Imagi International Holdings Limited Annual Report 2007/2008
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IMAGI INTERNATIONAL HOLDINGS LIMITED 意馬國際控股有限公司 * ANNUAL REPORT 2007/2008 年年報 * IMAGI INTERNATIONAL HOLDINGS LIMITED 意馬國際控股有限公司 STOCK CODE 股份代號 : 00585 ANNUAL REPORT 2007/2008 年年報 www.imagi.com.hk * For identifi cation only 僅供識別 Contents 2 Corporate Mission 3 Chairman’s Overview 4 Corporate Information 6 Chief Executive Officer’s Overview 12 Management Discussion And Analysis 19 Directors’ Profile 20 Senior Management’s Profile 23 Corporate Governance Report 28 Directors’ Report 37 Independent Auditor’s Report 39 Consolidated Income Statement 40 Consolidated Balance Sheet 42 Consolidated Statement Of Changes In Equity 43 Consolidated Cash Flow Statement 45 Notes To The Consolidated Financial Statements 96 Financial Summary Imagi International Holdings Limited Annual Report 2007/2008 Corporate Mission Our mission is to create a library of high-quality CG-animated feature films to entertain global audiences and build enduring brand franchises. 2 Chairman’s Overview Following on the success of Imagi’s first To achieve our goal, Imagi has recruited Kindergarten Cop). English-language voice theatrical release, TMNT (Teenage Mutant teams of the finest and most experienced talent includes Freddie Highmore, Nicolas Ninja Turtles), the company has been hard storytellers, creative executives, Cage, Donald Sutherland, Bill Nighy, at work producing our next two movies, animators and voice talent in the world. Nathan Lane and Eugene Levy. Astro Boy (scheduled for release in 2H-09) and Gatchaman (scheduled for release in For example, Astro Boy is directed by Imagi continues on its path to become 2H-10). As with TMNT, our objective has David Bowers (Flushed Away, Shark Tale, Asia’s first truly global film studio. On been to deliver world-class production Wallace & Gromit: The Curse of the Were- behalf of the board of directors and values in movies with universal appeal to Rabbit), produced by Maryann Garger management team, I would like to mass-market audiences around the globe. (Flushed Away, Madagascar, Spirit: Stallion thank our investors, strategic partners of the Cimarron), and written by Timothy and consumers for their support and Harris (Twins, Trading Places, Space Jam, encouragement. Kao Wai Ho, Francis Chairman 3 Imagi International Holdings Limited Annual Report 2007/2008 Corporate Information BOARD OF DIRECTORS QUALIFIED ACCOUNTANT Executive Directors Mr. TAM Wing Kin, Vincent Mr. KAO Wai Ho, Francis (Chairman and Chief Creative Officer) Mr. Douglas Esse GLEN (Chief Executive Officer) REGISTERED OFFICE Rosebank Centre Independent Non-Executive Directors 11 Bermudiana Road Mr. NG See Yuen Pembroke Mr. OH Kok Chi Bermuda AUDIT COMMITTEE HEAD OFFICE AND PRINCIPAL PLACE Mr. OH Kok Chi (Chairman) OF BUSINESS Mr. NG See Yuen 23rd Floor Eight Commercial Tower COMPANY SECRETARY 8 Sun Yip Street Mr. TAM Wing Kin, Vincent Chai Wan Hong Kong BERMUDA Resident representatiVE BERMUDA PRINCIPAL SHARE REGISTRAR AND Butterfield Fund Services (Bermuda) Limited TRANSFER OFFICE Butterfield Fund Services (Bermuda) Limited LEGAL ADVISORS Rosebank Centre As to Hong Kong law: 11 Bermudiana Road Kirkpatrick & Lockhart Preston Gates Ellis Pembroke Deacons Bermuda To, Lam & Co HONG KONG BRANCH SHARE REGISTRAR AND As to USA law: TRANSFER OFFICE Weissmann Wolff Bergman Coleman Grodin & Evall LLP Tricor Secretaries Limited Kaye Scholer LLP 26th Floor Tesbury Centre As to Bermuda law: 28 Queen’s Road East Conyers Dill & Pearman Hong Kong AUDITOR INTERNET WEBSITE Deloitte Touche Tohmatsu www.imagi.com.hk PRINCIPAL BANKERS The Hongkong and Shanghai Banking Corporation Limited Standard Chartered Bank (HK) Limited Credit Suisse City National Bank Imagi International Holdings Limited Annual Report 2007/2008 Chief Executive Officer’s Overview IMAGI has stayed tightly focused on five core strategies 6 During the past year, Imagi has stayed Where We Fit In The Feature Film tightly focused on five core strategies: (i) Business targeting feature animation, historically Imagi has focused on what we consider the most reliably profitable segment of the most financially attractive segment of the movie industry; (ii) producing world- feature films. class animation more efficiently than our U.S.-based competition; (iii) implementing Each year, there are approximately 600 distribution and marketing programs films distributed to major worldwide designed to optimize top- and bottom-line markets, comprising a US$50 billion performance; (iv) minimizing the inherent global industry. Within that US$50 risks of the feature film business in every billion, the top 25 films account for about way possible; and (v) building a sound three-quarters of the revenues and are financial foundation for the company’s consistently the most profitable. growth. 7 Imagi International Holdings Limited Annual Report 2007/2008 Chief Executive Officer’s Overview (continued) Among those top-performing films, the Why has CG animation consistently most consistently profitable have been outperformed the rest of the film computer graphics (CG) animation. industry? Scarcity is one factor. There Of the 49 CG-animated feature films are only a handful of quality CG-animated with budgets of US$70+ million (e.g. features released each year. Broad production values similar to Imagi’s Astro demographic appeal is another factor. Boy) released from 1997 to 2006, the CG animation attracts kids, teens, young average worldwide box office topped adults and parents more consistently US$340 million and gross profit topped than other genres. Superior entertainment US$325 million. In contrast, the average value is a third factor. CG animation is a gross profit of 1997-2007 action films fresh, visually exciting new cinematic art with similar budgets was just half that of form. CG animation. 8 Building A More Efficient Where we differ is in production Hollywood-Style Studio efficiency, which translates into more In some ways, Imagi is a traditional attractive margin structures than our U.S.- Hollywood movie studio. Like the other based competition. One big factor is our studios, our Los Angeles-based team Hong Kong CG production line, delivering of producers, directors, writers and world-class animation quality at a cost artists create mainstream mass-market substantially below that of its California entertainment for global audiences. counterparts. Another significant factor They work with our Los Angeles-based is Hong Kong-style overhead efficiency, marketing team to build movie-driven enabling Imagi to put a larger proportion consumer brands. In this regard, we are of our production budgets "on the screen" no different than other Hollywood studios. for consumers to enjoy. 9 Imagi International Holdings Limited Annual Report 2007/2008 Chief Executive Officer’s Overview (continued) Optimized Distribution And This enhanced distribution and marketing Imagi’s business model does much to Marketing Programs program underscores Imagi’s growth and mitigate many of the risks inherent in our For the release of TMNT, Imagi contracted maturation as a movie studio. With TMNT, industry. We work with proven "above the with Warner Bros. and The Weinstein the company demonstrated that it can line" creative talent – writers, producers Company for worldwide distribution and make films that compete successfully in and directors who have delivered marketing. The film was successfully global consumer markets. With Astro Boy, commercially successful pictures on a released, but the terms enabled little we will demonstrate that we can deliver consistent basis. We make films based of the upside potential of the film to go a level of financial performance that puts on characters and stories with proven to Imagi, and provided Imagi very little us on a par with, or even ahead of, our consumer appeal, such as Astro Boy control of the marketing efforts. competitors. and Teenage Mutant Ninja Turtles. We ally ourselves with marketing partners, In the case of Astro Boy, Imagi has Creative Risk Mitigation such as quick service restaurant chains, partnered with Summit Entertainment for Investing in films has not historically been soft drink brands and automotive distribution in most worldwide markets. a domain for the faint-hearted. Movies manufacturers, to reach out more The Summit-Imagi agreement provides for are big, chunky risks with a wide range effectively to consumers, and to leverage wide release in the key North American of possible outcomes. Even the biggest, our marketing budgets. market, considerable Imagi control over most established Hollywood studios have marketing and promotional programs, and sharply varying year-over-year results, Establishing A Solid Financial a much larger share of the rewards to be often driven by one or two big successes Foundation retained by Imagi. or disappointments. Astro Boy marks Imagi’s evolution to a business model that is similar to that of DreamWorks Animation, or of Pixar prior to its merger with Disney. Astro Boy also marks Imagi’s first real opportunity for significant financial success, if the film performs anywhere near the historical average of peer movies. 10 The first cash flows from Astro Boy will Thanks to Imagi’s production efficiencies, arrive near Imagi’s 10th birthday as low overhead and favorable distribution a company. While that seems like a economics, our films become financially long wait, it’s reflective of the patience successful at box office levels of less required to perfect a CG feature animation than half the average of comparable production line. It is worth noting that competitive