnemental masters N/A N/A 9. ANALYSIS OF FINANCIAL POSITION AND RESULT 9.1. Financial position Operating result CASH ASSETS AND CAPITAL Information on capital structure Cash flow Information on borrowing terms and financing structure Restriction on use of capital Sources of financing expected that will be required to meet the commitments described in points and RESEARCH AND DEVELOPMENT, PATENTS AND LICENCES INFORMATION ON MARKET TRENDS EARNINGS FORECASTS OR ESTIMATES N/A N/A 14. CORPORATE GOVERNANCE, MANAGEMENT AND SUPERVISORY BODIES AND EXECUTIVE MANAGEMENT Members of the Board of directors and management Conflicts of interests

185 15. COMPENSATION AND BENEFITS 2006/2007 Annual Report Page Compensation and benefits Total amount provided for or determined for payment in connection with pensions, retirement and other benefits FUNCTIONING OF ADMINISTRATIVE AND MANAGEMENT BODIES Offices held by the Directors Service agreements of officiers Information on the audit committee and compensation committee N/A N/A Conformity declaration to the recommendations concerning corporate governance EMPLOYEES Number of employees Share of capital and stock options and & Agreement for employees in share capital KEY SHAREHOLDERS Distributions of capital and voting rights Different voting rights Control of the issuer Agreements that could lead to a change in control AGREEMENTS WITH RELATED PARTIES FINANCIAL INFORMATION REGARDING THE ISSUER S ASSETS, FINANCIAL CONDITION, AND RESULTS OF OPERATIONS Historical financial information 2 and Pro forma financial information N/A N/A Financial statements 2 and Audit of Financial information presented 2 and Date of the last financial information N/A N/A Intermediary financial information and others N/A N/A Dividend policy Legal and arbitration proceedings Significant changes in the financial and trade position ADDITIONAL INFORMATION Share capital Incorporated documents and articles of association MAIN CONTRACTS N/A N/A 23. INFORMATION COMING FROM THIRD PARTIES, EXPERTS DECLARATIONS AND DECLARATIONS OF INTERESTS N/A N/A 24. DOCUMENTS AVAILABLE TO THE PUBLIC INFORMATION ON SUBSIDIARIES AND AFFILIATED COMPANIES

186 UBISOFT FINANCIAL REPORT 2007

187 Nintendo Wii. Wii and the Wii logo are trademarks of Nintendo. Nintendo DS. NIN- TENDO DS IS A TRADEMARK OF NINTENDO. PlayStation 3. " and "PLAYSTATION" are registered trademarks of Sony Computer Entertainment Inc. Xbox Microsoft Corporation. All rights reserved. Microsoft, Xbox, Xbox 360, Xbox Live and the Xbox logos are trademarks of the Microsoft group of companies. Driver Ubisoft All Rights Reserved. Driver, Ubisoft and the logo Ubisoft are trademarks of Ubisoft Entertainment in the US and/or other countries. Far Cry Ubisoft Entertainment. All Rights Reserved. Far Cry, Ubisoft and the Ubisoft logo are trademarks of Ubisoft Entertainment in the US and/or other countries. Based on Crytek s original Far Cry directed by Cevat Yerli. Powered by Crytek s technology CryEngine. PlayStation 2. (add litle PS2 logo) and PlayStation 2 are registered trademarks of Sony Computer Entertainment Inc. All Rights Reserved. Xbox. Microsoft, Xbox, the Xbox Logos and Xbox Live are either registered trademarks or trademarks of Microsoft Corporation in the U.S. and/or in other countries. Anno. The Settlers Ubisoft Entertainment. All Rights Reserved. The Settlers, Blue Byte and the Blue Byte logo are trademarks of Red Storm Entertainment in the US and/or other countries. Ubisoft and the Ubisoft logo are trademarks of Ubisoft Entertainment in the US and/or other countries. Red Storm Entertainment Inc is a Ubisoft Entertainment company. Developed by Blue Byte Software. Rayman Ubisoft Entertainment. All Rights Reserved. Rayman, Rayman 2 The Great Escape, Rayman 3 Hoodlum Havoc, Rayman Raving Rabbids, the character of Rayman, Ubisoft and the Ubisoft logo are trademarks of Ubisoft Entertainment in the U.S. and/or other countries. Tom Clancy's Rainbow Six Vegas Ubisoft Entertainment. All Rights Reserved. Persistent Elite Creation, Ubisoft, the Ubisoft logo, Ubi.com and the Soldier Icon are trademarks of Ubisoft Entertainment in the U.S. and/or other countries. Rainbow Six, Red Storm and Red Storm logo are trademarks of Red Storm Entertainment in the U.S. and/or other countries. Red Storm Entertainment, Inc. is a Ubisoft Entertainment company. Tom Clancy's Ghost Recon Advanced Warfighter Ubisoft Entertainment. All Rights Reserved. Ghost Recon, Ghost Recon Advanced Warfighter, the Soldier Icon, Ubisoft, Ubi.com and the Ubisoft logo are trademarks of Ubisoft Entertainment in the US and/or other countries. PC version developed by Grin. ASSASSIN'S CREED Ubisoft Entertainment. All Rights Reserved. Assassin's creed, Ubisoft, Ubi.com and the Ubisoft logo are trademarks of Ubisoft Entertainment in the U.S. and/or other countries. Tom Clancy s Splinter Cell Conviction Ubisoft Entertainment. All Rights Reserved. Splinter Cell, Splinter Cell Conviction, Sam Fisher, the Soldier Icon, Ubisoft, Ubi.com and the Ubisoft logo are trademarks of Ubisoft Entertainment in the U.S. and/or other countries. Tom Clancy s Splinter Cell Double Agent Ubisoft Entertainment. All Rights Reserved. Splinter Cell, Splinter Cell Double Agent, Sam Fisher, the Soldier Icon, Ubisoft, Ubi.com and the Ubisoft logo are trademarks of Ubisoft Entertainment in the U.S. and/or other countries. Brothers in Arms Hell's Highway Gearbox Software, L.L.C. All rights reserved. Published and distributed by Ubisoft Entertainment under license from Gearbox Software, L.L.C. Brothers in Arms Hell s Highway is a trademark of Gearbox Software and is used under license. Ubisoft, Ubi.com and the Ubisoft logo are trademarks of Ubisoft Entertainment in the U.S. and/or other countries. Gearbox Software and the Gearbox logo are registered trademarks of Gearbox Software, LLC. GEARBOX sub-credit for developer team such as Gearbox Combat Series to be included in First Game Sequel packaging and in the First Game Sequel where appropriate pending approval from UBISOFT, not to be reasonably withheld. Brothers in Arms Ubisoft Entertainment. All rights reserved. Published by Ubisoft Entertainment under license from Gearbox Software. Brothers In Arms is a trademark of Gearbox Software and is used under license. Gearbox Software and the Gearbox logo are registered trademarks of Gearbox Software, LLC. Ubisoft, Ubi.com and the Ubisoft logo are trademarks of Ubisoft Entertainment in the U.S. and/or other countries. Prince of Persia Ubisoft Entertainment. All Rights Reserved. Based on Prince of Persia created by Jordan Mechner. Ubisoft and the Ubisoft logo are trademarks of Ubisoft Entertainment in the U.S. and/or other countries. Prince of Persia is trademarks of Jordan Mechner in the US and/or other countries used under license by Ubisoft Entertainment. Red Steel Ubisoft Entertainment. All Rights Reserved. Red Steel, Ubisoft and the Ubisoft logo are trademarks of Ubisoft Entertainment in the U.S. and/or other countries. Rayman Raving Rabbids Ubisoft Entertainment. All Rights Reserved. Rayman, Rayman Raving Rabbids, the character of Rayman, Ubisoft and the Ubisoft logo are trademarks of Ubisoft Entertainment in the U.S. and/or other countries. Teenage Mutant Ninja Turtles Mirage Studios, Inc. Teenage Mutant Ninja Turtles and TMNT are trademarks of Mirage Studios, Inc. All rights reserved. Software 2007 Ubisoft Entertainment. All Rights Reserved. Ubisoft and the Ubisoft logo are trademarks of Ubisoft Entertainment in the U.S. and/or other countries. Tom Clancy's EndWar Ubisoft Entertainment. All Rights Reserved. Endwar, Ubisoft, Ubi.com and the Ubisoft logo are trademarks of Ubisoft Entertainment in the US and/or other countries. Open Season. Open Season: TM & 2006 Sony Pictures Animation Inc. All rights reserved. Game Software excluding Sony Elements: 2006 Ubisoft Entertainment. All rights reserved. Ubisoft and the Ubisoft logo are trademarks of Ubisoft Entertainment in the U.S. and/or other countries. Cosmic Family Ubisoft Entertainment. All Rights Reserved. Cosmic Family, Ubisoft, Ubi.com, and the Ubisoft logo are trademarks of Ubisoft Entertainment in the U.S. and/or other countries. Surf's up. Surf's Up: TM & 2007 Sony Pictures Animation Inc. All rights reserved. Game Software excluding Sony Elements: 2007 Ubisoft Entertainment. All rights reserved. Ubisoft and the Ubisoft logo are trademarks of Ubisoft Entertainment in the U.S. and/or other countries. Naruto Rise of a Ninja Ubisoft Entertainment. All Rights Reserved. Ubisoft and the Ubisoft logo are trademarks of Ubisoft Entertainment in the US and/or other countries MASASHI KISHIMOTO. This product is manufactured, distributed and sold under license from TV TOKYO CORPORATION & SHUEISHA INC. All Rights Reserved. Jam Sessions Plato. All Rights Reserved. Published and distributed by Ubisoft Entertainment under license from Plato. Video game based on "Sing & Play DS Guitar M- 06," which is a trademark of Plato. Jam Sessions, Ubisoft and the Ubisoft logo are trademarks of Ubisoft Entertainment in the US and/or other countries. Driver : Ubisoft Entertainment. Driver, Ubisoft and the Ubisoft logo are trademarks of Ubisoft Entertainment in the US and/or other countries. Haze Ubisoft Entertainment SA and Free Radical Design Limited. All Rights Reserved. Haze is a trademark of Ubisoft Entertainment and Free Radical Design. Free Radical Design and its associated logo are trademarks of Free Radical Design Limited. Ubisoft and the Ubisoft logo are registered trademarks of Ubisoft Entertainment SA. Developed by Free Radical Design Limited. Heroes of Might & Magic Ubisoft Entertainment. All Rights Reserved. Heroes, Might and Magic, Heroes of Might and Magic, Ubisoft and the Ubisoft logo are trademarks of Ubisoft Entertainment in the U.S. and/or other countries. Developed by Nival Interactive. Rayman Raving Rabbids Ubisoft Entertainment. All Rights Reserved. Rayman, Rayman Raving Rabbids, the character of Rayman, Ubisoft and the Ubisoft logo are trademarks of Ubisoft Entertainment in the U.S. and/or other countries. Star Wars. LucasArts and the LucasArts logo are trademarks of Lucasfilm Ltd Lucasfilm Entertainment Company Ltd. or Lucasfilm Ltd. & TM as indicated. All rights reserved. Beowulf. Beowulf: TM & 2007 Paramount Pictures. All Rights Reserved. Game software: 2007 Ubisoft Entertainment. All Rights Reserved. Ubisoft and the Ubisoft logo are trademarks of Ubisoft Entertainment in the United States and other countries. Horsez Ubisoft Entertainment. All rights Reserved. Horsez, Ubisoft, Ubi.com and the Ubisoft logo are trademarks of Ubisoft Entertainment in the US and/or other countries. Developed by Lexis Numérique. Catz Ubisoft Entertainment. All Rights Reserved. Catz, Ubisoft, Ubi.com and the Ubisoft logo are trademarks of Ubisoft Entertainment in the US and/or other countries. Developed by Powerhead Games. Dogz MTO Inc. All Rights Reserved. Published and distributed by Ubisoft Entertainment under license from MTO. Dogz, Ubisoft and the Ubisoft logo are trademarks of Ubisoft Entertainment in the U.S. and/or in other countries. Developed by MTO Inc. This statement may contain financial data evaluated, information on future projects and transactions and on future economic results/performance. Such valuations are provided for estimation purposes only. They are subject to market risks and uncertainties and may vary significantly with the actual results that shall be published. The financial data evaluated have been presented to the Board of Directors and have not been audited by the Auditors. The reference document is a free translation of the French Company Report which, in accordance with Article of the Autorité des Marchés Financiers General Regulation (the French Securities and Exchange Commission) was recorded on June 27, It may only be used in conjunction with a financial transaction if it is supplemented by a transaction note issued by the Autorité des Marchés Financiers. In pursuance of the article 28 from Regulations CE 809/2004, the following informations are included with reference in that French Company Report: - the consolidated financial statements, the corporate financial statements and the declaration by the statutory auditors as of March 31, 2005 presented on the French Company Report at pages 47 to 100 and recorded on September 14, 2005 with the reference D ; - the consolidated financial statements, the corporate financial statements and the declaration by the statutory auditors as of March 31, 2006 presented on the French Company Report at pages 53 to 122 and recorded on September 20, 2006 with the reference D Copies of this Company Report are available from Ubisoft s commercial offices : 28, rue Armand Carrel Montreuil-sous-Bois cedex - France Ubisoft Entertainment A limited liability Company with a Board of Directors Capital 7,068, Registered office : 107 avenue Henri Fréville BP Rennes cedex 2 N Rennes companies register tel: 33 (0) conception and design : avant garde