PLAYMATES Toys Holdings is to change its relationship with toy maker Harbour Ring International Holdings from an investment in an associate company to that of an equity nature. Playmates said the stake in Harbour Ring would allow it to be more flexible in capital flow, but an analyst believed that the transaction was initiated by Harbour Ring. 'It seemed Harbour Ring needs more independence,' he said. Playmates previously exerted control over Harbour Ring through its 300 shares in associate company Reading Investments. The other 700 Reading shares are held by independent third parties. Playmates held the 300 shares through its wholly owned subsidiary Playworld Toys. Reading is to get back the shares from Playworld in exchange for 13.37 per cent (or 230.4 million) of the issued share capital and 13.15 per cent (or 38.4 million) of 1997 warrants in toy maker Harbour Ring International Holdings after a transaction with its associate company. Reading, incorporated in the British Virgin Islands, has its only business in 768 million shares and 128 million 1997 warrants of Harbour Ring. The analyst said Playmates could then become more flexible with the investment in Harbour Ring. 'They can place the shares in the market if they like. But they should not have any cash call at the moment,' he said. 'Sales of their Teenage Mutant Ninja Turtle toys are in decline and it's expected that they would be looking for other new items.' He said that while Playmates handled only design and distribution, Harbour Ring manufactured only toys to order. No cash was involved in the transaction and there would be no impact on the net assets of Playmates, the company said. Net profit from Harbour Ring through Playworld was $50.6 million for the year to December 1994. The agreement was to be completed by mid January. The agreement specified that about 29.6 per cent of the Harbour Ring shares transferred to Playworld could not be sold for two years.