UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 6-K

REPORT OF FOREIGN PRIVATE ISSUER

PURSUANT TO RULE 13a-16 OR 15d-16 OF THE SECURITIES EXCHANGE ACT OF 1934

~~THE~~Quarterly ~~SECURITIES~~Report ~~EXCHANGE~~for ~~ACT~~the OFThree ~~1934~~Months ended September 30, 2006

Quarterly Report for the Three and Nine Months ended March 31, 2006

Commission File Number 0-20281

CREATIVE TECHNOLOGY LTD.

(Exact name of Registrant as specified in its charter)

SINGAPORE

(Jurisdiction of incorporation or organization)

31 International Business Park

Creative Resource

Singapore 609921

(Address of principal executive offices)

Indicate by check mark whether the ~~Registrant~~ registrant files or will file annual reports under cover of Form 20-F or 40-F.

Form 20-F x X Form 40-F ¨

Indicate by check mark if the Registrant is submitting the Form 6-K in paper as permitted by Regulation S-T Rule 101(b)(1): ¨

Indicate by check mark if the Registrant is submitting the Form 6-K in paper as permitted by Regulation S-T Rule 101(b)(7): ¨

Indicate by check mark whether the registrant by furnishing the information contained in this Form~~, the~~ ~~Registrant~~ is also thereby furnishing the information to the Commission pursuant to Rule 12g3-2(b) under the Securities Exchange Act of 1934.

Yes ¨ No X x

If “Yes” is marked, indicate below the file number assigned to the ~~Registrant~~registrant in connection with Rule 12g3-2(b):82 - N/A

TABLE OF CONTENTS

PART I - FINANCIAL INFORMATION


PART I - FINANCIAL INFORMATION

ITEM 1	Financial Statements

	Consolidated Balance Sheets as of September 30, 2006 (unaudited) and June 30, 2006	3

	Consolidated Statements of Operations for the Three Months ended September 30, 2006 and 2005 (unaudited)	4

	Consolidated Statements of Cash Flows for the Three Months ended September 30, 2006 and 2005 (unaudited)	5

	Notes to Consolidated Financial Statements	6

ITEM 2	Management’s Discussion and Analysis of Financial Condition and Results of Operations

	Safe Harbor Statements under The Private Securities Litigation Reform Act of 1995	11

	Selected Consolidated Financial Data	12

	Results of Operations	14

	Liquidity and Capital Resources	15

	Contractual Obligations and Commercial Commitments	16

	Effects of Recent Accounting Pronouncements	16

ITEM 3	Quantitative and Qualitative Disclosures about Market Risk	17

PART II - OTHER INFORMATION

	Submission of Matters to a Vote of Security Holders	17

Signature		18

ITEM 1	Financial Statements
	Consolidated Balance Sheets as of March 31, 2006 (unaudited) and June 30, 2005	3
	Consolidated Statements of Operations for the Three Months and Nine Months ended March 31, 2006 and 2005 (unaudited)	4
	Consolidated Statements of Cash Flows for the Nine Months ended March 31, 2006 and 2005 (unaudited)	5
	Notes to Consolidated Financial Statements	6
ITEM 2	Management’s Discussion and Analysis of Financial Condition and Results of Operations
	Safe Harbor Statements under The Private Securities Litigation Reform Act of 1995	14
	Selected Consolidated Financial Data	15
	Results of Operations	17
	Liquidity and Capital Resources	20
	Contractual Obligations and Commercial Commitments	21
ITEM 3	Quantitative and Qualitative Disclosures about Market Risk	22
Signature		23

Page 2

PART I— - FINANCIAL INFORMATION

ITEM 1

FINANCIAL STATEMENTS

CREATIVE TECHNOLOGY LTD.

CONSOLIDATED BALANCE SHEETS

(In US$’000, except per share data)

	March 31, 2006		June 30, 2005
	September 30, 2006(Unaudited)		June 30,2006
	(Unaudited)
ASSETS
ASSETS
Current assets:
Current assets:
Cash and cash equivalents	$	189,845	$	213,995
Cash and cash equivalents	$	224,373	$	187,246
Accounts receivable, net		167,185		133,002
Accounts receivable, net		132,486		163,184
Inventory		269,368		234,942
Inventory		276,010		395,886
Other assets and prepaids		45,329		53,248
Other assets and prepaids		38,778		43,144
Total current assets		671,727		635,187
Total current assets		671,647		789,460
Property and equipment, net		106,914		109,174
Property and equipment, net		111,509		117,187
Investments		71,740		74,581
Investments		89,849		125,914
Other non-current assets		11,417		11,671
Other non-current assets		13,428		44,913
Total Assets	$	861,798	$	830,613
Total Assets	$	886,433	$	1,077,474
LIABILITIES AND SHAREHOLDERS’ EQUITY
LIABILITIES AND SHAREHOLDERS’ EQUITY
Current liabilities:
Current liabilities:
Accounts payable	$	159,799	$	104,923
Accounts payable	$	115,668	$	151,070
Accrued liabilities		102,882		100,690
Accrued liabilities		119,986		103,768
Income taxes payable		18,428		18,930
Income taxes payable		17,256		20,712
Current portion of long term obligations and others		3,925		4,737
Current portion of long term obligations and others		5,458		7,383
Total current liabilities		285,034		229,280
Total current liabilities		258,368		282,933
Long term obligations		205,585		206,593
Long term obligations		206,605		209,455
Minority interest in subsidiaries		585		1,587
Minority interest in subsidiaries		1,816		3,954
Shareholders’ equity:
Shareholders’ equity:
Share capital (‘000)
Ordinary shares (‘000); S$0.25 par value;
Outstanding: 83,360 and 83,271 shares		298,881		298,474
Authorized: 200,000 shares
Other reserves		52,831		52,265
Outstanding: 83,100 and 83,593 shares		8,212		8,286
Unrealized holding gains on investments		16,929		19,453
Additional paid-in capital		341,191		337,990
Retained earnings		1,953		22,961
Unrealized holding gains on quoted investments		34,549		65,280
Total shareholders’ equity		370,594		393,153
Deferred share compensation		—		(378	)
Total Liabilities and Shareholders’ Equity	$	861,798	$	830,613
Retained earnings		35,692		169,954
Total shareholders’ equity		419,644		581,132
Total Liabilities and Shareholders’ Equity	$	886,433	$	1,077,474

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

Page 3

CREATIVE TECHNOLOGY LTD.

CONSOLIDATED STATEMENTS OF OPERATIONS

(~~Unaudited,~~In in US$’ 000, except per share data)

	Three months endedMarch 31,						Nine months endedMarch 31,
	2006			2005			2006			2005
Sales, net	$	225,657		$	333,840		$	896,656		$	919,002
Cost of goods sold		235,799			256,519			764,846			674,734
Gross (loss) profit		(10,142	)		77,321			131,810			244,268
Operating expenses:
Selling, general and administrative		51,959			51,208			152,444			148,207
Research and development		18,843			19,687			61,504			62,025
Other charges		37,351			—			37,351			65,225
Total operating expenses		108,153			70,895			251,299			275,457
Operating (loss) income		(118,295	)		6,426			(119,489	)		(31,189	)
Gain from investments, net		2,030			14,766			18,938			65,101
Interest income		1,847			1,243			4,241			2,604
Interest expense		(2,449	)		(1,275	)		(6,710	)		(1,882	)
Others		2,488			(5,728	)		(2,500	)		536
(Loss) income before income taxes and minority interest		(114,379	)		15,432			(105,520	)		35,170
Provision for income taxes		(229	)		(53	)		(482	)		(2,824	)
Minority interest in loss		279			534			575			186
Net (loss) income	$	(114,329	)	$	15,913		$	(105,427	)	$	32,532
Basic (loss) earnings per share:	$	(1.38	)	$	0.19		$	(1.27	)	$	0.40
Weighted average ordinary shares outstanding (‘000)		82,895			83,307			83,064			82,357
Diluted (loss) earnings per share:	$	(1.38	)	$	0.18		$	(1.27	)	$	0.38
Weighted average ordinary shares and equivalents outstanding (‘000)		82,895			86,274			83,064			85,480

(Unaudited)


	Three months ended September 30,
	2006			2005
Sales, net	$	241,512		$	280,173
Cost of goods sold		205,612			223,607

Gross profit		35,900			56,566

Operating expenses:
Selling, general and administrative		41,827			45,265
Research and development		15,863			19,927

Total operating expenses		57,690			65,192

Operating loss		(21,790	)		(8,626	)
(Loss) gain from investments, net		(717	)		10,028
Interest income		1,909			995
Interest expense		(2,864	)		(2,017	)
Others		1,833			152

(Loss) income before income taxes and minority interest		(21,629	)		532
Provision for income taxes		(382	)		(138	)
Minority interest in loss		1,003			297

Net (loss) income	$	(21,008	)	$	691

Basic (loss) earnings per share:	$	(0.25	)	$	0.01
Weighted average ordinary shares outstanding (‘000)		83,322			83,556
Diluted (loss) earnings per share:	$	(0.25	)	$	0.01
Weighted average ordinary shares and equivalents outstanding (‘000)		83,322			84,690

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

Page 4

CREATIVE TECHNOLOGY LTD.

CONSOLIDATED STATEMENTS OF CASH FLOWS

Increase (decrease) in cash and cash equivalents (in US$’000)

(Unaudited)

	Nine Months Ended March 31,
	Three Months EndedSeptember 30,
	2006			2005
Cash flows from operating activities:
Net (loss) income	$	(~~105~~21,~~427~~008	)	$	~~32,532~~691
Adjustments to reconcile net (loss) income to net cash provided by operating activities:
Adjustments to reconcile net (loss) income to net cash used in operating activities:
Depreciation of fixed assets		174,~~216~~237			165,~~358~~487
Amortization of intangible assets		~~1,874~~543			~~2,638~~746
Deferred stock compensation amortization		1,261			1,212
Deferred share compensation amortization		566			202
Minority interest in loss		(~~575~~1,003	)		(~~186~~297	)
Equity share in loss of unconsolidated investments		~~200~~81			~~1,640~~—
Loss (gain) on disposal of fixed assets		292			(79	)
Loss on disposal of fixed assets		5			26
Write-off of investments and other non-current assets		~~2,000~~717			~~8,303~~999
Gain from investments, net		~~(20,938~~—	)		(7311,~~447~~016	)
Impairment of goodwill / intangible assets		31,478			65,225
Deferred income taxes, net		(70	)		(13	)
Deferred income taxes, net		(39	)		(287	)
Foreign currency exchange (gain) loss		(10	)		727
Changes in assets and liabilities, net:
Accounts receivable		30(34,~~797~~183	)		(766,~~008~~202	)
Inventory		~~119~~(34,~~911~~426	)		~~(267~~30,~~301~~380	)
Other assets and prepaids		48,~~442~~299			(224,~~131~~574	)
Accounts payable		~~(35~~54,~~454~~876	)		~~162~~(24,~~246~~328	)
Accrued and other liabilities		162,~~870~~192			~~14,961~~(163	)
Income taxes		(~~3,456~~502	)		60(1,921	)
Net cash provided by (used in) operating activities		60,452			(134,264	)
Net cash used in operating activities		(19,686	)		(9,256	)
Cash flows from investing activities:
Capital expenditures, net		(112,~~831~~068	)		(286,~~011~~306	)
Proceeds from sale of fixed assets		3486			~~231~~3
Proceeds from sale of quoted investments		~~29,152~~—			8314,~~266~~408
Purchase of new subsidiaries (net of cash acquired)		(131	)		—
Purchase of investments		(400	)		(452	)
Purchase of investments		(2,629	)		(17,242	)
Increase in other non current assets, net		(750	)		(3,100	)
Increase in other non current assets, net		(4,049	)		(3,283	)
Net cash (used in) provided by investing activities		(3,132	)		4,553
Net cash provided by investing activities		10,546			34,961
Cash flows from financing activities:
(Decrease) increase in minority shareholders’ loan and equity balance		(959	)		305
Increase in minority shareholders’ loan and equity balance		1			18
Buyout of subsidiary’s minority interest		(604	)		—
Proceeds from exercise of ordinary share options		407			334
Proceeds from exercise of ordinary share options		2,244			14,557
Repurchase of ordinary shares		—			(8,134	)
Repurchase of ordinary shares		(8,135	)		—
Repayments of debt obligations		(945	)		(887	)
Proceeds from debt obligations		—			175,000
Repayments of capital leases		(818	)		(1,316	)
Repayments of debt obligations		(2,781	)		(2,719	)
Net cash used in financing activities		(1,355	)		(9,985	)
Repayments of capital leases		(2,936	)		(2,795	)
Net decrease in cash and cash equivalents		(24,173	)		(14,688	)
Dividends paid		(20,700	)		(41,357	)
Effects of exchange rate changes on cash and cash equivalents		23			(774	)
Net cash (used in) provided by financing activities		(33,871	)		142,991
Cash and cash equivalents at beginning of fiscal year		213,995			187,246
Net increase in cash and cash equivalents		37,127			43,688
Cash and cash equivalents at end of the period	$	189,845		$	171,784
Cash and cash equivalents at beginning of fiscal year		187,246			211,077
Cash and cash equivalents at end of the period	$	224,373		$	254,765

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

Page 5

CREATIVE TECHNOLOGY LTD.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

NOTE 1 -– BASIS OF PRESENTATION

In the opinion of management, the accompanying unaudited consolidated interim financial statements of Creative Technology Ltd. (“Creative”) have been prepared on a consistent basis with the June 30, ~~2005~~2006 audited consolidated financial statements and include all adjustments, consisting only of normal recurring adjustments, necessary to provide a fair presentation of the results of operations for the interim periods presented. 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. The consolidated interim financial statements should be read in conjunction with the consolidated financial statements and accompanying notes thereto included in Creative’s ~~2005~~2006 annual report on Form 20-F filed with the Securities and Exchange Commission.

The results of operations for the three month period ended ~~March~~September 3130, 2006 are not necessarily indicative of the results to be expected for the entire year or any future period. Creative generally operates on a a thirteen week calendar closing on the Friday closest to the natural calendar quarter. For convenience, all quarters are described by their natural calendar dates. ~~Creative~~The first quarter for fiscal 2007 ended on September 29, 2006. Creative conducts a substantial portion of its business in United States dollars (“US$” or “$”) and all amounts included in these interim financial statements and in the notes herein are in US$, unless designated as Singapore dollars (“S$”). For the three months period ended September 30, 2006, Creative has presented the effects of exchange rate changes on cash and cash equivalents, and has revised amounts in prior periods for comparative purposes.

NOTE 2 -– OTHER NON-CURRENT ASSETS

(in US$’000)	~~March~~September 3130, 2006			June 30, ~~2005~~2006
Other intangible assets	$	37,568		$	37,~~668~~568
Accumulated amortization		(35,503	)		(31,599	)
Accumulated impairment charges		(4,727	)		(4,727	)
Other intangible assets, net		2,065			6,069
Accumulated amortization		(31,630	)		(31,087	)
Goodwill		—			29,447
Other intangible assets, net		1,211			1,754
Other non-current assets		11,363			9,397
Goodwill		—			—
	$	13,428		$	44,913
Other non-current assets		10,206			9,917
	$	11,417		$	11,671

Creative reviews goodwill and purchased intangible assets with indefinite lives for impairment annually and whenever events or changes in circumstances indicate the carrying value of an asset may not be recoverable in accordance with the Statement of Financial Accounting Standards (“SFAS”) No. 142, “Goodwill and Other Intangible Assets.” Creative typically performs its annual impairment assessment for goodwill and other intangible assets in the fourth quarter of its fiscal year. However, during the third fiscal quarter, Creative’s subsidiary, 3Dlabs Inc., Ltd (“3Dlabs”), restructured its graphics business by refocusing its business on the portable handheld device market and de-emphasize its 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, and accordingly, Creative recorded a goodwill impairment charge of $29.4 million and other intangible assets impairment charge of $2.0 million in the third quarter of fiscal 2006.

Page 6

NOTE 3 -– INVENTORIES

Inventories are 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. The components of inventory are as follows (in US$’000):

	March 31, 2006		June 30, 2005
	September 30,2006		June 30,2006
Raw materials	$	~~119~~124,~~259~~629	$	~~166~~110,~~318~~469
Work in progress		516,~~633~~802		181,~~711~~198
Finished products		~~151~~127,~~118~~937		~~210~~123,~~857~~275
	$	~~276~~269,~~010~~368	$	~~395~~234,~~886~~942

NOTE 4 -– PRODUCT WARRANTIES

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

Changes in the product warranty accrual were as follows (in US$’000):

	March 31, 2006			March 31, 2005
	September 30,2006			September 30,2005
Balance at the beginning of the nine-month period	$	12,418		$	6,232
Balance at the beginning of the year	$	9,536		$	12,418
Accruals for warranties issued during the period		408,~~069~~209			1411,~~546~~587
Adjustments related to pre-existing warranties (include changes in estimates)		~~(196~~—	)		(~~100~~164	)
Settlements made during the period		(409,~~197~~594	)		(1112,~~616~~128	)
Balance at the end of the nine-month period	$	12,094		$	9,062
Balance at the end of the period	$	8,151		$	11,713

NOTE 5 -– NET INCOME PER SHARE

In accordance with Statement of Financial Accounting Standards No. 128 (“SFAS 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 the 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.

Page 7

~~other~~The ~~financial~~following ~~instruments~~is ~~that~~a ~~would~~reconciliation ~~impact~~between the ~~weighted~~ average number of ordinary shares outstanding ~~used~~and ~~for~~equivalent ~~computing~~shares outstanding ~~diluted~~(in ~~earnings~~‘000): ~~per share.~~

Following is a reconciliation between the average number of ordinary shares outstanding and equivalent shares outstanding (in ‘000):


	Three months ended September 30,
	2006	2005
Weighted average ordinary shares outstanding	83,322	83,556
Weighted average dilutive stock options outstanding	—	1,134

Weighted average ordinary shares and equivalents outstanding	83,322	84,690

	Three months ended March 31,		Nine months ended March 31,
	2006	2005	2006	2005
Weighted average ordinary shares outstanding	82,895	83,307	83,064	82,357
Weighted average dilutive stock options outstanding	—	2,967	—	3,123
Weighted average ordinary shares and equivalent outstanding	82,895	86,274	83,064	85,480

For the three months ended September 30, 2006, approximately 0.5 million shares were excluded from the determination of diluted net loss per share, as the effect of including such shares is anti-dilutive.

~~For~~NOTE ~~the~~6 ~~three~~– ~~months~~INCOME ~~and~~TAXES nine months ended March 31, 2006, approximately 0.7 million and 0.9 million shares were excluded from the determination of diluted net loss per share, as the effect of including such shares is anti-dilutive.

~~NOTE~~Provisions 6for -income ~~INCOME~~taxes ~~TAXES~~for interim periods are based on estimated annual effective income tax rates. Income of foreign subsidiaries of Creative is subject to tax in the country in which the subsidiary is located. Creative’s effective income tax rate is based on the mix of income arising from various geographic regions, where the tax rates range from 0% to 50% and pioneer status income in Singapore, which is exempt from tax. As a result, Creative’s overall effective rate of tax is subject to changes based on the international source of income before tax.

~~Provisions~~Creative ~~for~~was ~~income~~granted ~~taxes~~a ~~for~~Pioneer ~~interim~~Certificate ~~periods~~under ~~are~~the ~~based~~International onHeadquarters ~~estimated~~Award ~~annual~~that ~~effective~~will ~~income~~expire ~~tax rates. Income of foreign subsidiaries of Creative is subject to tax~~ in ~~the~~March ~~country in which the subsidiary is located~~2010. ~~Creative’s~~Under ~~effective income tax rate is based on~~ the ~~mix~~Pioneer ofCertificate, ~~income~~profits arising from ~~various~~qualifying ~~geographic~~activities ~~regions,~~will ~~where~~be ~~the~~exempted ~~tax rates range~~ from ~~0% to 50%; and pioneer status~~ income tax in Singapore, subject ~~which~~to iscertain ~~exempt from tax~~conditions. AsThe aSingapore ~~result,~~corporate ~~Creative’s~~income ~~overall~~tax ~~effective~~ rate of ~~tax~~20% is ~~subject~~applicable to ~~changes based on~~ the ~~international~~profits ~~source~~excluded offrom ~~income~~the ~~before~~Pioneer ~~tax~~Certificate.

~~Creative was granted a new Pioneer Certificate under the International Headquarters Award that will expire in March 2010. Under the new Pioneer Certificate, profits~~NOTE ~~arising~~7 ~~from~~– ~~qualifying~~COMPREHENSIVE ~~activities~~INCOME ~~will~~(LOSS) ~~be exempted from income tax in Singapore, subject to certain conditions. The Singapore corporate income tax rate of 20% is applicable to profits excluded from the new Pioneer Certificate.~~

~~NOTE~~The 7components -of ~~COMPREHENSIVE~~total ~~INCOME~~comprehensive loss are as follows (in US$’000):

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


	Three months ended September 30,
	2006			2005
Net (loss) income	$	(21,008	)	$	691
Unrealized loss on quoted investments		(2,524	)		(10,946	)

Total comprehensive loss	$	(23,532	)	$	(10,255	)

	Three months ended March 31,						Nine months ended March 31,
	2006			2005			2006			2005
Net (loss) income	$	(114,329	)	$	15,913		$	(105,427	)	$	32,532
Unrealized loss on quoted investments		(5,696	)		(8,207	)		(30,731	)		(18,372	)
Total comprehensive (loss) income	$	(120,025	)	$	7,706		$	(136,158	)	$	14,160

Page 8

NOTE 8 -– SHARE REPURCHASES

~~Details~~Creative ofdid ~~Share~~not ~~Repurchases~~repurchase byany ~~Creative~~shares ~~are~~in ~~set~~the ~~out~~quarter ~~below:~~ended September 30, 2006.

	Number of Shares Repurchased	Average Price
	(in millions)
Fiscal year 2006:
Quarter ended September 30, 2005	1.0	$	8
Quarter ended December 31, 2005	—		—
Quarter ended March 31, 2006	—		—

At the Annual General Meeting (“AGM”) held on October 31, 2006, 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 8.3 million shares. This authority to repurchase shares shall continue in force unless revoked or revised by the shareholders in a general meeting, or until the date the next AGM of Creative is held or is required to be held, whichever is earlier.

AtNOTE ~~the~~9 ~~Annual~~– ~~General~~EMPLOYEE ~~Meeting~~SHARE ~~(“AGM”)~~PURCHASE ~~held~~AND onSTOCK ~~October 28,~~OPTION ~~2005,~~PLANS 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 8.3 million shares. This authority to repurchase shares shall continue in force unless revoked or revised by the shareholders in a general meeting, or until the date the next AGM of Creative is held or is required to be held, whichever is earlier.

~~NOTE~~In 9December 1998, Creative adopted the Creative Technology (1999) Share Option Scheme (“1999 Scheme”) which allows options to be granted to full-time ~~EMPLOYEE~~employees ~~STOCK~~as ~~OPTION~~well ~~PLANS~~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. Creative issues new shares to satisfy its share based exercises.

InEffective ~~December~~July 1, ~~1998~~2005, Creative adopted the ~~Creative~~provisions ~~Technology~~of ~~(1999) Share Option~~Statement ~~Scheme~~of Financial Accounting Standard (“~~1999 Scheme~~SFAS”) ~~which~~No. 123(R), ~~allows options to be granted to full~~“Share-~~time~~Based ~~employees as well as consultants and non-executive directors~~Payment”. ~~The~~SFAS ~~total number of shares that may be granted under the 1999 Scheme is 7~~No.5 ~~million, provided that such amount shall be automatically increased on the first day~~ 123(~~July 1~~R) ofestablishes ~~each~~accounting offor ~~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~~-based ~~immediate~~awards ~~preceding~~exchanged ~~fiscal~~for ~~year.~~employee ~~The Option Committee has the discretion to decide the vesting schedule in the letter of offer~~services. ~~If it is not specifically stated in the letter of offer~~Accordingly, ~~1/4~~stock-based ofcompensation ~~the~~cost ~~total~~is ~~amount~~measured ~~of the grant vest~~ on the ~~first anniversary of the grant~~ date ~~and 1/48~~ of ~~the total amount of the~~ grant, based 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~~award, ~~as of the date of grant~~ and ~~the~~is ~~options~~recognized ~~expire~~as ~~after~~expense ~~the~~over ~~tenth anniversary of~~ the ~~date~~employee’s ofrequisite ~~grant,~~service ~~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~~period. ~~Creative issues new shares to satisfy its share based exercises.~~

~~Effective~~The ~~July 1,~~options ~~2005,~~outstanding 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, stock-based compensation cost is measured at grant date, based on the fair value of the award, and ~~is recognized~~exercisable as ~~expense~~at ~~over the employee’s requisite service period. Creative previously applied Accounting Principles Board (“APB”) Opinion No.~~September 2530, ~~“Accounting~~2006 ~~for~~were ~~Stock~~in ~~Issued to Employees”, and related Interpretations, and provided~~ the ~~required~~following ~~pro~~exercise ~~forma~~price ~~disclosures~~ranges: ~~of SFAS No. 123, “Accounting for Stock-Based Compensation”.~~


	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	104	$	2.75	$	392	4.37	104	$	2.75	$	392	4.37
$3.00 to $4.99	1,847	$	4.47	$	3,773	5.05	1,847	$	4.47	$	3,773	5.05
$5.00 to $6.99	165	$	5.77	$	122	4.72	156	$	5.74	$	120	4.62
$7.00 to $10.99	6,290	$	8.22	$	—	5.68	3,269	$	8.88	$	—	3.05
$11.00 to $18.99	6	$	18.40	$	—	3.42	6	$	18.40	$	—	3.42

	8,412	$	7.29	$	4,287	5.50	5,382	$	7.16	$	4,285	3.80

The intrinsic value is determined by the difference between Creative’s closing share price of $6.51 as of September 29, 2006 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. As at September 29, 2006, Creative expects to recognize total unrecognized compensation cost relating to non-vested stock-based compensation of $2,770,000 over a weighted average period of 3.05 years.

Page 9

~~Prior~~NOTE to10 ~~the~~– ~~adoption~~INTELLECTUAL ofPROPERTY ~~SFAS~~INDEMNIFICATION ~~No. 123(R),~~OBLIGATIONS 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”. The following table illustrates the effect on net income and earnings per share for the corresponding period if Creative had applied the fair value recognition provisions of SFAS No. 123 to stock-based employee compensation (in US$’000, except per share data):

	Three monthsendedMarch 31,2005		Nine monthsendedMarch 31,2005
Net income, as reported	$	15,913	$	32,532
Add/(less): Total stock-based employee compensation expense determine under fair value based method for all awards, net of related tax effects		334		(941	)
Add: Stock-based employee compensation expense included in reported net income, net of related tax effects		343		1,212
Pro forma net income	$	16,590	$	32,803
Earnings per share:
Basic – as reported	$	0.19	$	0.40
Basic – pro forma	$	0.20	$	0.40
Diluted – as reported	$	0.18	$	0.38
Diluted – pro forma	$	0.19	$	0.38

Creative indemnifies certain customers, distributors, suppliers, and subcontractors for attorneys’ fees and damages and costs awarded against these parties in certain circumstances in which its products are alleged to infringe third party intellectual property rights, including patents, trademarks, or copyrights. The terms 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.

~~Creative~~NOTE ~~elected~~11 to– ~~adopt~~LEGAL ~~the~~PROCEEDINGS modified-prospective application method as provided by SFAS No. 123(R). Accordingly, during the three months and nine months ended March 31, 2006, Creative recorded stock-based compensation cost of $548,000 and $1,261,000 respectively in its 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. Previously disclosed amounts have not been restated in the financial statements.

InDuring ~~connection~~the course of its ordinary business operations, Creative and its subsidiaries are involved from time to time in 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, Compression Labs, Incorporated (a patent infringement action filed in the ~~adoption~~Eastern District of ~~SFAS~~Texas, NoU. ~~123~~S., against Creative Labs, Inc. and 27 other defendants); Nichia Corporation (Ra patent infringement action filed in the Northern District of California against Creative and other defendants),; and representative purchasers of MP3 players (an action alleging false advertising and unfair competition in connection with reported storage capacity). Creative also ~~made~~from atime ~~one-~~to time ~~adjustment~~receives inlicensing inquiries and/or threats of potential future patent claims from a variety of entities. Creative believes it has valid defenses to the ~~quarter~~various ~~ended~~claims ~~September 30~~asserted against it, ~~2005~~and intends to ~~reverse~~defend the ~~unamortised~~actions ~~share~~vigorously. ~~compensation~~However, ~~balance~~should any of ~~$378,000~~these ~~against the~~claimants ~~additional~~prevail ~~paid-~~in ~~capital~~their ~~account~~suits or claims, Creative does not expect there to be any consequent material adverse effect on its financial position or results of operations.

~~There~~NOTE ~~were no options granted under the 1999 Scheme for the nine months ended March 31, 2005. No options were~~12 ~~granted~~– ~~during~~SUBSEQUENT ~~the~~EVENT three months ended March 31, 2006. During the nine months ended March 31, 2006, Creative granted 3,120,000 stock options under the 1999 Scheme with a total grant date fair value of $5,087,000. The weighted average grant date fair value of options granted was $1.63 per share.

~~The~~Creative ~~fair~~has ~~value~~agreed ofto ~~each~~sell ~~share~~an ~~option~~80.1% ~~granted~~interest isin ~~estimated~~its onmanufacturing ~~the~~operations ~~date~~in ofMalaysia ~~grant~~to ~~using~~a ~~the~~group ~~Black Scholes~~of ~~option-pricing~~third ~~model.~~party investors. The ~~option-pricing~~sale ~~model requires the input~~ of ~~highly~~a ~~subjective~~controlling ~~assumptions,~~interest ~~including~~in the ~~option’s~~manufacturing ~~expected~~operations ~~life,~~is ~~risk-free~~in ~~interest~~line ~~rates,~~with ~~dividend~~management’s ~~yield~~goal ~~and~~of ~~the~~streamlining ~~price~~and ~~volatility~~improving ofoperational ~~the underlying share~~efficiencies. ~~The expected~~Creative ~~life~~expects ofto ~~the~~receive ~~options~~approximately ~~represents~~$40 ~~the~~million ~~period~~in ofcash ~~time~~as ~~the~~sale ~~options~~consideration ~~are expected to be outstanding~~ and for isthe ~~based~~repayment onof ~~historical~~inter-company ~~trends~~balances. ~~The~~Upon ~~expected share price volatility assumption was determined using~~ the ~~historical~~completion ~~volatility~~ of ~~Creative’s shares. The following table presents~~ the ~~weighted-average~~transaction, ~~assumptions~~Creative ~~used~~expects into ~~the~~record ~~Black~~a ~~Scholes~~profit ~~option-pricing~~of ~~model~~approximately ~~for~~$5 ~~the share option grants~~million.

Page 10

	Nine months ended March 31,
	2006	2005
Expected volatility	36%	—
Risk-free interest rates	2.31% to 4.40%	—
Dividend yield	3%	—
Expected life of options (in years)	4.60	—

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 March 31, 2006.

	Number ofOptions (’000)		Weighted-AverageExercise Price($)	AggregateIntrinsicValue($’000)	Weighted-AverageRemainingContractual Life(in years)
Outstanding at June 30, 2005	6,581		6.93	—	—
Granted	3,120		7.50	—	—
Exercised	(506	)	4.35	—	—
Canceled/Forfeited/Expired	(248	)	9.18	—	—
Outstanding at March 31, 2006	8,947		7.21	6,517	6.00
Exercisable at March 31, 2006	5,775		7.05	6,493	4.33

The options outstanding and exercisable as at March 31, 2006 were in the following exercise price ranges:

	Options Outstanding						Options Exercisable
Range of Exercise Prices	Number ofSharesOutstanding(’000)	WeightedAverageExercisePrice		AggregateIntrinsicValue($’000)		WeightedAverageRemainingContractualTerm (in years)	Number ofSharesExercisable(’000)	WeightedAverageExercisePrice		AggregateIntrinsicValue($’000)		WeightedAverageRemainingContractualTerm (in years)
$1.00 to $2.99	180	$	2.82	$	781	5.08	180	$	2.82	$	781	5.08
$3.00 to $4.99	1,967	$	4.46	$	5,289	5.55	1,967	$	4.46	$	5,289	5.55
$5.00 to $6.99	287	$	5.59	$	447	4.97	260	$	5.52	$	423	4.77
$7.00 to $10.99	6,506	$	8.23	$	—	6.20	3,362	$	8.89	$	—	3.55
$11.00 to $18.99	6	$	18.40	$	—	3.92	6	$	18.40	$	—	3.92
	8,947	$	7.21	$	6,517	6.00	5,775	$	7.05	$	6,493	4.33

The intrinsic value is determined by the difference between Creative’s closing share price of $7.15 as of March 31, 2006 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 intrinsic value of options exercised during the three months and nine months ended March 31, 2006 was $884,000 and $1,629,000 respectively. As at March 31, 2006, Creative expects to recognize the total unrecognized compensation cost relating to non-vested stock-based compensation of $4,184,000 over a weighted average period of 3.52 years.

Page 11

NOTE 10 - OTHER CHARGES

In February 2006, Creative announced that 3Dlabs will refocus its graphics business on the portable handheld device market and de-emphasize its 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, and accordingly, Creative recorded a goodwill impairment charge of $29.4 million and other intangible assets impairment charge of $2.0 million in the third quarter of fiscal 2006. In addition to the goodwill and intangible assets impairment charges, 3Dlabs has also 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 were charged to operating expenses as part of restructuring costs in the fiscal third quarter of 2006.

Employee separation costs for 3Dlabs and other Creative subsidiaries represent the costs of involuntary severance benefits for approximately 200 employees. As of March 31, 2006, approximately 31% of these employees had left and the bulk of the remaining employees left by April 30, 2006. Facility exit costs primarily include lease termination and research and development expenses on some 3Dlabs’ graphics chips.

The following table displays the accruals established for employee separation and facility exit costs (in US$’000):

	Initial Charges		Amounts Paid			Accruals as ofMarch 31, 2006
Employee separation costs	$	3,958	$	(1,290	)	$	2,668
Facility exit costs		318		(156	)		162
Total	$	4,276	$	(1,446	)	$	2,830

Fixed assets impairment write-downs of $1.6 million were attributed to computer hardware and software associated with part of 3Dlabs’ facilities that were being closed down.

The $4.3 million inventory charge comprised stock obsolescence provisions for 3Dlabs’ graphics cards.

NOTE 11 - INTELLECTUAL PROPERTY INDEMNIFICATION OBLIGATIONS

Page 12

NOTE 12 - LEGAL PROCEEDINGS

During the course of its ordinary business operations, Creative and its subsidiaries are involved from time to time in 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, Compression Labs, Incorporated (a patent infringement action filed in the Eastern District of Texas, U.S., against Creative Labs, Inc. and 27 other defendants); Sviluppo del’elettronica S.I.S.V.E.L. S.P.A. and its wholly owned U.S. subsidiary, Audio MPEG, Inc. (legal proceedings in the Netherlands, Germany, Italy and the Eastern District of Virginia, U.S., each alleging that Creative’s MP3 technology violates patents managed by S.I.S.V.E.L); Nichia Corporation (a patent infringement action filed in the Northern District of California against Creative and other defendants); and representative purchasers of MP3 players (an action alleging false advertising and unfair competition in connection with reported storage capacity). Creative also from time to time receives licensing inquiries and/or threats of potential future patent claims from a variety of entities. 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 has filed a complaint with the U.S. International Trade Commission requesting the Commission to investigate whether Apple Computer Inc. (“Apple”) has violated Section 337 of the Tariff Act of 1930 through its importation and sale after importation into the United States of iPods and iPod Nanos that Creative believes infringe U.S. Patent 6,928,433, which Creative refers to as the “ZEN™ Patent.” Creative is seeking an exclusion order and cease and desist-order, which would prohibit Apple from engaging in sales, marketing, importation or sale after importation of iPod and iPod Nano products into the United States. Creative has also filed a lawsuit against Apple in the United States District Court for the Northern District of California that seeks an injunction and increased damages. Apple subsequently filed a lawsuit against Creative in the United States District Court for the Western District of Wisconsin, alleging that Creative infringes seven of Apple’s patents. Creative believes it has valid defenses to these claims, and intends to defend the action vigorously. However, should Apple prevail in asserting these claims, Creative does not expect there to be any consequent material adverse effect on its financial position or results of operations.

Page 13

ITEM 2

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

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

Safe Harbor Statements Under The Private Securities Litigation Reform Act of 1995

Except for the historical information contained herein, the matters set forth are forward-looking ~~statements~~ statements and are subject to certain risks and uncertainties that could cause ~~actual results to differ materially. These forward-looking statements involve 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; ~~Creative’s ability to successfully manage its expanding operations;~~ the vulnerability of certain markets to current and future currency fluctuations; the effects of restricted fuel availability and rising costs of fuel; fluctuations in the value and liquidity of Creative’s investee companies; and the potential decrease in trading volume and value of Creative’s Ordinary Shares as a result of the Flow Back Restriction that commenced on June 1, 2003 and Creative’s previous plan and any future plans to delist from NASDAQ and to eliminate its U.S. reporting obligations. For further information regarding the risks and uncertainties associated with Creative’s business, please refer to its filings with the SEC, including its Form 20-F for fiscal ~~2005~~2006 filed with the SEC. Creative undertakes no obligation to update any forward-looking statement to conform the statement to actual results or changes in Creative’s expectations.

Page 1411

SELECTED CONSOLIDATED FINANCIAL DATA

The following is a summary of Creative’s unaudited quarterly results for the eight quarters ended ~~March~~September 3130, 2006, together with the percentage of sales represented by such results. Consistent with the PC peripherals and digital entertainment markets, demand for Creative’s products is generally stronger in the quarter ended December 31, compared to any other quarter of the fiscal year due to consumer buying patterns. In management’s opinion, the results detailed below have been prepared on a basis consistent with the audited financial statements and include all adjustments, consisting only of normal recurring adjustments, necessary for a fair presentation of the information for the periods presented when read in conjunction with the financial statements and notes thereto contained elsewhere herein. Creative’s business is seasonal in nature and the quarterly results are not necessarily indicative of the results to be achieved for the complete year.

	Unaudited data for quarters ended (in US$’000 except per share data)
	Mar 312006			Dec 312005			Sep 302005			Jun 302005			Mar 312005			Dec 312004			Sep 302004			Jun 302004
	Sep 302006			Jun 302006			Mar 312006			Dec 312005			Sep 302005			Jun 302005			Mar 312005			Dec 312004
Sales, net	$	~~225~~241,~~657~~512		$	~~390~~230,~~826~~875		$	~~280~~225,~~173~~657		$	~~305~~390,~~409~~826		$	~~333~~280,~~840~~173		$	~~375~~305,~~142~~409		$	~~210~~333,~~020~~840		$	~~201~~375,~~780~~142
Cost of goods sold		~~235~~205,~~799~~612			~~305~~198,~~440~~371			~~223~~235,~~607~~799			~~274~~305,~~417~~440			~~256~~223,~~519~~607			~~273~~274,~~398~~417			~~144~~256,~~817~~519			~~135~~273,~~393~~398
Gross (loss) profit		(10,142	)		85,386			56,566			30,992			77,321			101,744			65,203			66,387
Gross profit		35,900			32,504			(10,142	)		85,386			56,566			30,992			77,321			101,744
Operating expenses:
Selling, general and administrative		5141,~~959~~827			5542,~~220~~753			4551,~~265~~959			4855,~~051~~220			5145,~~208~~265			5648,~~931~~051			4051,~~068~~208			4056,~~686~~931
Research and development		1815,~~843~~863			2215,~~734~~682			1918,~~927~~843			2022,~~300~~734			19,~~687~~927			2220,~~620~~300			19,~~718~~687			1822,~~940~~620
Other charges		~~37,351~~—			—			—37,351			—			—			~~65,225~~—			—			—65,225
Operating (loss) income		(~~118~~21,~~295~~790	)		7(25,~~432~~931	)		(8118,~~626~~295	)		~~(37~~7,~~359~~432	)		6(8,~~426~~626	)		(4337,~~032~~359	)		56,~~417~~426			6(43,~~761~~032	)
Net gain (loss) from investments		2,030			6,880			10,028			9,304			14,766			51,539			(1,204	)		(224	)
Net (loss) gain from investments		(717	)		(34	)		2,030			6,880			10,028			9,304			14,766			51,539
Interest income		1,~~847~~909			12,~~399~~000			~~995~~1,847			~~967~~1,399			~~1,243~~995			~~651~~967			~~710~~1,243			~~1,719~~651
Interest expense		(2,~~449~~864	)		(2,~~244~~701	)		(2,~~017~~449	)		(12,~~792~~244	)		(12,~~275~~017	)		(~~456~~1,792	)		(~~151~~1,275	)		(~~231~~456	)
Others		21,~~488~~833			(56,~~140~~072	)		~~152~~2,488			(45,~~796~~140	)		~~(5,728~~152	)		5(4,~~555~~796	)		~~709~~(5,728	)		~~(700~~5,555	)
(Loss) income before income taxes and minority interest		(~~114~~21,~~379~~629	)		8(20,~~327~~594	)		~~532~~(114,379	)		~~(33~~8,~~676~~327	)		~~15,432~~532			14(33,~~257~~676	)		515,~~481~~432			714,~~325~~257
Provision for income taxes		(~~229~~382	)		~~(115~~7,632	)		(~~138~~229	)		~~1,855~~(115	)		(53138	)		(21,~~236~~855	)		(~~535~~53	)		(~~604~~2,236	)
Minority interest in loss (income)		~~279~~1,003			(1230	)		~~297~~279			(~~123~~1	)		~~534~~297			(~~178~~123	)		~~(170~~534	)		(90178	)
Net (loss) income	$	(~~114~~21,~~329~~008	)	$	8(12,~~211~~732	)	$	~~691~~(114,329	)	$	~~(31~~8,~~944~~211	)	$	~~15,913~~691		$	11(31,~~843~~944	)	$	415,~~776~~913		$	611,~~631~~843
Basic (loss) earnings per share	$	(10.3825	)	$	(0.1015	)	$	0(1.0138	)	$	(0.3810	)	$	0.1901		$	(0.1438	)	$	0.0619		$	0.0814
Weighted average ordinary shares outstanding (‘000)		8283,~~895~~322			8283,~~740~~179			8382,~~556~~895			8382,~~576~~740			83,~~307~~556			8283,~~320~~576			8183,~~443~~307			8182,~~236~~320
Diluted (loss) earnings per share	$	(10.3825	)	$	(0.1015	)	$	0(1.0138	)	$	(0.3810	)	$	0.1801		$	(0.1438	)	$	0.0618		$	0.0814
Weighted average ordinary shares and equivalents outstanding (‘000)		8283,~~895~~322			83,~~532~~179			8482,~~690~~895			83,~~576~~532			8684,~~274~~690			8583,~~930~~576			8486,~~237~~274			8385,~~960~~930

Page 1512

	Unaudited data for quarters ended (as a percentage of sales)
	Mar 312006		Dec 312005		Sep 302005		Jun 302005		Mar 312005		Dec 312004		Sep 302004		Jun 302004
	Sep 302006		Jun 302006		Mar 312006		Dec 312005		Sep 302005		Jun 302005		Mar 312005		Dec 312004
Sales, net	100	%	100	%	100	%	100	%	100	%	100	%	100	%	100	%
Cost of goods sold	~~105~~85		7886		80105		9078		7780		7390		6977		6773
Gross (loss) profit	(5	)	22		20		10		23		27		31		33
Gross profit	15		14		(5	)	22		20		10		23		27
Operating Expenses:
Selling, general and administrative	2317		1418		1623		1614		1516		1516		1915		2015
Research and development	87		67		78		6		67		6		106		106
Other charges	17—		—		—17		—		—		17—		—		—17
Operating (loss) income	(539	)	2(11	)	(353	)	~~(12~~2	)	2(3	)	(1112	)	2		3(11	)
Net gain (loss) from investments	1		2		4		3		5		14		(1	)	—
Net (loss) gain from investments	(1	)	—		1		2		4		3		5		14
Interest income	1		—1		—1		—		—		—		—		1—
Interest expense	(1	)	(1	)	(1	)	—(1	)	—(1	)	—		—		—
Others	1		(12	)	—1		(21	)	(2—	)	1(2	)	1(2	)	(1	)
(Loss) income before income taxes and minority interest	(519	)	2(9	)	—(51	)	~~(11~~2	)	5—		4(11	)	25		34
Provision for income taxes	—		—3		—		1—		—		(1	)	—		—(1	)
Minority interest in (income) loss	—		—		—		—		—		—		—		—
Minority interest in loss (income)	—		—		—		—		—		—		—		—
Net (loss) income	(519	)%	2(6	)%	—(51	)%	~~(10~~2	)%	5—	%	3(10	)%	25	%	3	%

GENERAL

Management’s Discussion and Analysis of Financial Condition and Results of Operations is based upon Creative’s Consolidated Condensed 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~~disclosures 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 judgements 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.

For the list of critical accounting policies that may affect the management’s more significant estimates and assumptions used in the preparation of its consolidated financial statements, please refer to the Form 20-F for fiscal ~~2005~~2006 on file with the U.S. Securities and Exchange Commission.

Page 1613

RESULTS OF OPERATIONS

Three Months Ended ~~March~~September 3130, 2006 Compared to Three Months Ended ~~March~~September 3130, 2005

Net sales

~~Sales~~Net sales for the ~~third~~first quarter of ~~fiscal~~ ~~2006~~fiscal 2007 decreased by 3214% compared to the same quarter in the prior fiscal year ~~mainly due to a reduction in sales of digital audio players~~. Sales of personal digital entertainment (“PDE”) products, which include digital audio players and digital cameras, decreased by 409% in the first quarter of fiscal 2007 compared to the same quarter in the prior fiscal year. ~~and~~As a percentage of sales, PDE products represented 6070% of sales in the ~~third~~first quarter of fiscal ~~2006~~2007 compared to 6866% of sales in the same quarter in fiscal ~~2005. Sales of digital audio players in the third quarter of fiscal~~ 2006 ~~were negatively impacted by a steep drop in the flash memory prices at the end of the quarter due to an excess supply of flash memory in the market~~. The ~~steep~~decrease ~~drop~~ in ~~flash memory prices created uncertainty and~~sales ~~pricing~~of ~~instability~~PDE inproducts ~~the~~was ~~retail~~primarily ~~market~~attributable ~~for digital audio players, contributing~~ to amanagement’s ~~significant~~decision ~~slowing of worldwide sales of digital audio players. Creative intends~~ to streamline ~~its~~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 3031% in the ~~third~~first quarter of fiscal ~~2006~~2007 compared to the same quarter in fiscal ~~2005~~2006, and as a percentage of sales, represented 1310% of sales in the ~~third~~first quarter of fiscal ~~2006~~2007 compared to 13% in the first ~~and~~quarter of fiscal ~~2005~~2006. The decrease in ~~audio~~sales ~~product~~of ~~sales~~audio products was mainly due to a decrease in sales of low-end ~~audio~~ sound cards. Creative believes that the newly launched Xtreme Fidelity audio technology and Sound Blaster X-Fi sound cards will set a new standard for audio in music, movies and video games and will reverse the decline in its audio business. Sales of speakers in the ~~third~~first quarter of fiscal ~~2006~~2007 decreased by 414% compared to the same quarter ofin the prior fiscal year,. ~~primarily~~As ~~due~~a ~~to lower~~percentage ~~sales~~ of ~~non-multimedia~~sales, speakers, ~~and~~were ~~represented 17~~13% of sales in the ~~third~~first quarter of fiscal ~~2006~~2007 ~~compared~~and ~~to 12% of sales in the third quarter of fiscal 2005~~2006. Sales from all other products, which include graphics products, communication products, accessories and other miscellaneous items, decreased by 10 27% ~~in the third quarter of fiscal 2006 compared to the same quarter in fiscal 2005~~, and as a percentage of sales, represented 107% of sales in the ~~third~~first quarter of fiscal ~~2006~~ 2007 compared to 78% of sales in the ~~same~~first quarter of fiscal ~~2005~~2006. The decrease was primarily attributable to decreases in sales of graphics and communication products.

Gross profit

Gross profit ~~margin was negative 5% of sales~~ in the ~~third~~ first quarter of fiscal ~~2006~~2007 was 15% compared to 2320% in the same ~~period~~quarter in the prior fiscal ~~2005~~year. The ~~decrease~~markets in ~~gross~~ ~~profit~~which ~~margin~~Creative ~~was~~competes, ~~primarily~~especially ~~attributable to~~ the ~~substantial~~market ~~write~~for ~~down~~digital ofaudio ~~flash~~players, ~~memory~~are ~~inventory~~characterized ~~due~~by tointense ~~the~~competition ~~steep~~and ~~drop~~aggressive ~~in flash memory prices~~pricing practices. ~~The~~Gross ~~drop~~profit margin in ~~flash~~the ~~memory~~first ~~prices~~quarter ~~has~~of ~~also~~fiscal ~~caused~~2007 ~~market~~were ~~uncertainty~~lower ~~that~~mainly ~~resulted~~due into lower ~~sales~~average ~~and~~ selling prices of digital audio players, ~~negatively impacting the gross profit margin~~ in the ~~third~~first quarter of fiscal ~~2006.~~2007 Incompared ~~addition,~~to the ~~gross~~same ~~profit margin in the third~~ quarter of fiscal 2006 ~~was~~and ~~also~~inventory provisions ~~negatively~~resulting ~~impacted~~from bythe adrop ~~$4.3~~in ~~million inventory~~selling ~~provision~~prices ~~charged~~of bydigital ~~3Dlabs~~audio ~~due to restructuring~~players.

Operating expenses

Selling, general and administrative (“SG&A”) expenses ~~increased~~decreased by 18% in the ~~third~~first quarter of fiscal ~~2006~~2007 compared to the same quarter in the prior fiscal year. SG&A expense were lower in the quarter in line with the decrease in sales. As a percentage of sales, SG&A expenses were 2317% in the ~~third~~first quarter of fiscal ~~2006~~2007 compared to 1516% in the same quarter of fiscal ~~2005 mainly due to the 32% decrease in total net sales in the third quarter of fiscal~~ 2006 ~~compared to fiscal 2005~~.

Research and development (“R&D”) expenses indecreased ~~the~~by ~~third~~20%, ~~quarter~~primarily ofdue ~~fiscal~~to ~~2006~~a ~~decreased~~lower R&D spending by 4%Creative’s ~~compared~~wholly-owned tosubsidiary, ~~the~~3Dlabs Inc., ~~same~~Ltd, ~~quarter~~due to a change in ~~the~~business ~~prior~~strategy announced in fiscal year 2006 to focus on the portable handheld device market instead of the professional workstation graphics business. As a percentage of sales, R&D expenses were 87% of sales in the ~~third~~first quarter of fiscal ~~2006~~2007 ~~compared~~and ~~to 6% in the same quarter of fiscal 2005~~2006.

~~Other charges~~Net ofinvestment ~~$37.3~~(loss) ~~million~~gain in the third quarter of fiscal 2006 comprised a $4.9 million in restructuring charges in 3Dlabs, a $31.4 million impairment of goodwill and other intangible assets of 3Dlabs, and $1.0 million in employee separation costs under a worldwide workforce reduction exercise. The restructuring charges in 3Dlabs were due to a change in the business strategy of refocusing its graphics business on the portable handheld device market and de-emphasize its professional workstation graphics business. The charges comprised $3.0 million in employee

~~Page~~Net 17investment loss of $1.0 million in the first quarter of fiscal 2007 was attributable to write-downs of investments. Net investment gain of $10.0 million in the first quarter of fiscal 2006 comprised a $11.0 million net gain from sales of investments offset partially by $1.0 million in write-downs of investments.

severance costs, $0.3 million in facility exit costs and $1.6 million in fixed assets impairment write-downs. As a result of the change in business strategy, 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, and accordingly, Creative recorded a $31.4 million impairment of goodwill and other intangible assets in the third quarter of fiscal 2006. See Note 2 and 10 of “Notes to Consolidated Financial Statements.”

Net investment gain

Net investment gains of $2.0 million for the third quarter of fiscal 2006 comprised a $2.8 million net gain from sales of investments offset by $0.8 million in write-downs of investments. Net investment gains of $14.8 million for the third quarter of fiscal 2005 comprised a gain of $17.8 million from sales of investments offset by $3.0 million in write-downs of investments. The bulk of the net gain of $17.8 million from the sale of investments in fiscal 2005 was derived from the sale of shares of SigmaTel, Inc.

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.

~~Net~~Page ~~interest~~14

Net interest in the third quarter of fiscal 2006 was an expense of $0.6 million compared to a $0.03 million expense in the same quarter of the prior fiscal year. The higher net interest expense in third quarter of fiscal 2006 compared to fiscal 2005 was due to the five-year $175.0 million syndicated term loan where $100.0 million was drawn-down in December 2004 and the remaining $75.0 million in February 2005.

Others

Other income of $2.5 million in the third quarter of fiscal 2006 was mainly due to exchange gain of $2.3 million. Other expense of $5.7 million in the third quarter of fiscal 2005 was mainly due to exchange loss of $5.9 million.

Provision for income taxes

Provision for income taxes of foreign subsidiaries is based on the corporate income tax rates of the country in which the subsidiary is located. Net operating profits from some of Creative’s subsidiaries are not offsetable with the net operating losses sustained by subsidiaries from a different tax jurisdiction. In Singapore, Creative was granted a new Pioneer Certificate under the International Headquarters Award that will expire in March 2010. Profits arising from qualifying activities under the new Pioneer Certificate will be exempted from income tax, subject to certain conditions. The Singapore corporate income tax rate of 20% is applicable to the profits excluded from the new Pioneer Certificate.

Nine Months Ended March 31, 2006 Compared to Nine Months Ended March 31, 2005

Net sales

Sales for the first nine months of fiscal 2006 decreased by 2% compared with the first nine months of the prior fiscal year. Sales of PDE products increased by 4% compared to the same period in the prior fiscal year and represented 65% of sales in the first nine months of fiscal 2006 compared to 61% of sales in the first nine months of the prior fiscal year. For the first six months of fiscal 2006, sales of PDE products increased by 34% compared to the same period in the prior fiscal year, but on a cumulative nine-month basis, PDE sales increased only marginally by 4%, due to a steep drop in flash memory prices at the end of third quarter as a result of excess supply of flash memory. The steep drop in flash memory prices has created uncertainty and pricing instability in the retail market for digital audio players, contributing to a significant slowing of worldwide sales of digital audio players. Creative intends to streamline its lineup of digital audio players to focus on strategic and more profitable products. Sales of audio products decreased by 12% compared with the first nine months of the prior fiscal year and represented 13% of sales in the nine-month period ended March 31, 2006 compared to 15% of sales in the comparable period in the prior

Page 18

fiscal year. The decrease in audio product sales was mainly due to a decrease in sales of low-end audio sound cards. Creative believes that the newly launched Xtreme Fidelity audio technology and Sound Blaster X-Fi sound cards will set a new standard for audio in music, movies and video games and will reverse the decline in its audio business. Sales of speakers decreased by 8% in the first nine months of fiscal year 2006 compared to the first nine months of the prior fiscal year and represented 14% of sales in the first nine months of fiscal 2006 compared to 15% in the first nine months of fiscal 2005. The decrease was primarily attributable to lower sales of non-multimedia speakers. Sales from all other products which include graphics products, communication products, accessories and other miscellaneous items, decreased by 19% compared to the same period in the prior fiscal year and accounted for 8% of the total sales in the first nine months of fiscal 2006 compared to 10% in the first nine months of the prior fiscal year. The decrease was primarily attributable to decreases in sales of graphics products.

Gross profit

Gross profit was 15% of sales for the nine-month period ended March 31, 2006 compared to 27% in the nine-month period ended March 31, 2005. The decrease in gross profit margin was primarily attributable to the substantial write down of flash memory inventory in the third quarter of fiscal 2006 due to the steep drop in the flash memory prices. The drop in the flash memory prices has also caused market uncertainty that resulted in lower sales and selling prices of digital audio players, negatively impacting the gross profit margin in the third quarter of fiscal 2006

Operating expenses

SG&A expenses for the nine-month period ended March 31, 2006 increased by 3% compared to the same period in the prior fiscal year. As a percentage of sales, SG&A expenses were 17% of sales in the nine-month period ended March 31, 2006 compared to 16% in the same period in the prior fiscal year.

R&D expenses for the nine-month period ended March 31, 2006 decreased by 1% compared to the same period in the prior fiscal year. As a percentage of sales, R&D expenses were 7% of sales for both the nine-month periods ended March 31, 2006 and 2005.

Other charges of $37.3 million for the nine-month period ended March 31, 2006 comprised a $4.9 million in restructuring charges in 3Dlabs, a $31.4 million impairment of goodwill and other intangible assets of 3Dlabs, and $1.0 million in employee separation costs under a worldwide workforce reduction exercise. The restructuring charges in 3Dlabs were due to a change in the business strategy of refocusing its graphics business on the portable handheld device market and de-emphasize its professional workstation graphics business. The charges comprised $3.0 million in employee severance costs, $0.3 million in facility exit costs and a $1.6 million in fixed assets impairment write-downs. As a result of the change in business strategy, 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, and accordingly, Creative recorded a $31.4 million impairment of goodwill and other intangible assets in the third quarter of fiscal 2006. See Note 2 and 10 of “Notes to Consolidated Financial Statements.”

The impairment of goodwill and intangible assets of $65.2 million in the first nine months of fiscal 2005 resulted from a review of the goodwill and intangible assets of 3Dlabs in the second quarter of fiscal 2005. During the second quarter of fiscal 2005, management noted that the revenue of 3Dlabs continued to perform below expectations due to delays in the launch of new products. Therefore, in accordance with SFAS 142, an impairment test was performed by an independent assessor on the goodwill and other intangible assets of 3Dlabs. The fair value was determined based on a combination of the projected discounted cash flow method and the market comparable method whereby market multiples of 3Dlabs are compared to the market multiples of publicly traded companies in similar lines of business. The conclusion of the impairment review was that the fair value of 3Dlabs could no longer support the carrying value of the remaining goodwill and other intangible assets associated with them. As a result, Creative recorded goodwill and other intangible assets impairment charge of $65.2 million in the first nine months of fiscal 2005.

Page 19

Net investment gain

Net investment gains of $18.9 million for the first nine months of fiscal 2006 included a $20.9 million net gain from sales of investments offset by $2.0 million in write-downs of investments. Net investment gains of $65.1 million for the first nine months of fiscal 2005 comprised a $73.4 million net gain from sales of investments offset by $8.3 million in write-downs of investments. The bulk of the net gain from sales of investments in fiscal 2006 and 2005 were derived from sale of shares of SigmaTel, Inc.

Net interest

Net ~~interest~~ ~~for~~interest ~~the first nine months of fiscal 2006~~ was an expense of $21.~~5 million compared to income of $~~0.7 million in the ~~same~~first ~~period~~quarter of ~~the~~fiscal ~~prior~~2007 ~~fiscal~~and ~~year~~2006. The net interest expense was ~~due~~primarily related to the five-year $175.0 million syndicated term loan ~~where $100.0~~that ~~million~~ was drawn-down in ~~December~~fiscal ~~2004~~year ~~and the remaining $75.0 million in February~~ 2005.

Others

Other ~~expenses~~income of $21.58 million ~~for~~in the first ~~nine~~quarter ~~months~~ of fiscal 2007 ~~2006~~was ~~were~~ mainly due to an exchange ~~loss~~gain of $41.07 million~~, offset partially by sundry income of $1~~.~~4 million~~ ~~with the bulk of it pertaining to a write-back of unclaimed invoices.~~ Other income of $0.52 million in the first ~~nine~~quarter ~~months~~ of fiscal ~~2005~~2006 ~~was~~includes ~~mainly~~sundry ~~due~~income ~~to exchange gain~~ of $1.92 million, ~~offset~~pertaining ~~partially~~to bya ~~Creative’s~~write-back ~~share~~ of ~~its equity-method~~unclaimed ~~investees’~~invoices ~~losses~~and an exchange loss of $1.63 million.

Provision for income taxes

Provision for income taxes of foreign subsidiaries is based on the corporate income tax rates of the country in which the subsidiary is located. Net operating profits from some of Creative’s subsidiaries ~~are~~were not offsetable with the net operating losses sustained by subsidiaries from a different tax jurisdiction. In Singapore, Creative was granted a new Pioneer Certificate under the International Headquarters Award that will expire in March 2010. Profits arising from qualifying activities under ~~the~~this ~~new~~ Pioneer Certificate will be exempted from income tax, subject to certain conditions. The Singapore corporate income tax rate of 20% is applicable to the profits excluded from the new Pioneer Certificate.

LIQUIDITY AND CAPITAL RESOURCES

Cash and cash equivalents as of ~~March~~September 3130, 2006 ~~increased~~were by $37189.18 million ~~to $224.4 million~~ compared to the balance of $~~187~~214.20 million at June 30, ~~2005~~2006. Cash ~~provided~~used byin operating activities of $6019.57 million was mainly due to a $~~119~~25.9 million ~~decrease in inventory, a $35.2 million~~ net ~~decrease~~increase in accounts receivable and other assets and prepaid ~~expenses~~ and a $3234.84 million ~~adjustment~~increase ~~for~~in ~~non-cash items~~inventory, offset partially by ana $1857.61 million ~~net~~increase ~~decrease~~ in accounts payable and accrued and other liabilities., ~~The~~and a $325.81 million ~~adjustment~~adjustments infor non-cash items. ~~comprises~~Inventory ~~mainly $20.4~~levels ~~million~~were increased in anticipation of ~~depreciation~~the ~~and~~holiday ~~amortization,~~season. aThe $~~31.~~5.1 million ~~charge~~in ~~relating~~adjustments for tonon-cash ~~the~~items ~~impairment~~was ofprimarily ~~goodwill~~depreciation and ~~other~~amortization ~~intangible~~in ~~assets~~the amount of ~~3Dlabs, and~~ $205.93 million ~~in net gains from disposals of investments~~. The $103.51 million ~~provided~~used by in investing activities was primarily ~~comprised of proceeds from sales of investments, offset partially by net~~ capital expenditures, ~~purchases of investments and increases~~ in ~~other~~the ~~non-current~~amount ~~assets~~of ~~primarily~~$2.1 ~~relating to investments in equity-method investee companies~~million. Cash used in financing activities ofwas $331.9 4 million ~~was mainly for share repurchases and payment of a dividend on Creative’s ordinary shares~~.

As of ~~March~~September 3130, 2006, in addition to its cash reserves and excluding long-term loans, Creative has credit facilities totaling $9698.7 2 million for overdrafts, guarantees, letters of credit and fixed short-term loans, of which approximately $9495.87 million were unutilized.

Page 20

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.

Page 15

CONTRACTUAL OBLIGATIONS AND COMMERCIAL COMMITMENTS

The following table presents the contractual obligations and commercial commitments of Creative as of ~~March~~September 3130, 2006:

Payments Due by Period (US$’000)

Contractual Obligations

Total

Less than1 year

1 to 3years

4 to 5years

After 5years

Long Term Debt

~~196~~194,~~321~~855

3,~~708~~782

7,~~416~~564

182,~~416~~564

~~2,781~~945

Capital Lease Obligations

~~1,769~~161

~~1,750~~143

1910

—8

—

Operating Leases

2230,~~591~~713

6,~~197~~560

48,~~610~~386

24,~~826~~307

811,~~958~~460

Unconditional Purchase Obligations

6961,~~262~~268

—

Other Long Term Obligations

~~539~~180

45—

~~494~~180

—

Total Contractual Cash Obligations

~~290~~287,~~482~~177

8071,~~962~~753

1216,~~539~~140

~~185~~186,~~242~~879

1112,~~739~~405

Unconditional purchase obligations are defined as contractual obligations for 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 ~~March~~September 3130, 2006, Creative ~~has~~ utilized approximately $12.95 million under guarantees, and letters of credit~~, overdraft and fixed short-term loan facilities~~.

~~Page~~ EFFECTS 21OF RECENT ACCOUNTING PRONOUNCEMENTS

In September 2006, the 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 September 2006, the FASB issued SFAS No. 158, “Employers’ Accounting for Defined Benefit Pension and Other Postretirement Plans, an amendment of FASB Statements No. 87, 88, 106, and 132(R)” (“SFAS 158”). This standard requires employers to recognize the underfunded or overfunded status of a defined benefit postretirement plan as an asset or liability in its statement of financial position and to recognize changes in the funded status in the year in which the changes occur through accumulated other comprehensive income, which is a component of stockholders’ equity. Additionally, SFAS 158 requires employers to measure the funded status of a plan as of the date of its year-end statement of financial position. The new reporting requirements and related new footnote disclosure rules of SFAS 158 are effective for fiscal years ending after December 15, 2006. Creative is currently evaluating the impact, if any, that SFAS 158 will have on its consolidated financial statements.

In September 2006, the Securities and Exchange Commission (“SEC”) released Staff Accounting Bulletin No. 108, “Considering the Effects of Prior Year Misstatements when Quantifying Misstatements in Current Year Financial Statements” (“SAB 108”). SAB 108 provides interpretive guidance on the SEC’s views on how the effects of the carryover or reversal of prior year misstatements should be considered in quantifying a current year misstatement. The provisions of SAB 108 will be effective for fiscal years ending November 15, 2006. Creative is currently

Page 16

evaluating the impact of applying SAB 108 but does not believe that the application of SAB 108 will have a material effect on its consolidated financial statements.

ITEM 3

QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Equity Price Risks: Creative is exposed to equity price risk on its quoted investments. An aggregate 10% reduction in ~~the~~ market prices of Creative’s investments in quoted investments, based on a sensitivity analysis of the balance as of ~~March~~September 3130, 2006, would have a $76.90 million adverse effect on Creative’s results of operations and financial position.

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’s cash deposits and the 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~~or 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 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. 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 September 30, 2006. Included in other income for the three month period ended September 30, 2006 is an exchange gain of $1.7 million.

The ~~functional~~exchange ~~currency~~rates offor ~~Creative and its subsidiaries is~~ the USS$ ~~dollar~~ and, ~~accordingly,~~Euro ~~gains and losses resulting from the translation of~~utilized ~~monetary assets and liabilities denominated~~ in ~~currencies~~translating ~~other than~~ the USbalance ~~dollar~~sheet are reflected in the determination of net income. 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 ~~March~~September 3130, 2006., ~~Included~~expressed in ~~interest~~US$ ~~and~~per ~~other~~one ~~expenses~~S$ ~~for the three~~ and ~~nine~~Euro ~~month~~were ~~period ended March 31, 2006, is exchange gain of $2~~0.36303 ~~million~~ and ~~exchange loss of $4~~1.~~0 million~~2674, respectively.

~~The~~PART ~~exchange~~II – ~~rates~~OTHER ~~for~~INFORMATION ~~the S$ and Euro utilized in translating the balance sheet at March 31, 2006, expressed in US$ per one S$ and Euro were 0.6180 and 1.2112, respectively.~~

~~Page~~ SUBMISSION 22OF MATTERS TO A VOTE OF SECURITY HOLDERS

Results of Annual General Meeting

At the conclusion of the Annual General Meeting of shareholders held on October 31, 2006, the Company announced that all resolutions set forth in the Proxy Statement dated October 9, 2006 filed with the U.S. Securities and Exchange Commission were successfully adopted and passed by its shareholders.

Page 17

SIGNATURE

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

CREATIVE TECHNOLOGY LTD. [/S]/ NgNG ~~Keh~~KEH ~~Long~~LONG Ng Keh Long Chief Financial Officer Date: ~~June~~December 212, 2006

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Filing Compare · CREATIVE TECHNOLOGY LTD