Creative 2005 Annual Report Download - page 39

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39
In February 2004, Creative disposed of 1.9 million shares of SigmaTel common stock in a follow-on public offering. Net proceeds from
the disposal of these shares was $45.4 million and the net investment gain recognized in Creative’s results of operations in the quarter
ended March 31, 2004 was $38.1 million. As a result of the disposal, Creative’s shareholdings in SigmaTel was reduced to below 20%,
and as such, SigmaTel was no longer considered an equity-method investee company. The investment in SigmaTel was reclassified as
available for sale investments in accordance with SFAS No. 115 “Accounting for Certain Investments in Debt and Equity Securities,” and
carried at fair value with unrealized gains and losses recorded as a separate component of shareholders’ equity.
NOTE 15 – INVESTMENTS
Net investment gain of $74.4 million in fiscal year 2005 comprised a $86.0 million net gain from sales of investments offset by $11.6
million in write-downs of investments. Net investment gain of $72.6 million in fiscal year 2004 comprised a $52.9 million gain from sales
of investments which include a $38.1 million gain from the sale of an interest in SigmaTel; and a $23.1 million non-cash gain on a
“deemed disposal” of interests in SigmaTel, offset by $3.4 million in write-downs of unquoted investments.
NOTE 16 – RELATED PARTY TRANSACTIONS
In fiscal year 2005, Creative procured advertisement production services from a company in which a director, Sim Wong Hoo, is deemed
to have a substantial interest. The services provided to Creative for the year amounted to $175,000 and were negotiated under normal
commercial terms.
A company controlled by a director, Ng Kai Wa, has an existing rental agreement with a subsidiary of Creative. The agreement was
entered into in January 2003, which was prior to Ng Kai Wa’s appointment as a director of Creative in June 2005. The rental received
by Creative was $189,000 in fiscal year 2005.
NOTE 17 – SEGMENT REPORTING
Creative operates primarily in one industry segment and provides advanced multimedia solutions for personal computers and personal
digital entertainment products. Creative has manufacturing plants and distribution centers in Malaysia and China, with the European
distribution center located in Dublin, Ireland and the Americas distribution center located in Milpitas, California. Creative focuses its
worldwide sales and marketing efforts predominantly through sales offices in North America, Europe and the Asia Pacific region.
The following is a summary of net sales by product category (in US$’000):
Years ended June 30
2005 2004 2003
External net sales:
Personal Digital Entertainment $ 768,649 $ 268,133 $ 124,746
Audio 166,325 202,490 234,734
Speakers 175,729 183,913 158,343
All Other Products 113,708 160,317 183,946
Consolidated $ 1,224,411 $ 814,853 $ 701,769
The following is a summary of operations by geographical regions (in US$’000):
Years ended June 30
2005 2004 2003
External net sales:
Asia Pacific $ 233,152 $ 125,909 $ 95,711
The Americas 522,489 378,653 343,946
Europe 468,770 310,291 262,112
Consolidated $ 1,224,411 $ 814,853 $ 701,769