Playmates Interactive Entertainment Limited

Transcription

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Contents
Pages
CORPORATE INFORMATION
2
CHAIRMAN’S STATEMENT
3
BUSINESS REVIEW AND PROSPECTS
REPORT OF THE DIRECTORS
4-7
8-16
AUDITORS’ REPORT
17
CONSOLIDATED PROFIT AND LOSS ACCOUNT
18
CONSOLIDATED BALANCE SHEET
19
BALANCE SHEET
20
CONSOLIDATED CASH FLOW STATEMENT
21
STATEMENT OF RECOGNISED GAINS AND LOSSES
22
NOTES TO THE ACCOUNTS
COMPARATIVE TABLE OF RESULTS, ASSETS AND LIABILITIES
NOTICE OF ANNUAL GENERAL MEETING
23-46
47
48-50
The following trademarks and copyrights are used in the context of this report:–
The Simpsons TM is a trademark of Twentieth Century Fox Film Corporation. WaterBabies® is a registered trademark of Lauer Toys Incorporated. Chicken Run TM is a
trademark of DreamWorks LLC. Little Tikes® and Talking Little TTM are registered trademark and trademark of the Little Tikes Company. Tomb RaiderTM and Lara
CroftTM are trademarks of Core and Eidos. Amazing AllyTM, Amazing AmyTM, Amazing BabiesTM, Talking Potty DottyTM, Shop ’n Bop BabyTM, Sweet e.BabyTM, Playmates
Electronix TM, ePalsTM, OOgliesTM, Real Punch BoxingTM, Real Paint BallTM, Real Bass Boat Fishing TM, Jumpin’ Jam TM and Doc DreadTM are trademarks of Playmates
Toys Inc. Tech Deck TM & Tech Deck Pee WeesTM are trademarks of X-Concepts, LLC. Wallace & Gromit is a trademark of Wallace & Gromit Limited. PlayStation®
is a registered trademark of Sony Computer Entertainment Inc. Monster Rancher© 2000 Techmo, CBC, Dentsu, TMS-K. How The Grinch Stole Christmas© 2000 Universal
Studios.
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Corporate Information
Directors
Auditors
Executive Directors:
Chan Chun Hoo, Thomas (Chairman)
Ip Shu Wing, Charles (Vice Chairman)
To Shu Sing, Sidney
Cheng Bing Kin, Alain
PricewaterhouseCoopers
Certified Public Accountants, Hong Kong
Non-Executive Directors:
Lee Peng Fei, Allen
Lo Kai Yiu, Anthony
Tsim Tak Lung, Dominic
Yu Hon To, David
Principal Bankers
The Chase Manhattan Bank
The Hongkong and Shanghai Banking Corporation Limited
Solicitors
Bermuda:
Conyers Dill & Pearman
Tracy Fong
Hong Kong:
Deacons Graham & James
Richards Butler
Registered Office
Share Registrars and Transfer Office
Clarendon House
Church Street
Hamilton HM11
Bermuda
Bermuda:
The Bank of Bermuda Limited
6 Front Street
Hamilton HM11
Bermuda
Secretary
Principal Office
21/F
100 Canton Road
Tsimshatsui
Kowloon, Hong Kong
2
Hong Kong:
Abacus Share Registrars Limited
2401 Prince’s Building
Central
Hong Kong
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Chairman’s Statement
I am pleased to report that during the year ended 31 December 1999, the Group achieved a turnover of HK$1,081,836,000,
a 22% increase compared to HK$883,995,000 for the year ended 31 December 1998. Profit attributable to the shareholders was
HK$5,994,000, compared to a loss of HK$17,773,000 in 1998. The board recommends a final dividend of 6 cents per share
and a special dividend of 25 cents per share for the year 1999 (interim and final dividends of 6 cents per share for the year
1998).
The Group’s positive results in 1999 were derived from a balanced portfolio of successful products made up of licensed multimedia
entertainment based toys and many other original, fun and feature-filled playthings. Those successful products reaffirmed the Group’s
industry leadership position in the application of interactive technology to enhance the play values of traditional toys as well
as those of the new generation.
In 1999, the Group established two new business units: Re:PLAY! and NeXT Electronix. Each of the new business units will
develop its own distinct brand identity and specializes in different product-market segments. They will share in the established
strength of the Group in the creation and delivery of toy products of great value to the global consumers. Both new business
units have launched their inaugural products for year 2000 during major international toy fairs earlier this year.
During the year, the Group had teamed up with two strong independent toy marketing companies: Vivid Imaginations in the
U.K. and Rainbow Fun in Canada. These strategic partners will further expand the distribution of Playmates products in Europe
and in North America. They will also bring to Playmates new sources of products and other opportunities for mutual benefit.
The Group will continue to seek out and take advantage of synergetic investment opportunities. The strategic focus of new business
development will be on interactive entertainment products, in particular, multimedia technology based merchandise and internet
applications. It is expected that additional business units will be established to exploit new business ventures.
To better reflect the Group’s strategic business direction, the name of the Company will be changed to Playmates Interactive
Entertainment Limited , subject to the approval of the shareholders in the next Annual General Meeting.
The achievement and the future of the Group are founded on the support of our customers, licensors, suppliers and other business
partners, and on the dedication and hard work of my staff and management colleagues. I would like to take this opportunity
to express my sincere thanks to all of them.
Chan Chun Hoo, Thomas
Chairman
Hong Kong, 23 March 2000
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Business Review and Prospects
The top-selling large doll in the US for the 1999 holiday season was Playmates’ Amazing Ally which was selected by the
Toys ‘R’ Us on-line shopping site toysrus.com as a “Hotter than Hot Pick” for that season. Ally will be back in year 2000;
equipped with more innovative softwares and accessories to explore more interactive adventures with little girls around the world.
OOglies , the funky and colorful aliens, charmed their way into the hearts of a great number of children all over the world.
Together with their mini-sized brothers, the family of OOglies will continue to be popular in year 2000. The series of interactive
handheld virtual sports electronic games, in particular the Real Hunting games, were strong performers in the category.
A number of traditional and classical products offered by the Group in 1999 also performed well. Talking Potty Dotty, Shop
‘n Bop Baby and Waterbabies were all best sellers in the large doll category at various times of the year. Playmates’ application
of its renowned expertise in crafting collectible quality action figures to interpret the adventures of Lara Croft , as depicted
in the episodes of the popular PlayStation and PC game Tomb Raider , had created a strong worldwide demand by gaming fans
and collectors alike.
For year 2000 and beyond, the Group will further exploit its proven expertise in the application of technology to a diversified
range of product categories.
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Multimedia Entertainment – The Group will continue to actively secure licenses from partners in the entertainment industry.
A number of major new entertainment based product lines are introduced for year 2000.
Coming in summer 2000 is a line of hilarious toys and character collectibles inspired by the animated motion picture “Chicken
Run” featuring the vocal talents of Mel Gibson and Miranda Richardson from DreamWorks SKG and Aardman Studios, the Academy
Award-winning creators of “Wallace and Gromit” . Playmates has acquired the master toy license from Universal Studios for the
highly anticipated holiday 2000 movie, “How the Grinch Stole Christmas”, with Jim Carrey playing Grinch, the leading character
from the beloved children’s book by Dr. Seuss.
A partnership between Playmates and 20th Century Fox leads to the creation of a line of dynamic interactive products that bring
to life “The Simpsons” and other characters from the world of Springfield. The Simpsons, currently in its 11th anniversary, is
the longest running sitcom on the air in the USA and the most successful animated series of all time. Playmates is also the
master toy licensee for the hit video game and cartoon show “Monster Rancher” . Hundreds of different characters from the
action packed world of the Monster Rancher have been released to satisfy the market craze for collecting pocket-sized monsters.
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Promotional Dolls – Following the success of the top-selling dolls Amazing Amy (in 1998) and Amazing Ally (in 1999), Playmates
introduces the newest members of the Amazing family – Amazing Babies. Amazing Babies combine cutting-edge technology with
the real needs and responses of a baby to create a true-to-life mommy experience for little girls. Realistic animatronics allow
Amazing Babies to move their heads just like a real baby. Each Amazing Baby can hear, and will turn her head in recognition
of the voice of her “mommy”. A proprietary Smart Response System allows Amazing Babies to expand their vocabulary over time
and recognize the play pieces they are holding.
Another new member of the Amazing family is the interactive Talking Little T . This playful friend for pre-school aged little
boys is the result of a licensing partnership with Little Tikes, the maker of popular outdoor toys and equipment. Like his cousin
Ally, Little T can speak hundreds of different phrases, and encourages discovery and exploration by asking his buddy to participate
in role-playing adventures.
Other new dolls introduced for year 2000 include Sweet e.baby , the only doll that comes with a CD-ROM full of surprises.
Girls can pop the CD-ROM into the computer for a printable birth announcement, baby journal, personalized “family tree”, interactive
doctor’s clinic for all of the new mommy’s questions, and lots of fun e.venture stories. With more than 10 million dolls sold,
the classic Waterbabies line promises more excitement with the introduction of new dolls with a variety of new looks and sizes
for 2000.
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Interactive Electronics – Playmates continues to expand its Playmates Electronix brand using the latest technology to deliver innovative,
interactive toys and games for all ages. Hot new product introductions include e-Pals, which are animatronic characters delivering
wacky actions and commentaries in reaction to tasks performed on computers. Additional phrases and activities are downloadable
from e-Pal enabled websites for more interactive fun.
Real Adventure 3D Audio Games feature authentic 3D surround sound effects to intensify the audio-visual experience of game
play. Real Punch Boxing is a voice-command game that places the players in a virtual boxing ring. Motion sensors inside boxing
gloves can tell when a player is swinging in the air and when contact is made. Real Paint Ball Challenge delivers all of
the excitement without the mess of the classic “capture the flag” adventure. Search the field for enemy movement, line up the
crosshairs, pull the trigger, and each paintball “hit” shows up in color enhanced graphics. Real Bass Boat Fishing captures
the excitement of the sport through an interactive tilt sensor, vibrating boat motor, realistic tournament sounds, and fish fighting
feel.
Jumpin’ Jam is an electronic interactive ball that players jump on – repeatedly – to experience a variety of wacky games. It
comes with outrageous sound effects and two cool color patterns for maximum excitement.
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Report of the Directors
The directors present herewith their report and the accounts for the year ended 31 December 1999.
ACCOUNTS
The results of the Company and its subsidiaries (the “Group”) for the year are set out in the consolidated profit and loss account
on page 18.
The states of affairs of the Group and of the Company as at 31 December 1999 are set out in the balance sheets on pages
19 and 20 respectively.
The cash flows of the Group for the year are set out in the statement on page 21.
PRINCIPAL ACTIVITIES AND ANALYSIS OF OPERATIONS
The Company continued to be an investment holding company. The principal activities of its subsidiaries continued to be the
design, development, marketing and distribution of toys.
A geographical analysis of the Group’s turnover is as follows:–
North America
Europe
Far East
Others
1999
HK$’000
1998
HK$’000
867,807
208,723
4,510
796
704,381
163,559
9,856
6,199
1,081,836
883,995
An analysis of turnover and contribution to operating results, by business segment is as follows:–
Turnover
1998
1999
HK$’000
HK$’000
Toys
Video game software
Others
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Contribution to profit/(loss)
from ordinary activities
1999
1998
HK$’000
HK$’000
1,081,836
–
–
860,828
23,167
–
18,468
–
–
(28,872)
2,112
(11,825)
1,081,836
883,995
18,468
(38,585)
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MAJOR CUSTOMERS AND SUPPLIERS
The percentages of purchases and sales attributable to the Group’s largest suppliers and customers are as follows:–
Purchases
– the largest supplier
– five largest suppliers combined
Sales
– the largest customer
– five largest customers combined
1999
%
1998
%
23
65
34
76
23
64
25
60
No directors or their associates and no shareholders (who to the knowledge of the directors own more than 5% of the Company’s
share capital) were interested at any time in the year in the above suppliers or customers.
DIVIDENDS
The directors have declared or now recommend the following dividends in respect of the year ended 31 December 1999:–
1999
HK$’000
1998
HK$’000
–
19,832
39,912
19,832
166,302
–
206,214
39,664
Interim – HK$ nil (1998: HK$0.03) per share
Proposed final – HK$0.06 (1998 : HK$0.03) per share
Proposed special – HK$0.25 (1998 : nil) per share
TAXATION
Details of the assessment for additional Hong Kong profits tax on the Group’s offshore income claims are set out in note 6(a)(i)
on page 30.
RESERVES
The movements in the reserves of the Group and the Company are shown in note 18 on pages 41 to 43.
DONATIONS
The donations made by the Group during the year amounted to HK$666,000 (1998: HK$875,000).
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INFORMATION ON SUBSIDIARIES
Details of the principal subsidiaries are set out in note 12 on pages 35 and 36.
FIXED ASSETS
The movements in fixed assets of the Group are set out in note 11 on page 34.
SHARE CAPITAL
No new shares were issued during 1999.
Details of the share options granted by the Company during the year and options outstanding at 31 December 1999 are set
out in note 17 on page 40.
PURCHASE, SALE OR REDEMPTION OF THE COMPANY’S LISTED SECURITIES
During the year, neither the Company nor any of its subsidiaries has purchased, sold or redeemed any of the Company’s share
capital.
ANALYSIS OF BANK LOANS, OVERDRAFTS AND OTHER BORROWINGS
The particulars of the Group’s utilised banking facilities are set out in note 21 on page 45.
LIQUIDITY AND FINANCIAL RESOURCES
The Group’s business is seasonal in nature. Sales in the second half-year are generally significantly higher than the first half.
Accordingly, a disproportionately high balance of receivables is generated during the selling seasons in the fourth quarter of the
year. Consistent with trade practices, a significant portion of the sales is not collected until the final weeks of the fourth quarter
and the first quarter of the subsequent year, resulting in a seasonal demand for working capital for the peak selling seasons.
As at 31 December 1999, trade receivables were HK$493,522,000 (1998: HK$245,986,000) and inventories were at a seasonal
low level of HK$5,669,000 or 0.5 percent of turnover (1998: HK$68,291,000 or 7.7 percent of turnover).
The ratio of current assets to current liabilities was 1.09 at 31 December 1999 compared to 1.50 at 31 December 1998. As
at 31 December 1999, the Group’s cash and bank balances were HK$336,251,000, compared to HK$249,702,000 at 31 December
1998. The strong cash position together with the available bank facilities are sufficient to provide adequate liquidity and capital
resources for the Group’s ongoing operating needs.
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YEAR 2000 COMPUTER ISSUE
The Year 2000 computer issue was thoroughly discussed in the Group’s 1998 Annual Report, outlining our understanding of
and approach to addressing the issue. The Group has successfully passed the millennium rollover. All systems critical to the operating
of the business are functioning satisfactorily. The Group has incurred, in aggregate, approximately HK$24.6 million in enhancing
its operating facilities while preparing itself for the arrival of the millennium. These costs, which comprised the acquisitions of
new computer hardware and software, are treated as capital expenditure and are being amortised over the estimated useful lives
of three to five years. The Group has no further material commitment relating to this issue.
EMPLOYEES
As of 31 December 1999, the Group had a total of 112 employees world-wide. This compares to 150 employees as of 31 December
1998. The reduction in the number of employees reflects the Group’s business restructuring in Canada and the United Kingdom.
The Group remunerates its employees largely based on industry practice, including contributory provident funds, insurance and
medical benefits. The Group has also adopted a discretionary bonus programme for all management and staff and a share option
plan for its employees with awards under both programmes determined annually based upon the performance of the Group and
the individual employee.
DIRECTORS
The directors who held office during the year and up to the date of this report were:–
Mr.
Mr.
Mr.
Mr.
Mr.
Mr.
Mr.
Mr.
Ms.
Chan Chun Hoo, Thomas Chairman
Ip Shu Wing, Charles Vice Chairman
To Shu Sing, Sidney
Cheng Bing Kin, Alain
Lee Peng Fei, Allen *
Lo Kai Yiu, Anthony *
Tsim Tak Lung, Dominic *
Yu Hon To, David *
Li, Irene Suk Kay
(appointed on 30 August 1999)
(appointed on 30 August 1999)
(resigned on 12 July 1999)
* Non-executive directors
Pursuant to Bye-law 86(2) of the Company’s Bye-laws, Mr. Ip Shu Wing, Charles and Mr. Cheng Bing Kin, Alain retire and
offer themselves for re-election.
Pursuant to Bye-law 87(1) of the Company’s Bye-laws, Mr. Lee Peng Fei, Allen retires by rotation and offers himself for reelection.
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DIRECTORS AND SENIOR MANAGEMENT
Biographical details of directors and senior management are shown below:–
Executive directors
Chan Chun Hoo, Thomas Chairman
Mr. Chan, aged 49, joined the Group in 1967. In 1970 he became responsible for sales and was instrumental in developing
the Group’s global sales and marketing network. Since 1979, he has been actively involved in all aspects of the Group’s operations.
His decision to take on the promotional toy business in 1985 led to the evolution of the Group from a manufacturing entity
into a pure toy development and marketing group. The Group’s high level of productivity is attributable to his guiding management
principles of creativity, flexibility and simplicity. Mr. Chan was appointed Chairman on 15 October 1997.
Ip Shu Wing, Charles Vice Chairman
Mr. Ip, aged 49, previously joined the Group in 1986 during a period of rapid growth. He was involved in the initial development
of the promotional toy business of the Group and participated in the transformation of the Group from a manufacturing-based
to a marketing-based business group. He left Playmates soon after the launch of the Ninja Turtles in 1988.
Mr. Ip has close to thirty years experience in business management, and has held a number of key management positions in
various multinational corporations. He re-joined the Group and was appointed as Vice Chairman on 1 October 1999.
To Shu Sing, Sidney Executive Director
Mr. To, aged 42, joined the Group in 1986. Mr. To holds an Executive Master of Business Administration degree from Simon
Fraser University, British Columbia, Canada. Prior to joining the Group, he had worked for a number of multinational trading
and manufacturing companies for nine years.
Cheng Bing Kin, Alain Executive Director
Mr. Cheng, aged 37, joined the Group in 1999. He holds a bachelor’s degree in Economics from the University of Hong Kong
and a bachelor’s degree in Laws from the London University. Mr. Cheng is a fellow member of The Association of Chartered
Certified Accountants and an associate member of the Hong Kong Society of Accountants. In 1998, he obtained a master degree
in Chinese and Comparative Laws from the City University of Hong Kong.
Prior to joining the Group, he had worked for two international accounting firms with extensive experience in statutory auditing
and corporate finance. He subsequently joined the legal profession and had worked for two reputable law firms. Mr. Cheng was
admitted as a solicitor of the High Court of Hong Kong and the Supreme Court of England and Wales. During his practice
in the legal profession, he specialized in the commercial and corporate finance areas.
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Non-executive directors
Lee Peng Fei, Allen
Mr. Lee, aged 60, was appointed a director in November 1993. He is currently a member of the Commission on Strategic Development,
Hong Kong SAR and a deputy of HKSAR, the 9th National People’s Congress, PRC. He has taken on an active role in public
service.
Lo Kai Yiu, Anthony
Mr. Lo, aged 51, is an investment banker and a director of a number of public and private companies in Hong Kong and overseas.
Mr. Lo was appointed a director in November 1993.
Mr. Tsim, aged 53, is a consultant on corporate communication and strategic planning. He is on the boards of several public
and private companies in Hong Kong and North America. He was appointed a director in January 1997.
Yu Hon To, David
Mr. Yu, aged 52, was appointed as a director of the Company in April 1995. He is a fellow of The Institute of Chartered
Accountants in England and Wales and an associate member of the Hong Kong Society of Accountants. He was a partner of
an international accounting firm with extensive experience in corporate finance. Mr. Yu is a founder and director of Management
Capital Limited, which specializes in direct investment and financial advisory activities and also on the board of a number of
listed companies and private companies in Hong Kong.
Senior management
Ron K. Welch President – Playmates Toys Inc.
Mr. Welch, aged 52, joined the Group in 1987 and brought with him 28 years of toy management experience in the U.S. toy
industry.
Chan Wai Kan, George Chief Financial Officer
Mr. Chan, aged 42, joined the Group in 1994. He is a member of The Institute of Chartered Accountants in England and Wales
and of the Hong Kong Society of Accountants. Prior to joining the Group, he had worked for two of the Big-5 international
accounting firms where he gained a wide experience in auditing, taxation and corporate finance. He holds a Master of Business
Administration degree from The Chinese University of Hong Kong.
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SERVICE CONTRACTS
There is no service contract, which is not determinable by the Company within one year without payment of compensation (other
than statutory compensation), in respect of any director proposed for re-election at the forthcoming annual general meeting.
DIRECTORS’ INTERESTS IN CONTRACTS
No contracts of significance in relation to the Company’s business to which the Company or its subsidiaries was a party, and
in which any director had a material interest, subsisted at the end of the year or at any time during the year.
DIRECTORS’ AND CHIEF EXECUTIVES’ BENEFITS FROM RIGHTS TO ACQUIRE SHARES OR DEBENTURES
Details of share options granted to the directors and chief executives, pursuant to the Company’s Share Option Plan, are as follows:–
Name of Director
Date of Grant
Exercise Price
No. of Options
HK$
Mr. Ip Shu Wing, Charles
20 October 1999
0.478
3,000,000
Mr. To Shu Sing, Sidney
26 August 1998
27 May 1999
20 October 1999
0.586
0.558
0.478
800,000
600,000
750,000
Mr. Cheng Bing Kin, Alain
27 May 1999
20 October 1999
0.558
0.478
500,000
500,000
The options are exercisable in stages in accordance with the terms of the Share Option Plan within ten years from the date
of granting. No options were exercised and 800,000 options were cancelled during the year.
Apart from the aforesaid, at no time during the year was the Company or any of its subsidiaries a party to any arrangements
to enable the directors and chief executives of the Company to acquire benefits by means of the acquisition of shares in, or
debentures of, the Company or any other body corporate.
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DIRECTORS’ AND CHIEF EXECUTIVES’ INTERESTS IN SHARES OF THE COMPANY
As at 31 December 1999, the interests of directors and chief executives of the Company in the shares of the Company as recorded
in the register maintained under Section 29 of the Securities (Disclosure of Interests) Ordinance ("SDI Ordinance") and other interests
of directors in the Company were as follows:–
Number of shares held
Name
Mr.
Mr.
Mr.
Mr.
Mr.
Mr.
Yu Hon To, David
To Shu Sing, Sidney
Lee Peng Fei, Allen
Lo Kai Yiu, Anthony
Personal
interests
Family
interests
Corporate
interests
Other
interests
–
–
10,000
345,000
550,000
200,000
–
–
–
–
–
20,000
–
Note (b)
–
–
–
–
Note (a)
–
–
–
–
–
Note:–
(a)
312,107,572 shares of the Company were beneficially owned by Chansam Investments Limited ("CIL"). 85.19 percent of the issued share capital of CIL
is beneficially owned by a private company which is wholly owned by the trustees of a discretionary trust established for the benefit of Mr. Chan Chun
Hoo, Thomas and his family; and
(b)
3,500,000 shares of the Company were held by a private company in which Mr. Yu Hon To, David and a member of his family have a controlling interest.
Apart from the above, none of the directors and chief executives (including their spouses and children under 18 years of age)
had any beneficial interests or other interests in the shares of the Company.
SUBSTANTIAL SHAREHOLDERS’ INTEREST IN THE SHARE CAPITAL OF THE COMPANY
Other than the interests disclosed above in respect of directors and chief executives, the register of substantial shareholders maintained
under Section 16(1) of the SDI Ordinance shows that the Company at 31 December 1999 had been notified by Mr. Chan Chun
Wai and a company controlled by him that he was interested, in aggregate, in 123,079,201 shares of the Company.
CONNECTED TRANSACTIONS
The related party transactions entered by the Group during the year ended 31 December 1999, as disclosed in note 23 (a) to
the accounts, also constitute connected transactions under the Listing Rules. Details of these transactions have been disclosed in
the press announcements of the Company dated 5 March 1997 and 26 January 2000.
PRE-EMPTIVE RIGHTS
There is no provision for pre-emptive rights under the Company’s Bye-laws and there is no restriction against such rights under
the laws of Bermuda.
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AUDIT COMMITTEE
Pursuant to the Rules Governing the Listing of Securities of The Stock Exchange of Hong Kong Limited, an Audit Committee
comprising Mr. Tsim Tak Lung, Dominic as Chairman, Mr. Lee Peng Fei, Allen and Mr. Lo Kai Yiu, Anthony as members was
formed in May 1999. Its function is to assist the Board of Directors in providing an independent review of the effectiveness
of the financial reporting process and internal control system of the Company.
COMPLIANCE WITH THE CODE OF BEST PRACTICE OF THE LISTING RULES
The directors believe that the Code of Best Practice has been complied with by the Company during the year ended 31 December
1999 except that non-executive directors are not appointed for a specific term as recommended under the Listing Rules Appendix
14 Guidelines. According to the bye-laws of the Company, non-executive directors of the Company will retire by rotation on
average every three years and their appointments will be reviewed when they are due for re-election. In the opinion of the Company
this meets the same objective as the Code of Best Practice.
CHANGE OF NAME
In order to better reflect and signify the strategic business direction of the Group, the directors propose that, subject to the
approval by the shareholders of the Company and the Registrar of Companies in Bermuda, the name of the Company shall be
changed to “Playmates Interactive Entertainment Limited”. The change of name will take effect after the resolution therefor is
passed at the Annual General Meeting and approval of the Registrar of Companies in Bermuda is obtained. If the change of
name takes effect, all existing certificates for the shares of the Company will continue to be good evidence of legal title to
the shares of the Company, and it is not necessary for shareholders to exchange the existing certificates for new certificates to
be issued by the Company bearing its new name. An announcement will be made by the Company when the proposed change
of name has become effective.
AUDITORS
Our auditors, PricewaterhouseCoopers, being eligible, offer themselves for re-appointment, and a resolution to this effect will be
proposed at the Annual General Meeting.
On behalf of the Board
Chairman
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Auditors’ Report
TO THE SHAREHOLDERS OF PLAYMATES TOYS HOLDINGS LIMITED
(incorporated in Bermuda with limited liability)
We have audited the accounts set out on pages 18 to 46 which have been prepared in accordance with accounting principles
generally accepted in Hong Kong.
RESPECTIVE RESPONSIBILITIES OF DIRECTORS AND AUDITORS
The Company’s directors are responsible for the preparation of accounts which give a true and fair view. In preparing accounts
which give a true and fair view it is fundamental that appropriate accounting policies are selected and applied consistently.
It is our responsibility to form an independent opinion, based on our audit, on those accounts and to report our opinion to
you.
BASIS OF OPINION
We conducted our audit in accordance with Statements of Auditing Standards issued by the Hong Kong Society of Accountants.
An audit includes examination, on a test basis, of evidence relevant to the amounts and disclosures in the accounts. It also includes
an assessment of the significant estimates and judgments made by the directors in the preparation of the accounts, and of whether
the accounting policies are appropriate to the circumstances of the Company and the Group, consistently applied and adequately
disclosed.
We planned and performed our audit so as to obtain all the information and explanations which we considered necessary in order
to provide us with sufficient evidence to give reasonable assurance as to whether the accounts are free from material misstatement.
In forming our opinion we also evaluated the overall adequacy of the presentation of information in the accounts. We believe
that our audit provides a reasonable basis for our opinion.
OPINION
In our opinion the accounts give a true and fair view, in all material respects, of the state of affairs of the Company and the
Group as at 31 December 1999 and of the profit and cash flows of the Group for the year then ended and have been properly
prepared in accordance with the disclosure requirements of the Hong Kong Companies Ordinance.
PricewaterhouseCoopers
Certified Public Accountants
17
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Consolidated Profit and Loss Account
For the year ended 31 December 1999
1999
HK$’000
1998
HK$’000
139,592
(71,413)
1,081,836
(553,448)
883,995
(410,503)
68,179
528,388
473,492
(27,585)
(37,524)
(213,783)
(290,811)
(219,773)
(284,990)
3
3,070
23,794
(31,271)
4
5
(1,878)
1,190
(14,552)
9,226
(18,042)
22,553
–
–
(11,825)
Profit/(loss) from ordinary activities
2,382
18,468
(38,585)
Share of profit of an associated company
2,727
21,134
8,056
Profit/(loss) before taxation
5,109
39,602
(30,529)
(4,337)
(33,610)
12,756
772
5,992
(17,773)
–
2
–
772
5,994
(17,773)
50,732
393,173
438,785
895
6,939
11,825
52,399
406,106
432,837
Note
1999
US$’000
(Note 25)
Turnover
Cost of sales
2
Gross profit
Operating expenses
Marketing
Selling, distribution and administration
Operating profit/(loss)
Non-operating income/(expenses)
Interest expense and bank charges
Other income, net of expenses
Provision for diminution in value of
investment securities
Taxation (charge)/credit
6(a)
Profit/(loss) after taxation
Minority interests
Profit/(loss) attributable to shareholders
7
Retained profits brought forward
Transfer from reserves
Total available for appropriation
Dividends
8
26,608
206,214
39,664
Retained profits carried forward
18
25,791
199,892
393,173
US$
HK$
HK$
0.12 cents
0.91 cents
(2.69) cents
Earnings/(loss) per share
9
The notes on pages 23 to 46 form an integral part of these accounts.
Auditors’ report – page 17
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Consolidated Balance Sheet
As at 31 December 1999
1999
HK$’000
1998
HK$’000
4,514
34,984
3,572
27,683
33,994
263,457
13
100
23,589
26,085
344,053
990
732
63,680
6,141
514
22
43,388
5,669
493,522
47,604
3,984
169
336,251
68,291
245,986
66,469
5,291
11,768
249,702
114,477
887,199
647,507
43,116
7,984
21,363
5,793
26,608
334,149
61,872
165,566
44,899
206,214
144,845
23,389
229,412
14,710
19,832
104,864
812,700
432,188
9,613
74,499
215,319
51,706
400,723
610,036
17
8,530
66,107
66,107
18(a)
43,176
334,616
539,415
51,706
400,723
605,522
–
–
4,514
51,706
400,723
610,036
Note
1999
US$’000
(Note 25)
Fixed assets
Investment in an associated company
Investment securities
Deferred taxation
11
13
14(a)
6(b)
Current assets
Inventories
Trade receivables
Other receivables, deposits and prepayments
Taxation recoverable
Other investments
Cash and bank balances
15, 21
16, 21
14(b)
Current liabilities
Notes payable to banks, repayable on demand
Trade payables
Other payables and accrued charges
Taxation payable
Proposed dividends
Net current assets
Financed by:
Share capital
Reserves
Shareholders’ funds
Non-current liabilities
Chan Chun Hoo, Thomas Director
Ip Shu Wing, Charles Director
19
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Balance Sheet
As at 31 December 1999
1999
HK$’000
1998
HK$’000
43,021
333,410
466,745
130
–
17,375
1,012
–
134,653
120
50,000
33,446
17,505
135,665
83,566
2,881
26,608
22,328
206,214
–
19,832
29,489
228,542
19,832
(11,984)
(92,877)
63,734
31,037
240,533
530,479
17
8,530
66,107
66,107
18(b)
22,507
174,426
464,372
31,037
240,533
530,479
Note
1999
US$’000
(Note 25)
Investment in subsidiaries
12
Current assets
Accounts receivable and prepayments
Dividends receivable from subsidiaries
Current liabilities
Other payables and accrued charges
Proposed dividend
Net current (liabilities)/assets
Financed by:
Share capital
Reserves
Shareholders’ funds
Chan Chun Hoo, Thomas Director
Ip Shu Wing, Charles Director
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Consolidated Cash Flow Statement
1999
HK$’000
1998
HK$’000
(18,323)
(142,007)
212,465
1,497
(1,134)
1,391
(2,559)
534
11,599
(8,786)
10,780
(19,832)
4,141
20,758
(14,149)
9,800
(59,496)
3,455
(271)
(2,098)
(39,632)
(127)
(15)
113
79
(985)
(114)
880
611
(11,825)
(5,891)
2,963
40,944
50
392
26,191
–
–
(25,703)
(2,223)
(2,962)
48
(17,232)
(22,954)
369
(12,991)
(4,870)
1,157
11,030
85,484
26,463
Net cash inflow/(outflow) from investing activities
5,893
45,667
(15,944)
(Decrease)/increase in cash and cash equivalents
(12,651)
(98,046)
183,080
Cash and cash equivalents at 1 January
13,530
104,857
(75,603)
(608)
(4,709)
(2,620)
271
2,102
104,857
Note
1999
US$’000
(Note 25)
Net cash (outflow)/ inflow from operating activities
19(a)
Returns on investments and servicing of finance
Interest received
Interest paid
Dividends received from an associated company
Dividends paid
Dividends received from other investments
Net cash outflow from returns on investments and
servicing of finance
Taxation
Hong Kong profits tax paid
Overseas tax paid
Hong Kong profits tax refunded
Overseas tax refunded
Net tax refunded
Investing activities
Purchases of short term investments
Purchases of fixed assets
Moulds and tools
Other fixed assets
Proceeds from disposal of fixed assets
Proceeds from disposal of investment and
other securities
Effect of foreign exchange rate changes
Cash and cash equivalents at 31 December
19(b)
21
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Statement of Recognised Gains and Losses
Note
1999
US$’000
1999
HK$’000
1998
HK$’000
(Note 25)
Exchange loss arising on translation of accounts of
foreign subsidiaries
18(a)
(591)
(4,579)
(2,713)
Profit / (loss) for the year
18(a)
772
5,994
(17,773)
181
1,415
(20,486)
Total recognised gains and (losses)
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Notes to the Accounts
31 December 1999
1
PRINCIPAL ACCOUNTING POLICIES
The principal accounting policies which have been adopted in the preparation of these accounts are set out below.
(a)
Basis of preparation
The accounts have been prepared in accordance with generally accepted accounting principles in Hong Kong and comply
with accounting standards issued by the Hong Kong Society of Accountants. The accounts are prepared under the
historical cost convention as modified by the revaluation of investment securities.
(b)
Consolidation
The group accounts comprise the consolidation of the accounts of the Company and all its subsidiaries made up to
the end of the year. Internal transactions are eliminated on consolidation and all figures in the group accounts relate
to external transactions only.
A subsidiary is a company in which the Company, directly or indirectly, controls more than half the voting power
or issued share capital or of whose board of directors it controls the composition.
The investment in subsidiaries is recorded in the Company’s books at cost, being the fair value of the consideration
given plus related acquisition costs, or, where appropriate, at directors’ estimate of the fair value of the net assets
of subsidiaries contributed to the Company, less any provision required for permanent diminution in value.
Discount arising on consolidation represents the excess of fair value of the net assets of subsidiaries acquired over
the purchase consideration. Goodwill arising on consolidation represents the excess of the purchase consideration over
the fair value of the net assets of subsidiaries acquired. Any goodwill or discount arising on consolidation is charged
or credited, as appropriate, directly to reserves.
The turnover and results of subsidiaries are included in the group accounts from the date of their acquisition. In
the case of disposals, turnover and results are included up to the date of disposal.
Minority interests represent the interests of outside shareholders in the operating results and net assets of subsidiaries.
(c)
Associated companies
Associated companies are companies other than subsidiaries in which the Group effectively holds a long term equity
investment and over whose management it is able to exercise significant influence. Associated companies are accounted
for by the Group using the equity method of accounting.
23
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31 December 1999
1
PRINCIPAL ACCOUNTING POLICIES (CONT’D)
(d)
Revenue recognition
Revenue from the sale of toys and video games is recognized on the transfer of risks and rewards of ownership, which
generally coincides with the time of shipment.
Interest income is recognized on a time proportion basis, taking into account the principal amounts outstanding and
the interest rates applicable.
Dividend income is recognized when it is received except dividends from subsidiaries which are recognized when determined
by the holding company as the holding company’s right to receive payment is established by virtue of its control
over the subsidiary.
(e)
Deferred taxation
Deferred taxation is accounted for at the current tax rate in respect of timing differences between profit as computed
for taxation purposes and profit as stated in the accounts to the extent that a liability or an asset is expected to
be payable or recoverable in the foreseeable future.
(f)
Advertising and marketing expenses, advanced royalties and development costs
Advertising and marketing expenses are written off as incurred, except for the production costs of commercials and
related programming costs which are deferred and written off in the year the commercial is first aired.
Advanced royalties represent prepayments made to licensors of intellectual properties under licensing agreements. All
prepayments with respect to these agreements are recoupable against future royalties. Advanced royalties are amortized
at the contractual royalty rate based on actual product sales. Management evaluates the future realization of advanced
royalties periodically and charges to expense any amounts that management deems unlikely to be recoupable at the
contractual royalty rate through product sales. All advanced royalties are amortized within the term of the license
agreement and are written off upon the abandonment of the product or upon the determination that there is significant
doubt as to the success of the product.
Expenses relating to product development are deferred and amortized on a straight line basis over the estimated useful
life of the products. Substantially all product development costs are amortized within one year of initial product shipment.
On an ongoing basis, management reviews the useful lives and carrying value of deferred product development costs
based on the projected sales and operating results of the related products. If the facts and circumstances suggest a
change in useful lives or an impairment in the carrying value, the useful lives are adjusted and any unamortized
costs are written off accordingly.
24
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31 December 1999
(g)
Fixed assets
(i)
Fixed assets are stated at cost less accumulated depreciation. Depreciation is calculated to write off the costs
of these assets on a straight line basis over their expected useful lives to the Group. The principal annual
rates used for this purpose are:Percent
Machinery and equipment
Office equipment, furniture and fixtures
Motor vehicles
Computer equipment
Computer software
20
15 to 20
20
25 to 33
20
The Group owns the moulds and tools used in the production of the Group’s products by third party manufacturers.
Substantially all moulds and tools expenditure is depreciated in full in the year of initial product shipment.
(ii)
Impairment of fixed assets
The carrying amounts of fixed assets are reviewed regularly to assess whether their recoverable amounts have
declined below their carrying amounts. When such a decline has occurred, their carrying amount is reduced
to their recoverable amount.
(iii) Gain or loss on disposal of fixed assets
The gain or loss on disposal of a fixed asset is the difference between the net sales proceeds and the carrying
amount of the relevant asset, and is recognized in the profit and loss account.
(iv) Restoration cost
Major costs incurred in restoring fixed assets to their normal working condition are charged to the profit and
loss account. Improvements are capitalized and depreciated over their expected useful lives to the Group.
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31 December 1999
1
PRINCIPAL ACCOUNTING POLICIES (CONT’D)
(h)
Investments in securities
(i)
Investment securities and investment securities reserve
Investment securities are stated at cost or, in the case of investments previously treated as investments in associated
companies or regarded as trading investments, at their carrying value at the date of change of classification,
less any provision for permanent diminution in value considered necessary by the directors.
The carrying value at the date of change was, in the case of investments previously held as investments in
associated companies, the carrying value on the equity basis of accounting at that date or, in the case of investments
previously held as trading investments, the lower of cost and market value at that date. Any excess in the
carrying value over cost at the date of change is carried as investment securities reserve. Profits or losses on
disposal of investment securities, representing the difference between the net sales proceeds and the carrying
amounts, are recognised in the profit and loss account as they arise. Decreases in valuation, due to additional
provisions or disposals, are charged against operating profits and a corresponding transfer is made between the
investment securities reserve and retained profits until this investment securities reserve is insufficient to cover
a deficit.
(ii)
Trading investments
Trading investments are carried at fair value. At each balance sheet date, the net unrealised gains or losses
arising from the changes in fair value of trading investments are recognised in the profit and loss account.
Profits or losses on disposal of trading investments, representing the difference between the net sales proceeds
and the carrying amounts, are recognised in the profit and loss account as they arise.
In prior years, trading investments were stated at the lower of cost and net realisable value. This represents
a change in accounting policy in order to comply with Statement of Standard Accounting Practice Number 24
issued by the Hong Kong Society of Accountants. The change in accounting policy does not have any effect
on the current year’s profit or retained earnings. The impact on the profits of prior years is immaterial and
accordingly the comparatives have not been restated.
(iii) Held-to-maturity securities
Held-to-maturity securities are stated in the balance sheet at cost plus/less any discount/premium amortised to
date. The discount or premium is amortised over the period to maturity and included as interest income/expense
in the profit and loss account. Provision is made when there is a diminution in value.
The carrying amounts of held-to-maturity securities are reviewed at the balance sheet date in order to assess
the credit risk and whether the carrying amounts are expected to be recovered. Provisions are made when carrying
amounts are not expected to be recovered and are recognised in the profit and loss account.
26
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31 December 1999
(i)
Inventories
Inventories are stated at the lower of cost and net realisable value. Cost is determined on a weighted average basis.
Net realisable value is determined on the basis of anticipated sales proceeds less estimated selling expenses.
(j)
Accounts receivable
Provision is made against accounts receivable to the extent which they are considered to be doubtful. Accounts receivable
in the balance sheet is stated net of such provision.
(k)
Operating leases
Operating leases are leases where substantially all the rewards and risks of ownership of assets remain with the lessors.
Related rental payments are charged to the profit and loss account on a straight line basis over the lease term.
(l)
Translation of foreign currencies
Transactions in foreign currencies are translated at exchange rates ruling at the transaction dates. Monetary assets and
liabilities expressed in foreign currencies at the balance sheet date are translated at rates of exchange ruling at the
balance sheet date. Exchange differences arising in these cases are dealt with in the profit and loss account.
The accounts of subsidiaries expressed in foreign currencies are translated at the rates of exchange ruling at the balance
sheet date. Exchange differences are dealt with as a movement in exchange fluctuation reserve.
(m) Retirement benefits
The Group operates defined contribution provident fund schemes for its employees, the assets of which are held separately
from those of the Group in independently administered funds. The Group’s contributions under the scheme are charged
to the profit and loss account as incurred. The amount of the Group’s contributions is based on specified percentages
of the basic salaries of employees. Any contributions forfeited by employees who leave, relating to unvested benefits,
are used to reduce the Group’s ongoing contributions otherwise payable.
(n)
Borrowing costs
Borrowing costs are charged to the profit and loss account in the year in which they are incurred.
(o)
Comparative figures
Due to the adoption of the revised SSAP 1 and SSAP 2 during the current year, the presentation of the Group’s
profit and loss account have been revised to comply with the new disclosure requirements. Accordingly, certain comparative
figures have been reclassified to conform with the current year’s presentation.
27
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31 December 1999
2
TURNOVER AND REVENUES
The group is principally engaged in the design, development, marketing and distribution of toys. Revenues recognised during
the year are as follows:–
1999
1998
HK$’000
HK$’000
Turnover:
Sales of toys and video games
1,081,836
883,995
Other revenues:
Interest income
Dividend income
- Listed investments
- Unlisted investment
Total revenues
3
11,749
19,026
4,137
4
3,451
4
15,890
22,481
1,097,726
906,476
1999
HK$’000
1998
HK$’000
28,814
23,061
(9,510)
62,826
5,917
65,539
17,079
642
17,721
16,766
728
17,494
2,035
193
2,228
2,208
290
2,498
2,286
262
279
631
OPERATING PROFIT / (LOSS)
The operating profit / (loss) is stated after charging and crediting the following:-
Charging:
Depreciation of fixed assets
Staff costs
- (Reversal of) / provision for discretionary bonus
- Others
Operating lease expenses
- Office and warehouse facilities
- Hire of equipment
Auditors’ remuneration
- Current year
- Under provision in previous year
Crediting:
Net exchange gain
Gain on disposal of fixed assets
28
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31 December 1999
4
INTEREST EXPENSE AND BANK CHARGES
Interest on bank loans and overdrafts
Factoring charges
5
1998
HK$’000
8,786
5,766
14,253
3,789
14,552
18,042
1999
HK$’000
1998
HK$’000
8,908
2,841
4,141
(6,664)
–
12,000
7,026
3,455
–
72
9,226
22,553
1999
HK$’000
1998
HK$’000
(1,636)
(22,692)
(890)
(3,508)
–
(835)
OTHER INCOME, NET OF EXPENSES
Interest income from bank deposits
Interest income from debt securities
Dividend income
Net realised loss on disposal of investment and other securities
Net realised gain on disposal of equity securities
6
1999
HK$’000
TAXATION (CHARGE) / CREDIT
(a)
The taxation (charge)/credit in the consolidated profit and loss account comprises:-
Hong Kong profits tax
Current year
Prior years (note i)
Transferred to deferred taxation account
(25,218)
(4,343)
Overseas taxation
Current year
Prior years (note ii)
Transferred to deferred taxation account
(375)
(5,629)
–
3,618
22,604
(7,440)
Share of taxation attributable to an associated company
(6,004)
(2,388)
18,782
(1,683)
(33,610)
12,756
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31 December 1999
6
TAXATION (CHARGE) / CREDIT (CONT’D)
Hong Kong profits tax represents the amount provided at the rate of 16% (1998: 16%) on the estimated assessable profit
for current year. Overseas taxation is provided on the profits/losses of the overseas subsidiaries and branch in accordance
with the tax laws of the countries in which these entities operate.
(i)
The group’s offshore income claims for the seven years ended 31 December 1998 had been subject to review by the
Hong Kong Inland Revenue Department (“IRD”). The review was finalized in February 2000. Following this, the
IRD issued an agreed assessment for additional tax and interest aggregating approximately HK$23.5 million which
has been charged to the profit and loss account for the year ended 31 December 1999.
(ii)
For the year ended 31 December 1998, the overseas taxation credit for prior years primarily represents tax refund
received in respect of prior years.
(b)
The movements in the deferred taxation account are as follows:-
Balance at 1 January
Hong Kong
Overseas
Transferred to profit and loss account
Hong Kong
Overseas
Balance at 31 December
Hong Kong
Overseas
30
1999
HK$’000
1998
HK$’000
990
–
1,825
7,440
990
9,265
(890)
–
(835)
(7,440)
(890)
(8,275)
100
–
990
–
100
990
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31 December 1999
(c)
Details of the full potential net deferred tax asset and of the amounts of deferred tax recognised in the accounts
are as follows:1998
1999
Differences in depreciation allowances
Other timing differences
– overseas assessable losses carry forward
– others
7
Full
potential
asset
HK$’000
Amount
recognised
HK$’000
Full
potential
asset
HK$’000
Amount
recognised
HK$’000
(115)
–
(358)
–
77,014
64,045
–
100
68,393
54,342
–
990
141,059
100
122,735
990
140,944
100
122,377
990
PROFIT / (LOSS) ATTRIBUTABLE TO SHAREHOLDERS
Included in the profit attributable to shareholders of HK$5,994,000 (1998: loss of HK$17,773,000) is a loss of HK$83,732,000
(1998: loss of HK$71,718,000) which is dealt with in the Company’s own accounts.
8
DIVIDENDS
1998
1999
HK$ per share
Interim
Proposed final
Proposed special
9
HK$’000 HK$ per share
HK$’000
–
0.06
0.25
–
39,912
166,302
0.03
0.03
–
19,832
19,832
–
0.31
206,214
0.06
39,664
EARNINGS / (LOSS) PER SHARE
The calculation of earnings per share is based on the Group’s profit attributable to shareholders of HK$5,994,000 (1998:
loss of HK$17,773,000) and the number of shares in issue of 661,065,673 (1998: 661,065,673) shares during the year.
The options in shares of the Company do not result in a dilution effect on the earnings/loss per share in respect of the
years ended 31 December 1999 and 1998.
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31 December 1999
10
EMOLUMENTS OF THE DIRECTORS AND THE FIVE HIGHEST PAID EMPLOYEES
The emoluments of the directors and the five highest paid employees have been included in staff costs disclosed in note
3 to the accounts.
(a)
Directors’ emoluments
The aggregate amounts of the directors’ emoluments are as follows:-
Fees
Basic salaries, housing allowances, other allowances and benefits in kind
Discretionary bonuses
Pension contributions
1999
HK$’000
1998
HK$’000
160
4,749
–
95
160
4,369
1,880
131
5,004
6,540
Directors’ fees include HK$160,000 (1998: HK$160,000) payable to non-executive directors.
The numbers of directors whose emoluments for the year fell within the designated bands are as follows:Number of directors
1998
1999
HK$
Up to 1,000,000
1,000,001 - 1,500,000
1,500,001 - 2,000,000
2,000,001 - 2,500,000
3,000,001 - 3,500,000
7
1
–
1
–
4
1
1
–
1
No director waived emoluments in respect of the years ended 31 December 1999 and 1998.
Pursuant to the Company’s Share Option Plan, the Company has granted share options to the directors. Details of
the share options held by the directors are set out on page 14 in the Report of the Directors.
32
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31 December 1999
(b)
Five highest paid employees’ emoluments
Among the five top-paid employees, one (1998: one) is an executive director whose remuneration is disclosed above.
The total remuneration of the other four (1998: four) highest paid employees, disclosed pursuant to the Listing Rules
of The Stock Exchange of Hong Kong Limited, is as follows:-
Basic salaries, housing allowances, other allowances and benefits in kind
Pension contributions
Discretionary bonuses
1999
HK$’000
1998
HK$’000
8,434
232
–
7,915
66
1,160
8,666
9,141
The emoluments of these highest paid employees fell within the following bands:Number of employees
1998
1999
HK$
1,500,001 - 2,000,000
2,000,001 - 2,500,000
2,500,001 - 3,000,000
2
1
1
2
–
2
33
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31 December 1999
11
FIXED ASSETS - GROUP
Office
equipment,
Machinery
furniture
and
and
equipment
fixtures
Moulds
and
tools
Motor Computer Computer
vehicles equipment software
HK$’000
HK$’000
HK$’000
HK$’000
HK$’000
HK$’000
Total
HK$’000
At 1 January 1999
Exchange movement
Additions
Disposals
1,864
(10)
9
(126)
35,871
59
2,227
(1,122)
307,664
–
17,232
–
4,959
98
217
(544)
17,265
(21)
3,019
(1,187)
–
–
17,482
–
367,623
126
40,186
(2,979)
At 31 December 1999
1,737
37,035
324,896
4,730
19,076
17,482
404,956
At 1 January 1999
Exchange movement
Charge for the year
Disposals
1,743
(8)
60
(126)
18,519
(2)
5,953
(1,077)
307,664
–
17,232
–
3,179
38
370
(482)
12,929
(32)
3,268
(1,187)
–
–
1,931
–
344,034
(4)
28,814
(2,872)
At 31 December 1999
1,669
23,393
324,896
3,105
14,978
1,931
369,972
Net book value at
31 December 1999
68
13,642
–
1,625
4,098
15,551
34,984
Net book value at
31 December 1998
121
17,352
–
1,780
4,336
–
23,589
Cost
Accumulated depreciation
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31 December 1999
12
INVESTMENT IN SUBSIDIARIES
Unlisted shares
At cost
At directors’ estimate of fair value on acquisition
Less : Provision for permanent diminution in value
Amounts due from subsidiaries
Amounts due to subsidiaries
1999
HK$’000
1998
HK$’000
13,026
530,865
10,702
530,865
543,891
541,567
(295,685)
(199,155)
248,206
342,412
280,814
(195,610)
306,950
(182,617)
333,410
466,745
The amounts due from or to subsidiaries are unsecured, interest free and have no fixed terms of repayment.
35
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31 December 1999
12
INVESTMENT IN SUBSIDIARIES (CONT’D)
Details of the principal subsidiaries of the Company as at 31 December 1999 are as follows:Country/
place of
incorporation
Total issued and
fully paid shares
Playmates Asia
Services Limited
The British
Virgin Islands
1 share of
US$1
100
Provision of services,
based in Hong Kong.
Playmates Toys
(Hong Kong) Limited
Hong Kong
1,000 ordinary
shares of HK$10
each
100
Toys product engineering,
development, marketing
and sales, based in Hong
Kong and Macau.
Playmates Inc.
U.S.A.
30,000,000
common stock of
US$0.01 each
100
Investment holding of
subsidiaries operating
in the U.S.A.
Playmates Toys
(U.K.) Limited
U.K.
250,000 ordinary
shares of £1
each
100
Toys sales and distribution
in the U.K.
Profit Point Limited
The British
Virgin Islands
1 ordinary share
of US$1
100
Portfolio investments in
Hong Kong.
Playmates Toys
Limited
The British
Virgin Islands
100 ordinary
shares of US$1
each
100
Investments holding in
Hong Kong.
Playmates Toys Inc.
U.S.A.
120,000
common stock of
US$30 each
100
Toys development,
marketing and distribution
in the U.S.A.
Next Electronix Inc.
(formerly known as
Playmates Interactive
Entertainment Inc.)
U.S.A.
80 shares of
US$100 each
and
199,920 shares
of US$0.01 each
100
Electronics toys
development, sales and
distribution in and outside
the U.S.A.
Regarding Play Inc.
U.S.A.
200,000 shares
of US$0.01 each
90
Toys development,
marketing and distribution
in the U.S.A.
Name of company
Effective
percentage
holding
Nature of business and
place of operation
Shares held directly :-
Shares held indirectly :-
The above table includes the subsidiaries of the Company which, in the opinion of the directors, principally affected the
results of the year or formed a substantial portion of the net assets of the group. To give details of other subsidiaries
would, in the opinion of the directors, result in particulars of excessive length.
36
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31 December 1999
13
INVESTMENT IN AN ASSOCIATED COMPANY - GROUP
As at 31 December 1999, the Group held interests in the following associated company:-
Name of company
Place of incorporation
Shares
Held directly %
Unimax Holdings Limited (“Unimax”)
The British Virgin Islands
Ordinary shares
49
Analysis of the Group’s interest in the associated company:1999
HK$’000
1998
HK$’000
Share of net assets
27,683
26,085
Investment at cost, unlisted shares
18,077
18,077
Unimax is an investment holding company whose subsidiaries are principally engaged in the design and marketing of preschool toys and dolls.
37
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31 December 1999
14
INVESTMENT IN SECURITIES - GROUP
(a)
Investment securities
1999
HK$’000
1998
HK$’000
224,805
235,960
49,868
49,868
–
70,000
Provision
274,673
(11,266)
355,828
(11,825)
Unlisted shares, at cost
263,407
50
344,003
50
263,457
344,053
85,224
136,773
1,208,600
86,158
Listed equity securities in Hong Kong
– at carrying value on the equity basis of accounting at the date the
investment ceased to be an associated company (note (i))
– at carrying value when other investment was reclassified as
investment securities (note (ii))
Listed bonds in Hong Kong
– at cost
Market value of listed shares
– as at 31 December (note (iii))
– as at the date of approval of accounts (note (iii))
(i)
At 31 December 1999, the Group held 244,900,000 (1998 : 257,052,000) ordinary shares in Harbour Ring
International Holdings Limited (“HRIH”), which is incorporated in Bermuda, representing 14.17% (1998 : 14.87%)
of HRIH’s issued share capital. Subsequent to 31 December 1999, the share capital of HRIH has undergone
a restructuring, resulting in a dilution in the Group’s shareholdings in HRIH to approximately 4.3% of its
enlarged capital. The amount of the Group’s holding in HRIH exceeded 10% of the total assets of the Group.
(ii)
At 31 December 1999, the Group held 34,156,338 (1998 : 34,156,338) shares of Prestige Properties Holdings
Limited (“PPHL”) representing 5.1% (1998 : 5.1%) of the total issued shares of that company. PPHL and the
Company have a common major shareholder. In March 2000, PPHL has conditionally agreed to place additional
shares to independent investors. Upon completion of the placing, there will be a dilution in the Group’s shareholdings
in PPHL to approximately 4.3%.
(iii) The investments in listed securities are intended to be held for the long term. Consequently the directors believe
that the underlying net asset values of the investments are a better basis than market value for determining
whether permanent diminution in value has arisen.
38
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31 December 1999
(b)
Other investments
Equity securities listed in Hong Kong
Held-to-maturity securities listed outside Hong Kong, at cost
Market value as at 31 December
15
1999
HK$’000
1998
HK$’000
169
–
216
11,552
169
11,768
169
11,231
INVENTORIES - GROUP
At 31 December 1999, the amount of inventories that are carried at net realisable value amounted to HK$5,437,000 (1998:
HK$16,706,000).
16
TRADE RECEIVABLES - GROUP
As at 31 December 1999, trade receivables of the subsidiaries in the U.S.A. totalling HK$355,258,000 (1998: HK$201,305,000)
were pledged to financial institutions in return for the provision of credit facilities. The financial institutions assume the
credit risk associated with the trade receivables so pledged (note 21).
39
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31 December 1999
17
SHARE CAPITAL
Authorised
1,500,000,000 shares of HK$0.10 each
Issued and fully paid
661,065,673 (1998: 661,065,673) shares of HK$0.10 each
1999
HK$’000
1998
HK$’000
150,000
150,000
66,107
66,107
Details of the share options granted pursuant to the Share Option Plan of the Company are as follows:Number of options
Date of Grant
Exercise
Price
Balance at
beginning
of year
Granted
during the
year
Exercised
during the
year
Lapsed
during the
year
Balance
at end of
year
HK$
15 May 1998
0.5860
29,140,000
–
–
3,100,000
26,040,000
26 Aug 1998
0.5860
2,000,000
–
–
1,200,000
800,000
27 May 1999
0.5580
–
9,100,000
–
470,000
8,630,000
17 August 1999
0.4620
–
7,500,000
–
–
7,500,000
20 October 1999
0.4780
–
4,750,000
–
–
4,750,000
31,140,000
21,350,000
–
4,770,000
47,720,000
The options are exercisable in stages in accordance with the terms of the Share Option Plan within ten years from their
date of granting.
Additionally, pursuant to a Merchandising License Agreement (the “Agreement”) entered into between Playmates Inc., an
U.S. subsidiary of the Company, and an independent third party licensor (the “Grantee”), an option to acquire shares in
the Company has been granted to the Grantee. According to the Agreement, the Company granted an option to the Grantee
for the acquisition of 19,831,970 shares at a price of HK$0.7683 per share exercisable between 27 March 1998 and the
expiry date of the term of the Agreement at 31 December 1999. The option lapsed without being exercised.
40
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31 December 1999
18
RESERVES
(a)
The Group
Share
premium
account
HK$’000
Capital
redemption
reserve
HK$’000
Reserve
on
consolidation
HK$’000
Investment
securities
reserve
HK$’000
Exchange
fluctuation
reserve
HK$’000
Retained
profits
HK$’000
HK$’000
At 1 January 1998
Exchange loss on translation
of accounts of foreign
subsidiaries
Loss for the year
Dividends
Deficit on revaluation of
the Group’s long term
investments (Note 14 (a))
5,397
347
20,964
158,602
(24,546)
426,323
587,087
–
–
–
–
–
–
–
–
–
–
–
–
(2,713)
–
–
–
(18,266)
(39,664)
–
–
–
(11,825)
–
11,825
–
At 1 January 1999
Exchange loss on translation
of accounts of foreign
subsidiaries
Profit for the year
Dividends
Release upon the Group’s
disposal of investment
securities
5,397
347
20,964
146,777
(27,259)
380,218
526,444
–
–
–
–
–
–
–
–
–
–
–
–
(4,579)
–
–
–
4,396
(206,214)
–
–
–
(6,939)
–
6,939
–
At 31 December 1999
5,397
347
20,964
185,339
320,047
Total
(i) The Company and
its subsidiaries
139,838
(31,838)
(2,713)
(18,266)
(39,664)
(4,579)
4,396
(206,214)
41
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31 December 1999
18
RESERVES (CONT’D)
Share
premium
account
HK$’000
Capital
redemption
reserve
HK$’000
Reserve
on
consolidation
HK$’000
Investment
securities
reserve
HK$’000
Exchange
fluctuation
reserve
HK$’000
Retained
profits
HK$’000
HK$’000
–
–
–
–
16
12,462
12,478
–
–
–
–
–
493
493
Total
(ii) Associated company
Share of post-acquisition reserves
At 1 January 1998
Share of profit for the year
less dividend
At 1 January 1999
Share of profit for the year
less dividend
–
–
–
–
16
12,955
12,971
–
–
–
–
–
1,598
1,598
At 31 December 1999
–
–
–
–
16
14,553
14,569
At 31 December 1999
5,397
347
20,964
139,838
(31,822)
199,892
334,616
At 1 January 1999
5,397
347
20,964
146,777
(27,243)
393,173
539,415
(i) and (ii) The Group
The share premium of HK$5,397,000 arose upon the combination of the company and a then fellow subsidiary, accounted
for as a merge pursuant to a group restructuring in 1993.
(b)
The Company
Share
premium
account
HK$’000
Capital
redemption
reserve
HK$’000
Contributed
surplus
HK$’000
Retained
profits
HK$’000
Total
HK$’000
At 1 January 1998
Profit for the year
Dividends
3,541
–
–
347
–
–
171,750
–
–
256,680
71,718
(39,664)
432,318
71,718
(39,664)
At 1 January 1999
Loss for the year
Dividends
3,541
–
–
347
–
–
171,750
–
(166,302)
288,734
(83,732)
(39,912)
464,372
(83,732)
(206,214)
At 31 December 1999
3,541
347
5,448
165,090
174,426
42
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31 December 1999
(c)
Distributable reserves
The reserves of the Company available for dividend or distribution comprised the following:-
Contributed surplus
Retained profits
1999
HK$’000
1998
HK$’000
5,448
165,090
171,750
288,734
170,538
460,484
Contributed surplus in the amount of HK$171,750,000 arose on the merger, in 1993, of a then fellow subsidiary
with the Company. The amount represents the excess of the consolidated net asset value of the then fellow subsidiary
over the nominal value of the Company’s shares issued in exchange therefor and is distributable subject to and in
accordance with The Companies Act 1981 of Bermuda. In 1999, a special dividend of HK$166,302,000 was distributed
from the contributed surplus account, reducing it to HK$5,448,000.
(d)
Investment securities reserve
The investment securities reserve represents the difference between the cost and the carrying value when certain long
term investee companies, previously treated as associated companies, were reclassified to other investments. This includes
the Group’s attributable share of those companies’ reserves, including retained profits less accumulated losses, less subsequent
provisions.
43
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31 December 1999
19
NOTES TO THE CONSOLIDATED CASH FLOW STATEMENT
(a)
(b)
Reconciliation of operating profit/(loss) to net cash (outflow)/inflow from operating activities
18,468
–
(11,749)
8,786
(4,141)
28,814
(262)
6,664
–
62,622
(38,585)
11,825
(19,026)
14,253
(3,455)
23,061
(631)
–
(72)
(18,346)
(240,701)
(10,508)
377,210
(133,769)
Net cash (outflow) / inflow from operating activities
(142,007)
212,465
1999
HK$’000
1998
HK$’000
336,251
(334,149)
249,702
(144,845)
2,102
104,857
Analysis of cash and cash equivalents
CONTINGENT LIABILITIES
(a)
The Company has executed guarantees amounting to approximately HK$592 million (1998: HK$513 million) with
respect to banking facilities made available to subsidiaries. As at 31 December 1999, the borrowings outstanding against
the facilities amounted to HK$338 million (1998: HK$154 million).
(b)
The Internal Revenue Services (“IRS”) of the United States of America has commenced a review of the US subsidiary
companies’ income tax affairs, including transfer pricing and other matters, for the years of 1996 and 1997. The
review conducted by the IRS is presently ongoing. It is too early to assess the likely outcome of the review and
is, therefore, not practicable to assess whether any additional tax assessment might arise. Hence, no provision has
been made in the accounts in respect of this event, taking into account the legal advice received.
44
1998
HK$’000
Operating profit / (loss)
Provision for diminution in value of investment securities
Interest income
Interest on bank loans and overdrafts
Dividends received from investments
Depreciation
Gain on disposal of fixed assets
Net realised loss on disposal of investment and other securities
Net realised gain on disposal of equity securities
Decrease/(increase) in inventories
(Increase)/decrease in trade receivables,
other receivables, deposits and prepayments
Decrease in trade payables, other payables and accrued charges
Notes payable to banks
20
1999
HK$’000
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31 December 1999
21
BANKING AND OTHER FACILITIES
The inventories and the trade receivables of the subsidiaries in the U.S.A. amounting to HK$356 million (1998 : HK$269
million) and bank balance of a subsidiary in Hong Kong amounting to HK$66 million (1998 : nil) have been pledged
to financial institutions as security for the credit facilities provided to the respective subsidiaries. Total facilities utilised
as at the balance sheet date amounted to HK$296 million (1998: HK$124 million).
22
COMMITMENTS
As at 31 December 1999, the Group had the following commitments:(a)
Capital commitments
Contracted but not provided for
(b)
1999
HK$’000
1998
HK$’000
–
7,684
Licensing commitments
In the normal course of business, the Group enters into contractual licensing agreements to secure its rights to create,
develop and market certain toys and video games products for future sales. Certain licensing agreements contain financial
commitment by the Group to the licensors to be fulfilled during the terms of contract. The amount of financial
commitment contracted but not provided for at the end of the year were payable as follows:–
Within one year
More than one year but not exceeding two years
More than two years but not exceeding five years
1999
HK$’000
1998
HK$’000
5,553
1,511
–
9,817
2,705
5,706
7,064
18,228
45
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31 December 1999
22
COMMITMENTS (CONT’D)
(c)
Lease commitments
Commitments in respect of operating leases for office and warehouse facilities to make payments in the next year
are as follows:-
Expiring within one year
Expiring after one year but within five years
Expiring over five years
23
1999
HK$’000
1998
HK$’000
668
8,808
3,092
1,141
14,799
3,060
12,568
19,000
RELATED PARTY TRANSACTIONS
During the year, the Group leased office premises and a storeroom for its own occupation from subsidiaries of Prestige
Properties Holdings Limited (“PPHL”) in the normal course of business. The gross rent paid during the year amounted
to HK$5,619,000 (1998: HK$4,733,000), being at fair market rent . The Company and PPHL are related parties by reason
of their being held by a common major shareholder. As at 31 December 1999, the Group held 34,156,338 shares of PPHL
representing 5.1% of the total issued shares.
24
RETIREMENT BENEFIT SCHEMES
The Group maintains defined contribution retirement benefit schemes for its employees in its Hong Kong and overseas subsidiaries.
The schemes require the contribution of the same amount by the Group and its employees at various funding rates up
to a maximum of 15% of the monthly salary and in accordance with the terms stipulated in the relevant scheme. The
Group’s contributions charged to the profit and loss account for 1999 were HK$3,240,000 (1998: HK$3,078,000). In Hong
Kong, any forfeited Group contributions relating to employees who leave the scheme prior to such contributions vesting
fully are used to reduce future contributions. The forfeited contributions utilised by the Group in 1999 amounted to HK$127,000
(1998: HK$416,000).
25
US DOLLAR EQUIVALENTS
These are shown for reference only and have been arrived at based on the exchange rate of HK$7.75 to US$1.00 ruling
at 31 December 1999.
26
APPROVAL OF ACCOUNTS
The accounts were approved by the Board of Directors on 23 March 2000.
46
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Comparative Table of Results, Assets and Liabilities
The following table summarises the results, assets and liabilities of the Group for each of the five years ended 31 December:–
1995
HK$’000
1996
HK$’000
1997
HK$’000
1998
HK$’000
1999
HK$’000
1,118,946
1,218,505
1,525,501
883,995
1,081,836
4,082
65,330
(129,499)
(38,585)
18,468
Share of profits/(losses) of
associated companies
(102,039)
10,695
11,378
8,056
21,134
Profit/(loss) before taxation
(97,957)
76,025
(118,121)
(30,529)
39,602
(23)
(22,385)
4,291
12,756
(33,610)
(97,980)
53,640
(113,830)
(17,773)
5,992
383
–
–
–
2
(97,597)
53,640
(113,830)
(17,773)
5,994
1,345,531
1,530,005
1,504,909
1,042,224
1,213,423
Total liabilities
507,385
693,528
839,237
436,702
812,700
Net assets
838,146
836,477
665,672
605,522
400,723
Turnover
Profit/(loss) from ordinary activities
Taxation (charge)/credit
Profit/(loss) before minority interests
Minority interests
Profit/(loss) attributable
to shareholders
Total assets
47
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Notice of Annual General Meeting
NOTICE IS HEREBY GIVEN that the Annual General Meeting of the Company will be held at the Ballroom, 2nd floor, Great
Eagle Hotel, 8 Peking Road, Tsimshatsui, Kowloon on Friday, 12 May 2000 at 12:15 p.m. for the following purposes:–
1.
To receive and consider the accounts and the reports of the directors and auditors for the year ended 31 December 1999;
2.
To declare a final dividend and a special dividend;
3.
To re-elect directors;
4.
To fix the ordinary remuneration of the directors;
5.
To appoint auditors and to authorise the board of directors to fix their remuneration; and
6.
As special business to consider and, if thought fit, pass the following resolutions as Ordinary Resolutions and Special Resolution:–
ORDINARY RESOLUTIONS
A.
“THAT the maximum number of directors of the Company for the time being be fixed at twenty and that the directors
of the Company be authorised to fill any vacancies on the board and to appoint additional directors up to such maximum
number in addition to those in office at the close of this meeting.”
B.
“THAT:–
(a)
the exercise by the directors of the Company during the Relevant Period (as defined below) of all the powers
of the Company to repurchase shares of HK$0.10 each in the capital of the Company, subject to paragraph
(b) below, be and is hereby generally and unconditionally approved;
(b)
the aggregate number of the shares of the Company which may be repurchased by the Company on The Stock
Exchange of Hong Kong Limited or any other stock exchange recognised for this purpose by the Securities
and Futures Commission of Hong Kong and The Stock Exchange of Hong Kong Limited under the Hong Kong
Code on Share Repurchases pursuant to the approval in paragraph (a) above shall not exceed 10 per cent. of
the issued share capital of the Company on the date of passing this Resolution and the said approval shall
be limited accordingly; and
(c)
for the purposes of this Resolution:–
“Relevant Period” means the period from the passing of this Resolution until whichever is the earlier of:–
48
(i)
the conclusion of the next annual general meeting of the Company; or
(ii)
the expiration of the period within which the next annual general meeting of the Company is required
by the Companies Act 1981 of Bermuda or the Company’s bye-laws to be held; or
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(iii) the date on which the authority given under this Resolution is revoked or varied by an ordinary resolution
of the shareholders of the Company in general meeting.”
C.
“THAT:–
the granting of an unconditional general mandate to the directors of the Company to issue, allot and deal with unissued
shares in the capital of the Company, and to make or grant offers, agreements and options or other rights, and issue
warrants and other securities, which would or might require the exercise of such power, subject to the following
conditions, be and is hereby generally and unconditionally approved:–
(a)
such mandate shall not extend beyond the Relevant Period (as defined below) save that the directors of the
Company may during the Relevant Period make or grant offers, agreements and options or other rights, and
issue warrants and other securities, which would or might require the exercise of such powers after the expiry
of the Relevant Period;
(b)
the aggregate number of shares allotted or agreed conditionally or unconditionally to be allotted or issued or
dealt with (whether pursuant to an option or otherwise) by the directors of the Company pursuant to the mandate
granted under this Resolution otherwise than pursuant to (i) a Rights Issue (as defined below); (ii) any share
option plan or similar arrangement of the Company for the time being adopted for the grant or issue to officers
and/or employees of the Company and/or any of its subsidiaries of shares or rights to acquire shares of the
Company; and (iii) any scrip dividend or similar arrangement providing for the allotment of shares in lieu of
the whole or part of a dividend on shares of the Company in accordance with the bye-laws of the Company,
shall not exceed 20 per cent. of the issued share capital of the Company as at the date of passing this Resolution,
and the said approval under this Resolution shall be limited accordingly; and
(c)
for the purposes of this Resolution:–
“Relevant Period” means the period from the passing of this Resolution until whichever is the earlier of:–
(i)
the conclusion of the next annual general meeting of the Company; or
(ii)
the expiration of the period within which the next annual general meeting of the Company is required
by the bye-laws of the Company or the Companies Act 1981 of Bermuda to be held; or
(iii) the date on which the authority given under this Resolution is revoked or varied by an ordinary resolution
of the shareholders of the Company in general meeting; and
“Rights Issue” means an offer of shares open for a period fixed by the directors of the Company made to holders
of shares on the register of members of the Company on a fixed record date in proportion to their then holdings
of such shares (subject to such exclusions or other arrangements as the directors of the Company may deem
necessary or expedient in relation to fractional entitlements or having regard to any restrictions or obligations
under the laws of, or the requirements of, any recognised regulatory body or any stock exchange in, or in
any territory outside, Hong Kong).”
49
Pl
ay
m
at
es
Pla
ym
ate
s
D.
“THAT, conditional upon the passing of Resolution No. 6B set out in the notice convening this meeting, the general
mandate granted to the directors of the Company to exercise the powers of the Company to allot shares pursuant
to Resolution No. 6C set out in the notice convening this meeting be and is hereby extended by the addition to
the aggregate number of the shares which may be allotted or agreed conditionally or unconditionally to be allotted
by the directors of the Company pursuant to such general mandate, of an aggregate number of shares of the Company
repurchased by the Company under the authority granted pursuant to Resolution No. 6B set out in the notice convening
this meeting, provided that such number shall not exceed 10 per cent. of the issued share capital of the Company
as at the date of passing this Resolution.”
SPECIAL RESOLUTION
E.
“THAT, the name of the Company be changed from “Playmates Toys Holdings Limited” to “Playmates Interactive Entertainment
Limited.”
By Order of the Board
Tracy Fong
Secretary
Notes:
50
(1)
Every member of the Company entitled to attend and vote at the Meeting is entitled to appoint one or more proxies
to attend and vote instead of him. A proxy need not be a member of the Company.
(2)
In order to be valid, the form of proxy, together with any power of attorney or other authority (if any) under which it
is signed, or a certified copy of such power or authority, must be delivered to the Company’s principal office in Hong
Kong at 21/F., 100 Canton Road, Tsimshatsui, Kowloon, Hong Kong not less than 48 hours before the time appointed
for holding the Meeting.
(3)
The register of members of the Company will be closed from 3 May 2000 to 12 May 2000, both days inclusive, during
which period no transfer of shares of the Company will be effected. In order to qualify for the final dividend and special
dividend, all transfers accompanied by the relevant share certificates must be lodged with the Company’s Branch Registrars,
Abacus Share Registrars Limited at 2401 Prince’s Building, Central, Hong Kong not later than 4:00 p.m. on Tuesday, 2
May 2000.

Playmates Interactive Entertainment Limited

Transcription

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