A REAL-LIFE fight will soon be facing directors of Playmates, manufacturers of the battling Teenage Mutant Ninja Turtles toy products. United States investment funds are being advised to oppose a share option scheme proposed by the company's directors. The surprise resistance to the scheme, which was expected to be nodded through, could surface at a special meeting for shareholders scheduled to follow the company's annual general meeting on May 10. The opposition is being recommended by Institutional Shareholders Services (ISS), a group based in Washington which monitors corporate actions on behalf of its clients, and recommends how they should vote. In a report to its clients, which include many of America's powerful pension funds, ISS urges shareholders to vote against the executive stock option plan proposed in the latest annual report. This is a second share option arrangement which would run alongside an existing plan, and would run for 10 years. It would allow options to be issued representing up to 10 per cent of the issued capital, and would apply to all employees, executives and directors of the company, subject to the discretion of the board. The Washington watchdog has three major objections to the Playmates schemes, although it is not against the concept in principle. ISS senior analyst Brian Babcock said the proposed discount of up to 20 per cent on the ruling share price would, by itself, be sufficient to warrant a ''no'' vote by shareholders. But he was also critical of the potential conflict of interest that could arise with directors recommending an action from which they would benefit. ISS prefers to see independent directors in charge of the administration of such schemes. He complained that 10 per cent was too a high a proportion of the issued capital to set aside for the options. He said it also had too long a life. ''While this plan does carry a life of only 10 years, a significant amount of abuse can take place during that time,'' he warned. ISS would prefer to see any scheme subjected to periodic review by shareholders. Playmates director Ian Forsyth said there had been no warning of any possible opposition to the share option scheme, which he argued would normally be perfectly acceptable to shareholders in the region. ''Most people are happy with it, we have had no complaints,'' he said, pointing out that the Playmates scheme was designed to make it competitive with the rest of the market in attracting a good standard of employees. He suggested that ISS and similar US organisations concerned with the exercising of shareholders' rights should recognise the different approach taken by Hongkong companies. ''The market here is different. If they are talking from a US point of view they are off-beam. They are trying to compare two completely different markets. Stock options in the US are driven by Erisa [US pension fund laws] and tax considerations, which is not the case here,'' he said. Under the rules of US pension funds, which are administered by the Department of Labour, managers of funds are required to use their votes in the best interests of shareholders. The spread of investments to other markets means that they now take a close interest in how foreign companies are being managed, and are prepared to challenge boards of companies which they feel are not acting in the best interests of US investors, according to the American rules. Although Playmates offers exposure to the Hongkong and Chinese markets, as well as providing an investment in US toy demand, the company is unaware of any powerful American holdings. Mr Forsyth reckons the total number of shares held in the US is well below 10 per cent.