Creative 2011 Annual Report Download

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1
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
CONTENTS

Table of contents

  • Page 1
    ... 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 Consolidated Statement of Cash Flows Notes to the Financial Statements SGX-ST Listing...

  • Page 2
    ... and gross profit in the year, and restructuring charges of US$10.4 million. During the past year, despite the very challenging market conditions, we continued to push forward with the research and development of our ZMS media-rich StemCell processors, as well as products and services under the Zii...

  • Page 3
    ... a viable and cost effective solution that enables them to take the lead and launch new tablets, or just to stay competitive in the market. The announcement of JAGUAR3 is significant and timely. The huge investments we have made in ZiiLABS and the explosive nature of the market make it more prudent...

  • Page 4
    Creative teChnology ltd and its sUBsidiaries FINANCIAL HIGHLIGHTS AND REVIEW For the financial year ended 30 June 2011 overview Us$million 2011 Sales, net Gross profit Gross profit margin Expenses Net (loss) profit 231.0 49.1 21% 128.0 (47.1) 2010 275.3 68.9 25% 118.8 (38.4) Sales for the ...

  • Page 5
    ... for deferred tax liabilities in FY2010. Balance sheet The decrease in trade receivables by US$1.5 million and trade payables by US$3.5 million to US$27.5 million and US$20.6 million respectively as at 30 June 2011 were in line with the reduction in sales. The decrease in property and equipment...

  • Page 6
    ... Chief Executive Officer since its inception. Lee KHenG naM has been a Director of Creative since 1991. Mr Lee is presently a Venture Partner of GGV Capital. At the same time he is Chairman of Advantec Pte Ltd, an investment holding company. He is also the non-executive chairman of Vertex Management...

  • Page 7
    ... Committees"). Matters which are specifically reserved to the full Board for decision-making include those involving the review and approval of strategic plans, direction and policies, material acquisitions and disposals of assets, corporate or financial restructuring and share issuances, dividends...

  • 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
    ...; and to review any other long term incentive schemes which may be set up from time to time. The RC members are also members of the committees 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...

  • Page 10
    ... Group whose annual remuneration exceeds S$150,000 are immediate family members 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...

  • Page 11
    ... announces its quarterly and full year results within the regulatory periods. Material and price-sensitive information is publicly released via SGXNET on a timely basis. All shareholders of the Company receive the annual report of the Company and the notice of the Annual General Meeting, for which...

  • Page 12
    ... the members together with the audited financial statements of the Group for the financial year ended 30 June 2011 and the balance sheet of the Company as at 30 June 2011. 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
    ... outstanding as at 30.6.2011 name of director aggregate options lapsed Lee Kheng Nam Ng Kai Wa - - 160,000 80,000 80,000 - 80,000 80,000 - - During the financial year ended 30 June 2011, the Company re-issued 66,000 (2010: 7,000) treasury shares pursuant to exercises under the 1999 Scheme...

  • Page 14
    ...4 annual performance periods subject to the completion of service and the achievement of prescribed performance targets in each of the performance periods. There were no awards granted under the Plan during the financial year ended 30 June 2011. Details of the Directors' performance share awards are...

  • Page 15
    .... The Committee also reviewed interested person transactions, the effectiveness of 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...

  • Page 16
    Creative teChnology ltd and its sUBsidiaries STATEMENT BY DIRECTORS For the financial year ended 30 June 2011 In the opinion of the directors, (a) the balance sheet of the Company and the consolidated financial statements of the Group as set out on pages 18 to 61 are drawn up so as to give a true ...

  • Page 17
    ... the balance sheet of the Company as at 30 June 2011, the consolidated statement of comprehensive income, the consolidated statement of changes in equity and the consolidated statement of cash flows of the Group for the financial year then ended, and a summary of significant accounting policies and...

  • Page 18
    Creative teChnology ltd and its sUBsidiaries CONSOLIDATED INCOME STATEMENT For the financial year ended 30 June 2011 group note 2011 Us$'000 2010 US$'000 Sales, net Cost of goods sold gross profit Expenses: Selling, general and administrative Research and development total expenses Other income ...

  • Page 19
    ... STATEMENT OF COMPREHENSIVE INCOME For the financial year ended 30 June 2011 group 2011 Us$'000 2010 US$'000 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...

  • Page 20
    Creative teChnology ltd and its sUBsidiaries BALANCE SHEETS As at 30 June 2011 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
    Creative teChnology ltd and its sUBsidiaries CONSOLIDATED STATEMENT OF CHANGES IN EQUITY For the financial year ended 30 June 2011 note share capital Us$'000 treasury shares Us$'000 Fair value reserve Us$'000 other reserves Us$'000 retained earnings Us$'000 total Us$'000 non-controlling ...

  • Page 22
    ... ) Purchase of financial assets, available-for-sale Purchase of investments in associated companies Purchase of intangible assets Dividend received net cash (used in) provided by investing activities Cash flows from financing activities: Proceeds from exercise of share options Performance share plan...

  • Page 23
    ... FINANCIAL STATEMENTS For the financial year ended 30 June 2011 These notes form an integral part of and should be read in conjunction with the accompanying financial statements. 1. GeneraL inforMation Creative Technology Ltd. (the "Company") is listed on the Singapore Exchange Securities Trading...

  • Page 24
    ... 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 25
    ...These costs are amortised to profit or loss using the straight-line method over the shorter of the contractual rights and estimated useful lives of the assets, ranging from one to ten years. The amortisation period and amortisation method are reviewed at least at each balance sheet date. The effects...

  • Page 26
    ...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 purchase or sell the asset. Financial assets are derecognised when the rights to receive cash flows from the financial assets...

  • Page 27
    ... at fair value. Loans and receivables are subsequently carried at amortised cost using the effective interest method. Interest and dividend income on financial assets, available-for-sale are recognised separately in profit or loss. Changes in fair values of available-for-sale equity securities are...

  • Page 28
    ...improvements 20 to 50 years 1 to 6 years 1 to 8 years Shorter of lease term or useful life The residual values, estimated useful lives and depreciation methods are reviewed and adjusted as appropriate, at each balance sheet date. The effects of any revision are recognised in profit or loss when the...

  • Page 29
    .... 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 financial assets and liabilities carried at amortised cost approximate their carrying amounts. 2.13 revenue recognition Sales comprise the...

  • Page 30
    Creative teChnology ltd and its sUBsidiaries NOTES TO THE FINANCIAL STATEMENTS For the financial year ended 30 June 2011 2. siGnificant accountinG PoLicies (cont'd) 2.15 income taxes (cont'd) that the temporary difference will not reverse in the foreseeable future. A deferred income tax asset is ...

  • Page 31
    ... the benefits will accrue to the employee under the plan over the prescribed vesting periods from date of grant. No adjustments to the amounts charged to profit or loss are made whether or not the market condition is met. For performance share grants with non-market conditions, the Company revises...

  • Page 32
    Creative teChnology ltd and its sUBsidiaries NOTES TO THE FINANCIAL STATEMENTS For the financial year ended 30 June 2011 2. siGnificant accountinG PoLicies (cont'd) 2.20 share capital and treasury shares Ordinary shares are classified as equity. Incremental costs directly attributable to the ...

  • Page 33
    ... development plans, quality issues, and current inventory levels. The markets for PC peripherals and personal digital entertainment products are subject to a rapid and unpredictable pace of product and component obsolescence and demand changes. If future demand or market conditions for the Group...

  • Page 34
    Creative teChnology ltd and its sUBsidiaries NOTES TO THE FINANCIAL STATEMENTS For the financial year ended 30 June 2011 4. exPenses BY nature Included in the cost of goods sold, selling, general and administrative and research and development expenses are the following: group 2011 Us$'000 2010 ...

  • Page 35
    Creative teChnology ltd and its sUBsidiaries 7. otHer Gains, net group 2011 Us$'000 2010 US$'000 Impairment loss of financial assets, available-for-sale (Note 15) Net impairment loss of investments in associated companies Gain on disposal of financial assets, available-for-sale Gain on dilution ...

  • Page 36
    Creative teChnology ltd and its sUBsidiaries NOTES TO THE FINANCIAL STATEMENTS For the financial year ended 30 June 2011 8. incoMe taxes (cont'd) The tax credit on results differs from the amount that would arise using the Singapore standard rate of income tax as explained below: group 2011 Us$'...

  • Page 37
    ... have been issued at fair value (determined as the Company's average share price for the financial year) for the same total proceeds is added to the denominator as the number of shares issued for no consideration. No adjustment is made to net loss. For the financial years ended 30 June 2011 and 30...

  • Page 38
    Creative teChnology ltd and its sUBsidiaries NOTES TO THE FINANCIAL STATEMENTS For the financial year ended 30 June 2011 12. aMounts Due froM (to) suBsiDiaries Company 2011 Us$'000 2010 US$'000 Amounts due from subsidiaries - current - Trade - Non-trade Less: Allowance for impairment 52,783 11,...

  • Page 39
    Creative teChnology ltd and its sUBsidiaries 14. otHer current assets group 2011 Us$'000 2010 US$'000 Company 2011 Us$'000 2010 US$'000 Prepaid expenses and security deposits Prepaid non-income taxes Other receivables from associated companies Other receivables from non-related parties Loan to ...

  • Page 40
    ...repayment terms. Management has assessed the fair values of other non-current receivables and concluded that the fair values as at balance sheet date approximate carrying values. 17. investMents in suBsiDiaries Company 2011 Us$'000 2010 US$'000 Equity investments at cost Beginning of financial year...

  • Page 41
    Creative teChnology ltd and its sUBsidiaries In the financial year ended 30 June 2011, the Group's wholly-owned subsidiary, Vue Networks Pte Ltd, has issued 1,999,998 new ordinary shares for a cash consideration of S$1,999,998. As a result of the shares issuance, the Group's interest in Vue ...

  • Page 42
    ...STATEMENTS For the financial year ended 30 June 2011 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 2011 Cost Beginning...

  • Page 43
    ... and office equipment Us$'000 total Us$'000 Company 2011 Cost Beginning of financial year Additions Disposals End of financial year Accumulated depreciation Beginning of financial year Depreciation charge Disposals End of financial year Net book value end of financial year 2010 Cost Beginning of...

  • Page 44
    Creative teChnology ltd and its sUBsidiaries NOTES TO THE FINANCIAL STATEMENTS For the financial year ended 30 June 2011 19. intanGiBLe assets group 2011 Us$'000 2010 US$'000 Company 2011 Us$'000 2010 US$'000 Composition: Goodwill arising on consolidation (Note (a)) Trademarks and licences (Note...

  • Page 45
    Creative teChnology ltd and its sUBsidiaries 20. otHer non-current assets group 2011 Us$'000 2010 US$'000 Company 2011 Us$'000 2010 US$'000 Security deposits Others 11,972 3,628 15,600 21,081 1,124 22,205 - 1,422 1,422 - 998 998 The Group's security deposits pertain to the sales and ...

  • Page 46
    ... product failures (if any), historical experience, and other currently available evidence. Movements in provision for warranty are as follows: group 2011 Us$'000 2010 US$'000 Company 2011 Us$'000 2010 US$'000 Beginning of financial year Provision (written back) made (Note 4) Provision utilised End...

  • Page 47
    Creative teChnology ltd and its sUBsidiaries 23. DeferreD incoMe tax LiaBiLities Movements in deferred income tax account are as follows: group 2011 Us$'000 2010 US$'000 Company 2011 Us$'000 2010 US$'000 Beginning of financial year Singapore tax concession on offshore interest income remitted ...

  • Page 48
    ... forward from the previous financial years can be used to offset certain future tax liabilities. Respectively, the Group and the Company have unrecognised tax losses of approximately US$466,000,000 and US$147,000,000 (2010: US$405,000,000 and US$95,000,000) at the balance sheet date which can be...

  • Page 49
    Creative teChnology ltd and its sUBsidiaries 24. sHare caPitaL anD treasurY sHares number of ordinary shares issued share capital '000 treasury shares '000 share capital Us$'000 amount treasury shares Us$'000 group and Company 2011 Beginning of financial year Utilisation of treasury shares for ...

  • Page 50
    ... 8.20 5.70 2.84 6.25 5.57 5.69 Options exercised in the financial year ended 30 June 2011 resulted in 66,000 treasury shares (2010: 7,000) being re-issued at the exercise price of US$2.84 (2010: US$3.58) each. The weighted average share price at the date of exercise was US$3.11 (2010: US$4.27) per...

  • Page 51
    .... Capital reserves arose from changes of interests in the group companies in prior financial years. Share-based compensation reserves comprised mainly of compensation expense for share options, tax benefits relating to exercise of non qualified share options by US employees, performance share plans...

  • Page 52
    Creative teChnology ltd and its sUBsidiaries NOTES TO THE FINANCIAL STATEMENTS For the financial year ended 30 June 2011 25. otHer reserves (cont'd) group 2011 Us$'000 2010 US$'000 Company 2011 Us$'000 2010 US$'000 (b) Movements: Share-based compensation reserves Beginning of financial year ...

  • Page 53
    Creative teChnology ltd and its sUBsidiaries 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 2011 Us$'000 2010 US$'000 Company 2011 Us$'000 2010 US$'000 ...

  • Page 54
    ... 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 or products that...

  • Page 55
    Creative teChnology ltd and its sUBsidiaries The Group's currency exposure is as follows: Us$ Us$'000 s$ Us$'000 eUro Us$'000 gBP Us$'000 others Us$'000 total Us$'000 group 2011 Financial assets Cash and cash equivalents Financial assets, available-for-sale Trade receivables Other receivables ...

  • Page 56
    ... equipment manufacturers, distributors and key retailers. The Group believes that the concentration of credit risk in its trade receivables is substantially mitigated due to performance of ongoing credit evaluations of its customers' financial condition, use of short collection terms, use of letters...

  • Page 57
    ... 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 2011...

  • Page 58
    ... year ended 30 June 2011 30. reLateD PartY transactions In addition to the information disclosed elsewhere in the financial statements, the following transactions took place between the Group and related parties at terms agreed between the parties: (a) sales and purchases of goods and services...

  • Page 59
    ... net Share of loss of associated companies Interest expense (Loss) profit before income tax Income tax credit (expense) net (loss) profit other segment items Additions to - property and equipment - intangible assets Depreciation Amortisation Impairment of financial assets, available-for sale segment...

  • Page 60
    ...2011 Us$'000 2010 US$'000 Personal Digital Entertainment Audio Speakers and Headphones All Other Products 55,842 43,861 98,420 32,902 231,025 81,920 51,623 98,730 43,034 275,307 There was no customer who accounted for 10% or more of net revenues for the current and prior financial years. 32. neW...

  • Page 61
    ... in tHe GrouP name of companies Principal activities Country of business/ incorporation equity holding 2011 % significant subsidiaries held by the group Creative Labs, Inc. (a) Distribution of digitised sound and video boards, computers, related multimedia and personal digital entertainment products...

  • Page 62
    Creative teChnology ltd and its sUBsidiaries SGX-ST LISTING MANUAL REQUIREMENTS For the financial year ended 30 June 2011 additional requirements of sGx-st Listing Manual Directors' reMuneration The following information relates to remuneration of directors of the Company during the financial year...

  • Page 63
    ...69%) Ordinary shares 1 vote per share Based on the information available to the Company as at 12 September 2011, 63.24% 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...

  • Page 64
    ... 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: 65-6895-4000...