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                       SECURITIES AND EXCHANGE COMMISSION
                              WASHINGTON, DC 20549
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                                    FORM 10-K
                        FOR ANNUAL AND TRANSITION REPORTS
                     PURSUANT TO SECTIONS 13 OR 15(d) OF THE
                         SECURITIES EXCHANGE ACT OF 1934

(Mark One)

[X]     ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
        EXCHANGE ACT OF 1934

        For the fiscal year ended March 31, 2002 OR

[ ]     TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
        SECURITIES EXCHANGE ACT OF 1934

        For the transition period from __________ to __________

                        Commission file number: 000-22161

                                 ZINDART LIMITED
             (Exact Name of Registrant as Specified in its Charter)

                             HONG KONG S.A.R., CHINA
         (State or Other Jurisdiction of Incorporation or Organization)

                                 Not Applicable
                      (I.R.S. Employer Identification No.)

               Flat C&D, 25/F, Block 1, Tai Ping Industrial Centre
       57 Ting Kok Road, Tai Po, New Territories, Hong Kong S.A.R., China
                    (Address of Principal Executive Offices)

                                 Not Applicable
                                   (Zip Code)

               Registrant's telephone number, including area code:
                               011-852-2256-6000

           Securities registered pursuant to Section 12(b) of the Act:

                               Title of Each Class
                                 Not Applicable

                    Name of Each Exchange on Which Registered
                                 Not Applicable

           Securities registered pursuant to Section 12(g) of the Act:

                           AMERICAN DEPOSITARY SHARES
                         (Representing Ordinary Shares)
                                (Title of Class)

Indicate by check mark whether the Registrant: (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes [X] No [ ]

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of Registrant's knowledge, in the definitive proxy or information
statements incorporated by reverence in Part III of this Form 10-K of any
amendment to this Form 10-K. [X]

The approximate aggregate market value of the American Depositary Shares
("ADSs") held by non-affiliates of the Registrant, based upon the last sale
price of the ADSs reported on the Nasdaq National Market on Thursday, June 27,
2002 was $3,025,567. Shares held by each officer, director and holder of 5% or
more of the outstanding ADSs have been excluded in that such person may be
deemed affiliates. This determination of affiliate status is not necessarily a
conclusive determination for other purposes.

The number of ordinary shares ("Shares") outstanding as of Thursday June 27,
2002 was 8,834,125, of which 6,223,014 were represented by ADSs.

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FORWARD-LOOKING STATEMENTS

This Annual Report on Form 10-K contains forward-looking statements within the
meaning of Section 27A of the Securities Act of 1933, as amended and Section 21E
of the Securities Exchange Act of 1934, as amended, regarding events and trends
which may affect the Company's future operating results and financial position.
These statements are subject to risks, assumptions and uncertainties that could
cause actual results to differ materially from those anticipated. These risks,
assumptions and uncertainties include, but are not limited to, changes in market
demand for our products, changes in general economic conditions, dependence on
certain customers, the results of our planned growth initiatives, competition,
changes in governmental regulations, a decline in capital markets, changes in
the political, social and economic situations of the United States, Hong Kong
and the People's Republic of China (excluding Hong Kong, the "PRC"), and other
risks described in the section in this Annual Report on Form 10-K entitled "
Risk Factors". In some cases, forward looking statements can be identified by
terminology such as "may," "will," "should," "could," "predicts," "potential,"
"continue," "expects," "anticipates," "future," "intends," "plans," "believes,"
"estimates," and similar expressions. The forward-looking statements are based
on information available to the Company on the date of this Annual Report. The
Company undertakes no obligation to revise or publicly release the results of
any revision to these forward-looking statements to reflect subsequent events or
circumstances. Readers should carefully review the risk factors described in
this annual report on Form 10-K as well as in other documents that we file from
time to time with the Securities and Exchange Commission, including the
quarterly reports on form 10-Q and any current reports on Form 8-K.

REPORTS TO SHAREHOLDERS

Zindart Limited (the "Company") is publishing this annual report (the "Annual
Report") on Form 10-K, and the Company intends to publish its subsequent
quarterly reports on Form 10-Q in order to provide additional information to the
Company's shareholders. However, the Company, as a foreign private issuer, is
not required to publish reports on these forms and may discontinue doing so at
any time without prior notice. Moreover, as a foreign private issuer, the
Company is and will remain exempt from Section 14(a), 14(b), 14(c), and 14(f) of
the Securities Exchange Act of 1934 (the "Exchange Act"), and the Company's
officers, directors and principal shareholders are and will remain exempt from
the reporting and "short-swing" profit recovery provisions contained in Section
16 of the Exchange Act until such time as the Company ceases to be a foreign
private issuer.

DOCUMENTS INCORPORATED BY REFERENCE

Certain parts of the Zindart Limited Proxy Statement relating to the annual
general meeting of shareholders to be held on September 5, 2002 (the "Proxy
Statement") are incorporated by reference into Part III of this Annual Report on
Form 10-K.

CURRENCY CONVERSIONS

All references in this Annual Report on Form 10-K to "U.S. dollars," "US$" or
"$" alone are to United States dollars; all reference to "GBP" are to pounds
sterling of the United Kingdom; all references to "HK dollars" or "HK$" are to
Hong Kong dollars; and all references to "Renminbi" or "RMB" are to Renminbi,
which is the currency of the PRC. This Annual Report on Form 10-K contains
translations of certain HK dollar amounts into U.S. dollar amounts at specified
rates. These translations should not be construed as representations that the HK
dollar amounts actually represent or represented such U.S. dollar amounts or
could be or could have been converted into U.S. dollars at the rates indicated.
Unless otherwise stated, the translations of HK dollars into U.S. dollars have
been made at the rate of US$1.00 = HK$7.8. The translations of GBP into U.S.
dollars is performed for balance sheet accounts using the closing exchange rate
in effect at the balance sheet date and for revenue and expenses accounts using
an average exchange rate during each reporting period.

TRADEMARKS AND OTHER PROPRIETARY RIGHTS

The Company has no registered trademarks in respect of its manufacturing
businesses. The Company received a U.S. utility patent on a novelty book
product. Under the terms of certain acquisition agreements, the Company acquired
certain trademarks and other intellectual property rights associated with the
Corgi Classics Ltd. and the Lledo businesses. Key trademarks are registered in
the substantive territories in which the Company operates or distributes its
products. The Company's key employees have entered into confidentiality
agreements with the Company.

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PART I

ITEM 1 - BUSINESS

Unless the context otherwise requires, references in this Annual Report on Form
10-K to the "Company" refers to Zindart Limited and its subsidiaries (including
Hua Yang and Corgi) and the term "Zindart" refers to Zindart Limited and its
subsidiaries (excluding Hua Yang and Corgi). The term "Hua Yang" refers to Hua
Yang Holdings Co., Ltd., its main operating subsidiary, Hua Yang Printing
Holdings Co., Ltd., and its other subsidiaries. The term "Corgi" refers to Corgi
Classics Holdings Ltd., its main operating subsidiaries, Corgi Classics Ltd.,
Corgi Classics, Inc. and its other subsidiaries. The Company's executive offices
are located at Flat C&D, 25/F, Block 1, Tai Ping Industrial Centre, 57 Ting Kok
Road, Tai Po, New Territories, Hong Kong, S.A.R., China and its telephone number
is 011-852-2256-6000.

The Company is a turnkey manufacturer of high-quality die-cast, injection-molded
plastic and paper products that require a significant degree of engineering and
hand-assembly expertise to produce. The Company markets and distributes some of
its die-cast products under the Corgi brand names. The Company manufactures
die-cast and injection-molded collectibles, collectible holiday ornaments, toys,
hand-made books, specialty packaging and other paper products. The Company is
headquartered in Hong Kong and its manufacturing operations are located in the
neighboring Guangdong Province of the PRC. The Corgi products are marketed from
the Company's subsidiaries in the United Kingdom and the United States.

The Company serves a growing number of customers that are brand-name marketers
of die-cast and injection-molded giftware and collectibles, as well as packagers
and publishers of books and board games in the United States and Europe.
Customers for die-cast and injection-molded plastic products include Hallmark
Cards, Inc. ("Hallmark"), Mattel(R) Toys ("Mattel(R)"), Sieper Werke GmbH,
Promotional Partners Group Ltd., Freeplay Group, Spin Master Toys Far East Ltd.
and Revell Monogram Inc. Customers for books, paper and packaging products
include Mattel(R), Intervisual Books, Inc. ("IBI"), Jetta Co. Ltd., Penguin
Putnam Inc., Macmillan Children's Books, L.V.M.H., Usborne Publishing and
Scholastic Inc. Corgi serves its market through a number of distribution
channels including wholesale, retail, direct response and the Internet.

DEVELOPMENT OF THE COMPANY

Zindart was founded in 1977 by Mr. George Sun. In 1982, Zindart moved its
production to its first facility in the PRC. Additional production capacity was
added in 1987 with the opening of Zindart's second PRC facility. In 1993,
ChinaVest IV Funds Group, a fund controlled by ChinaVest Limited ("ChinaVest"),
acquired a majority ownership position in Zindart. By late 1994, in response to
growth in sales, Zindart built a large modern facility for its die-cast and
injection-molded products in Dongguan, Guangdong Province (the "Dongguan
Facility") in order to expand and consolidate its manufacturing operations. By
the end of 1998, the Dongguan Facility provided over 1,424,000 square feet for
production and production support including dormitory spaces capable of
accommodating up to 12,200 employees.

In February 1998, Zindart acquired 100% of the outstanding capital stock of Hua
Yang Holdings Co., Ltd. ("HYHCL"). In such acquisition, the shareholders of
HYHCL exchanged all of the outstanding ordinary shares and preferred shares of
HYHCL for $35.0 million in cash and up to 1,000,000 shares. Hua Yang was founded
in Hong Kong in the 1950's as a small business printer. Today, Hua Yang is a
leading printer and manufacturer of hand-made books, specialty packaging and
other paper products and is located in the PRC. The acquisition provided Zindart
with its own packaging operation, which continues to be an integral part of
providing its customers with a fully integrated turnkey manufacturing service.
The acquisition of Hua Yang (the "Hua Yang Acquisition") broadened Zindart's
product lines and customer base, and promoted its goal of becoming a leading
producer of high-quality hand-assembled consumer products in the PRC.

In July 1999, the Company acquired Corgi Classics Ltd. ("Corgi UK"), a leading
collectibles company based in the United Kingdom (the "Corgi Acquisition").
Corgi UK produces classic collectible scale model cars, trucks, buses and
airplanes and distributes its collectibles in Europe, North America and Asia.
The Company expects the Corgi Acquisition to establish synergies between Corgi
UK's branded collectibles, marketing capabilities and product innovations in the
collectibles industry with Zindart's manufacturing capabilities. The Corgi
Acquisition is also expected to allow the Company to strengthen its marketing
infrastructure, to advance its goals to continue worldwide growth and expansion
and to access brand-building opportunities. In November 1999, Corgi UK acquired,
in an asset purchase, the rights to the name "Lledo", a leading brand in the
U.K. premium collectibles industry, and certain tooling for collectibles
manufactured by Lledo for an aggregate of GBP1.95 million in cash (the "Lledo
Acquisition"). The Lledo Acquisition is expected to further strengthen Corgi's
position in the collectibles market. With the aim of expanding its branded
presence in the global collectibles market through the Corgi Acquisition, the
Company incorporated Corgi Classics, Inc., a Delaware corporation ("Corgi US")
in 1999 and is committing resources to develop a U.S. distribution network. In
fall 2000, Corgi successfully developed a relationship with FAO Schwarz and
installed its first dedicated display cabinet in the FAO Schwarz Chicago
flagship store. The success of the Chicago fixture has led to the signing of a
cooperative merchandising agreement providing for an allotment of dedicated
space in three more FAO Schwarz stores: New York, San Francisco and Las Vegas.
This type of retail development will

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enable Corgi to more quickly establish a market share in the United States.

Located in Leicester, Hong Kong, Chicago and Illinois, Corgi employs a total of
73 people engaged in sales, marketing, product engineering and administration of
its collectible business. In the United Kingdom, there are over 2,000 retail
outlets that stock Corgi products, and of these there are more than 350 Gold
Star and Approved specialist Corgi collector retailers and 21 premium standard
Collector Centers, each of which carries the full line of Corgi's cars, trucks,
buses, and airplanes die-cast scale models. Corgi also operates a Corgi Classics
Roadshow vehicle which can be seen at over 50 events per year and is visited by
an estimated 2.0 million people every year.

THE COMPANY'S SOLUTION

The Company's customers seek suppliers that can manufacture high-quality
products in desired volume (i.e. both in large quantities and limited runs) in a
timely and cost-effective manner. In addition, the Company's customers seek to
eliminate the cost, time and complexity of identifying and managing multiple
vendors required to develop and produce a product. For example, marketers of
die-cast and injection-molded plastic products often must hire different
companies to engage in product engineering, design, model and mold-making, and
manufacturing, assembling and packaging of the finished product. Book customers
often must turn to trading houses, brokers or service intermediaries for product
development, engineering and component sourcing. The need to coordinate several
different companies in the manufacturing process can cause production delays,
inefficiencies in the management of multiple contractors and quality and
reliability problems.

The Company's full service, value-added approach to manufacturing addresses
these customer needs as follows:

High-Quality Production

The Company uses modern computer-aided design and manufacturing equipment to
produce high-quality products. The Company also employs a highly trained
workforce, including skilled, technically trained craftsmen and other capable
but relatively inexpensive laborers for its manufacturing and assembly
operations under the guidance of experienced management. The Company ensures
quality through rigorous quality control procedures at each step of the
production process. The Company has an employee-training program geared
specifically toward inspection and quality control.

Manufacturing Capacity

The Company currently employs approximately 8,890 production workers and has an
aggregate of 1,962,000 square feet of manufacturing space with the capacity for
up to 15,800 workers in its two manufacturing facilities. The Company believes
that its available production capacity provides added flexibility to shorten
production cycles, which in turn will enable the Company to offer, among other
things, a just-in-time manufacturing service.

Turnkey Manufacturing Service

The Company's turnkey manufacturing service fulfills a customer's requirements
at every stage in the production process including: component sourcing;
computer-aided product engineering; design, model and mold-making; and
manufacturing, assembling and packaging of the finished product. This
coordinated, one-stop production process provides the Company's customers with
(1) shortened lead times from design to production, (2) a single participant in
the manufacturing process instead of the multiple participants previously
required and (3) increased efficiency, designed to result in lower per-unit
costs.

Commitment to Efficiency

The Company continually strives to increase efficiency and reduce costs for the
benefit of the Company and its customers. To date, the Company has been able to
achieve efficiencies by locating its production facilities in the PRC,
vertically integrating its production processes and working in close cooperation
with its customers. The Company has achieved efficiencies as a result of the
consolidation of Zindart's operations in its Dongguan Facility.

THE COMPANY'S STRATEGY

The Company's goal is to become the leading manufacturer of high-quality
die-cast and injection-molded collectibles, collectible holiday ornaments, toys,
hand-made books, specialty packaging and other paper products for the premier
designers and marketers of such items. In addition, the Company intends to build
shareholder value by implementing a branding strategy. In February 2001, the
Company announced a new growth strategy which calls for strengthening its
relationships with its multi-national customers and retail partners, increasing
and diversifying its customer base and expanding its self-branded presence in
the global markets with an emphasis on the U.S. markets. To achieve these goals,
the Company expects to focus on the following:

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Brand Development

The Company seeks to develop the Corgi brand in the United States. The Company
established a direct sales force for its Corgi line of die-cast replica items in
the United States. Combining Corgi's marketing strength and brand credentials
with Zindart's manufacturing capabilities, the Company expects to strengthen its
marketing infrastructure and to advance its goal of worldwide growth and
expansion in collectible markets. Recently, Corgi has expanded the number of its
retail storefronts in the United States and has opened a permanent showroom at
the Toy Center in New York which is convenient major retail chain buyers.

Develop Additional Major Customers

Currently, the Company has a core group of large customers, but it also
manufactures products for many other smaller customers. The Company expects that
it may be able to develop several of these smaller customers into major
customers as they become familiar with the benefits of the Company's turnkey
manufacturing service. The Company offers major customers a dedicated production
team and dedicated production space which can provide such customers with
attractive advantages. For example, the Company can customize its production
facility to meet the specific needs of such customers, and the customer is able
to exercise greater control over the production process, thereby enhancing
quality control and cost efficiency, increasing confidentiality and expediting
scheduling and delivery timetables. The Company believes that its ability to
offer such dedicated production services has led to enhanced relationships with
its core customer base. During the fiscal year ended March 31, 2001, the Company
further developed business relationships with Promotional Partners Group Ltd.
and Spin Master Toys Far East Ltd. During the fiscal year ended March 31, 2002,
the Company successfully started business relationships with McDonald agent,
L.V.M.H., Usborne Publishing and Scholastic Inc.

Diversify Product Offerings

The Company has established itself as a leading manufacturer of die-cast and
injection-molded collectibles, collectible holiday ornaments, toys, hand-made
books, specialty packaging and other paper products. The Company intends to
diversify its product offerings to include the manufacture of other consumer
products that utilize the Company's current competitive advantages and
production expertise. During the fiscal year ended March 31, 2001, the Company
began producing radios for Promotional Partners Group Ltd. and die-cast bikes
for Spin Master Toys Far East Ltd. During the same year, the Company also
produced the new board game titled "Survivor Game" for Mattel(R). In fiscal year
ended March 31, 2002, Hua Yang successfully diversified into packaging for
perfumes sold in Duty Free shops by a French perfume company while Corgi signed
a three year license to produce miniature icons of Jim Henson's four most
popular Muppets, matched with die-cast vehicles appropriate to their characters,
in celebration of the 25th Anniversary of the first season of "The Muppet Show".
Corgi also marketed several lines of military collectibles including Forgotten
Heroes(TM), a line commemorating the veterans of the Korean War, and Unsung
Heroes(TM), a line of highly detailed military vehicles and aviation equipment
used in the Vietnam War. Other popular ranges include Heroes under Fire(TM), a
line of emergency vehicles used by fire departments around the country; a
licensed series of Budweiser(R) collectibles; a Heavy Haulers(TM) line of eight
wheeler trunks; and a group of Film and Television Favorites. Another popular
line is Corgi's collection of James Bond movie vehicles and icons.

Deploy Advanced Management Information Systems

The Company seeks to enhance its manufacturing and business processes through
the deployment of advanced management information systems that enable the
real-time monitoring and management of its operating and financial performance
and resources. The Company has targeted to implement Enterprise Resources Plan
("ERP") System to enhance its master planning and operation efficiency.

MARKETS, PRODUCTS AND CUSTOMERS

Die-cast Collectibles

The Company manufactures a wide range of metal die-cast collectible scale model
replicas of trucks, airplanes and automobiles, such as the Ford Taurus,
Chevrolet Monte Carlo, Ferrari, Audi TT, Corvette, Mustang and Formula One cars.
These replicas come in various scales from 1/18th to 1/64th of the size of the
original product, and are medium and high-feature products that must meet
exacting standards. Many of the die-cast replicas have complex designs which
require high-quality workmanship and decorative details, with pad printing with
up to one hundred imprints. The most complex of these models incorporates up to
200 moveable parts. The die-cast scale model replicas manufactured by the
Company are sold through hobby shops, collectors' clubs, car and equipment
dealers, toy and gift stores and other channels. These products typically retail
in the United States for between $150 and $180 for the high-feature products,
between $25 and $60 for the

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medium-feature products and between $5 and $10 for the small-feature products.
Many of these products have nostalgic appeal to adult consumers, and some of
these products, especially the automobile replicas, have attracted a following
of collectors and are traded on secondary markets. The Company believes, based
on many years of sales experience, that many die-cast collectibles have enduring
consumer appeal.

The Company's primary customers for die-cast collectibles are Mattel(R) and
Hallmark. Sales to Mattel(R), a leading U.S. designer and marketer of die-cast
collectible replicas and general toys, represented 16.3% of the Company's total
revenues for the fiscal year ended March 31, 2002 compared to 18.2% of the
Company's total revenues for the fiscal year ended March 31, 2001. Sales to
Hallmark represented 8.7% of the Company's total revenues for the fiscal year
ended March 31, 2002 compared to 9.7% of the Company's total revenues for the
fiscal year ended March 31, 2001. Apart from the above two primary customers,
there are no customers which account for greater than 10% of the Company's total
revenues. Sales to other major customers including Sieper Werke GmbH,
Promotional Partners Group Ltd., Freeplay Group, Spin Master Toys Far East Ltd.,
Revell Monogram Inc. and Creata Promotion (Asia) Ltd. represented approximately
9.5% of the Company's total revenues for the fiscal year ended March 31, 2002.

Collectible Holiday Ornaments

Hallmark, regarded as a leading producer of greeting cards, also distributes
collectible holiday ornaments and giftware products. Hallmark relies on the
Company to manufacture many of its Keepsake Ornaments, which consist of a
variety of Christmas ornaments, holiday-themed pieces and other giftware both in
die-cast zinc alloy and plastic. Hallmark's Keepsake Ornaments product line also
includes free-standing decorations such as die-cast replicas of pedal cars. The
production of Keepsake Ornaments requires highly-developed hand spray painting
skills and attention to quality by each member of the Company's workforce in
order to meet Hallmark's exacting aesthetic and quality requirements.

The Keepsake Ornaments manufactured by the Company are collectibles sold through
authorized retail outlets. These products typically retail in the United States
for between $7 and $25. Many purchasers of Keepsake Ornaments consider these
products to be valuable, collectible items. In addition to traditional holiday
themes, many Keepsake Ornaments depict characters from storybooks and films such
as the Wizard of Oz, Star Trek, Star Wars, Madam Alexandra, Peanuts and various
well-known Disney characters. For the fiscal year ended March 31, 2002, sales to
Hallmark represented 8.7% of the Company's total revenues.

Books

The Company manufactures "pop-up" books, novelty books and board books. Pop-up
books are books containing specially die-cut, folded and glued paper pieces
that, when the book is opened, "pop" out of the book in three dimensions. These
products typically retail in the United States for between $3 and $50. Most of
the Company's "pop-up" books are targeted at children, but there is a small
segment that targets the adult and young adult markets. Novelty books, sometimes
also referred to as "book-plus", incorporate an extra or unusual element. These
elements often make the book interactive or provide play value. For example,
novelty books may include an electronic device, a noise maker, plastic, vinyl,
textured or scented materials, or a plush toy. Board books usually are die-cut
or punched into an unusual shape, thus requiring hand-assembly. These books are
made of heavyweight, stiff paperboard, are durable in nature and usually target
the children's market. Often board books come in a set of three or more titles
and are grouped together in a hand-assembled slip case, sleeve or custom made
box. These books are sold through toy and book stores, authorized dealers and
other channels.

Specialty Packaging

Specialty packaging includes paper board and E-flute (corrugated) boxes and, to
a lesser extent, blister cards and inserts. Box packaging often requires
advanced printing techniques, including five- and six- color printing, foil hot
stamping, spot or total coating, varnishing, embossing and lamination. After
printing, boxes are die-cut to shape with a drop-out window often included. PVC
sheets, which also are cut to shape and often incorporate some silk screen
printing, are glued in place by hand in the drop-out windows. Blister cards are
simple backing boards used in a plastic blister pack while insert cards are
printed pieces of board used as backing or filler inside a larger packaging box.
Specialty packaging is produced for certain manufacturers and other marketers to
protect products during shipment and to exhibit products for sale in retail
stores.

Other Paper Products

Other paper products manufactured by the Company include puzzles, board games,
photo albums, stationery sets and activity packs, all of which require hand
assembly. These products are targeted at children, young adult and adult
markets.

These products are sold through hobby shops, authorized dealers, book and gift
stores, as well as through other channels.

Corgi Products

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Corgi is one of the oldest and fastest growing U.K. based marketers of
collectible die-cast models of trucks, buses, cars and airplanes. Corgi serves
its customers through a number of distribution channels, including wholesale,
retail, direct marketing and the Internet.

Corgi offers a broad portfolio of products ranging from special interest items
to more popular, often license-based, items. The majority of Corgi's product
lines are highly detailed, authentic scale replicas of transport vehicles,
produced in strictly limited numbers and appealing to a wide range of die-cast
collectors. Increasingly, Corgi is broadening its product lines to include more
mixed scale, lower-priced, unlimited die-cast lines which are sold in wider
distribution channels. Corgi's product portfolio is broadly divided into the
following categories: (1) collectible trucks, steam vehicles, and other road
transport; (2) collectible public transport; (3) collectible aircraft; (4)
traditional die-cast toys and (5) collectible metal figurines. Corgi holds a
number of major licenses, including licenses for the production of James Bond,
and Texaco items. More recently, Corgi has established a number of products
designed to be more appealing to the U.S. consumer, including U.S. fire truck
and military based lines, which are developed and supplied by Corgi US. Corgi
also owns the Lledo brand and a number of sub-brands including The Aviation
Archive, The Original Omnibus Company, Icon Collectibles and Unsung Heroes.

Corgi's products are sold in 30 countries throughout the world. In addition to
the United Kingdom and North America, important markets include France, Germany,
Hong Kong, Japan and Australia.

RESEARCH AND DEVELOPMENT

Corgi is continually involved in the development of new products, new markets
and new manufacturing processes. The total research and development costs
incurred by the Company during the fiscal year ended March 31, 2000 was $1.2
million. The total research and development costs incurred by the Company during
the fiscal year ended March 31, 2001 was $1.9 million. The total research and
development costs incurred by the Company during the fiscal year ended March 31,
2002 was $2.2 million.

MANUFACTURING

The Company offers a fully-integrated turnkey manufacturing service. With this
service, the Company integrates component sourcing, computer-aided product
engineering, design, model and mold-making, and manufacturing, assembling and
packaging of the finished product. This enables the Company to meet all of a
customer's design engineering and manufacturing needs and eliminates the need
for intermediaries. By coordinating product development and process design with
production and packaging, the Company is able to shorten the lead time from
conceptual design to product delivery and to lower product cost while
maintaining high quality and reliability.

The Company's die-cast and injection-molded production facilities are located in
Dongguan in the PRC. The Dongguan Facility includes (1) a product engineering
area, (2) model-making and mold-making areas, (3) die-casting and
injection-molding areas, (4) hand-spray and electrostatic painting and pad
printing areas, (5) assembly and packing areas, (6) a heat transfer decal
application workshop, (7) a warehouse and (8) dormitory, dining and recreational
facilities. The Company's product engineering staff makes extensive use of
sophisticated, computer-aided design systems for the development of
prototype-scale models. The die-casting, injection-molding and electrostatic
painting areas operate on a two-shift basis. The hand-spray, pad printing and
assembly and packing areas run on a single-shift basis. Most employees are
engaged in the assembly of the Company's products, and as a result, assembly and
packaging account for most of the total production area. The Company's hand-made
books, specialty packaging and other paper production facilities are located
between Dongguan and Hong Kong in Shenzhen (the "Shenzhen Facility") in the PRC.
The Shenzhen Facility includes (1) a pre-press area, press rooms and print
finishing area, (2) die-cut, trimming, guillotining and punching areas, (3)
packaging and book hand assembly areas, (4) a warehouse and (5) dormitory and
dining facilities. The press rooms operate on a two-shift basis with seven
advanced German presses delivering up to six-color printing capability. The
die-cut department also runs on a two-shift basis during the peak season. Hand
assembly for both packaging and books generally works one shift, adding an
additional shift during the peak season. Packaging and books account for most of
the total work force and production areas.

The Company uses zinc alloy and various plastic resins in its die-cast and
injection-molded production operations. The supply and demand for zinc alloy and
for both plastic resins and the petrochemical intermediates from which plastic
resins are produced are subject to cyclical and other market factors and can
fluctuate significantly. The Company acquires raw materials for its die-cast
production primarily from Australia, Belgium and Canada. Plastics used for
manufacturing collectible holiday ornaments and figurines are obtained from Hong
Kong. The Company's standard practice is to maintain a supply of raw materials
sufficient for approximately three months' production.

Corgi's suppliers are based primarily in the PRC. Corgi obtains a substantial
share of its supplies from the Company's die-cast manufacturing facility.

<PAGE>
Paper, ink and glue are the principal raw materials used by the Company in the
manufacture of books, specialty packaging and other paper products. The Company
uses many types of coated paper and board in a variety of grades, depending on
customers' quality and price requirements. The Company purchases a majority of
its paper from U.S., Asian and European suppliers, but generally places orders
through trading companies or agents in Hong Kong. Additionally, the Company
acquires a small amount of paper from local sources in Hong Kong and PRC. Ink
and glue are ordered locally in Hong Kong.

The plants and equipment owned and operated or leased by the Company are subject
to comprehensive PRC laws and regulations that involve substantial risks.

COMPETITION

The Company faces significant competition in each of its product segments. In
die-cast collectibles and collectible holiday ornaments, the Company competes
with several companies located primarily in the PRC. In toys, the Company
competes with numerous companies located all over the world. In "pop-up" books,
the Company competes with several companies located in Southeast Asia and South
America. In novelty and board books as well as packaging, the Company competes
with several companies located in Hong Kong and other parts of the PRC. The
Company believes that there are several factors that provide the basis of
competition in the manufacturing of its products, which include: price, quality,
technical capabilities, production capabilities and on-time delivery. The
ability to meet increasing demands of just-in-time ordering by customers is
becoming one of the essential factors for maintaining competitive advantage in
the die-cast market. The Company believes that it can maintain this competitive
advantage through the effective use of its expanded facilities. The Company also
expects increased competition from other industry participants that may seek to
enter one or more of the Company's high margin product segments. Many of the
existing and potential competitors have significantly greater financial,
technical, manufacturing and marketing resources than the Company.

The Company does not believe that there are any significant barriers to entry
into the manufacture of its products, although the Company believes that it
currently holds certain competitive advantages such as its turnkey manufacturing
service, commitment to quality and strong management team. Although the Company
has received a U.S. utility patent on one of its novelty book products, the
Company does not characterize its business as proprietary and does not own any
copyrights or possess any material trade secrets. Accordingly, additional
participants may enter the market at any time. In addition, certain of the
Company's customers manufacture a substantial portion of their products
internally. Any determination by a principal customer to manufacture new
products internally or to move manufacturing from the Company to another third
party would have a material adverse effect on the Company's results of
operations.

SUBSIDIARIES

The Company holds the controlling interests in two mold-making subsidiaries:
Onchart Industrial Ltd., Luen Tat Mould Manufacturing Ltd. ("Luen Tat Mould")
and one model-making subsidiary: Luen Tat Model Design Co. Ltd., each of which
is a British Virgin Islands corporation. Presently, Luen Tat Mould conducts its
mold-making operations in one of the Company's factories, and provides the
Company with the largest in-house mold-making capacity in Southern China.

Dongguan Xinda Giftware Co. Ltd. ("Dongguan Xinda") is a Sino-foreign
contractual joint venture between the Company and Dongguan Hengli Trading
General Co., an entity that is controlled by PRC governmental bodies. This joint
venture was established in the PRC to own and operate the Dongguan Facility.
This joint venture has a term of 15 years, expiring in November 2009. Under the
joint venture agreement and the supplemental agreement thereto, the Company
possesses substantive participating rights and is entitled to 100% of the joint
venture's profit, after paying its joint venture partner a pre-determined annual
fee. At the end of the joint venture term, the Company will continue to own the
buildings and other assets of the joint venture, but the land currently used to
conduct the business of Dongguan Xinda will revert to the PRC party.

HYHCL is a wholly-owned subsidiary of the Company and has three subsidiaries.
Hua Yang Printing Holdings Co., Ltd. ("HY Printing Holdings Co."), based in Hong
Kong, is wholly-owned by HYHCL and employs the sales, accounting and management
staff for the books and packaging businesses. HY Printing Holdings Co. also
holds the Hua Yang equity interests in Shenzhen Huaxuan Printing Product Co.,
Ltd. ("Shenzhen Huaxuan"), a Chinese joint venture and Guangzhou Jin Yi
Advertising Co. Ltd. ("Guangzhou Advertising"), a company organized under the
laws of PRC. Shenzhen Huaxuan is a contractual joint venture between HY Printing
Holdings Co. and Goshu Economic Development Co., a PRC government entity that
was established in the PRC to operate the Shenzhen Facility. The Shenzhen
Huaxuan joint venture has a term of 15 years and expires in October 2010. Under
the joint venture agreement, the Company possesses substantive participating
rights and is entitled to 100% of the joint venture's profits, after paying its
joint venture partner a pre-determined annual fee. At the end of the joint
venture term, the Company will continue to own the other assets of the joint
venture, but the land and building currently used to conduct the business of
Shenzhen Huaxuan will revert to the PRC party. Guangzhou Advertising is

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an inactive company 90% owned by HY Printing Holdings Co.

Corgi Classics Holdings Ltd. is a wholly-owned subsidiary of the Company and has
a wholly-owned subsidiary, Corgi UK. Corgi UK has three wholly-owned operating
subsidiaries: Corgi US, Icon Collectibles Ltd. and Lledo Collectibles Ltd.

BACKLOG AND SEASONALITY

The Company's die-cast and injection-molded plastic product customers generally
contact the Company six to eight months in advance of product delivery in order
to provide the Company's engineers adequate time to design and fashion the molds
for the products. Thereafter, these customers place production orders one to
three months in advance of target delivery dates. These purchase orders may be
canceled by the customer upon reimbursement of actual costs incurred and payment
of a portion of lost profits, as determined on a case-by-case basis. However,
premium products have a shortened production lead time which normally will
require delivery within one or two months from the date the order is accepted.

The buying and ordering cycles for packaging and books differ. With regard to
packaging, in November or December, the Company reviews with its two core
customers such customers' anticipated packaging needs for the upcoming year. By
the beginning of the calendar year, both of the core customers will provide the
Company with dollar and unit allocations for the year. These allocations will be
based on the Company's past performance, capacity and technical capability
vis-a-vis the designs requested by the customer. Every week thereafter, the
Company will receive purchase orders covering the next four to six weeks. Firm
orders and packaging planning rarely extend beyond six weeks.

The buying cycle for books varies and is much longer than the buying cycle for
packaging, with a majority of activity grouped around the Frankfurt Book Fair
held in Germany every October and the Children's Book Fair held in Bologna,
Italy every April. The fairs are a time for customers of the Company's book and
packaging division to present their new book concepts and ideas to potential
buyers and confirmed sales are usually realized three to six weeks after each
fair. Once these customers have confirmed sales, they turn to printers, such as
the Company, to reserve production capacity. Orders for reprints of old titles,
however, can be booked anytime during the year, but generally fall outside of
the peak summer production months.

The Company's operating results in the past have fluctuated and those results
may fluctuate in the future. The Company ceases production for a two-week period
during January or February of each year due to the Chinese New Year holiday,
which has caused revenues during the fourth fiscal quarter of each year to be
lower than revenues during the other three quarters. The Company may also
experience fluctuations in quarterly sales and related net income compared with
other quarters due to the timing of receipt of orders from customers and the
shipment of products. Sales of books are weighted toward the Christmas season;
as a result, book sales in the first half of the fiscal year are generally
higher than the second half. The Company may experience annual and quarterly
variations in operating results and, accordingly, the trading price of the ADSs
may be subject to fluctuations in response to such variations.

TRADEMARKS AND OTHER PROPRIETARY RIGHTS

The Company has no registered trademarks in respect of its manufacturing
businesses. The Company received a U.S. utility patent on a novelty book
product. Under the terms of the Corgi Acquisition and the Lledo Acquisition, the
Company acquired certain trademarks and other intellectual property rights
associated with the Corgi UK and Lledo businesses. Key trademarks are registered
in the substantive territories in which the Company operates or distributes its
products. The Company's key employees have entered into confidentiality
agreements with the Company.

EMPLOYEES

As of March 31, 2002, the Company employed approximately 10,638 persons, of whom
approximately 8,890 were production workers, 1,181 were administrative staff and
567 were engineering and technical personnel. As is customary for employers in
the PRC, each of the Company's production facilities includes housing facilities
for workers. The Company is committed to providing good working and living
conditions for its employees in the PRC. To that end, the Company has adopted a
code of conduct relating to human rights, including a prohibition on use of
child labor. In addition, the Company has adopted guidelines which address
worker safety, wages, hours and statutory holidays.

The Company provides training to its managers and executives in its Hong Kong
headquarters through courses conducted by industry professionals engaged by the
Company as well as senior management. The courses cover marketing and sales
skills, management skills, total quality management and the technical aspects of
the Company's operations. In addition, the Company sponsors the attendance of
night classes for a number of technical staff, and in-house seminars for workers
are held semi-annually by the quality control staff or the factory managers on
quality requirements.

FINANCIAL INFORMATION ABOUT FOREIGN OPERATION

<PAGE>
Segment Information as to foreign operations is included in Note 24 to the
consolidated financial statements of this Annual Report on Form 10-K.

RISK FACTORS

Limited Precedent. There is limited precedent with which to evaluate the
potential risks and rewards related to the development, financing, ownership and
operation of a light manufacturing company in the PRC.

Limited Reporting Requirements. As a foreign private issuer, the Company is
exempt from the rules and regulations under the Exchange Act prescribing the
furnishing and content of proxy statements, and its officers, directors and
principal shareholders are exempt from the reporting and short-swing profit
recovery provisions contained in Section 16 of the Exchange Act. Under the
Exchange Act, the Company is not required to publish financial statements as
frequently, as promptly or containing the same information as U.S. companies.

Dependence on Major Customers. Sales to two core customers - Hallmark, and
Mattel(R) - accounted for approximately 25% of the Company's total sales in
fiscal year ended March 31, 2002. Zindart began a business relationship with
Mattel(R) in February 1997. The Company may be more susceptible to a loss of
business from Mattel(R) than it would be from its other customers with which the
Company has longer-term relationships. The Company's dependence on its core
customers is expected to continue in the foreseeable future. Although management
believes that any one of its customers could be replaced eventually, the loss of
any one of its major customers, particularly Mattel(R) or Hallmark would have a
material adverse effect on the Company's business, financial condition and
results of operations. The Company's sales transactions with all of its
customers are based on purchase orders received by the Company from time to time
that are subject to cancellation.

Introduction of New Products by Customers; Market Acceptance; Economic Factors.
The Company's long-term operating results depend substantially upon its
customers' ability to continue to conceive of, design and market new products
and upon continuing market acceptance of its customers' existing and future
products. In the ordinary course of their businesses, the Company's customers
continuously develop new products and create additions to their existing product
lines. Significant delays by the Company's customers in the introduction of, or
their failure to introduce or market, new products or additions to their
respective product lines would impair the Company's results of operations. The
die-cast collectible, collectible holiday ornament, toy and hand-made book
markets are affected by changing consumer tastes and interests, which are
difficult to predict and over which the Company's customers have little, if any,
control. These products in any event have limited life cycles and may be
discontinued by the customer at any time. Accordingly, there can be no assurance
that existing or future products of the Company's customers will continue to
receive substantial market acceptance. In addition, since most of the products
manufactured by the Company are sold in the United States, the Company's
profitability will also depend on the strength of the U.S. economy, which can
affect U.S. consumers' spending habits on such items as die-cast collectibles,
collectible holiday ornaments, toys and books. Any downturn in the U.S. economy
could have a material adverse effect on the Company's business, financial
condition and results of operations.

Competition. The Company faces significant competition in each of its product
segments. In die-cast collectibles and collectible holiday ornaments, the
Company competes with several companies located primarily in Hong Kong and the
PRC. With respect to toys, the Company competes with numerous companies located
all over the world. In "pop-up" books, the Company competes with several
companies located in Southeast Asia and South America. In novelty and board
books as well as packaging, the Company competes with several companies located
in Hong Kong and other parts of the PRC. The Company believes that the basis of
competition in the manufacturing of all of its products is price, quality,
technical capabilities and the ability to produce in required volumes and to
meet delivery schedules in a timely manner. The Company expects increased
competition from other industry participants that may seek to enter one or more
of the Company's high margin product segments. Many of the existing and
potential competitors have significantly greater financial, technical,
manufacturing and marketing resources than the Company.

The Company does not believe that there are any significant barriers to entry
into the manufacture of its products, although the Company believes that it
currently holds certain competitive advantages such as its turnkey manufacturing
service, commitment to quality and strong management team. While the Company
holds one U.S. utility patent, it does not characterize its business as
proprietary and does not own copyrights or possess any material trade secrets.
Accordingly, additional participants may enter the market at any time. No
assurance can be given as to the ability of the Company to compete successfully
with its current or future competitors, and the inability to do so would have a
material adverse effect on the Company's business, financial condition and
results of operations. In addition, certain of the Company's customers,
including Mattel(R), manufacture a substantial portion of their products
internally. Any determination by a principal customer to manufacture its
products internally or to move manufacturing from the Company to another third
party would have a material adverse effect on the Company's business, financial
condition and results of operations.

<PAGE>
Ability to Manage Growth and Fluctuations. The Company has experienced
significant growth over the past few years and is expanding its manufacturing
and marketing operations. The operations of the Company's book and packaging
division have fluctuated significantly over the same periods. The management of
the Company's growth or fluctuations in levels of operations, as appropriate,
will require continued improvement and refinement of the Company's operating,
management and financial control systems, as well as a significant increase in
the Company's manufacturing, quality control, marketing, logistics and service
capabilities, any of which could place a significant strain on the Company's
resources. If the Company's management is unable to manage its operations
effectively, the quality of the Company's products, its ability to retain key
customers and its business, financial condition and results of operations could
be adversely affected. As part of its expansion, the Company will have to hire
additional management personnel and other employees. The expenses associated
with hiring, training and integrating such employees may be incurred prior to
the generation of any associated revenues, with a corresponding adverse effect
on the Company's business, financial condition and results of operations. In
addition, the failure to integrate new personnel on a timely basis could have an
adverse effect on the Company's business, financial condition and results of
operations.

Concentration of Credit Risk; Collection of Accounts Receivable. Concentration
of credit risk is primarily limited to trade accounts receivable and is subject
to the financial conditions of certain major customers. The Company performs an
ongoing credit evaluation of each customer's financial condition. As of March
31, 2002, the Company's five largest accounts receivable accounted for
approximately 33% of the Company's gross accounts receivable. The Company
maintains reserves for potential credit losses and such losses in the aggregate
have not exceeded management's projections. However, no assurances can be given
as to the ability of the Company to recover the gross accounts receivable, and
the inability to do so could have a material adverse effect on the Company's
financial condition.

Ability to Recover Loan from Certain Borrower. In May 1999, the Company entered
into a loan and security agreement with IBI (the "IBI Agreement"). Under the
terms of IBI Agreement, the Company agreed to provide a $2.3 million revolving
credit facility to IBI (the "IBI Credit Facility"), which was scheduled to
mature in May 2000 and secured by certain assets of IBI. Pursuant to the IBI
Agreement, IBI extended the IBI Credit Facility for an additional year and
issued warrants to the Company to purchase 150,000 shares of common stock of IBI
at price of $1.73 per share (the "Warrants"). The Warrants are non-transferable
and were exercisable during a two-year period ended May 12, 2002. All Warrants
expired unexercised.

In April 2001, the Company entered into an amendment to the IBI Agreement, which
extended the maturity date of the IBI Facility to June 30, 2002. Pursuant to
this amendment, IBI repaid the Company $250,000 in April 2001.

In December 2001, the Company and IBI entered into a second amendment to the IBI
Agreement. Under the terms of the second amendment, the parties renegotiated the
terms of payment for (1) the outstanding principal under the IBI Agreement and
(2) the outstanding balance of past due trade payables under the second
amendment to the IBI Agreement.

At the time of the second amendment, the outstanding principal was $2,050,000.
With respect to the outstanding principal, the parties agreed that (a) $400,000
of the outstanding principal will be converted into common stock of IBI at $0.63
per share, with voting rights which will be subject to the terms and provisions
of a voting agreement, to be executed between the Company and Intervisual
Partners LLC (IBI's parent corporation), (b) $400,000 of the outstanding
principal will be canceled in the quarter ending September 30, 2002, contingent
upon satisfactory payment performance by IBI of certain obligations and (c) the
remaining $1.25 million of the outstanding principal will be payable in
twenty-four equal monthly installments beginning August 31, 2002.

At the time of the second amendment, the outstanding balance of past due trade
payables was $1,250,000. The parties agreed that (a) $400,000 of the outstanding
past due trade payables will be converted into common stock of IBI at $0.63 per
share on a date to be determined by the Company, with voting rights which will
be subject to the terms and provisions of a voting agreement, to be executed
between the Company and Intervisual Partners LLC; (b) $400,000 of the past due
trade payables will be canceled in January 2002 upon the closing of the sale of
certain IBI's preferred stock and (c) the remaining balance will be payable in
seven equal monthly installments beginning January 31, 2002.

In December 2001, the Company provided a valuation allowance of $400,000 for the
outstanding principal and wrote off an amount of $400,000 for the outstanding
past due trade payables.

In January 2002, $400,000 of the outstanding principal and $400,000 of the
outstanding past due trade payables were converted into common stock of IBI.

IBI has repaid past due trade payables in monthly installments on time beginning
January 31, 2002. IBI has experienced net income and positive cash flow for its
quarter ended March 31, 2002. Management of the Company will continue to monitor
the situation and expects to take necessary action as appropriate at the time to
recover the loan. No assurances can be given as to the ability of the Company to
recover the amount due to the Company under the terms of the IBI Credit
Facility, as

<PAGE>
amended, and the inability to do so could have a material adverse effect on the
Company's financial condition. Management of the Company will determine at each
reporting date whether the value of the loan could be impaired, and if
appropriate, record necessary provision.

Production Facilities; Capacity Limitations. The existing Shenzhen Facilities of
Hua Yang are relatively old and will likely need to be upgraded and expanded in
coming years in order to handle projected business. In that case, the Company
will be required to incur substantial costs in connection with upgrading its
book and packaging division manufacturing facilities. The Company leases its
current facilities for its book and packaging division. The Company does not
have an ownership interest in the facilities or such facilities' leasehold
improvements, and upon termination of its lease such improvements would revert
to the owner of the facilities. The lease will expire on March 31, 2003. No
assurance can be given as to the ability of the Company to renew its existing
facilities on acceptable terms and at an acceptable cost, and the inability of
the Company to do so would have a material adverse effect on the Company's
business, financial condition and results of operations.

If a natural disaster, such as a typhoon, fire or flood, were to destroy or
significantly damage any of the Company's facilities or if any such facility
were to otherwise become unavailable or inoperable, the Company would need to
obtain alternative facilities to conduct its operations. This would result in
significantly increased operating costs and significant delays in the
fulfillment of customer orders. No assurance can be given that alternative
facilities could be obtained at an affordable price or at all. Such increased
costs or delays, or inability to obtain alternative facilities, would have a
material adverse effect on the Company's business, financial condition and
results of operations.

Dependence on PRC Parties. The Dongguan Facility, which is the facility where
the Company conducts its manufacturing operations, is owned by a Sino-foreign
contractual joint venture in which the Company has a majority interest. The
other party to this contractual joint venture is an entity that is controlled by
PRC governmental bodies. In connection with the Dongguan Facility, the Company
also entered into a subcontract processing agreement with a local industrial
development authority, which provides the Company with a labor pool for certain
production needs. Hua Yang operates its facility through a similar contractual
joint venture. The joint ventures for Zindart's and Hua Yang's facilities differ
in that the land use rights related to the Dongguan Facility, which are for a
term of 50 years, are in the name of Zindart, while the land use rights and
leasehold improvements related to Hua Yang's facility are owned by Hua Yang's
PRC joint venture partners.

The efficient and cost-effective operation of these facilities depends upon the
cooperation and support of the development authorities and the joint venture
partners (collectively, the "PRC Parties"). Should a dispute develop between the
Company and any of the PRC Parties, there can be no assurance that the Company
would be able to enforce its understanding of its agreements or interests with
any of such PRC Parties, which could result in a significant loss of, or
depreciation in the value of, the Company's property and facilities. In any
event, ownership interests of land and improvements are considerably more
attenuated in the PRC. The Company's investment in property, facilities and
improvements, particularly at the Dongguan Facility, are significant and could
not be replaced without a considerable new investment, if at all. The lack of
cooperation by any of the PRC Parties could subject the Company to additional
risks and costs, including the interruption or cessation of its present
operations in the PRC, all of which would have a material adverse effect on the
Company's business, financial condition and results of operations. In this
regard, the Company's book and packaging division occupies its manufacturing
facilities pursuant to a joint venture agreement with a third party located in
the PRC. Pursuant to that agreement, the PRC party is obligated to contribute
the land upon which the facilities are built to the joint venture. Instead, the
PRC party has leased the land to the joint venture. In deciding to lease the
land rather than contributing the land as an ownership asset to the joint
venture, the PRC party breached the terms of the joint venture agreement. The
Company is currently seeking to rectify the situation. No assurance can be given
as to the ability of the Company to cause the PRC party to cure the breach. The
Company is unable to assess the effect on the Company's business, financial
condition and results of operations, if any, if the Company were unable to
rectify the situation.

Dependence on Raw Materials. The Company uses zinc alloy, various plastic resins
and paper in its manufacturing operations. The Company's financial performance
is dependent, to a substantial extent, on the cost of such raw materials. The
supply and demand for paper, zinc alloy and for both plastic resins and the
petrochemical intermediates from which plastic resins are produced are subject
to cyclical and other market and political factors and may fluctuate
significantly. As a result, the cost of raw materials to the Company is subject
to substantial increases and decreases over which the Company has no control
except by seeking to time its purchases in order to take advantage of favorable
market conditions. In the past, the Company has experienced significant
increases in the price of certain raw materials, which resulted in an increase
in the Company's production costs that the Company was not able to pass on fully
to its customers. To the extent that future increases in the cost of raw
materials cannot be passed on to customers, such increases could have a material
adverse effect on the Company's business, financial condition and results of
operations. The Company purchases its raw materials from a limited number of
suppliers. The Company has no formal written agreements with any of its
suppliers, but the Company is not dependent upon any single supplier for key
materials. The Company has not experienced any difficulty in obtaining needed
materials and thus believes that the lack of written agreements with its
suppliers does not present a risk to its business; however, no assurance can be
given that the Company will be able to obtain sufficient quantities of such raw
materials to meet its needs. The

<PAGE>
Company believes that it could continue to obtain needed raw materials in the
event that it experiences significant rapid growth, in light of the current
availability of such raw materials on the world markets. Any lack of sufficient
raw materials for its needs would have a material adverse effect on the
Company's business, financial condition and results of operations. However, to
the extent the Company is unable to obtain needed raw materials in such
circumstances in sufficient quantities or at affordable prices, such inability
would have a material adverse effect on the Company's business, financial
condition and results of operations.

Reliance on Key Personnel. The success of the Company is substantially dependent
upon its executive management, as well as upon its ability to attract and retain
additional qualified design, manufacturing and marketing personnel. In November
2001, Alexander Ngan M.K. resigned from his position as President and Chief
Executive Officer and from the Board of Directors of the Company. Mr. Peter A.J.
Gardiner, a senior international executive with experience in global trade, was
appointed as Executive Chairman of the Board of Directors effective September
2000. Mr. Gardiner has been charged with expanding the Company's three divisions
with emphasis on implementing branding strategies and increasing sales in the
U.S. markets and the management of the Company on an interim basis. In November
2001, Kevin Murphy, formerly Vice President of Operations, was promoted to
President and Chief Executive Officer of Hua Yang. In December 2001, C. Richard
Tong, a seasoned executive with more than 20 years of experience in operations
and general management positions, was appointed as President and Chief Executive
Officer of Zindart. The loss of the services of any of the Company's current
executive management for any reason could have a material adverse effect on the
business, financial condition and results of operations of the Company. The
Company is not the beneficiary of any "key person" life insurance policy on any
such person. Successful expansion of the Company's business will require
additional management resources and may require the hiring of additional senior
management personnel.

Possible Fluctuation in Operating Results; Reduced Revenue in the Fourth Fiscal
Quarter. The Company's operating results in the past have fluctuated and those
results may fluctuate in the future. The Company ceases production for a
two-week period during January or February of each year due to the Chinese New
Year holiday, which has caused revenues during the fourth quarter of each year
to be lower than revenues during the other three quarters. The Company may also
experience fluctuations in quarterly sales and related net income compared with
other quarters due to the timing of receipt of orders from customers and the
shipment of products. Sales of books are weighted toward the Christmas season;
as a result, book sales in the first half of the fiscal year are generally
higher than the second half. The Company may experience annual and quarterly
variations in operating results and, accordingly, the trading price of the ADSs
may be subject to fluctuations in response to such variations. In any event, it
is likely that the Company's operating results from time to time will not meet
the expectations of the Company's public market analysts, which will have an
adverse effect on the trading price of the ADSs.

Potential Product Liability. The Company is engaged in businesses that could
result in possible claims for injury or damage resulting from its products. The
Company is not currently, nor has it been in the past, a defendant in any
product liability lawsuit. Although the Company maintains certain product
liability insurance, a successful claim brought against the Company by a
customer of the Company or a consumer and the adverse publicity that could
accompany any harm caused to a consumer by a product manufactured by the Company
could have a material adverse effect on the Company's business, financial
condition and results of operations.

Government Regulations. U.S. customers of the Company are subject to the
provisions of, among other laws, the Federal Hazardous Substances Act and the
Federal Consumer Product Safety Act. These laws empower the Consumer Product
Safety Commission (the "CPSC") to protect consumers from hazardous toys and
other articles. The CPSC has the authority to exclude from the market products
that are found to be unsafe or hazardous, and can require a recall of such
products under certain circumstances. Similar laws exist in some states and
cities in the United States, as well as in foreign jurisdictions. The Company
relies on its customers to design products that comply with such safety
standards and to test the products to ensure compliance with applicable
regulatory safety standards. While the Company believes that its customers
design and test the products the Company manufactures for compliance with
regulatory standards, and the Company itself maintains quality assurance, there
can be no assurance that the Company's products will not be found to violate
applicable laws, rules and regulations, which could have a material adverse
effect on the business, financial condition and results of operations of the
Company. In addition, there can be no assurance that more restrictive laws,
rules and regulations will not be adopted in the future, or that the Company's
products will not be marketed in the future in countries with more restrictive
laws, rules and regulations, either of which could make compliance more
difficult or expensive, and which could have a material adverse effect on the
Company's business, financial condition and results of operations.

Effect of Principal Shareholders. As a principal shareholder, ChinaVest has the
ability to significantly influence, if not control, the election of the
Company's directors and most corporate actions of the Company. Robert A.
Theleen, Vice-Chairman of the Board of Directors, and Mr. Ngan, who resigned
from his position as President and Chief Executive Officer and director of the
Company on November 12, 2001, are partners in ChinaVest.

Taxation. The Hong Kong profits tax rate is currently 16%. The PRC income tax
rates applicable to the Company's two

<PAGE>
Sino-foreign joint ventures are currently 27% (24% state income tax and 3% local
income tax) and 15% for Dongguan Xinda and Shenzhen Huaxuan, respectively. These
joint venture enterprises are exempted from state income tax and local income
tax for two years starting from the first year of profitable operations after
offsetting prior years' losses, followed by a 50% reduction in state income tax
for the next three years. The tax exemption period of Dongguan Xinda expired on
December 31, 2000. It was subject to PRC state income tax at the rate of 12%
(exemption from local income tax) for the fiscal year ended March 31, 2002. The
tax exemption period of Shenzhen Huaxuan expired on December 31, 1997 and it was
subject to PRC state income tax at the rate of 15% (exemption from local income
tax) for the fiscal year ended March 31, 2002. The Company's effective tax rate
was 1.9% for the fiscal year ended March 31, 2002. The amount of income realized
is based in a large measure on the transfer prices the Company pays for the
products manufactured in its joint ventures located in the PRC. In the event
that the PRC tax authorities were to successfully challenge the transfer prices
established by the Company, the Company would become subject to increased
taxation in the PRC. As a result, the effective tax rate of the Company would
increase, which in turn could have a material adverse effect on the Company's
business, financial condition and results of operations. Under interpretations
relating to allocation of income under Hong Kong tax law, Zindart recognizes
one-half of the gross profit of Zindart as taxable income in Hong Kong. In the
event that these interpretations change or are held invalid, the Company's
taxable income could be increased in Hong Kong. As a result, the effective tax
rate of the Company would increase, which would in turn have a material adverse
effect on the Company's business, financial condition and results of operations.

Tariffs and Quotas. Most of the Company's products are shipped to customers in
the United States. The United States may, from time to time, impose new quotas,
duties, tariffs, or other charges or restrictions, or adjust presently
prevailing quota, duty or tariff levels, which could adversely affect the
Company's ability to continue to export products to the United States at current
or increased levels. The Company cannot predict what regulatory changes may
occur, if any, or the type or extent of any financial impact on the Company that
such changes may have in the future. In addition, various forms of protectionist
trade legislation have been proposed in the United States. Adverse changes in
tariff structures or other trade policies could have a material adverse effect
on the Company's business, financial condition and results of operations.

Environmental Matters. The Company's operations involve the use of certain toxic
substances, including plastic resins, oil-based paints and cleaning solvents.
The Company is, and is likely to continue to be, subject to PRC national,
provincial and local environmental protection laws and regulations. Such laws
and regulations currently impose a uniform fee on industrial wastewater
discharges and a graduated schedule of pollution fees for the discharge into the
environment of waste substances in excess of applicable standards, require the
payment of fines for violations of laws, regulations or decrees and provide for
possible closure by the central, provincial or local government of any facility
that fails to comply with orders requiring it to cease or cure certain
activities deemed by such authorities to be causing environmental damage. The
Company currently disposes of its waste substances in a manner it believes is
consistent with similarly-situated companies operating in the PRC. Such disposal
practices may not be consistent with those of companies operating in the United
States. There can be no assurance that the Company will be in compliance with
applicable laws and regulations and will avoid incurring the consequences of
non-compliance, or that PRC authorities will not impose additional regulatory
requirements that would necessitate additional expenditures for environmental
compliance. Any such occurrence could have a material adverse effect on the
Company's business, financial condition and results of operations.

Employees. Substantially all of the Company's manufacturing and assembly workers
are young women who come from various rural provinces in the PRC for the purpose
of working for wages higher than are available in such rural regions. These
employees typically work for the Company for two to five years and then return
to their communities. In addition, approximately 20% of the factory employees do
not return to the Company each year after the Chinese New Year holiday, and the
Company must hire replacements. If these employees were able to earn similar
wages in their home provinces or higher wages in other industries, the Company
could experience labor shortages or could be required to increase salaries to
meet its labor needs, either of which could have a material adverse effect on
the Company's business, financial condition and results of operations. The
Company's employees are not unionized, and the Company has not experienced any
labor strike. Union organizing and worker unrest are not common in the PRC;
however, no assurance can be given that labor conflicts will not develop. Any
labor conflicts could have a material adverse effect on the Company's business,
financial condition and results of operations.

Limited Public Market; Possible Volatility of Market Price of ADSs. The public
trading volume of the ADSs at times has been limited. There can be no assurance
that a more active trading market for the ADSs will develop going forward or
that, if developed, it will be sustained. Further, there is no public market for
the Shares underlying the ADSs. In the past several years, many foreign issuers
with market capitalization similar to that of the Company have been unable to
sustain an active trading market for their securities. The market price for the
ADSs going forward may be highly volatile, as has been the case with the ADSs
and the securities of other companies located in emerging market countries. The
market price of the ADSs may fluctuate substantially in response to numerous
factors, many of which are beyond the Company's control.

Compliance with loan covenants. Under the terms of the Refinancing Loan and RBS
Loan, the Company is required to

<PAGE>
comply with various restrictive financial covenants imposed by the Lenders and
RBS. The financial covenants include, among others, the maintenance of specific
tangible net assets, ratio of net borrowings to tangible net assets, ratio of
current assets to current liabilities, interest cover, earnings before interest
and tax ("EBIT"), debt service ratio, ratio of net cash flow to borrowing costs,
ratio of EBIT to borrowing costs and amount of capital expenditure. The Company
was in violation of all financial covenants as of March 31, 2002 except for the
covenant limiting capital expenditure, giving the Lenders and RBS the right to
accelerate the due dates of the Refinancing Loan and RBS Loan. In June 2002, the
Company obtained letters from the Lenders and RBS acknowledging its
non-compliance with the aforementioned financial covenants as of March 31, 2002.
However, the Company will be required to meet certain revised financial
covenants during the fiscal year ending March 31, 2003 with specific terms to be
finalized, failing which the Lenders and RBS would have the right to accelerate
the due dates of the Refinancing Loan and RBS Loan. Further, the revised
financial covenants state that it is an event of default if there is a material
adverse change in the Company's ability to comply with its obligations under the
Refinancing Loan and RBS Loan. Taking into the above matters, the Company's
long-term bank loans under the Refinancing Loan and RBS Loan have been
reclassified as a current liability as of March 31, 2002.

The Company has also suffered a loss from operations during the year ended March
31, 2002, the only year of loss over the past ten years, as a result of the
economic downturn. Management has implemented stringent control to improve
costs, productivity and margins. Management continues to consider asset
divestment to improve cash flows. The directors and management believe that the
Company's future operations will generate sufficient cash to meet its
obligations as they become due. However, the failure to meet any of the
financial covenants would constitute an event of default which would give the
Lenders and RBS the right to accelerate the due dates of their loans and the
Company may not have sufficient cash to repay the loans.

Independent Public Accounting Firm. There may be risks related to our use of
Arthur Andersen & Co Hong Kong as our independent auditors and our access to
capital markets and timely financial reporting may be impaired if we need to
engage a new independent public accounting firm. On June 15, 2002, Arthur
Andersen LLP, the United States affiliate of our independent accountants, Arthur
Andersen & Co Hong Kong (taken together "Arthur Andersen"), was convicted of
federal obstruction of justice charges arising from the United States
government's investigation of Enron Corp. The SEC has said that it will continue
accepting financial statements audited by Arthur Andersen, and interim financial
statements reviewed by it, so long as Arthur Andersen is able to make certain
representations to its clients. The Company's access to capital markets and its
ability to make timely SEC filings could be impaired if the SEC ceases accepting
financial statements audited by Arthur Andersen, if Arthur Andersen becomes
unable to make the required representations to the Company or if for any other
reason Arthur Andersen is unable to perform required audit-related services for
the Company. The Company understands that Arthur Andersen & Co Hong Kong has
planned to combine its practice with PricewaterhouseCoopers Hong Kong on July 1,
2002. The Company may engage PriceWaterhouseCoopers Hong Kong or another new
independent public accounting firm or take such other actions as may be
necessary to enable the Company to maintain access to the capital markets and to
file timely its financial reports. Any such transition between accounting firms
could cause us to incur substantial unforeseen costs, could delay our access to
capital markets and could impair our ability to make timely SEC filings.

Country Risks

General. The Company conducts all of its product engineering, model-making,
mold-making and manufacturing operations in the PRC. In addition, some of the
Company's administrative, finance and accounting, marketing and Management
Information System activities are located in Hong Kong. As a result, the
Company's business, financial condition and results of operations may be
influenced by the general political, social and economic situation in Hong Kong,
the PRC and the United States. Accordingly, the Company may be subject to
political and economic risks, including political instability, currency
controls, exchange rate fluctuations and changes in import/export regulations,
tariffs, duties and quotas.

Exchange Rate Risk. The Company's sales are denominated either in U.S. dollars,
GBP, Hong Kong dollars or Euros. The majority of the Company's expenses are
denominated in Hong Kong dollars, followed by RMB, GBP, Euros and U.S. dollars.
The Company is subject to a variety of risks associated with changes among the
relative values of the U.S. dollar, GBP, the Euros, Hong Kong dollar and RMB.
The Company does not currently hedge its foreign exchange positions. Any
material increase in the value of the Hong Kong dollar, RMB, GBP or Euros
relative to the U.S. dollar would increase the Company's expenses and therefore
would have a material adverse effect on the Company's business, financial
condition and results of operations.

Since 1983, the Hong Kong government has maintained a policy of linking the U.S.
dollar and the H.K. dollar at an exchange rate of approximately HK$7.80 to
US$1.00. There can be no assurance that this link will be continued, although
the Company is not aware of any intention of the Hong Kong government or the PRC
to abandon the link. Over the last five years, the RMB has experienced
significant devaluation against most major currencies. The rates at which
exchanges of RMB into U.S. dollars may take place in the future may vary.

<PAGE>
Risks Relating to Hong Kong

The Company's business, financial condition and results of operations may be
influenced by the political situation in Hong Kong and by the general state of
the Hong Kong economy. On July 1, 1997, sovereignty over Hong Kong was
transferred from the United Kingdom to the PRC, and Hong Kong became a Special
Administrative Region ("SAR") of the PRC. As provided in the Sino-British Joint
Declaration on the Question of Hong Kong and the Basic Law of the Hong Kong SAR
of the PRC (the "Basic Law"), the Hong Kong SAR is to have a high degree of
autonomy from PRC except in foreign affairs and defense. Under the Basic Law,
the Hong Kong SAR has its own legislature, legal and judicial system and
economic autonomy for 50 years. Based on current political conditions and the
Company's understanding of the Basic Law, the Company does not believe that the
transfer of sovereignty of Hong Kong has had or will have a material adverse
effect on the Company's business, financial condition or results of operations.
There can be no assurance, however, that changes in political, legal or other
conditions will not result in such an adverse effect.

Risks Relating to the PRC

Investment in the Company may be adversely affected by the political, social and
economic environment in the PRC. The PRC is controlled by the Communist Party of
the PRC. Under its current leadership, the PRC has been pursuing economic reform
policies, including the encouragement of private economic activity and greater
economic decentralization. There can be no assurance, however, that the PRC
government will continue to pursue such policies, that such policies will be
successful if pursued, or that such policies will not be significantly altered
from time to time. Political relations between the United States and the PRC
have been and may continue to be adversely affected by a number of factors.
Economic development may be limited as well by the imposition of austerity
measures intended to reduce inflation or reform money-losing state-owned
enterprises, the inadequate development or maintenance of infrastructure or the
unavailability of adequate power and water supplies, transportation, raw
materials and parts, or a deterioration of the general political, economic or
social environment in the PRC, any of which could have a material adverse effect
on the Company's business, financial condition and results of operations.

Loss of PRC Facilities; Nationalization; Expropriation. If for any reason the
Company were required to move its manufacturing operations outside of the PRC,
the Company's profitability, competitiveness and market position could be
materially jeopardized, and there could be no assurance that the Company could
continue its manufacturing operations. The Company's business and prospects are
dependent upon agreements with various entities controlled by PRC governmental
instrumentalities. Not only would the Company's operations and prospects be
materially and adversely affected by the failure of such entities to honor these
contracts, but it might also be difficult to enforce these contracts in the PRC.
The Company's investment in property, facilities and improvements in the PRC,
particularly at the Dongguan Facility, are significant and comprise
substantially all the Company's assets. There can be no assurance that assets
and business operations in the PRC will not be nationalized, which could result
in the total loss of the Company's investments in that country, or that the
Company's ownership interest in its properties and facilities will not otherwise
be impaired, which could result in a significant loss of, or depreciation in the
value of, such assets. Following the formation of the PRC in 1949, the PRC
government renounced various debt obligations incurred by predecessor
governments, which obligations remain in default, and expropriated assets
without compensation. Accordingly, an investment in the Company involves a risk
of total loss. After nearly 20 years of foreign manufacturing performed in
China, Zindart is unaware of any nationalization or expropriation of a
foreign-owned or operated enterprise.

Government Control Over Economy. The PRC only recently has permitted greater
provincial and local economic autonomy and private economic activities.
Accordingly, PRC government actions in the future, including any decision not to
continue to support current economic reform programs and to return to a more
centrally-planned economy, or regional or local variations in the implementation
of economic reform policies, could have a significant effect on economic
conditions in the PRC or particular regions thereof. Any such developments could
affect current operations of and property ownership by foreign investors.

PRC Law; Evolving Regulations and Policies. The PRC's legal system is a civil
law system based on written statutes in which decided legal cases have little
value as precedents, unlike the common law system in the United States. The PRC
does not have a well-developed, consolidated body of law governing foreign
investment enterprises. As a result, the administration of laws and regulations
by government agencies may be subject to considerable discretion and variation.
In addition, the legal system of the PRC relating to foreign investments is both
new and continually evolving, and currently there can be no certainty as to the
application of its laws and regulations in particular instances. Definitive
regulations and policies with respect to such matters as the permissible
percentage of foreign investment and permissible rates of equity returns have
not yet been published, statements regarding these evolving policies have been
conflicting, and any such policies, as administered, are likely to be subject to
broad interpretation and discretion and to be modified, perhaps on a
case-by-case basis. As the legal system in the PRC develops with respect to
these new types of enterprises, foreign investors may be

<PAGE>
adversely affected by new laws, changes to existing laws (or interpretations
thereof) and the preemption of provincial or local laws by national laws. In
circumstances where adequate laws exist, it may not be possible to obtain timely
and equitable enforcement thereof. The Company's activities in the PRC are by
law subject, in some circumstances, to administrative review and approval by
various national and local agencies of the PRC government. Although the Company
believes that the present level of support from local, provincial and national
governmental entities enjoyed by the Company benefits the Company's operations
in connection with administrative review and the receipt of approvals, there is
no assurance that such approvals, when necessary or advisable in the future,
will be forthcoming. The inability to obtain such approvals could have a
material adverse effect on the Company's business, financial condition and
results of operations.

<PAGE>
ITEM 2 - PROPERTIES

The Company is headquartered in part of one building in the Tai Ping Industrial
Centre located in Hong Kong and occupies approximately 26,100 square feet of
such building. The facilities in Hong Kong are owned by the Company, but the
land on which such facilities are located is subject to medium-term leases.

The Company's manufacturing operations are conducted in the Dongguan Facility
and the Shenzhen Facility. The Company's die-cast and injection-molded
production facilities are located in the Dongguan Facility. The Company's
hand-made books, specialty packaging and other paper production facilities are
located in the Shenzhen Facility. The Company's manufacturing facilities have an
aggregate of approximately 1,962,000 square feet of manufacturing space and
approximately 643,000 square feet of dormitory space. Virtually all land in the
PRC is state-owned, but can be leased from the government on a long-term basis.

The Dongguan Facility is built on land leased by Zindart pursuant to a 50-year
lease. The operation of the Dongguan Facility is structured as a contractual
joint venture with a PRC governmental entity, Dongguan Hengli Trading General
Co., which receives a pre-determined annual fee from the Company but does not
share in the joint venture's profit. This joint venture has a term of 15 years.
At the end of this term, the Company will continue to own the principal assets
of the joint venture, including the 50-year land lease. Part of the operation of
the Shenzhen Facility is structured as a 15-year contractual joint venture known
as Shenzhen Huaxuan with Goshu Economic Development Co., Shenzhen, which
receives a pre-determined annual fee from the Company but does not share in the
joint venture's profit. Unlike the Dongguan Facility, the Company does not own
but leases its factory building and land at the Shenzhen Facility. At the end of
the joint venture term, the Company will continue to own the other assets of the
joint venture, but the land and building will revert to the PRC party.

The plants and equipment owned and operated or leased by the Company are subject
to comprehensive PRC laws and regulations that involve substantial risks.

Corgi UK operates out of an office accommodation in Leicester, England totaling
approximately 8,600 square feet under a lease scheduled to expire in March 2010.
The offices of Corgi US are located in Chicago, Illinois and occupy an area of
approximately 2,400 square feet under a lease that expires in February 2003.

ITEM 3 - LEGAL PROCEEDINGS

The Company is not a party to any material litigation.

The Company currently maintains insurance coverage with the People's Insurance
Co. of China and HSBC Insurance (Asia) Limited on its property, plant and
equipment in an amount in excess of the current net book value of such assets.
It carries business interruption and third-party liability insurance to cover
claims arising out of bodily injury or property or environmental damage caused
by accidents on its property, or otherwise relating to its operations. The
Company also maintains directors and officers liability insurance for all of its
directors and officers.

ITEM 4 - SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS; CONTROL OF
REGISTRANT.

No matters were submitted to a vote of the Company's security holders during the
fourth quarter of fiscal year ended March 31, 2002.

<PAGE>
PART II

ITEM 5 - MARKET FOR REGISTRANT'S EQUITY AND RELATED STOCKHOLDER MATTERS.

The ADSs are traded on the Nasdaq National Market under the symbol "ZNDT". The
table below sets forth the high and low sales prices for the ADSs (as reported
on the Nasdaq National Market) during the periods indicated. The reported last
sale price of the ADSs on the Nasdaq National Market on Thursday, June 27, 2002
was $1.96.

<TABLE>
<CAPTION>
                                                       Price Range of ADSs
                                                   ---------------------------
                                                   High                   Low
                                                   -----                 -----
<S>                                                <C>                   <C>
Fiscal Year Ended March 31, 2001
1st Quarter                                        $4.63                 $2.44
2nd Quarter                                        $4.00                 $2.50
3rd Quarter                                        $2.81                 $0.94
4th Quarter                                        $2.00                 $1.06

Fiscal Year Ended March 31, 2002
1st Quarter                                        $3.38                 $1.06
2nd Quarter                                        $3.42                 $1.06
3rd Quarter                                        $3.00                 $1.18
4th Quarter                                        $2.09                 $1.25
</TABLE>

As of Thursday, June 27, 2002, there were two holders of record of the Shares
(including the depositary on behalf of the holders of ADSs), and 49 holders of
record of ADSs. Zindart's Shares are not traded on any market. Since certain of
the ADSs are held by nominees, the above number is not representative of the
actual number of U.S. beneficial holders or the number of ADSs beneficially held
by U.S. persons. The depositary for the ADSs is The Bank of New York.

While the Company may pay dividends in the future, the Company currently intends
to retain substantially all of its earnings for expansion of its operations in
accordance with its business strategy. Neither Zindart Limited nor any of its
majority-owned subsidiaries declared a cash dividend or other dividend during
the fiscal year ended March 31, 2002.

RECENT SALES OF UNREGISTERED SECURITIES

The Company has granted incentive stock options and/or non-statutory stock
options to employees, directors and consultants. Under its Amended and Restated
1997 Equity Incentive Plan (the "1997 Plan") the Company may grant up to an
aggregate of 2,200,000 options to purchase Shares or ADSs. The Shares issued
pursuant to the 1997 Plan were registered pursuant to three separate
registration statements on Form S-8, filed with the Securities and Exchange
Commission on October 31, 1997, October 13, 1998 and October 17, 2001.

CERTAIN FOREIGN ISSUER CONSIDERATIONS

The Company is a public company with limited liability incorporated under the
Companies Ordinance of Hong Kong. The Company is therefore governed by and
subject to the provisions of Hong Kong law.

Under Hong Kong law, there are currently no restrictions on the degree of
foreign ownership of a company incorporated in Hong Kong. Likewise, there are
currently no restrictions on the rights of non-Hong Kong owners to exercise
voting rights in respect of shares held by them in Hong Kong-incorporated
companies.

There are currently no foreign exchange control restrictions imposed by Hong
Kong law that affect the Company. There are currently no foreign exchange
control restrictions on the ability of the Company to transfer funds into and
out of Hong Kong or to pay dividends to U.S. residents who are holders of the
Shares or ADSs.

In accordance with Hong Kong law, share certificates are only issued in the name
of corporations or individuals. In the case of an applicant acting in a special
capacity (for example, as an executor or trustee), certificates may, at the
request of the applicant, record the capacity in which the applicant is acting.
Notwithstanding the recording of any special capacity, the Company is not bound
to investigate or incur any responsibility in respect of the proper
administration of any such estate or trust. The Company will take no notice of
any trust applicable to any of its securities, whether or not it had notice of
such trust.

<PAGE>
The rights and liabilities of the shareholders of the Company are governed by
the Companies Ordinance, the Memorandum of Association of the Company and the
Articles of Association of the Company. Under Hong Kong law, shareholders are
liable to pay the full purchase price of shares or ADSs registered in their
name, but are not otherwise subject to liabilities vis-a-vis the Company in
their capacity as shareholders.

The Company's subsidiary, Corgi UK, is incorporated under the Company Law of
England and Wales.

TAXATION

The following discussion under "Hong Kong Taxation" generally summarizes the
material Hong Kong tax consequences of an investment in the Shares or ADSs and
the material Hong Kong taxes applicable to the Company's operations in Hong
Kong. The discussion under "United States - Federal Income Tax Considerations"
generally summarizes certain United States federal income tax consequences of an
investment in the Shares or ADSs. The discussion under "PRC Taxation" generally
summarizes the material PRC taxes applicable to the Company's investment in the
PRC. The discussion under "United Kingdom Taxation" generally summarizes the
material United Kingdom taxes applicable to the Company's investment in the
United Kingdom. The summaries do not address all the possible tax consequences
relating to an investment in the Shares or ADSs and do not purport to address
the tax consequences applicable to all categories of investors, some of which
may be subject to special rules. In particular, the discussion does not address
the tax consequences under state or local law or the laws of countries other
than Hong Kong, the United States, the PRC and the United Kingdom. Accordingly,
an investor is urged to consult its own tax advisor regarding the particular tax
consequences to such investor of an investment in the Shares or ADSs. The
following summaries are based upon laws and relevant interpretations thereof in
effect as of the date of this Annual Report on Form 10-K, all of which are
subject to change, possibly with retroactive effect.

HONG KONG TAXATION

The following discussion summarizes the taxes applicable to the Company and its
shareholders under Hong Kong law:

Profits Tax. The Company is subject to profits tax on all profits (excluding
capital profits) arising in or derived from Hong Kong. The source of income is
therefore the relevant factor, and this is generally regarded as a question of
fact. There are certain situations in which the Hong Kong tax authorities are
prepared to accept apportionment of chargeable profits, for example when a Hong
Kong-based company has manufacturing facilities in the PRC. The proportion of
income originating from the PRC and Hong Kong respectively in such situations is
a question of fact. However, where apportionment is appropriate, the Hong Kong
tax authorities usually adopt a 50:50 allocation unless compelling circumstances
dictate otherwise. Profits tax is levied at the rate of 16% for corporations and
15.0% for unincorporated entities. Generally speaking, business losses may be
carried forward indefinitely to be offset against future profits of the Company.

Capital Gains/Taxation of Dividends. Hong Kong has neither capital gains tax nor
any form of dividend taxation or withholding taxes, and hence profits
accumulated in a Hong Kong company can be distributed as dividends without tax
withheld in Hong Kong. However, Hong Kong profits tax will be charged on trading
gains from the sale of property that are derived from or arose in Hong Kong, by
persons carrying on a trade in Hong Kong where such gains are from such trade.
Liability for Hong Kong profits tax would therefore arise in respect of trading
gains from the sale of the ADSs or Shares realized by persons carrying on a
business of trading or dealing in securities in Hong Kong.

Estate Duty. Estate duties are imposed upon the value of properties situated in
Hong Kong that pass to a person's estate upon his or her death. In general, ADSs
or Shares that are registered outside Hong Kong are not regarded as properties
situated in Hong Kong for estate duty purposes.

Stamp Duty. Hong Kong stamp duty is generally payable by the purchaser on every
purchase, and by the seller on every sale, of shares of Hong Kong-incorporated
companies. The duty is charged to both the purchaser and the seller at the rate
of HK$1.125 per HK$1,000 (reduced to HK$1.0 per HK$1,000 effective September 1,
2001) or part thereof of the consideration for, or (if greater) the value of,
the shares transferred. In addition, a fixed duty of HK$5 is currently payable
on an instrument of transfer of such shares. Under the current practices of the
Hong Kong Inland Revenue Department, if ADSs are not specifically identified to
correspond with particular underlying Shares, the issuance of ADSs upon the
deposit of Shares issued directly to the Depositary or for the account of the
Depositary should not be subject to stamp duty, nor should any Hong Kong stamp
duty be payable upon the transfer of ADSs outside Hong Kong.

UNITED STATES FEDERAL INCOME TAX CONSIDERATIONS

The following is a summary of certain United States federal income tax
considerations relevant to U.S. Holders, as defined below, who own Shares or
ADSs. This summary is based upon existing United States federal income tax law,
which is subject

<PAGE>
to change, possibly with retroactive effect. This summary does not discuss all
aspects of United States federal income taxation which may be important to
particular investors in light of their individual investment circumstances, such
as investors subject to special tax rules including financial institutions,
insurance companies, broker-dealers, tax-exempt organizations, and foreign
persons, or to persons that hold Shares or ADSs as part of a straddle, hedge,
conversion, or constructive sale transaction for United States federal income
tax purposes or that have a functional currency other than the U.S. dollar, or
persons treated as owning 10% or more of the voting power of the Company's
Shares, all of whom may be subject to tax rules that differ significantly from
those summarized below. In addition, this summary does not discuss any state,
local, or foreign tax considerations. This summary assumes that investors hold
their Shares or ADSs as "capital assets" (generally, property held for
investment) under the United States Internal Revenue Code. Each investor is
urged to consult its tax advisor regarding the United States federal, state,
local, and foreign income and other tax considerations of the ownership and
disposition of Shares or ADSs.

General. For purposes of this summary, a U.S. Holder is a beneficial owner of
Shares or ADSs that is for United States federal income tax purposes:

-     an individual who is a citizen or resident of the United States;

-     a corporation or partnership created in or organized under the law of the
      United States or any State or political subdivision thereof;

-     an estate the income of which is includible in gross income for United
      States federal income tax purposes regardless of its source;

-     a trust the administration of which is subject to the primary supervision
      of a United States court and which has one or more United States persons
      who have the authority to control all substantial decisions of the trust;
      or

-     a trust that was in existence on August 20, 1996, was treated as a United
      States person, for United States federal income tax purposes, on the
      previous day, and elected to continue to be so treated.

The Company will be treated as a "passive foreign investment company" (a
"PFIC"), for United States federal income tax purposes, if 75% or more of its
gross income consists of certain types of "passive" income or 50% or more of its
assets are passive. Based on its current and projected income, assets, and
activities, the Company presently does not believe that it is a PFIC. This is,
however, a factual determination that is made on an annual basis.

In addition, the Company will be treated as a "controlled foreign corporation"
(a "CFC") if in the aggregate 10% U.S. Holders own more than 50% of the voting
power or the value of the Company's equity. A "10% U.S. Holder" is a U.S. Holder
who owns 10% or more of the voting power of the Company's equity. Complex
attribution rules apply in determining whether a person is treated as a 10% U.S.
Holder and whether 10% U.S. Holders in the aggregate own more than 50% of the
voting power or the value of the Company. Although the Company presently does
not believe that it is a CFC, the principles for applying these tests are not
entirely clear and this determination is based on factors beyond the Company's
control such as the identity of the Company's shareholders, and in the case of
the Company's shareholders treated as pass-through entities for United States
federal income tax purposes, the identity of the owners of such entities.
Accordingly, the Company cannot assure U.S. Holders that it is not or will not
become a CFC.

The discussion below under "Dividends" and "Sale or Other Disposition of Shares
or ADSs," assumes that the Company will not be subject to treatment as a PFIC or
as a CFC for United States federal income tax purposes.

For United States federal income tax purposes, a U.S. Holder of an ADS will be
treated as the owner of a proportionate interest of the Shares held by the
depositary that is represented by an ADS. Accordingly, no gain or loss will be
recognized upon the exchange of an ADS for the holders' proportionate interest
in the underlying Shares. A U.S. Holder's tax basis in the withdrawn shares will
be the same as the tax basis in the ADS surrendered in exchange therefore, and
the holding period in the withdrawn shares will include the period during which
the holder held the surrendered ADS.

Dividends. Any cash distributions paid by the Company out of its earnings and
profits, as determined under United States federal income tax principles, will
be subject to tax as ordinary dividend income and will be includible in the
gross income of a U.S. Holder upon receipt. Cash distributions paid by the
Company in excess of its earnings and profits will be treated as a tax-free
return of capital to the extent of the U.S. Holder's adjusted tax basis in its
Shares or ADSs, and thereafter as gain from the sale or exchange of a capital
asset. Dividends paid in HK dollars will be includible in income in a U.S.
dollar amount based on the U.S. dollar - HK dollar exchange rate prevailing at
the time of receipt of such dividends by the depositary, in the case of ADSs, or
by the U.S. Holder, in the case of shares held directly by such U.S. Holder.
Each U.S. Holder is urged to consult its tax advisor regarding the United States
federal income tax treatment of any foreign currency gain or loss

<PAGE>
recognized on the subsequent conversion of HK dollars into U.S. dollars.
Dividends received on shares or ADSs will not be eligible for the dividends
received deduction allowable to United States corporations.

Dividends received on Shares or ADSs will be treated, for United States federal
income tax purposes, as foreign source income. A U.S. Holder may be eligible,
subject to a number of complex limitations, to claim a foreign tax credit in
respect of any foreign withholding taxes imposed on dividends received on Shares
or ADSs. A U.S. Holder who does not elect to claim a foreign tax credit for
foreign withholding taxes may instead claim a deduction, for United States
federal income tax purposes, in respect of such withholdings, but only for a
year in which the U.S. Holder elects to do so for all creditable foreign income
taxes.

In addition, the United States Treasury has expressed concerns that parties to
whom depositary shares are pre-released may be taking actions that are
inconsistent with the claiming of foreign tax credits by the holders of ADSs.
Accordingly, the analysis of the creditability for foreign withholding taxes
could be affected by future actions that may be taken by the United States
Treasury.

Sale or Other Disposition of Shares or ADSs. A U.S. Holder will recognize
capital gain or loss upon the sale or other disposition of Shares or ADSs in an
amount equal to the difference between the amount realized upon the disposition
and the U.S. Holder's adjusted tax basis in such Shares or ADSs, as each is
determined in U.S. dollars. Any such gain or loss will be long-term if the
Shares or ADSs have been held for more than one year and will generally be
United States source gain or loss. The claim of a deduction in respect of a
capital loss, for United States federal income tax purposes, may be subject to
limitations. If a U.S. Holder receives HK dollars for any such disposition, such
U.S. Holder is urged to consult its tax advisor regarding the United States
federal income tax treatment of any foreign currency gain or loss recognized on
the subsequent conversion of the HK dollars to U.S. dollars.

PFIC Considerations. If the Company were to be classified as a PFIC in any
taxable year, a U.S. Holder would be subject to special rules generally intended
to reduce or eliminate any benefits from the deferral of United States federal
income tax that a U.S. Holder could derive from investing in a foreign company
that does not distribute all of its earnings on a current basis. In such event,
a U.S. Holder of the Shares or ADSs may be subject to tax at ordinary income tax
rates on (i) any gain recognized on the sale of the Shares or ADSs and (ii) any
"excess distribution" paid on the shares or ADSs (generally, a distribution in
excess of 125% of the average annual distributions paid by the Company in the
three preceding taxable years). In addition, a U.S. Holder may be subject to an
interest charge on such gain or excess distribution. Each U.S. Holder is urged
to consult its tax advisor regarding the potential tax consequences to it if the
Company is or becomes a PFIC, as well as certain elections that may be available
to such holder in order to mitigate such consequences.

Controlled Foreign Corporation Considerations. If the Company were to be
classified as a CFC, a 10% U.S. Holder would be required to include in income
its pro rata share of "Subpart F income" of the Company, which generally
includes income of a passive nature such as dividends and interest, whether or
not the Company pays dividends, and would be subject to special rules on the
disposition of Shares or ADSs that may treat all or a portion of any gain as
ordinary income. Each U.S. Holder is urged to consult its tax advisor regarding
the potential tax consequences to such holder if the Company is or becomes a
CFC.

PRC TAXATION

The following discussion summarizes the taxes applicable to the Company's
investment in the PRC under PRC law:

Income Tax. The Company's investment is subject to the Income Tax Law of the PRC
for Enterprises with Foreign Investment and Foreign Enterprises ("the Foreign
Investment Enterprise Tax Law"). Pursuant to the Foreign Investment Enterprise
Tax Law, Sino-foreign equity and contractual joint venture enterprises generally
are subject to an income tax at an effective rate of 33%, which is comprised of
a state tax of 30% and a local tax of 3%. The production joint venture
established in the open coastal area of Mainland China is subject to Mainland
Chinese income taxes at a rate of 27% (24% state income tax and 3% local income
tax), while the joint venture established in a special economic zone in Mainland
China is subject to Mainland Chinese income taxes at a rate of 15%. The Foreign
Investment Enterprise Tax Law generally exempts Sino-foreign equity and
contractual joint venture enterprises engaged in production with an operating
period of more than ten years from state and local income taxes for two years
starting from the first profitable year of operations after offsetting prior
years' losses, followed by a 50% reduction for the next three years. The tax
exemption period of Dongguan Xinda started on January 1, 1999 and expired on
December 31, 2000. It was subject to PRC state income tax at the rate of 12% for
the three months ended March 31, 2001 and for the year ended March 31, 2002. The
tax exemption period of Shenzhen Huaxuan expired on December 31, 1997 and it was
subject to PRC state income tax at the rate of 7.5% for the nine months ended
December 31, 2000. Starting from January 1, 2001, it was and continues to be
subject to PRC state income tax at the rate of 15%.

Value-Added Tax ("VAT"). Effective January 1, 1994, all goods produced or
processed in the PRC, other than real property

<PAGE>
and goods produced or processed for export, are subject to a new VAT at each
stage or sale in the process of manufacture, processing and distribution through
the sale to the ultimate consumer of the goods. The new basic output VAT rate
for the Company is 17% of the sale price of the item except items such as books
and magazines is 13% instead of 17%. Generally, the seller of the goods adds 17%
to the sale price of the item, separately invoiced (except in the case of retail
sales), and collects the applicable amount of output VAT through the sale of the
item. The amount of the seller's output VAT liability to the Tax Bureau is
calculated as the amount of sales multiplied by the applicable output VAT rate.
The amount of the seller's VAT liability may be reduced by deducting the
invoiced amount of input VAT included in the materials, parts and other items
purchased by the seller and used in producing the goods.

The Value-Added Tax Provisional Regulations do not permit the seller to deduct
from its VAT liability the amount of input VAT included in the purchase price of
fixed assets purchased by the seller. Thus, although the book value of fixed
assets, including plant and equipment purchased by the Company will be the
depreciated cost (ordinarily the purchase price plus VAT) paid at the time of
such purchase, the Company is not permitted to deduct from its output VAT
liability in respect of products sold.

Taxation of Dividends from the PRC. Although the Foreign Investment Enterprise
Tax Law provides that certain remittances of foreign exchange earnings from the
PRC are subject to PRC withholding tax, dividends received by a foreign investor
from its foreign investment enterprise are currently exempt from withholding
tax. The Company's PRC subsidiaries are qualified as foreign investment
enterprises, so withholding tax is exempted on dividends paying out to the
Company from these subsidiaries.

Taxation of Disposition of Interest in PRC Subsidiaries. In the event the
Company transfers its interest in its PRC subsidiaries, the amount received in
excess of its original capital contribution would be subject to PRC withholding
tax at the rate of 20% (reduced to 10% effective January 1, 2000).

In the event that the Company's PRC subsidiaries are liquidated, the portion of
the balance of their assets or remaining property, after deducting undistributed
profits, various funds and liquidation expenses, that exceeds the Company's
paid-in capital would be treated as income from liquidation, which would be
subject to income tax at the same rate that would apply to the Company's income
as described under "Income Tax."

UNITED KINGDOM TAXATION

The following discussion summarizes the taxes applicable to the Company's
investment in the United Kingdom under United Kingdom law:

The U.K. statutory corporation tax rate is 30%. The U.K. group companies are
able to claim and surrender tax losses between them under the U.K. group's
relief provisions. As such, deductible interest expenses incurred within the
U.K. parent company can be offset against taxable trading profits earned by
trading entities within the U.K. group only in the same year.

The accounts and computations of the U.K. entities contain relatively
significant amounts in respect of intra-group flows, including funding. Were the
U.K. Inland Revenue to successfully secure adjustments to the returns under the
U.K.'s transfer pricing legislation, the U.K. group's tax position would be
adversely affected, with a consequential increase in the effective tax rate
applicable to the U.K. group.

<PAGE>
ITEM 6 -- SELECTED CONSOLIDATED FINANCIAL DATA

The following selected consolidated financial data for 1998 give retroactive
effect to the acquisition of Hua Yang, which occurred during fiscal year ended
March 31, 1998 as a reorganization of companies under common control. Under such
presentation, net income has been reduced by the minority interests in Hua Yang
not held under common control during the period. The consolidated financial data
presented for fiscal year ended March 31, 2000 are that of Zindart after
including the operating results of Corgi from July 1999, the date of
acquisition. The selected consolidated statement of operations data for the
fiscal years ended March 31, 2000, 2001 and 2002 and selected consolidated
balance sheet data as of March 31, 2001 and 2002 are derived from the audited
Consolidated Financial Statements of the Company, prepared in accordance with
United States Generally Accepted Accounting Principles ("U.S. GAAP"), and notes
thereto appearing elsewhere in this Annual Report on Form 10-K. The selected
consolidated statement of operations data for the fiscal years ended March 31,
1998 and 1999 and the selected consolidated balance sheets data as of March 31,
1998, 1999 and 2000 not included elsewhere in this Annual Report have been
prepared in accordance with U.S. GAAP and have been derived from the audited
financial statements.

The following selected consolidated financial data should be read in conjunction
with "Management's Discussion and Analysis of Financial Condition and Results of
Operations," and the Consolidated Financial Statements of the Company and the
notes thereto contained elsewhere in this Annual Report on Form 10-K.

<TABLE>
<CAPTION>
                                                                           Years Ended March 31,
                                                ----------------------------------------------------------------------
                                                   1998           1999           2000           2001           2002
                                                ----------     ----------     ----------     ----------     ----------
                                                             (In thousands, except per share price data)
<S>                                             <C>            <C>            <C>            <C>            <C>
Statement of Operations Data:-
Net sales                                       $  111,534     $  113,605     $  137,120     $  136,083     $  120,693
Cost of goods sold                                 (77,422)       (78,323)       (91,845)       (93,161)       (86,880)
                                                ----------     ----------     ----------     ----------     ----------
Gross profit                                        34,112         35,282         45,275         42,922         33,813
Selling, general and administrative expenses       (19,140)       (20,479)       (30,573)       (34,502)       (37,779)
Interest income (expense), net                         389             35         (1,924)        (3,701)        (2,565)
Other expense, net                                    (314)          (537)        (1,334)        (1,555)        (1,855)
                                                ----------     ----------     ----------     ----------     ----------
Income (loss) before income taxes                   15,047         14,301         11,444          3,164         (8,386)
Income tax (expense) benefit                        (1,419)        (1,377)        (2,099)          (688)           162
                                                ----------     ----------     ----------     ----------     ----------
Income (loss) before minority interests             13,628         12,924          9,345          2,476         (8,224)
Minority interests                                  (3,632)          (757)          (307)          (294)          (210)
                                                ----------     ----------     ----------     ----------     ----------
Net income (loss)                               $    9,996     $   12,167     $    9,038     $    2,182     $   (8,434)
                                                ==========     ==========     ==========     ==========     ==========
Earnings (loss) per common share:-
- Basic                                         $     1.41     $     1.38     $     1.02     $     0.25     $    (0.95)
                                                ==========     ==========     ==========     ==========     ==========
- Diluted(1)                                    $     1.40     $     1.38     $     1.02     $     0.25     $    (0.95)
                                                ==========     ==========     ==========     ==========     ==========
</TABLE>

<PAGE>

<TABLE>
<Caption>
                                                                    Years Ended March 31, (cont.)
                                                --------------------------------------------------------------------
                                                   1998          1999           2000          2001           2002
                                                ----------    ----------     ----------    ----------     ----------
                                                               (In thousands, except per share data)

<S>                                             <C>           <C>            <C>           <C>            <C>
Weighted average number of common shares
  outstanding:-
- Basic                                              7,109         8,804          8,822         8,834          8,834
                                                ==========    ==========     ==========    ==========     ==========
- Diluted(2)                                         7,155         8,827          8,874         8,834          8,934
                                                ==========    ==========     ==========    ==========     ==========
Balance Sheets Data:-
Cash and cash equivalents                       $   22,373    $   17,061     $   12,488    $    8,738     $    3,714
Net current assets (liabilities)(4)                 40,246        27,429         10,081        10,013         (9,100)
Property, machinery, equipment, net and
  land use right, net                               29,177        30,311         35,804        33,267         31,192
Total assets                                       105,827        90,911        146,598       140,204        125,639
Short-term debt(3)                                      --            --         21,046        16,900         25,563
Long-term bank loans, capital lease
   obligations and convertible note                 30,000            --         18,492        14,937            252
Shareholders' equity                                50,827        67,778         76,805        77,268         68,710
Statements of Cash Flows Data:-
Net cash provided by operating activities           16,520        26,497         17,622        10,729          5,974
Net cash used in investing activities               50,129         6,474         56,715         5,333          4,604
Net cash provided by (used in) financing
  activities                                        34,682       (25,220)        34,669        (8,341)        (6,387)
</TABLE>

(1)   Diluted earnings per common share reflects the dilution that would have
      resulted from the exercise of stock options. Diluted earnings per common
      share is computed by dividing net income for each period by the weighted
      average number of common shares outstanding and all dilutive securities
      outstanding during the periods and is adjusted for the issuance of 279,863
      shares, which represents an approximately 42% effective interest in the
      number of Shares reserved to issue at the closing of the Hua Yang
      Acquisition.

      The diluted loss per common share for the year ended March 31, 2002 is
      anti-dilutive as a result of the net loss. Therefore, the basic and
      diluted loss per common share for the year ended March 31, 2002 are the
      same.

(2)   The weighted average number of common shares outstanding is adjusted for
      the issuance of 279,863 Shares up to February 13, 1998 (date of completion
      of Hua Yang Acquisition), which represents an approximately 42% effective
      interest in the number of Shares reserved to issue at the closing of the
      Hua Yang Acquisition.

(3)   Includes short-term bank borrowings, current portions of long-term bank
      loans, capital lease obligations and convertible note. As of March 31,
      2002, this included the reclassification of long-term debt of
      approximately $5.6 million relating to the breach of loan covenants under
      such banking facilities.

(4)   As of March 31, 2002, net current liabilities arose due to the
      reclassification of long-term debt of approximately $5.6 million relating
      to the breach of loan covenants under such banking facilities.
<PAGE>
ITEM 7 -- MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
          RESULTS OF OPERATIONS

This Management's Discussion and Analysis of Financial Condition and Results of
Operations contains forward-looking statements within the meaning of Section 27A
of the Securities Act of 1933, as amended and Section 21E of the Securities
Exchange Act of 1934, as amended, regarding events and trends which may affect
the Company's future operating results and financial position. These statements
are subject to risks, assumptions and uncertainties that could cause actual
results to differ materially from those anticipated. These risks, assumptions
and uncertainties include, but are not limited to, changes in market demand for
our products, changes in general economic conditions, dependence on certain
customers, the results of our planned growth initiatives, competition, changes
in governmental regulations, a decline in capital markets, changes in the
political, social and economic situations of the United States, Hong Kong and
the PRC, and other risks described in the section in this Annual Report on Form
10-K entitled "Risk Factors". In some cases, forward looking statements can be
identified by terminology such as "may," "will," "should," "could," "predicts,"
"potential," "continue," "expects," "anticipates," "future," "intends," "plans,"
"believes," "estimates," and similar expressions. The forward-looking statements
are based on information available to the Company on the date of this Annual
Report. The Company undertakes no obligation to revise or publicly release the
results of any revision to these forward-looking statements to reflect
subsequent events or circumstances. Readers should carefully review the risk
factors described in this annual report on Form 10-K as well as in other
documents that we file from time to time with the Securities and Exchange
Commission, including the quarterly reports on form 10-Q and any current reports
on Form 8-K.

The following discussion and analysis should be read in conjunction with the
consolidated financial statements and the notes thereto and the information
contained in this Annual Report.

Overview

The Company is a turnkey manufacturer of high-quality die-cast, injection-molded
plastic and paper products that require a significant degree of engineering and
hand-assembly expertise to produce. The Company markets and distributes some of
its die-cast products under the Corgi brand names. The Company manufactures
die-cast collectibles, collectible holiday ornaments, toys, hand-made books,
specialty packaging and other paper products. The Company is headquartered in
Hong Kong and its manufacturing operations are located in the neighboring
Guangdong Province of the PRC. The Corgi products are marketed from the
Company's subsidiaries in the United Kingdom and the United States.

The Company services a growing number of customers that are brand-name marketers
of die-cast and injection-molded giftware and collectibles, as well as
publishers of books and board games in the United States and Europe and
marketers of luxury consumable goods. Customers for die-cast and
injection-molded plastic products include Hallmark, Mattel(R), Sieper Werke
GmbH, Promotional Partners Group Ltd., Freeplay Group, Spin Master Toys Far East
Ltd. and Revell Monogram Inc. Customers for books, paper and packaging products
include Mattel(R), IBI, Jetta Co. Ltd., Penguin Putnam Inc. and Macmillan
Children's Books, L.V.M.H., Usborne Publishing, Scholastic Inc. and Cranium Inc.
Corgi serves its market through a number of distribution channels including
wholesale, retail, direct response and the Internet.

The Company operates in three business segments: (1) manufacturing of die-cast
and injection-molded plastic products under OEM arrangements (the "Die-Cast
Division"), (2) manufacturing of paper products under OEM arrangements (the
"Paper Division") and (3) design, marketing and distribution of die-cast
products under the proprietary brand names owned by its subsidiary, Corgi UK
(the "Corgi Division").

Results of Operations

Quarterly Results of Operations

The table below sets forth unaudited quarterly results of the operations for
each of the quarters in the fiscal year ended March 31, 2002 and fiscal year
ended March 31, 2001. All quarterly information was obtained from unaudited
consolidated financial statements not otherwise contained herein. The Company
believes that all necessary adjustments have been made to present fairly the
quarterly information when read in conjunction with the consolidated financial
statements and notes thereto included elsewhere herein. The operating results
for any quarter are not necessarily indicative of the results for any future
period.

<PAGE>
                  (In thousands, except per share price data)

<TABLE>
<CAPTION>
                                                 QUARTER (UNAUDITED)
                                  ----------------------------------------------        FULL
                                    First        Second     Third        Fourth         YEAR
                                  --------     --------    --------     --------     ---------
<S>                               <C>          <C>         <C>          <C>          <C>
Fiscal year 2002

Net sales                         $ 28,265     $ 37,692    $ 27,594     $ 27,142     $ 120,693
Gross profit                         7,328       10,824       7,209        8,452        33,813
(Loss) Income before
  income taxes                      (2,947)         188      (4,167)      (1,460)       (8,386)
Net (loss) income                   (2,562)         205      (3,683)      (2,394)       (8,434)

(Loss) Earnings Per Common
  Share
- Basic                              (0.29)        0.02       (0.42)       (0.27)        (0.95)
- Diluted                            (0.29)        0.02       (0.42)       (0.27)        (0.95)
</TABLE>

<TABLE>
<CAPTION>
                                               QUARTER (UNAUDITED)
                                  ----------------------------------------------        FULL
                                    First       Second      Third        Fourth         YEAR
                                  --------     --------    --------     --------     ---------
<S>                               <C>          <C>         <C>          <C>          <C>
Fiscal year 2001

Net sales                         $ 35,335     $ 33,271    $ 36,969     $ 30,508     $ 136,083
Gross profit                        10,842       10,309      11,348       10,423        42,922
Income before income taxes             609          429       1,108        1,018         3,164
Net income                             609          325         812          436         2,182

Earnings Per Common Share
- Basic                               0.07         0.04        0.09         0.05          0.25
- Diluted                             0.07         0.04        0.09         0.05          0.25
</TABLE>

Yearly Results of Operations

The table below sets forth certain statements of operations data as a percentage
of net sales for fiscal years ended March 31, 2000, 2001 and 2002.

<TABLE>
<CAPTION>
                                                 2000        2001        2002
                                                ------      ------      ------
<S>                                             <C>         <C>         <C>
Net sales                                        100.0 %     100.0 %     100.0 %
Gross profit                                      33.0 %      31.5 %      28.0 %
Selling, general and administrative expenses     (22.3)%     (25.4)%     (31.3)%
Amortization of goodwill                          (1.1)%      (1.4)%      (1.6)%
Operating income (loss)                            9.6 %       4.7 %      (4.9)%
Interest expense, net                             (1.5)%      (2.7)%      (2.1)%
Other income, net                                  0.2 %       0.3 %       0.1 %
Income (loss) before income taxes                  8.3 %       2.3 %      (6.9)%
Income tax (expense) benefit                      (1.5)%      (0.5)%       0.1 %
Minority interests                                (0.2)%      (0.2)%      (0.2)%
Net income (loss)                                  6.6 %       1.6 %      (7.0)%
</TABLE>

Years Ended March 31, 2002 and 2001

Net Sales. The Company's net sales were $120.7 million for the fiscal year ended
March 31, 2002, a decrease of $15.4 million, or 11.3%, from $136.1 million
during the fiscal year ended March 31, 2001. The decrease was primarily due to
the reduction in sales in the Die-cast and Paper Divisions as a result of global
economic slowdown.

Gross Profit and Gross Margin. The Company's gross profit was $33.8 million for
the fiscal year ended March 31, 2002, a decrease of $9.1 million, or 21.2%, from
$42.9 million during the fiscal year ended March 31, 2001. Gross margin was
28.0% in fiscal year ended March 31, 2002 and 31.5% in fiscal year ended March
31, 2001. The decreases in gross margin and gross profit were due to lower sales
volume, unfavorable product mix and excess operating costs in all divisions.

Selling, General and Administrative Expenses. The Company's selling, general and
administrative expenses were $37.8 million for the fiscal year ended March 31,
2002, an increase of $3.3 million, or 9.6%, from $34.5 million during the fiscal

<PAGE>
year ended March 31, 2001. Selling, general and administrative expenses
constituted 31.3% of net sales in fiscal year ended March 31, 2002 and 25.4% in
fiscal year ended March 31, 2001. The increase in selling, general and
administrative expenses was due to an increase of 36% in advertising
expenditures in the Corgi Division, a write off of $400,000 for the impairment
of the accounts receivable and a valuation allowance of $400,000 for the
impairment of the loan receivable resulting from the financing restructuring by
IBI in the Die-cast and Paper Divisions.

Amortization of Goodwill. The Company's amortization of goodwill was $2.0
million in fiscal year ended March 31, 2002 and 2001. The amortization expense
is a result of the acquisition of subsidiaries.

Interest Expense, Net. The Company's interest expense, net, was $2.6 million in
fiscal year ended March 31, 2002, as compared to $3.7 million in fiscal year
ended March 31, 2001. The decrease in the Company's interest expense, net, was
due to the reduction of the principal of the term loan for the acquisition of
Corgi UK as well as continuous interest rate reductions in the United States and
Hong Kong.

Other Income, Net. The Company's other income, net, was $121,000 in fiscal year
ended March 31, 2002, as compared to $419,000 during the fiscal year ended March
31, 2001. The decrease in the Company's other income, net, was due to the fact
that no new investment income was recorded during the fiscal year ended March
31, 2002, as compared to the recording of investment income for warrants issued
by IBI in relation to the extension of the credit facilities entered into during
the fiscal year ended March 31, 2001. For more information about the extension
of credit to IBI by the Company, see the section entitled "Liquidity and
Capital Resources" in this Management's Discussion and Analysis of Financial
Conditions and Results of Operations.

Income Tax (Expense) Benefit. The Company's income tax (expense) benefit was
$162,000 in fiscal year ended March 31, 2002, as compared to $(688,000) in
fiscal year ended March 31, 2001. The increase in income tax benefit is due to
the net loss during the fiscal year ended March 31, 2002, as compared to the net
income during the fiscal year ended March 31, 2001.

Minority Interests. The Company's minority interests were $210,000 in fiscal
year ended March 31, 2002 and $294,000 in fiscal year ended March 31, 2001. The
decrease was due to lower net income in the Company's subsidiaries.

Net Income (Loss). The Company's net income (loss) was $(8.4) million in fiscal
year ended March 31, 2002, a decrease of $10.6 million or 481.8% from $2.2
million in fiscal year ended March 31, 2001. The decrease was primarily due to
lower sales and lower gross margin; higher selling, general and administrative
expenses incurred by the Corgi Division in connection with its expansion into
the U.S. markets, a write off for the impairment of the accounts receivable and
a valuation allowance for the impairment of the loan receivable resulting from
the financial restructuring by IBI. For more information about the extension of
credit to IBI by the Company, see the section entitled "Liquidity and Capital
Resources" in this Management's Discussion and Analysis of Financial Conditions
and Results of Operations.

Years Ended March 31, 2001 and 2000

Net Sales. The Company's net sales were $136.1 million for fiscal year ended
March 31, 2001, a decrease of $1.0 million, or 0.7%, from $137.1 million in
fiscal year ended March 31, 2000. The decrease was primarily due to the
reduction in sales in the Die-Cast Division as a result of overall industry
downturn. The reduction was partially offset by a full year of sales in fiscal
year ended March 31, 2001 for the Corgi Division as compared with eight months
of sales for the Corgi Division in fiscal year ended March 31, 2000.

Gross Profit and Gross Margin. The Company's gross profit was $42.9 million for
fiscal year ended March 31, 2001, a decrease of $2.4 million, or 5.3%, from
$45.3 million in fiscal year ended March 31, 2000. Gross margin was 31.5% in
fiscal year ended March 31, 2001 and 33.0% in fiscal year ended March 31, 2000.
Gross margin decreased due to lower sales and lower margins in the Die-Cast
Division as a result of the change in product mix, competitive price for the
Paper Division, as well as higher royalty costs and more premium sales with
lower margins in the Corgi Division.

Selling, General and Administrative Expenses. The Company's selling, general and
administrative expenses were $34.5 million for fiscal year ended March 31, 2001,
an increase of $3.9 million, or 12.7%, from $30.6 million in fiscal year ended
March 31, 2000. Selling, general and administrative expenses constituted 25.4%
of net sales in fiscal year ended March 31, 2001 and 22.3% in fiscal year ended
March 31, 2000. Selling, general and administrative expenses for the Company
increased due to the increase of the Corgi Division's expenses as a result of
the incremental running costs associated with the new Lledo and Corgi US
businesses. Moreover, selling, general and administrative expenses included a
full year effect for the Corgi Division in fiscal year ended March 31, 2001, as
compared to only eight months in fiscal year ended March 31, 2000.

Amortization of Goodwill. The Company's amortization of goodwill was $2.0
million in fiscal year ended March 31, 2001, an increase of $0.5 million from
$1.5 million in fiscal year ended March 31, 2000. The increase was due to the
amortization expense in relation to acquisition of Corgi UK having a full year
effect as compared with eight months results in fiscal year ended March 31,
2000.

<PAGE>
Interest Expense, Net. The Company's interest expense, net, was $3.7 million in
fiscal year ended March 31, 2001, as compared to $1.9 million in fiscal year
ended March 31, 2000. The increase in interest expense was primarily due to the
Company's acquisition of Corgi.

Other Income, Net. The Company's other income, net, was $419,000 in fiscal year
ended March 31, 2001, as compared to $208,000 in fiscal year ended March 31,
2000. The increase in other income was primarily due to the recording of
investment income for warrants issued by IBI in relation to the extension of the
credit facilities entered in the fiscal year ended March 31, 2001.

Income Tax (Expense) Benefit. The effective income tax rate for the Company was
21.7% in fiscal year ended March 31, 2001 and 18.3% in fiscal year ended March
31, 2000. The increase is due to the higher effective income tax rate of the
Corgi Division and an increase in non-tax deductible expenses such as
amortization of goodwill.

Minority Interests. The Company's minority interests were approximately $300,000
in fiscal year ended March 31, 2001 and 2000.

Net Income (Loss). The Company's net income was $2.2 million in fiscal year
ended March 31, 2001, a decrease of $6.8 million or 75.6% from $9.0 million in
fiscal year ended March 31, 2000. The decrease is primarily due to the lower
sales, lower gross margin as well as higher selling, general and administrative
expenses of the Corgi Division.

Liquidity and Capital Resources

On July 28, 1999, the Company acquired all of the outstanding shares of Corgi
UK. The Corgi Acquisition was financed by a $30.0 million term loan extended on
July 28, 1999 to Corgi Classics Holdings Ltd. by ABN AMRO Bank N.V. (London
Branch) (the "Corgi Term Loan"). A standby letter of credit facility between ABN
AMRO Bank, N.V. (Hong Kong Branch) and certain other financial institutions and
the Company also in the amount of $30.0 million, was entered into on the same
date in support of the Corgi Term Loan.

From July 1999 through March 2001, the Company repaid $21.0 million (70%) of its
original $30.0 million Corgi Term Loan. In order to release working capital to
expand its sales and marketing efforts, the Company completed a $9.0 million
refinancing (the "Refinancing Loan") with four international banks: ABN AMRO
Bank, N.V. (Hong Kong Branch), KBC Bank, N.V. (Hong Kong Branch), Standard
Chartered Bank and Rabo Bank (Hong Kong Branch) (collectively, the "Lenders") in
March 2001. The Refinancing Loan extended the loan terms and reduced the
quarterly repayment commitments. As of March 31, 2002, the outstanding amount
under the Refinancing Loan was $7.0 million.

In connection with the Corgi Acquisition, the Company issued a total of $4.7
million (equivalent of GBP3.0 million) in convertible loan notes to certain
stockholders of Corgi UK (the "Loan Note"). The Loan Note matures at various
dates within a three year period ending in July 28, 2002. The Loan Note carries
with it a right, exercisable by the Loan Note holders (as defined in the Loan
Note), to require the Company to purchase the outstanding amount of the Loan
Note in exchange for the issuance to the Loan Note holders of shares of the
Company at a price equal to 80 percent of the average market price of the
Company's common stock over a ten-day period prior to exercise of the right, so
long as the average market price is above $12. This right is exercisable over a
three-year period commencing on July 28, 1999 subject to certain conditions. The
outstanding amount of the Loan Note as of March 31, 2002 was $1.6 million
(equivalent of GBP1.1 million).

In January 2001, Corgi UK entered into two agreements (collectively, the "RBS
Loan Agreements") with RBS to support the Corgi Division's expansion into U.S.
markets and general working capital requirements. Under the terms of the RBS
Loan Agreements, RBS agreed to provide Corgi UK a term loan of $5.8 million
(equivalent of GBP4 million) as well as a revolving working capital facility of
$4.3 million (equivalent GBP3 million). As of March 31, 2002, the outstanding
amount for term loan was $5.2 million and the outstanding amount for revolving
working capital facility was $2.8 million.

Under the terms of the Refinancing Loan and RBS Loan, the Company is required to
comply with various restrictive financial covenants imposed by the Lenders and
RBS. The financial covenants include, among others, the maintenance of specific
tangible net assets, ratio of net borrowings to tangible net assets, ratio of
current assets to current liabilities, interest cover, earnings before interest
and tax ("EBIT"), debt service ratio, ratio of net cash flow to borrowing costs,
ratio of EBIT to borrowing costs and amount of capital expenditure. The Company
was in violation of all financial covenants as of March 31, 2002 except for the
covenant limiting capital expenditure, giving the Lenders and RBS the right to
accelerate the due dates of the Refinancing Loan and RBS Loan. In June 2002, the
Company obtained letters from the Lenders and RBS acknowledging its
non-compliance with the aforementioned financial covenants as of March 31, 2002.
However, the Company will be required to meet certain revised financial
covenants during the fiscal year ending March 31, 2003 with specific terms to be
finalized, failing which the Lenders and RBS would have the right to accelerate
the due dates of the Refinancing Loan and RBS Loan. Further, the revised
financial covenants state that it is an event of default if there is a material
adverse change in

<PAGE>
the Company's ability to comply with its obligations under the Refinancing Loan
and RBS Loan. Taking into consideration the above matters, the Company's
long-term bank loans under the Refinancing Loan and RBS Loan have been
reclassified as a current liability as of March 31, 2002.

The Company has also suffered a loss from operations during the fiscal year
ended March 31, 2002, the only year of loss over the past ten years, as a result
of the economic downturn. Management has implemented stringent control to
improve costs, productivity and margins. Management continues to consider assets
divestment to improve cash flows. The directors and management believe that the
Company's future operations, including asset divestment, will generate
sufficient cash to meet its obligations as they become due. However, the failure
to meet any of the financial covenants would constitute an event of default
which would give the Lenders and RBS the right to accelerate the due dates of
their loans and the Company may not have sufficient cash to repay the loans.

Cash and cash equivalents were $3.7 million as of March 31, 2002. Cash generated
from operating activities was $6.0 million for fiscal year ended March 31, 2002.
Cash used in investing activities for fiscal year ended March 31, 2002 was $4.6
million. Such cash was used primarily in connection with the acquisition of
tools. Cash used in financing activities was $6.4 million for fiscal year ended
March 31, 2002.

The Company has lines of credit with certain banks including: ABN AMRO Bank, KBC
Bank, Standard Chartered Bank, The Hong Kong and Shanghai Banking Corporation
Limited, and The Royal Bank of Scotland plc (the "RBS"). As of March 31, 2002,
the Company had outstanding banking facilities of $55.9 million and
unused facilities of $31.3 million.

Consistent with practice in industry, the Company offers accounts receivable
terms to its customers. This practice creates working capital requirements that
the Company generally finances with net cash balances through short-term
borrowings. The Company's accounts receivable balance at March 31, 2002 was
$23.3 million.

In May 1999, the Company entered into a loan and security agreement with IBI
(the "IBI Agreement"). Under the terms of IBI Agreement, the Company agreed to
provide a $2.3 million revolving credit facility to IBI (the "IBI Credit
Facility"), which was scheduled to mature in May 2000 and secured by certain
assets of IBI. Pursuant to the IBI Agreement, IBI extended the IBI Credit
Facility for an additional year and issued warrants to the Company to purchase
150,000 shares of common stock of IBI at price of $1.73 per share. The Warrants
are non-transferable and were exercisable during a two-year period ended May 12,
2002. All Warrants expired unexercised.

In April 2001, the Company entered into an amendment to the IBI Agreement, which
extended the maturity date of the IBI Facility to June 30, 2002. Pursuant to
this amendment, IBI repaid the Company $250,000 in April 2001.

In December 2001, the Company and IBI entered into a second amendment to the IBI
Agreement. Under the terms of the second amendment, the parties renegotiated the
terms of payment for (1) the outstanding principal under the IBI Agreement and
(2) the outstanding balance of past due trade payables under the second
amendment to the IBI Agreement.

At the time of the second amendment, the outstanding principal was $2,050,000.
With respect to the outstanding principal, the parties agreed that (a) $400,000
of the outstanding principal will be converted into common stock of IBI at $0.63
per share, with voting rights which will be subject to the terms and provisions
of a voting agreement, to be executed between the Company and Intervisual
Partners LLC (IBI's parent corporation), (b) $400,000 of the outstanding
principal will be canceled in the quarter ending September 30, 2002, contingent
upon satisfactory payment performance by IBI of certain obligations and (c) the
remaining $1.25 million of the outstanding principal will be payable in
twenty-four equal monthly installments beginning August 31, 2002.

At the time of the second amendment, the outstanding balance of past due trade
payables was $1,250,000. The parties agreed that (a) $400,000 of the outstanding
past due trade payables will be converted into common stock of IBI at $0.63 per
share on a date to be determined by the Company, with voting rights which will
be subject to the terms and provisions of a voting agreement, to be executed
between the Company and Intervisual Partners LLC; (b) $400,000 of the past due
trade payables will be canceled in January 2002 upon the closing of the sale of
certain IBI's preferred stock and (c) the remaining balance will be payable in
seven equal monthly installments beginning January 31, 2002.

In December 2001, the Company provided a valuation allowance of $400,000 for the
outstanding principal and wrote off an amount of $400,000 for the outstanding
past due trade payables.

In January 2002, $400,000 of the outstanding principal and $400,000 of the
outstanding past due trade payables were converted into common stock of IBI.

IBI has repaid past due trade payables in monthly installments on time beginning
January 31, 2002. IBI has experienced net

<PAGE>
income and positive cash flow for it's quarter ended March 31, 2002. Management
of the Company will continue to monitor the situation and expects to take
necessary action as appropriate at the time to recover the loan. No assurances
can be given as to the ability of the Company to recover the amount due to the
Company under the terms of the IBI Credit Facility, as amended, and the
inability to do so could have a material adverse effect on the Company's
financial condition. Management of the Company will determine at each reporting
date whether the value of the loan could be impaired, and if appropriate, record
necessary provision.

The Company's principal source of cash to fund its liquidity needs is net cash
generated from operating activities and cash available under lines of credit.
The Company continues to consider assets divestment to improve cash flows. The
Company believes that these sources will be adequate to meet the Company's
anticipated future requirements for working capital and capital expenditures,
assuming that the revised financial covenants in the RBS Loan and the Refinance
Loan are finalized and that the Company is able to meet the revised financial
covenants as set forth therein. However, there can be no assurances that these
resources will be adequate to meet the Company's needs in the future. In the
event that the Company requires additional capital, it may be required to issue
additional equity securities, which could result in dilution to existing
stockholders, or to borrow funds, which could adversely affect operating
results. Such capital may not be available on appropriate terms, if at all.

Contractual obligations

The Company had capital commitments for acquisition of property, machinery and
equipment for a total of US$1.6 million as of March 31, 2002.

The Company has various operating lease agreements for factory premises, staff
quarters which extend through April 2009. As of March 31, 2002, the total future
minimum payments under agreements classified as operating leases agreements with
non-cancelable terms were US$2.7 million.

Under the supplementary joint venture agreement for the establishment of
Dongguan Xinda and Shenzhen Huaxuan, the Company has committed to pay
pre-determined annual fees to the respective third-party joint venture partners
for the period from November 1994 to October 2010. As of March 31, 2002, the
total future fees payable under these agreements were US$5.6 million.

The Company entered into certain foreign currency forward contracts in order to
settle trade payable denominated in foreign currencies. As of March 31, 2002,
the Company had outstanding foreign currency forward contracts to sell
approximately GBP 2.3 million for HK$25 million. These contracts matured in
April and May 2002.

Critical Accounting Policies: Accounting Estimates

In preparing our consolidated financial statements in conformity with accounting
principles generally accepted in the United States of America, we must make a
variety of estimates that affect the reported amounts and related disclosures.
The following accounting policies are currently considered most critical to the
preparation of our financial statements.

Revenue Recognition. The Securities and Exchange Commission's Staff Accounting
Bulletin ("SAB") No. 101: "Revenue Recognition". SAB No. 101 requires that four
basic criteria must be met before revenue can be recognized: (1) persuasive
evidence of an arrangement exists; (2) delivery has occurred or services
rendered; (3) the fee is fixed and determinable; and (4) collectibility is
reasonably assured. Based on the above criteria our revenue is recognized at the
time when the merchandise is shipped and title to the merchandise has passed to
customers. Title to the merchandise may transfer to the customer when shipped or
when received by the customer based on the specific agreement. We grant
discounts or allowances on merchandise and account for these discounts and
allowances as a deduction from sales. We evaluate our provisions for estimated
discounts and allowances periodically based on historical trends. To date, we
have not experienced any significant discounts and allowances. Any material
increase in the level of returns could have a material and adverse effect on our
financial statements.

Inventory Valuation. We write down our inventory for estimated obsolescence or
unmarketable inventory equal to the difference between the cost of inventory and
the estimated market value based upon assumptions about future demand and market
conditions. If actual future demand or market conditions are less favorable than
those projected by management, additional write-downs may be required.

Impairment on loan restructuring. On December 31, 2001, the terms of the credit
facility with a Borrower were amended. The loan restructuring was accounted for
in accordance with SFAS No. 15: "Accounting by Debtors and Creditors for
Troubled Debt Restructurings" and SFAS No. 114: "Accounting by Creditors for
Impairment of A Loan - an Amendment of FASB Statement No. 5 and 15". The loan
restructuring involved receipt of common stock from the Borrower in partial
satisfaction of the aforementioned loan and a modification of terms of the
remaining loan. The loan receivable from the

<PAGE>
Borrower was first reduced by the fair value of common stock received from the
Borrower. The remaining balance was recorded at the present value of expected
future cash flows to be received under the modified terms of the restructured
loan. If the present value of expected future cash flows to be received under
the modified terms of the restructured loan is less than the remaining balance,
we recognize an impairment by creating a valuation allowance with a
corresponding charge to bad debt expense.

Valuation of Long-lived Assets. We assess the carrying value of long-lived
assets whenever events or changes in circumstances indicate that the carrying
value may not be recoverable. Factors we consider important which could trigger
an impairment review include the following:

(1)   significant under-performance relative to expected historical or projected
      future operating results;

(2)   significant changes in the manner of our use of the asset;

(3)   significant negative industry or economic trends; and

(4)   our market capitalization relative to net book value.

Upon the existence of one or more of the above indicators of impairment, we test
such assets for a potential impairment. The carrying value of a long-lived asset
is considered impaired when the anticipated cash flows are less than the asset's
carrying value. In that event, a loss is recognized based on the amount by which
the carrying value exceeds the fair market value of the long-lived asset. Fair
market value is determined primarily using the anticipated cash flows discounted
at a rate commensurate with the risk involved.

Deferred taxes. As part of the process of preparing our consolidated financial
statements, we are required to estimate our income taxes and tax bases of assets
and liabilities in each of the jurisdictions in which we operate. This process
involve us estimating our current tax exposure together with assessing temporary
differences resulting from differing treatment of items for tax and accounting
purposes. These differences result in deferred tax assets and liabilities, which
are included in our consolidated balance sheet. We must then assess the
likelihood that our deferred tax assets will be recovered from future taxable
income, and, to the extent we believe that recovery is more unlikely than
likely, we must establish a valuation allowance. To the extent we establish a
valuation allowance or increase this allowance in a period, we must include an
expense with the tax provision in the statement of operations.

Critical Accounting Policies: Adoption of New Accounting Policies

In June 2001, the Financial Accounting Standards Board ("FASB") issued Statement
of Financial Accounting Standards ("SFAS") No. 141: "Business Combinations" and
Statement of Financial Accounting Standards ("SFAS") No. 142: "Goodwill and
Other Intangible Assets," effective for fiscal years beginning after December
15, 2001. SFAS No. 141 requires that the purchase method of accounting be used
for all business combinations completed after June 30, 2001. The adoption of
SFAS No. 141 is not expected to have a material impact on the Group's financial
statements. SFAS No. 142 requires, among other provisions, companies to assess
the possible impairment of goodwill existing at the date of adoption and perform
subsequent impairment tests on an annual basis. Additionally, existing goodwill
and intangible assets must be reassessed and classified consistently in
accordance with the Statement's criteria. Under this new statement, the Company
will no longer amortize goodwill but will instead assess goodwill impairment
using specialized independent advisors.

Furthermore, under this new Statement, intangible assets with determinable
useful lives will continue to be amortized over their estimated useful lives,
which, if supportable, may be a period that exceeds the current maximum period
of 40 years. Intangible assets with indeterminable useful lives will not be
amortized but rather, will be assessed for impairment in accordance with SFAS
No. 144. The Company is required to and will adopt SFAS No. 142 on April 1,
2002. As of March 31, 2001 and 2002, the carrying amount of goodwill amounted to
$47,210,000 and $45,234,000, respectively. Goodwill amortization for the years
ended March 31, 2000, 2001 and 2002 were $1,542,000, $1,974,000 and $1,976,000,
respectively. The Company has made a preliminary assessment of goodwill and
other intangible assets in accordance with the provisions of this new Statement,
and believes that adoption of SFAS No. 142 will not have a material adverse
impact on the Group's financial statements.

In August 2001, FASB issued Statement of Financial Accounting Standards ("SFAS")
No. 143: "Accounting for Asset Retirement Obligations". This Statement requires,
among other provisions, retirement obligations to be recognized when they are
incurred and displayed as liabilities, with a corresponding amount capitalized
as part of the related long-lived asset. The capitalized element is required to
be expensed using a systematic and rational method over its useful life. The
Company is required to and will adopt SFAS No. 143 on April 1, 2003. The
adoption of SFAS No. 143 is not expected to have a material impact on the
Group's financial statements.

In October 2001, FASB issued Statement of Financial Accounting Standards
("SFAS") No. 144: "Accounting for the Impairment or Disposal of Long-Lived
Assets". The Statement supersedes SFAS No. 121, "Accounting for the Impairment

<PAGE>
of Long-Lived Assets and for Long-Lived Assets to be Disposed Of" and modifies
APB Opinion No. 30, "Reporting the Results of Operations - Reporting the Effects
of Disposal of a Segment of a Business, and Extraordinary, Unusual and
Infrequently Occurring Events." For long-lived assets to be held and used, the
Statement retains the requirements of SFAS No. 121, whereby an impairment loss
is recognized if the carrying value of the asset is not recoverable from its
undiscounted cash flows and an impairment loss is measured as the difference
between fair values and carrying values of the asset. The new Statement requires
long-lived assets to be disposed of other than by sale to be considered held and
used until it is disposed of. The Statement also broadens the scope of APB 30
provisions for the presentation of discontinued operations separately from
continuing operations to include a component of an entity that either has been
disposed of or is classified as held for sale. In addition, discontinued
operations are no longer measured on a net realizable value basis, and expected
future operating losses must be reflected in the periods incurred, rather than
at the measurement date as previously required by APB 30. The Company is
required to and will adopt SFAS No. 144 on April 1, 2002. The adoption of SFAS
No. 144 is not expected to have a material impact on the Group's financial
statements.

In April 2002, FASB issued Statement of Financial Accounting Standards ("SFAS")
No. 145: "Rescission of FASB Statements No. 4, 44, and 64, Amendment of FASB
Statement No. 13, and Technical Corrections". This statement made revisions to
the accounting for gains and losses from the extinguishment of debt, rescinded
Statement No. 44, and required certain lease modifications that have economic
effects similar to sale-leaseback transactions be accounted for in the same
manner as sale-leaseback transactions. The Company is required to and will adopt
SFAS No. 145 on April 1, 2003. The Company is in the process of evaluating the
effect the adoption of this standard will have on the consolidated results of
operations, financial position and cash flows, if any.

Seasonality

The Company's operating results in the past have fluctuated and those results
may fluctuate in the future. The Company ceases production for a two-week period
during January or February of each year due to the Chinese New Year holiday,
which has caused revenues during the fourth fiscal quarter of each year to be
lower than revenues during the other three quarters. The Company may also
experience fluctuations in quarterly sales and related net income compared with
other quarters due to the timing of receipt of orders from customers and the
shipment of products. Sales of books are weighted toward the Christmas season;
as a result, book sales in the first half of the fiscal year are generally
higher than the second half. The Company may experience annual and quarterly
variations in operating results and, accordingly, the trading price of the ADSs
may be subject to fluctuations in response to such variations.

<PAGE>
ITEM 7A -- QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK

The Company's primary risk exposures arise from changes in interest rates and
foreign currency exchanges rates.

Interest Rates. The Company had $24.3 million in variable rate debt outstanding
at March 31, 2002. The Company does not currently hedge its interest rate
exposure. Based on its current level of variable rate debt, the Company believes
that its financial position, results from operations and cash flows would not be
adversely affected if the applicable interest rate were increased one percent.

Foreign Currency Risks. The Company is exposed to risk from changing foreign
currency exchange rates. The Company's sales are denominated either in U.S.
dollars, GBP, HK dollars or Euros. The majority of the Company's expenses are
denominated in HK dollars, followed by RMB, GBP, Euros and U.S. dollars. The
Company is subject to a variety of risks associated with changes among the
relative value of the U.S. dollar, GBP, Euro, HK dollar and RMB. The Company
does not currently hedge its foreign exchange positions. Any material increase
in the value of the HK dollar, RMB, GBP or Euro relative to the U.S. dollar
would increase the Company's expenses and therefore would have a material
adverse effect on the Company's business, financial condition and results of
operations. If exchange rates on such currencies were to fluctuate by 10%, the
Company believes that its financial position, results from operations and cash
flows would not be adversely affected.

Inflation. Although the Company cannot accurately determine the precise effect
of inflation on its operations, it does not believe inflation has had a material
effect on sales or results of operations.

<PAGE>
ITEM 8 -- REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS

To the Shareholders and Board of Directors of Zindart Limited:

We have audited the accompanying consolidated balance sheets of Zindart Limited
(incorporated in Hong Kong; "the Company") and subsidiaries ("the Group") as of
March 31, 2001 and 2002, and the related consolidated statements of operations
and comprehensive income, shareholders' equity and cash flows for the years
ended March 31, 2000, 2001 and 2002. These financial statements are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these financial statements based on our audits.

We conducted our audits in accordance with auditing standards generally accepted
in the United States of America. Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.

In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the financial position of Zindart Limited and
subsidiaries as of March 31, 2001 and 2002, and the results of their operations
and cash flows for the years ended March 31, 2000, 2001 and 2002, in conformity
with accounting principles generally accepted in the United States of America.

The accompanying financial statements have been prepared assuming that the
Company will continue as a going concern. As discussed in Note 1 to the
financial statements, the Group was in violation of certain financial loan
covenants as of March 31, 2002. Although the Group has obtained letters from the
relevant banks acknowledging the Group's March 31, 2002 violations, the Group
will be required to meet certain revised restrictive financial covenants with
specific terms to be finalized, failing which the banks would have the right to
accelerate the due dates of their loans and the Group may not have sufficient
cash to repay all those loans on those earlier dates. The Group has also
suffered a loss from operations during the year ended March 31, 2002. These
matters raise substantial doubt about the Company's ability to continue as a
going concern. Management's plans in regard to these matters are also described
in Note 1. The financial statements do not include any adjustments relating to
the recoverability and classification of asset carrying amounts that might
result should the Company not be able to continue as a going concern.

                                            ARTHUR ANDERSEN & CO
                                        Certified Public Accountants
                                                Hong Kong

Hong Kong,
June 21, 2002.

<PAGE>
                        ZINDART LIMITED AND SUBSIDIARIES

                           CONSOLIDATED BALANCE SHEETS

                          AS OF MARCH 31, 2001 AND 2002

      (Amounts expressed in United States dollars unless otherwise stated)

<TABLE>
<CAPTION>
                                                Note             2001              2002
                                                ----            -------           -------
                                                                 $'000            $'000
<S>                                             <C>             <C>               <C>
ASSETS

Current assets:
  Cash and cash equivalents                                       8,738             3,714
  Short-term investments                          4                 130               470
  Accounts receivable, net                        5              28,177            23,336
  Inventories                                     6              13,783            13,362
  Prepaid expenses and other current assets       7               4,450             4,378
  Loan receivable, current portion                8                 500               417
                                                                -------           -------
        Total current assets                                     55,778            45,677

Property, machinery and equipment, net            9              32,079            30,031
Deferred advertising costs                                        2,149             2,040
Loan receivable, non-current portion              8               1,800               833
Deferred tax assets                              17                  --               663
Land use rights, net                             10               1,188             1,161
Goodwill, net                                    11              47,210            45,234
                                                                -------           -------
        Total assets                                            140,204           125,639
                                                                =======           =======
LIABILITIES, MINORITY INTERESTS AND
  SHAREHOLDERS' EQUITY

Current liabilities:
  Short-term bank borrowings                     12              10,872            10,432
  Long-term bank loans, current portion          13               2,851            12,187
  Capital lease obligations, current portion     14               1,901             1,393
  Convertible note, current portion              15               1,276             1,551
  Accounts payable                                               14,705            17,633
  Receipts in advance                                             1,539               721
  Accrued liabilities                            16              11,165             9,750
  Taxation payable                               17               1,456             1,110
                                                                -------           -------
        Total current liabilities                                45,765            54,777

Long-term bank loans, non-current portion        13              11,822                --
Capital lease obligations, non-current
  portion                                        14               1,413               252
Convertible note, non-current portion            15               1,702                --
Deferred tax liabilities                         17                 981               549
                                                                -------           -------
        Total liabilities                                        61,683            55,578
                                                                -------           -------
Minority interests                                                1,253             1,351
                                                                -------           -------
Shareholders' equity:
  Common stock, par value $0.0646
    (equivalent of HK$0.5):
    - authorized - 15,000,000 shares as of
        March 31, 2001 and 2002;
    - outstanding and fully paid -
        8,834,125 shares as of March 31,
        2001 and 2002                            18                 571               571
  Additional paid-in capital                                     38,634            38,634
  Retained earnings                                              40,064            31,630
  Accumulated other comprehensive loss                           (2,001)           (2,125)
                                                                -------           -------
        Total shareholders' equity                               77,268            68,710
                                                                -------           -------
        Total liabilities, minority
         interests and shareholders' equity                     140,204           125,639
                                                                =======           =======
</TABLE>

   The accompanying notes are an integral part of these financial statements.

<PAGE>
                        ZINDART LIMITED AND SUBSIDIARIES

         CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME

                FOR THE YEARS ENDED MARCH 31, 2000, 2001 AND 2002

                  (Amounts expressed in United States dollars)

<TABLE>
<CAPTION>
                                           Note          2000            2001             2002
                                           ----        ---------       ---------       ---------
                                                         $'000           $'000           $'000

<S>                                        <C>         <C>             <C>             <C>
Net sales                                  24.a          137,120         136,083         120,693
Cost of goods sold                                       (91,845)        (93,161)        (86,880)
                                                       ---------       ---------       ---------
      Gross profit                                        45,275          42,922          33,813
Selling, general and administrative
   expenses                                              (30,573)        (34,502)        (37,779)
Amortization of goodwill                                  (1,542)         (1,974)         (1,976)
Interest income                                              697             546             250
Interest expense                                          (2,621)         (4,247)         (2,815)
Other income, net                                            208             419             121
                                                       ---------       ---------       ---------
      Income (Loss) before income taxes                   11,444           3,164          (8,386)
Income tax (expense) benefit                17            (2,099)           (688)            162
                                                       ---------       ---------       ---------
      Income (Loss) before minority
         interests                                         9,345           2,476          (8,224)
Minority interests                                          (307)           (294)           (210)
                                                       ---------       ---------       ---------
      Net income (loss)                                    9,038           2,182          (8,434)
                                                       =========       =========       =========
Other comprehensive gain (loss), net
  of tax:
   Translation adjustments                                  (149)         (1,679)            166
   Unrealized loss on short-term
      investment                                              --             (40)           (330)
   Reclassification adjustment for
      realized loss included in net
      loss                                                    --              --              40
                                                       ---------       ---------       ---------
      Comprehensive income (loss)                          8,889             463          (8,558)
                                                       =========       =========       =========
Earnings (Loss) per common share
   -  Basic                                                $1.02           $0.25          $(0.95)
                                                       =========       =========       =========
   -  Diluted                                              $1.02           $0.25          $(0.95)
                                                       =========       =========       =========
Weighted average number of common
   shares outstanding
   -  Basic                                            8,822,000       8,834,000       8,834,000
                                                       =========       =========       =========
   -  Diluted                                          8,874,000       8,834,000       8,934,000
                                                       =========       =========       =========
</TABLE>

   The accompanying notes are an integral part of these financial statements.

<PAGE>
                        ZINDART LIMITED AND SUBSIDIARIES

                 CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY

                FOR THE YEARS ENDED MARCH 31, 2000, 2001 AND 2002

                  (Amounts expressed in United States dollars)

<TABLE>
<CAPTION>
                                                      Common stock
                                       -----------------------------------------
                                                               Reserved and to
                                              Issued              be issued
                                       -------------------   -------------------
                                                                                  Additional
                                       Number of              Number               paid-in       Retained
                                         shares    Amount    of shares   Amount    capital       earnings
                                       ---------   -------   ---------   -------  ----------     --------
                                         '000       $'000      '000      $'000       $'000         $'000
<S>                                    <C>         <C>       <C>         <C>      <C>            <C>
Balance as of March 31, 1999             8,147       527        667         43      38,497         28,844
Issue of common stock                       20         1         --         --         137             --
Net income                                  --        --         --         --          --          9,038
Translation adjustments                     --        --         --         --          --             --
                                         -----       ---       ----        ---      ------        -------
Balance as of March 31, 2000             8,167       528        667         43      38,634         37,882
Issue of common stock                      667        43       (667)       (43)         --             --
Net income                                  --        --         --         --          --          2,182
Translation adjustments                     --        --         --         --          --             --
Unrealized loss on short-
  term investment                           --        --         --         --          --             --
                                         -----       ---       ----        ---      ------        -------
Balance as of March 31, 2001             8,834       571         --         --      38,634         40,064
Net loss                                    --        --         --         --          --         (8,434)
Translation adjustments                     --        --         --         --          --             --
Unrealized loss on short-
   term investment                          --        --         --         --          --             --
Reclassification adjustment
   for realized loss included
   in net loss                              --        --         --         --          --             --
                                         -----       ---       ----        ---      ------        -------
Balance as of March 31, 2002             8,834       571         --         --      38,634         31,630
                                         =====       ===       ====        ===      ======        =======
</TABLE>

<TABLE>
<CAPTION>
                                         Accumulated other comprehensive loss
                                        ---------------------------------------
                                        Unrealized loss   Cumulative                 Total
                                         on short-term    translation             shareholders'
                                          investments     adjustments    Total      equity
                                        ---------------   -----------   -------   -------------
                                             $'000           $'000        $'000        $'000
<S>                                     <C>                <C>           <C>       <C>
Balance as of March 31, 1999                    --            (133)        (133)      67,778
Issue of common stock                           --              --           --          138
Net income                                      --              --           --        9,038
Translation adjustments                         --            (149)        (149)        (149)
                                              ----          ------       ------      -------
Balance as of March 31, 2000                    --            (282)        (282)      76,805
Issue of common stock                           --              --           --           --
Net income                                      --              --           --        2,182
Translation adjustments                         --          (1,679)      (1,679)      (1,679)
Unrealized loss on short-
  term investment                              (40)             --          (40)         (40)
                                              ----          ------       ------      -------
Balance as of March 31, 2001                   (40)         (1,961)      (2,001)      77,268
Net loss                                        --              --           --       (8,434)
Translation adjustments                         --             166          166          166
Unrealized loss on short-
   term investment                            (330)             --         (330)        (330)
Reclassification adjustment
   for realized loss included
   in net loss                                  40              --           40           40
                                              ----          ------       ------      -------
Balance as of March 31, 2002                  (330)         (1,795)      (2,125)      68,710
                                              ====          ======       ======      =======
</TABLE>

   The accompanying notes are an integral part of these financial statements.
<PAGE>
                        ZINDART LIMITED AND SUBSIDIARIES

                      CONSOLIDATED STATEMENTS OF CASH FLOWS

                FOR THE YEARS ENDED MARCH 31, 2000, 2001 AND 2002

                  (Amounts expressed in United States dollars)

<TABLE>
                                                      2000        2001        2002
                                                     -------     -------     -------
                                                     $'000        $'000       $'000
<S>                                                  <C>          <C>         <C>
Cash flows from operating activities:
Net income (loss)                                      9,038       2,182      (8,434)
Adjustments to reconcile net income (loss) to
  net cash provided by operating activities-
   Minority interests                                    307         294         210
   Amortization of goodwill                            1,542       1,974       1,976
   Depreciation of property, machinery and
      equipment                                        6,247       6,967       7,267
   Net loss on disposal of property,
      machinery and equipment                              7           3          14
   Amortization of land use rights                        27          27          27
   Amortization of loan arrangement fees                 233         825         394
   Gain on short-term investment                          --        (170)         --
   Loss on impairment of short-term investment            --          --         170
   Deferred taxes                                         (4)         13      (1,095)
   Valuation allowance for impairment of loan
      receivable                                          --          --         400
Changes in operating assets and liabilities-
   Accounts receivable, net                             (177)     (1,022)      4,441
   Inventories                                           510       1,041         421
   Prepaid expenses and other current assets             319      (1,341)       (275)
   Deferred advertising costs                         (1,403)       (746)        109
   Accounts payable                                    5,334         179       2,928
   Receipts in advance                                  (444)        181        (818)
   Accrued liabilities                                (3,156)      1,103      (1,415)
   Taxation payable                                     (758)       (781)       (346)
                                                     -------     -------     -------
        Net cash provided by operating activities     17,622      10,729       5,974
                                                     -------     -------     -------

Cash flows from investing activities:
Acquisition of a subsidiary, net of cash
   acquired                                          (47,126)         --          --
Acquisition of property, machinery and
   equipment                                          (7,317)     (5,336)     (4,892)
Proceeds from disposal of property, machinery
   and equipment                                          28           3          38
(Increase) Decrease in loan receivable                (2,300)         --         250
                                                     -------     -------     -------
        Net cash used in investing activities        (56,715)     (5,333)     (4,604)
                                                     -------     -------     -------
</TABLE>

                                                               (To be continued)

<PAGE>
                        ZINDART LIMITED AND SUBSIDIARIES

                 CONSOLIDATED STATEMENTS OF CASH FLOWS (Cont'd)

                FOR THE YEARS ENDED MARCH 31, 2000, 2001 AND 2002

                  (Amounts expressed in United States dollars)

<TABLE>
                                                      2000        2001        2002
                                                     -------     -------     -------
                                                     $'000        $'000       $'000
<S>                                                  <C>          <C>         <C>
Cash flows from financing activities:
Net proceeds from issue of common stock                  138          --          --
New short-term bank borrowings                         5,933      30,587      48,602
Repayment of short-term bank borrowings               (3,984)    (25,648)    (49,042)
New long-term bank loans                              30,000       5,673          --
Repayment of long-term bank loans                     (6,000)    (15,000)     (2,486)
New capital leases                                     4,844         217          --
Repayment of capital element of capital                   --      (1,747)     (1,875)
   lease obligations
Issue of convertible note                              4,761          --          --
Repayment of convertible note                             --      (1,783)     (1,427)
Payment of loan arrangement fees                        (875)       (494)        (47)
Dividends paid by subsidiaries to their
   minority shareholders                                (148)       (146)       (112)
                                                     -------     -------     -------
   Net cash provided by (used in) financing
       activities                                     34,669      (8,341)     (6,387)
                                                     -------     -------     -------
Effect of translation adjustments on cash               (149)       (805)         (7)
                                                     -------     -------     -------
Net decrease in cash and cash equivalents             (4,573)     (3,750)     (5,024)

Cash and cash equivalents, as of beginning
   of year                                            17,061      12,488       8,738
                                                     -------     -------     -------
Cash and cash equivalents, as of end of
    year                                              12,488       8,738       3,714
                                                     =======     =======     =======
</TABLE>

   The accompanying notes are an integral part of these financial statements.

<PAGE>
                        ZINDART LIMITED AND SUBSIDIARIES

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

      (Amounts expressed in United States dollars unless otherwise stated)

1.      ORGANIZATION, PRINCIPAL ACTIVITIES AND RISK FACTORS

Zindart Limited ("the Company") was incorporated in Hong Kong in July 1977. Its
shares have been listed on the Nasdaq National Market since February 1997.

The Company and its subsidiaries ("the Group") are principally engaged in the
manufacturing of die-cast, injection-molded plastic and paper products under
Original Equipment Manufacturing ("OEM") arrangements, and the design, marketing
and distribution of die-cast products under its proprietary brand names.

Compliance with loan covenants - The Group is required to comply with various
restrictive financial covenants imposed by certain banks. The financial
covenants include, among others, the maintenance of specific tangible net
assets, ratio of net borrowings to tangible net assets, ratio of current assets
to current liabilities, interest cover, earnings before interest and tax
("EBIT"), debt service ratio, ratio of net cash flow to borrowing costs, ratio
of EBIT to borrowing costs and amount of capital expenditure. The Group was in
violation of all financial covenants as of March 31, 2002 except for amount of
capital expenditure, giving the banks the right to accelerate the due dates of
the related bank loans. In June 2002, the Group obtained letters from the
relevant banks acknowledging its non-compliance with the aforementioned
financial covenants as of March 31, 2002. However, the Group will be required to
meet certain revised restrictive financial covenants during the year ending
March 31, 2003 with specific terms to be finalized, failing which the banks
would have the right to accelerate the due dates of the related bank loans.
Further, the revised covenants stipulate an event of default in the event of a
material adverse change in the Group's ability to comply with its obligations
under the bank loans. Taking into consideration the above matters, the Group's
long-term bank loans under such banking facilities have been reclassified as a
current liability as of March 31, 2002.

The Group has also suffered a loss from operations during the year ended March
31, 2002, the only year of loss over the past ten years, as a result of the
global economic downturn. Management has implemented stringent control to
improve productivity and margins and to reduce costs. Management has also
evaluated and is considering the possibilities of assets divestment to improve
cash flows. The Company's directors and management believe that the Group's
future operations will generate sufficient cash to meet its obligations as they
fall due, although there can be no assurances of adequate cash generation or
adequate available facilities to meet the Company's needs in the future. Also,
the failure to meet any of the financial covenants would constitute an event of
default which would give the banks the right to accelerate the due dates of
their loans and the Group may not have sufficient cash to repay all those loans
on those earlier dates.

The Group is also subject to, among others, the following operating risks:

Country risk - As a major portion of the Group's operations are conducted in
Mainland China, the Group is subject to special considerations and significant
risks not typically associated with companies in North America and Western
Europe. These include risks associated with, among others, the political,
economic and legal environments and foreign currency exchange. The Group's
results may be adversely affected by changes in the political and social
conditions in Mainland China, and by changes in governmental policies with
respect to laws and regulations, anti-inflationary measures, currency conversion
and remittance abroad, and rates and methods of taxation, among other things.

Dependence on strategic relationship - The Group conducts its manufacturing
operations through its contractual joint ventures established between the Group
and two Chinese parties, and subcontracting agreements entered into with certain
Chinese parties. The deterioration of any or all these strategic relationships
may have an adverse effect on the operations of the Group.

Concentration of credit risk - Concentration of credit risk is primarily limited
to trade accounts receivable and a loan receivable from a Borrower (see Note 8)
and is subject to the financial conditions of certain major customers and the
Borrower.

The Group performs ongoing credit evaluation of each customer's financial
condition. It maintains reserves for potential credit losses and such losses in
the aggregate have not exceeded management's projections. Sales to five largest
customers accounted for approximately 44%, 41% and 34%, respectively, of the
Group's net sales for the years ended March 31, 2000, 2001 and 2002. As of March
31, 2001 and 2002, the Group's five largest accounts receivable accounted for
approximately 31% and 33%, respectively, of the Group's gross accounts
receivable.

<PAGE>
1.      ORGANIZATION, PRINCIPAL ACTIVITIES AND RISK FACTORS (Cont'd)

Dependence on a limited number of suppliers - The Group purchases raw materials
from a limited number of suppliers. Purchases from five largest suppliers
accounted for approximately 24%, 15% and 12%, respectively, of the Group's net
purchases for the years ended March 31, 2000, 2001 and 2002.

2.      SUBSIDIARIES

Details of the Company's subsidiaries as of March 31, 2002 are as follows:

<TABLE>
<CAPTION>
                                                   Place of              Percentage of                    Principal
Name                                             incorporation          equity interest                   activities
----                                             -------------          ---------------                   ----------
<S>                                             <C>                     <C>                   <C>
Corgi Classics Holdings Limited - Note a            United                    100%            Investment holding
                                                    Kingdom

Corgi Classics Limited - Note a                     United                    100%            Design, marketing and distribution
                                                    Kingdom                                      of die-cast products

Corgi Classics Inc.                              United States                100%            Design, marketing and distribution
                                                  of America                                     of die-cast products

Icon Collectibles Limited                           United                    100%            Design, marketing and distribution
                                                    Kingdom                                      of die-cast products

Lledo Collectibles Limited                          United                    100%            Design, marketing and distribution
                                                    Kingdom                                      of die-cast products

Dongguan Xinda Giftware Company Limited            Mainland               100% - Note b       Manufacturing of die-cast and
                                                     China                                       injection-molded plastic products

Hua Yang Holdings Company Limited                   Cayman                    100%            Investment holding
                                                    Islands

Hua Yang Printing Holdings Company Limited         Hong Kong                  100%            Printing and assembly of books and
                                                                                                 specialty packaging

Luen Tat Model Design Company Limited             The British                  51%            Design and production of molds and
                                                Virgin Islands                                   tooling models

Luen Tat Mould Manufacturing Limited              The British                  90%            Provision of technical support
                                                Virgin Islands                                   service on mold production

Onchart Industrial Limited                        The British                  55%            Provision of technical support
                                                Virgin Islands                                   service on mold production

Shenzhen Huaxuan Printing Product                  Mainland               100% - Note c       Printing and assembly of books
   Company Limited                                   China                                       and specialty packaging

Wealthy Holdings Limited                          The British                 100%            Inactive
                                                Virgin Islands

Guangzhou Jin Yi Advertising Company               Mainland                    90%            Inactive
   Limited - Note d                                  China

Zindart Limited                                     Bermuda                   100%            Inactive

Bassett Lowke Limited                               United                    100%            Inactive
                                                    Kingdom

Corgi Sales Limited                                 United                    100%            Inactive
                                                    Kingdom

Corgi Toys Limited                                  United                    100%            Inactive
                                                    Kingdom

Blow-ko Limited                                     United                    100%            Inactive
                                                    Kingdom

Bassett Lowke (Railways) Limited                    United                    100%            Inactive
                                                    Kingdom

Corgi Collectors Limited                            United                    100%            Inactive
                                                    Kingdom
</TABLE>

<PAGE>
2.      SUBSIDIARIES (Cont'd)

Notes -

a.      In July 1999, Corgi Classics Holdings Limited (formerly known as
        Exitarena Limited), a wholly-owned subsidiary, acquired 100% equity
        interest in Corgi Classics Limited, a company incorporated in the United
        Kingdom, for a consideration of approximately $46,125,000 (equivalent of
        GBP29,000,000), including cash of approximately $40,313,000 (equivalent
        of approximately GBP25,346,000) and assumption of debt of approximately
        $5,812,000 (equivalent of approximately GBP3,654,000). The acquisition
        was partially financed by a bank loan of $30,000,000 and a convertible
        note of approximately $4,761,000 (equivalent of GBP3,000,000) (see Note
        15).

        The acquisition was recorded under the purchase method of accounting.
        The purchase price has been allocated to the assets acquired and
        liabilities assumed based on the fair values as of the date of
        acquisition, while the balance of approximately $38,724,000 was recorded
        as goodwill and was being amortized on a straight-line basis over 30
        years. The results of operations of Corgi Classics Limited were included
        in the consolidated financial statements of the Company from the date of
        acquisition.

        The following unaudited pro forma summary presents information as if
        Corgi Classics Limited had been acquired at the beginning of the year
        ended March 31, 2000. The pro forma information gives effect to actual
        operating results prior to the acquisition, adjusted to include the pro
        forma effect of interest expense and amortization of goodwill. These pro
        forma amounts do not purport to be indicative of the results that would
        have actually been obtained if the acquisition occurred at the beginning
        of the period presented or that may be obtained in the future.

<TABLE>
<CAPTION>
                                                     2000
                                                   ---------
                                                     $'000
                                                   Unaudited
<S>                                                <C>
        Net sales                                   148,794
        Net income                                    8,573
                                                    =======
        Earnings per common share
           -  Basic                                 $  0.97
           -  Diluted                               $  0.97
                                                    =======
</TABLE>

b.      Dongguan Xinda Giftware Company Limited is a contractual joint venture
        established in the open coastal area in Mainland China to be operated
        for 15 years until November 2009. Under the joint venture agreement and
        the supplemental agreement thereto, the Group possesses substantive
        participating rights and is entitled to 100% of the joint venture's
        profit after paying its joint venture partner a pre-determined amount of
        annual fee (see Note 20.c). In view of the substantive participating
        rights and profit sharing arrangement, the joint venture is regarded as
        100% owned by the Company.

c.      Shenzhen Huaxuan Printing Product Company Limited is a contractual joint
        venture established in a special economic zone in Mainland China to be
        operated for 15 years until October 2010. Under the joint venture
        agreement, the Group possesses substantive participating rights and is
        entitled to 100% of the joint venture's profit after paying its joint
        venture partner a pre-determined amount of annual fee (see Note 20.c).
        In view of the substantive participating rights and profit sharing
        arrangement, the joint venture is regarded as 100% owned by the Company.

d.      In April 1996, the Group acquired a 90% interest in Guangzhou Jin Yi
        Advertising Company Limited, a contractual joint venture established in
        Mainland China. Full provision has been recorded against the balance of
        this investment in previous years. As of March 31, 2002, the Group was
        in the process of dissolving this joint venture.

<PAGE>
3.      SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

a.      Basis of consolidation

        The consolidated financial statements include the accounts of the
        Company, its subsidiaries and its contractual joint ventures which are
        considered as de facto subsidiaries. A subsidiary is a company in which
        the Company holds, directly or indirectly, more than 50% of its issued
        voting share capital as long-term investment and over which it is able
        to govern and control its financial and operating policies and its board
        of directors. All significant intercompany balances and transactions
        have been eliminated on consolidation.

b.      Contractual joint ventures

        A contractual joint venture is an entity established between the Group
        and one or more other parties, with the rights and obligations of the
        joint venture partners governed by a contract. If the Group owns more
        than 50% of the joint venture and is able to govern and control its
        financial and operating policies and its board of directors and the
        joint venture partners do not possess substantive participating rights
        (as defined by generally accepted accounting principles), such joint
        venture is considered as a de facto subsidiary and is accounted for as a
        subsidiary.

c.      Cash and cash equivalents

        Cash and cash equivalents include cash on hand, amount on deposit with
        banks and highly liquid investments with maturity of three months or
        less at the time of acquisition.

d.      Short-term investment

        Short-term investment is classified as available-for-sale investment in
        accordance with Statement of Financial Accounting Standards ("SFAS") No.
        115: "Accounting for Certain Investments in Debt and Equity Securities".
        It is carried at fair value, with unrealized gains and losses reported
        in shareholders' equity as a component of other comprehensive
        income/loss. Realized gains and losses and other-than-temporary declines
        in value on available-for-sale investment are recognized in current
        period in the statement of operations.

e.      Inventories

        Inventories are stated at the lower of cost, on a first-in, first-out
        basis, or market. Costs of work-in-process and finished goods consist of
        direct materials, direct labor and an attributable portion of production
        overheads.

f.      Property, machinery and equipment

        Property, machinery and equipment are recorded at cost. Gains or losses
        on disposals are reflected in current operations. Major expenditures for
        betterments are capitalized. All ordinary repair and maintenance costs
        are expensed as incurred.

        Depreciation for financial reporting purposes is provided using the
        straight-line method over the estimated useful lives of the assets as
        follows: buildings - 25 to 50 years, machinery and tools - 3 to 10
        years, furniture and office equipment - 5 to 8 years, and motor vehicles
        - 3 to 4 years.

        The Group accounts for impairment of property, machinery and equipment
        to be held and used by recognizing impairment loss on the assets when
        the sum of the projected undiscounted cash flows is less than the
        carrying amount of the assets. Measurement of the impairment loss is
        based on the fair value of the assets, determined by the discounted cash
        flow method. Assets to be disposed of are reported at the lower of the
        carrying amount or fair value of such assets less costs to sell. In the
        opinion of the management, no indication of impairment existed as of
        March 31, 2001 and 2002.

g.      Land use rights

        Land use rights are stated at cost less accumulated amortization.
        Amortization is provided using the straight-line method over the lease
        term of 50 years.

<PAGE>
3.      SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES  (Cont'd)

h.      Goodwill

        Goodwill, being the excess of cost over the fair value of the Group's
        share of net assets of subsidiaries acquired, is amortized on a
        straight-line basis over the estimated economic lives as follows: Luen
        Tat Model Design Company Limited and Luen Tat Mould Manufacturing
        Limited - 10 years, Hua Yang Holdings Company Limited - 20 years and
        Corgi Classics Limited - 30 years. The Group periodically evaluates the
        existence of goodwill impairment on the basis of whether amounts
        recorded are recoverable from projected undiscounted cash flows of the
        underlying businesses. Impairment losses are valued by comparing the
        carrying value of the goodwill to its fair value, determined by the
        discounted cash flow method. In the opinion of the management, no
        indication of impairment existed as of March 31, 2001 and 2002.

i.      Convertible note

        The Group accounts for convertible note in accordance with Accounting
        Principles Board ("APB") Opinions No. 14: "Accounting for Convertible
        Debt and Debt issued with Stock Purchase Warrants". Convertible note is
        stated at cost, and no portion of the proceeds from the issuance of the
        convertible note is accounted for as attributable to the embedded
        conversion feature.

j.      Revenue recognition

        The Company adopted the Securities and Exchange Commission's Staff
        Accounting Bulletin ("SAB") No. 101: "Revenue Recognition". SAB No. 101
        requires that four basic criteria must be met before revenue can be
        recognized: (i) persuasive evidence of an arrangement exists; (ii)
        delivery has occurred or services rendered; (iii) the fee is fixed and
        determinable; and (iv) collectibility is reasonably assured. The Group's
        revenue arising from the sale of goods is recognized at the time when
        the merchandise is shipped and titles to the merchandise passed to
        customers. Title to the merchandise may transfer to the customer when
        shipped or when received by the customer based on the specific
        agreement. The Group grants discounts or allowances on merchandise and
        accounts for these discounts and allowances as a deduction from sales.
        The Group evaluates its provisions for estimated discounts and
        allowances periodically based on historical trends. To date, the Group
        has not experienced any significant discounts and allowances.

        Deposits or advance payments from customers prior to delivery and
        passage of title of merchandise are recorded as receipts in advance.

k.      Advertising costs

        Advertising costs are expensed the first time the advertising takes
        place, except for direct-response advertising costs, consisting of
        primarily magazine and newspaper space, artwork and printing
        expenditures, which are capitalized and amortized over its expected
        period of future benefits as supported by historical experience and
        data.

l.      Research and development expenditures

        Research and development expenditures are charged to expenses as
        incurred unless a product's technological feasibility has been
        established. Such development costs are capitalized until the product is
        available for release to customers.

m.      Income taxes

        The Group accounts for income tax in accordance with Statement of
        Financial Accounting Standards ("SFAS") No. 109: "Accounting for Income
        Taxes," which requires recognition of deferred tax assets and
        liabilities for the expected future tax consequences of events that have
        been included in the financial statements or tax returns. Deferred tax
        assets and liabilities are determined based on the differences between
        the financial reporting and tax bases of assets and liabilities using
        enacted tax rates in effect for the year in which the differences are
        expected to reverse. To the extent that it is more likely than not that
        a deferred tax asset will not be realized, a valuation allowance is
        recognized as an offset to the deferred tax asset.

<PAGE>
3.      SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES  (Cont'd)

n.      Foreign currency translation

        The Company's functional currency is United States dollars as a
        substantial portion of the Group's business activities is based in
        United States dollars. The translation of financial statements into
        United States dollars is performed for balance sheet accounts using the
        closing exchange rate in effect at the balance sheet date and for
        revenue and expense accounts using an average exchange rate during each
        reporting period. The gains or losses resulting from translation are
        treated as translation adjustments and included in the accumulated other
        comprehensive income/loss in shareholders' equity. Aggregate gains or
        losses from foreign currency transactions included in selling, general
        and administrative expenses and other income, net for the years ended
        March 31, 2000, 2001 and 2002 were approximately losses of $94,000,
        gains of $255,000 and losses of $505,000, respectively.

o.      Derivative financial instruments

        The Group periodically enters into foreign exchange forward contracts.
        Effective April 1, 2001, it has adopted Statement of Financial
        Accounting Standards ("SFAS") No. 133: "Accounting for Derivative
        Instruments and Hedging Activities," as amended by SFAS No. 138. In
        doing so, the Group did not incur any transition adjustments to income.
        In accordance with the provisions of SFAS No. 133, all derivatives are
        recorded in the balance sheet as either an asset or a liability measured
        at fair value and that changes in fair value are recognized in the
        statement of operations.

p.      Comprehensive income

        The Group has adopted Statement of Financial Accounting Standards
        ("SFAS") No. 130: "Reporting Comprehensive Income," which requires the
        Group to report all changes in equity during a period, except for those
        resulting from investment by owners and distribution to owners, in the
        financial statements for the period in which they are recognized. The
        Group has presented comprehensive income/loss, which encompasses net
        income/loss, foreign currency translation adjustments, unrealized loss
        on short-term investment and reclassification adjustment for realized
        loss, in the statement of operations and comprehensive income/loss.

q.      Earnings or loss per common share

        Earnings or loss per common share is computed in accordance with
        Statement of Financial Accounting Standards ("SFAS") No. 128: "Earnings
        Per Share," by dividing the net income or loss by the weighted average
        number of common shares outstanding during the year. Diluted earnings or
        loss per common share is computed based on the weighted average number
        of common shares outstanding and adjusted to include the potentially
        dilutive effect of outstanding stock options and convertible note to the
        extent such instruments were dilutive during the year.

        The numerator in calculating both basic and diluted earnings or loss per
        share for each year is the reported net income or loss. The difference
        between basic and diluted weighted average number of common shares for
        the years ended March 31, 2000 and 2002 results from the assumption that
        stock options outstanding were exercised. Convertible note outstanding
        during the years ended March 31, 2000, 2001 and 2002 and stock options
        outstanding during the year ended March 31, 2001 did not impact the
        computation of diluted earnings or loss per common share because their
        effects were anti-dilutive.

r.      Stock-based compensation

        The Company accounts for employee stock options in accordance with
        Accounting Principles Board ("APB") Opinion No. 25: "Accounting for
        Stock Issued to Employees." Compensation expense related to employee
        stock options is recorded only if the fair value of the underlying stock
        exceeds the exercise price on the date of grant. Also, the Company has
        adopted the disclosure-only requirements of SFAS No. 123: "Accounting
        for Stock-Based Compensation," which allows entities to continue to
        apply the provisions of APB Opinion No. 25 for transactions with
        employees and provide pro-forma net income and pro-forma earnings per
        share disclosures for employee stock grants as if the fair-value-based
        method of accounting as prescribed in SFAS No. 123 had been applied to
        these transactions.

<PAGE>
3.      SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES  (Cont'd)

s.      Fair value of financial instruments

        The carrying amounts for cash and cash equivalents, accounts receivable,
        short-term borrowings, accounts payable and accrued liabilities
        approximate their fair values because of the short maturity of these
        instruments. The carrying amounts for short-term investment, loan
        receivable, long-term bank loans, capital lease obligations and
        convertible note either approximate their fair values as of March 31,
        2001 and 2002 or are estimated based on the quoted market prices for the
        same or similar issues.

t.      Use of estimates

        The preparation of financial statements in conformity with generally
        accepted accounting principles in the United States of America requires
        management to make estimates and assumptions that affect certain
        reported amounts and disclosures. Accordingly, actual results could
        differ from those estimates.

u.      Reclassifications

        Certain prior year figures presented have been reclassified to conform
        to the current year presentation.

v.      New Statements of Financial Accounting Standards

        In June 2001, the Financial Accounting Standards Board ("FASB") issued
        Statement of Financial Accounting Standards ("SFAS") No. 141: "Business
        Combinations" and Statement of Financial Accounting Standards ("SFAS")
        No. 142: "Goodwill and Other Intangible Assets," effective for fiscal
        years beginning after December 15, 2001. SFAS No. 141 requires that the
        purchase method of accounting be used for all business combinations
        completed after June 30, 2001. The adoption of SFAS No. 141 is not
        expected to have a material impact on the Group's financial statements.
        SFAS No. 142 requires, among other provisions, companies to assess the
        possible impairment of goodwill existing at the date of adoption and
        perform subsequent impairment tests on an annual basis. Additionally,
        existing goodwill and intangible assets must be reassessed and
        classified consistently in accordance with the Statement's criteria.
        Under this new statement, the Company will no longer amortize goodwill
        but will instead assess goodwill impairment using specialized
        independent advisors.

        Furthermore, under this new Statement, intangible assets with
        determinable useful lives will continue to be amortized over their
        estimated useful lives, which, if supportable, may be a period that
        exceeds the current maximum period of 40 years. Intangible assets with
        indeterminable useful lives will not be amortized but rather, will be
        assessed for impairment in accordance with Statement of Financial
        Accounting Standards ("SFAS") No. 144: "Accounting for the Impairment or
        Disposal of Long-Lived Assets". The Company is required to and will
        adopt SFAS No. 142 on April 1, 2002. As of March 31, 2001 and 2002, the
        carrying amount of goodwill amounted to $47,210,000 and $45,234,000,
        respectively. Goodwill amortization for the years ended March 31, 2000,
        2001 and 2002 were $1,542,000, $1,974,000 and $1,976,000, respectively.
        The Company has made a preliminary assessment of goodwill and other
        intangible assets in accordance with the provisions of this new
        Statement, and believes that adoption of SFAS No. 142 will not have a
        material adverse impact on the Group's financial statements.

        In August 2001, FASB issued Statement of Financial Accounting Standards
        ("SFAS") No. 143: "Accounting for Asset Retirement Obligations". This
        Statement requires, among other provisions, retirement obligations to be
        recognized when they are incurred and displayed as liabilities, with a
        corresponding amount capitalized as part of the related long-lived
        asset. The capitalized element is required to be expensed using a
        systematic and rational method over its useful life. The Company is
        required to and will adopt SFAS No. 143 on April 1, 2003. The adoption
        of SFAS No. 143 is not expected to have a material impact on the Group's
        financial statements.

<PAGE>
3.      SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES  (Cont'd)

v.      New Statements of Financial Accounting Standards  (Cont'd)

        In October 2001, FASB issued SFAS No. 144. The Statement supersedes SFAS
        No. 121, "Accounting for the Impairment of Long-Lived Assets and for
        Long-Lived Assets to be Disposed Of" and modifies APB Opinion No. 30,
        "Reporting the Results of Operations - Reporting the Effects of Disposal
        of a Segment of a Business, and Extraordinary, Unusual and Infrequently
        Occurring Events." For long-lived assets to be held and used, the
        Statement retains the requirements of SFAS No. 121, whereby an
        impairment loss is recognized if the carrying value of the asset is not
        recoverable from its undiscounted cash flows and an impairment loss is
        measured as the difference between fair values and carrying values of
        the asset. The new Statement requires long-lived assets to be disposed
        of other than by sale to be considered held and used until it is
        disposed of. The Statement also broadens the scope of APB Opinion No. 30
        provisions for the presentation of discontinued operations separately
        from continuing operations to include a component of an entity that
        either has been disposed of or is classified as held for sale. In
        addition, discontinued operations are no longer measured on a net
        realizable value basis, and expected future operating losses must be
        reflected in the periods incurred, rather than at the measurement date
        as previously required by APB Opinion No. 30. The Company is required to
        and will adopt SFAS No. 144 on April 1, 2002. The adoption of SFAS No.
        144 is not expected to have a material impact on the Group's financial
        statements.

        In April 2002, FASB issued Statement of Financial Accounting Standards
        ("SFAS") No. 145: "Rescission of FASB Statements No. 4, 44, and 64,
        Amendment of FASB Statement No. 13, and Technical Corrections". This
        statement made revisions to the accounting for gains and losses from the
        extinguishment of debt, rescinded Statement No. 44, and required certain
        lease modifications that have economic effects similar to sale-leaseback
        transactions be accounted for in the same manner as sale-leaseback
        transactions. The Company is required to and will adopt SFAS No. 145 on
        April 1, 2003. The Company is in the process of evaluating the effect
        the adoption of this standard will have on the consolidated results of
        operations, financial position and cash flows, if any.

4.      SHORT-TERM INVESTMENTS

On May 13, 2000, the Company received warrants relating to its loan receivable
(see Note 8). The warrants entitle the Company to purchase a maximum of 150,000
shares of common stock of the Borrower at a price of $1.7325 per share, during a
two-year period ended May 12, 2002. The warrants are non-transferable.

The estimated fair value of the warrants upon receipt was approximately
$170,000, as determined by using the Black-Scholes option-pricing model using
the following assumptions:

<TABLE>
<S>                                                                     <C>
Risk-free interest rate                                                   6.81%
Expected dividend yield                                                     --
Expected warrant life                                                   2 years
Expected stock price volatility                                          158.9%
                                                                        =======
</TABLE>

Upon receipt, the estimated fair value of the warrants of approximately $170,000
has been recognized. As of March 31, 2001, the fair value of the warrants, as
determined using the Black-Scholes option-pricing model, was approximately
$130,000, resulting in an unrealized loss of $40,000 reported in shareholders'
equity as a component of other comprehensive loss. As of March 31, 2002, the
fair value of the warrants was nil, resulting in a realized loss of $170,000
included in the results of operations. Up to May 12, 2002, all warrants remained
unexercised and have expired.

According to the second amendment to the credit facility dated December 31,
2001, $400,000 of the outstanding credit facility (see Note 8) and $400,000 of
the outstanding accounts receivable (see Note 5) from the Borrower were
converted into common stock of the Borrower at $0.63 per share. In connection
therewith, the Group acquired 1,269,842 shares, or approximately 11.85% equity
interest in the Borrower, a company incorporated in the United States of
America. Such investment in common stock of $800,000, representing the fair
value of common stock received from the Borrower upon receipt, was classified as
an available-for-sale investment. As of March 31, 2002, the fair value of this
investment, as determined based on quoted market price, was approximately
$470,000, resulting in an unrealized loss of $330,000 reported in shareholders'
equity as a component of other comprehensive loss.

<PAGE>
5.      ACCOUNTS RECEIVABLE

Accounts receivable consisted of:

<TABLE>
<CAPTION>
                                                            2001         2002
                                                           -------      -------
                                                            $'000        $'000
<S>                                                         <C>       <C>
Trade receivables                                           32,980       28,158
Less: Allowance for doubtful accounts                       (4,803)      (4,822)
                                                           -------      -------
Accounts receivable, net                                    28,177       23,336
                                                           =======      =======
</TABLE>

Movements of allowance for doubtful accounts were as follows:

<TABLE>
<CAPTION>
                                               2000         2001          2002
                                               -----       ------        ------
                                               $'000        $'000        $'000
<S>                                            <C>          <C>           <C>
Balance at the beginning of the
   year                                        2,049        3,919         4,803
Charged to costs and expenses                  1,870        1,333           773
Bad debts written off                             --         (449)         (754)
                                               -----       ------        ------
Balance at the end of the year                 3,919        4,803         4,822
                                               =====       ======        ======
</TABLE>

According to the second amendment to the credit facility dated December 31, 2001
(see Note 8), the payment of accounts receivable amounting to $1,250,000 from
the Borrower was restructured as follows - (i) $400,000 of the outstanding
receivable was converted into common stock of the Borrower at $0.63 per share,
representing the quoted market price on the date which the amendment became
unconditional; (ii) $400,000 of the outstanding receivable was foregone upon
sale of certain Borrower's preferred stocks to an investor in January 2002; and
(iii) the remaining $450,000 is payable in seven equal monthly installments
commencing January 31, 2002.

The debt restructuring was accounted for in accordance with Statement of
Financial Accounting Standards ("SFAS") No. 15: "Accounting by Debtors and
Creditors for Troubled Debt Restructurings" and SFAS No. 114: "Accounting by
Creditors for Impairment of A Loan - an Amendment of FASB Statement No. 5 and
15". The debt restructuring involved receipt of common stock from the Borrower
in partial satisfaction of the aforementioned accounts receivable and a
modification of terms of the remaining receivable.

The accounts receivable of $1,250,000 from the Borrower was first reduced by
$400,000, representing the fair value of common stock received from the
Borrower. The remaining balance was recorded at approximately $450,000,
representing the present value of expected future cash flows to be received
under the modified terms of the restructured debt. Accordingly, the Group has
written off approximately $400,000 for the impairment of the accounts receivable
from the Borrower.

6.      INVENTORIES

Inventories consisted of:

<TABLE>
<CAPTION>
                                                             2001          2002
                                                            ------        ------
                                                             $'000         $'000
<S>                                                         <C>           <C>
Raw materials                                                4,529         3,639
Work-in-process                                              1,860         1,364
Finished goods                                               7,394         8,359
                                                            ------        ------
                                                            13,783        13,362
                                                            ======        ======
</TABLE>

As of March 31, 2001 and 2002, certain inventories of the Group were held under
trust receipts bank loans (see Note 12).

<PAGE>

7.      PREPAID EXPENSES AND OTHER CURRENT ASSETS

Prepaid expenses and other current assets consisted of:

<TABLE>
<CAPTION>
                                                                2001        2002
                                                                -----      -----
                                                                $'000      $'000
<S>                                                             <C>        <C>
Prepaid loan interest and deferred loan arrangement               711        364
   fees
Other prepayments                                               1,223      1,280
Deposits for acquisition of moulds and models                   1,529      1,544
Tax recoverable                                                   726        592
Rental and utility deposits                                       101        178
Others                                                            160        420
                                                                -----      -----
                                                                4,450      4,378
                                                                =====      =====
</TABLE>

8.      LOAN RECEIVABLE

Loan receivable consisted of:

<TABLE>
<CAPTION>
                                                                 2001       2002
                                                                -----      -----
                                                                $'000      $'000
<S>                                                             <C>        <C>
Loan receivable                                                 2,300      1,650
Less: Valuation allowance                                          --       (400)
                                                                -----      -----
Loan receivable, net                                            2,300      1,250
                                                                =====      =====
</TABLE>

Maturities of the loan receivable were as follows:

<TABLE>
<CAPTION>
                                                                 2001       2002
                                                                -----      -----
                                                                $'000      $'000
<S>                                                             <C>        <C>
Receivable during the following period
   - Within one year                                              500        417
   - Over one year but not exceeding two years                  1,800        625
   - Over two years but not exceeding three years                  --        208
                                                                -----      -----
                                                                2,300      1,250
Less: Current portion                                            (500)      (417)
                                                                -----      -----
Non-current portion                                             1,800        833
                                                                =====      =====
</TABLE>
<PAGE>
8.      LOAN RECEIVABLE (Cont'd)

During the year ended March 31, 2000, the Company granted to the Borrower a
credit facility up to an amount of $2,300,000. The credit facility was
collateralized by certain assets of the Borrower, bore interest at LIBOR plus 5%
and matured on May 12, 2000. On May 13, 2000, the Borrower exercised an option
under the credit facility to extend the maturity date of the facility for an
additional one year to May 12, 2001 and as consideration for the extension,
issued to the Company non-transferable warrants to purchase a maximum of 150,000
shares of common stock of the Borrower at a price of $1.7325 per share,
representing the average of the closing bid prices of the shares over 20 trading
days prior to May 13, 2000, during a two-year period ended May 12, 2002 (see
Note 4). The transaction was accounted for as follows - (i) the estimated fair
value of the warrants of $170,000 was recognized upon receipt as
available-for-sale investment; and (ii) gain of the same amount was recorded in
the statement of operations for the year ended March 31, 2001.

On April 16, 2001, the Borrower repaid $250,000, and the Company granted an
extension of the loan to June 30, 2002 for no consideration.

On December 31, 2001, the terms of the credit facility were further amended
pursuant to which (i) $400,000 of the outstanding facility was converted into
common stock of the Borrower at $0.63 per share, representing the quoted market
price on the date which the amendment became unconditional; (ii) $400,000 of the
outstanding facility will be canceled in the quarter ending September 30, 2002,
contingent upon satisfactory performance in respect of repayment of interest and
principal by the Borrower; and (iii) the remaining $1,250,000 will be payable in
24 equal monthly installments commencing August 31, 2002. The loan receivable is
collateralized by certain assets of the Borrower and bears interest at LIBOR
plus 5%.

The loan restructuring was accounted for in accordance with SFAS No. 15:
"Accounting by Debtors and Creditors for Troubled Debt Restructurings" and SFAS
No. 114: "Accounting by Creditors for Impairment of A Loan - an Amendment of
FASB Statement No. 5 and 15". The loan restructuring involved receipt of common
stock from the Borrower in partial satisfaction of the aforementioned loan and a
modification of terms of the remaining loan. The loan receivable from the
Borrower of $2,050,000 was first reduced by $400,000, representing the fair
value of common stock received from the Borrower. The remaining balance was
recorded at approximately $1,250,000, representing the present value of expected
future cash flows to be received under the modified terms of the restructured
loan. In this connection, the Company has recorded a valuation allowance of
approximately $400,000 for the impairment of the loan receivable.

9.      PROPERTY, MACHINERY AND EQUIPMENT

Property, machinery and equipment consisted of:

<TABLE>
<CAPTION>
                                                          2001            2002
                                                        -------         -------
                                                         $'000           $'000
<S>                                                     <C>             <C>
Buildings                                                15,294          15,268
Machinery and tools                                      35,687          39,784
Furniture and office equipment                            8,667           9,760
Motor vehicles                                              867             827
                                                        -------         -------
Cost                                                     60,515          65,639
Less: Accumulated depreciation                          (28,436)        (35,608)
                                                        -------         -------
Property, machinery and equipment, net                   32,079          30,031
                                                        =======         =======
</TABLE>

As of March 31, 2001 and 2002, buildings with net book value of approximately
$589,000 and $573,000, respectively, were situated in Hong Kong and were held
under leases expiring in 2047, and buildings with net book value of
approximately $11,648,000 and $11,095,000, respectively, were situated in
Mainland China and were held under land use rights of 50 years until 2044 and
2047.

As of March 31, 2001 and 2002, certain machinery and tools with net book value
of approximately $4,139,000 and $3,523,000, respectively, were held under
capital leases (see Note 14).

<PAGE>
10.     LAND USE RIGHTS

Land use rights consisted of:

<TABLE>
<CAPTION>
                                                                 2001       2002
                                                                ------     ------
                                                                 $'000     $'000
<S>                                                            <C>        <C>
Land use rights                                                  1,315     1,315
Less: Accumulated amortization                                    (127)     (154)
                                                                ------    ------
Land use rights, net                                             1,188     1,161
                                                                ======    ======
</TABLE>

A subsidiary operating in Mainland China owns factory buildings on certain
state-owned land in Mainland China and has been assigned the land use rights for
a period of 50 years until 2044 and 2047.

11.     GOODWILL

Goodwill consisted of:

<TABLE>
<CAPTION>
                                                                 2001      2002
                                                               -------    -------
                                                                 $'000     $'000
<S>                                                           <C>         <C>
Goodwill                                                        51,539    51,539
Less: Accumulated amortization                                  (4,329)   (6,305)
                                                               -------   -------
Goodwill, net                                                   47,210    45,234
                                                               =======   =======
</TABLE>

12.     SHORT-TERM BANK BORROWINGS

Short-term bank borrowings consisted of:

<TABLE>
<CAPTION>
                                                                  2001     2002
                                                                 ------   ------
                                                                 $'000     $'000
<S>                                                             <C>       <C>
Bank overdrafts                                                     --     3,068
Bank loans                                                       4,683     3,379
Trust receipts bank loans                                        6,189     3,985
                                                                ------    ------
                                                                10,872    10,432
                                                                ======    ======
</TABLE>

As of March 31, 2002, bank loans and trust receipts bank loans bore
weighted-average interest rates of approximately 9.0% and 7.0% per annum,
respectively, with repayment terms of up to 120 days. As of March 31, 2002, bank
overdrafts bore weighted-average interest rate of 7.8% per annum and were
repayable on demand.

<PAGE>

13.     LONG-TERM BANK LOANS

Maturities of the long-term bank loans were as follows:

<TABLE>
<CAPTION>
                                                             2001        2002
                                                            -------     -------
                                                             $'000       $'000
<S>                                                         <C>         <C>
Payable during the following period
   - Within one year                                          2,851       6,229
   - Over one year but not exceeding two years                5,918       5,958
   - Over two years but not exceeding five years              5,904          --
                                                            -------     -------
                                                             14,673      12,187
Less: Amounts repayable within one year included
        under current portion                                (2,851)     (6,229)
      Amounts included under current portion as a
        result of non-compliance with certain
        financial covenants (see Note 1)                         --      (5,958)
                                                            -------     -------
Non-current portion                                          11,822          --
                                                            =======     =======
</TABLE>

The long-term bank loans bear interest at LIBOR plus 1.5% to 2% (equivalent to
3.5% to 4.0% per annum as of March 31, 2002). One of the loans amounting to
$9,000,000 and $7,000,000 as of March 31, 2001 and 2002, respectively, is
secured by charges over the Company's entire interest in Corgi Classics Holdings
Limited and Corgi Classics Limited (see Note 23).

As of March 31, 2002, the Group was in violation of certain financial covenants,
giving the banks the right to accelerate the due dates of the related loans.
Taking into consideration the above matters, the Group's long-term bank loans
under such banking facilities have been reclassified as a current liability as
of March 31, 2002 (see Note 1).

14.     CAPITAL LEASE OBLIGATIONS

Machinery and tools held under capital leases consisted of:

<TABLE>
<CAPTION>
                                                            2001          2002
                                                           -------      -------
                                                            $'000         $'000
<S>                                                        <C>          <C>
Cost                                                        10,701       10,907
Less: Accumulated depreciation                              (6,562)      (7,384)
                                                           -------      -------
                                                             4,139        3,523
                                                           =======      =======
</TABLE>

<PAGE>

14.     CAPITAL LEASE OBLIGATIONS (Cont'd)

Future minimum lease payments under capital leases, together with the present
value of the minimum lease payments, were:

<TABLE>
<CAPTION>
                                                              2001        2002
                                                             ------      ------
                                                             $'000        $'000
<S>                                                         <C>          <C>
Payable during the following period
   - Within one year                                          2,119       1,446
   - Over one year but not exceeding two years                1,301         207
   - Over two years but not exceeding three years               149          58
   - Over three years but not exceeding four years               30          --
                                                             ------      ------
Total minimum lease payments                                  3,599       1,711
Less: Amount representing interest element                     (285)        (66)
                                                             ------      ------
Present value of minimum lease payments                       3,314       1,645
Less: Current portion                                        (1,901)     (1,393)
                                                             ------      ------
Non-current portion                                           1,413         252
                                                             ======      ======
</TABLE>

The capital leases bore interest at 4.7% to 9.8% per annum as of March 31, 2002.
The leases are secured by charges over certain of the Group's machinery and
tools (see Note 9).

15.     CONVERTIBLE NOTE

Maturities of the convertible note were as follows:

<TABLE>
<CAPTION>
                                                              2001        2002
                                                             ------      ------
                                                             $'000        $'000
<S>                                                          <C>         <C>
Payable during the following period
   - Within one year                                          1,276       1,551
   - Over one year but not exceeding two years                1,702          --
                                                             ------      ------
                                                              2,978       1,551
Less: Current portion                                        (1,276)     (1,551)
                                                             ------      ------
Non-current portion                                           1,702          --
                                                             ======      ======
</TABLE>

During the year ended March 31, 2000, in connection with the acquisition of
Corgi Classics Limited (see Note 2.a), the Company issued a convertible note of
approximately $4,761,000 (equivalent of Pound Sterling3,000,000), which is
exchangeable for the common stock of the Company. The convertible note is
unsecured, bears interest at 7% per annum and matures at various dates within a
three-year period to July 2002. The conversion right is exercisable upon the
maturity dates, at a price equal to 80% of the average market price of the
common stock over a ten-day period prior to the exercise, and subject to the
condition that the average market price exceeds $12 per share. No conversion
right under the convertible note was exercised during the years ended March 31,
2001 and 2002.

<PAGE>

16.     ACCRUED LIABILITIES

Accrued liabilities consisted of:

<TABLE>
<CAPTION>
                                                                 2001      2002
                                                                ------     -----
                                                                 $'000     $'000
<S>                                                             <C>       <C>
Accruals for operating expenses
   - Wages, salaries and bonus                                   2,200     1,519
   - Management bonus                                              380       114
   - Rental expenses                                                82       100
   - Freight charges and packaging fees                            347       334
   - Utility charges                                               277        --
   - Others                                                      1,855     1,353
Commission                                                          31        36
Royalty                                                            280       422
Raw materials purchases                                          3,629     4,085
Factory consumables                                                637       788
Subcontracting charges                                             849       150
Others                                                             598       849
                                                                ------     -----
                                                                11,165     9,750
                                                                ======     =====
</TABLE>

17.     INCOME TAXES

The Company and its subsidiaries are subject to income taxes on an entity basis
on income arising in or derived from the tax jurisdictions in which they
operate. The Company and the Hong Kong subsidiaries are subject to Hong Kong
profits tax at a rate of 16%. The United Kingdom subsidiaries are subject to
United Kingdom profits tax at a rate of 30%. The British Virgin Islands
subsidiaries are incorporated under the International Business Companies Act of
the British Virgin Islands and, accordingly, are exempted from payment of the
British Virgin Islands income taxes. The Cayman Islands subsidiary is
incorporated under the Companies Law of the Cayman Islands as a limited
liability exempted company and, accordingly, is exempted from payment of the
Cayman Islands income taxes until 2014. The Bermuda subsidiary is incorporated
under the Companies Act 1981 of Bermuda and, accordingly, is exempted from
payment of the Bermuda income taxes until 2016. The joint venture established in
the open coastal area of Mainland China is subject to Mainland Chinese income
taxes at a rate of 27% (24% state income tax and 3% local income tax), while the
joint venture established in a special economic zone in Mainland China is
subject to Mainland Chinese income taxes at a rate of 15%. However, these joint
venture enterprises are exempted from state income tax and local income tax for
two years starting from the first year of profitable operations after offsetting
prior years' losses, followed by a 50% reduction in state income tax for the
next three years. The tax exemption period of Dongguan Xinda Giftware Company
Limited expired on December 31, 2000 and it has been subject to Mainland Chinese
state income tax at the rate of 12% for the three months ended March 31, 2001
and for the year ended March 31, 2002. The tax exemption period of Shenzhen
Huaxuan Printing Product Company Limited expired on December 31, 1997 and it was
subject to Mainland Chinese state income tax at the rate of 7.5% for the year
ended March 31, 2000 and for the nine months ended December 31, 2000. Starting
from January 1, 2001, it has been subject to Mainland Chinese state income tax
at the rate of 15%.

If the tax holiday for the joint ventures established in Mainland China did not
exist, the Group's income tax provisions would have been increased by
approximately $90,000, $179,000 and $9,000 for the years ended March 31, 2000,
2001 and 2002, respectively. Basic earnings (loss) per common share would have
been approximately $1.01, $0.23 and $(0.96) for the years ended March 31, 2000,
2001 and 2002, respectively. Diluted earnings (loss) per common share would have
been approximately $1.01, $0.23 and $(0.96) for the years ended March 31, 2000,
2001 and 2002, respectively.

<PAGE>

17.     INCOME TAXES  (Cont'd)

Income tax expense (benefit) consisted of:

<TABLE>
<CAPTION>
                                                       2000      2001      2002
                                                      ------     -----    ------
                                                       $'000     $'000    $'000
<S>                                                   <C>        <C>      <C>
Current taxes
   - Hong Kong profits tax                             1,413       720       643
   - United Kingdom profits tax                          594      (146)      235
   - Mainland Chinese income taxes                        96       101        55
Deferred taxes                                            (4)       13    (1,095)
                                                      ------      ----    ------
                                                       2,099       688      (162)
                                                      ======      ====    ======
</TABLE>

The reconciliation of the Hong Kong statutory profits tax rate to the effective
income tax rate based on income (loss) before income taxes stated in the
consolidated statements of operations was as follows:

<TABLE>
<CAPTION>
                                                       2000      2001      2002
                                                      ------    ------    ------
<S>                                                  <C>        <C>       <C>
Hong Kong statutory profits tax rate                    16.0%     16.0%     16.0%
Effect of difference in income tax
   rates outside Hong Kong                               2.5%     (7.9)%    (2.2)%
Non-taxable income arising from
   activities which qualified as
   offshore                                             (6.6)%    (8.1)%     0.6%
Non-deductible activities
  - Amortization of goodwill                             2.2%      9.8%     (5.9)%
  - Interest expense                                     1.3%      6.5%     (1.4)%
  - Others*                                              2.9%      5.4%     (5.2)%
                                                        ------    ------    ------
Effective income tax rate                               18.3%     21.7%      1.9%
                                                        ======    ======    ======
</TABLE>

*  Others mainly represented the tax effect of valuation allowance for loan
   receivable and amortization of loan arrangement fees.

Taxation payable consisted of:

<TABLE>
<CAPTION>
                                                                  2001     2002
                                                                 -----     -----
                                                                 $'000     $'000
<S>                                                              <C>       <C>
Hong Kong profits tax                                              837     1,110
United Kingdom profits tax                                         572        --
Mainland Chinese income taxes                                       47        --
                                                                 -----     -----
                                                                 1,456     1,110
                                                                 =====     =====
</TABLE>

Both deferred tax assets and liabilities as of March 31, 2001 and 2002
represented temporary differences arising from depreciation of property,
machinery and equipment.

<PAGE>
18.     COMMON STOCK

As of April 1, 1999 (the earliest date covered by these financial statements),
the Company had 15,000,000 shares of common stock, par value HK$0.50 each,
authorized, 8,146,958 shares of common stock outstanding and 666,667 shares of
common stock reserved and to be issued.

In November 1999, the Company issued 20,500 shares of common stock, par value
HK$0.50 each, for cash consideration of $6.75 per share in respect of the
exercise of stock options granted under the Company's 1997 equity incentive
plan.

In November 2000, the Company issued 666,667 shares of common stock, par value
HK$0.50 each, which had been reserved for issue to the former shareholders of
Hua Yang Holdings Company Limited ("HYHCL"), in connection with the Company's
acquisition of HYHCL in February 1998.

19.     STOCK OPTIONS

The Company has a stock-based compensation plan, under which non-qualified stock
options may be granted to certain employees and directors. Under the 1997 equity
incentive plan, as amended in fiscal 2002, the Company may grant up to 2,200,000
shares of common stock of the Company to employees of the Group and directors of
the Company. The options granted under the plan are to purchase common stock at
not less than fair market value of the common stock at the date of grant, and
generally vest in four equal annual installments within a four-year period, and
expire 10 years after issuance.

In fiscal 2001, the Company entered into stock option agreements with certain of
its directors such that the Company granted options to these directors to
purchase up to 405,000 shares of common stock of the Company. The exercise price
of the options granted under these agreements was set at a price not less than
the fair market value of the common stock at the dates of the grants. The
options vest within a three to four-year period and expire 10 years after
issuance.

In fiscal 2002, the Company granted stock options to an executive officer of the
Company to purchase up to 100,000 shares of common stock of the Company. The
exercise price of the options granted was set at a price not less than the fair
market value of the common stock at the date of grant. The options vest in four
equal annual installments and expire 10 years after issuance.

Changes in outstanding options under the plans were as follows:

<TABLE>
<CAPTION>
                                              2000                          2001                             2002
                                     --------------------------  ----------------------------    ----------------------------
                                                    Weighted                      Weighted                       Weighted
                                     Number of       average      Number of        average       Number of        average
                                      options    exercise price    options     exercise price     options      exercise price
                                     ---------   --------------  ----------    --------------    ----------    --------------
                                                        $                              $                             $
<S>                                  <C>         <C>             <C>           <C>               <C>           <C>
Outstanding, beginning of year        749,500          6.75          826,000          6.78        1,536,250          4.02
Granted at market price of the
   common stock                       166,500          6.88          900,000          2.08          100,000          1.80
Exercised                             (20,500)         6.75               --            --               --            --
Forfeited/Cancelled                   (69,500)         6.75         (189,750)         6.80         (113,000)         4.75
                                     --------        ------       ----------        ------       ----------        ------
Outstanding, end of year              826,000          6.78        1,536,250          4.02        1,523,250          3.82
                                     ========        ======       ==========        ======       ==========        ======
Exercisable, end of year              463,213          6.76          680,709          6.01          942,444          4.91
                                     ========        ======       ==========        ======       ==========        ======
</TABLE>

The following table summarizes the information about stock options outstanding
and exercisable as of March 31, 2002.

<TABLE>
<CAPTION>
                                 Outstanding                    Exercisable
                       ------------------------------   ----------------------------
                                          Weighted                      Weighted
Exercise                  Number          average         Number         average
price                   of options     unexpired life   of options    unexpired life
--------                ----------     --------------   ----------    ---------------
<S>                     <C>            <C>              <C>           <C>
1.56                       356,875           8.83          90,625            8.83
1.80                       100,000           9.75              --              --
2.50                       500,000           8.58         299,444            8.58
6.75                       501,625           6.09         497,125            6.08
6.88                        64,750           7.83          55,250            7.83
                         ---------           ----         -------            ----
                         1,523,250           7.86         942,444            7.24
                         =========           ====         =======            ====
</TABLE>

<PAGE>

19.     STOCK OPTIONS (Cont'd)

The Company accounts for stock-based compensation using the intrinsic value
method prescribed by APB Opinion No. 25, under which no compensation cost was
recognized as all the stock options were granted with exercise price at or above
the fair market value of the underlying stock at the date of grant. Had
compensation expense for the Company's stock-based compensation plan been
recognized based on fair value of the options on the grant date in accordance
with SFAS No. 123, the Company's pro forma net income (loss) and earnings (loss)
per common share would have been as follows:

<TABLE>
<CAPTION>
                                             2000         2001           2002
                                          ---------     ---------     ---------
                                            $'000         $'000          $'000
<S>                                       <C>           <C>           <C>
Pro forma net income (loss)                   8,154         1,356        (8,713)
                                          =========     =========     =========
Reported net income (loss)                    9,038         2,182        (8,434)
                                          =========     =========     =========
Pro forma earnings (loss) per common
   share
   - Basic                                $    0.92     $    0.15     $   (0.99)
   - Diluted                              $    0.92     $    0.15     $   (0.99)
                                          =========     =========     =========
Reported earnings (loss) per common
   share
   - Basic                                $    1.02     $    0.25     $   (0.95)
   - Diluted                              $    1.02     $    0.25     $   (0.95)
                                          =========     =========     =========
</TABLE>

The weighted average fair value of the options on the grant dates relating to
options granted during the years ended March 31, 2000, 2001 and 2002 is
estimated, using the Black-Scholes option-pricing model, to be $4.96 per share,
$0.16 per share and $0.02 per share, respectively. Such fair values are
estimated using the following weighted-average assumptions:

<TABLE>
<CAPTION>
                                             2000           2001          2002
                                            -------       -------        ------
<S>                                         <C>           <C>            <C>
Risk-free interest rate                        5.46%         5.44%         5.52%
Expected dividend yield                          --            --            --
Expected option life                        5 years       5 years        5 years
Expected stock price volatility               88.82%       107.80%       119.10%
                                            =======       =======        ======
</TABLE>

The Black-Scholes option-pricing model requires the input of subjective
assumptions, including the expected volatility of stock price. Because changes
in subjective input assumptions can materially affect the fair value estimate,
in management's opinion, the existing model may not necessarily provide a
reliable measure of the fair value of the stock options.

20.     COMMITMENTS

The Group had the following significant commitments which were not provided for
in the financial statements.

a.      Capital commitments

<TABLE>
<CAPTION>
                                               2001          2002
                                              -----         -----
                                              $'000         $'000
<S>                                           <C>           <C>
Authorized and contracted for - Acquisition
   of  property, machinery and equipment         --         1,627
                                              =====         =====
</TABLE>

<PAGE>
20.     COMMITMENTS (Cont'd)

b.      Operating lease commitments

        The Group has various operating lease agreements for factory premises,
        staff quarters which extend through April 2009. Rental expense for the
        years ended March 31, 2000, 2001 and 2002 was approximately $1,238,000,
        $1,310,000 and $1,339,000, respectively. As of March 31, 2002, future
        minimum payments under agreements classified as operating leases with
        non-cancelable terms were analyzed as follows:

<TABLE>
<CAPTION>
                                                                          $'000
                                                                          ------
<S>                                                                      <C>
       Payable during the following period
          -  Within one year                                                594
          -  Over one year but not exceeding two years                      303
          -  Over two years but not exceeding three years                   251
          -  Over three years but not exceeding four years                  182
          -  Over four years but not exceeding five years                   173
          -  Thereafter                                                   1,169
                                                                          -----
                                                                          2,672
                                                                          ======
</TABLE>

c.      Commitment relating to contractual joint ventures

        Under the supplementary joint venture agreement for the establishment of
        Dongguan Xinda Giftware Company Limited and the joint venture agreement
        for the establishment of Shenzhen Huaxuan Printing Product Company
        Limited, the Group has committed to pay pre-determined annual fees to
        the third-party joint venture partners for the period from November 1994
        to October 2010. Pre-determined annual fees paid to joint venture
        partners, which have been charged to expense, amounted to approximately
        $430,000, $450,000 and $472,000 for the years ended March 31, 2000, 2001
        and 2002, respectively. As of March 31, 2002, future fees payable under
        these agreements were as follows:

<TABLE>
<CAPTION>
                                                                          $'000
                                                                         -------
<S>                                                                      <C>
       Payable during the following period
          -  Within one year                                                551
          -  Over one year but not exceeding two years                      576
          -  Over two years but not exceeding three years                   603
          -  Over three years but not exceeding four years                  632
          -  Over four years but not exceeding five years                   661
          -  Thereafter                                                   2,559
                                                                         -------
                                                                          5,582
                                                                         =======
</TABLE>

21.     DERIVATIVE FINANCIAL INSTRUMENTS

Prior to fiscal 2002, the Group did not engage in material derivative
activities. Starting in fiscal 2002, the Group has entered into certain foreign
currency forward contracts in order to settle trade payable denominated in
foreign currencies. As of March 31, 2002, the Group had outstanding foreign
currency forward contracts to sell approximately GBP2,318,000 for HK$25,000,000.
These contracts will mature in April and May 2002. For the year ended March 31,
2002, total net unrealized loss on these outstanding foreign currency forward
contracts amounted to approximately $20,000 based on the fair value of these
contracts, which has been included in the statements of operations as hedge
accounting criteria is not met.


<PAGE>
22.     RETIREMENT PLANS

During the period from April 1, 2000 to November 30, 2000, the Group's employees
in Hong Kong and the United Kingdom, after completing a probation period, were
entitled to join the Group's defined contribution provident funds managed by
independent trustees in Hong Kong and the United Kingdom. The Group makes
monthly contribution to the schemes ranging from 5.0% to 11.0% of the employees'
basic salaries, and the employees make monthly contributions ranging from 2.5%
to 5.0% of their basic salaries. The employees are entitled to receive their
entire contribution together with accrued interest thereon at any time upon
leaving the Group, and 100% of the employer's contribution and the accrued
interest thereon upon retirement or at a reduced scale of 30% to 100% of the
employer's contribution and the accrued interest thereon upon leaving the Group
depending on the number of years of service. Any forfeited contributions made by
the Group and the accrued interest thereon are used to reduce future employer's
contributions. Starting from December 1, 2000, the Group has arranged for its
employees in Hong Kong to participate in the Mandatory Provident Fund Scheme
("MPF Scheme"), a defined contribution scheme managed by an independent trustee.
Under the MPF Scheme, the Group makes monthly contributions to the scheme at 5%
of the employees' basic salaries subject to a maximum contribution of $128
(equivalent of HK$1,000) per month. The Group has no other post-retirement or
post-employment benefit plans.

Dongguan Xinda Giftware Company Limited contributes to a state-sponsored
retirement plan with amounts stipulated by local government of Mainland China
and has no further obligations for the actual pension payments or
post-retirement benefits. The state-sponsored retirement plan is responsible for
the entire pension obligations payable to retired employees. Shenzhen Huaxuan
Printing Product Company Limited hires employees on a contractual basis and
consequently has no obligation for pension liabilities to its employees.

The aggregate amount of the Group's employer contributions (net of forfeited
contributions) to the retirement plans for the years ended March 31, 2000, 2001
and 2002 was approximately $425,000, $614,000 and $671,000, respectively.

23.     BANKING FACILITIES

As of March 31, 2002, the Group had banking facilities of approximately
$55,864,000 for overdrafts, loans, capital leases and trade financing. Unused
facilities as of the same date amounted to approximately $31,291,000.

The banking facilities included an installment loan in relation to the
acquisition of Corgi Classics Limited (see Note 2.a). The Company pledges its
entire interest in Corgi Classics Holdings Limited and Corgi Classics Limited as
collateral for the loan. It has also agreed to comply with certain of these
restrictive financial covenants. As of March 31, 2002, the Group was in
violation of certain of these financial covenants, giving the banks the right to
accelerate the due dates of their loans of approximately $12,187,000. In June
2002, the Group obtained letters from the relevant banks acknowledging its
non-compliance with the aforementioned financial covenants as of March 31, 2002
(see Note 1).

In addition, the capital lease obligations were secured by certain machinery and
tools with net book value amounted to approximately $3,523,000 (see Note 14).

<PAGE>
24.     SEGMENT INFORMATION

The Group operates in three business segments: (i) manufacturing of die-cast and
injection-molded plastic products under OEM arrangements, (ii) manufacturing of
paper products under OEM arrangements, and (iii) design, marketing and
distribution of die-cast products under its proprietary brand names owned by
Corgi Classics Limited.

a.      Net sales

        Net sales consist of:

<TABLE>
<CAPTION>
                                                   2000        2001       2002
                                                 -------     -------     -------
                                                  $'000       $'000       $'000
<S>                                              <C>         <C>         <C>
Manufacturing of die-cast and
   injection-molded plastic products              78,051      60,216      48,521
Manufacturing of paper products                   36,398      34,328      29,008
Design, marketing and distribution of
   die-cast products under proprietary
    brand names                                   22,671      41,539      43,164
                                                 -------     -------     -------
                                                 137,120     136,083     120,693
                                                 =======     =======     =======
</TABLE>

   Geographical analysis of net sales is as follows:

<TABLE>
<CAPTION>
                                                   2000       2001        2002
                                                 -------     -------     -------
                                                   $'000      $'000       $'000
<S>                                              <C>         <C>         <C>
Manufacturing of die-cast and
  injection-molded plastic products
U.S.A                                             71,572      57,383      46,309
Europe                                             5,517       2,480       2,011
Others                                               962         353         201
                                                 -------     -------     -------
                                                  78,051      60,216      48,521
                                                 -------     -------     -------
Manufacturing of paper products
U.S.A                                             16,862      13,379       5,939
Hong Kong                                          9,279      11,258      13,108
Europe                                             9,715       9,394       9,683
Others                                               542         297         278
                                                 -------     -------     -------
                                                  36,398      34,328      29,008
                                                 -------     -------     -------
Design, marketing and distribution
  of die-cast products under
  proprietary brand names
United Kingdom                                    19,724      33,467      35,152
Other European countries                           1,360       2,939       3,702
U.S.A                                                577       2,913       4,203
Others                                             1,010       2,220         107
                                                 -------     -------     -------
                                                  22,671      41,539      43,164
                                                 -------     -------     -------
Total                                            137,120     136,083     120,693
                                                 =======     =======     =======
</TABLE>

<PAGE>
24.     SEGMENT INFORMATION (Cont'd)

b.      Segment profit (loss)*

<TABLE>
<CAPTION>
                                                     2000       2001       2002
                                                    ------     ------     ------
                                                    $'000      $'000      $'000
<S>                                                 <C>        <C>        <C>
Manufacturing of die-cast and
   injection-molded plastic products                 8,525      1,866     (4,153)
Manufacturing of paper products                      2,515      3,384        258
Design, marketing and
   distribution of die-cast
   products under proprietary
    brand names                                      2,120      1,196     (2,047)
                                                    ------     ------     ------
                                                    13,160      6,446     (5,942)
                                                    ======     ======     ======
</TABLE>

*  Segment profit (loss) represents gross profit less selling, general and
   administrative expenses and amortization of goodwill.

c.      Identifiable assets **, capital expenditures, depreciation and
        amortization

<TABLE>
<CAPTION>
                                                     2000       2001       2002
                                                    ------     ------     ------
                                                    $'000      $'000      $'000
<S>                                                 <C>        <C>        <C>
Identifiable assets
Manufacturing of die-cast and injection-
   molded plastic products                          49,254     43,000     31,396
Manufacturing of paper products                     25,674     18,913     17,227
Design, marketing and distribution of die-
   cast products under proprietary brand names      22,486     31,081     31,782
                                                    ------     ------     ------
                                                    97,414     92,994     80,405
                                                    ======     ======     ======
Capital expenditures
Manufacturing of die-cast and injection-
   molded plastic products                           1,350        394        656
Manufacturing of paper products                      1,054        381        261
Design, marketing and distribution of die-
   cast products under proprietary brand names       4,913      4,561      4,181
                                                    ------     ------     ------
                                                     7,317      5,336      5,098
                                                    ======     ======     ======
Depreciation and amortization
Manufacturing of die-cast and injection-
   molded plastic products                           4,072      3,875      3,356
Manufacturing of paper products                      1,305      1,273      1,250
Design, marketing and distribution of die-
   cast products under proprietary brand names       2,439      3,820      4,664
                                                    ------     ------     ------
                                                     7,816      8,968      9,270
                                                    ======     ======     ======
</TABLE>

** Identifiable assets represent total assets less goodwill.

<PAGE>
24.     SEGMENT INFORMATION (Cont'd)

d.      Long-lived assets***

        Geographic analysis of long-lived assets is as follows:

<TABLE>
<CAPTION>
                                                     2000       2001       2002
                                                    ------     ------     ------
                                                    $'000      $'000      $'000
<S>                                                 <C>        <C>        <C>
Hong Kong and Mainland China                        46,298     34,781     31,057
United Kingdom                                      38,690     45,696     45,369
                                                    ------     ------     ------
                                                    84,988     80,477     76,426
                                                    ======     ======     ======
</TABLE>

*** Long-lived assets represent land use rights, property, machinery and
    equipment, and goodwill.

e.      Major customers

        Details of individual customers accounting for more than 5% of the
Group's sales are as follows:

<TABLE>
<CAPTION>
                                                     2000       2001       2002
                                                    ------     ------     ------
<S>                                                 <C>        <C>        <C>
Mattel Toys (HK) Limited/Mattel
   Vendor Operations Asia Limited                     21.1%      18.2%      16.3%
ERTL and its related company                           5.9%        --         --
Hallmark Cards (HK) Limited
   (a subsidiary of Hallmark Cards, Inc.)              8.5%       9.7%       8.7%
Premium Manufacturing Services Limited                 5.2%       7.0%        --
                                                    ======     ======     ======
</TABLE>

<PAGE>
25.     SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION

a.      During the year ended March 31, 2000, the Group acquired the entire
        issued capital stock of Corgi Classics Holdings Limited. Details of the
        fair value of the assets acquired and liabilities assumed for the
        acquisition are as follows:

<TABLE>
<CAPTION>
                                                                        2000
                                                                       ------
                                                                        $'000
<S>                                                                    <C>
       Cash and bank deposits                                             959
       Accounts receivable                                              7,851
       Deposits and prepayments                                         1,785
       Inventories                                                      4,256
       Machinery and equipment                                          4,485
       Short-term borrowings                                           (3,984)
       Accounts payable                                                (3,771)
       Accrued liabilities                                               (661)
       Taxation payable                                                (1,559)
                                                                       ------
       Net assets acquired                                              9,361
       Goodwill on acquisition                                         38,724
                                                                       ------
       Consideration settled by cash and assumption of debt            48,085
       Less: Cash and bank deposits acquired                             (959)
                                                                       ------
       Net cash outflow for acquisition of a subsidiary                47,126
                                                                       ======
</TABLE>

b.      During the year ended March 31, 2002, the Group acquired property, plant
        and equipment of approximately $206,000 under capital lease contracts.

c.      During the year ended March 31, 2002, the Group received 1,269,842
        shares of the common stock of the Borrower with a fair value of $800,000
        in partial satisfaction of the loan receivable and trade receivable from
        the Borrower.

d.      Cash paid for interest and income taxes is as follows:

<TABLE>
<CAPTION>
                                                2000       2001         2002
                                                -----      -----        -----
                                                $'000      $'000        $'000
<S>                                             <C>        <C>          <C>
       Interest                                 2,388      3,827        2,421
                                                =====      =====        =====
       Income taxes                             2,861      1,455        1,279
                                                =====      =====        =====
</TABLE>

<PAGE>

26.     OTHER ADDITIONAL INFORMATION

The following items are included in the consolidated statements of operations:

<TABLE>
<CAPTION>
                                                  2000        2001        2002
                                                 ------      ------      ------
                                                 $'000       $'000       $'000
<S>                                              <C>         <C>         <C>
Depreciation of property, machinery
   and equipment
   - owned assets                                 6,247       6,051       6,445
   - assets held under capital leases                --         916         822
Provision for/Write-off of doubtful
   accounts                                       1,870       1,333       1,573
Interest expense for
   - factoring of accounts receivable                --         151          97
   - short-term bank borrowings                     395       1,099         921
   - convertible note                               236         229         155
   - long-term bank loans                         1,983       2,254       1,393
   - capital lease obligations                        7         514         249
                                                 ------      ------      ------
                                                  2,621       4,247       2,815
Advertising expenses                              2,310       5,534       7,531
Research and development expenses                 1,239       1,903       2,156
Interest income from
   - bank deposits                                 (496)       (276)        (82)
   - loan receivable                               (201)       (270)       (168)
                                                 ======      ======      ======
</TABLE>

<PAGE>
PART III

ITEM 10 - DIRECTORS, EXECUTIVE OFFICERS AND CERTAIN KEY EMPLOYEES

The following table sets forth certain information about the directors,
executive officers and certain key employees of the Company and their ages as of
March 31, 2002. All directors serve on the board for a one year term.

<TABLE>
<CAPTION>
Name                     Age      Position
----                     ---      --------
<S>                      <C>      <C>
Peter A.J. Gardiner      66       Executive Chairman of the Board
Robert A. Theleen(1)     56       Vice-Chairman of the Board
Christopher Guest        55       Chief Executive Officer of Corgi and Director
Len Kalkun               40       Interim Chief Financial Officer
C. Richard Tong          46       President and Chief Executive Officer of Zindart
Kevin Murphy             42       President and Chief Executive Officer of Hua Yang
Trevor Dyer              59       Vice President - Operations Development of Zindart
K.H. Li                  44       Vice President - Technical Services of Zindart
C.W. Ng                  43       Vice President - Operations of Zindart
Franki Lee               44       Vice President - Marketing and Sales of Zindart
Daisy Lee                34       Vice President - Finance and Administration of Zindart
T.M. Tong                41       Vice president - Operations of Hua Yang
Colin Summerbell         50       U.K. Sales Director of Corgi
John H. Dunkel           53       Vice President and General Manager of Corgi U.S.A.
George Chen              51       Director
Feather S.Y. Fok         40       Director
Leo Paul Koulos(1)(2)    68       Director
Gordon L.M. Seow         67       Director
Victor Yang(1)(2)        56       Director
</TABLE>

(1)     Member of Compensation Committee

(2)     Member of Audit Committee

Peter A.J. Gardiner serves as the Executive Chairman of the Board. Mr. Gardiner
joined the Board in January 2000. From March 1997 to August 1998, Mr. Gardiner
had been Chairman, Chief Executive Officer and a major shareholder of Veriflo
Corporation, a leading manufacturer of semiconductor components. Mr. Gardiner
received a bachelor's degree in brewing and industrial fermentation from
Heriot-Watt University in Edinburgh, United Kingdom.

Robert A. Theleen serves as Vice-Chairman of the Board and served as Chairman of
the Board from January 1997 until September 2000. Mr. Theleen is also the
founder and Chairman of ChinaVest. Mr. Theleen joined the Board in January 1997.
Mr. Theleen is a director of several ChinaVest portfolio companies. Mr. Theleen
is a founding member of the executive committee of the Hong Kong-Taipei Business
Cooperation Committee of the Hong Kong General Chamber of Commerce. Mr. Theleen
received a B.A. degree from Duquesne University and an M.B.A. from the American
School of International Management.

Christopher Guest joined the Board as a director in June 1999. Mr. Guest is the
Chief Executive Officer of Corgi Classics Ltd. (the "Corgi U.K."), a subsidiary
of the Company. Mr. Guest joined Corgi U.K. in 1984 as Sales and Marketing
Director. He was appointed Managing Director of Corgi U.K. in 1988, and was
responsible for the integration of Corgi U.K. with Mattel in connection with
Mattel's acquisition of Corgi U.K. He left Corgi U.K. in January 1995 after
completion of the integration. Later the same year, he led Corgi U.K.'s
management in a leveraged buyout of the company from Mattel. His previous
marketing experience includes seven years with Unilever PLC and eight years with
Mars Inc. Mr. Guest received a Bachelor of Arts degree in English and Economics
from the University of York.

Len Kalkun joined Corgi as Finance Manager in 1994, having worked for Mattel for
two years. He has worked for Courtaulds Textiles, Gallifords and York Trailers.
He was appointed both Finance Director and Company Secretary following the MBO.

In December 2001, C. Richard Tong was appointed President & CEO of Zindart
Manufacturing Division, he is in charge of the Group's diecast and plastic OEM
business. A native of Hong Kong, from November 1999 to September 2000, Mr. Tong
was the CEO of Magician Industries. His US experiences include Emerson Electric,
Alcoa, and Allied-Signal. Richard obtained his undergraduate degrees from
Columbia University and Davidson College as well as Master degrees in Chemical
Engineering and Management (Kellogg) from Northwestern University.

Kevin Murphy joined Zindart in 1998 as Vice-President Operations of the Group's
Hua Yang paper products division. Prior to joining the Company, from June 1994
to 1998, he worked as Managing Director, General Manager, and

<PAGE>
Production Manager at various companies. He received a M.Sc. degree in
Manufacturing Systems Engineering from the Cranfield Institute of Technology.

Trevor Dyer's career in diecast production began in 1970 when he joined Mettoy
as Production Control Manager. Thereafter, he held senior production positions
before relocating to Hong Kong as Operations Director for Mattel where he
implemented a tooling relocation and product sourcing program. He joined Zindart
in August 1995 and he was appointed Operations Director for Corgi in August 1999
as part of the successful MBO team, and is currently working with Zindart's
manufacturing team.

K.H. Li has served as Vice President - Technical Services since December 2001.
He joined the Company in September 1998. Mr. Li has 18 years of experience in
marketing and engineering of toys. Prior to joining the Company, Mr. Li worked
for Unitoys, Mattel and Playmates. Mr. Li received a Higher Diploma in
Production & Industrial Engineering from the Hong Kong Polytechnic University.

C.W. Ng joined the Company in June 2001. Mr. Ng has 20 years experience in
project management, manufacturing and quality in toys/consumer products. Prior
to rejoining the Company, Mr. Ng worked for Mattel Toys, Neil Pryde Sails and
Strombecker Toys. Mr. Ng got a Engineering Degree from University of Hong Kong
and a MBA from Andrews University.

Franki Lee has served as Vice President since December 2001. He joined the
Company in April 1987. Mr. Lee has 15 years experience in customer services and
engineering of toys. Mr. Lee received a certificate of Mechanical Engineering
from the Hong Kong Polytechnic University.

Daisy Lee joined the Company in February 1999 and served as the Financial
Controller from May 2001. In May 2002, she was appointed as the Vice President
of Finance and Administration, a position that she continues to hold. Ms. Lee
served as the Assistant Manager -- Finance for Hua Yang Printing Holdings
Company Ltd. from March 1995 to November 1996. Ms. Lee is a qualified accountant
in the U.K. and H.K. Ms. Lee received a Bachelor of Business Administration
degree from the Hong Kong Baptist University and a MBA from University of
Nottingham in U.K.

T.M. Tong has served as Vice President in December 2001. He joined the Company
in November 1997. Mr. Tong has 20 years experience in publishing and printing of
books. Prior to joining the Company, Mr. Tong worked as a Divisional Manager in
Reed Elsevier Publishing Group. Mr. Tong has taken some management training
course in Open University of Hong Kong.

Colin Summerbell joined Corgi in 1989 as Northern Sales Manager. In 1995 he was
appointed as Sales Director and his role is to oversee the various duties of the
sales department.

John H. Dunkel joined Corgi U.S.A. in November 1999. He is responsible for all
retail, wholesales operations and premium activity. From 1988 to December 1999
Mr. Dunkel was Vice President of Ertl Collectibles, where he was responsible for
the strategic development and direction of the Collectibles division. Mr. Dunkel
has attended Loras College (Dubuque, IA) and served in Vietnam with the United
States Marine Corps.

George Chen has served as a director since January 2000. Mr. Chen is the Chief
Executive Officer of Tait Asia Limited, a food and beverage distribution company
in China. He is also a director of, Tait Asia Ltd., South Pacific Sea Land Air
Ltd., Sea Star Fishing Co. Ltd., Pacific Genesis Ltd., China Food and
Beverage.com, Ltd., Tonga Petroleum & Gas Ltd. and China National Advertising
Co. Mr. Chen is a graduate of Boston University and has a bachelor's degree in
business administration.

Feather S.Y. Fok has served as a director since August 1993. Ms. Fok served as
Chief Financial Officer from August 1993 to March 2001. Ms. Fok joined the
Company in January 1989. Before joining the Company, Ms. Fok worked in the Audit
and Business Advisory division of Arthur Andersen & Co in Hong Kong. Ms. Fok is
a Certified Public Accountant in Hong Kong and an associate member of the Hong
Kong Society of Accountants. Ms. Fok is also a member of the Chartered
Association of Certified Accountants, United Kingdom. Ms. Fok received a
bachelor's degree in Business Administration from the Chinese University of Hong
Kong.

Leo Paul Koulos joined the Board in March 1997. Prior to the sale of his
company, Mr. Koulos was President and Chief Executive Officer of National Coupon
Redemption Service, Inc., a national clearinghouse for manufacturers' cents-off
coupons and served as Chairman and Chief Executive Officer of Coupon Processing
Associates, Inc., of Texas, and its Mexican affiliate, Enlace Vital, S.A. de.
C.V. He is now the Chairman of the board of International Data, LLC, its
successor company. Mr. Koulos received a B.A. degree from the University of San
Francisco.

Gordon L.M. Seow joined the Board in March 1998. He is a barrister-at-law from
Lincoln's Inn, United Kingdom. Mr. Seow was a director of Shell Eastern
Petroleum (Pte) Ltd., Singapore and retired from the company in 1987 after 30
years of service. He then joined the Ministry of Foreign Affairs in 1988 and
served as Singapore's Commissioner to Hong Kong from 1988 to 1994 and
subsequently retired. Mr. Seow is currently a director of several companies in
Singapore, including Hotel Properties Ltd, Kim Eng Holdings Ltd and Pacific
Century Regional Developments Ltd. He is a member of the advisory board of
ChinaVest IV-B.

<PAGE>
Victor Yang joined the Board in March 1998. He is a founding partner of and has
practiced for over 20 years with the Canadian law firm Boughton Peterson Yang
Anderson, Solicitors and resides currently in the firm's Hong Kong office. Mr.
Yang has served on the board of directors of various publicly listed companies
in Canada, Singapore and Hong Kong. He is also a member of the law societies of
British Columbia, Canada, Hong Kong and United Kingdom.

Equity Compensation Plan Information

The following table gives information about our securities that may be issued
upon the exercise of options, warrants and rights under all of our existing
equity compensation plans and arrangements as of March 31, 2002:

<TABLE>
<CAPTION>
                                                                                              Number of securities
                                                                                              remaining available
                                                                                              for future issuance
                                              Number of Securities                                under equity
                                                to be issued upon       Weighted average          compensation
                                                   exercise of          exercise price of       plans (excluding
                                              outstanding options,    outstanding options,         securities
                                                  warrants and            warrants and            reflected in
Plan Category                                       rights(a)               rights(b)            column (a))(c)
-------------                                 --------------------    --------------------    ---------------------
<S>                                           <C>                     <C>                     <C>
Equity compensation plans approved by             818,250(1)                  US$3.40               1,381,750
security holders

Equity compensation plans not approved by         705,000(2)                  US$4.30                      --
security holders

Total                                           1,523,250                     US$3.82               1,381,750
</TABLE>

(1)     Issued under our 1997 Equity Incentive Plan.

(2)     Issued pursuant to individual arrangement with Messrs. Gardiner, Ngan
        and Guest, which do not require approval of and have not been approved
        by our security holders. See the description below of each of these
        arrangements.

The Company has made option grants to three individuals outside of the 1997
Equity Incentive Plan. Except as described below and otherwise set forth in the
option agreement entered into with each individual, the options are governed by
the terms of the 1997 Equity Incentive Plan.

On May 8, 1998, the Company granted to Alexander Ngan, the former Chief
Executive Officer of the Company, an option to purchase 300,000 ADSs at an
exercise price of $6.75. The option has a term of nine years and was vested with
respect to 75,000 ADSs upon grant. The option continued to vest pro rata on a
monthly basis until fully vested on May 8, 2001.

On October 31, 2000, the Company granted to Peter A.J. Gardiner, the Executive
Chairman of the Company, an option to purchase 380,000 ADSs at an exercise price
of $2.50. The option has a term of ten years and vests over three years with
one-third of the ADSs subject to the option having vested on October 31, 2001
and one twenty-fourth of the ADSs vesting pro rata on a monthly basis through
October 31, 2003. Regardless of vesting, the option may be exercised in whole or
in part as to 100% of the ADSs. Upon the exercise of the option to purchase
unvested ADSs, Mr. Gardiner will receive ADSs, which until vested, will be
restricted and therefore nontransferable except by will or the laws of descent
and distribution. On October 31, 2000, the Company also granted to Mr. Gardiner
an option to purchase 20,000 ADSs with an exercise price of $2.50. The option
was 100% vested upon grant and has a term of three years.

On January 11, 2001, the Company granted to Christopher Guest, the Chief
Executive Officer of Corgi an option to purchase 5,000 ADSs at an exercise price
of $1.5625. The option has a term of ten years and vests with respect to 25% of
the underlying ADSs on the anniversary date of grant until fully vested on
January 11, 2005.

As set forth in the 1997 Equity Incentive Plan, upon a change in control of the
Company, any outstanding options will either be assumed by any surviving or
acquiring corporation, or will immediately vest and become exercisable.

<PAGE>
ITEM 11 - EXECUTIVE COMPENSATION

The information required by this item is incorporated by reference from the
section captioned "Executive Compensation" contained in the Company's 2002 Proxy
Statement.

ITEM 12 - SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

The information required by this item is incorporated by reference from the
section captioned "Security Ownership of Certain Beneficial Owners and
Management" contained in the 2002 Proxy Statement.

ITEM 13 - CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

The information required by this item is incorporated by reference from the
section captioned "Certain Relationships and Related Transactions" contained in
the 2002 Proxy Statement.

<PAGE>
PART IV

ITEM 14 - EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORT ON FORM 8-K

(a)     Documents filed as a part of this Annual Report. On Form 10-K:

        (1)    FINANCIAL STATEMENTS

               Report of Independent Auditors
               Consolidated Balance Sheets
               Consolidated Statements of Operations and Comprehensive Income
               Consolidated Statements of Shareholders' Equity
               Consolidated Statements of Cash Flows
               Notes to Consolidated Financial Statements

        (2)    Financial Statement Schedules:

               Financial statement schedules are omitted because they are not
               applicable and are not required or the information required to be
               set forth therein is included in the Financial Statements or
               Notes thereto.

(b)     REPORTS ON FORM 8-K

        No reports on Form 8-K were filed by the Company during the fiscal
        quarter ended March 31, 2002.

(c)     EXHIBITS

<TABLE>
<CAPTION>
        Exhibit No.   Description
        -----------   -----------
<S>                   <C>
          2.1(3)      Exchange Agreement by and among Zindart Limited, Hua Yang
                      Holdings Co., Ltd., Hua Yang Printing Holdings Co.,
                      Limited, the shareholders of Hua Yang Holdings Co., Ltd.
                      and certain beneficial owners of such shareholders, dated
                      February 13, 1998.

          3(i)(1)     Memorandum of Association of the Company.

          3(ii)(3)    Articles of Association of the Company.

          4.1(1)      Form of Deposit Agreement by and among Zindart Limited,
                      The Bank of New York and Owners and Holders of American
                      Depositary Receipts, dated as of January __, 1997.

          4.2         Amended and Restated 1997 Equity Incentive Plan.

          4.3         Option Agreement, between Zindart Limited and Peter A.J.
                      Gardiner, dated as of October 31, 2000.

          4.4         Option Agreement, between Zindart Limited and Peter A.J.
                      Gardiner, dated as of October 31, 2000.

          4.5         Option Agreement, between Zindart Limited and Christopher
                      Guest, dated as of January 11, 2001.

          4.6         Option Agreement, between Zindart Limited and Alexander
                      M.K. Ngan, dated as of May 8, 1998.

         10.1(1)      Sino-Foreign Co-Operation Contract, Zindart Toys
                      (Dongguan) Company Limited, between Dongguan Hengli
                      Trading General Company and Zindart Industrial Company
                      Limited, dated September 8, 1994.

         10.2(1)      Sino-Foreign Co-Operation Contract, Zindart Toys
                      (Dongguan) Company Limited, Supplemental Contract, between
                      Dongguan Hengli Trading General Company and Zindart
                      Industrial Company Limited, dated December 5, 1995.

         10.3(3)      Sino-Foreign Cooperation Contract by and between Shenzhen
                      City Boan District Xixian Town Gushu Economic Development
                      Company Limited and Hua Yang Printing Holdings Co.
                      Limited, dated May 28, 1995.

         10.4(3)      Processing Agreement by and between Zindart Limited and
                      Dongguan Hengli Industry
</TABLE>

<PAGE>
<TABLE>
<S>                   <C>
                      Development Company, dated August 18, 1997.

         10.5(1)      Land Use Certificate for State-Owned Land, Dongguan
                      Government State-Owned (1993) No. 49.

         10.6(1)      Land Use Certificate for State-Owned Land, Dongguan
                      Government State-Owned (1994) No. 664.

         10.7(1)      Land Use Certificate for State-Owned Land, Dongguan
                      Government State-Owned (1994) No. 665.

         10.8(1)      Land Use Certificate for State-Owned Land, Dongguan
                      Government State-Owned (1994) No. 666.

         10.9(3)      Agreement of Utilization of Factory, Warehouse and
                      Dormitory, by and between Gushu Economic Development
                      Company and Huan Printing Group Company, dated January 24,
                      1995.

         10.10(3)     Tenancy Agreement of Dormitory by and between Gushu
                      Economic Development Co. and Huaxuan Printing Company
                      Limited, dated August 1997.

         10.11(4)     Standard Chartered Bank, Banking Facility: Hua Yang, dated
                      March 22, 2000.

         10.12(4)     Standard Chartered Bank, Banking Facility: Zindart Limited
                      dated March 22, 2000.

         10.13(4)     Hong Kong Bank, Banking Facilities, dated April 25, 2000.

         10.14(5)     Agreement by and between The Royal Bank of Scotland plc
                      and Corgi Classics Limited with respect to the Term Loan
                      of GBP4,000,000, dated January 24, 2001.

         10.15(5)     Agreement by and between The Royal Bank of Scotland plc
                      and Corgi Classics Limited with respect to the Revolving
                      Advance Facility of GBP3,000,000, dated January 24, 2001.

         10.16(7)     Agreement by and among ABN AMRO Bank, N.V. Hong Kong
                      Branch, KBC Bank, N.V., Hong Kong Branch, Standard
                      Chartered Bank, Rabo Bank, Hong Kong Branch with respect
                      to the Term Loan of US$9,000,000, dated March 8, 2001.

         10.17(6)     Zindart Loan and Security Agreement and Agreement, May 13,
                      1999, by and among Zindart Limited (Hong Kong),
                      Intervisual Books, Inc. and Fast Forward Marketing, Inc.

         10.18(6)     Extension Notice, May 29, 2000, delivered pursuant to the
                      Zindart Loan and Security Agreement and Agreement, May 13,
                      1999, by and among Zindart Limited (Hong Kong),
                      Intervisual Books, Inc. and Fast Forward Marketing, Inc.

         10.19(6)     Amendment No. 1 to the Zindart Loan and Security Agreement
                      and Agreement, April 16, 2001, by and among Zindart
                      Limited (Hong Kong), Intervisual Books, Inc. and Fast
                      Forward Marketing, Inc.

         10.20(6)     Amendment No. 2 to the Zindart Loan and Security Agreement
                      and Agreement, December 31 2001, by and among Zindart
                      Limited (Hong Kong), Intervisual Books, Inc. and Fast
                      Forward Marketing, Inc.

         10.21(5)     Employment Agreement, by and between Zindart Limited, a
                      corporation organized under the laws of Bermuda and Peter
                      A.J. Gardiner, dated as of October 1, 2000.

         10.22(6)     Employment Agreement, between Hua Yang Printing Holdings
                      Co., Ltd., a wholly-owned subsidiary of Zindart Limited,
                      and Kevin Murphy, dated November 1, 2001.

         10.23(6)     Employment Agreement, between Zindart Limited and Richard
                      Tong, dated December 17, 2001.
</TABLE>

<PAGE>

<TABLE>
<S>                   <C>
         21.1         Subsidiaries of the Registrant.

         23.1         Consent of Arthur Andersen & Co, Independent Auditors.

         24.1         Power of Attorney (see signature page).

         99.1         Acknowledgment of representations of Arthur Andersen & Co
                      Hong Kong
</TABLE>

----------

        (1)     Incorporated by reference into this Annual Report on Form 10-K
                from the Registrant's Registration Statement on Form F-1, as
                amended (File No. 333-17973).

        (2)     Incorporated by reference into this Annual Report on Form 10-K
                from the Registrant's Registration Statement on Form S-8, filed
                October 13, 1998 (File No. 333-09516).

        (3)     Incorporated by reference into this Annual Report on Form 10-K
                from the Registrant's Registration Statement on Form F-1, as
                amended (File No. 333-08134).

        (4)     Incorporated by reference into this Annual Report on Form 10-K
                from the Registrant's Annual Report on Form 10-K, filed June 29,
                2000 (File No. 000-22161).

        (5)     Incorporated by reference into this Annual Report on Form 10-K
                from the Registrant's Quarterly Report on Form 10-Q, filed
                February 14, 2001 (File No. 000-22161).

        (6)     Incorporated by reference into this Annual Report on Form 10-K
                from the Registrant's Quarterly Report on Form 10-Q, filed
                February 12, 2002.

        (7)     Incorporated by reference into this Annual Report on Form 10-K
                from the Registrant's Annual Report on Form 10-K, filed June 28,
                2001.

(d)     FINANCIAL STATEMENT SCHEDULES

        All schedules for which provision is made in the applicable accounting
        regulations of the Securities and Exchange Commission are not required
        under the related instructions or are inapplicable and therefore have
        been omitted.

<PAGE>
SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange
Act of 1934, as amended, the Registrant has duly caused this report to be signed
on its behalf by the undersigned, thereunto duly authorized, on the 28th of June
2002.

                                        ZINDART LIMITED

                                        /s/ PETER A.J. GARDINER
                                        ----------------------------------------
                                        By: Peter A.J. Gardiner
                                            Executive Chairman
                                            (Principal Executive Officer)

                                        /s/ LEN KALKUN
                                        ----------------------------------------
                                        By: Len Kalkun
                                            Interim Chief Financial Officer
                                            (Principal Financial Officer)

                                POWER OF ATTORNEY

KNOW ALL PERSONS BY THESE PRESENTS, that each person whose signature appears
below, with the exception of Peter A.J. Gardiner, constitutes and appoints Peter
A.J. Gardiner, his attorney-in-fact, with the power of substitution, for him in
any and all capacities, to sign any amendments to this report on Form 10-K, and
to file the same, with exhibits thereto and other documents in connection
herewith, with the Securities and Exchange Commission, hereby ratifying and
confirming all that each of said attorney-in-fact, or his or her substitute or
substitute, may do or cause to be done by virtue hereof.

Pursuant to the requirements of the Securities Exchange Act of 1934, this report
has been signed below by the following persons on behalf of the registrant and
in the capacities and on the dates indicated.


<PAGE>

<TABLE>
<S>                                                       <C>
Peter A.J. Gardiner                                       Date: June 28, 2002

     /s/ PETER A.J. GARDINER
     --------------------------------
     Peter A.J. Gardiner
     Executive Chairman of the Board

Robert A. Theleen


     --------------------------------
     Robert A. Theleen
     Vice-Chairman of the Board

Christopher Guest                                         Date: June 28, 2002

     /s/ CHRISTOPHER GUEST
     --------------------------------
     Christopher Guest
     Director

Feather S.Y. Fok


     --------------------------------
     Feather S.Y. Fok
     Director

George Chen                                               Date: June 28, 2002

     /s/ GEORGE CHEN
     --------------------------------
     George Chen
     Director
</TABLE>

<PAGE>

<TABLE>
<S>                                                      <C>
Gordon L.M. Seow                                         Date: June 28, 2002

     /s/ GORDON L.M. SEOW
     --------------------------------
     Gordon L.M. Seow
     Director

Leo Paul Koulos                                          Date: June 28, 2002

     /s/ LEO PAUL KOULOS
     --------------------------------
     Leo Paul Koulos
     Director

Victor Yang                                              Date: June 27, 2002

     /s/ VICTOR YANG
     --------------------------------
     Victor Yang
     Director
</TABLE>

<PAGE>
                                  EXHIBIT INDEX

<TABLE>
<CAPTION>
        Exhibit No.   Description
        -----------   -----------
<S>                   <C>
          2.1(3)      Exchange Agreement by and among Zindart Limited, Hua Yang
                      Holdings Co., Ltd., Hua Yang Printing Holdings Co.,
                      Limited, the shareholders of Hua Yang Holdings Co., Ltd.
                      and certain beneficial owners of such shareholders, dated
                      February 13, 1998.

          3(i)(1)     Memorandum of Association of the Company.

          3(ii)(3)    Articles of Association of the Company.

          4.1(1)      Form of Deposit Agreement by and among Zindart Limited,
                      The Bank of New York and Owners and Holders of American
                      Depositary Receipts, dated as of January __, 1997.

          4.2         Amended and Restated 1997 Equity Incentive Plan.

          4.3         Option Agreement, between Zindart Limited and Peter A.J.
                      Gardiner, dated as of October 31, 2000.

          4.4         Option Agreement, between Zindart Limited and Peter A.J.
                      Gardiner, dated as of October 31, 2000.

          4.5         Option Agreement, between Zindart Limited and Christopher
                      Guest, dated as of January 11, 2001.

          4.6         Option Agreement, between Zindart Limited and Alexander
                      M.K. Ngan, dated as of May 8, 1998.

         10.1(1)      Sino-Foreign Co-Operation Contract, Zindart Toys
                      (Dongguan) Company Limited, between Dongguan Hengli
                      Trading General Company and Zindart Industrial Company
                      Limited, dated September 8, 1994.

         10.2(1)      Sino-Foreign Co-Operation Contract, Zindart Toys
                      (Dongguan) Company Limited, Supplemental Contract, between
                      Dongguan Hengli Trading General Company and Zindart
                      Industrial Company Limited, dated December 5, 1995.

         10.3(3)      Sino-Foreign Cooperation Contract by and between Shenzhen
                      City Boan District Xixian Town Gushu Economic Development
                      Company Limited and Hua Yang Printing Holdings Co.
                      Limited, dated May 28, 1995.

         10.4(3)      Processing Agreement by and between Zindart Limited and
                      Dongguan Hengli Industry
</TABLE>

<PAGE>
<TABLE>
<S>                   <C>
                      Development Company, dated August 18, 1997.

         10.5(1)      Land Use Certificate for State-Owned Land, Dongguan
                      Government State-Owned (1993) No. 49.

         10.6(1)      Land Use Certificate for State-Owned Land, Dongguan
                      Government State-Owned (1994) No. 664.

         10.7(1)      Land Use Certificate for State-Owned Land, Dongguan
                      Government State-Owned (1994) No. 665.

         10.8(1)      Land Use Certificate for State-Owned Land, Dongguan
                      Government State-Owned (1994) No. 666.

         10.9(3)      Agreement of Utilization of Factory, Warehouse and
                      Dormitory, by and between Gushu Economic Development
                      Company and Huan Printing Group Company, dated January 24,
                      1995.

         10.10(3)     Tenancy Agreement of Dormitory by and between Gushu
                      Economic Development Co. and Huaxuan Printing Company
                      Limited, dated August 1997.

         10.11(4)     Standard Chartered Bank, Banking Facility: Hua Yang, dated
                      March 22, 2000.

         10.12(4)     Standard Chartered Bank, Banking Facility: Zindart Limited
                      dated March 22, 2000.

         10.13(4)     Hong Kong Bank, Banking Facilities, dated April 25, 2000.

         10.14(5)     Agreement by and between The Royal Bank of Scotland plc
                      and Corgi Classics Limited with respect to the Term Loan
                      of GBP4,000,000, dated January 24, 2001.

         10.15(5)     Agreement by and between The Royal Bank of Scotland plc
                      and Corgi Classics Limited with respect to the Revolving
                      Advance Facility of GBP3,000,000, dated January 24, 2001.

         10.16(7)     Agreement by and among ABN AMRO Bank, N.V. Hong Kong
                      Branch, KBC Bank, N.V., Hong Kong Branch, Standard
                      Chartered Bank, Rabo Bank, Hong Kong Branch with respect
                      to the Term Loan of US$9,000,000, dated March 8, 2001.

         10.17(6)     Zindart Loan and Security Agreement and Agreement, May 13,
                      1999, by and among Zindart Limited (Hong Kong),
                      Intervisual Books, Inc. and Fast Forward Marketing, Inc.

         10.18(6)     Extension Notice, May 29, 2000, delivered pursuant to the
                      Zindart Loan and Security Agreement and Agreement, May 13,
                      1999, by and among Zindart Limited (Hong Kong),
                      Intervisual Books, Inc. and Fast Forward Marketing, Inc.

         10.19(6)     Amendment No. 1 to the Zindart Loan and Security Agreement
                      and Agreement, April 16, 2001, by and among Zindart
                      Limited (Hong Kong), Intervisual Books, Inc. and Fast
                      Forward Marketing, Inc.

         10.20(6)     Amendment No. 2 to the Zindart Loan and Security Agreement
                      and Agreement, December 31 2001, by and among Zindart
                      Limited (Hong Kong), Intervisual Books, Inc. and Fast
                      Forward Marketing, Inc.

         10.21(5)     Employment Agreement, by and between Zindart Limited, a
                      corporation organized under the laws of Bermuda and Peter
                      A.J. Gardiner, dated as of October 1, 2000.

         10.22(6)     Employment Agreement, between Hua Yang Printing Holdings
                      Co., Ltd., a wholly-owned subsidiary of Zindart Limited,
                      and Kevin Murphy, dated November 1, 2001.

         10.23(6)     Employment Agreement, between Zindart Limited and Richard
                      Tong, dated December 17, 2001.
</TABLE>

<PAGE>

<TABLE>
<S>                   <C>
         21.1         Subsidiaries of the Registrant.

         23.1         Consent of Arthur Andersen & Co, Independent Auditors.

         24.1         Power of Attorney (see signature page).

         99.1         Acknowledgment of representations of Arthur Andersen & Co
                      Hong Kong
</TABLE>

----------

        (1)     Incorporated by reference into this Annual Report on Form 10-K
                from the Registrant's Registration Statement on Form F-1, as
                amended (File No. 333-17973).

        (2)     Incorporated by reference into this Annual Report on Form 10-K
                from the Registrant's Registration Statement on Form S-8, filed
                October 13, 1998 (File No. 333-09516).

        (3)     Incorporated by reference into this Annual Report on Form 10-K
                from the Registrant's Registration Statement on Form F-1, as
                amended (File No. 333-08134).

        (4)     Incorporated by reference into this Annual Report on Form 10-K
                from the Registrant's Annual Report on Form 10-K, filed June 29,
                2000 (File No. 000-22161).

        (5)     Incorporated by reference into this Annual Report on Form 10-K
                from the Registrant's Quarterly Report on Form 10-Q, filed
                February 14, 2001 (File No. 000-22161).

        (6)     Incorporated by reference into this Annual Report on Form 10-K
                from the Registrant's Quarterly Report on Form 10-Q, filed
                February 12, 2002.

        (7)     Incorporated by reference into this Annual Report on Form 10-K
                from the Registrant's Annual Report on Form 10-K, filed June 28,
                2001.