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Financial & Corporate Releases

Creative Technology Ltd - Annual Report 2008

SINGAPORE - 10 October 2008 - Creative Technology Ltd's Annual Report for fiscal year 2008, together with its Notice of Annual General Meeting, will be mailed to shareholders on or about 10 October 2008.

The Company would like to inform readers of a change in the Balance Sheet included in the Annual Report from that included in the earnings announcement on 6 August 2008. The change resulted from the US GAAP accounting treatment for the sale and leaseback of the Creative Resource building in Singapore. The change involves only the Balance Sheet and there is no impact on the Income Statement for the year ended 30 June 2008.

Creative sold its headquarters office building in June 2008, to an unrelated third party at a sales price of US$181.4 million. Under the terms of the sale and purchase agreement, Creative also agreed to leaseback the property for a period of five years with an option for additional periods of three and two years. Creative also placed a security deposit and paid an advance rental, totaling US$53.8 million, to the purchaser.

The sale was completed on 26 June 2008, legal title has been transferred to the buyer and sale proceeds were received. As a result of the completion of the sale, the office building was derecognized in the consolidated financial statements when Creative made its earnings announcement on 6 August 2008. Creative made a gain on the sale of the property of US$147.9 million from this transaction. This amount was to be treated as a deferred gain and to be amortised and recognized in the Company's Income Statement over the lease term of five years.

After further review and research by the auditors, it was concluded that the transaction did not meet certain criteria of sale-leaseback accounting under FASB Statement No. 98 “Accounting for Leases: Sale-Leaseback Transactions Involving Real Estate, Sales-Type Leases of Real Estate, Definition of the Lease Term, and Initial Direct Costs of Direct Financing Leases” (“FAS 98”). Accordingly, for US GAAP accounting purposes, the building is still recorded as a fixed asset and the sale proceeds received, net of security deposit and rental prepayment, is presented as “Advance payments from sale of building”. The gain on the sale equal to the difference between the net book value of the building and the balance of the “Advance payments from sale of building” will be recognized at the end of the initial five year lease term.

About Creative
Creative is a worldwide leader in digital entertainment products for PC users. Famous for its Sound Blaster® sound cards and for launching the multimedia revolution, Creative is now driving digital entertainment on the PC platform with products like its highly acclaimed ZEN® MP3 players. Creative's innovative hardware, proprietary technology, applications and services leverage the Internet, enabling consumers to experience high-quality digital entertainment — anytime, anywhere.

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