Creative 2013 Annual Report Download

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1
Chairman’s Message 2
Financial Highlights and Review 4
Board of Directors and Execuve 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 Lisng Manual Requirements 62
CONTENTS

Table of contents

  • Page 1
    ... 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 Consolidated Statement of Cash Flows Notes to the Financial Statements...

  • Page 2
    ...have recently introduced the Sound BlasterAxx AXX 200 sound system - a game-changing audio product that I envisage will radically transform the way the new generation of networked mobile device users interact with music, videos, movies, games, as well as voice communications. Powered by the built-in...

  • Page 3
    ... such as the all-new ShareMe technology that allows two listeners of ShareMe-enabled Creative wireless headsets to easily link the two headsets wirelessly to a single smart device and share their audio simultaneously. Looking ahead, for the current fiscal year, the Group expects no major improvement...

  • Page 4
    ... due to the uncertain and difficult market conditions which affected the sales of the Group's products and impacted sales across all three geographical regions. US$million Sales by Product Category Personal Digital Entertainment Audio Speakers and Headphones All Other Products 2013 13.6 33.5 88.5 29...

  • Page 5
    ... subsidiary, QMax Communications Pte Ltd ("QMax"), for its wireless broadband project in Singapore, US$8.1 million currency translation loss, and US$3.4 million impairment loss on investments, offset partially by US$7.1 million net gain on disposal of investments. The Group's income tax credit of US...

  • Page 6
    ... Financial Officer SIM WONG HOO founded Creative in 1981 and has been its Chairman of the Board and Chief Executive Officer since its inception. LEE KHENG NAM has been a Director of Creative since 1991. He is presently a Venture Partner of GGV Capital since 2005. He is also Chairman of Advantec Pte...

  • Page 7
    ... the meeting. The number of Board and Board Committee meetings held in the financial year ended 30 June 2013 and the attendance of directors during these meetings is as follows: Name of Director Board Audit Committee Remuneration Committee Nominating Committee (Number of Meetings Held) Sim Wong Hoo...

  • Page 8
    CREATIVE TECHNOLOGY LTD AND ITS SUBSIDIARIES For the financial year ended 30 June 2013 CORPORATE GOVERNANCE PRINCIPLE 3: CHAIRMAN 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-...

  • Page 9
    ... 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 Chairman of the RC, has been receiving a nominal sum of S$1 as his annual remuneration since the financial year ended 30...

  • 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
    ... to Boardroom Business Solutions Pte. Ltd. The internal audit team performs risk assessment and conducts the review of the effectiveness of the Group's internal controls, including financial, operational and compliance controls and risk management systems. The internal auditors have unrestricted...

  • Page 12
    ...% of the issued capital of Creative Technology Ltd., Mr Sim Wong Hoo is also deemed under the Companies Act to have interests in all of the Company's subsidiaries. (b) According to the register of directors' shareholdings, none of the directors holding office at the end of the financial year had any...

  • Page 13
    ... the average of the closing prices of the Company's shares as quoted on the Singapore Exchange Securities Trading Limited ("SGX-ST") or the National Association of Securities Dealers Automated Quotations ("NASDAQ") for five market days preceding the date of the grant. Options expire after the tenth...

  • Page 14
    ... 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 15
    CREATIVE TECHNOLOGY LTD AND ITS SUBSIDIARIES 8. INDEPENDENT AUDITOR The independent auditor, PricewaterhouseCoopers LLP, has expressed its willingness to accept re-appointment. On behalf of the directors Sim Wong Hoo Director 25 September 2013 Lee Kheng Nam Director 15

  • Page 16
    ... the business, changes 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...

  • Page 17
    ... of the Act and Singapore Financial Reporting Standards so as to give a true and fair view of the state of affairs of the Group and of the Company as at 30 June 2013, and the results, changes in equity and cash flows of the Group for the financial year ended on that date. Report on other Legal and...

  • Page 18
    CREATIVE TECHNOLOGY LTD AND ITS SUBSIDIARIES For the financial year ended 30 June 2013 CONSOLIDATED INCOME STATEMENT Group Note 2013 US$'000 2012 US$'000 Sales, net Cost of goods sold Gross profit Expenses: Selling, general and administrative Research and development Total expenses Other income ...

  • Page 19
    CREATIVE TECHNOLOGY LTD AND ITS SUBSIDIARIES CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME Group 2013 US$'000 2012 US$'000 For the financial year ended 30 June 2013 Net profit (loss) Other comprehensive income: Fair value gains (losses) of financial assets, available-for-sale: Fair value gains (...

  • Page 20
    CREATIVE TECHNOLOGY LTD AND ITS SUBSIDIARIES As at 30 June 2013 BALANCE SHEETS Group Note ASSETS Current assets: Cash and cash equivalents Trade receivables Amounts due from subsidiaries Inventories Property and equipment held for sale Other current assets Non-current assets: Financial assets, ...

  • Page 21
    CREATIVE TECHNOLOGY LTD AND ITS SUBSIDIARIES CONSOLIDATED STATEMENT OF CHANGES IN EQUITY Share capital US$'000 Treasury shares US$'000 Fair value reserve US$'000 Other Accumulated reserves losses US$'000 US$'000 Non-controlling Total interests equity US$'000 US$'000 For the financial year ended 30...

  • Page 22
    ... year ended 30 June 2013 CONSOLIDATED STATEMENT OF CASH FLOWS Group Cash flows from operating activities: Net profit (loss) Adjustments for: Income tax (credit) expense Depreciation of property and equipment Amortisation of intangible assets Employee share-based expense Share of loss of associated...

  • Page 23
    ... year ended 30 June 2013 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 #03-01 Creative Resource Singapore...

  • Page 24
    ... 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 are recognised in profit or loss and its share of post-acquisition movements in reserves...

  • Page 25
    ... 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 of any revision are recognised in profit or loss when the changes arise. 2.4 Impairment of non-financial...

  • 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
    ... in profit or loss. Changes in fair values of available-for-sale equity securities are recognised in the fair value reserve, together with the related currency translation differences. (e) Impairment The Group assesses at each balance sheet date whether there is objective evidence that a financial...

  • Page 28
    ..., fixtures and office equipment Leasehold improvements 20 to 30 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...

  • 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
    ... reference to the fair value of the options granted on the date of the grant. Non-market vesting conditions are included in the estimation of the number of shares under options that are expected to become exercisable on the vesting date. At each balance sheet date, the Group revises its estimates of...

  • Page 31
    ... is a market condition, the probability of the performance target being met is taken into account in estimating the fair value of the ordinary shares granted at the grant date. The compensation expense is charged to profit or loss on a basis that fairly reflects the manner in which the benefits will...

  • Page 32
    ...the treasury share account and the realised gain or loss on sale or reissue, net of any directly attributable incremental transaction costs and related income tax, is recognised as a change in equity of the Company. 2.21 Dividends to Company's shareholders Dividends to the Company's shareholders are...

  • Page 33
    ... 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 and unpredictable pace of product and component obsolescence and demand changes. If future demand or market conditions for...

  • Page 34
    CREATIVE TECHNOLOGY LTD AND ITS SUBSIDIARIES For the financial year ended 30 June 2013 NOTES TO THE FINANCIAL STATEMENTS 5. EMPLOYEE COMPENSATION Group 2013 US$'000 2012 US$'000 Wages and salaries Employer's contribution to defined contribution plans including Central Provident Fund Employee ...

  • Page 35
    ... equipment and related intangible assets for the project, as well as provisions for commitments for other expenditures and obligations to third parties relating to the project. 8. INCOME TAXES Group 2013 US$'000 2012 US$'000 Tax (credit) expense attributable to profit (loss) is made up of: Current...

  • Page 36
    CREATIVE TECHNOLOGY LTD AND ITS SUBSIDIARIES For the financial year ended 30 June 2013 NOTES TO THE FINANCIAL STATEMENTS 9. EARNINGS (LOSS) PER SHARE Group 2013 Basic US$'000 Diluted US$'000 Basic US$'000 2012 Diluted US$'000 Net profit (loss) attributable to equity holders of the Company 16,...

  • Page 37
    ...in escrow account (Note 17) Cash and cash equivalents per consolidated statement of cash flows 163,574 (4,500) 159,074 131,432 - 131,432 11. TRADE RECEIVABLES Group 2013 US$'000 2012 US$'000 2013 US$'000 Company 2012 US$'000 Trade receivables - Associated companies - Non-related parties 531 20...

  • Page 38
    .... Management 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 2013 US$'000 2012 US$'000 2013 US$'000 Company 2012 US$'000 Raw materials Work-in...

  • Page 39
    ... year ended 30 June 2011. The other receivables from associated companies and non-related parties are unsecured, interest-free and repayable on demand. 15. FINANCIAL ASSETS, AVAILABLE-FOR-SALE Group 2013 US$'000 2012 US$'000 2013 US$'000 Company 2012 US$'000 Beginning of financial year Fair value...

  • Page 40
    ... financial year ended 30 June 2013 NOTES TO THE FINANCIAL STATEMENTS FINANCIAL ASSETS, AVAILABLE-FOR-SALE (cont'd) Available-for-sale financial assets are analysed as follows: Group 2013 US$'000 2012 US$'000 2013 US$'000 Company 2012 US$'000 15. Listed equity securities Unlisted equity securities...

  • Page 41
    ...of the Group in the financial years ended 30 June 2013 and 2012 are as follows: Group Disposal Carrying amount 2013 US$'000 2012 US$'000 Identifiable assets and liabilities Cash and cash equivalents Other current assets Property and equipment (Note 18) Intangible assets (Note 19) Total assets Trade...

  • Page 42
    ... financial year ended 30 June 2013 NOTES TO THE FINANCIAL STATEMENTS PROPERTY AND EQUIPMENT Machinery and equipment US$'000 Furniture, fixtures and office equipment US$'000 18. Leasehold improvements US$'000 Land and buildings US$'000 Total US$'000 Group 2013 Cost Beginning of financial year...

  • Page 43
    ...was sold in the financial year ended 30 June 2013 for net proceeds of US$5,903,000. Machinery and equipment US$'000 Furniture, fixtures and office equipment US$'000 Leasehold improvements US$'000 Total US$'000 Company 2013 Cost Beginning of financial year Additions Disposals End of financial year...

  • Page 44
    CREATIVE TECHNOLOGY LTD AND ITS SUBSIDIARIES For the financial year ended 30 June 2013 NOTES TO THE FINANCIAL STATEMENTS 19. INTANGIBLE ASSETS Group 2013 US$'000 2012 US$'000 2013 US$'000 Company 2012 US$'000 Goodwill arising on consolidation (Note (a)) Trademarks and licences (Note (b)) - - -...

  • Page 45
    CREATIVE TECHNOLOGY LTD AND ITS SUBSIDIARIES Amortisation expense included in profit or loss is analysed as follows: Group 2013 US$'000 2012 US$'000 Cost of goods sold Research and development expenses - - - 210 59 269 20. OTHER NON-CURRENT ASSETS Group 2013 US$'000 2012 US$'000 2013 US$'000 ...

  • Page 46
    ...experience, and other currently available evidence. Movements in provision for warranty are as follows: Group 2013 US$'000 2012 US$'000 2013 US$'000 Company 2012 US$'000 22. (a) Beginning of financial year Provision made (written back) (Note 4) Provision utilised End of financial year 974 295 (16...

  • Page 47
    ... profits of foreign subsidiaries US$'000 Transfer pricing and withholding tax US$'000 Others US$'000 Total deferred tax liabilities US$'000 Net deferred tax liabilities US$'000 Group 2013 Beginning of financial year Over provision in prior financial years End of financial year 2012 Beginning...

  • Page 48
    ... of the related tax benefits through future taxable profit is probable. The deferred tax asset of US$11,800,000 as at the financial years ended 30 June 2013 and 2012 pertains to losses brought forward from the previous financial years which can be used to offset certain future tax liabilities...

  • Page 49
    ... Treasury shares '000 Share capital US$'000 Amount Treasury shares US$'000 Group and Company 2013 Beginning of financial year Utilisation of treasury shares for shares issued under employee options plans and performance share plan End of financial year 2012 Beginning of financial year Purchase of...

  • Page 50
    CREATIVE TECHNOLOGY LTD AND ITS SUBSIDIARIES For the financial year ended 30 June 2013 NOTES TO THE FINANCIAL STATEMENTS SHARE CAPITAL AND TREASURY SHARES (cont'd) Share options (cont'd) were made to the 1999 Scheme to allow the use of treasury shares to satisfy share based exercises. The options ...

  • Page 51
    ... the Plan during the financial years ended 30 June 2013 and 2012. The fair value of the performance shares is determined at the grant date using the Monte Carlo simulation model which involves projecting future outcomes based on statistical distributions of key random variables including share price...

  • Page 52
    ... 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 and Chairman...

  • Page 53
    ...year ended 30 June 2012, the Group leases out office space to non-related parties under non-cancellable operating leases. The future minimum lease receivables under non-cancellable operating leases contracted for at the balance sheet date but not recognised as receivables, are as follows: Group 2013...

  • 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 2013 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
    ... quoted market prices at the balance sheet date. These instruments are included in Level 1. 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...

  • Page 58
    ...statements, the following transactions took place between the Group and related parties at terms agreed between the parties: 30. (a) Sales and purchases of goods and services Group 2013 US$'000 2012 US$'000 Sales of goods and/or services to associated companies Purchases of goods and/or services...

  • Page 59
    ... gains, net Share of loss of associated companies Profit before income tax Income tax credit (expense) Net profit Other segment items Additions to - property and equipment Depreciation Impairment of financial assets, available-for sale Segment assets Segment liabilities Group 2012 Sales (Loss) gain...

  • Page 60
    ...Included in sales of all other products in the financial year ended 30 June 2013 is a one time US$20.0 million licensing income. There was no customer who accounted for 10% or more of net revenues for the current and prior financial years. 32. NEW OR REVISED ACCOUNTING STANDARDS AND INTERPRETATIONS...

  • Page 61
    ...sound and video boards, computers, related multimedia and personal digital entertainment products Property rental Provision of data communications, telecommunications, wireless broadband and related services Investment holding Investment holding United States of America 100 100 2012 % Creative Labs...

  • Page 62
    ... member firms outside Singapore 264 35 382 47 92 14 92 35 The Group has complied with Rules 712 and 715 or 716 of the Listing Manual issued by SGX-ST in relation to its auditors. The Audit Committee has reviewed all non-audit services provided by the auditor of the Company and in the...

  • Page 63
    ...TWENTY LARGEST SHAREHOLDERS Name of shareholder Number of shares Percentage (%) 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 Sim Wong Hoo DBS Nominees Pte Ltd Citibank Nominees Singapore Pte Ltd Raffles Nominees (Pte) Ltd United Overseas Bank Nominees Pte Ltd OCBC Nominees Singapore Pte Ltd...

  • Page 64
    ... Non-Executive Director Company Secretary Ng Keh Long Registered Office 31 International Business Park #03-01 Creative Resource Singapore 609921 Tel: 65-6895-4000 Email: [email protected] Share Registrar Boardroom Corporate & Advisory Services Pte. Ltd. 50 Raffles Place #32-01 Singapore...