Creative 1999 Annual Report Download - page 34

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32
NOTE 8 – STOCK OPTION PLANS (Cont’d)
Years ended June 30
1999 1998 1997
Weighted average fair value of options granted during the year
at exercise prices:
At market $ 5.95 $ 11.41 $ 3.18
Below market $ 6.09 $ – $ –
Had compensation cost for Creative’s stock option plans been determined based on the fair value of the options at the grant dates using
the Black-Scholes model, Creative’s net income and net income per share for the years ended June 30, 1999, 1998 and 1997 would have
been as follows:
In US$’000, except for per share data Years ended June 30
1999 1998 1997
Net income:
As reported $ 115,082 $ 134,774 $ 167,046
Pro forma $ 108,230 $ 128,472 $ 162,216
Diluted earnings per share:
As reported $ 1.25 $ 1.42 $ 1.84
Pro forma $ 1.19 $ 1.36 $ 1.81
The pro forma effects on net income for 1999, 1998 and 1997 are not representative of the pro forma effect on net income in future years
because it does not take into consideration pro forma compensation expense related to grants made prior to July 1, 1995.
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. Such status had the effect of reducing Creative’s
provision for income taxes by approximately $26.4 million, $43.3 million, and $36.4 million, or $0.29, $0.46, and $0.40 per share, for fiscal
1999, 1998 and 1997, respectively. The corporate income tax rate in Singapore, which would otherwise be applicable for Creative’s fiscal
1999, 1998 and 1997, 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.
Notes to Consolidated Financial Statements