IMPORTANT If you are in any doubt about this document, you should obtain independent professional advice from your stockbroker, bank manager, solicitor, professional accountant or other professional advisor. PLAYMATES TOYS LIMITED 彩星玩具有限公司* (Incorporated in Bermuda with limited liability) INTRODUCTION OF THE ENTIRE ISSUED SHARE CAPITAL OF THE COMPANY ON THE MAIN BOARD OF THE STOCK EXCHANGE OF HONG KONG LIMITED Nominal Value : HK$0.01 each Stock code : 869 Sponsor WAG WORLDSEC CORPORATE FINANCE LIMITED The Stock Exchange of Hong Kong Limited, or Hong Kong Stock Exchange, and Hong Kong Securities Clearing Company Limited, or HKSCC, take no responsibility for the contents of this document, make no representation as to its accuracy or completeness and expressly disclaim any liability whatsoever for any loss howsoever arising from or in reliance upon the whole or any part of the contents of this document. This document is published in connection with the Introduction on the Hong Kong Stock Exchange of the Shares presently in issue and contains particulars given in compliance with the Securities and Futures (Stock Market Listing) Rules (Chapter 571V of the Laws of Hong Kong) and the Listing Rules solely for the purpose of giving information with regard to the Company and its subsidiaries. This document does not constitute an offer of, nor is it calculated to invite offers for, shares or other securities of the Company, nor have any such shares or other securities been allotted with a view to any of them being offered for sale to or subscription by the public. No new shares in the share capital of the Company will be allotted and issued in connection with, or pursuant to, this document. Information regarding the proposed arrangements for the listing of, and dealings and settlement of dealings in, the ordinary Shares following the Introduction is set out in the section entitled “Information about this Listing Document and the Introduction” in this document. * for identification purpose only 31 December 2007 EXPECTED TIMETABLE Last day of dealings in PHL Shares on a cum entitlement basis .........Friday, 18 January 2008 First day of dealings in PHL Shares on an ex entitlement basis ........Monday, 21 January 2008 Latest time for lodging transfers of the PHL Shares cum entitlement to the Shares pursuant to the Distribution ....................4:30 p.m. on Tuesday, 22 January 2008 Register of members of PHL closes from ...................... Wednesday, 23 January 2008 PHL SGM ..........................................................9:00 a.m. on Friday, 25 January 2008 Distribution Record Date ......................................Friday, 25 January 2008 Declaration of the distribution of a special interim dividend by PHL to be satisfied by way of distribution in specie of Shares to Qualifying PHL Shareholders .........................Friday, 25 January 2008 Announcement of PHL SGM results .............................Monday, 28 January 2008 Register of members of PHL opens on ...........................Monday, 28 January 2008 Shares certificates to be dispatched on ........................ Wednesday, 30 January 2008 Dealings in Shares on the Hong Kong Stock Exchange expected to commence on .............................................9:30 a.m. on Friday, 1 February 2008 Note: 1. All times refer to Hong Kong local time. 2. If the conditions referred to in the section headed “INFORMATION ABOUT THIS LISTING DOCUMENT AND THE INTRODUCTION – 9. CONDITIONS OF THE INTRODUCTION” are not fulfilled, the Introduction will lapse and the Stock Exchange will be notified immediately. We will cause notice of the lapse of the Introduction to be published by us in the South China Morning Post (in English) and the Hong Kong Economic Journal (in Chinese) on the next day following such lapse. In addition, if there is any revision to the above timetable, a separate announcement will be made by the Company. - i - TABLE OF CONTENTS The Company has not authorised anyone to provide you with information that is different from what is contained in this document. Any information or representations not made in this document must not be relied upon by you as having been authorised by the Company, the Sponsor, any of their respective directors or any other person or party involved in the Introduction. Page Expected Timetable ....................................................... i Summary ............................................................... 1 Definitions .............................................................. 15 Forward-looking Statements ................................................ 21 Risk Factors ............................................................ 22 Information about this Listing Document and the Introduction .................... 37 Directors and Parties Involved in the Introduction .............................. 40 Corporate Information .................................................... 42 Industry Overview........................................................ 44 History and Reorganization ................................................ 51 Business ................................................................ 56 Relationship with our Controlling Shareholders ................................ 82 Connected Transactions ................................................... 88 Directors and Senior Management ........................................... 93 Substantial Shareholders................................................... 104 Share Capital............................................................ 106 Financial Information ..................................................... 109 Future Plans and Strategies ................................................ 150 Reasons for the Introduction ............................................... 151 - ii - TABLE OF CONTENTS Appendices I Accountants’ Report............................................. I-1 II Property Valuation .............................................. II-1 III Summary of the Constitution of the Company and Bermuda Company Law ........................................ III-1 IV Statutory and General Information ................................. IV-1 V Documents Available for Inspection................................. V-1 - iii - SUMMARY This summary aims to give you an overview of the information contained in this document. As this is a summary, it does not contain all the information that may be important to you. You should read the entire document. 1. OVERVIEW We design, develop, market and distribute a diverse portfolio of innovative branded toys. We market and distribute our products in over 50 countries worldwide. Our current product categories consist of action figures, vehicles, dolls, feature plush, role play toys and interactive electronic toys. We develop a wide range of products in these categories by acquiring rights in entertainment properties (including brands) from third parties and by developing brands internally. We also acquire rights in patented technologies and inventions through Inventor Licenses for use in our products. Our products can be categorised generally into licensed brands and proprietary brands – licensed brands are products that are principally based on entertainment properties held by third parties which we acquired the rights to use through Entertainment Licenses; while proprietary brands are brands we develop internally. Our key licensed brands include the Teenage Mutant Ninja Turtles range of toys, the Disney Princess brand dolls and the Strawberry Shortcake dolls. Our proprietary brands include Amazing Dolls, WOW Pals, Struts and Playmates Electronics. Design activities undertaken by us are set out in the sections headed “BUSINESS – PRODUCT DEVELOPMENT” and “BUSINESS – SOURCING AND PRODUCTION”. The chart below summarises our product development work flow. Marketing Department (U.S.) Product Development Department & 3rd party (U.S./H.K.) Product Development Department & 3rd party (U.S./H.K.) The Group and contracted vendors (H.K./China) Contracted manufacturing vendors or 3rd paries (China) Contracted manufacturing vendors (China) 1. Vendor to Port to the Group 2. Vendor to Retailer Consolidator 3. Vendor to International Distributors Consolidator - 1 - SUMMARY Our product development involves in-house as well as external parties. Once in-house and external parties determine the design and specific requirements for our products, our Hong Kong and Shenzhen operations oversee their sourcing and production. These teams review the design and engineering of products for manufacturability and select contracted vendors or third parties with matching technical capabilities for production requirements and quality assurance. Finished goods are packaged and are shipped to our U.S. distribution centre or the point of delivery in the PRC or Hong Kong. We also intend to expand our product offerings into targeted growth categories such as arts and crafts, preschool and youth electronics. We believe our ability to build long-term brand franchises and to quickly bring innovative new products from concept to retail shelves is recognized by the trade community which we operate in, including licensors, retailers and distributors. We focus on building long-term brand franchises and creating innovative products. Our current major products include Teenage Mutant Ninja Turtles action figures, accessories and role play toys, Disney Princess brand large dolls and accessories and the Amazing brand interactive dolls. As an example of our long-term