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96 ANNUAL GROUP CONSOLIDATED FINANCIAL STATEMENTS Capgemini Effective interest rates (EIR) by currency At December 31 2006 B) Fair values At December 31 in millions of euros REPORT 2006 Capgemini Carrying amount 2004 2005 2006 Fair value Carrying amount Fair value Carrying amount ASSETS Short-term investments 1,001 1,001 1,805 1,805 2,460 2,460 Cash 251 251 416 416 442 442 Bank overdrafts (20) (20) (85) (85) (43) (43) LIABILITIES “OCEANE 2003” bonds (1) 408 426 418 425 427 434 “OCEANE 2005” bonds (2) - - 396 350 411 364 Drawdowns on bank and similar facilities 46 46 8 8 6 6 Obligations under finance leases 228 (3) - 174 (3) - 156 (3) - Other financial debt 266 267 220 220 224 222 Commercial paper - - 15 15 - - (1) At December 31, 2006, the fair value (stock market value) of the financial instrument amounted to €517 million, versus €465 million and €456 million, respectively, at December 31, 2005 and 2004. In view of comparison, the amounts shown as “Fair value” in the table above correspond to the debt composant of the bonds. (2) At December 31, 2006, the fair value (stock market value) of the financial instrument amounted to €611 million, versus €496 million at December 31, 2005. In view of comparison, the amounts shown as “Fair value” in the table above correspond to the debt composant of the bonds. (3) In view of the number and diverse types and maturities of finance leases, this information is not deemed to be relevant. NOTE 18 – DERIVATIVE INSTRUMENTS A) Interest rate hedges At December 31, 2006, three interest rate hedges were outstanding in the form of swaps and options (caps and floors) on a total amount of €593 million (versus €497 million at December 31, 2005), for periods ranging from two months to eight years: the main characteristics of these contracts are as follows: Euro US dollar Pound sterling Other Total EIR Amount EIR Amount EIR Amount Amount Amount (€ millions)) (€ millions) (€ millions) (€ millions) (€ millions) “OCEANE 2003” bonds 5.10 % 427 - - - - - 427 “OCEANE 2005” bonds 4.80 % 411 - - - - - 411 Drawdowns on bank and similar facilities - - 6.40% 1 - - 5 6 Obligations under finance leases 3.40% 94 6.10% 11 10.40% 37 14 156 Other financial debt 3.90% 138 5.50% 84 - - 2 224 TOTAL FINANCIAL DEBT - 1,070 - 96 - 37 21 1,224 Fair value An interest rate swap contracted by Cap Gemini S.A. on October 28, 2004 and maturing in January 2010, as a hedge of the “OCEANE 2003” convertible/exchangeable bonds. This swap covers a notional amount of €460 million over a remaining period of three years. In view of the increase in short-term interest rates in 2006 and current market forecasts through to the maturity of the “OCEANE 2003” bonds on January 1, 2010, this interest rate swap was amended on September 15, 2006. Under the revised terms of the swap contract,
Cap Gemini S.A. pays a variable rate of 3-month post-fixed Euribor (12-month post-fixed Euribor less 0.59% under the previous terms) against the fixed rate of the OCEANE bonds (2.5%). The variable rate is now capped at 3.07% (3.41% under the previous terms), while the floor is unchanged at 1.41%. The revised terms of the interest rate swap contract do not affect the zero-cost automatic deactivation clause in the event that the Company exercises its right (under certain conditions) to redeem the bonds early (the terms and conditions of the contract are set out in Note 17 – “Cash and cash equivalents” and in the prospectus approved by the AMF on June 24, 2003 under the reference number 03-607). The measurement of this contract at market value at December 31, 2006 resulted in a loss of €5 million recorded under “Other financial income and expense, net”. In the balance sheet at December 31, 2006, this contract is valued at €6 million and is included under the line “Other non-current liabilities”. An interest rate swap contract maturing in July 2014, covering 50% B) Currency hedges Group exposure to currency risks The Group’s exposure to currency risks arising from transactions recognized at December 31, 2006 by Group operating subsidiaries and denominated in currencies other than the functional currency, is as follows: in millions of euros Euro US dollar 2006 Pound sterling Swedish krona Other currencies (1) TOTAL ASSETS 48 27 11 8 16 TOTAL LIABILITIES (34) (10) (295) (1) (14) Exposure to currency risks before hedging 14 17 (284) 7 2 Amounts hedged (6) (10) 280 (5) (6) Exposure to currency risks after hedging 8 7 (4) 2 (4) (1) Other currencies essentially include Australian and Canadian dollars, and Swiss francs. At December 31, 2006, hedges acquired concern Cap Gemini S.A. for intercompany financing transactions, and Group subsidiary Capgemini Consulting India Private Ltd. for its subcontracting activities realized for other Group regions. Currency hedges At December 31, 2006, currency swaps totaled €416 million (versus €207 million at December 31, 2005), as follows: Hedges of commercial transactions in India expiring in 2007 and 2008 in the form of currency swaps for a total equivalent value of €90 million. The swaps relate to amounts denominated in euros, US dollars and Pounds sterling. Currency swaps expiring in 2007, acquired as hedges of intercompany financing transactions and concern amounts in Pounds sterling, US dollars, Australian dollars, Swedish krona and Swiss francs for a total equivalent value of €326 million. Besides, on November 3, 2006, Cap Gemini S.A. purchased a currency option conferring the right (but not the obligation) to purchase until February 26, 2007– at a pre-set price – USD 650 million for an equivalent value of €518 million. This contract is designated to hedge a portion of the Group currency risk exposure arising from of a finance lease taken out by S.A.R.L. Immobilière Les Fontaines (Capgemini University) in 2002, for a notional amount of €33 million. Under the terms of the swap, S.A.R.L. Immobilière Les Fontaines pays a fixed rate of 3.51% and receives 3-month Euribor. The measurement of this contract at market value at December 31, 2006 resulted in a gain of €1 million recorded under “Other financial income and expense, net”. In the balance sheet at December 31, 2006, this contract is valued at €1 million and is included under the line “Other non-current assets”. End of February, an interest rate swap contract covering Cap Gemini S.A.’s short-term investments, maturing in February 2007, and for a notional amount of €100 million. Under the terms of the swap, the Group pays a variable rate (Eonia) and receives a fixed rate of 2.86%. The measurement of this contract at market value at December 31, 2006 resulted in a loss of €0.2 million recorded under “Other financial income and expense, net”. In the balance sheet at December 31, 2006, this contract is valued at €0.2 million and is included under the line “Other non-current liabilities”. the acquisition of Kanbay in 2007 announced October 26, 2006 for 1.26 billion (see Note 28 – “Subsequent events”). Considering the acquisition of 14.7% of Kanbay on November 21, 2006, this option, expiring on February 26, 2007, hedges 60% of the remaining currency risk exposure as at December 31, 2006. The cost of this contract is recorded within “Other financial income and expense, net” in an amount of €3.3 million. At December 31, 2006, its carrying amount in the balance sheet is not material. All of the currency hedges contracts are designated and treated as fair value or cash flow hedges, and are recorded in the balance sheet at December 31, 2006 under “Other non-current assets” in an amount of €2 million. In the statement of income, these contracts led to a €2.6 million loss, including a net finance cost of €0.3 million recorded under “Other financial income and expense, net”. ANNUAL REPORT 2006 Capgemini 97
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CONTENTS 02 Financial highlights 03
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THE CAPGEMINI GROUP I - COMPANY HIS
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Prospects for 2007. Demand should r
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is beginning to produce a European
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Professional IT Services Market Sha
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Simplified organization chart for t
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ut also on local issues, in partner
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the investment slowdown led to down
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BREAKDOWN OF WORKFORCE BY AGE: EVOL
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in 2005. Overall satisfaction with
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same content management platform an
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committed to delivering a truly col
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urgent health crises, which an empl
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7.5 The group and the environment E
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principles into its offers and to r
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this trend is set to increase in th
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Economic conditions The Group’s g
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STOCK MARKET CAPITALIZATION From Ja
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MANAGEMENT REPORT PRESENTED BY THE
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1.5 Profitability Operating margin
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€193 million in actuarial gains r
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paragraph 3 of article 158 of the F
Page 45 and 46: As is the case for all the Group’
Page 47 and 48: VI - FINANCING POLICY AND MARKET RI
Page 49 and 50: of the countries in which beneficia
Page 51 and 52: under French corporate governance g
Page 53 and 54: is based on the percentage of attai
Page 55 and 56: internal control procedures cannot
Page 57 and 58: specific issues relating to the fol
Page 59 and 60: Management and, above all, the Chai
Page 61 and 62: GROUP CONSOLIDATED FINANCIAL STATEM
Page 63 and 64: CONSOLIDATED STATEMENTS OF INCOME F
Page 65 and 66: CONSOLIDATED STATEMENTS OF CASH FLO
Page 67 and 68: (1) Restated in accordance with IFR
Page 69 and 70: Exchange differences arising on mon
Page 71 and 72: term growth rates for the period be
Page 73 and 74: Other financial liabilities With th
Page 75 and 76: NOTE 3 - CHANGES IN GROUP STRUCTURE
Page 77 and 78: In 2004 and 2005, restructuring cos
Page 79 and 80: The difference between the French s
Page 81 and 82: Fair value of options granted and i
Page 83 and 84: Dilutive impact of the June 24, 200
Page 85 and 86: Net value of goodwill At December 3
Page 87 and 88: Reconciliation of the acquisition c
Page 89 and 90: Deferred tax liabilities at Decembe
Page 91 and 92: Total accounts receivable net of ad
Page 93 and 94: Upon early redemption, the bonds ma
Page 95: The facility agreement includes cov
Page 99 and 100: B) Analysis of movements in provisi
Page 101 and 102: F) Contributions to plans in 2007 T
Page 103 and 104: NOTE 20 - CURRENT AND NON-CURRENT P
Page 105 and 106: At December 31, 2006, commitments r
Page 107 and 108: Results for 2004 break down as foll
Page 109 and 110: At December 31, 2005, assets and li
Page 111 and 112: NOTE 27 - NUMBER OF EMPLOYEES A) Av
Page 113 and 114: NOTE 29 - LIST OF CONSOLIDATED COMP
Page 115 and 116: Country Consolidated company % inte
Page 117 and 118: FIVE-YEAR FINANCIAL SUMMARY in mill
Page 119 and 120: STATUTORY AUDITORS’ SPECIAL REPOR
Page 121 and 122: STATUTORY AUDITORS’ SPECIAL REPOR
Page 123 and 124: TEXT OF THE DRAFT RESOLUTIONS PRESE
Page 125 and 126: Ninth resolution Authorization to b
Page 127 and 128: Meeting may decide to appropriate a
Page 129 and 130: Proposed renewals of financial auth
Page 131 and 132: Changes in the Company’s capital
Page 133 and 134: CORPORATE GOVERNANCE To avoid repet
Page 135 and 136: MEMBERS OF THE BOARD Yann DELABRIÈ
Page 137 and 138: MEMBERS OF THE BOARD Phil LASKAWY D
Page 139 and 140: DIRECTORS’ INTERESTS This informa
Page 141 and 142: Fees paid by the Group to the Statu
Page 143: CROSS-REFERENCE TABLE To facilitate
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CONTENTS - Capgemini

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