Form 20-F

Securities for which there is a reporting obligation pursuant to Section 15(d) of the Act: None

The number of outstanding shares of each of the issuer’s classes of capital or common stock as of June 30, 2008: 83,625,858

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. ¨ Yes x No

If this report is an annual or transition report, indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934. ¨ Yes x No

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. x Yes ¨ No

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, or a non-accelerated filer. See definition of “accelerated filer and large accelerated filer” in Rule 12b-2 of the Exchange Act.

Indicate by check mark which financial statement item the registrant has elected to follow. ¨ Item 17 x Item 18

If this is an annual report, indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). ¨ Yes x No

Creative Technology Ltd (“Creative”), the Creative logo, and the Creative products referred to herein are either the trademarks or the registered trademarks of Creative. All other trademarks are property of their respective owners.

SAFE HARBOR STATEMENTS UNDER THE PRIVATE SECURITIES LITIGATION REFORM ACT OF 1995

Except for the historical information contained herein, the matters set forth contains forward-looking statements and are subject to certain risks and uncertainties that could cause Creative’s actual results to differ materially. Such risks and uncertainties include: Creative’s ability to timely develop new products that gain market acceptance and to manage frequent product transitions; competitive pressures in the marketplace; a reduction or cancellation of sales orders for Creative products; accelerated declines in the average selling prices of Creative’s products or any prices of components; Creative’s ability to successfully integrate acquisitions; potential fluctuations in quarterly results due to the seasonality of Creative’s business and the difficulty of projecting such fluctuations; possible disruption in commercial activities caused by factors outside of Creative’s control, such as terrorism, armed conflict and labor disputes; a reduction in demand for computer systems, peripherals and related consumer products as a result of poor economic conditions, social and political turmoil; major health concerns; the proliferation of sound functionality in new products from competitors at the application software, chip and operating system levels; the deterioration of global equity markets; exposure to excess and obsolete inventory; Creative’s reliance on sole sources for many of its chips and other key components; component shortages which may impact Creative’s ability to meet customer demand; Creative’s ability to protect its proprietary rights; the vulnerability of certain markets to current and future currency fluctuations; the effects of restricted fuel availability and rising costs of fuel; and fluctuations in the value and liquidity of Creative’s investee companies. For further information regarding the risks and uncertainties associated with Creative’s business, please refer to its filings with the U.S. Securities and Exchange Commission (“SEC”), including elsewhere in this annual report filed on Form 20-F. Creative undertakes no obligation to update any forward-looking statement to conform the statement to actual results or changes in Creative’s expectations.

The following table contains selected data from Creative’s Consolidated Statements of Operations for the five years ended June 30, 2008. The data for the three years ended June 30, 2008 is derived from and should be read in conjunction with the consolidated financial statements and related notes thereto included elsewhere in this annual report. The data for the two years ended June 30, 2005 and 2004 is derived from the audited financial statements which are not included in this annual report.

At the Annual General Meeting held on October 31, 2007, Creative’s shareholders approved an ordinary dividend of S$0.20 ($0.14) for each outstanding ordinary share of Creative for the fiscal year ended June 30, 2008. Dividends of $11.5 million were paid on November 30, 2007 to all shareholders of record as of November 14, 2007. In fiscal year 2007, Creative paid an ordinary dividend of $0.25 for each outstanding ordinary share amounting to $20.9 million.

Creative publishes its consolidated financial statements in US dollars, which is the principal currency in which it conducts its business. In this annual report, references to “US dollars” and “$” are to United States currency and references to “Singapore dollars” and “S$” are to Singapore currency. Except as otherwise stated herein, all monetary amounts in this annual report have been presented in US dollars.

The following table sets forth, for the periods indicated, certain information concerning the currency exchange rate as expressed in US dollars per Singapore dollar as certified for customs purposes by the Federal Reserve Bank of New York:

On December 23, 2008, each Singapore dollar equaled 0.6900 US dollars, as certified for customs purposes by the Federal Reserve Bank of New York.

In addition to the other information and risks described elsewhere in this annual report, Creative’s business is subject to the following risks:

Creative needs to efficiently develop and introduce new products that gain market acceptance and to manage frequent product transitions in order to be competitive

The markets that Creative targets are highly competitive and are characterized by rapidly changing technologies, dynamic consumer demand, frequent new product introductions and decreasing prices. Creative’s business depends to a significant extent on its ability to cost-effectively develop and introduce new products and product enhancements for the digital entertainment market that gain market acceptance.

The development of new products and product enhancements can be very challenging and requires high levels of innovation. The development process is also lengthy and costly. In addition, the introduction of a new product or product line is a complex task which involves heavy expenditures in training, promotion and channel development, the effective management of inventory levels in line with anticipated demand as well as careful management of existing product inventories to avoid the costs associated with returns and slow-moving channel inventory.

Creative faces a number of risks when it introduces new or enhanced products or integrates new technologies into new or existing products, including, among other things, disruption in its customers’ ordering patterns, excessive levels of older product inventories and delivering adequate supplies of new products to meet customer demand.

Creative may not successfully enter the various product markets that it identifies and sales of new products and product enhancements introduced may not become significant or profitable in the face of competition. If Creative is not successful in cost-effectively identifying, developing, manufacturing and selling new products or product enhancements, or if it is unable to manage product transitions smoothly and efficiently, its results of operations and financial condition could be harmed.

Creative faces intense competition from a large number of established companies and emerging companies in the personal digital entertainment, PC audio, communications, speakers and headphones markets and semiconductor markets and expects competition to continue to intensify as these markets evolve. In addition, Creative increasingly faces competition from cell phone companies which have been promoting phones that offer music and other entertainment functions. Furthermore, in the U.S., service providers often discount the price of cell phones when purchased with a calling plan. The industries in which Creative competes are characterized by frequent product introductions, short product lifecycles, aggressive pricing practices, downward pressure on gross margins and steady improvements in product price/performance characteristics. Many of Creative’s current and potential competitors have substantially greater financial, manufacturing, marketing, distribution and other resources. Some of Creative’s competitors may also have greater name recognition and market presence, longer operating histories, greater market power and product depth, lower cost structures and larger customer bases.

Creative’s competitors may be able to adapt more quickly to new technologies and changes in consumer preferences by introducing new products at competitive prices, which may result in lost market share for Creative and may force Creative to lower prices on its products, which may result in reduced margins for those products. These competitive pressures may also cause Creative’s potential customers to delay or defer their purchasing decisions in anticipation of potential new products, lower prices, or both. Creative may not be able to compete successfully in the future with its existing or potential competitors and intense competition could have a material adverse effect on Creative’s operating results. For more information regarding Creative’s competition and the risk factors arising out of the competitive environment in which Creative operates, see “Competition” in Item 4 of this annual report.

Creative’s gross margins have fluctuated and can vary significantly depending on product mix and other factors

Creative has a diversified product portfolio of consumer electronics and peripherals for PCs and sells these products through a worldwide network of domestic and international distributors, retailers and OEM customers. Creative’s gross margins vary significantly by product line and customer type, as well as within product lines.

In fiscal year 2008, Creative’s gross margin was 22% compared to gross margin of 19% for fiscal year 2007 and 15% for fiscal year 2006. The fluctuation in Creative’s gross margins over the past three fiscal years was largely attributable to a change in the mix of products sold during those periods.

Sales of Creative’s audio products, including the Sound Blaster X-Fi family of sound cards, generally have higher gross margins than sales of its portable digital audio players, including the ZEN family of hard drive players and flash players. In fiscal year 2006, the proportion of sales of personal digital entertainment products, which included portable digital audio and video players, was higher compared to fiscal year 2008. In addition, Creative recorded a substantial write-down for inventories of components in the third quarter of fiscal year 2006, which also adversely affected its gross margin. Given the rapid and unpredictable pace of product obsolescence in the consumer electronics and PC industries and fluctuations in the price of components, such as flash memory, the company may incur inventory and related charges in the future. Such charges have had, and may have, a material adverse effect on the company’s gross margin and operating margin.

Creative’s gross margins are generally lower for sales to OEM customers compared with sales to its retail customers. Increases in OEM sales or decreases in retail sales relative to total sales may also negatively impact Creative’s gross margins.

A substantial proportion of Creative’s overall sales are derived from a few product categories

A limited number of Creative’s product categories account for a substantial portion of Creative’s overall sales. Sales of personal digital entertainment products represented approximately 53% of sales in fiscal year 2008, 63% of sales in fiscal year 2007 and 65% of sales in fiscal year 2006. Sales of audio products represented approximately 13% of sales in fiscal year 2008, 2007 and 2006. Sales of speakers and headphones represented approximately 26% of sales in fiscal year 2008, 18% of sales in fiscal year 2007 and 15% of sales in fiscal year 2006. Creative’s profitability has resulted largely from sales of products from these categories.

The markets for personal digital entertainment products are evolving rapidly and competition is particularly intense. In addition, some of Creative’s competitors in the semiconductor industry are integrating basic audio capabilities into their products for inclusion in PCs. The integration of audio capabilities into the central processing units, motherboards and/or operating systems of PCs has adversely impacted and may continue to adversely impact Creative’s ability to sell its sound card products into the PC market.

Creative expects that these product categories will continue to account for a significant portion of Creative’s sales in the future. Creative believes that a decline in demand or prices for these products, whether as a result of competition, technological change or otherwise, would adversely affect Creative’s sales and profitability.

Because Creative must acquire components and build products based on forecasted demand, it faces substantial inventory risk

Creative must order components and build inventory in advance of customer orders for products. Because demand for the company’s products is affected by a number of factors, including market acceptance of its products, competition and general economic conditions, there is a risk that Creative may forecast demand incorrectly and produce or order from third parties excess or insufficient inventories of particular products. Creative has experienced differences between actual and forecasted demand in the past and expects differences to arise in the future. In addition, Creative’s operating results and financial condition have in the past and may in the future be materially adversely affected by the company’s ability to manage its inventory levels and respond to short-term shifts in customer demand.

Creative records a write-down for inventories of components and products that have become obsolete or are in excess of anticipated demand or net realizable value and accrues necessary reserves for cancellation fees of orders for inventories that have been cancelled. Creative recorded a substantial write-down for inventories of components in the third quarter of fiscal year 2006 and, given the rapid and unpredictable pace of product obsolescence in the consumer electronics and PC industries and fluctuation in the prices of components, such as flash memory, the company may incur inventory and related charges in the future. Such charges have had, and may have, a material adverse effect on the company’s results of operations and financial condition.

Creative acquires new technologies from time to time; acquisitions involve numerous risks and may not lead to improved operating results

Creative’s growth is dependent on growth in its target markets, its ability to enhance its products and its ability to introduce new products and product enhancements on a timely basis that gain market acceptance. Creative acquires technologies from time to time for its products from third parties through acquisitions, licenses or other means, often at substantial cost.

While acquisitions may be important to remain competitive, they may not lead to any improvements in Creative’s operating results and involve numerous risks, including the following:

Mergers and acquisitions of high-technology companies are inherently risky and no assurance can be given that Creative’s previous or future acquisitions will be successful and will not materially adversely affect its business, operating results or financial condition. If Creative fails to successfully integrate acquisitions or achieve any anticipated benefits of an acquisition, its operations and business could be harmed.

Creative’s operating results fluctuate due to seasonal buying patterns and other factors and are not indicative of future performance

Creative’s operating results have been in the past, and will continue to be, subject to quarterly and annual fluctuations as a result of a number of factors. These factors include:

As a consequence, Creative’s operating results for a particular future period are difficult to predict, and therefore, prior results are not necessarily indicative of results to be expected in future periods. Many of Creative’s operating expenses are relatively fixed in the short term and Creative may be unable to rapidly adjust spending to compensate for any unexpected sales shortfall. Any of the foregoing factors, or any other factors discussed elsewhere in this annual report, could have a material adverse effect on Creative’s business, results of operations and financial condition.

Creative depends upon outside vendors and has limited supply sources for certain components of its most successful products

Creative’s sales are principally derived from its personal digital entertainment products, audio products and speaker and headphone products. Creative purchases several components for these products from third party vendors, some of whom are the sole sources for these components. Creative has experienced delays and shortages in the delivery of these components, including flash memory chips and hard disk drives, in the past and may experience them again in the future. If Creative’s vendors do not allocate a sufficient supply of high-quality components to meet Creative’s needs, Creative may be required to procure these components at a higher cost from alternative suppliers. Creative may also be forced to alter product designs to accommodate the alternative components, which may cause significant delays in the manufacturing process. In the event any delay or shortage occurs, Creative’s operations could be adversely impacted by reducing Creative’s ability to distribute its products to distributors and to meet customer demand.

Creative is subject to risks associated with substantial international operations

Sales outside the United States accounted for 73% of Creative’s net sales in fiscal year 2008. In addition, a substantial number of Creative’s products are manufactured, assembled and tested by third parties in Asia. As a result, Creative is subject to a number of risks of conducting business outside of the United States, any of which could have a material adverse impact on its results of operations, including:

Creative is also subject to geopolitical risks, such as political and economic instability and changes in diplomatic and trade relationships. In addition, the laws of some countries in which Creative’s products are or may be manufactured or sold may not protect its products or intellectual property rights to the same extent as do the laws of the United States.

Creative may be adversely affected by general economic conditions, political and economic uncertainty in various countries and other factors outside of its control

Sales of consumer electronics and PCs have historically been dependent upon discretionary spending by consumers and Creative’s operating performance depends significantly on general global economic conditions and growth of the consumer electronics and PC markets. Uncertainty about current global economic conditions poses a risk as consumers and businesses may postpone spending in response to tighter credit, negative financial news and/or declines in income or asset values, which could have a material negative effect on the demand for Creative’s products and on Creative’s financial condition and operating results. A slowdown in the global economy and the consumer electronics and PC markets coupled with a poor economic outlook, political and social turmoil in the near future may cause consumers to defer decisions to purchase Creative products.

The current financial turmoil affecting the banking system and financial markets and the possibility that financial institutions may consolidate or go out of business have resulted in tightening in the credit markets, a low level of liquidity in many financial markets, and extreme volatility in fixed income, credit, currency and equity markets. There could be a number of follow-on effects from the credit crisis on Creative’s business, including insolvency of key suppliers resulting in product delays; inability of customers, including channel partners, to obtain credit to finance purchases of Creative’s products and/or customer, including channel partners, insolvencies. Other income and expense could also vary materially from expectations depending on gains or losses from exchange differences.

Creative also has strategic investments in numerous companies throughout the world, including Asia and the Middle East. Creative’s financial position, results of operations, return on investments or ability to realize the anticipated benefits from a portfolio company’s technology may be adversely impacted in the future due to turmoil in international markets.

To remain competitive, Creative must be able to maintain substantial capital which Creative may be unable to do in the future

In order to compete, Creative believes that it will need to have substantial capital in order to maintain the flexibility to take advantage of opportunities as they arise and to fund Creative’s working capital requirements. Creative believes that at the current level of operations, its existing resources, including existing cash and cash equivalents, existing credit facilities and anticipated cash flows from operations, will be adequate to meet its projected working capital and other cash needs for at least the next twelve months. To the extent, however, that existing resources and anticipated cash flows are not adequate for its operational and other cash needs, Creative’s operating results and financial position could be adversely affected.

In November 2004, Creative entered into a five-year $175.0 million syndicated term loan facility with a group of international banks and drew down on the entire loan during fiscal year 2005. The proceeds from this facility were used primarily to fund the growth in working capital requirements arising from the growth in the company’s revenue. The loan facility contains certain financial covenants, including requirements for Creative to maintain certain working capital ratios, but does not restrict Creative’s ability to borrow or distribute earnings. Creative repaid $75 million of the loan in fiscal 2007 and the remaining balance of $100.0 million was repaid subsequent to the end of the fiscal year 2008.

Creative may decide to obtain additional working capital to better position the company for growth in the personal digital entertainment market and other markets. In such event, Creative may engage in equity or debt financing to secure additional funds. If Creative raises additional funds through issuances of equity or convertible debt securities, its existing shareholders could suffer significant dilution, and any new equity securities issued by Creative could have superior rights to those of Creative’s ordinary shares. Any new debt financing secured by Creative in the future could involve restrictive covenants relating to Creative’s capital raising activities and other financial and operational matters, which may make it more difficult for Creative to obtain additional capital and to pursue business opportunities, including potential acquisitions. In addition, Creative may not be able to obtain additional financing on favorable or commercially acceptable terms. If Creative is unable to obtain adequate financing or financing on favorable or commercially acceptable terms, its ability to pursue new business opportunities and to respond to business challenges could be limited.

Creative’s continued success is dependent on a group of key distributors and customers

Creative relies on distributors, retailers and resellers to sell its products. If Creative’s competitors offer its distributors, retailers or resellers more favorable terms or have more products available to meet demand from their customers or are able to exert greater leverage over the distributors, retailers or resellers than Creative, then Creative’s distributors, retailers and resellers may de-emphasize or decline to carry its products. If Creative is unable to maintain successful relationships with its distributors, retailers and resellers or to expand its distribution channels, its operating results and financial position will suffer.

Although during fiscal years 2008, 2007 and 2006, none of Creative’s customers accounted for more than 10% of Creative’s total worldwide sales, a reduction or delay in orders from a group of Creative’s key distributors and customers could have an adverse effect upon Creative’s operating results and financial position. As of June 30, 2007 and 2006, one customer accounted for more than 10% of net accounts receivable, and as of June 30, 2008, no customer accounted for more than 10% of net accounts receivable.

Distributors and retail customers historically have been characterized by rapid change, including periods of widespread financial difficulties and consolidation. Creative may be unable to retain its distributors and retail customers and may be unable to find alternative distributors and retail customers without incurring delays and increased costs. In addition, sales to any particular distributor or retailer may fluctuate significantly from quarter to quarter. Though Creative records allowances for expected bad or doubtful accounts receivable balances, non-recovery of these or other accounts receivable balances could have an adverse effect upon Creative’s operating results and financial position.

Creative’s success is dependent upon its ability to continue to protect its proprietary technologies, and know-how in product design

Creative’s ability to compete successfully depends, in part, on its ability to protect its proprietary technologies, and know-how in product design. Creative relies primarily upon its trade secrets program, copyrights and patents to protect its technologies. Creative generally enters into confidentiality and/or license agreements with its employees, distributors, customers and potential customers. It also limits access to, and distribution of, its software, documentation and other proprietary information. However, these protections may not be adequate and Creative’s competitors may independently develop technologies that are substantially equivalent or superior to Creative’s technologies. In addition, the steps taken by Creative may not be adequate to deter misappropriation or independent third-party development of Creative’s technologies. Furthermore, the protection provided to Creative’s proprietary technologies by the laws and courts of foreign nations may not be substantially similar to or as protective as the remedies available under U.S. laws.

Creative holds various U.S. patents and pending U.S. patent applications and corresponding patents and pending applications in other countries. It is possible that a patent owned by Creative will be invalidated, deemed unenforceable, circumvented or challenged, that the patent rights granted will not provide competitive advantages to Creative or that one or more of Creative’s pending or future patent applications will not be issued. Any of these events could significantly harm Creative’s business and future prospects.

Creative’s success depends on its ability to attract and retain key personnel

Creative’s success depends to a significant extent upon a number of key employees and senior management. The loss of the service of one or more of these key employees, none of whom is bound by a written employment agreement, could have a material adverse effect on Creative. Creative believes that its future success will also depend in large part upon its ability to attract and retain highly skilled technical, managerial and marketing personnel. Competition for such personnel is intense. Creative may not be successful in attracting and retaining the personnel it requires.

Creative may incur substantial costs enforcing its intellectual property rights and defending against third party claims as a result of litigation or other proceedings

Creative is a party to lawsuits in the normal course of its business. In connection with the enforcement of Creative’s own intellectual property rights or in connection with disputes relating to the validity or alleged infringement of third party rights, including patent rights, Creative has been, currently is and may in the future be, subject to claims or litigation. Any assertion of infringement against Creative may result in potentially costly litigation by Creative, may require Creative to enter into royalty arrangements with the third parties claiming infringement and may result in an injunction or award of damages against Creative.

Litigation can also be disruptive to normal business operations. Moreover, the results of legal proceedings are often difficult to predict. An unfavorable resolution of a particular lawsuit could have a material adverse effect on Creative’s business, operating results or financial condition. For additional information regarding certain of the lawsuits in which Creative is involved, see “Legal Proceedings” in Item 8 of this annual report.

Changes in environmental rules and regulations could increase Creative’s costs and impact its future operating results

Creative is subject to environmental regulations and other requirements in a number of countries. For example, Creative is subject to the European Union Waste Electrical and Electronic Equipment Directive as enacted by individual European Union countries, which makes producers of electrical goods responsible for the collection, recycling, treatment and disposal of covered products. In the event it is determined that Creative has not complied with applicable environmental laws and regulations, Creative may incur remediation costs, other penalties and sustain injury to its brand image. Creative’s activities also may be limited if it is unable to comply with applicable environmental regulations, which could adversely affect its operating results.

Similar environmental legislation may be enacted in other geographies, including federal and state legislation in the United States, the cumulative impact of which could be significant. There is no assurance that such existing laws or future laws will not have a material adverse effect on Creative.

Rising fuel costs, limited fuel availability or higher shipping costs may increase Creative’s costs of doing business

Increases in fuel costs, limited fuel availability or higher shipping costs may adversely affect Creative’s business, including its gross margins. Creative’s products are often manufactured far from the final points of sale for these products. As a result, Creative’s shipping costs are impacted by an increase in fuel costs or limitations on fuel availability.

As of June 30, 2008, Mr. Sim Wong Hoo, one of Creative’s founders and its current Chief Executive Officer, beneficially owned approximately 31.3% of Creative’s outstanding ordinary shares. Because he is the largest shareholder, Mr. Sim may be able to influence the election of Creative’s directors, to determine the outcome of most corporate actions requiring shareholder approval and to control the management and affairs of Creative.

Creative is subject to anti-takeover provisions that could delay or prevent an acquisition and could adversely affect the price of Creative’s ordinary shares

The Securities and Futures Act (Chapter 289) of Singapore and the Singapore Code on Take-Overs and Mergers (“Code”) contain certain provisions that may discourage, delay, deter or prevent a future takeover or change in control of Creative. Except with the Securities Industry Council’s consent, the Code requires any person acquiring an interest in 30% or more of Creative’s voting rights, to extend a takeover offer to the holders of any class of share capital of Creative which carries votes. Such voting rights may be acquired either individually or by acting in concert with other parties, through a single transaction or a series of transactions over a period of time. The Code also requires such takeover offer to be made if a person holding between 30% and 50% of Creative’s voting rights, either individually or acting in concert with other parties, acquires an additional 1% of Creative’s voting rights in any six month period. In addition to such person, each of the principal members of the group of persons acting in concert with him may also have the obligation to extend such takeover offer.

These provisions may discourage or prevent certain types of transactions involving an actual or threatened change of control of Creative, which may allow shareholders to sell their shares of Creative at a price above the prevailing market price. Therefore, these provisions could limit the price that investors might be willing to pay for shares of Creative in the future.

As a result of Creative’s voluntary delisting from the NASDAQ Global Market, U.S. investors may find it more difficult to buy or sell Creative’s ordinary shares

On September 4, 2007, Creative announced that the company completed the voluntary delisting of its ordinary shares from the NASDAQ Global Market. August 31, 2007 was the last day of trading for Creative ordinary shares on NASDAQ. The delisting of Creative’s shares from NASDAQ could reduce the ability of holders of its ordinary shares to purchase or sell shares as quickly and as inexpensively as they have done historically, and may have an adverse effect on the trading price of Creative’s ordinary shares.

If Creative terminates its U.S. public company reporting obligations, investors may find it more difficult to obtain information about Creative

Creative currently files reports with the U.S. Securities and Exchange Commission electronically and its reports can be found at the SEC’s website. Creative intends to terminate its reporting obligations under the Securities Exchange Act of 1934 when it becomes eligible to do so, which will occur at the earliest twelve months after the delisting of its ordinary shares from NASDAQ and will occur only if Creative meets certain requirements under the Exchange Act. The elimination of Creative’s U.S. public reporting obligations may make it more difficult for investors to obtain current information about Creative. If Creative terminates its reporting obligations under the Exchange Act, it will still be obligated to file reports under Singapore’s applicable reporting requirements, but Singapore’s applicable reporting requirements may not require the same level of disclosure as the U.S. public reporting requirements and investors may not have easy access to Creative’s Singapore-mandated reports.

If Creative is unable to suspend its U.S. public reporting obligations or spends a substantial amount of its cash reserves in an effort to do so, then its results of operations and financial condition will be harmed

Creative will be able to terminate its U.S. public company reporting obligations if the U.S. average daily trading volume of its ordinary shares is 5% or less of the worldwide average daily trading volume of its ordinary shares during the twelve-month period ending 60 days before filing to deregister its securities under the Securities Exchange Act of 1934. Alternatively, if Creative’s ordinary shares are held by fewer than 300 U.S. residents, including each U.S. resident that owns shares in the name of a broker, dealer, bank or nominee for such holder’s account, and if options to purchase ordinary shares are held by fewer than 300 U.S. residents, Creative will be able to suspend its U.S. public reporting obligations after completion of the fiscal year in which Creative is able to so reduce the number of holders of Creative’s ordinary shares and options to purchase ordinary shares.

If Creative is not able to terminate or suspend its U.S. public reporting obligations, then it will continue to incur significant costs and administrative burdens to comply with its U.S. public reporting obligations. Such costs and burdens may have an adverse impact on Creative’s profitability and results of operations.

In addition, if Creative spends a substantial amount of its cash reserves to be in the position to cease its U.S. public reporting obligations, then its cash position will be adversely affected.

Changes in, or interpretations of, accounting principles could result in unfavorable accounting charges

Creative prepares its consolidated financial statements in conformity with U.S. generally accepted accounting principles. These principles are subject to interpretation by the SEC and various bodies formed to interpret and create appropriate accounting principles. A change in these principles can have a significant effect on Creative’s reported results and may even retroactively affect previously reported transactions.

Creative is exposed to increased costs and risks associated with complying with Section 404 of the Sarbanes-Oxley Act

Section 404 of the Sarbanes-Oxley Act of 2002 requires that public companies in the United States evaluate and report on their systems of internal controls over financial reporting. Creative has incurred and will continue to incur significant expenses and management resources to comply with the requirements of Section 404 on an ongoing basis and Creative cannot provide any assurance that it will be able to satisfy the requirements related to internal controls on an ongoing basis and that its auditors will be able to provide an attestation report regarding management’s internal control report when required.

A determination that Creative’s internal control over financial reporting is not effective might cause investors to lose confidence in the company’s reported financial information, which could cause volatility in the market price of the company’s shares.

The quoted market price of Creative’s ordinary shares has fluctuated significantly in the past and is likely to continue to be highly volatile. The quoted market price of Creative’s ordinary shares may be significantly affected by a variety of factors, including:

The stock prices for many technology companies, including Creative, have experienced wide fluctuations, which often have been unrelated to the operating performance of these companies. In addition, the relatively low trading volume of Creative’s ordinary shares on the SGX-ST in Singapore may lead to more volatility in the market price of Creative’s shares. As a result, these fluctuations may adversely affect the market price of Creative’s ordinary shares in the future.

Creative’s stock price may fluctuate because the value of its investments fluctuates

A portion of Creative’s assets includes equity investments in various companies. These companies include both publicly traded and non-publicly traded companies. The market price, valuations and carrying value of the securities that Creative holds in these companies may fluctuate due to general market conditions, volatility for technology stocks and other conditions over which Creative has no control. Fluctuations in the market price and valuations of the securities that Creative holds in other companies may result in potential price reductions of carrying values of Creative’s investee companies and fluctuations in the market price of Creative’s ordinary shares. Decreases in the value of Creative’s publicly-traded investments may reduce the amount of working capital available to Creative.

Because substantial portions of Creative’s assets are located outside the United States, purchasers of Creative’s securities have limited assets in the United States against which they may enforce judgments of U.S. courts. As a result, purchasers of Creative’s securities who obtain judgments against Creative based upon allegations of violations of U.S. laws may be required to seek enforcement of their judgments in non-U.S. jurisdictions, such as Singapore, where Creative’s executive offices and its principal research and development operations are located. However, there is no guarantee that a court in a non-U.S. jurisdiction would enforce a U.S. judgment.

There is no treaty between the United States and Singapore providing for the reciprocal recognition and enforcement of judgments. As a result, U.S. judgments are not automatically enforceable in Singapore. In addition, judgments of U.S. courts based on the civil liability provisions of the U.S. securities laws are not enforceable in Singapore courts. It is doubtful as to whether Singapore courts will hear actions brought in Singapore courts based solely upon the civil liability provisions of the U.S. securities laws or enter judgments in such actions.

Creative is a Singapore corporation. A majority of the members of its management team and Board of Directors are not U.S. residents. As a result, it may not be possible for investors to effect service of process within the United States upon these non-U.S. residents.

Creative Technology Ltd., founded in 1981 by Mr. Sim Wong Hoo, was incorporated in Singapore as a private limited company in July 1983 and continues to maintain its principal executive offices there. From 1983 to 1988, Creative’s revenues were derived primarily from the design, manufacture and distribution of personal computers, or PCs, and related enhancement products. In 1987, as a result of intense competition and continuing price erosion in the PC market, Creative decided to concentrate its development strategy on newer, higher margin audio products. In November 1987, Creative began shipments of Game Blaster, a product designed to add music capabilities to PCs targeted at the PC games and entertainment market. This product evolved into the Sound Blaster product line that began shipping in November 1989. Revenues grew significantly, reflecting rapid market acceptance of Sound Blaster and other products in the Blaster family, which lead to Creative’s successful initial public offering in the United States. Creative’s ordinary shares began trading on the NASDAQ Global Market (“NASDAQ”) under the symbol “CREAF” on August 3, 1992. On June 15, 1994 Creative’s shares began trading on the Singapore Exchange Securities Trading Limited (“SGX-ST”). On September 4, 2007, Creative announced that the company has completed the voluntary delisting of its ordinary shares from NASDAQ. August 31, 2007 was the last day of trading for Creative ordinary shares on NASDAQ. Creative’s sole stock exchange listing is on the SGX-ST. The delisting from NASDAQ did not affect the status of Creative’s shares on the SGX-ST.

Creative’s corporate headquarters is located in Singapore at 31 International Business Park, Creative Resource, Singapore 609921, telephone number: 65-6895-4000. Creative manages its operations in the United States, Canada and Latin America through its U.S. subsidiary, Creative Labs, Inc., (“Creative Labs”) which is located at 1901 McCarthy Boulevard, Milpitas, California 95035. Sales, distribution and research and development are being carried out through a global network of subsidiaries located in North America, Europe and Asia.

Creative’s capital expenditures for property, plant and equipment for the fiscal years 2008, 2007 and 2006 were $12.6 million, $6.0 million and $13.3 million, respectively. The principal areas of capital expenditures were land and buildings, leasehold improvements, computer hardware and software in fiscal year 2008, machinery, computer hardware and software in fiscal year 2007, and land and buildings, machinery, computer hardware and office equipment in fiscal year 2006. In June 2008, Creative sold its headquarters office building to an unrelated third party at a sales price of $181.4 million which was derived on an arms length basis, supported by a valuation of the property carried out by an independent assessor. Under the terms of the sale and purchase agreement, Creative 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 of $52.9 million and paid an advance rental of $0.9 million to the purchaser. 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” (“SFAS 98”), the transaction did not meet certain criteria of sale-leaseback accounting. 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” (see Note 3 and 4 of “Notes to Consolidated Financial Statements”). In fiscal year 2008, Creative also sold an 80.1% interest in its manufacturing operations in Malaysia. The sale of a controlling interest in the Malaysia manufacturing operations is in line with management’s goal of streamlining and improving operational efficiencies.

As part of its long-term business strategy, from time to time, Creative makes strategic equity investments in companies that can provide Creative with technologies or products that management believes will give Creative a competitive advantage in the markets in which Creative competes. During fiscal years 2008, 2007 and 2006, Creative made investments that totaled $9.5 million, $1.7 million and $2.5 million, respectively.

Net investment gain of $18.8 million in fiscal year 2008 comprised $34.4 million in net gain from sales of investments offset by $15.6 million in write-downs of mainly quoted investments. Bulk of the $34.4 million in net gain from sales of investments was derived from the sale of shares in subsidiaries and equity accounted investments. The disposals of these investments were in line with management’s goal of streamlining and improving operational

efficiencies. Net loss of $1.9 million in fiscal year 2007 was mainly due to $2.0 million in write-downs of investments. Net investment gain of $18.9 million in fiscal year 2006 included a $20.9 million net gain from sale of investments offset by $2.0 million in write-downs of investments.

Creative is one of the leading providers of digital entertainment and PC products. Creative’s products include digital media players and other products used in a wide array of solutions for entertainment, education, music, Internet applications and services and productivity tools markets. Creative markets its products to consumers and system integrators, with worldwide distribution through traditional marketing channels, original equipment manufacturers (“OEMs”) and the Internet, under a variety of trademarks, including the “ZEN^®”, “MuVo^®”, and “Blaster^®” family of names. Creative’s EAX^® technologies have been established as de facto standards for multimedia enhancements for the PC.

Creative believes that its strengths in the digital entertainment and PC market resulting from its “ZEN”, “MuVo”, “Blaster” and other brand names, its extensive global distribution network, and its technology and manufacturing expertise, places it in a solid position to sell new and enhanced digital entertainment, PC audio, speaker/headphones, and related products. Creative continues to invest in research and development activities to improve existing products and to introduce new products. It continually evaluates other companies’ technologies and product offerings and may make equity investments in, or establish strategic alliances with, those entities that can provide Creative with complementary products and technologies. To achieve low per unit costs and meet rapid time to market demands, Creative has developed in-house expertise in software and hardware development, industrial/mechanical design, and chip design.

Using proprietary technologies and industrial design expertise, Creative’s innovative hardware and applications enable consumers to experience high quality digital entertainment, especially in three core categories: digital entertainment products, sound cards, and speakers/headphones.

Portable Digital Entertainment Players: Creative offers an array of portable digital audio and video players. Creative’s digital audio players are aimed at consumers with an active lifestyle and include the ZEN and MuVo line of products, such as the Creative ZEN X-Fi, Creative ZEN Mozaic, and Creative MuVo T200. The Creative ZEN X-Fi is the first digital media player to be built with Creative’s X-Fi technology, and comes equipped with wireless capability as well as a 2.5” LCD screen with 16.7 million TFT color support. The Creative ZEN Mozaic sports a mosaic keypad, a 1.8” LCD screen, and a built-in speaker. The Creative MuVo T200 comes with a built-in USB connector for easy file transfers and a screen for content navigation and date and time display.

The compact and lightweight Creative inPerson™ is easy to use, and is designed to ensure a reliable, fast and easy connection via Wi-Fi or LAN connection. It is equipped with a built-in speaker, dual microphones with integrated acoustic echo cancellation technology for crystal clear voice quality. Its wide-angle precision glass lens built into a flexible rotating bezel and high-grade sensor with superb low light performance enables it to deliver stunning video output on its built-in LCD display, or output to a large LCD or plasma screen. The combination of all these features makes the system a very useful business tool for one-on-one or multi-party small group meetings among executives.

Web Cameras: Creative offers a full line of feature-rich desktop and notebook webcams. The Creative Live! Cam Optia AF does not require installation of drivers and offers auto focus technology and a true 2.0 megapixel CMOS sensor. The ultra portable Live! Cam Notebook Ultra has an Ultra Wide-Angle Precision Lens and offers full motion 30fps digital video streams.

Pocket Video Cams: The Creative Vado is a compact and lightweight pocket video cam that weighs only 84g, has a 2” LCD screen, a video resolution of up to 640 x 480 pixels, and allows easy uploading and sharing of videos.

Since the introduction of the original Sound Blaster in 1989, Creative has continuously improved the technology and features of its PC audio offerings. Creative’s most advanced sound card to date, the Sound Blaster X-Fi™ series of sound cards includes the PCI Express Sound Blaster X-Fi Titanium Fatal1ty Champion Series sound card. The PCI Express Sound Blaster X-Fi Titanium Fatal1ty Champion Series sound card is Creative’s latest sound card and features high quality digital-to-analog converters, a comprehensive selection of connectivity for audio creation, 24-bit Crystalizer, X-Fi CMSS-3D, and X-Fi CMSS-3D Headphone Expander technologies. The 24-bit Crystalizer technology enhances music to 24-bit quality, enabling MP3s, CDs, games and other sources to sound better. The Creative X-Fi Go! is a USB-powered external audio device that is incredibly lightweight and portable, and it offers X-Fi Xtreme Fidelity audio technology.

Speakers: To provide a complete audio solution for music, gaming and movie enthusiasts, Creative offers a complete range of high-quality satellite and subwoofer speaker and docking systems for the PC and portable media players. Current PC models include the Creative GigaWorks^® T40 Series II and Creative GigaWorks T20 Series II high-end two-piece speaker systems, and the Creative GigaWorks T3 speaker system, a premium 2.1 speaker system. Portable speaker systems include the TravelSound^® ZEN X-Fi and TravelSound ZEN Mosaic for use with the Creative ZEN X-Fi and Creative ZEN Mozaic digital media players respectively.

Headphones and Headsets: Creative offers a wide range of headphones and headsets including noise-canceling headphones and wireless headphones and headsets for music, home entertainment, gaming and professional or studio purposes. The Aurvana Live! and Aurvana X-Fi headphones are the top-of-the-line models. The Aurvana Live! offers advanced driver technology with pro-quality acoustic tuning, and the Aurvana X-Fi are the world’s first noise-canceling headphones to feature award-winning X-Fi Xtreme Fidelity audio technologies. The lightweight and high-quality Creative Digital Wireless Gaming Headset HS-1200 USB headset is designed for online gaming communications and VOIP applications and also comes equipped with X-Fi technology.

Creative markets its products in more than 50 countries in the Americas, Europe and Asia through a worldwide network of wholly-owned subsidiaries and third-party distributors, and key on-line and brick and mortar retailers. The third party distributors and retailers are selected for their expertise in marketing and ability to place Creative’s products in the major retail channels. See Note 20 of “Notes to Consolidated Financial Statements” for information relating to foreign and domestic operations and export sales.

Creative’s sales, by geographical region, expressed as a percentage of total external sales are as follows:

Creative distributes its products in North America predominantly through Creative Labs, its wholly-owned subsidiary in the United States. The distribution of products in Europe is carried out principally through Creative Labs Ireland, a wholly-owned European subsidiary located in Dublin, Ireland, where product marketing, finance and customer support operations are conducted. In order to focus its products more directly on satisfying local market needs, and to enhance and support existing distribution arrangements, Creative also utilizes wholly-owned sales and marketing agencies in certain European countries including: the United Kingdom, France, Germany, Russia, Denmark, Sweden, Italy and Poland. In Asia, Creative distributes its products through its headquarters in Singapore and its sales offices and subsidiaries in Australia, China, Hong Kong, Japan, Malaysia, Taiwan and United Arab Emirates.

Like other manufacturers of consumer products, Creative is exposed to the risk of product returns from distributors and retailers, either through customers exercising their contractual return rights or as a result of Creative’s strategic interest in assisting customers to balance their inventories. For example, although Creative attempts to monitor and manage the volume of its sales to its distributors and retailers, large shipments made to these distributors and retailers to meet anticipated high demand during the year-end holiday season can lead to a post-holiday overstock situation which may result in the need to balance customer inventory resulting in larger than normal product returns, following the holiday season. Moreover, the risk of product returns may increase if the demand for Creative’s products declines, or if competitors liquidate inventory at distressed prices. In the past, Creative has accepted returns from its direct retail channel customers that have overstocked certain of its products or rotated older products out in order to stock newer Creative products. Creative continually reviews its allowance for sales returns and believes that it has provided adequate allowances for projected returns. However, there can be no assurance that such allowances will be sufficient for actual returns in future periods. Creative has in the past on occasion provided price protection for specific distributors, and online and brick and mortar retailers. The price protections issued were made to allow the channel customers to lower their pricing to meet competition. Creative also believes that it has provided sufficient allowances to cover its price protection obligations. In addition, Creative may provide end user rebate promotions to increase demand for its products in the retail channel. Creative believes that it has provided sufficient allowances to cover its rebate obligations. A significant decrease in the price of Creative’s products or its competitors’ products could adversely affect Creative’s operating results.

Creative’s primary OEM focus has been to sell and support its family of sound cards, audio chips sets, MP3 players, speakers and headphones to personal computer companies who incorporate or bundle those products for sale with their PCs. Creative products are either included as a part of a pre-configured feature in some OEM system configurations or offered as an upgrade option that the end customer can specify.

Creative maintains four customer support centers, one each in the United States, Ireland, China and Singapore to provide multilingual support to purchasers of Creative’s products in the United States, Europe and Asia via email, on-line knowledge base systems, user forums, on-line chat, telephone and fax. Support center services and support representatives answer questions regarding product specifications, availability, installation and use. Product specifications, technical information and various levels of support are also available through Creative’s Internet web site at www.creative.com. In addition, Creative provides programming support to developers of PC Games software used for the creation of PC games that incorporate the Sound Blaster EAX standard.

Because Creative’s customers typically require delivery within a short period of time after submitting a purchase order, Creative seeks to ship products promptly after receipt of such orders and expects to operate without significant backlog, relying on bookings each quarter to comprise a predominant portion of its sales for that quarter. As a result, Creative does not believe that backlog is a meaningful indicator of future sales.

Creative’s executive offices and a substantial portion of its research and development operations are located in Singapore and, therefore, its operations and the market price of its ordinary shares may be affected by economic, geopolitical and other conditions in Singapore and in the Asia Pacific region.

Central to Creative’s pricing strategy is its ability to manufacture high-quality, sophisticated products in commercial volumes at a relatively low cost at facility in China, using modern surface mount technology assembly lines. To minimize component costs and to enable Creative to price its products competitively, Creative relies extensively on in-house research and development and strict control of the manufacturing process. In order to balance manufacturing capacity requirements, Creative also utilizes, and expects to continue to utilize, a number of

subcontractors in Singapore, Malaysia and China. These subcontractors assemble speakers, PDE products and provide board assembly functions during periods of peak demand. This flexibility between in-house and third party manufacturing allows Creative to lower its fixed manufacturing costs, thereby reducing per unit cost, while meeting rapid time-to-market demands.

Creative has maintained its research and development department (“R&D Department”) at its Singapore headquarters and in the U.S., U.K. and China. The efforts of the R&D Department have been critical in Creative’s development of its products and resulted in several new products, including the latest Sound Blaster X-Fi Titanium product line, wireless audio solutions, various products incorporating X-Fi technology, PDE products, including the Zen and MuVo lines of portable digital audio players and media players, the Live! Cam family of webcams, the new inPerson video conferencing system, award winning headphones and earphones, the new line of headset products, including the Fatal1ty and Creative line of high quality and high performance gaming headsets, and the line of speakers under the Gigaworks, I-Trigue, Inspire, Cambridge SoundWorks and TravelSound brands.

To remain competitive, Creative believes that it will need to continue to invest significant resources in research and development to enhance existing products and to develop new technologies and products. In fiscal years 2008, 2007 and 2006, Creative spent $63.9 million, $63.6 million, and $77.2 million, respectively, on research and development. Some of the technologies and products currently being developed by Creative include next generation audio products and silicon devices that incorporate X-Fi technology, OpenAL, 3D Audio and EAX technologies for gaming, software and hardware technologies for new PDE products including digital cameras and digital audio players, and a new line of headphone, headset and speaker products. 3Dlabs continues with the design of sophisticated programmable high performance media processors that are among some of the most complex silicon devices in the industry. In developing new products, Creative strives to design technologies, products and processes that provide greater consumer functionality, ease of use, lower cost of production, and better performance. In addition to in-house research and development efforts, Creative continues to license and purchase relevant technologies in the normal course of its business.

Creative holds a number of patents and pending patent applications from the United States and other countries. Creative also licenses patents and other intellectual property from third parties. However, Creative does not believe that it is materially dependent on any single patent or license. While Creative believes that patent protection is important, Creative also believes that other competitive factors, such as technological and manufacturing expertise, product design and ease of use, are as important if not more important to its business.

In August 2005, Creative was awarded a patent by the U.S. Patent and Trademark Office. This patent, Patent no. 6,928,433, which Creative refers to as “ZEN Patent”, covers the user interface of portable media players, including many of the Creative ZEN and earlier NOMAD^® Jukebox MP3 players, and some competing players, such as the Apple^® iPod^® products, and certain cell phones with music functions. The ZEN Patent covers the user interface that enables users of such devices to efficiently and intuitively navigate among and select tracks on the device.

Creative’s sales are seasonal. Creative typically experiences higher demand for its products in the second quarter of the fiscal year compared to the other quarters of the fiscal year, due primarily to the back to school buying season and the year-end holiday shopping season.

Creative faces intense competition from a large number of established companies and emerging companies in the personal digital entertainment, PC audio, communications, headphones, speakers and video conferencing markets and semiconductor markets and expects competition to continue to intensify as these markets evolve, and the economic environment impacts consumer demand. In addition, Creative now competes in its personal digital entertainment category with cell phone companies which have been promoting phones that offer music and other entertainment functions. Furthermore, in the U.S., service providers typically subsidize the cost of cell phones when

purchased with a calling plan, providing the phones at low or no cost to customers that enter into a service contract. Many of Creative’s current and potential competitors have substantially greater financial, manufacturing, marketing, distribution and other resources. Some of Creative’s competitors may also have greater name recognition and market presence, longer operating histories, greater market power and product depth, lower cost structures and larger customer bases. Creative’s current competitors include:

These competitors may be able to adapt more quickly to new technologies and changes in consumer preferences by introducing new products at lower prices which may result in lost market share for Creative and may force Creative to lower prices on its products which would result in reduced margins for those products. These competitive pressures may also cause Creative’s potential customers to delay or defer their purchasing decisions in anticipation of potential new products, lower prices, or both. Creative may not be able to compete successfully in the future with its existing or potential competitors and intense competition could have a material adverse effect on Creative’s operating results. See Item 3 “Risk Factors” - Creative faces a high level of competition in each of its product markets.

Creative procures raw materials, parts and components to be used in the production of its products from various vendors around the world. While there are multiple sources of supply for many categories of parts and components, Creative has limited supply sources for certain components of its most successful products, such as flash memory chips used in various PDE products. The inability of limited supply sources to provide Creative with sufficient quantities of components has in the past and may in the future affect Creative’s production and/or cost of goods sold. See Item 3 “Risk Factors” - Creative depends upon outside vendors and has limited supply sources for certain components of its most successful products.

Creative is subject to various governmental regulations in countries in which it operates, including regulations relating to business/investment approvals, export regulations including those related to national security considerations, tariffs, antitrust, intellectual property, consumer and business taxation and exchange controls. In addition, Creative is subject to the rules and regulations of the Accounting and Corporate Regulatory Authority and Singapore Exchange Securities Trading Limited in Singapore, and the rules and regulations of the Securities and Exchange Commission in the United States. Creative is also subject to environmental, recycling and occupational health and safety regulations in the jurisdictions in which it operates, particularly those in which it has manufacturing, research, or similar operations.

The following is a listing of the significant (direct/indirect) subsidiaries of Creative:

Creative’s headquarters, research and development, international sales and marketing, and engineering facilities are located in Singapore and Creative has a manufacturing plant in China.

The following is a description of Creative’s leased properties as of June 30, 2008:

Creative also currently leases an aggregate of approximately 110,000 square feet of office space for smaller sales offices in Australia, Belgium, China, Denmark, France, Germany, Hong Kong, Italy, Japan, Poland, Portugal, Spain, Sweden, Taiwan, Dubai, the United Kingdom, and the United States. In addition, Creative operates 2 retail stores with an aggregate of approximately 3,520 square feet in Singapore. Leases for these smaller sales offices are subject to lease agreements expiring between 2008 and 2016.

Creative also owns an office building of approximately 56,000 square feet in Milpitas, California, 100,000 square feet in Dublin, Ireland and 288,000 square feet in China. Creative owns approximately 5 acres of land for its facilities in Ireland, approximately 3.5 acres of land for its facilities in U.S. and approximately 58 acres of leasehold land for its facilities in China.

In June 2008, Creative sold its headquarters office building to an unrelated third party at a sales price of $181.4 million which was derived on an arms length basis, supported by a valuation of the property carried out by an independent assessor. Under the terms of the sale and purchase agreement, Creative agreed to leaseback the

property for a period of five years with an option for additional periods of three and two years. Under SFAS 98, the transaction did not meet certain criteria of sale-leaseback accounting. 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” (see Note 3 and 4 of “Notes to Consolidated Financial Statements”). In fiscal year 2008, Creative also sold its manufacturing operations in Malaysia and owns a minority interest in its 1,037,000 square feet office, production and warehouse facilities with approximately 30 acres of leasehold land.

Creative believes that all of its properties are in good condition and suitable for the purposes for which they are used.

Operating and Financial Review and Prospects are based upon Creative’s Consolidated Financial Statements, which have been prepared in accordance with accounting principles generally accepted in the United States of America. The preparation of these financial statements requires management to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenues and expenses, and related disclosure of contingent assets and liabilities. Management bases its estimates on historical experience and on various other assumptions that are believed to be reasonable under the circumstances, the results of which form the basis for making judgment about the carrying values of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates under different assumptions or conditions.

Management believes the following critical accounting policies affect its more significant estimates and assumptions used in the preparation of its consolidated financial statements:

Revenue from product sales is recognized when the following four criteria are met:

Persuasive evidence of an arrangement exists when Creative receives a purchase order from the customer and Creative subsequently confirms the order by issuing a sales order to the customer.

Based on the shipping terms specified in the customer’s purchase order or Creative’s sales order to the customer, this criteria is met when a product is delivered to a common carrier, or delivered to the customer’s delivery site or shipped to the customer.

The price is fixed or determinable when a sales order is issued to the customer.

Creative assesses the credit worthiness of each customer and will only issue a sales order to a customer if it believes that collection from that customer is probable.

Allowances are provided for estimated returns, discounts and warranties. Management analyzes historical returns, current economic trends and changes in customer demand and acceptance of its products when evaluating the adequacy of the sales returns allowance. Such allowances are adjusted periodically to reflect actual and anticipated experience. When recognizing revenue, Creative records estimated reductions to revenue for customer and distributor programs and incentive offerings, including price protection, promotions, other volume-based incentives and rebates. Significant management judgment and estimates must be used in connection with establishing these allowances in any accounting period. Creative 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.

Creative distributes its products primarily through third party resellers. Creative establishes allowances for doubtful accounts, returns and discounts for specifically identified doubtful accounts, returns and discounts based on credit profiles of its customers, current economic trends, contractual terms and conditions and historical payment, return and discount experience. Management performs ongoing credit evaluations of customers’ financial condition and uses letters of credit in certain circumstances. Credit insurance coverage is obtained when coverage is available and feasible. However, Creative is not able to procure credit insurance coverage for all customers as insurers have excluded certain customers and geographic markets. In the event actual returns, discounts and bad debts differ from the company’s estimates, or Creative adjusts these estimates in future periods, its operating results and financial position could be adversely affected.

The warranty period for the bulk of Creative’s products typically ranges between one to three years. The product warranty accrual reflects management’s best estimate of probable liability under its product warranties. Management determines the warranty provision based on known product failures (if any), historical experience, and other currently available evidence. If actual experience of product returns or cost of repair differ from the management’s estimates, revisions to the estimated warranty liability would be required and could have a material effect on Creative’s future results of operations.

Creative states inventories at the lower of cost or market. The company records a write-down for inventories of components and products which have become obsolete or are in excess of anticipated demand or net realizable value. Management performs a detailed assessment of inventory at each balance 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 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 and unpredictable pace of product and component obsolescence and demand changes.

If future demand or market conditions for the company’s products are less favorable than forecasted or if unforeseen technological changes negatively impact the utility of component inventory, Creative may be required to record write-downs which would negatively affect gross margins in the period when the write-downs are recorded and its operating results and financial position could be adversely affected.

Creative holds equity investments in various companies from less than 1% to 100% of the issuer’s outstanding capital stock. Investments in companies in which Creative acquires more than 50% of the outstanding capital stock and which are under Creative’s effective control, are treated as investments in subsidiaries, and the balance sheets and results of operations are fully consolidated after making an allowance for any minority interests. Companies in which Creative’s investments total between 20% and 50% of such company’s capital stock are treated as associated companies and recorded on an equity basis, whereby the cost of investment is adjusted to recognize Creative’s share of all post acquisition results of operations.

As for investments of less than 20%, non-quoted investments are carried at cost, less provisions for permanent impairment where necessary, and quoted investments are reported at fair value with the unrealized gains and losses included as a separate component of shareholders’ equity. The investment portfolio is monitored on a periodic basis for impairment. Creative’s investments in these companies are inherently risky because the markets for the technologies or products they have under development are typically in the early stages and may never develop. In the event that the carrying value of an investment exceeds its fair value and the decline in value is determined to be other-than-temporary, an impairment charge is recorded and a new cost basis for the investment is established. Fair values for investments in public companies are determined using quoted market prices. Fair values for investments in privately-held companies are estimated based upon one or more of the following: pricing models using historical and forecasted financial information and current market rates, liquidation values, the values of recent rounds of financing, or quoted market prices of comparable public companies.

In order to determine whether a decline in value is other-than-temporary, Creative evaluates, among other factors: the duration and extent to which the fair value has been less than the carrying value; the financial condition of and business outlook for the company, including key operational and cash flow metrics, current market conditions and future trends in the company’s industry, and the company’s relative competitive position within the industry; and Creative’s intent and ability to retain the investment for a period of time sufficient to allow for any anticipated recovery in fair value.

Creative uses the purchase method of accounting for business combinations, in line with Financial Accounting Standards Board’s (“FASB”) Statement of Financial Accounting Standard (“SFAS”) No. 141 “Business Combinations.” The purchase method of accounting for acquisitions requires extensive use of accounting estimates and judgment to allocate the purchase price paid to the fair value of the net tangible and intangible assets acquired, including in-process technology. The allocation of the purchase price is based on independent appraisals. The amounts and useful lives assigned to intangible assets could impact future amortization. The amount assigned to in-process technology is expensed immediately. If the assumptions and estimates used to allocate the purchase price are not correct, purchase price adjustments or future asset impairment charges could be required.

Creative reviews goodwill and purchased intangible assets for impairment annually and whenever events or changes in circumstances indicate the carrying value of an asset may not be recoverable in accordance with SFAS No. 142, “Goodwill and Other Intangible Assets.” Factors that Creative may consider important which could trigger an impairment review include the following:

When the existence of one or more of the above factors indicate that the carrying value of goodwill or other intangible assets may be impaired, Creative measures the amount of impairment based on a combination of market comparable method and projected discounted cash flow method using a discount rate determined by the management to commensurate with the risk inherent in Creative’s current business model. Additionally, in response to changes in the PC peripherals and consumer electronics industries and changes in global or regional economic conditions, Creative may strategically realign its resources and consider restructuring, disposing or otherwise exiting businesses, which could result in an impairment of property, plant and equipment, identifiable intangibles or goodwill.

Creative records accruals for loss contingencies when it is probable that a liability has been incurred and the amount of loss can be reasonably estimated.

In preparing its financial statements, Creative estimates its income taxes for each of the jurisdictions in which it operates. This involves estimating the actual current tax exposure, assessing temporary differences resulting from differing treatment of items, such as reserves and accruals for tax and accounting purposes and accounting for uncertainty in income taxes. These differences result in deferred tax assets and liabilities, which are included within Creative’s consolidated balance sheet. Significant management judgment is required in determining the provision for income taxes, deferred tax assets and liabilities and future taxable income for purposes of assessing the ability to realize any future benefit from its deferred tax assets. Creative provides for a valuation allowance with regard to its deferred tax assets as management believes that a substantial uncertainty exists regarding the realizability of these assets.

The following table sets forth, for the periods indicated, selected statement of operations data as a percentage of sales:

The following table sets forth Creative’s net sales, by product category expressed as a percentage of sales for the past three fiscal years:

Net sales for the year ended June 30, 2008 decreased by 19% compared to the year ended June 30, 2007 mainly due to lower sales of personal digital entertainment (“PDE”) products. Sales of PDE products, which include digital audio players and digital cameras, decreased by 33% compared to fiscal year 2007 and represented 53% of sales in fiscal year 2008 compared to 63% of sales in fiscal year 2007. The decrease in sales of PDE products was primarily attributable to lower average selling prices of digital audio players resulting from product mix and competitive pricing, and management’s decision to streamline the company’s lineup of digital audio players to focus on strategic and more profitable products. Sales of audio products, which consist of Sound Blaster audio cards and chipsets, decreased by 12% compared to fiscal year 2007 and represented 13% of sales in fiscal years 2008 and 2007. Sales of speakers and headphones increased by 13% in fiscal year 2008 compared to fiscal year 2007 and represented 26% of sales in fiscal year 2008 compared to 18% in fiscal year 2007. The increase was mainly contributed by an increase in sales of headphones. Sales from all other products, which include graphics products, communication products, accessories and other miscellaneous items, increased by 14% compared to fiscal year 2007 and represented 8% of sales in fiscal year 2008 and 6% in fiscal year 2007.

Gross profit in fiscal year 2008 was 22% of sales compared to 19% in fiscal year 2007. Gross profit at 22% in fiscal year 2008 was consistent with the mix of products sold during the fiscal year.

In line with the decrease in sales and management’s efforts to reduce operating costs, selling, general and administrative (“SG&A”) expenses in fiscal year 2008 decreased by 19% compared to fiscal year 2007. As a percentage of sales, SG&A expenses were 19% of sales in fiscal years 2008 and 2007.

Research and development (“R&D”) expenses were comparable in fiscal years 2008 and 2007, and as a percentage of sales were 8% in fiscal year 2008 and 7% in fiscal year 2007. R&D expenses in fiscal year 2008 remained at the same level as compared to fiscal year 2007 even though net sales have decreased because of spending on new product development in fiscal year 2008.

Other charges of $9.7 million for fiscal year 2008 relate to restructuring charges incurred to streamline the business operation of the group, and the charges comprised mainly employee severance costs and other exit costs pertaining mainly to lease cancelations. See Note 13 of “Notes to Consolidated Financial Statements.”

Chairman’s gift of shares to employees of $3.8 million in fiscal year 2008 relates to Creative’s Chairman and CEO’s gift of his personal Creative shares to the employees of Creative. In accordance with the US GAAP, the value of these Creative shares was reported as a non-cash charge in the operating expenses of Creative.

Net gain of $18.8 million in fiscal year 2008 comprised $34.4 million in net gain from sales of investments offset by $15.6 million in write-downs of mainly quoted investments. Bulk of the $34.4 million in net gain from sales of investments was derived from the sale of shares in subsidiaries and equity accounted investments. The disposals of these investments were in line with management’s goal of streamlining and improving operational efficiencies. Net loss of $1.9 million in fiscal year 2007 was mainly due to $2.0 million in write-downs of investments.

Net interest for fiscal year 2008 was an income of $5.0 million compared to an expense of $0.3 million in fiscal year 2007. Net interest income for fiscal year 2008 was mainly due to a partial loan repayment made in the fourth quarter of fiscal year 2007 which reduced the interest expense in fiscal year 2008.

Other income was $12.8 million in fiscal year 2008 compared to $114.6 million in fiscal year 2007. Other income of $12.8 million in fiscal year 2008 comprised mainly of a $14.6 million exchange gain. Other income of $114.6 million in fiscal year 2007 included a $100.0 million paid-up license by Apple Inc. for use of the Creative ZEN Patent in its products and a $12.1 million exchange gain.

Income tax expense of $1.7 million in fiscal year 2008 was mainly due to the changes in the mix of taxable income arising from various geographical regions. Income taxes of foreign subsidiaries are based on the corporate income tax rates of the country in which the subsidiary is located. Net operating profits from some subsidiaries cannot be offset with net operating losses sustained by subsidiaries from a different tax jurisdiction. In Singapore, Creative was granted a Pioneer Certificate under the International Headquarters Award that will expire in March 2010. Profits arising from qualifying activities under the Pioneer Certificate will be exempted from income tax, subject to certain conditions. The Singapore corporate income tax rate of 18% is applicable to profits excluded from the Pioneer Certificate.

Income tax expense of $23.9 million in fiscal year 2007 was mainly due to $18.0 million withholding tax paid on the license fees received from Apple Inc. and the changes in the mix of taxable income arising from various geographical regions.

Net sales for the year ended June 30, 2007 decreased by 19% compared to the year ended June 30, 2006. Sales of PDE products, which include digital audio players and digital cameras, decreased by 21% compared to fiscal year 2006 and represented 63% of sales in fiscal year 2007 compared to 65% of sales in fiscal year 2006. The decrease in sales of PDE products was primarily attributable to lower average selling prices of digital audio players resulting from product mix and management’s decision to streamline the company’s lineup of digital audio players to focus on strategic and more profitable products. Sales of audio products, which consist of Sound Blaster audio cards and chipsets, decreased by 22% compared to fiscal year 2006 and represented 13% of sales in fiscal years 2007 and 2006. The decrease in audio product sales was mainly due to a decrease in sales of low-end audio sound cards. Sales of speakers and headphones were comparable in fiscal years 2007 and 2006, and as a percentage of sales, represented 18% of sales in fiscal year 2007 compared to 15% in fiscal year 2006. Sales from all other products, which include graphic products, communication products, accessories and other miscellaneous items, decreased by 34% compared to fiscal year 2006 and represented 6% of sales in fiscal year in 2007 and 7% in fiscal year 2006. The decrease was primarily attributable to decrease in sales of graphics and other miscellaneous products.

Gross profit in fiscal year 2007 was 19% of sales compared to 15% in fiscal year 2006. Gross profit at 19% in fiscal year 2007 was consistent with the mix of products sold during the fiscal year with a higher percentage of sales coming from digital audio players which generally have lower gross profit margins due to competitive pricing on the digital audio players. The lower gross profit margin in fiscal year 2006 was primarily attributable to a substantial write-down of flash memory inventory amounting to $19.0 million in the third quarter of fiscal year 2006 due to a drop in flash memory prices. The drop in flash memory prices caused market uncertainty that resulted in lower sales and selling prices of digital audio players, negatively impacting the gross profit margin of fiscal year 2006.

In line with the decrease in sales and management’s efforts to reduce operating costs, SG&A expenses in fiscal year 2007 decreased by 10% compared to fiscal year 2006. As a percentage of sales, SG&A expenses were 19% of sales compared to 18% of sales in fiscal year 2006.

R&D expenses decreased by 18% compared to fiscal year 2006. The decrease was in line with the management’s costs cutting efforts and a reduced R&D spending by Creative’s wholly-owned subsidiary, 3Dlabs, due to a change in its business strategy to focus on the portable handheld device market instead of the professional workstation graphics business. As a percentage of sales, R&D expenses were 7% of sales in fiscal years 2007 and 2006.

In fiscal year 2006, there was a change in the business strategy of 3Dlabs to refocus on the portable handheld device market instead of the professional workstation graphics business. As a result, the fair value of 3Dlabs could no longer support the carrying value of the goodwill and other intangible assets associated with the acquisition of 3Dlabs in May 2002. Accordingly, Creative recorded a $31.5 million impairment of goodwill and other intangible assets in fiscal year 2006. See Note 3 of “Notes to Consolidated Financial Statements.”

Other charges of $5.9 million for fiscal year 2006 comprised mainly restructuring charges incurred by 3Dlabs due to the change in business strategy. The restructuring charges comprised mainly employee severance costs and fixed assets impairment write-downs. See Note 13 of “Notes to Consolidated Financial Statements.”

Net loss of $1.9 million in fiscal year 2007 was mainly due to $2.0 million in write-downs of investments. Net investment gain of $18.9 million in fiscal year 2006 included a $20.9 million in net gain from sales of investments offset by $2.0 million in write-downs of investments.

Net interest for fiscal years 2007 and 2006 was an expense of $0.3 million and $3.2 million respectively. The lower net interest expense for fiscal year 2007 was due to higher interest income from the higher average cash balance in fiscal year 2007 compared to fiscal year 2006 which helped to offset the bulk of the interest expense in fiscal year 2007.

Other income was $114.6 million in fiscal year 2007 compared to $3.6 million in fiscal year 2006. Other income of $114.6 million in fiscal year 2007 included a $100.0 million paid-up license by Apple Inc. for use of the Creative ZEN Patent in its products and a $12.1 million exchange gain. Other income of $3.6 million in fiscal year 2006 comprised mainly of $1.4 million in dividends received from investments and $2.0 million in sundry income, the bulk of which pertained to a write-back of unclaimed invoices.

Income tax expense of $23.9 million in fiscal year 2007 was mainly due to $18.0 million withholding tax paid on the license fees received from Apple and the changes in the mix of taxable income arising from various geographical regions. Income taxes of foreign subsidiaries are based on the corporate income tax rates of the country in which the subsidiary is located. Net operating profits from some subsidiaries cannot be offset with net operating losses sustained by subsidiaries from a different tax jurisdiction. In Singapore, Creative was granted a Pioneer Certificate under the International Headquarters Award that will expire in March 2010. Profits arising from qualifying activities under the Pioneer Certificate will be exempted from income tax, subject to certain conditions. The Singapore corporate income tax rate of 18% is applicable to profits excluded from the Pioneer Certificate.

In fiscal year 2006, tax write-back includes a $10.0 million reversal of income taxes. The reversal was related to corporate taxes provided for in full for profits arising from qualifying activities from the commencement date of the Pioneer Certificate until the second quarter of fiscal year 2004, based on the standard tax rates of 24.5% for fiscal year 2001, 22% for fiscal years 2002 and 2003, and 20% for fiscal year 2004.

Cash and cash equivalents at June 30, 2008 were $408.6 million compared to the balance of $250.5 million at June 30, 2007.

Net cash provided by operating activities during fiscal year 2008 and fiscal year 2007 were $53.3 million and $132.2 million, respectively. The cash provided by operating activities of $53.3 million in fiscal year 2008 was mainly due to a net decrease in accounts receivable by $74.4 million and a $14.7 million increase in accounts payable, offset partially by an increase in other assets and prepaids of $9.8 million and a $9.8 million adjustment for non-cash items. The $9.8 million adjustment for non-cash items was mainly pertaining to depreciation and amortization charges, net gain from disposal of investments and write-downs of investments.

Net cash provided by operating activities during fiscal year 2007 was $132.2 million compared with $48.9 million provided in fiscal year 2006. The cash provided by operating activities of $132.2 million was mainly contributed by gross license fees of $100.0 million received from Apple Inc., less tax of $18.0 million, a $35.2 million net decrease in accounts receivable and other assets and prepaid expenses, a $100.0 million net decrease in inventory and a $12.4 million adjustment for non-cash items. The decrease in inventory was in line with management’s intention to maintain a lower inventory balance. Cash provided by operating activities was offset partially by a $45.9 million net decrease in accounts payable and accrued and other liabilities. The $12.4 million in adjustments to non-cash items was mainly pertaining to depreciation and amortization charges.

Net cash provided by investing activities during fiscal year 2008 was $30.5 million compared to cash used of $2.8 million in fiscal year 2007. The $30.5 million cash provided in fiscal year 2008 was primarily proceeds from sale of investments amounting to $53.0 million, offset partially by $12.6 million of capital expenditures and $9.5 million of purchase of investments.

Net cash used in investing activities during fiscal year 2007 was $2.8 million compared to cash provided of $10.7 million in fiscal year 2006. The $2.8 million cash used in fiscal year 2007 was primarily for capital expenditures amounting to $6.0 million offset partially by proceeds from sales of fixed assets of $4.3 million.

Net cash provided by financing activities during fiscal year 2008 was $64.1 million compared with $99.5 million net cash used in fiscal year 2007. Cash provided by financing activities of $64.1 million comprised $127.6 million advance payments from sale of building, offset partially by $32.2 million used for the purchase of treasury shares, $19.8 million for repayment of debt obligations and $11.5 million for dividend payment (see Note 9 of “Notes to Consolidated Financial Statements”). The $127.6 million advance payment from sale of building arises because under SFAS 98, the transaction did not meet certain criteria of sale-leaseback accounting. 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” (see Note 3 and 4 of “Notes to Consolidated Financial Statements”). Legal counsel has confirmed that legal title has been transferred to the buyer and in the opinion of the directors and management, the sale was completed as legal title has been transferred to the buyer and sale proceeds were received.

Net cash used in financing activities during fiscal year 2007 was $99.5 million compared with $35.0 million in fiscal year 2006. Cash used in financing activities of $99.5 million primarily consisted of a $20.9 million dividend payment (see Note 9 of “Notes to Consolidated Financial Statements”) and $78.9 million in repayments of debt obligations.

As of June 30, 2008, in addition to its cash reserves and excluding long term loans, Creative has credit facilities totaling $100.1 million for overdrafts, guarantees, letters of credit and fixed short-term loans, of which approximately $97.2 million were unutilized.

Subsequent to the end of the fiscal year on June 30, 2008, Creative repaid the entire $100.0 million outstanding balance of the $175.0 million syndicated term loan facility that it obtained in November 2004.

Management believes that Creative has adequate resources to meet its projected working capital and other cash needs for at least the next twelve months. To date, inflation has not had a significant impact on Creative’s operating results.

In November 2004, Creative entered into a five-year $175.0 million syndicated term loan facility with a group of international banks. The proceeds from this facility were used primarily to fund the growth in working capital requirements arising from the growth in the company’s revenue. The facility is unsecured and bears interest at LIBOR plus a margin of 0.45% for the first three years and LIBOR plus a margin of 0.95% for the remaining two years. The loan facility contains certain financial covenants, including requirements for Creative to maintain certain ratios for its working capital, but does not restrict Creative’s ability to borrow nor distribute earnings. The entire loan facility of $175.0 million was drawn down in fiscal year 2005 and Creative repaid $75.0 million in fiscal year 2007 and the remaining balance of $100.0 million was repaid subsequent to the end of the fiscal year 2008. The weighted average effective interest rate at the balance sheet date was 3.4031%.

On November 21, 2002, Creative Technology Centre Pte Ltd (“CTC”), a Singapore subsidiary of Creative, entered into a nine-year term loan facility for up to S$54.0 million ($39.6 million) with a bank. The loan is repayable in thirty-six quarterly installments of S$1.5 million ($1.1 million). The repayment commenced on March 31, 2003. The interest on the outstanding loan balance is based on the bank’s floating rate plus a margin of 1.5%. The loan is secured by a first mortgage on Creative’s headquarter building in Singapore and by way of a fixed and floating charge over all assets of CTC. At June 30, 2007, S$27.0 million ($19.8 million) was outstanding and this entire outstanding balance was repaid in fiscal year 2008.

Creative has various other credit facilities relating to overdrafts, letters of credit, bank guarantees and short term loans with several banks totaling approximately $100.1 million at June 30, 2008. Within these credit facilities, sub-limits have been set on how Creative may utilize the overall credit facilities. At June 30, 2008, $2.9 million in bank guarantees was drawn under these facilities. Facilities under letters of credit, bank guarantees, overdrafts and short-term loans bear interest at approximately the banks’ prime rates.

The functional currency of Creative and its subsidiaries is predominantly the US dollar and accordingly, gains and losses resulting from the translation of monetary assets and liabilities denominated in currencies other than the US dollar are reflected in the determination of net income (loss). From time to time, Creative enters into forward exchange contracts to reduce its exposure to foreign exchange translation gains and losses. Forward exchange contracts are marked to market each period and the resulting gains and losses are included in the determination of net income or loss. No forward exchange contracts were outstanding at June 30, 2008. Included in other income (expenses) are exchange gains of $14.6 million, $12.1 million and $0.7 million in fiscal years 2008, 2007 and 2006, respectively.

For a discussion on Creative’s research and development activities, please see Item 4 “Business Overview.”

For a discussion of significant trends on the financial condition and results of operation, please refer to Item 5 “Results of Operations” and “Liquidity and Capital Resources.”

Creative was not a party to any off-balance sheet arrangement in fiscal year 2008 and is not currently a party to any off balance sheet arrangement.

The following table presents the contractual obligations and commercial commitments of Creative as of June 30, 2008:

Unconditional purchase obligations are defined as contractual obligations for the purchase of goods or services, which are enforceable and legally binding on the company and that specify all significant terms, including fixed or minimum quantities to be purchased, fixed, minimum or variable price provisions and the approximate timing of the transaction. The expected timing of payment of the obligations set forth above is estimated based on current information. Timing of payments and actual amounts paid may be different depending on the time of receipt of goods or services or changes to agreed-upon amounts for some obligations.

As of June 30, 2008, Creative has utilized approximately $2.9 million under guarantees and letters of credit.

Please refer to Note 1 of “Notes to Consolidated Financial Statements” for the discussion of recently issued accounting pronouncements.

Creative’s Directors and Executive Officers as of September 19, 2008 were as follows:

SIM WONG HOO founded Creative in Singapore in 1981 and has been its Chairman of the Board and Chief Executive Officer since its inception.

TAN LIP-BU became a Director of Creative in 1990. He is the Founder and Chairman of Walden International, a leading international venture capital firm that manages over US$1.9 billion in committed capital. Mr. Tan has been active in the venture capital business in the United States since the 1980’s and has been a lead investor and/or a board member in more than 50 companies, mostly in telecommunications, semiconductor/components and enterprise software related industries. Listed companies of which he is a director include Cadence Design Systems, Creative Technology, Flextronics, MindTree Ltd., Semiconductor Manufacturing International Corporation (“SMIC”) and SINA. Mr. Tan is also a member of the Committee of 100 in the United States and a member of the Visiting Committee for the Department of Electrical Engineering and Computer Science at the Massachusetts Institute of Technology.

TANG CHUN CHOY became a Director of Creative in 1990. He has more than 30 years of venture capital, banking, operational and engineering experience. He spent 15 years with Walden International and was its Co-Founder and Vice Chairman. Prior to joining the Walden Group in 1989, Mr. Tang was with the then Chemical Bank for 10 years and his last position, from 1985 to 1988, was as its General Manager, based in Singapore. He has also held various management and executive positions at Chemical Bank’s offices in New York and Jakarta from 1981 to 1985. Earlier in his career, from 1971 to 1976, Mr. Tang was a Senior Engineer and Project Coordinator at Esso Singapore Pte Ltd. He holds directorships in several public and private companies. Mr. Tang holds a Bachelor of Engineering Degree (Hons) from the then University of Singapore and a Master of Business Administration Degree from the University of British Columbia.

LEE KHENG NAM became a Director of Creative in 1991. He is currently the Chairman of Advantec Pte Ltd, an investment holding company. From March 1995 to February 2004, Mr Lee was the President of Vertex Management Pte Ltd and executive director of Vertex Venture Holdings Ltd (“VVH”), which were wholly-owned subsidiaries of Temasek Holdings (Private) Limited, engaged in the venture capital direct investment and fund management business. Mr Lee is currently a non-executive chairman of Vertex Management (II) Pte Ltd, and has been appointed as non-executive chairman of VVH on 1 September 2008. He is a Director of 2 listed companies - Creative Technology Ltd and China Finance Online Co Ltd. Mr. Lee formerly served on the boards of Centillium Communications Inc, Chartered Semiconductor Manufacturing Ltd, GRIC Communications Inc., ActivCard Corp and Gemplus International S.A. Prior to joining the Singapore Technologies Group, Mr. Lee was with NatSteel group as the Manager of the Project Development Department and the Ministry of National Development where he was Deputy Director of Planning. Mr. Lee holds a Bachelor of Science degree in Mechanical Engineering (First Class Honours) from Queen’s University, Canada and a Master of Science degree in Operations Research & Systems Analysis from the U.S. Naval Postgraduate School.

NG KAI WA became a Director of Creative in 2005. He has been the Co-Founder, Chairman and Chief Executive Officer of InnoMedia Pte Ltd since 1995. InnoMedia is a leading supplier of broadband IP Telephony solutions that deliver high quality-voice and video over IP network, targeted to the broadband service providers, enterprises, consumers and OEM customers. Prior to that, he was the Co-Founder, Chief Technology Officer and Vice Chairman of the Board of Creative Technology Ltd. Mr. Ng holds an Executive Master of Business Administration Degree from the National University of Singapore and a Diploma in Electronic and Electrical Engineering from Ngee Ann Polytechnic.

NG KEH LONG joined the Company in April 1993 as Financial Controller and held various financial positions until May 1996, when he was appointed as Vice President, Corporate Treasurer and Acting Chief Financial Officer. In 1998 he was appointed as Chief Financial Officer. Prior to joining Creative, he was a Senior Manager with Price Waterhouse (now PricewaterhouseCoopers), where he gained more than ten years’ experience in finance, accounting and auditing. Mr. Ng is a member of the Institute of Certified Public Accountants in Singapore.

Creative has proposed to pay each of its four non-Executive Directors (namely, Messrs Tan Lip-Bu, Tang Chun Choy, Lee Kheng Nam and Ng Kai Wa) S$60,000 (approximately US$43,000) for fees and reimbursement of any expenses incurred in connection with attendance at Board, Board committee or general meetings of the Company.

It is provided in the Company’s Articles of Association that all Directors except Executive Directors are to retire at least once every three years by rotation if they are appointed by the Company at general meeting. The retiring Directors are nonetheless eligible for re-election. Accordingly, Mr. Tan Lip-Bu and Mr. Ng Kai Wa will, on the date of the Annual General Meeting, retire as Directors. The Board recommends their re-election at this Annual General Meeting as Directors.

The following table sets forth the aggregate base salary, fees and bonuses paid, or proposed by Creative, for services rendered by all executive officers and directors for fiscal year 2008 (in US$’000):

The Audit Committee of the Board of Directors was formed in 1992. The members of the Audit Committee, all of whom are non-executive directors, are as follows:

In performing its functions, the Committee reviewed the audit plan and the overall scope of work of the Company’s independent auditor. During fiscal year 2008, it met with the auditor to discuss the results of its examination and its evaluation of the system of internal accounting control of Creative and its subsidiaries. The Audit Committee also reviewed the unconsolidated balance sheet of Creative and the consolidated financial statements of the Group as well as the independent auditor’s report thereon.

The Board of Directors has determined that each member of the Audit Committee has sufficient knowledge in financial and auditing matters to serve on the Audit Committee and that each member of the Audit Committee meets the independence requirements of the NASDAQ Global Market listing standards and any applicable rules and regulations of the SEC. In addition, the Board has determined that Mr. Lee Kheng Nam and Mr. Tang Chun Choy are audit committee financial experts as defined by the applicable rules and regulations of the SEC.

The Compensation and Option Committee of the Board of Directors oversees executive compensation and development at Creative. It establishes compensation policies for key executives, reviews the salaries, bonuses and incentives for key executives and approves share options for executives. The members of the Compensation and Option Committee are Mr. Sim Wong Hoo, Mr. Tan Lip-Bu and Mr. Lee Kheng Nam.

Creative had approximately 3,100 full-time employees as of June 30, 2008 compared to approximately 5,800 full-time employees as of June 30, 2007. The geographical distribution of these employees was 79% in Asia, 9% in the Americas and 12% in Europe, while the functional distribution was 33% in manufacturing, 18% in selling, marketing and customer support, 36% in research and development, and 13% in administrative and other. Creative believes that its future success will largely depend upon its ability to continue to attract, retain, train and motivate highly skilled and dedicated employees. None of Creative’s employees is represented by a labor union and Creative has not experienced any work stoppages in the past. Creative believes that its employee relations are good.

The following table sets forth certain information regarding the beneficial ownership of Creative’s ordinary shares by executive officers and directors as of September 19, 2008.

automatically increased on the first day (July 1) of each of the five fiscal years ending June 30, 2001, 2002, 2003, 2004 and 2005 by four percent of the issued share capital of Creative as at the last day of the immediate preceding fiscal year. The Option Committee has the discretion to decide the vesting schedule in the letter of offer. If it is not specifically stated in the letter of offer, 1/4 of the total amount of the grant vests on the first anniversary of the grant date and 1/48 of the total amount of the grant vests on the last day of each calendar month thereafter. The exercise price of options granted under the 1999 Scheme may be less than the fair market value of the shares as of the date of grant and the options expire after the tenth anniversary of the date of grant, except in the case of options granted to participants other than employees, options expire not later than the fifth anniversary of the date of grant. Effective November 12, 2007, amendments were made to the 1999 Scheme to allow the use of treasury shares to satisfy share based exercises. During the fiscal year ended June 30, 2008, Creative has issued new shares as well as utilized its treasury shares to satisfy share options exercises.

Effective July 1, 2005, Creative adopted the provisions of SFAS No. 123(R), “Share-Based Payment”. SFAS No. 123(R) establishes accounting for share-based awards exchanged for employee services. Accordingly, share-based compensation cost is measured on the date of grant, based on the fair value of the award, and is recognized as expense over the employee’s requisite service period. Creative previously applied Accounting Principles Board (“APB”) Opinion No. 25, “Accounting for Stock Issued to Employees”, and related Interpretations, and provided the required pro forma disclosures of SFAS No. 123, “Accounting for Stock-Based Compensation.”

Prior to the adoption of SFAS No. 123(R), Creative provided the disclosures required under SFAS No. 123, “Accounting for Stock-Based Compensation”, as amended by SFAS No. 148, “Accounting for Stock-Based Compensation, Transition and Disclosures.”

Creative elected to adopt the modified-prospective application method as provided by SFAS No. 123(R). Accordingly, during the fiscal year ended June 30, 2008, Creative recorded share-based compensation cost of $1.6 million in the financial statements, totaling the amount that would have been recognized had the fair value method been applied since the effective date of SFAS No. 123(R). Previously disclosed amounts have not been restated in the financial statements.

During the fiscal year ended June 30, 2006, Creative granted 3,120,000 stock options under the 1999 Scheme with a total grant date fair value of $5.1 million. The weighted average grant date fair value of options granted was $1.63 per share. There were no options granted under the 1999 Scheme in the fiscal year ended June 30, 2007. During the fiscal year ended June 30, 2008, Creative granted 2,931,500 stock options under the 1999 scheme with a total grant date fair value of $2.4 million. The weighted average grant date fair value of options granted was $0.82 per share.

The following table sets forth certain information regarding the ownership of Creative’s ordinary shares by each person who is known by Creative to own beneficially more than 5% of its outstanding ordinary shares as of August 29, 2008. The voting rights of shares held by major shareholders are the same as the voting rights of shares held by all other shareholders. The company does not believe it is directly or indirectly owned or controlled by any corporation or by any foreign government. The company is unaware of any arrangement that might result in a change in its control.

Mr. Sim Wong Hoo, one of Creative’s founders and its current Chief Executive Officer is the company’s largest shareholder. Accordingly, Mr. Sim may be able to influence the election of Creative’s directors, to determine the outcome of most corporate actions requiring shareholder approval and to control the management and affairs of Creative.

As of August 29, 2008, there were approximately 14,480 shareholders of record of the ordinary shares, of which approximately 206 were registered in the US, and approximately 14,274 in Singapore. Because many of the US shares are held by brokers and other institutions on behalf of shareholders, Creative is unable to estimate the total number of shareholders represented by these US record holders.

In January 2003, a corporation controlled by a director, Ng Kai Wa, entered into a rental agreement with a subsidiary of Creative, which was prior to Ng Kai Wa’s appointment as a director of Creative in June 2005. The rental agreement expired during fiscal year 2006 and the corporation has moved out of Creative’s premises in April 2006. Creative received $150,000 in rent payments in fiscal year 2006 under the rental agreement.

In fiscal year 2008, Creative paid Directors’ fees of S$240,000 to its four non-executive directors on its Board of Directors.

The total remuneration paid to the Chairman and Chief Executive Officer in fiscal year 2008 was S$1.

The following financial statements of the company and the auditors’ report appear under Item 19 “EXHIBITS” on pages F-1 through F-24 and S-1 through S-2.

During the course of its ordinary business operations, Creative and its subsidiaries are subject to a variety of intellectual property and other disputes, including claims against Creative alleging copyright infringement, patent infringement, contract claims, employment claims and business torts. Ongoing disputes exist with, among other entities, Bose Corporation (a patent infringement action filed in the U.S. International Trade Commission against Creative Technology Ltd and several other respondents); SMDK Corp. (a patent infringement action filed in the U.S. District Court for the Eastern District of Texas against Creative Labs, Inc. and several other defendants); Acticon Technologies (a patent infringement action filed in the U.S. District Court for the Eastern District of Texas Against Creative Labs, Inc. and E-Mu Systems, Inc.); and Fuzzysharp Technologies Corporation (a patent infringement action filed in the U.S. District Court, Northern District of California against 3Dlabs Inc., Ltd). Creative believes it has valid defenses to the various claims asserted against it, and intends to defend the actions vigorously. However, should any of these claimants prevail in their suits or claims, Creative does not expect there to be any consequent material adverse effect on its financial position or results of operations.

Creative in a general meeting may by ordinary resolution declare dividends recommended by the Board of Directors. The directors may declare an interim dividend. No dividend may be paid except out of profits which are available for distribution under the provisions of Singapore law. Profits applied by the company to purchase its own shares cannot be paid as dividend to the shareholders. Similarly, the company’s gains from the sale of treasury shares cannot be used for the distribution of dividends.

No significant change has occurred since the date of the company’s annual financial statements.

Creative’s ordinary shares have been traded on the NASDAQ Global Market (“NASDAQ”) since August 3, 1992, under the symbol “CREAF.” Creative’s ordinary shares have been traded on the Singapore Exchange (“SGX-ST”) since June 15, 1994. In June 2007, Creative announced that it intends to voluntarily delist its ordinary shares from NASDAQ with August 1, 2007 as the last day of trading on NASDAQ. In July 2007, Creative extended the date of the voluntary delisting with August 31, 2007 as the last day of trading on NASDAQ. After August 31, 2007, the company’s current primary listing on the SGX-ST is Creative’s sole exchange listing. The delisting from NASDAQ did not affect the status of Creative’s shares on the SGX-ST.

The following table presents, for the registered shares on the NASDAQ and SGX-ST: (i) the annual high and low market prices for the five most recent full fiscal years; (ii) the high and low market prices for each full fiscal quarter for the two most recent full fiscal years; and (iii) the high and low market prices for each month for the most recent six months. These prices do not include retail markups, markdowns, or commissions.

On August 29, 2008, the closing price of Creative’s ordinary shares on the SGX-ST was S$6.11.

Our objects and purposes are found in paragraph 3 of our Memorandum of Association. Our main object and purpose includes, but is not limited to, the design, manufacture and distribution of digitized sound and video boards, computers and related multimedia and personal digital entertainment products.

A director shall not vote in respect of any contract or proposed contract or arrangement in which he has directly or indirectly a personal material interest and if he shall do so his vote shall not be counted. Notwithstanding his interest, a director may be counted in the quorum present at any meeting of the directors.

The compensation of our directors is determined by the company in a general meeting. Any director who is appointed to an executive office or serves on any committee or who otherwise performs or renders services, which in the opinion of the directors, are outside his ordinary duties as a director, may be paid such remuneration as the directors may determine.

The directors may exercise all the powers of the company to borrow money and to mortgage or charge its undertaking, property and uncalled capital and to issue debentures and other securities.

At each annual general meeting of the company, one-third of the directors shall retire from office by rotation provided that no director who is also an executive shall retire by such rotation. A retiring director is eligible for re-election and the directors to retire every year are those who have been longest in office since their last election.

The directors are entitled to appoint one or more from their body as executive director. A director so appointed shall not, while holding that office, be subject to retirement by rotation or be taken into account when determining the rotation or retirement of directors but his appointment shall be automatically terminated if he ceases for any cause to be a director. Where an executive director is appointed for a fixed term, the term shall not exceed five years.

The directors may at any time, and from time to time, appoint any person to be a director, either to fill a casual vacancy or as an addition to the existing directors. Any directors so appointed shall hold office only until the next annual general meeting, but shall then be eligible for re-election and shall not be taken into account in determining the directors who are to retire by rotation at that meeting.

A director need not be a shareholder of the company, but shall be entitled to receive notice of and to attend all general meetings of the company.

Creative has only one class of shares, known as ordinary shares. All new shares issued by the company are subject to pre-emption rights, unless these rights have been waived by the shareholders in a general meeting. Shareholders may, at a general meeting, grant general approval to issue new ordinary shares. Such approval would be effective from the date of the meeting at which it was given, to the date of the company’s next general meeting. Creative’s shareholders have given it general authority to issue new ordinary shares of up to 25% of the total number of its issued ordinary shares at the time of issue. All new ordinary shares are under the control of Creative’s Board of Directors who may allot and issue the shares with such rights and restrictions as it may think fit, provided that no new ordinary shares may be issued which nullify, restrict or disparately reduce the per share voting rights of the shareholders.

The Board of Directors may issue new shares in excess of its 25% mandate from the shareholders, subject to authority of the company in a general meeting.

The company shall have a first and paramount lien on shares and dividends from time to time declared in respect of such shares but such lien shall be restricted to unpaid calls and installments upon the specific shares in respect of which such monies are due and unpaid, and to such amounts as the company may be called upon by law to pay in respect of the shares of the member or deceased member.

The company may sell, in such manner as the directors think fit, any shares on which the company has a lien, but no sale shall be made unless a sum in respect of which the lien exists is presently payable, nor until the expiration of 14 days after a notice in writing, stating and demanding payment of such part of the amount in respect of which the lien exists as is presently payable, has been given to the registered holder for the time being of the share, or the person entitled thereto by reason of his death or bankruptcy.

The directors may make calls upon Creative’s shareholders in respect of any money unpaid on their shares and not by the conditions of allotment thereof made payable at fixed times, provided that no call shall be payable at less than one month from the date fixed for the payment of the last preceding call.

The Articles of Association allow the company to hold shares in treasury. Treasury shares are shares which are purchased by the company in accordance with the Singapore Companies Act (Cap.50) and since such purchase, have been continuously held by the company. The company may hold or deal with its treasury shares in the manner authorized by, or prescribed pursuant to, the Singapore Companies Act. The treasury shares have no voting rights and are not entitled to any dividend or other distribution (whether in cash or otherwise) of the company’s assets (including any distribution of assets to members on a winding up) that may be made by the company.

Any shareholder may transfer all or any of his shares. Creative’s Board of Directors may decline to register any transfer of ordinary shares which are not fully paid shares or ordinary shares to a person not approved by them and may also decline to register any transfer of shares on which the company has a lien. No shares shall in any circumstances be transferred to any infant or bankrupt or person of unsound mind. Ordinary shares may be transferred by a duly signed instrument of transfer. Creative’s Board of Directors may also decline to accept any instrument of transfer unless, among other things, the proper amount of duty has been paid in relation to each instrument of transfer and a certificate of payment of stamp duty is presented for registration together with the instrument of transfer, the share certificate and such other evidence as may be required. Creative will replace lost or destroyed certificates for ordinary shares if it is properly notified and if the applicant pays a fee which will not exceed S$1 and furnishes any evidence and indemnity that Creative’s Board of Directors may require.

If any time the share capital is divided into different classes of shares, the rights attached to any class (unless otherwise provided by the terms of issue of the shares of that class) may, whether or not the company is being wound up, be varied with the consent in writing of the holders of three-fourths of the issued shares of that class, or with sanction of a special resolution passed at a separate general meeting of the holders of the shares of the class.

Every member (except the company as a holder of treasury shares) is entitled to be present and to vote at any general meeting either personally or by proxy. A proxy need not be a shareholder. A person who holds ordinary shares in the book-entry clearance system maintained by the Central Depository (Pte) Limited, or CDP, will only be entitled to vote at a general meeting as a shareholder if his name appears on the depository register maintained by CDP 48 hours before the general meeting. At any general meeting a resolution put to the vote of the meeting shall be decided on a show of hands, unless before or on the declaration of the result of the show of hands, a poll is demanded. A poll may be demanded by the Chairman, by at least two members present in person or by proxy, or by any member present in person or by proxy and holding or representing not less than 10% of the total voting rights of all the voting rights of all members having the rights to vote or 10% of the total number of paid up shares of the company conferring that right. On a show of hands, every member present in person or by proxy, shall have one vote. If a member is represented by two or more proxies, only one of the proxies, as the Chairman shall determine, shall be entitled to vote. And on a poll, every member present in person or by proxy shall have one vote for each share he holds or represents.

The company in a general meeting may declare dividends, but no dividend shall exceed the amount recommended by the directors. The directors may from time to time pay to shareholders interim dividends if the directors believe dividends are justified by the profits of the company. Creative must pay all dividends out of its profits which is available for distribution under the provisions of the law. Profits applied by the company to purchase its own shares cannot be paid as dividends to the shareholders. Similarly, gains of the company from the sale of treasury shares cannot be used for the distribution of dividends. All dividends are paid pro rata among the shareholders in proportion to the amount paid up on each shareholder’s ordinary shares, unless the right attaching to an issue of any ordinary share provides otherwise. Unless otherwise directed, dividends are paid by check or warrant sent through the post to each shareholder at his registered address. Notwithstanding the foregoing, Creative’s payment to CDP of any dividend to the extent of payment made to the CDP, discharges it from any liability to that shareholder in respect of that payment.

The company is entitled to issue bonus shares pursuant to the general mandate to issue shares obtained from its shareholders and may issue such bonus shares for no consideration.

The company may also, in a general meeting may upon the recommendation of the directors, capitalize any of the company’s reserve accounts or other undistributable reserve or any sum standing to the credit of the profit and loss account by appropriating such sum to the persons registered as holders of shares at the close of business on the date of the ordinary resolution in proportion to their holdings.

If the company is wound up and liquidated, holders of ordinary shares (except the company as a holder of treasury shares) will be entitled to participate in any surplus assets in proportion to their shareholdings.

Provisions Discriminating against any Existing or Prospective Holder of Shares

There are no provisions in Creative’s Articles of Association discriminating against any existing or prospective holder of shares as a result of a shareholder owning a substantial number of shares.

Under the Singapore Companies Act, the rights of shareholders can be altered by way of a special resolution of the company to alter or add to its articles of association. Such special resolution must be passed by not less than three fourths of the members of the company at a general meeting. Notice of such general meeting must be given to the shareholders 21 days in advance of the same.

In addition, the SGX-ST Listing Manual requires that an alteration to any special entitlement granted to shareholders of listed companies can only be made with the approval of the SGX-ST.

Creative’s Articles of Association do not prescribe any procedure of changing the rights of holders of shares. Thus, the procedures under the Singapore Companies Act will apply to Creative. However, the procedures under the SGX-ST Listing Manual do not apply to Creative because the SGX-ST has waived compliance with the SGX-ST Rules.

Creative is required to hold an annual general meeting every year and not more than 15 months after the holding of the last annual general meeting. The Board of Directors may convene an extraordinary general meeting whenever it thinks fit. A quorum of members is required to be present at the time when the meeting proceeds. Members holding at least one third of all the issued shares of the company shall form a quorum.

All business transacted at an extraordinary general meeting, and all business transacted at an annual general meeting, with the exception of declaring a dividend, the consideration of the accounts, balance sheets, the report of the directors and auditors, election of directors in the place of those retiring, fixing of fees of directors and the appointment and fixing of the remuneration of the auditors, are regarded as special business. The Companies Act – Chapter 50 requires certain matters to be approved by shareholders by special resolutions whereby Creative must give at least 21 days’ notice in writing for every general meeting convened for the purpose of passing a special resolution. Ordinary resolutions generally require at least 14 days’ notice in writing. A notice must be given to every shareholder who has supplied Creative with an address for the giving of notices of general meeting and must set forth the place, the day and the hour of the meeting and, in the case of special business, the general nature of that business.

Except as described in “Voting Rights” above, there are no limitations imposed by Creative’s Articles of Association on the rights of shareholders who are non-resident in Singapore to hold or vote ordinary shares.

Creative sold its headquarters office building in June 2008, to an unrelated third party at a sales price of $181.4 million which was derived on an arms length basis, supported by a valuation of the property carried out by an independent assessor. 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 of $52.9 million and paid an advance rental of $0.9 million to the purchaser. The sale was completed on June 26, 2008, legal title has been transferred to the buyer and sale proceeds were received.

This summary of Singapore and United States tax considerations is based on current law and is provided for general information. The discussion does not purport to deal with all aspects of taxation that might be relevant to particular shareholders in light of their investment or tax circumstances, or to certain types of shareholders (including insurance companies, tax-exempt organizations, regulated investment companies, financial institutions or broker-dealers, and shareholders that are not U.S. Shareholders (as defined below)) subject to special treatment under the U.S. federal income tax laws. Such shareholders should consult their own tax advisors regarding the tax consequences of any investment in the ordinary shares.

Under current provisions of the Singapore Income Tax Act, corporate profits are taxed at a rate of 18%. Prior to January 1, 2003, under the dividend imputation system, the income tax paid by a company on its profits is fully passed on or imputed to its shareholders when a dividend is paid. Thus, the shareholders receive dividends net of the income tax paid by Creative. Dividends received by either a resident or a non-resident of Singapore are not subject to withholding tax. Shareholders are taxed on the gross amount of dividends (i.e., the cash amount of the dividend plus the amount of corporate tax paid by Creative). The income tax paid by Creative in respect of the franked dividend paid will be available to shareholders as a tax credit to offset the Singapore income tax liability on their

overall income (including the gross amount of dividends). In the case of a Singapore resident shareholder, if the shareholder’s marginal tax rate is equal to the corporate tax rate, there is no further Singapore tax to pay in respect of the dividends. If the shareholder’s marginal tax rate is lower than the corporate tax paid, the shareholder is entitled to claim a tax refund for the difference from the Inland Revenue Authority of Singapore; conversely, if the resident shareholder’s marginal tax rate is higher than the corporate tax rate, the shareholder must pay the difference of the tax rate on the dividend income to the Inland Revenue Authority of Singapore. In the case of a non-resident shareholder, the shareholder is taxed on dividends at the corporate tax rate. Thus, the non-resident shareholder pays no further Singapore income tax on net dividends received. Further, the non-resident shareholder will not receive any tax refund from the Inland Revenue Authority of Singapore. No tax treaty currently exists between the Republic of Singapore and the United States of America.

Starting from January 1, 2003, the dividend imputation system has been replaced by a new one-tier corporate tax system, subject to transitional provisions. Under the new one-tier corporate tax system, dividends paid by a company would be exempt from Singapore tax in the hands of its resident or non-resident shareholders. A five year transitional period from January 1, 2003 to December 31, 2007 is provided for companies with unutilized franking credits as at December 31, 2002 to remain on the imputation system (before moving to the new one-tier corporate tax system) for the purpose of paying franked dividends. With effect from January 1, 2008, Creative has automatically moved to the new one-tier corporate tax system.

Creative was granted a Pioneer Certificate under the International Headquarters Award that will expire in March 2010. The Pioneer Certificate exempts income from qualifying activities from tax in Singapore, subject to certain conditions. The qualifying activities include management of intellectual property, research and development activities, global/ regional functions such as brand management, corporate marketing etc, and sales of qualifying products. Under the Pioneer Certificate, qualifying pioneer profits for fiscal years 2002, 2003, 2004, 2005, 2006, 2007 and 2008 are exempt from tax in Singapore. Non-pioneer profits for fiscal years 2002, 2003, 2004, 2005, 2006, 2007 and 2008 are subject to Singapore corporate tax at the prevailing corporate tax rate (2002 and 2003 – 22%, 2004, 2005 and 2006 – 20%, 2007 and 2008 – 18%).

Under current Singapore tax law there is no tax on capital gains and, thus, any profits from the disposal of shares are not taxable in Singapore unless the vendor is regarded as carrying on a trade in shares in Singapore, in which case, the disposal profits would be taxable as trade profits rather than capital gains.

There is no stamp duty payable in respect of the holding and disposition of shares. No duty is payable on the acquisition of new shares. Where existing shares are acquired in Singapore, stamp duty is payable on the instrument of transfer of the shares and computed based on the number of shares transferred multiplied by 0.2% of the higher of consideration paid or net assets value of the company concerned. The stamp duty is borne by the purchaser unless there is an agreement to the contrary. Where no instrument of transfer is executed or the transfer is registered through the Transfer Agent, no stamp duty is payable on the acquisition of existing shares. Stamp duty may be payable if the instrument of transfer is subsequently received in Singapore.

Shareholders that are (i) corporations or partnerships organized under the laws of the United States or any political subdivision thereof, (ii) an estate the income of which is includible in gross income for United States federal income tax purposes regardless of its source, (iii) a trust, if a court within the United States is able to exercise primary supervision over the administration of the trust and one or more U.S. persons has authority to control all substantial decisions of the trust, (iv) United States citizens or (v) United States resident aliens (as defined in Section 7701(b) of the Internal Revenue Code of 1986, as amended) (together, “US Shareholders,” and each a “US Shareholder”) generally should report dividend income for United States income tax purposes in the amount of any cash dividend received from Creative to the extent paid out of the current or accumulated earnings and profits of Creative, as determined under current United States income tax principles. Such dividend income will generally be foreign source income subject to the separate limitation for “passive income” for purposes of the foreign tax credit limitation. If a US Shareholder receives a dividend payment in any currency other than US dollars, the amount of the dividend payment for Federal income tax purposes will be the US dollar value of the dividend payment (determined at the spot rate on the date of such payment) regardless of whether the payment is in fact converted into

US dollars. In such case, US Shareholders may recognize ordinary income or loss as a result of currency fluctuations during the period between the date of a dividend payment and the date such dividend payment is converted into US dollars. US Shareholders generally should not be entitled to a foreign tax credit for corporate taxes paid by Creative, except that any domestic corporation which owns 10 percent or more of the voting stock of Creative should consult its tax advisor with respect to its ability to claim foreign tax credits with respect to such taxes. Additionally, US Shareholders will, upon the sale or exchange of ordinary shares, recognize gain or loss for United States income tax purposes in an amount equal to the difference between the amount realized and the US Shareholder’s tax basis in such ordinary shares. Such gain or loss will be capital gain or loss if the ordinary shares were a capital asset in the hands of the US Shareholder and will be long-term capital gain or loss if such ordinary shares have been held for more than one year. If a US shareholder receives any currency other than US dollars on the sale of ordinary shares, such US Shareholder may recognize ordinary income or loss as a result of currency fluctuations between the date of such sale and the date such sale proceeds are converted into US dollars.

Movable assets situated in Singapore of non-domiciled individuals (dying on or after January 1, 2002) are exempt from estate duty. In the case of an individual who is not domiciled in Singapore, Singapore estate tax is imposed on the value of all immovable assets situated in Singapore. There is an exemption of up to S$9,000,000 for residential properties. In addition, there is an exemption of S$600,000 in respect of the non-domiciled deceased’s other immovable assets. Any excess will be taxed at a rate equal to 5 percent on the first S$12,000,000 of the individual’s Singapore chargeable immovable assets and thereafter at a rate equal to 10 percent. With effect from February 15, 2008, no Singapore estate duty will be leviable in respect of deaths occurring on or after February 15, 2008. An individual shareholder that is a U.S. citizen or resident (for US estate tax purposes) also will have the value of the shares included in the individual’s gross estate for U.S. estate tax purposes. An individual shareholder generally will be entitled to a tax credit against the shareholder’s U.S. estate tax if the individual shareholder actually pays Singapore estate tax; however, such tax credit is generally limited to the percentage of the U.S. estate tax attributable to the inclusion of the value of the shares included in the shareholder’s gross estate for U.S. estate tax purposes.

Creative files annual and special reports and other information with the SEC. You may read any portion of this Form 20-F and any other document that Creative files with the SEC at the Public Reference Section of the SEC, 450 Fifth Street, N.W., Washington D.C. 20549. Please call the SEC at 1-800-SEC-0330 for further information about the public reference section. Such material may also be obtained at the internet site maintained by the SEC at www.sec.gov.

Equity Price Risks: Creative is exposed to equity price risk on its quoted investments. An aggregate 10% reduction in market prices of Creative’s investments in quoted investments, based on a sensitivity analysis of the balance as of June 30, 2008, would have a $2.6 million adverse effect on Creative’s results of operations and financial position. Creative’s results of operations for fiscal year 2008 and 2007 included $15.6 million and $2.0 million of losses from write-downs of investments.

Interest Rate Risk: Changes in interest rates could impact Creative’s anticipated interest income on its cash equivalents and interest expense on its debt. Due to the short duration of Creative cash deposits and terms of its debt, an immediate 10% increase in interest rates would not have a material adverse impact on Creative’s future operating results and cash flows.

Foreign Currency Exchange Risk in the Rate of Exchange of Reporting Currency Relative to US$: The functional currency of Creative and its subsidiaries is predominantly the US dollar and accordingly, gains and losses resulting from the translation of monetary assets and liabilities denominated in currencies other than the US dollar are reflected in the determination of net income (loss). From time to time, Creative enters into forward exchange contracts to reduce its exposure to foreign exchange translation gains and losses. Forward exchange contracts are

marked to market each period and the resulting gains and losses are included in the determination of net income or loss. No forward exchange contracts were outstanding at June 30, 2008. Included in other expenses are exchange gains of $14.6 million, $12.1 million and $0.7 million in fiscal years 2008, 2007 and 2006.

At June 30, 2008, the monetary assets and liabilities of Creative are denominated in the following currencies:

The exchange rates for the S$ and Euro utilized in translating the balance sheet at June 30, 2008, expressed in US$ per one S$ and Euro was 0.7331 and 1.5748, respectively.

An aggregate decline of 10% in foreign currency exchange rates relative to US$, based on a sensitivity analysis of foreign currency denominated cash and cash equivalents and accounts receivable balances as of June 30, 2008, would have a $21.3 million and $4.0 million adverse effect on Creative’s results of operations and financial position.

Creative’s management under the supervision and with the participation of Creative’s Chief Executive Officer and Chief Financial Officer conducted an evaluation of the effectiveness of the disclosure controls and procedures as of June 30, 2008. Based on this evaluation, the Chief Executive Officer and Chief Financial Officer have concluded that as of June 30, 2008, the company’s disclosure controls and procedures (as defined in Rules 13a-15(e) under the Securities Exchange Act of 1934, as amended, (the “Exchange Act”)) were effective. The Company’s disclosure controls and procedures are designed to ensure that information required to be disclosed by us in the reports we file under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in Securities and Exchange Commission rules and forms and that such information is accumulated and communicated to management, including the Chief Executive Officer and the Chief Financial Officer, to allow timely decisions regarding required disclosure.

Creative’s management is responsible for establishing and maintaining adequate internal control over financial reporting (as defined in Rule 13a-15(f)) under the Exchange Act.

Internal control over financial reporting is defined as a process designed by, or under the supervision of, our Chief Executive Officer and Chief Financial Officer and effected by the company’s Board of Directors, management and other personnel, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles and includes those policies and procedures that:

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

Creative’s management evaluated the effectiveness of the company’s internal control over financial reporting as of June 30, 2008 using the framework set forth in the report of the Treadway Commission’s Committee of Sponsoring Organizations (“COSO”), “Internal Control – Integrated Framework.” Based on this evaluation, Creative’s management has concluded that the company’s internal control over financial reporting was effective as of June 30, 2008.

Creative’s independent registered public accounting firm, PricewaterhouseCoopers, has issued an audit report on Creative’s internal control over financial reporting on page F-1.

There was no change in the company’s internal control over financial reporting during the last fiscal year that has materially affected, or is reasonably likely to materially affect, the company’s internal control over financial reporting.

The Board of Directors has determined that both Mr. Lee Kheng Nam and Mr. Tang Chun Choy, members of the Audit Committee, each qualify as an “audit committee financial expert” as defined in Item 16A of Form 20-F under the Securities Exchange Act of 1934, as amended, and meets the independence requirements of the NASDAQ Global Market and the rules and regulations of the U.S. Securities and Exchange Commission.

Creative has adopted a “code of ethics” as defined in Item 16B of Form 20-F under the Securities Exchange Act of 1934, as amended, that applies to its chief executive officer, chief financial officer, controller and every other officer, director and employee of the company and its subsidiaries. The text of the Code of Business Conduct and Ethics is posted on the company’s Internet website at http://www.creative.com.

During fiscal year 2008, no waivers or amendments were made to the code of ethics for any officer, director or employee of the company.

The following table sets forth the aggregate fees paid or accrued for the audit and other services rendered to Creative by Creative’s independent principal accountant for fiscal years 2008 and 2007 (in US$’000):

Audit fees. This category consists of fees billed/billable for the audit of financial statements and internal control over financial reporting, which are normally provided by the independent auditors in connection with statutory and accounting matters that arose during, or as a result of, the audit or the review of interim financial statements and include the group audit.

Audit-related fees. This category consists of fees billed/billable for assurance and related services that are reasonably related to the performance of the audit or review of our financial statements or that are traditionally performed by the external auditor, and includes internal control reviews and assistance with and review of documents filed with the SEC.

Tax fees. This category includes fees for tax compliance, tax planning, and tax advice. Tax compliance generally involves preparation of original and amended tax returns, claims for refunds and tax payment-planning services. Tax planning and tax advice encompass a diverse range of services, including assistance with tax audits and appeals, tax advice related to mergers and acquisitions, employee benefit plans and requests for rulings or technical advice from taxing authorities.

All other fees. This category primarily consists of fees for retirement plan audits and advice on transfer price studies.

The Audit Committee has adopted a policy requiring pre-approval by the committee of all services, audit and non-audit, to be provided by the company’s independent auditor. In accordance with that policy, the Audit Committee reviews and pre-approves the scope and the cost of all audit and permissible non-audit services performed by the independent auditors, other than those for de minimus services which are approved by the Audit Committee prior to the completion of the audit. All of the services provided by the company’s principal accountant during the last two fiscal years have been approved by the Audit Committee.

The following table sets forth certain information related to share repurchases by Creative in fiscal year 2008:

The shares purchased in fiscal year 2008 were purchased in open-market transactions.

At the company’s Annual General Meeting (“AGM”) held on October 31, 2008, the shareholders approved a share repurchase mandate allowing Creative to buy up to 10% of the issued share capital of Creative outstanding as of the date of the AGM. This amounts to approximately 7.5 million shares. This authority to repurchase these shares shall continue in force unless revoked or revised by the shareholders in a general meeting, or until the date that the next AGM of Creative is held or is required to be held, whichever is the earlier.

Pursuant to the requirements of Section 12 of the Securities Exchange Act of 1934, the registrant certifies that it meets all of the requirements for filing on Form 20-F and has duly caused this Annual Report to be signed on its behalf by the undersigned, thereunto duly authorized.

CREATIVE TECHNOLOGY LTD.

/s/ Ng Keh Long

Ng Keh Long

Chief Financial Officer

Date: December 31, 2008

In our opinion, the accompanying consolidated balance sheets and the related consolidated statements of operations, of cash flows and of shareholders’ equity present fairly, in all material respects, the financial position of Creative Technology Ltd and its subsidiaries at June 30, 2008 and June 30, 2007, and the results of their operations and their cash flows for each of the three years in the period ended June 30, 2008 in conformity with accounting principles generally accepted in the United States of America. Also in our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of June 30, 2008, based on criteria established in Internal Control—Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). The Company’s management is responsible for these financial statements, for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting, included in Management’s Report on Internal Control over Financial Reporting appearing under Item 15 (b) “Management’s Report on Internal Control over Financial Reporting.” Our responsibility is to express opinions on these financial statements and on the Company’s internal control over financial reporting based on our audits (which was an integrated audit in 2008). We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the financial statements are free of material misstatement and whether effective internal control over financial reporting was maintained in all material respects. Our audits of the financial statements included examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. Our audit of internal control over financial reporting included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, and testing and evaluating the design and operating effectiveness of internal control based on the assessed risk. Our audits also included performing such other procedures as we considered necessary in the circumstances. We believe that our audits provide a reasonable basis for our opinions.

A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures that (i) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (ii) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (iii) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.

The accompanying notes are an integral part of these consolidated financial statements.

The consolidated financial statements include the financial statements of Creative Technology Ltd and Creative’s subsidiaries under its effective control from their respective dates of acquisition, after elimination of inter-company transactions and balances. The consolidated financial statements are presented in accordance with accounting principles generally accepted in the United States of America (“US GAAP”). The preparation of consolidated financial statements in conformity with US GAAP requires management to make estimates and assumptions that affect the amounts of assets and liabilities and disclosure of contingent assets and liabilities as of the date of the financial statements and reported amounts of revenues and expenses during the reporting periods. Actual results may differ from those estimates and such differences could be material. Certain reclassifications have been made in prior years’ financial statements to conform with classifications used in the current year. Creative conducts a substantial portion of its business in United States dollars (“US$” or “$”). All dollar amounts included in the financial statements and in the notes herein are United States dollars unless designated as Singapore dollars (“S$”). Creative operates on a thirteen week calendar closing on the Friday closest to the natural calendar quarter. Our financial year 2008 ended on June 27, 2008, the Friday nearest to June 30, 2008, while our prior financial years ended on June 29, 2007 and June 30, 2006. All quarters and fiscal years are described by their natural calendar dates.

At June 30, 2008, the monetary assets and liabilities of Creative are denominated in the following currencies:

The exchange rates for the S$ and Euro utilized in translating the balance sheet at June 30, 2008, expressed in US$ per one S$ and Euro was 0.7331 and 1.5748, respectively.

Cash equivalents consist of highly liquid investment instruments with original or remaining maturities of three months or less at the time of purchase. All deposits are in short-term deposits and money market accounts with various banks. This diversification of risk is consistent with Creative’s policy to maintain liquidity and ensure the safety of principal. Included in cash equivalents as of June 30, 2008 and 2007 are fixed rate deposits of $369.1 million and $204.7 million, respectively.

For certain of Creative’s financial instruments, including cash equivalents, accounts receivable and accounts payable, the carrying amounts approximate fair value due to their short maturities. The amounts shown for long-term obligations also approximate fair value because current interest rates charged to Creative for debts of similar maturities are substantially the same.

Inventory is stated at the lower of cost or market. Cost is determined using standard cost, appropriately adjusted at the balance sheet date to approximate actual cost on a weighted average basis. In the case of finished products and work-in-progress, cost includes materials, direct labor and an appropriate proportion of production overheads.

Management performs a detailed assessment of inventory at each balance sheet date to establish provisions for excess and obsolete inventories. The evaluation includes a review 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.

Property and equipment are stated at cost less accumulated depreciation. Depreciation is computed using the straight-line method over the estimated useful lives of the assets. Leasehold improvements are amortized over the shorter of the remaining facility lease term or the estimated useful lives of the improvements. No depreciation is provided on freehold land and construction in progress.

Creative reviews property and equipment for impairment in accordance with SFAS No. 144, “Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to Be Disposed”. Long-lived assets are reviewed for impairment whenever events or changes in circumstances indicate the carrying amount of an asset may not be recoverable. Recoverability of these assets is measured by comparison of its carrying amount to future undiscounted cash flows the assets are expected to generate. If the property and equipment are considered to be impaired, the impairment to be recognized equals the amount by which the carrying value of the assets exceeds its fair market value. For the three fiscal years ended June 30, 2008, 2007 and 2006, Creative had no impairment of its long-lived assets.

Creative holds equity investments in various companies pursuant to which it has acquired anywhere from less than 1% to 100% of the issuer’s outstanding capital stock. Investments in which Creative acquires more than 50% of the outstanding capital stock of an entity and which are under the effective control of Creative, are treated as investments in subsidiaries, and the balance sheets and results of operations of these subsidiaries are fully consolidated after making allowance for any minority interests. Companies in which Creative’s investments total between 20% and 50% of such company’s capital stock are treated as associated companies and recorded on an equity basis, whereby Creative adjusts its cost of investments to recognize its share of all post acquisition results of operations. In the event where a subsidiary or associated company issues shares to a third party at a price different from Creative’s carrying value of such shares, the difference is taken to the income statement.

Non-quoted investments of less than 20% in an entity are carried at cost, less provisions for permanent impairment where necessary.

In accordance with SFAS No. 115, “Accounting for Certain Investments in Debt and Equity Securities,” quoted investments of less than 20% in an entity are classified as available-for-sale. Such investments are reported at fair value with the unrealized gains and losses included as a separate component of shareholders’ equity. Unrealized losses are charged against income when a decline in fair value is determined to be other than temporary. Realized gains and losses upon the sale or disposition of such investments are based on the average cost of the specific investments sold.

The investment portfolio is monitored on a periodic basis for impairment. Creative’s investments in these companies are inherently risky because the markets for the technologies or products they have under development are typically in the early stages and may never develop. In the event that the carrying value of an investment exceeds its fair value and the decline in value is determined to be other-than-temporary, an impairment charge is recorded and a new cost basis for the investment is established. Fair values for investments in public companies are determined using quoted market prices. Fair values for investments in privately-held companies are estimated based upon one or more of the following: pricing models using historical and forecasted financial information and current market rates, liquidation values, the values of recent rounds of financing, or quoted market prices of comparable public companies.

Goodwill and other intangible assets are stated at cost and relate principally to the acquisition of new subsidiaries accounted for under the purchase method. Under this method, the purchase price has been allocated to the assets acquired, liabilities assumed and in-process technology based on their estimated fair market values at the dates of acquisition. Amounts allocated to acquired in-process technology are expensed in the period in which the acquisition is consummated. Intangible assets are amortized on a straight-line basis over the estimated useful lives of the assets, ranging from one to seven years.

Reviews for impairment of goodwill and other intangible assets are also conducted whenever events indicate that the carrying amount might not be recoverable. Factors that Creative may consider important which could trigger an impairment review include the following:

When the existence of one or more of the above factors indicates that the carrying value of the goodwill or other intangible assets may be impaired, Creative measures any impairment based on a combination of market comparable method and projected discounted cash flow method using a discount rate determined by the management commensurate with the risk inherent in Creative’s current business model.

The warranty period for the bulk of Creative’s products typically ranges between 1 to 3 years. The product warranty accrual reflects management’s best estimate of probable liability under its product warranties. Management determines the warranty provision based on known product failures (if any), historical experience, and other currently available evidence.

Revenue from product sales is recognized when the following four criteria are met:

Persuasive evidence of and arrangement exists when Creative receives a purchase order from the customer and Creative subsequently confirms the order by issuing a sales order to the customer.

Based on shipment terms specified in the customer’s purchase order or Creative’s sales order to the customer, this criteria is met when a product is delivered to a common carrier, or delivered to the customer’s delivery site or shipped to the customer.

The price is fixed or determinable when a sales order is issued to the customer.

Creative assesses the credit worthiness of each customer and will only issue a sales order to a customer if it believes that collection from that customer is probable.

Allowances are provided for estimated returns, discounts and warranties based on historical experience, current economic trends and changes in customer demand and acceptance of its products. Such allowances are adjusted periodically to reflect actual and anticipated experience. When recognizing revenue, Creative records estimated reductions to revenue for customer and distributor programs and incentive offerings, including price protection, promotions, other volume-based incentives and rebates.

Creative records accruals for loss contingencies when it is probable that a liability has been incurred and the amount of loss can be reasonably estimated.

Income taxes are accounted for under the asset and liability method. Deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the carrying amounts of existing assets and liabilities in the financial statements and their respective tax bases, and operating loss and tax carryforwards. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period that includes the enactment date. A valuation allowance is recorded for loss carryforwards and other deferred tax assets where it is more likely than not that such deferred tax assets will not be realized.

Financial instruments that potentially subject Creative to significant concentrations of credit risk consist principally of cash and cash equivalents and trade accounts receivable. Creative limits the amount of credit exposure to any one financial institution. Creative sells its products to original equipment manufacturers, distributors and key retailers. Creative 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 of credit in certain circumstances, procurement of credit insurance coverage and the geographical dispersion of sales. Creative establishes allowances for doubtful accounts, returns and discounts for specifically identified doubtful accounts, returns and discounts based on credit profiles of its customers, current economic trends, contractual terms and conditions and historical payment, returns and discount experience.

Effective July 1, 2005, Creative accounts for share-based employee compensation in accordance with SFAS No. 123(R), “Share-Based Payment.” Accordingly, share-based compensation cost is measured on the date of grant, based on the fair value of the award, and is recognized as expense over the employee’s requisite service period. Creative previously applied Accounting Principles Board Opinion (“APB”) No. 25, “Accounting for Stock Issued to Employees,” and related Interpretations, and provided the required pro forma disclosures of SFAS No. 123, “Accounting for Stock-Based Compensation,” and SFAS No. 148, “Accounting for Stock-Based Compensation, Transition and Disclosures.” See Note 10.

Creative participates in a number of defined contribution retirement plans in certain countries of operations. Contributions are based on a percentage of each eligible employee’s salary and are expensed as the related salaries are incurred. Creative incurred expenses of approximately $7.3 million, $8.0 million and $8.1 million with respect to these retirement plans for the fiscal years 2008, 2007 and 2006, respectively.

Treasury shares are accounted for under the cost method and are shown as a deduction from shareholders’ equity in the Consolidated Balance Sheet.

In September 2006, the Financial Accounting Standards Board (“FASB”) issued SFAS No. 157, “Fair Value Measurements”
(“SFAS 157”), which defines fair value, establishes guidelines for measuring fair value and expands disclosures regarding fair value measurements. SFAS 157 does not require any new fair value measurements but rather eliminates inconsistencies in guidance found in various prior accounting pronouncements. SFAS 157 is effective for fiscal years beginning after November 15, 2007. Earlier adoption is permitted, provided the Company has not yet issued financial statements, including for interim periods, for that fiscal year. Creative is currently evaluating the impact of SFAS 157, but does not expect the adoption of SFAS 157 to have a material impact on its consolidated financial statements.

In February 2007, the FASB issued SFAS No. 159 “The Fair Value Option for Financial Assets and Financial Liabilities including an Amendment of SFAS No. 115” (“SFAS 159”). SFAS 159 permits companies to measure certain financial assets and financial liabilities at fair value. The standard requires that unrealized gains and losses on items for which the fair value option has been elected be reported in earnings. SFAS 159 amends previous guidance to extend the use of the fair value option to available-for-sale and held-to-maturity securities. SFAS 159 is effective for fiscal years beginning after November 15, 2007. Creative is currently evaluating the impact of SFAS 159, but does not expect the adoption of SFAS 159 to have a material impact on its consolidated financial statements.

In December 2007, the FASB issued SFAS No. 160 “Non-controlling Interests in Consolidated Financial Statements – an amendment of ARB No. 51” (“SFAS 160”). SFAS 160 requires the recognition of a non-controlling (minority) interest as equity in the consolidated financial statements and separate from the parent’s equity. The amount of net income attributable to the non-controlling (minority) interest will be included in consolidated net income on the face of the income statement. It also amends certain of ARB No. 51’s consolidation procedures. This statement also includes expanded disclosure requirements regarding the interests of the parent and its non-controlling interest. SFAS 160 is effective for fiscal years beginning after December 15, 2008 and should be applied prospectively. However, the presentation and disclosure requirements of the statement shall be applied retrospectively for all periods presented. Creative is currently evaluating the impact of SFAS 160.

In accordance with SFAS No. 128, “Earnings per Share,” Creative reports both basic earnings per share and diluted earnings per share. Basic earnings per share is computed using the weighted average number of ordinary shares outstanding during the period. Diluted earnings per share is computed using the weighted average number of ordinary and potentially dilutive ordinary equivalent shares outstanding during the period. Ordinary equivalent shares are excluded from the computation if their effect is anti-dilutive. In computing diluted earnings per share, the treasury stock method is used to determine, based on average stock prices for the respective periods, the ordinary equivalent shares to be purchased using proceeds received from the exercise of such equivalent shares. Other than the dilutive effect of stock options, there are no other financial instruments that would impact the weighted average number of ordinary shares outstanding used for computing diluted earnings per share. The potentially dilutive ordinary equivalent shares outstanding under the employee share purchase plan were not material.

The following is a reconciliation between the average number of ordinary shares outstanding and equivalent shares outstanding (in ’000):

For fiscal years 2008 and 2006, approximately 0.1 million and 0.8 million shares were excluded from the computation of dilutive earnings per share, as the effect of including such shares would be anti-dilutive.

Included in property and equipment are assets purchased under capital lease obligations with a cost and accumulated depreciation of approximately $10.6 million and $10.5 million for fiscal year 2008, and $10.9 million and $10.9 million for fiscal year 2007, respectively.

Depreciation charged to results of operations, including depreciation related to assets under capital leases, amounted to $9.7 million, $15.3 million and $21.0 million for fiscal years 2008, 2007 and 2006, respectively.

Creative routinely reviews the remaining estimated useful lives of its machinery and equipment to determine if such lives should be adjusted due to the likelihood of technological obsolescence arising from changes in production techniques or in market demand for the use of its machinery and equipment.

The sale was completed on June 26, 2008, legal title has been transferred to the buyer and sale proceeds were received. However 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” (“SFAS 98”), the transaction did not meet certain criteria of sale-leaseback accounting. 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” (see Note 4). 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.

Goodwill and other intangible assets fully amortized were excluded from the table above. Other intangible assets amortization expense was $0.3 million, $1.5 million and $2.2 million for fiscal years 2008, 2007 and 2006.

Other accruals of $38.3 million and $29.6 million as of June 30, 2008 and 2007 includes accruals for various operating expense items that individually account for less than 5% of the total current liabilities.

As discussed in Note 3, under SFAS 98, the transaction did not meet certain criteria of sale-leaseback accounting, and accordingly the sale proceeds received, net of the security deposit and rental prepayment, is presented as “Advance payments from sale of building.”

Movements in the product warranty accrual for fiscal year 2008 were as follows (in US$’000):

Creative leases the use of land and certain of its facilities and equipment under non-cancelable operating lease arrangements.

Minimum future lease commitments for non-cancelable leases as of June 30, 2008, are as follows (in US$’000):

Rental expense under all operating leases was $8.9 million, $10.2 million and $12.0 million for fiscal years 2008, 2007 and 2006, respectively.

Future minimum lease commitments, which are secured by the underlying assets, as of June 30, 2008, under capital leases are as follows (in US$’000):

The components of total comprehensive income (loss) are as follows (in US$’000):

Details of share repurchases by Creative since the commencement date of the program on November 6, 1998 are set out below:

At the Annual General Meeting (“AGM”) held on October 31, 2007, the shareholders approved the share repurchase mandate allowing Creative to buy up to 10% of the issued share capital of Creative outstanding as of the date of the AGM. This amounts to approximately 8.3 million shares. This authority to repurchase these shares shall continue in force unless revoked or revised by the shareholders in a general meeting, or until the date that the next AGM of Creative is held or is required to be held, whichever is the earlier.

In accordance with The Companies (Amendment) Act 2005 of Singapore (Companies Amendment Act), which became effective on January 30, 2006, a company is allowed to repurchase shares out of its share capital, as well as from distributable profits and ordinary shares repurchased by the company can be held as treasury shares instead of being cancelled.

In fiscal year 2008, Creative had repurchased 7.0 million shares and held them as treasury shares. Creative had paid a total amount of $32.2 million to acquire these shares and this had been presented as a component within shareholders’ equity under the balance sheet.

Creative had utilized 19,500 treasury shares in fiscal year 2008 to satisfy share option exercises pursuant to the 1999 Scheme at a weighted-average exercise price of $4.37 each.

In December 1998, Creative adopted the Creative Technology (1999) Share Option Scheme (“1999 Scheme”) which allows options to be granted to full-time employees as well as consultants and non-executive directors. The total number of shares that may be granted under the 1999 Scheme is 7.5 million, provided that such amount shall be automatically increased on the first day (July 1) of each of the five fiscal years ending June 30, 2001, 2002, 2003, 2004 and 2005 by four percent of the issued share capital of Creative as at the last day of the immediate preceding fiscal year. The Option Committee has the discretion to decide the vesting schedule in the letter of offer. If it is not specifically stated in the letter of offer, 1/4 of the total amount of the grant vests on the first anniversary of the grant date and 1/48 of the total amount of the grant vests on the last day of each calendar month thereafter. The exercise price of options granted under the 1999 Scheme may be less than the fair market value of the shares as of the date of grant and the options expire after the tenth anniversary of the date of grant, except in the case of options granted to participants other than employees, options expire not later than the fifth anniversary of the date of grant. Effective November 12, 2007, amendments were made to the 1999 Scheme to allow the use of treasury shares to satisfy share based exercises. During the fiscal year ended June 30, 2008, Creative has issued new shares as well as utilized its treasury shares to satisfy share options exercises.

The fair value of each share option granted is estimated on the date of grant using the Black Scholes option-pricing model. The option-pricing model requires the input of highly subjective assumptions, including the option’s expected life, risk-free interest rates, dividend yield and the price volatility of the underlying share. The expected life of the options represents the period of time the options are expected to be outstanding and is based on historical trends. The expected share price volatility assumption is determined using the historical volatility of Creative’s shares. The following table presents the weighted-average assumptions used in the Black Scholes option-pricing model for the share option grants.

Summary of outstanding options under Creative’s employee share option plans

The following table summarizes the option information under the Creative’s employee share option plans as at June 30, 2008.

The options outstanding and exercisable as at June 30, 2008 were in the following exercise price ranges:

The intrinsic value is determined by the difference between Creative’s closing share price of $4.55 as of June 30, 2008 and the grant price. The aggregate intrinsic value in the table above represents the amount that would have been received by the option holders had all option holders exercised their options as of that date. The total fair value of shares vested during the fiscal year ended June 30, 2008 was $1.1 million and the total intrinsic value of options exercised during the fiscal year ended June 30, 2008 was $0.01 million. As at June 30, 2008, Creative expects to recognize the total unrecognized compensation cost relating to non-vested share-based compensation of $2.6 million over a weighted average period of 2.97 years.

In fiscal year 2008, there was a charge of $3.8 million relating to Creative’s Chairman and CEO’s gift of his personal Creative shares to the employees of Creative. In accordance with the US GAAP, the value of these Creative shares was reported as a non-cash charge in the operating expenses of Creative.

Creative was granted a Pioneer Certificate under the International Headquarters Award that will expire in March 2010. Under the Pioneer Certificate, profits arising from qualifying activities will be exempted from income tax in Singapore, subject to certain conditions. As a result of obtaining the Pioneer Certificate, there were tax write-backs of $10.0 million and $12.3 million in fiscal years 2006 and 2004. The reversal was related to corporate taxes provided for in full for profits arising from qualifying activities from the commencement date of the Pioneer Certificate until the second quarter of fiscal year 2004, based on the standard tax rates of 24.5% for fiscal year 2001 and 22% for fiscal years 2002 and 2003 and 20% for fiscal year 2004. These standard corporate income tax rates continue to be applicable to profits arising from activities excluded from the Pioneer Certificate.

The Singapore and other components of (loss) income before income taxes are as follows (in US$’000):

Creative’s effective tax provision for fiscal years 2008, 2007 and 2006 reconciles to the amount computed by applying the Singapore statutory rate of 18.0% for fiscal years 2008 and 2007 and 20.0% for fiscal year 2006 to (loss) income before income taxes and minority interest, as follows (in US$’000):

Deferred tax assets at June 30, 2008 and 2007 consisted of the following (in US$’000):

Deferred tax liabilities at June 30, 2008 and 2007 consisted of the following (in US$’000):

Creative had net operating loss carryforward of approximately $194.7 million and $174.8 million as at June 30, 2008 and June 30, 2007, the bulk of which expire between 2009 and 2029. The utilization of the net operating losses by Creative is subject to certain conditions.

Valuation allowance is provided for Creative’s deferred tax assets as management believes substantial uncertainty exists regarding the realizability of these assets.

Creative has United States tax deductions not included in the net operating loss carryforward described above aggregating approximately $60.9 million at June 30, 2008 and June 30, 2007, as a result of the exercise of employee stock options, the tax benefit of which has not been realized. The tax benefit of the deductions, when realized will be accounted for as a credit to other reserves rather than a reduction of the income tax provision.

Creative adopted FASB Interpretation No. 48, “Accounting for Uncertainty in Income Taxes – an interpretation of FASB Statement No. 109” (“FIN 48”), effective July 1, 2007. FIN 48 contains a two-step approach to recognize and measure uncertain tax positions. The first step is to evaluate the tax position for recognition by determining if the weight of available evidence indicates it is more likely than not that the position will be sustained on audit, including resolution of related appeals or litigation processes, if any. The second step is to measure the tax benefit as the largest amount which is more than 50% likely of being realized upon ultimate settlement.

Prior to adoption of FIN 48, Creative provided for tax exposures as part of its income taxes payable. As a result of the adoption of FIN 48, certain of the payables were reclassified from income taxes payable to the opening balance of FIN 48 liabilities. A reconciliation of the unrecognized tax benefits is as follows (in US$’000):

The liability of $11.7 million for the uncertain tax positions at June 30, 2008 is related to estimated transfer pricing in various jurisdictions, and withholding tax payments. This amount, if recognized, would affect Creative’s effective tax rate favorably.

Creative recognized interest and penalties related to unrecognized tax positions in income tax expense. The total amount of accrued interest and penalties relating to unrecognized tax benefits was $2.1 million.

As there are unused net operating loss carryforwards in one of the major tax jurisdictions, the tax periods that may be open to tax examinations include fiscal years 1998 through 2008. Creative does not anticipate a significant change to the total amount of unrecognized benefits within the next 12 months.

The following table presents the payments due by period for the long term debt and capital lease obligations as of June 30, 2008:

In fiscal year 2008, Creative announced a series of cost-cutting measures which included restructuring charges of $11.7 million to streamline the business operation of the group. Out of the $11.7 million restructuring charges recorded in fiscal year 2008, $2.0 million was charged to cost of goods sold and the balance $9.7 million was recorded as other charges in the operating expenses. The restructuring charges comprised mainly employee severance costs and other exit costs pertaining mainly to lease cancelations.

Severance charges of $7.4 million represented the costs of involuntary severance benefits for approximately 220 employees where $0.5 million was charged to cost of goods sold and the balance of $6.9 million was recorded in operating expenses. Half of the employees had left the Company as at June 30, 2008 and the majority of the remaining affected employees left in July 2008.

Other exit costs of $4.3 million comprised mainly of lease cancelation charges imposed on the non-cancelable operating leases. Out of the $4.3 million other exit costs recorded, $1.5 million pertaining to warehouse lease cancelation was charged to cost of goods sold and the balance of $2.8 million was recorded in operating expenses.

In February 2006, Creative announced that its wholly-owned subsidiary 3Dlabs will refocus its graphics business on the portable handheld device market instead of the professional workstation graphics market. As a result, Creative recorded restructuring charges of $4.9 million in operating expenses and an inventory charge of $4.3 million to cost of goods sold. The $4.9 million restructuring charges in operating expenses comprised $3.0 million in employee separation costs, $0.3 million in facility exit costs and fixed assets impairment write-downs of $1.6 million. Besides 3Dlabs’ restructuring charges, as part of ongoing worldwide cost-cutting measures, $1.0 million in employee separation costs was charged to operating expenses as part of restructuring costs in fiscal year 2006.

Employee separation costs for 3Dlabs and other Creative subsidiaries in fiscal year 2006 represented the costs of involuntary severance benefits for approximately 200 employees. Facility exit costs in fiscal year 2006 consisted primarily of lease termination costs and research and development expenses on some 3Dlabs’ graphics chips.

Fixed assets impairment write-downs of $1.6 million in fiscal year 2006 were attributed to computer hardware and software associated with the 3Dlabs’ facilities that were shut down.

The $4.3 million inventory charge in fiscal year 2006 comprised inventory obsolescence costs for 3Dlabs’ graphics cards.

Creative indemnifies certain of its customers, distributors, suppliers, and subcontractors for losses arising from matters such as intellectual property rights, including patents, trademarks, or copyrights. The scope of these indemnities varies and may include indemnification for damages and expenses, including reasonable attorneys’ fees. The term of its indemnification obligations are generally perpetual from the effective date of the agreement. In certain cases, there are limits on and exceptions to its potential liability for indemnification relating to intellectual property infringement claims. Creative cannot estimate the amount of potential future payments, if any, that the company might be required to make as a result of these agreements. Creative does not expect there to be any consequent material adverse effect on its financial position or results of operations. However, there can be no assurance that Creative will not have any future financial exposure under those indemnification obligations.

Net investment gain of $18.8 million in fiscal year 2008 comprised $34.4 million net gain from sales of investments offset by $15.6 million in write-downs of mainly quoted investments. Bulk of the $34.4 million in net gain from sales of investments was derived from the sale of shares in subsidiaries and equity accounted investments, including a net gain of $6.9 million on disposal of 80.1% interest in a manufacturing operation in Malaysia to a group of third party investors. Net loss of $1.9 million in fiscal year 2007 was mainly due to $2.0 million write-downs of investments.

The following provides a breakdown on the net (loss) gain from available-for-sale investments (in US$’000):

Gross realized gains were $8.2 million and $21.2 million for fiscal years 2008 and 2006 and negligible in fiscal year 2007. Gross realized losses were $1.5 million for fiscal year 2008 and nil for fiscal years 2007 and 2006.

In fiscal year 2008, Creative paid Directors’ fees of S$240,000 to its four non-executive directors on its Board of Directors.

The total remuneration paid to the Chairman and Chief Executive Officer in fiscal year 2008 was S$1.

Effective January 30, 2006, Creative became subject to the amendments promulgated under the Companies (Amendment) Act 2005 of Singapore. These amendments included the abolition of the ordinary share par value and authorized capital. The relevant amendments have resulted in all ordinary shares being recorded with no par value. The amendments do not affect the actual number of ordinary shares issued and the paid-in capital of Creative. As a result of the abolition of the ordinary share par value, a significant portion of the additional paid-in capital amounting to $290.2 million became part of the share capital account as at June 30, 2006 and increased the share capital account on that date to $298.5 million. The remaining balance of $52.3 million in the additional paid-in capital was classified as other reserves where it comprised mainly compensation expense for stock options, tax benefits relating to exercise of non qualified stock options by US employees and reserves arising from the buyout of a subsidiary’s convertible preference shares.

Creative operates primarily in one industry segment and provides advanced multimedia solutions for personal computers and personal digital entertainment products. Creative focuses its worldwide sales and marketing efforts predominantly through sales offices in North America, Europe and the Asia Pacific region.

The following is a summary of operations by geographical regions (in US$’000):

Major customers: In fiscal years 2008, 2007 and 2006, no customer accounted for more than 10% of net revenues. As of June 30, 2007 and June 30, 2006, one customer accounted for more than 10% of net accounts receivable, and as of June 30, 2008, no customer accounted for more than 10% of net accounts receivable.

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM ON FINANCIAL STATEMENT SCHEDULE

Our audits of the consolidated financial statements and of the effectiveness of the internal control over financial reporting referred to in our report dated September 30, 2008, appearing on page F-1 of this Annual Report on Form 20-F of Creative Technology Ltd also included an audit of the Financial Statement Schedule listed in Item 19(b) of this Form 20-F. In our opinion, this Financial Statement Schedule presents fairly, in all material respects, the information set forth therein when read in conjunction with the related consolidated financial statements.


Title of each class				Name of each exchange on which registered
Ordinary Shares				Singapore Exchange Securities Trading Limited


Securities and Exchange Commission Item Numbers and Description		Page #
PART I

Item 1	Identity Of Directors, Senior Management And Advisers	4
Item 2	Offer Statistics And Expected Timetable	4
Item 3	Key Information	5
Item 4	Information On The Company	18
Item 4A	Unresolved Staff Comments	25
Item 5	Operating And Financial Review And Prospects	25
Item 6	Directors, Senior Management And Employees	36
Item 7	Major Shareholders And Related Party Transactions	39
Item 8	Financial Information	40
Item 9	The Offer And Listing	42
Item 10	Additional Information	43
Item 11	Quantitative And Qualitative Disclosures About Market Risk	48
Item 12	Description Of Securities Other Than Equity Securities	49

PART II
Item 13	Defaults, Dividend Arrearages And Delinquencies	49
Item 14	Material Modifications To The Rights Of Security Holders And Use Of Proceeds	49
Item 15	Controls And Procedures	50
Item 16	Reserved	51
Item 16A	Audit Committee Financial Expert	51
Item 16B	Code Of Ethics	51
Item 16C	Principal Accountant Fees And Services	51
Item 16D	Exemptions From The Listing Standards For Audit Committees	52
Item 16E	Purchases Of Equity Securities By The Issuer And Affiliated Purchasers	52

PART III
Item 17	Financial Statements	52
Item 18	Financial Statements	52
Item 19	Exhibits	53

Signature		54


	For the years ended June 30
	2008			2007			2006			2005			2004
Sales, net	$	736,848		$	914,906		$	1,127,531		$	1,224,411		$	814,853
Cost of goods sold		572,946			737,203			963,217			949,151			533,513

Gross profit		163,902			177,703			164,314			275,260			281,340
Operating expenses:
Selling, general and administrative		141,148			175,180			195,197			196,258			167,588
Research and development		63,872			63,646			77,186			82,325			69,504
Impairment of goodwill and other intangible assets		—			—			31,478			65,225			—
Other charges (1)		9,666			—			5,873			—			—
Chairman’s gift of shares to employees		3,774			—			—			—			—

Operating (loss) income		(54,558	)		(61,123	)		(145,420	)		(68,548	)		44,248
Gain (loss) from investments, net		18,761			(1,880	)		18,904			74,405			72,602
Interest income		10,679			9,916			6,241			3,571			4,592
Interest expense		(5,644	)		(10,245	)		(9,411	)		(3,674	)		(1,001	)
Others (2)		12,762			114,622			3,572			(4,260	)		5,685

(Loss) income before income taxes and minority interest		(18,000	)		51,290			(126,114	)		1,494			126,126
Income tax (expense) benefit (3)		(1,735	)		(23,918	)		7,150			(969	)		8,539
Minority interest in loss (income)		1			817			805			63			(418	)

Net (loss) income	$	(19,734	)	$	28,189		$	(118,159	)	$	588		$	134,247

Basic (loss) earnings per share	$	(0.24	)	$	0.34		$	(1.42	)	$	0.01		$	1.66

Weighted average ordinary shares outstanding (’000)		81,564			83,452			83,093			82,661			80,654

Diluted (loss) earnings per share	$	(0.24	)	$	0.34		$	(1.42	)	$	0.01		$	1.61

Weighted average ordinary shares and equivalents outstanding (’000)		81,564			83,913			83,093			85,333			83,630

Dividends declared per share	$	0.14		$	0.25		$	0.25		$	0.50		$	0.25


	As of June 30
	2008		2007		2006		2005		2004
Cash and cash equivalents	$	408,644	$	250,480	$	213,995	$	187,246	$	211,077
Working capital		363,571		351,260		405,907		506,527		297,502
Total assets		750,358		723,033		830,613		1,077,474		940,848
Long-term debt, net of current maturities		10		113,732		192,028		195,443		27,650
Shareholders’ equity		329,683		408,570		393,153		581,132		691,497


Fiscal years ended June 30	At period-end	Average	High	Low
2004	0.5804	0.5819	0.5997	0.5666
2005	0.5912	0.6012	0.6180	0.5783
2006	0.6317	0.6088	0.6398	0.5862
2007	0.6536	0.6460	0.6619	0.6274
2008	0.7336	0.6971	0.7406	0.6515


Months	Highs	Lows
June	0.7339	0.7245
July	0.7423	0.7325
August	0.7339	0.7057
September	0.7076	0.6925
October	0.6999	0.6633
November	0.6793	0.6533


	Fiscal years ended June 30,
	2008		2007		2006
The Americas	27	%	36	%	41	%
Europe	50	%	47	%	41	%
Asia Pacific	23	%	17	%	18	%


Name/Region of Principal Operations	Country of Incorporation	Ownership
*United States of America:*
Creative Labs, Inc.	U.S.A.	100	%
*Europe:*
Creative Labs Ireland	Ireland	100	%
*Asia:*
Creative Technology Centre Pte Ltd	Singapore	100	%
Creative Technology (Qingdao) Co. Ltd	China	100	%
*Others:*
CTI Limited	Bermuda	100	%
CTI II Limited	Bermuda	100	%
3Dlabs Inc., Ltd and subsidiary companies	Bermuda	100	%


Location	Description of Property	Area Sq. Ft.	Lease Expiration
Singapore	Land and office for corporate headquarters building	930,863	2013
Beijing, China	Office and warehouse	34,669	2012
Shanghai, China	Office and warehouse	42,258	2010
Hefei, China	Office	22,927	2010
Stillwater, Oklahoma, USA	Office and warehouse	58,720	2010
San Jose, California, USA	Office and warehouse	129,270	2011
Scotts Valley, California, USA	Office, R&D center and warehouse	46,048	2010


	Years ended June 30
	2008		2007		2006
Sales, net	100	%	100	%	100	%
Cost of goods sold	78		81		85

Gross profit	22		19		15
Operating expenses:
Selling, general and administrative	19		19		18
Research and development	8		7		7
Impairment of goodwill and other intangible assets	—		—		3
Other charges	1		—		—
Chairman’s gift of shares to employees	1		—		—

Operating loss	(7	)	(7	)	(13	)
Gain (loss) from investments, net	2		—		2
Interest income	1		1		1
Interest expense	(1	)	(1	)	(1	)
Others	2		13		—

(Loss) income before income taxes and minority interest	(3	)	6		(11	)
Income tax (expense) benefit	—		(3	)	1
Minority interest in loss	—		—		—

Net (loss) income	(3	)%	3	%	(10	)%


	Percentage of Net Sales for fiscal years ended June 30
	2008		2007		2006
Personal Digital Entertainment	53	%	63	%	65	%
Audio	13	%	13	%	13	%
Speakers and Headphones	26	%	18	%	15	%
All Other Products	8	%	6	%	7	%


	Payments Due by Period (US$’000)
Contractual Obligations	Total		Less than 1 year		1 to 3 years		4 to 5 years		After 5 years
Long Term Debt	$	100,000	$	100,000	$	—	$	—	$	—
Capital Lease Obligations		29		19		10		—		—
Operating Leases		23,839		6,875		9,878		5,048		2,038
Unconditional Purchase Obligations		35,174		35,174		—		—		—

Total Contractual Cash Obligations	$	159,042	$	142,068	$	9,888	$	5,048	$	2,038


Name	Age	Position	Year First Appointed	Year Current Term Expires
Sim Wong Hoo (1)(2)	53	Chairman of the Board and Chief Executive Officer	1981	—
Tan Lip-Bu (1)(2)	48	Director	1990	2008
Tang Chun Choy (3)	60	Director	1990	2010
Lee Kheng Nam (1)(2)(3)	60	Director	1991	2009
Ng Kai Wa (3)	52	Director	2005	2008
Ng Keh Long	49	Chief Financial Officer	—	—


Number of Persons in Group	Base Salary/ Fees		Bonuses
All executive officers as a group (two persons)	$	253	$	75
All executive officers and directors as a group (six persons)	$	429	$	75


	Beneficially Owned
	Number (1)	Percent Of Total Outstanding Shares (2)
Sim Wong Hoo	23,270,652	31.1	%
Tan Lip-Bu	143,333	*
Tang Chun Choy	88,333	*
Lee Kheng Nam	68,333	*
Ng Kai Wa	2,420,338	3.2	%
All officers and directors as a group	28,130,614	37.6	%


	Shares Beneficially Owned
	Number of Shares (1)	Percentage of Total Outstanding Shares (2)
Sim Wong Hoo	23,270,652	30.74	%


	NASDAQ (Price in US$/Share)		SGX-ST (Price in Singapore $/Share)
	High	Low	High	Low
Annual High and Low
Fiscal 2004	12.59	7.73	20.40	13.80
Fiscal 2005	16.89	6.46	27.20	11.00
Fiscal 2006	8.95	4.72	14.40	7.75
Fiscal 2007	7.31	4.78	11.40	7.20
Fiscal 2008	4.93	3.74	7.65	4.88
Quarterly High and Low
Fiscal 2007:
First Quarter	6.90	5.22	11.40	8.40
Second Quarter	7.31	6.25	11.30	9.95
Third Quarter	6.92	6.12	10.80	9.30
Fourth Quarter	6.19	4.78	9.50	7.20
Fiscal 2008:
First Quarter	4.93	3.74	7.65	5.80
Second Quarter	—	—	7.45	5.85
Third Quarter	—	—	7.48	4.88
Fourth Quarter	—	—	6.80	6.08
Monthly High and Low:
March 2008	—	—	7.48	6.24
April 2008	—	—	6.48	6.08
May 2008	—	—	6.63	6.45
June 2008	—	—	6.80	6.27
July 2008	—	—	6.19	5.71
August 2008	—	—	6.50	5.64


	Approximate Percentage of $ Balance Denominated in:
	US$		S$		EURO		Other Currencies
Cash and cash equivalents	48	%	26	%	13	%	13	%
Accounts receivable, net	53	%	1	%	31	%	15	%
Total current liabilities	82	%	7	%	6	%	5	%
Long-term obligations	99	%	—		1	%	—


	Total Number of Shares Purchased (in millions)	Average Price
September 2007	0.5	$	4
December 2007	1.5	$	4
March 2008	2.5	$	5
June 2008	2.5	$	5

Total	7.0	$	5


		Page
(A)	FINANCIAL STATEMENTS

	Report of Independent Registered Public Accounting Firm	F-1

	Consolidated Balance Sheets at June 30, 2008 and 2007	F-2

	Consolidated Statements of Operations for the years ended June 30, 2008, 2007 and 2006	F-3

	Consolidated Statements of Cash Flows for the years ended June 30, 2008, 2007 and 2006	F-4

	Consolidated Statements of Shareholders’ Equity for the years ended June 30, 2008, 2007 and 2006	F-5

	Notes to Consolidated Financial Statements	F-6

(B)	SUPPLEMENTAL SCHEDULES

	Report of Independent Registered Public Accounting Firm on Financial Statement Schedule	S-1

	Schedule II – Allowance for Doubtful Accounts and Sales Returns	S-2

(C)	EXHIBITS

	Exhibit Index	E-1


	June 30, 2008			June 30, 2007
ASSETS
Current assets:
Cash and cash equivalents	$	408,644		$	250,480
Accounts receivable, less allowances of $14,721 and $14,153		82,554			110,520
Inventory		99,788			134,911
Other assets and prepaids		39,563			40,308

Total current assets		630,549			536,219
Property and equipment, net		67,043			97,696
Investments		37,247			80,121
Other non-current assets		15,519			8,997

Total Assets	$	750,358		$	723,033

LIABILITIES AND SHAREHOLDERS’ EQUITY
Current liabilities:
Accounts payable	$	66,507		$	66,778
Accrued liabilities		91,164			92,898
Income taxes payable		5,288			21,349
Current portion of long term obligations and others		100,019			3,934

Total current liabilities		262,978			184,959

Long term obligations		29,756			129,131

Advance payments from sale of building		127,563			—

Minority interest in subsidiaries		378			373

Shareholders’ equity:
Share capital (’000);
Outstanding: 83,626 and 83,622 shares		300,100			300,086
Treasury share capital (’000);
Outstanding: 6,981 and nil shares		(32,113	)		—
Other reserves		59,286			53,949
Unrealized holding gains on investments		3,377			24,240
Retained earnings		(967	)		30,295

Total shareholders’ equity		329,683			408,570

Total Liabilities and Shareholders’ Equity	$	750,358		$	723,033


	Ordinary Shares ('000)		Treasury Shares ('000)		Ordinary Share Capital			Treasury Share Capital			Additional Paid In Capital			Other Reserves			Unrealized Holding Gains on Investments			Deferred Share Compensation			(Accumulated Loss) Retained Earnings			Total
Balance at June 30, 2005	83,593		—		$	8,286		$	—		$	337,990		$	—		$	65,280		$	(378	)	$	169,954		$	581,132
Shares issued under employee options plans	678		—			103			—			2,846			—			—			—			—			2,949
Repurchase of ordinary shares	(1,000	)	—			(150	)		—			150			—			—			—			(8,134	)		(8,134	)
Dividends paid	—		—			—			—			—			—			—			—			(20,700	)		(20,700	)
Reversal of unvested deferred share compensation, net	—		—			—			—			(378	)		—			—			378			—			—
Amortization of deferred share compensation	—		—			—			—			1,892			—			—			—			—			1,892
Effect of Companies (Amendment) Act 2005 (see Note 18)	—		—			290,235			—			(290,235	)		—			—			—			—			—
Transfer to other reserves	—		—			—			—			(52,265	)		52,265			—			—			—			—
Comprehensive loss	—		—			—			—			—			—			(45,827	)		—			(118,159	)		(163,986	)

Balance at June 30, 2006	83,271		—			298,474			—			—			52,265			19,453			—			22,961			393,153
Shares issued under employee options plans	351		—			1,612			—			—			—			—			—			—			1,612
Dividends paid	—		—			—			—			—			—			—			—			(20,855	)		(20,855	)
Amortization of deferred share compensation	—		—			—			—			—			1,684			—			—			—			1,684
Comprehensive income	—		—			—			—			—			—			4,787			—			28,189			32,976

Balance at June 30, 2007	83,622		—			300,086			—			—			53,949			24,240			—			30,295			408,570
Shares issued under employee options plans	4		—			14			—			—			—			—			—			—			14
Chairman’s gift of shares to employees	—		—			—			—			—			3,774			—			—			—			3,774
Purchase of treasury shares	—		(7,000	)		—			(32,196	)		—			—			—			—			—			(32,196	)
Utilization of treasury shares for shares issued under employee options plans	—		19			—			83			—			(5	)		—			—			—			78
Dividends paid	—		—			—			—			—			—			—			—			(11,528	)		(11,528	)
Amortization of deferred share compensation	—		—			—			—			—			1,568			—			—			—			1,568
Comprehensive loss	—		—			—			—			—			—			(20,863	)		—			(19,734	)		(40,597	)

Balance at June 30, 2008	83,626		(6,981	)	$	300,100		$	(32,113	)	$	—		$	59,286		$	3,377		$	—		$	(967	)	$	329,683


	Estimated Useful Life	As of June 30
	Estimated Useful Life	2008			2007
Property and equipment:
Freehold Land	—		2,625			2,625
Leasehold land and buildings	20 to 50 years		82,863			104,531
Machinery and equipment	3 to 6 years		34,464			60,509
Furniture, fixtures and office equipment	1 to 8 years		68,708			82,166
Leasehold improvements	Term of lease		10,934			11,853

		$	199,594		$	261,684
Accumulated depreciation			(132,551	)		(163,988	)

Net property and equipment		$	67,043		$	97,696


	Operating Leases
Fiscal years ending June 30,
2009	$	6,875
2010		5,513
2011		4,365
2012		2,651
2013		2,397
Thereafter		2,038

Total minimum lease commitments	$	23,839


	Capital Leases
Fiscal years ending June 30,
2009	$	21
2010		10
2011		—
2012		—
2013		—
Thereafter		—

Total minimum lease commitments	$	31
Less: Interest		(2	)

Total capital lease commitments	$	29


	Number of Shares Repurchased (in millions)	Average Price (US$)
Fiscal year 1999 to fiscal year 2006	27.3	$	13
Fiscal year 2007	—		—
Fiscal year 2008	7.0		5

Total	34.3		11


	Fiscal Year 2008	Fiscal Year 2007	Fiscal Year 2006
Expected volatility	35%	—	36%
Risk-free interest rates	1.82% to 2.33%	—	2.31% to 4.40%
Dividend yield	3.0%	—	3.0%
Expected life of options (in years)	0.93 years after vest date	—	0.60 years after vest date


	Number of Options (’000)		Weighted-Average Exercise Price ($)
Outstanding at June 30, 2005	6,581		6.93
Granted	3,120		7.50
Exercised	(677	)	4.29
Cancelled/Forfeited/Expired	(355	)	8.92

Outstanding at June 30, 2006	8,669		7.26
Exercised	(351	)	4.40
Cancelled/Forfeited/Expired	(501	)	8.06

Outstanding at June 30, 2007	7,817		7.34
Granted	2,931		4.70
Exercised	(23	)	4.37
Cancelled/Forfeited/Expired	(523	)	6.51

Outstanding at June 30, 2008	10,202		6.63

Exercisable at June 30, 2008	6,418		7.36


	Options Outstanding						Options Exercisable
Range of Exercise Prices	Number of Shares Outstanding (’000)	Weighted Average Exercise Price		Aggregate Intrinsic Value ($’000)		Weighted Average Remaining Contractual Term (in years)	Number of Shares Exercisable (’000)	Weighted Average Exercise Price		Aggregate Intrinsic Value ($’000)		Weighted Average Remaining Contractual Term (in years)
$1.00 to $2.99	76	$	2.84	$	129	2.50	76	$	2.84	$	129	2.50
$3.00 to $4.99	4,268	$	4.62	$	173	7.45	1,421	$	4.45	$	173	3.31
$5.00 to $6.99	80	$	5.84	$	—	3.57	80	$	5.84	$	—	3.57
$7.00 to $10.99	5,774	$	8.17	$	—	3.97	4,837	$	8.30	$	—	3.45
$11.00 to $18.99	4	$	18.40	$	—	1.67	4	$	18.40	$	—	1.67

	10,202	$	6.63	$	302	5.41	6,418	$	7.36	$	302	3.41


	As of June 30 2008
Balance at July 1, 2007	$	11,056
Increase related to current year tax positions		646

Balance at June 30, 2008	$	11,702


	Payments Due by Period (US$’000)
Debt Obligations	Total		Less than 1 year		1 to 3 years		4 to 5 years		After 5 years
Long Term Debt	$	100,000	$	100,000	$	—	$	—	$	—
Capital Lease Obligations		29		19		10		—		—

Total Debt Obligations	$	100,029	$	100,019	$	10	$	—	$	—


	Years ended June 30,
	2008			2007			2006
Balance at beginning of year	$	14,153		$	18,806		$	21,288
Additions charged to consolidated statement of operations		32,308			34,820			26,872
Deductions from allowance		(31,740	)		(39,473	)		(29,354	)

Balance at end of year	$	14,721		$	14,153		$	18,806


Exhibit Number		Description

1.1		Memorandum and Articles of Association of Creative incorporated by reference to Exhibit 4.1 of Creative’s Registration Statement on Form F-3 (Registration No. 333-13084) as filed with the SEC on January 22, 2001.

4.2		Five-year $175.0 million Syndicated Term Loan Agreement between Creative Technology Ltd and a group of international banks, incorporated by reference to Creative’s Annual Report on Form 20-F for the fiscal year ended June 30, 2005.

4.3		Sale and leaseback agreement between Creative Technology Centre Pte Ltd and HSBC Institutional Trust Services (Singapore) Limited dated June 26, 2008.

8		List of significant subsidiaries

12.1		Certification Pursuant to Rule 13a-14(a)/15d-14(a)

12.2		Certification Pursuant to Rule 13a-14(a)/15d-14(a)

13.1		Certification Pursuant to Rule 13A-14(B) or Rule 15D-14(B) And Section 1350 of Chapter 63 of Title 18 of The United States Code

13.2		Certification Pursuant to Rule 13A-14(B) or Rule 15D-14(B) And Section 1350 of Chapter 63 of Title 18 of The United States Code

23.1		Consent of Independent Registered Public Accounting Firm