Creative 2006 Annual Report Download - page 41

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41
NOTE฀16฀–฀RELATED฀PARTY฀TRANSACTIONS
In฀fiscal฀year฀2005,฀Creative฀procured฀advertisement฀production฀services฀from฀a฀company฀in฀which฀Creative’s฀CEO฀and฀Chairman,฀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.฀฀In฀fiscal฀year฀2006,฀Sim฀Wong฀Hoo฀has฀reduced฀his฀deemed฀interest฀in฀that฀company฀
and฀is฀no฀longer฀deemed฀to฀have฀a฀substantial฀interest฀in฀that฀company.
In฀January฀2003,฀a฀company฀controlled฀by฀a฀director,฀Ng฀Kai฀Wa,฀entered฀into฀a฀rental฀agreement฀with฀a฀subsidiary฀of฀Creative,฀which฀
was฀prior฀to฀Ng฀Kai฀Wa’s฀appointment฀as฀a฀director฀of฀Creative฀in฀June฀2005.฀฀The฀rental฀agreement฀expired฀during฀fiscal฀year฀2006฀
and฀the฀company฀has฀moved฀out฀of฀Creative’s฀premises฀in฀April฀2006.฀฀The฀rental฀received฀by฀Creative฀was฀$189,000฀in฀fiscal฀year฀
2005฀and฀$150,000฀in฀fiscal฀year฀2006.
NOTE฀17฀–฀SHARE฀CAPITAL
Effective฀January฀30,฀2006,฀Creative฀was฀subjected฀to฀the฀amendments฀promulgated฀under฀the฀Companies฀(Amendment)฀Act฀2005฀of฀
Singapore.฀฀These฀amendments฀included฀the฀abolition฀of฀the฀ordinary฀share฀par฀value฀and฀authorized฀capital.฀฀The฀relevant฀amendments฀
have฀resulted฀in฀all฀ordinary฀shares฀being฀recorded฀with฀no฀par฀value.฀The฀amendments฀do฀not฀affect฀the฀actual฀number฀of฀ordinary฀
shares฀issued฀and฀the฀paid-in฀capital฀of฀Creative.฀As฀a฀result฀of฀the฀abolition฀of฀the฀ordinary฀share฀par฀value,฀a฀significant฀portion฀of฀
the฀additional฀paid-in฀capital฀amounting฀to฀$290.2฀million฀became฀part฀of฀the฀share฀capital฀account฀as฀at฀June฀30,฀2006฀and฀increased฀
the฀share฀capital฀account฀on฀that฀date฀to฀$298.5฀million.฀The฀remaining฀balance฀of฀$52.3฀million฀in฀the฀additional฀paid-in฀capital฀were฀
classified฀as฀other฀reserves฀where฀it฀comprised฀mainly฀compensation฀expense฀for฀stock฀options,฀tax฀benefits฀relating฀to฀exercise฀of฀non฀
qualified฀stock฀options฀by฀US฀employees฀and฀reserves฀arising฀from฀the฀buyout฀of฀a฀subsidiary’s฀convertible฀preference฀shares.
NOTE฀18฀–฀SUBSEQUENT฀EVENT
In฀August฀2006,฀Creative฀and฀Apple฀announced฀a฀broad฀settlement฀ending฀all฀legal฀disputes฀between฀the฀two฀companies.฀The฀settlement฀
terms฀included฀a฀requirement฀for฀Apple฀to฀pay฀Creative฀$100.0฀million฀for฀a฀paid-up฀license฀to฀use฀Creative’s฀ZEN฀Patent฀in฀all฀Apple฀
products.฀
NOTE฀19฀–฀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.฀
Years ended June 30
2006 2005 2004
External฀net฀sales:฀ ฀
Personal฀Digital฀Entertainment฀ $฀ 732,253฀ $฀ 768,649฀ $฀ 268,133
Audio฀ ฀ 146,378฀ ฀ 166,325฀ ฀ 202,490
Speakers฀ ฀ 153,911฀ ฀ 175,729฀ ฀ 183,913
All฀Other฀Products฀ ฀ 94,989฀฀ ฀ 113,708฀฀ ฀ ฀160,317
฀
฀ Consolidated฀ $฀ ฀1,127,531฀฀ $฀ ฀฀1,224,411฀ $฀ 814,853
The฀following฀is฀a฀summary฀of฀net฀sales฀by฀product฀category฀(in฀US$’000):