Creative 2000 Annual Report Download - page 34

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34
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 8 – EMPLOYEE SHARE PURCHASE AND STOCK OPTION PLANS (Cont’d)
Had compensation cost for Creative’s employee share purchase and stock option plans, and the subsidiary’s stock option plan
been determined based on the fair value at the grant dates using the Black-Scholes model, Creative’s net income and net
income per share would have been as follows:
In US$’000, except for per share data Years ended June 30
2000 1999 1998
Net income:
As reported $ 161,012 $ 115,082 $ 134,774
Pro forma $ 151,450 $ 108,230 $ 128,472
Diluted earnings per share:
As reported $ 1.86 $ 1.25 $ 1.42
Pro forma $ 1.78 $ 1.19 $ 1.36
NOTE 9 – INCOME TAXES
Creative was granted a Pioneer Certificate in 1990 under the Singapore Economic Expansion Incentives (Relief from Income
Tax) Act, Cap. 86 for the design and manufacture of digital computer video, audio and multimedia products, including
personal computers and related components, chipsets and software but not including interest income. The Pioneer Certificate
exempted income derived from such activities (“Pioneer Income”) from tax in Singapore, subject to certain conditions until
the year 2000. Creative’s Pioneer Certificate expired in March 2000. Creative has applied for a separate and new Pioneer
Certificate covering a new range of products. If Creative is awarded this new Pioneer Certificate, profits from qualified
products under the new Pioneer Certificate will be exempted from tax in Singapore. The Singapore corporate income tax
rate of 25.5% will be applicable to the profits of products excluded from the new Pioneer Certificate.
The Pioneer tax status had the effect of reducing Creative’s provision for income taxes by approximately $18.3 million, $26.4
million and $43.3 million, or $0.21, $0.29 and $0.46 per share, for fiscal 2000, 1999 and 1998, respectively. The corporate
income tax rate in Singapore, which would otherwise be applicable for Creative’s fiscal 2000 is 25.5%, 1999 and 1998, is
26%. Any income of a foreign subsidiary of Creative is subject to tax in the country in which the subsidiary is located and,
as a result, the effective rate of tax is subject to changes as a result of the international source of income before tax.