Creative 2000 Annual Report Download - page 37

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37
NOTE 10 – CREDIT FACILITIES AND LONG TERM OBLIGATIONS
On March 13, 1996, Creative Technology Centre Pte Ltd (“CTC”), a Singapore subsidiary of Creative, entered into an
agreement with two banks for an eight year term loan facility for S$60.0 million ($34.7 million) to finance the construction
of Creative’s headquarters building in Singapore. The loan is repayable in nineteen quarterly instalments comprising of
eighteen instalments of S$1.5 million ($0.9 million) and a final instalment for the remaining S$31.0 million ($17.9 million).
The repayment commenced on July 5, 1998. The interest on the outstanding loan balance is payable at the banks’ cost of
funds plus 1.25%. The average interest rate charged for fiscal 2000 was 3.98%. The loan is secured by a first mortgage on
the building and by way of a fixed and floating charge over all assets of CTC. At June 30, 2000, S$45.9 million ($26.6
million) was outstanding.
A portion of the construction of the headquarters building is also being financed in equal parts by Creative and Bukit
Frontiers Pte Ltd., a company owned by one of Creative’s officers, who is also a director. At June 30, 2000, loans extended
and equity contributed by Bukit Frontiers Pte Ltd. totaled S$12.5 million ($7.2 million) and S$0.5 million ($0.4 million),
respectively.
Creative has various other credit facilities relating to overdrafts, letters of credit and bank guarantees with several banks
totaling approximately $103.2 million at June 30, 2000. Within these credit facilities, sub-limits have been set on how
Creative may utilize the overall credit facilities. At June 30, 2000, $3.5 million in letters of credit and $0.6 million in bank
guarantees were drawn under these facilities. These facilities bear interest at approximately the banks’ prime rates.
NOTE 11 – ISSUANCE OF CONVERTIBLE PREFERENCE SHARES
In May 2000, a wholly-owned subsidiary issued 5.0 million convertible preference shares at $4.50 per share, their then
deemed fair value, resulting in net proceeds to the subsidiary of approximately $22.5 million. Subsequent to the issuance,
Creative continued to own approximately 89% of the outstanding shares of the subsidiary on a fully converted basis.
NOTE 12 – LICENSE AGREEMENTS
Creative has entered into license agreements with certain software developers under which it has the right to include, modify
and distribute software products in support of its sales. Typically, royalties are payable on a per unit basis in relation to sales
volume, although certain agreements may include one time payments or guaranteed minimum commitments. Creative
periodically reviews these arrangements in accordance with its stated accounting policies. At June 30, 2000, Creative has
committed to pay $0.8 million in respect of future minimum royalty obligations over terms of up to 5 years.