Creative 2015 Annual Report Download

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1
Chairman’s Message 2
Financial Highlights and Review 3
Board of Directors and Execuve Ocers 5
Corporate Governance 6
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
    ... 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 Consolidated Statement of Cash Flows Notes to the Financial...

  • Page 2
    ... worldwide headcount and costs. With a lower cost structure, and the potential revenue growth opportunities provided by the introduction of new products, the Group is working towards an improvement in financial performance for the year. Thank you Sim Wong Hoo Chairman & Chief Executive Officer 2

  • Page 3
    CREATIVE TECHNOLOGY LTD AND ITS SUBSIDIARIES FINANCIAL HIGHLIGHTS AND REVIEW For the financial year ended 30 June 2015 Overview US$million 2015 Sales, net Gross profit Gross profit margin Expenses Net loss 99.5 28.5 29% 55.8 33.4 2014 116.3 30.1 26% 59.6 21.8 Sales for the financial year ended ...

  • Page 4
    ...transfer pricing and withholding tax exposure of foreign subsidiaries. Balance Sheet The decrease in cash and cash equivalents was due mainly to net cash used in operating activities and exchange loss on translation of cash and cash equivalents. The decrease in financial assets available-for-sale by...

  • Page 5
    ... 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 and also Chairman of Advantec Pte Ltd, an investment holding company. Mr. Lee is also currently Deputy Chairman of...

  • Page 6
    ... 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 by telephone conference or video...

  • Page 7
    ... Group. No individual or small group of individuals dominates the Board's decision-making. 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-Executive Directors have...

  • Page 8
    ... 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 9
    ... the top five key executives for the financial year ended 30 June 2015 was S$1,323,000. None of the employees of the Group whose annual remuneration exceeds S$50,000 are immediate family members of the CEO or any other Director of the Company. Details of the Creative Employee Share Option Plans and...

  • Page 10
    ... TECHNOLOGY LTD AND ITS SUBSIDIARIES For the financial year ended 30 June 2015 CORPORATE GOVERNANCE PRINCIPLE 11: RISK MANAGEMENT AND INTERNAL CONTROLS (cont'd) The Board reviews the Group's business and operational activities as presented by the management to identify areas of significant risks...

  • Page 11
    ...the release of the Group's results. Shareholders may also seek clarification on investor related issues by email provided in the Company's website at www.creative.com. The Company pays an annual dividend, taking into consideration the Company's financial performance, present cash position, projected...

  • Page 12
    ...' shareholdings, none of the directors holding office at the end of the financial year had any interests in options to subscribe for ordinary shares of the Company granted pursuant to the Creative Technology (1999) Share Option Scheme as set out under "Share options" on pages 13 to 14 of this report...

  • Page 13
    ... 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 employees as well as consultants and non-executive directors. The total number...

  • Page 14
    ... employees and non-executive directors of the Company and its subsidiaries, provided that certain prescribed performance targets are met and/or upon expiry of the prescribed vesting periods. The aggregate number of shares for which an Award may be granted on any date under the Plan, when added...

  • Page 15
    ...the system of internal accounting control of the Company and its subsidiaries. The Committee also reviewed the requirements for approval and disclosure of interested person transactions. The Committee reviewed the balance sheet of the Company and the consolidated financial statements of the Group as...

  • Page 16
    ... 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 Lee Kheng Nam Director...

  • Page 17
    ...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 other explanatory information. Management's Responsibility for the Financial Statements Management is responsible for the preparation...

  • Page 18
    CREATIVE TECHNOLOGY LTD AND ITS SUBSIDIARIES For the financial year ended 30 June 2015 CONSOLIDATED INCOME STATEMENT Group Note 2015 US$'000 2014 US$'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 Group 2015 US$'000 2014 US$'000 For the financial year ended 30 June 2015 Net loss Other comprehensive income (loss): Items that may be reclassified subsequently to profit or loss: Fair value gains (losses) of financial assets, available-for-sale: Fair value...

  • Page 20
    ...2015 BALANCE SHEETS 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 Amounts due from subsidiaries Investments in subsidiaries Property and equipment...

  • Page 21
    ... 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$'000 For the financial year ended 30 June 2015 Note Total US$'000 2015 Beginning...

  • Page 22
    CREATIVE TECHNOLOGY LTD AND ITS SUBSIDIARIES For the financial year ended 30 June 2015 CONSOLIDATED STATEMENT OF CASH FLOWS Group Cash flows from operating activities: Net loss Adjustments for: Income tax credit Depreciation of property and equipment Employee share-based expense (Gain) loss on ...

  • Page 23
    .... 1. GENERAL INFORMATION For the financial year ended 30 June 2015 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...

  • Page 24
    ... year ended 30 June 2015 NOTES TO THE FINANCIAL STATEMENTS SIGNIFICANT ACCOUNTING POLICIES (cont'd) Group accounting (cont'd) (a) Subsidiaries (cont'd) 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...

  • Page 25
    ...and associated companies" for the accounting policy on investments in associated companies in the separate financial statements of the Company. 2.3 Intangible assets (a) Goodwill on acquisitions Goodwill represents the excess of the cost of an acquisition over the fair value of the Group's share of...

  • Page 26
    CREATIVE TECHNOLOGY LTD AND ITS SUBSIDIARIES For the financial year ended 30 June 2015 NOTES TO THE FINANCIAL STATEMENTS SIGNIFICANT ACCOUNTING POLICIES (cont'd) 2. 2.4 Impairment of non-financial assets (cont'd) (b) Intangible assets Property and equipment Investments in subsidiaries and ...

  • Page 27
    CREATIVE TECHNOLOGY LTD AND ITS SUBSIDIARIES (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 ...

  • Page 28
    CREATIVE TECHNOLOGY LTD AND ITS SUBSIDIARIES For the financial year ended 30 June 2015 NOTES TO THE FINANCIAL STATEMENTS SIGNIFICANT ACCOUNTING POLICIES (cont'd) Inventories Inventories are carried at the lower of cost and net realisable value. Cost is determined using standard cost, appropriately...

  • 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
    ... 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 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
    ...any accounting period. The Group may take action when necessary in response to market conditions to increase customer incentive offerings, possibly resulting in an incremental reduction of revenue at the time the incentive is offered. The Group's net revenue for the financial year ended 30 June 2015...

  • Page 33
    ... sheet date to establish provisions for excess and obsolete inventories. Management's evaluation includes a review of, among other factors, historical sales, current economic trends, forecasted sales, demand requirements, product life cycle and product development plans, quality issues, and current...

  • Page 34
    CREATIVE TECHNOLOGY LTD AND ITS SUBSIDIARIES For the financial year ended 30 June 2015 NOTES TO THE FINANCIAL STATEMENTS 5. EMPLOYEE COMPENSATION Group 2015 US$'000 2014 US$'000 Wages and salaries Employer's contribution to defined contribution plans including Central Provident Fund Termination...

  • Page 35
    CREATIVE TECHNOLOGY LTD AND ITS SUBSIDIARIES 9. INCOME TAXES Group 2015 US$'000 2014 US$'000 Tax (credit) expense attributable to profit (loss) is made up of: Current income tax: - Tax expense for current financial year - Withholding tax Over provision in respect of previous years : - Current ...

  • Page 36
    CREATIVE TECHNOLOGY LTD AND ITS SUBSIDIARIES For the financial year ended 30 June 2015 NOTES TO THE FINANCIAL STATEMENTS 10. LOSS PER SHARE Group 2015 Basic US$'000 Diluted US$'000 Basic US$'000 2014 Diluted US$'000 Net loss attributable to equity holders of the Company (33,400) (33,400) (21...

  • Page 37
    ...$4,500,000 proceeds released from escrow account relating to the divestment of ZiiLABS Limited in the financial year ended 30 June 2013. 12. TRADE RECEIVABLES Group 2015 US$'000 2014 US$'000 2015 US$'000 Company 2014 US$'000 Trade receivables - Associated companies - Non-related parties 217 13,774...

  • Page 38
    ... 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. 14. INVENTORIES Group 2015 US$'000 2014 US$'000 2015 US$'000 Company 2014 US$'000 Raw materials Finished products 4,933 23,946...

  • Page 39
    ... year ended 30 June 2009. The other receivables from associated companies and non-related parties are unsecured, interest-free and repayable on demand. 16. FINANCIAL ASSETS, AVAILABLE-FOR-SALE Group 2015 US$'000 2014 US$'000 2015 US$'000 Company 2014 US$'000 Beginning of financial year Fair value...

  • Page 40
    ... expansion purpose. All issued ordinary shares of Creative Labs Pte Ltd are subscribed and fully paid by the Company. In the financial year ended 30 June 2014, the Company has disposed its entire 60% equity interest in a subsidiary, MLK Industry Limited, for a cash consideration of US$163,000...

  • Page 41
    CREATIVE TECHNOLOGY LTD AND ITS SUBSIDIARIES The aggregate effects of the disposal of a subsidiary on the cashflows of the Group in the financial year ended 30 June 2014 are as follows: Group Disposal Carrying amount 2014 US$'000 Identifiable assets and liabilities Cash and cash equivalents Total ...

  • Page 42
    ... financial year ended 30 June 2015 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 2015 Cost Beginning of financial year...

  • Page 43
    ..., fixtures and office equipment US$'000 Total US$'000 Company 2015 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 1,739 1 (25...

  • Page 44
    ...262 - 2,262 - (b) Trademarks and licences Group 2015 US$'000 2014 US$'000 2015 US$'000 Company 2014 US$'000 Cost Beginning of financial year Write-off End of financial year Accumulated amortisation Beginning of financial year Write-off End of financial year Net book value 16,574 (4,727) 11,847...

  • Page 45
    ...TECHNOLOGY LTD AND ITS SUBSIDIARIES 20. OTHER NON-CURRENT ASSETS Group 2015 US$'000 2014 US$'000 2015 US$'000 Company 2014 US$'000 Security deposits 88 88 98 98 - - - - 21. TRADE PAYABLES Group 2015 US$'000 2014 US$'000 2015 US$'000 Company 2014 US$'000 Trade payables - Non-related parties...

  • Page 46
    ... For the financial year ended 30 June 2015 NOTES TO THE FINANCIAL STATEMENTS ACCRUED LIABILITIES AND PROVISIONS (cont'd) Warranty The warranty period for the bulk of the products typically ranges between 1 to 2 years. The product warranty provision reflects management's best estimate of...

  • Page 47
    ... income tax account are as follows: Group 2015 US$'000 2014 US$'000 2015 US$'000 Company 2014 US$'000 Beginning of financial year Over provision in prior financial years (Note 9) End of financial year 10,702 (800) 9,902 15,202 (4,500) 10,702 - - - - - - Deferred income tax liabilities (assets...

  • Page 48
    ... profit is probable. The deferred tax asset of US$5,388,000 as at the financial year ended 30 June 2015 (2014: US$11,800,000) pertains to losses brought forward from the previous financial years which can be used to offset certain future tax liabilities. Respectively, the Group and the Company...

  • 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 2015 Beginning and end of financial year 2014 Beginning of financial ...

  • Page 50
    CREATIVE TECHNOLOGY LTD AND ITS SUBSIDIARIES For the financial year ended 30 June 2015 NOTES TO THE FINANCIAL STATEMENTS SHARE CAPITAL AND TREASURY SHARES (cont'd) Share options (cont'd) Movements in the number of unissued ordinary shares under option and their exercise prices were as follows: ...

  • 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 For the financial year ended 30 June 2015 NOTES TO THE FINANCIAL STATEMENTS OTHER RESERVES (cont'd) Group 2015 US$'000 2014 US$'000 2015 US$'000 Company 2014 US$'000 25. (b) Movements: Share-based compensation reserves Beginning of financial year ...

  • Page 53
    ... lessee The Group leases office space from non-related parties under non-cancellable operating lease agreements. The leases have varying terms, escalation clauses and renewal rights. The future minimum lease payables under non-cancellable operating leases contracted for at the balance sheet date but...

  • Page 54
    CREATIVE TECHNOLOGY LTD AND ITS SUBSIDIARIES For the financial year ended 30 June 2015 NOTES TO THE FINANCIAL STATEMENTS FINANCIAL RISK MANAGEMENT (cont'd) Market risk (cont'd) Price risk (cont'd) monitoring of the performance of investments held and assessing market risk relevant to which the ...

  • Page 55
    ... Group sells its products to original 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...

  • Page 56
    ...Beginning of financial year Allowance made (write-back) Allowance utilised End of financial year 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...

  • Page 57
    ... 18,239 2014 Financial assets, available-for-sale - Listed equity securities - Unlisted equity securities 13,666 - 13,666 - - - - 7,942 7,942 13,666 7,942 21,608 Fair values for listed equity securities are determined using quoted market prices at the balance sheet date. These instruments are...

  • Page 58
    ... sale/purchase of goods and services, are set out in Notes 12, 15 and 21 respectively. (b) Key management personnel compensation Key management personnel compensation is as follows: Group 2015 US$'000 2014 US$'000 Short-term employees benefits Employer's contribution to defined contribution plans...

  • Page 59
    ... CODM excludes sales between segments. The revenue from external parties reported to the CODM is measured in a manner consistent with that in profit or loss. Geographic revenue information for the financial years ended 30 June 2015 and 30 June 2014 is based on the location of the selling entity. The...

  • Page 60
    ... and headphones Personal digital entertainment Other products 90,216 5,101 4,165 99,482 103,565 8,171 4,596 116,332 There was no customer who accounted for 10% or more of net revenues for the current and prior financial years. Summary of property and equipment by country: Group 2015 US$'000...

  • Page 61
    ... sound and video boards, computers, related multimedia and personal digital entertainment products Provision of data communications, telecommunications, wireless broadband and related services Investment holding Investment holding United States of America 100 100 2014 % Name of companies Principal...

  • Page 62
    ...,000) to its nonexecutive directors on its Board of Directors. The Company paid a total remuneration of S$1 (2014: S$1) to its Chairman and Chief Executive Officer. AUDITOR'S REMUNERATION The following information relates to fees of the auditors during the financial year: 2015 US$'000 2014 US$'000...

  • Page 63
    ... 70,331,649 0.07 5.02 18.49 29.64 46.78 100.00 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 (Private) Limited Citibank Nominees Singapore Pte Ltd United Overseas Bank Nominees (Private...

  • Page 64
    ... Gwong-Yih, Independent 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...