Creative 2010 Annual Report Download

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1
contents
Chairman’s Message 2
Financial Highlights and Review 4
Board of Directors and Executive Ocers 6
Corporate Governance 7
Directors’ Report 12
Statement by Directors 16
Independent Auditor’s Report 17
Consolidated Income Statement 18
Consolidated Statement of Comprehensive Income 19
Balance Sheets 20
Consolidated Statement of Changes in Equity 21
Consolidated Statement of Cash Flows 22
Notes to the Financial Statements 23
SGX-ST Listing Manual Requirements 62

Table of contents

  • Page 1
    ...Financial Highlights and Review Board of Directors and Executive Officers Corporate Governance Directors' Report Statement by Directors Independent Auditor's Report Consolidated Income Statement Consolidated Statement of Comprehensive Income Balance Sheets Consolidated Statement of Changes in Equity...

  • Page 2
    ... year, I shared with you the progress on the development of our Zii Platform and the ZMS System Module, and our plan to utilize the Zii Platform in a new line of our own Zii-branded products, including portable media players, speakers, audio solutions and other personal digital entertainment devices...

  • Page 3
    ...Zii-powered products. In addition to continuing our investment in product research and development, to support the marketing and sales of the new products and services, we expect to incur additional sales and marketing expenses, in line with the revenue from such new products and services. The Group...

  • Page 4
    ...FY2009 and the Group's decision to consolidate certain businesses in order to focus on specific markets that provide best opportunities to improve business going forward. Us$million sales by Product Category Personal Digital Entertainment Audio Speakers and Headphones All Other Products 2010 81.9 51...

  • Page 5
    .... Balance sheet Inventories for the Group was US$46.1 million as at 30 June 2010, an increased of US$8.5 million from the previous year. The increase was due to additional inventories for certain new speaker and headphone products which were in line with the production plan. The decrease in trade...

  • Page 6
    ...Director Director Chief Financial Officer siM WonG Hoo founded Creative in Singapore in 1981 and has been its Chairman of the Board and Chief Executive Officer since its inception. Lee KHenG naM became a Director of Creative in 1991. Mr Lee is currently a non-executive chairman of Vertex Management...

  • Page 7
    ...of strategic plans, direction and policies, material acquisitions and disposals of assets, corporate or financial restructuring and share issuances, dividends and other returns to shareholders. The Articles of Association of the Company allow the Company's Directors to participate in a Board meeting...

  • Page 8
    ... anD cHief executive officer The Company has the same Chairman and Chief Executive Officer ("CEO"), Mr Sim Wong Hoo. The Company believes that the independent non-Executive Directors have demonstrated high commitment in their role as Directors and have ensured that there is a good balance of power...

  • Page 9
    ... administering the Creative Employee Share Option Plans and the Creative Performance Share Plan. Mr Sim Wong Hoo, the Chairman and CEO of the Company, and the Chairman of the RC, has received a nominal sum of S$1 as his annual remuneration for the financial years ended 30 June 2009 and 2010. He has...

  • Page 10
    ...of the CEO or any other Director of the Company. Details of the Creative Employee Share Option Plans and Creative Performance Share Plan are set out in the Notes to the Financial Statements. PrinciPLe 10: accountaBiLitY The Company provides shareholders with quarterly and annual financial results of...

  • Page 11
    ... the Chief Financial Officer of the Company. The AC reviews the annual IA plans and resources to ensure that the IA has the necessary resources to adequately perform its functions. The AC also reviews the IA's reports and activities on a quarterly basis. PrinciPLe 14: coMMunication WitH sHareHoLDers...

  • Page 12
    ... the members together with the audited financial statements of the Group for the financial year ended 30 June 2010 and the balance sheet of the Company as at 30 June 2010. 1. Directors The directors of the Company in office at the date of this report are as follows: Sim Wong Hoo Lee Kheng Nam Ng Kai...

  • Page 13
    ... financial statements and in this report. 5. (a) sHare oPtions employee share option plans The Creative Technology (1999) Share Option Scheme ("1999 Scheme") was approved by shareholders at an Extraordinary General Meeting on 30 December 1998 which allows options to be granted to full-time...

  • Page 14
    ... the Plan to the end of the financial year, there were no new shares issued and no existing shares transferred to any of the directors. No participant was granted 5% or more of the total awards available under the Plan. No performance shares were awarded to controlling shareholders of the Company or...

  • Page 15
    ... the internal audit function and the assistance given by the Company's officers to the auditor. The Committee reviewed the balance sheet of the Company and the consolidated financial statements of the Group as well as the independent auditor's report thereon and recommended to the Board of Directors...

  • Page 16
    ...in equity and cash flows of the Group for the financial year then ended; and at the date of this statement, there are reasonable grounds to believe that the Company will be able to pay its debts as and when they fall due. (b) On behalf of the directors Sim Wong Hoo Director 28 September 2010 Lee...

  • Page 17
    ...'s RePoRt to the members of Creative Technology Ltd. We have audited the accompanying financial statements of Creative Technology Ltd. (the "Company") and its subsidiaries (the "Group") set out on pages 18 to 61, which comprise the balance sheets of the Company and of the Group as at 30 June 2010...

  • Page 18
    Creative teChnology ltd and its sUBsidiaries consolIdAted IncoMe stAteMent - For the financial year ended 30 June 2010 group note 2010 Us$'000 2009 US$'000 Sales, net Cost of goods sold gross profit Expenses: Selling, general and administrative Research and development Restructuring charges total ...

  • Page 19
    ... IncoMe group 2010 Us$'000 2009 US$'000 - For the financial year ended 30 June 2010 Net loss Other comprehensive income: Fair value gains of financial assets, available-for-sale total comprehensive loss for the financial year attributable to: Equity holders of the Company Non-controlling...

  • Page 20
    Creative teChnology ltd and its sUBsidiaries bAlAnce sHeets - As at 30 June 2010 group note assets Current assets: Cash and cash equivalents Trade receivables Amounts due from subsidiaries Inventories Other current assets non-current assets: Financial assets, available-for-sale Other non-current ...

  • Page 21
    ...Us$'000 retained earnings Us$'000 non-controlling total interests equity Us$'000 Us$'000 - For the financial year ended 30 June 2010 note total Us$'000 2010 Beginning of financial year Utilisation of treasury shares for shares issued under employee options plans and performance share plan 24, 25...

  • Page 22
    ... teChnology ltd and its sUBsidiaries consolIdAted stAteMent of cAsH flows - For the financial year ended 30 June 2010 group note Cash flows from operating activities: Net loss Adjustments for: Income tax credit Depreciation of property and equipment Amortisation of intangible assets Employee share...

  • Page 23
    ... financial statements. 1. GeneraL inforMation Creative Technology Ltd. (the "Company") is listed on the Singapore Exchange Securities Trading Limited ("SGX-ST") and incorporated and domiciled in Singapore. The address of its registered office is: 31 International Business Park Creative Resource...

  • Page 24
    ... entity. The purchase method of accounting is used to account for the acquisition of subsidiaries. The cost of an acquisition is measured as the fair value of the assets given, equity instruments issued or liabilities incurred or assumed at the dates of exchange, plus costs directly attributable to...

  • Page 25
    ... fair value of the assets given, equity instruments issued or liabilities incurred or assumed at the date of exchange, plus costs directly attributable to the acquisition. In applying the equity method of accounting, the Group's share of its associated companies' post-acquisition profits or losses...

  • Page 26
    Creative teChnology ltd and its sUBsidiaries notes to tHe fInAncIAl stAteMents - For the financial year ended 30 June 2010 2. siGnificant accountinG PoLicies (cont'd) 2.4 Impairment of non-financial assets (a) Goodwill Goodwill is tested for impairment annually and whenever there is indication ...

  • Page 27
    .... They are presented as non-current assets unless management intends to dispose of the assets within 12 months after the balance sheet date. (b) recognition and derecognition Regular way purchases and sales of financial assets are recognised on trade-date, the date on which the Group commits to...

  • Page 28
    ... to tHe fInAncIAl stAteMents - For the financial year ended 30 June 2010 2. 2.6 siGnificant accountinG PoLicies (cont'd) financial assets (cont'd) (ii) financial assets, available-for-sale A significant or prolonged decline in the fair value of an equity security below its cost is considered...

  • Page 29
    ... asking prices. The fair values of financial instruments that are not traded in an active market are determined by using valuation techniques. The Group uses a variety of methods and makes assumptions that are based on market conditions existing at each balance sheet date. The fair values of current...

  • Page 30
    ... the financial year ended 30 June 2010 2. siGnificant accountinG PoLicies (cont'd) 2.14 revenue recognition Sales comprise the fair value of the consideration received or receivable for the sale of goods in the ordinary course of the Group's activities. Sales are presented net of value-added tax...

  • Page 31
    ... have been paid. (b) share-based compensation share options The share options plan is an equity-settled, share-based compensation plan. The fair value of the employee services received in exchange for the grant of options is recognised as an expense in profit or loss with a corresponding...

  • Page 32
    ... with the internal reporting provided to the chief operating decisionmaker. 2.21 share capital and treasury shares Ordinary shares are classified as equity. Incremental costs directly attributable to the issuance of new ordinary shares are deducted against the share capital account. Where the...

  • Page 33
    ... of, among other factors, historical sales, current economic trends, forecasted sales, demand requirements, product lifecycle and product development plans, quality issues, and current inventory levels. The markets for PC peripherals and personal digital entertainment products are subject to a rapid...

  • Page 34
    ... are determined using quoted market prices. Fair values for unlisted equity securities are determined by using valuation techniques. The Group uses a variety of methods, such as asset values, and makes assumptions that are based on market conditions existing at each balance sheet date. In order to...

  • Page 35
    ... 22) presented on the consolidated income statement for the financial year ended 30 June 2009 comprised termination benefits and costs associated with headcount reductions, primarily in the Group's global field organisations and facilities costs from consolidation of certain international offices...

  • Page 36
    Creative teChnology ltd and its sUBsidiaries notes to tHe fInAncIAl stAteMents - For the financial year ended 30 June 2010 8. incoMe taxes group 2010 Us$'000 2009 US$'000 Tax credit attributable to loss is made up of: Current income tax: - Tax expense for current financial year - Over provision ...

  • Page 37
    ...,457 193,015 218,472 11. traDe receivaBLes group 2010 Us$'000 2009 US$'000 Company 2010 Us$'000 2009 US$'000 Trade receivables - Associated companies - Non-related parties Less: Allowance for sales returns and impairment of receivables - non-related parties Trade receivables - net 120 38,084 38...

  • Page 38
    ... has assessed the fair values of the non-current amounts due from and due to subsidiaries and concluded that the fair values at balance sheet date approximate carrying values. 13. inventories group 2010 Us$'000 2009 US$'000 Company 2010 Us$'000 2009 US$'000 Raw materials Work-in-progress Finished...

  • Page 39
    ... receivables from associated companies and non-related parties are unsecured, interest-free and repayable on demand. 15. financiaL assets, avaiLaBLe-for-saLe group 2010 Us$'000 2009 US$'000 Company 2010 Us$'000 2009 US$'000 Beginning of financial year Fair value gains recognised in equity Additions...

  • Page 40
    ...as at balance sheet date approximate carrying values. 17. investMents in suBsiDiaries Company 2010 Us$'000 2009 US$'000 Equity investments at cost Beginning of financial year Additions Liquidations / disposals End of financial year Accumulated impairment Beginning of financial year Write-off End of...

  • Page 41
    ... of the Group in the financial year ended 30 June 2009 were: group acquisition Fair value/ carrying amount in acquiree's books Us$'000 disposal Carrying amount Us$'000 2009 Identifiable assets and liabilities Cash and cash equivalents Trade receivables Inventories Other current assets Property and...

  • Page 42
    ... financial year ended 30 June 2010 18. ProPertY anD eQuiPMent Machinery and equipment Us$'000 Furniture, fixtures and office equipment Us$'000 Freehold land Us$'000 leasehold leasehold land improvements Buildings Us$'000 Us$'000 Us$'000 total Us$'000 group 2010 Cost Beginning of financial year...

  • Page 43
    Creative teChnology ltd and its sUBsidiaries leasehold improvements Us$'000 Machinery and equipment Us$'000 Furniture, fixtures and office equipment Us$'000 total Us$'000 Company 2010 Cost Beginning of financial year Additions Disposals End of financial year Accumulated depreciation Beginning ...

  • Page 44
    Creative teChnology ltd and its sUBsidiaries notes to tHe fInAncIAl stAteMents - For the financial year ended 30 June 2010 19. intanGiBLe assets group 2010 Us$'000 2009 US$'000 Company 2010 Us$'000 2009 US$'000 Composition: Goodwill arising on consolidation (Note (a)) Trademarks and licences (...

  • Page 45
    ...998 998 - 768 768 The Group's security deposits pertain to the sales and leaseback of its headquarters office building to an unrelated third party. Under the terms of the sale and purchase agreement, the Group agreed to leaseback the property for a period of five years starting from June 2008 with...

  • Page 46
    .... Management determines the warranty provision based on known product failures (if any), historical experience, and other currently available evidence. Movements in provision for warranty are as follows: group 2010 Us$'000 2009 US$'000 Company 2010 Us$'000 2009 US$'000 Beginning of financial year...

  • Page 47
    ...2009 US$'000 Company 2010 Us$'000 2009 US$'000 Beginning of financial year Singapore tax concession on offshore interest income remitted recognised in profit or loss (Note 8) Effect of change in Singapore tax rate recognised in profit or loss (Note 8) Currency translation differences Acquisition of...

  • Page 48
    ... differences Charged to profit or loss End of financial year Deferred tax assets consist of the following: 7,388 (2,000) 5,388 6,412 6,412 13,800 (2,000) 11,800 7,745 (430) - 73 7,388 6,299 (350) (17) 480 6,412 14,044 (780) (17) 553 13,800 tax losses Us$'000 group and Company 2010 Beginning...

  • Page 49
    ... treasury shares '000 share capital Us$'000 amount treasury shares Us$'000 group and Company 2010 Beginning of financial year Utilisation of treasury shares for shares issued under employee options plans and performance share plan End of financial year 2009 Beginning of financial year Purchase of...

  • Page 50
    ... of the Company's shares. The following table presents the weighted average assumptions used in the Black Scholes option-pricing model for the share option grants. 2010 2009 Exercise price Expected volatility Risk-free interest rates Dividend yield Expected life of options (in years) - - - - - US...

  • Page 51
    ... year, 2,793,600 performance shares were granted on 31 March 2010 subject to the terms and conditions of the Plan. Of the total performance shares granted, 716,950 shares were vested immediately on the date of grant. The fair value of the performance shares is determined at the grant date using...

  • Page 52
    ... to employees. group 2010 Us$'000 2009 US$'000 Company 2010 Us$'000 2009 US$'000 (b) (i) Movements: Share-based compensation reserves Beginning of financial year Amortisation of deferred share compensation (Note 5) Utilisation of shares issued under performance share plan End of financial year 40...

  • Page 53
    ...shareholders' equity as an appropriation of retained earnings in the financial year ending 30 June 2011. 28. (a) coMMitMents capital and other commitments Capital and other expenditures contracted for at the balance sheet date but not recognised in the financial statements are as follows: group 2010...

  • Page 54
    ... Group level. The policies for managing each of these risks at the Group level are summarised below. (a) (i) Market risk Price risk As part of its long-term business strategy, from time to time, the Group makes strategic equity investments in companies that can provide the Group with technologies...

  • Page 55
    ... and 30 June 2009. The Group's currency exposure is as follows: Us$'000 balance denominated in: Us$ s$ eUro gBP others total group 2010 Financial assets Cash and cash equivalents Financial assets, available-for-sale Trade receivables Other receivables Other financial assets-deposits 42,168 19,060...

  • Page 56
    ... its customers, current economic trends, contractual terms and conditions and historical payment, returns and discount experience. The maximum exposure to credit risk for each class of financial instruments is the carrying amount of that class of financial instruments presented on the balance sheet...

  • Page 57
    ... 4) Allowance utilised End of financial year 5,379 17 - (317) 273 (52) 5,300 The impaired trade receivables arose mainly from sales to customers who significantly delayed their payments. (c) Liquidity risk To manage liquidity risk, the Group monitors its net operating cash flows and maintains an...

  • Page 58
    ... Group uses a variety of methods, such as asset values, and makes assumptions that are based on market conditions existing at each balance sheet date. These instruments are included in Level 3. The following table presents the changes in Level 3 instruments for the financial year ended 30 June 2010...

  • Page 59
    ...: group 2010 Us$'000 2009 US$'000 Short-term employees benefits Share-based expense 2,612 1,216 3,828 2,634 614 3,248 Included in the above is total compensation to the Chairman and Chief Executive Officer of the Company amounting to S$1 (2009: S$1). 31. seGMent inforMation Management determines...

  • Page 60
    ... the financial statements. These liabilities are allocated based on the operations of the segment. All liabilities are allocated to reportable segments. Summary of net sales by product category: group 2010 Us$'000 2009 US$'000 Personal Digital Entertainment Audio Speakers and Headphones All Other...

  • Page 61
    ...financial statements were authorised for issue in accordance with a resolution of the Board of Directors of CREATIVE TECHNOLOGY LTD. on 28 September 2010. 34. ListinG of siGnificant coMPanies in tHe GrouP name of companies Principal activities Country of business/ incorporation equity holding 2010...

  • Page 62
    Creative teChnology ltd and its sUBsidiaries sGx-st lIstInG MAnuAl RequIReMents - For the financial year ended 30 June 2010 additional requirements of sGx-st Listing Manual Directors' reMuneration The following information relates to remuneration of directors of the Company during the financial ...

  • Page 63
    ... shares 1 vote per share Based on the information available to the Company as at 13 September 2010, 63.14% of the issued ordinary shares of the Company is held by the public and therefore, Rule 723 of the Listing Manual issued by SGX-ST is complied with. size of shareholdings number of shareholders...

  • Page 64
    Creative teChnology ltd and its sUBsidiaries coRPoRAte InfoRMAtIon Board of Directors Sim Wong Hoo, Chairman Lee Kheng Nam, Director Ng Kai Wa, Director Lee Gwong-Yih, Director company secretary Ng Keh Long Registered Office 31 International Business Park Creative Resource Singapore 609921 Tel: 65-...