AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON FEBRUARY 21, 1997

REGISTRATION NO. 333-17973
================================================================================

SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------

AMENDMENT NO. 2

FORM F-1
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
------------------------

1,400,000 AMERICAN DEPOSITARY SHARES
REPRESENTING 1,400,000 ORDINARY SHARES

ZINDART LIMITED
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER.)
------------------------

HONG KONG 3944 NOT APPLICABLE
(STATE OR OTHER JURISDICTION OF (PRIMARY STANDARD INDUSTRIAL (I.R.S. EMPLOYER
INCORPORATION OR ORGANIZATION) CLASSIFICATION CODE NO.) IDENTIFICATION NUMBER)

FLAT C & D, 25/F BLOCK 1, TAI PING INDUSTRIAL CENTRE
57 TING KOK ROAD, TAI PO, N.T., HONG KONG
GENERAL: 011-852-2665-6992
(ADDRESS AND TELEPHONE NUMBER OF REGISTRANT'S PRINCIPAL EXECUTIVE OFFICES)
------------------------

CT CORPORATION SYSTEM
1733 BROADWAY, NEW YORK, NEW YORK 10019
(NAME, ADDRESS AND TELEPHONE NUMBER OF AGENT FOR SERVICE)
------------------------

COPIES OF ALL COMMUNICATIONS SHOULD BE SENT TO:

LIOR O. NUCHI, ESQ. AUGUST J. MORETTI, ESQ.
DANIEL D. MEYERS, ESQ. SIMON C. LUK, ESQ.
ELAN Q.G. NGUYEN, ESQ. TIMOTHY G. HOXIE, ESQ.
MCCUTCHEN, DOYLE, BROWN & ENERSEN, LLP DAWN L. JUDD, ESQ.
ONE EMBARCADERO PLACE HELLER EHRMAN WHITE & MCAULIFFE
2100 GENG ROAD, SUITE 200 525 UNIVERSITY AVENUE
PALO ALTO, CA 94303-0913 PALO ALTO, CA 94301
(415) 846-4000 (415) 324-7000

------------------------

APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC:
As soon as practicable after the effective date of this Registration Statement.
------------------------

If any of the securities being registered on this form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, please check the following box. [ ]
------------------------

CALCULATION OF REGISTRATION FEE

==========================================================================================================
PROPOSED MAXIMUM
PROPOSED MAXIMUM AGGREGATE AMOUNT OF
TITLE OF EACH CLASS OF AMOUNT TO BE OFFERING PRICE OFFERING REGISTRATION
SECURITIES BEING REGISTERED REGISTERED(1) PER SHARE(2) PRICE(2) FEE
- ----------------------------------------------------------------------------------------------------------
Ordinary Shares represented by
American Depositary Shares(3)............ 1,610,000 $12.00 $19,320,000 $6,662.07
==========================================================================================================

(1) Includes (a) 1,400,000 Ordinary Shares represented by 1,400,000 American
Depositary Shares that are to be sold in the Offering, and (b) 210,000
Ordinary Shares represented by 210,000 American Depositary Shares that the
Underwriters may purchase to cover over-allotments, if any.
(2) Estimated solely for the purpose of computing the amount of the registration
fee pursuant to Rule 457.
(3) A separate Registration Statement on Form F-6 has been filed with respect to
the American Depositary Shares evidenced by American Depositary Receipts
issuable upon deposit of the Ordinary Shares registered hereby. Each
American Depositary Share will represent one Ordinary Share.
------------------------

THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF
THE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE SECURITIES AND EXCHANGE COMMISSION, ACTING
PURSUANT TO SAID SECTION 8(A), MAY DETERMINE.
================================================================================
2

ZINDART LIMITED

CROSS REFERENCE SHEET
Pursuant to Rule 404(a) and Item 501(b) of Regulation S-K

REGISTRATION STATEMENT ITEM AND HEADING PROSPECTUS CAPTION
----------------------------------------- -----------------------------------------

1. Forepart of Registration Statement and
Outside
Front Cover Page of Prospectus........... Facing Page; Outside Front Cover Page
2. Inside Front and Outside Back Cover Pages
of
Prospectus............................... Inside Front Cover Page; Additional
Information; Outside Back Cover Page
3. Summary Information, Risk Factors and
Ratio
of Earnings to Fixed Charges............. Prospectus Summary; Selected Financial
Data; Risk Factors
4. Use of Proceeds.......................... Use of Proceeds
5. Determination of Offering Price.......... Underwriting
6. Dilution................................. Dilution
7. Plan of Distribution..................... Outside Front Cover Page; Underwriting
8. Description of Securities to be
Registered............................... Prospectus Summary; Description of
Shares; Description of American
Depositary Receipts
9. Interests of Named Experts and Counsel... Legal Matters
10(a). Information with Respect to the
Registrant............................... Prospectus Summary; Use of Proceeds;
Dividends and Dividend Policy; Dilution;
Capitalization; Selected Financial Data;
Management's Discussion and Analysis of
Financial Condition and Results of
Operations; Business; Management;
Description of Shares; Description of
American Depositary Receipts; Shares
Eligible for Future Sale; Taxation;
Certain Foreign Issuer Considerations;
Financial Statements
10(b). Financial Statements..................... Index to Financial Statements

INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A
REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES
MAY NOT BE SOLD NOR MAY OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE
REGISTRATION STATEMENT BECOMES EFFECTIVE. THIS PROSPECTUS SHALL NOT
CONSTITUTE AN OFFER TO SELL OR THE SOLICITATION OF AN OFFER TO BUY NOR
SHALL THERE BE ANY SALE OF THESE SECURITIES IN ANY STATE IN WHICH SUCH
OFFER, SOLICITATION OR SALE WOULD BE UNLAWFUL PRIOR TO REGISTRATION OR
QUALIFICATION UNDER THE SECURITIES LAWS OF ANY SUCH STATE.

SUBJECT TO COMPLETION, DATED FEBRUARY 3, 1997

1,400,000 AMERICAN DEPOSITARY SHARES
REPRESENTING 1,400,000 ORDINARY SHARES

LOGO

All of the 1,400,000 American Depositary Shares ("ADSs") offered hereby are
being sold by Zindart Limited ("Zindart" or the "Company"). Each ADS offered
hereby represents one Ordinary Share, par value $0.065 per share (a "Share") of
the Company. The ADSs are evidenced by American Depositary Receipts ("ADRs"),
and are initially being offered hereby for sale by Van Kasper & Company ("Van
Kasper" or the "Representative") and the several underwriters named herein
(together with the Representative, the "Underwriters") (the "Offering"). Prior
to this Offering, there has been no public market for the ADSs or the Shares. It
is currently estimated that the initial public offering price per ADS will be
between $10.00 and $12.00. See "Underwriting" for a discussion of the factors
considered in determining the initial public offering price. The ADSs have been
approved for inclusion on the Nasdaq National Market under the symbol ZNDTY upon
commencement of this Offering. Zindart Pte Limited ("Zindart Singapore") owns
100% of the Shares prior to the Offering, and after the Offering will own 78.1%
of the Shares, thereby retaining control of the Company. ZIC Holdings Limited
("ZICHL") owns 76.0% of the shares of Zindart Singapore. Funds under the
management of ChinaVest Group ("ChinaVest") own 67.8% of the shares of ZICHL.
Two directors of the Company are partners of ChinaVest, and may be deemed to
beneficially own the Shares held by Zindart Singapore. See "Principal
Shareholders."

THE ADSS OFFERED HEREBY INVOLVE A HIGH DEGREE OF RISK.
SEE "RISK FACTORS," COMMENCING ON PAGE 9.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
================================================================================

UNDERWRITING
PRICE TO DISCOUNTS PROCEEDS TO
PUBLIC AND COMMISSIONS(1) COMPANY(2)
- -----------------------------------------------------------------------------------------------

Per ADS............................ $ $ $
- -----------------------------------------------------------------------------------------------
Total (3).......................... $ $ $
===============================================================================================

(1) The Company has agreed to indemnify the Underwriters against certain
liabilities and to pay the Underwriters an amount not to exceed $280,000 as
reimbursement of their expenses. See "Underwriting."

(2) Before deducting expenses payable by the Company, estimated at $1,300,000.

(3) The Company has granted to the Underwriters a 30-day option to purchase up
to 210,000 additional ADSs representing 210,000 additional Shares on the
same terms as set forth above, solely for the purpose of covering
over-allotments, if any (the "Over-allotment Option"). If the Over-allotment
Option is exercised in full, the Price to Public and Underwriting Discounts
and Commissions will be $ and $ , respectively. See
"Underwriting."

The ADSs offered by the several Underwriters named herein are subject to
receipt and acceptance by them and subject to their right to reject any order in
whole or in part. It is expected that delivery of the ADSs will be made against
payment therefore at the office of Van Kasper & Company, San Francisco,
California on or about , 1997.

VAN KASPER & COMPANY
THE DATE OF THIS PROSPECTUS IS FEBRUARY , 1997
4

REPORTS TO SECURITIES HOLDERS

As of the date of this Prospectus, the Company will become subject to
certain periodic reporting and informational requirements of the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), and in accordance
therewith, will file reports and other information with the Securities and
Exchange Commission (the "Commission"). As a foreign private issuer, the Company
is exempt from the rules and regulations under the Exchange Act requiring 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 will not be required to publish financial statements
as frequently, as promptly or containing the same information as United States
("U.S.") companies. The Company intends to provide its securities holders with
annual reports in English containing audited financial statements and such other
periodic reports as the Company deems appropriate or as may be required by law.
The Company intends to publish its consolidated financial statements in U.S.
Dollars prepared in conformity with generally accepted accounting principles in
the United States ("U.S. GAAP"). The Company intends to make publicly available
certain summary financial information with respect to the results of operations
of the Company for each quarter of each fiscal year. The Company has agreed to
provide the Depositary referred to under "Description of American Depositary
Receipts" with annual reports of the Company, including a review of operations
and annual audited consolidated financial statements prepared in conformity with
U.S. GAAP. Upon receipt thereof, the Depositary will promptly mail such reports
to all holders of ADSs. The Depositary will also mail to all holders of ADSs a
notice containing the information (or a summary of the information) contained in
any notice of a shareholders' meeting received by the Depositary and make
available to all holders of ADSs such notices and all other reports and other
communications received by the Depositary from the Company.

------------------------

THIS PROSPECTUS DOES NOT COMPRISE AN OFFER TO SELL SHARES OR ADSs, DIRECTLY
OR INDIRECTLY, TO ANY MEMBER OF THE PUBLIC IN HONG KONG, OR ANY SECTION OF THE
PUBLIC IN HONG KONG. THIS PROSPECTUS HAS NOT BEEN APPROVED BY OR REGISTERED WITH
ANY REGULATORY AUTHORITY IN HONG KONG. NO SHARES OF THE COMPANY ARE TRADED ON
ANY STOCK EXCHANGE AND THERE IS NO INTENTION TO LIST SHARES OR ADSs ON ANY STOCK
EXCHANGE OTHER THAN THE LISTING OF ADSs AS CONTEMPLATED IN THIS PROSPECTUS.

------------------------

THE ADSs MAY NOT BE OFFERED OR SOLD IN THE UNITED KINGDOM OTHER THAN TO
PERSONS WHOSE ORDINARY ACTIVITIES INVOLVE THEM IN ACQUIRING, HOLDING, MANAGING
OR DISPOSING OF INVESTMENTS (AS PRINCIPAL OR AGENT) FOR THE PURPOSES OF THEIR
BUSINESS OR OTHERWISE IN CIRCUMSTANCES WHICH HAVE NOT RESULTED AND WILL NOT
RESULT IN AN OFFER TO THE PUBLIC IN THE UNITED KINGDOM WITHIN THE MEANING OF THE
PUBLIC OFFERS OF SECURITIES REGULATIONS 1995 OF THE UNITED KINGDOM, AND THIS
PROSPECTUS MAY ONLY BE ISSUED OR PASSED ON IN THE UNITED KINGDOM TO A PERSON WHO
IS OF A KIND DESCRIBED IN ARTICLE 11(3) OF THE FINANCIAL SERVICES ACT 1986
(INVESTMENT ADVERTISEMENT) (EXEMPTIONS) ORDER 1996 OR IS A PERSON TO WHOM SUCH A
DOCUMENT MAY OTHERWISE LAWFULLY BE ISSUED OR PASSED ON.

3
5

CURRENCY CONVERSIONS

All references in this Prospectus to "U.S. Dollars," "Dollars," "US$" or
"$" alone are to United States dollars; 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 People's Republic of China (the "PRC").
This Prospectus 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$7.73.

ENFORCEABILITY OF CIVIL LIABILITIES

The Company is organized under the laws of Hong Kong and all or a
substantial portion of its assets are located outside the United States. In
addition, certain of the directors and officers of the Company and certain of
the experts named herein are nationals or residents of Hong Kong or the PRC, and
all or a substantial portion of the assets of such persons are or may be located
outside the United States. The Company has appointed CT Corporation System, 1733
Broadway, New York, New York 10019 as its agent to receive service of process
with respect to any action brought against it in the United States District
Court for the District of New York under the laws of the United States or any
state, or any action brought against it in the Supreme Court of the State of New
York in the County of New York under the laws of the State of New York. However,
it may be difficult for investors to enforce outside the United States judgments
against the Company or any of its officers and directors or the experts named
herein obtained in the United States in any such actions, including actions
predicated upon the civil liability provisions of the United States federal
securities laws. As a result, it may be difficult for investors to effect
service of process within the United States upon such persons or to enforce
against them judgments obtained in United States federal or state courts,
including judgments predicated upon the civil liability provisions of United
States federal securities laws. The Company has been advised by its PRC counsel,
Guangzhou Law Office, and its Hong Kong counsel, Robert W.H. Wang & Co., that
there is uncertainty as to whether the courts of the PRC or Hong Kong would
enforce (i) judgments of United States federal or state courts obtained against
the Company or such persons predicated upon the civil liability provisions of
United States federal or state laws or (ii) claims against the Company or such
persons predicated upon United States federal or state laws in original actions
brought in the PRC or Hong Kong.

4
6

PROSPECTUS SUMMARY

This Prospectus contains forward-looking statements that involve risks and
uncertainties. The Company's actual results could differ materially from those
anticipated in these forward-looking statements as a result of certain factors,
including those set forth under "Risk Factors" and elsewhere in this Prospectus.
The following summary is qualified in its entirety by the more detailed
information and the financial statements and notes thereto appearing elsewhere
in this Prospectus. Except as otherwise noted herein, all information contained
in this Prospectus assumes that the Over-allotment Option will not be exercised.
See "Underwriting." Unless otherwise indicated, all Share and per Share
information in this Prospectus gives effect to the 20 for 1 stock split of the
Company's Shares effected in December 1996.

THE COMPANY

Zindart Limited ("Zindart" or the "Company") manufactures high-quality,
detailed die-cast and injection-molded products, including: (i) die-cast
collectibles, (ii) collectible holiday ornaments, and (iii) action figures and
miniature figurine playsets used primarily as toys. Zindart's headquarters are
located in Hong Kong and its manufacturing operations are located in the
neighboring Guangdong Province in the People's Republic of China (the "PRC"). In
fiscal year 1996, Zindart sold its products to approximately 20 customers, many
of which are the premier U.S. designers and marketers of die-cast collectibles,
collectible holiday ornaments and toys.

Hallmark Cards, Inc. ("Hallmark") and The Ertl Company, Inc. ("Ertl") are
Zindart's two largest customers, and together accounted for 66.3%, 63.3% and
52.9% of the Company's sales in fiscal years 1994, 1995 and 1996, respectively.
Hallmark, a customer of the Company since 1982, is a leading U.S. designer and
marketer of greeting cards and collectible holiday ornaments under the Keepsake
Ornaments line, which are sold through authorized retail outlets. Ertl, a
customer of the Company since 1978, is a leading U.S. designer and marketer of
high-quality, die-cast scale model replicas of automobiles, trucks, planes, farm
implements, construction equipment and other similar items targeted at adult
collectors, farm and equipment dealers and children. Ertl's die-cast replicas
are sold through hobby shops, collectors' clubs, car and equipment dealers, toy
and gift stores and other similar channels. Zindart's other customers include
Sieper Werke Gmbh ("SWG"), Revell-Monogram, Inc., a subsidiary of Hallmark
("Revell-Monogram"), Hasbro, Inc. and Drumwell Limited. See
"Business -- Markets, Products and Customers."

Zindart seeks to develop a partnering relationship with each of its
customers and to improve and expand such relationships for the parties' mutual
benefit. In order to enhance these partnering relationships, in 1994 Zindart
introduced its Turnkey Manufacturing Service, which enables Zindart to satisfy a
customer's requirements at every stage in the production process -- from product
engineering to model making, to computer-aided mold design and production, to
manufacturing and packaging of the finished product. This coordinated, one-stop
production strategy enables Zindart and its customers to shorten lead times from
design to production, lower the costs of production, better control the quality
and consistency of the manufactured products and better meet shipping and
delivery schedules. See "Business -- Manufacturing."

In February 1996, the Company completed Phase I of the construction of a
large, modern facility located on a 20-acre site in HengLi, Dongguan, the PRC
(the "Dongguan Facility"), approximately 60 miles north of Hong Kong. Currently,
the Company has approximately 1,300 employees in the Dongguan Facility. By early
1998, the Company intends to complete Phase II of the construction of the
Dongguan Facility, using approximately $7 million of the net proceeds of this
Offering, and to close its other two manufacturing facilities. As a result, all
of the Company's production is expected to be consolidated at the Dongguan
Facility. Upon completion of Phase II of the construction of the Dongguan
Facility, the manufacturing area of the Dongguan Facility will be 887,000 square
feet, 470,773 square feet more than Phase I's manufacturing space and double the
size of the manufacturing space in the Company's original two manufacturing
facilities. The Dongguan Facility will be able to accommodate 8,000 employees.
See "Business -- Properties." The Company believes that, based on projected
demand, upon completion of Phase II of the construction of the Dongguan
Facility, currently scheduled for the fourth quarter of fiscal year 1998, it
will operate the Dongguan Facility at approximately 80% of full capacity. The
Company projects that growth in demand from both new and existing customers will
enable the Company to operate at or near full capacity by the second quarter of

5
7

fiscal year 1999. The Company's ability to use the Dongguan Facility as
projected is dependent upon several factors, most of which are beyond the
Company's control, and accordingly there can be no assurance that the Company
will be able to meet any such projections. See "Risk Factors." The Company also
intends to establish a sales, marketing and investor relations office in the
U.S. in 1997.

Zindart's net sales for the fiscal year ended March 31, 1996 were $46.9
million, an increase of 27.3% from the prior fiscal year. Net sales for the nine
months ended December 31, 1996, were $48.7 million, an increase of 37.4% from
the prior year's comparable period, and consisted of die-cast collectibles
(38.74% of net sales), collectible holiday ornaments (28.01%), action figures
and miniature figurine playsets (17.93%) and molds (15.32%). As a percentage of
sales for the 12 months ended December 31, 1996, sales in each quarter during
such period were 19.3%, 26.1%, 26.8% and 27.8%, respectively. The lower sales
figure for the quarter ended March 31, 1996 reflects the annual customary
two-week factory closing for the Chinese New Year holiday. As of December 31,
1996, Zindart had orders on hand of approximately $24.1 million, compared to
$20.9 million at December 31, 1995. The Company's net income for the nine months
ended December 31, 1996 was $4.2 million, versus $3.8 million for the prior
year's comparable period. See "Summary Consolidated Financial Data."

Zindart's largest beneficial shareholders are private equity funds under
the management of two U.S.-based venture capital firms -- ChinaVest Group
("ChinaVest") and Advent International Corporation ("Advent") -- which funds
acquired their indirect interests in Zindart in 1993. Prior to the Offering, the
funds under the management of ChinaVest indirectly owned 51.5% of the
outstanding Shares of the Company, and funds under the management of Advent
indirectly owned 14.9% of the outstanding Shares of the Company. See "Risk
Factors -- Risks Relating to the Company -- Control by Principal Shareholders"
and "Principal Shareholders."

Zindart's principal executive offices are located at Flat C&D, 25/F Block
1, Tai Ping Industrial Centre, 57 Ting Kok Road, Tai Po, N.T., Hong Kong, its
telephone number is 011-852-2665-6992, its fax number is 011-852-2664-7066, and
its e-mail address is featherf@netvigator.com.

THE OFFERING

SECURITIES OFFERED......... 1,400,000 ADSs, each representing one Share.

SHARES TO BE OUTSTANDING
AFTER THE OFFERING......... 6,400,000 Shares.

USE OF PROCEEDS............ Of the approximately $13,000,000 net proceeds
anticipated from the Offering, approximately
$7,000,000 will be used to finance Phase II of the
construction of the Dongguan Facility, $1,600,000
to purchase equipment, $1,480,000 to repay certain
indebtedness to unaffiliated commercial banks and
equipment lessors, and $300,000 to establish a
sales, marketing and investor relations office in
the U.S. in 1997. The balance will be used for
working capital and general corporate purposes. See
"Use of Proceeds."

OVER-ALLOTMENT OPTION...... The Company has granted the Underwriters an option
to purchase up to an additional 210,000 ADSs solely
for the purpose of covering over-allotments, if
any. See "Underwriting."

NASDAQ NATIONAL

MARKET SYMBOL............ ZNDTY.

6
8

SUMMARY CONSOLIDATED FINANCIAL DATA
(IN THOUSANDS, EXCEPT PER SHARE DATA)

The following tables present summary consolidated financial information
derived from the consolidated financial statements of the Company and certain
other data, all of which have been prepared in conformity with U.S. GAAP. See
also "Business," "Selected Financial Data," "Management's Discussion and
Analysis of Financial Condition and Results of Operations" and the consolidated
financial statements and notes thereto appearing elsewhere herein.

NINE MONTHS ENDED
YEARS ENDED MARCH 31, DECEMBER 31,
----------------------------------------------- -----------------
1992 1993 1994 1995 1996 1995 1996
------- ------- ------- ------- ------- ------- -------

INCOME STATEMENT DATA:
Net sales.................................. $29,116 $35,603 $35,583 $36,879 $46,930 $35,423 $48,670
Gross profit............................... 7,037 8,294 10,546 11,235 12,814 10,006 12,390
Operating income........................... 2,178 3,214 4,195 4,429 6,316 4,684 5,830
Interest income (expense), net............. (7) (1) (21) 91 (194) 15 (572)
Other income (expense), net................ 52 122 80 492 (416) 70 168
Income before income taxes................. 2,223 3,335 4,254 5,012 5,706 4,769 5,426
Income before minority interests........... 2,004 3,033 3,818 4,529 5,218 4,365 4,962
Minority interests(1)...................... 0 0 83 337 622 525 734
------- ------- ------- ------- ------- ------- -------
Net income................................. $ 2,004 $ 3,033 $ 3,735 $ 4,192 $ 4,596 $ 3,840 $ 4,228
======= ======= ======= ======= ======= ======= =======

Earnings per share(2)...................... $ 0.40 $ 0.61 $ 0.75 $ 0.84 $ 0.92 $ 0.77 $ 0.85
======= ======= ======= ======= ======= ======= =======
Weighted average number of shares
outstanding.............................. 5,000 5,000 5,000 5,000 5,000 5,000 5,000
======= ======= ======= ======= ======= ======= =======

AS OF AS OF
MARCH 31, 1996 DECEMBER 31, 1996
-------------- ---------------------------
ACTUAL ACTUAL AS ADJUSTED(3)
-------------- -------- --------------

BALANCE SHEET DATA:
Cash and cash equivalents................................... $ 3,294 $ 4,873 $ 8,193
Working capital............................................. 3,401 6,676 10,643
Property, plant and equipment, net.......................... 10,800 11,632 20,232
Total assets................................................ 31,710 37,187 48,729
Short-term debt(4).......................................... 8,899 5,711 5,064
Long-term debt and capital lease obligations................ 2,128 1,827 994
Shareholders' equity........................................ 11,608 15,836 28,858

- ---------------
(1) Certain third parties own minority equity interests in the Company's
subsidiaries. See "Business -- Subsidiaries."

(2) Earnings per share is computed by dividing net income for each year/period
by 5,000,000, the weighted average number of ordinary shares outstanding
during the years/periods, on the basis that the 20 for 1 stock split had
been consummated prior to the years/periods presented.

(3) As adjusted to reflect the sale of 1,400,000 ADSs at an assumed public
offering price of $11.00 per ADS and the application of the net proceeds
therefrom. See "Use of Proceeds."

(4) Includes current portions of long-term debt and capital lease obligations.

7
9

ORGANIZATION OF THE COMPANY

The following chart shows the organization of the Company, its principal
shareholders and operating subsidiaries prior to giving effect to the Offering.

OPERATING STRUCTURE

The following chart shows the operating structure of the Company's three
manufacturing facilities.

8
10

RISK FACTORS

An investment in the ADSs offered hereby involves a high degree of risk.
Prior to making an investment decision, prospective purchasers of the ADSs
offered hereby should consider carefully, together with the other information
contained in this Prospectus, the matters set forth below.

LIMITED PRECEDENT

Prospective investors should be aware of and take into consideration the
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. See "Reports to Securities
Holders."

RISKS RELATING TO THE COMPANY

Dependence on Major Customers; Cancellable Orders. Sales to two major
customers -- Hallmark and Ertl -- account for a majority of the Company's total
net sales. Sales to these two customers as a percentage of the Company's total
net sales during the fiscal years ended March 31, 1994, 1995 and 1996 were
approximately 66.3%, 63.3% and 52.9%, respectively. The Chief Executive Officer
of Ertl is a director of the Company. See "Management." In addition, sales to
four other customers, Hasbro, Inc., SWG, Drumwell Limited, and Revell-Monogram,
as a percentage of the Company's total net sales during fiscal years 1994, 1995
and 1996 in the aggregate were approximately 20.9%, 20.7%, and 23.0%,
respectively. The Company's dependence on these 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 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. While these purchase orders may be cancelled by the customer,
to date, such cancellations have not been significant in the aggregate. Except
for these purchase orders, the Company has no written purchase agreements with
its customers relating to the sale of products.

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 and toy
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. Accordingly, there can be no assurance that the existing or future
products of the Company's customers will maintain or 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 and
toys. 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 expects significantly increased competition, both
from existing and new competitors. Some of these competitors may have
significantly greater financial, technical, manufacturing and

9
11

marketing resources than the Company. The ability of the Company to compete
successfully depends, in part, upon the Company's ability to maintain and
increase demand for its manufacturing services and increase production capacity
to meet such increased demand. There can be no assurance that the Company will
be able to compete successfully in the future or that the Company will not be
subject to increased price competition. See "Business -- Competition." In
addition, the Company's major customers operate in highly competitive markets.
There can be no assurance that these customers will be able to continue to enjoy
market acceptance of their products in the face of such competition. Any failure
by the Company's major customers to remain competitive could have a material
adverse effect on the Company's business, financial condition and results of
operations.

Lack of Barriers to Entry. The Company does not believe that there are any
significant barriers to entry into the manufacture of die-cast collectibles,
collectible holiday ornaments and toys, although the Company believes that it
currently holds certain competitive advantages. The Company does not
characterize its business as proprietary and does not own any patents or
copyrights or possess any material trade secrets. There can be no assurance that
additional participants will not enter the market or that the Company could
effectively compete with such entrants. Any failure by the Company to compete
effectively with such new entrants would have a material adverse effect on the
Company's business, financial condition and results of operations.

Ability to Manage Growth and Expansion. The Company has experienced
significant growth over the past few years and is expanding its manufacturing
operations. The management of the Company's growth 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 growth 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.

Reliance on New Production Facility. Historically, the Company conducted
its manufacturing operations in two facilities in Guangzhou. In February 1996,
the Company completed Phase I of the construction of the Dongguan Facility. By
early 1998, the Company intends to complete Phase II of the construction of the
Dongguan Facility, to consolidate all manufacturing operations at the Dongguan
Facility and to close the other two facilities. In addition, the Company intends
to transfer some administrative functions from its Hong Kong headquarters to the
Dongguan Facility. See "Business -- Properties."

Although the Company believes that it will be able to complete Phase II of
the construction of the Dongguan Facility on schedule, no assurance can be given
that such construction will be completed or completed on schedule. Any material
delay in completing, or the inability to complete, Phase II of the construction
of the Dongguan Facility would have a material adverse effect on the Company's
business, financial condition and results of operations. Consolidating the
Company's operations into the Dongguan Facility will require the Company's
management to coordinate a wide array of key decisions and physical logistics,
including the relocation of a majority of the Company's factory employees and
equipment. Failure to timely and properly execute these tasks could 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 the Dongguan Facility or if such facility were to otherwise
become unavailable or inoperable, the Company would need to obtain alternative
facilities from which to conduct its operations, which 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

10
12

delays, or inability to obtain alternative facilities, would have a material
adverse effect on the Company's business, financial condition and results of
operations. The Company maintains business interruption insurance.

A significant portion of the benefits to be obtained from consolidating
operations in the Dongguan Facility depends on the Company's ability to
terminate in a cost-effective and timely manner its obligations under the joint
venture agreement relating to the Xin Xing Facility and the sub-contracting
agreement relating to the Zhong Xin Facility. The Company does not have the
right to terminate at will these agreements and thus must depend on the
cooperation of other parties to attain this objective. There can be no assurance
that the Company will be able to terminate these agreements on a timely basis or
without incurring substantial costs. Any substantial costs associated with
terminating such agreements could have a material adverse effect on the
Company's business, financial condition and results of operations. In the event
that the Company is unable to capitalize its relocation costs, the Company will
have to expense such costs, which may have an adverse effect on the Company's
reported net income.

Dependence on PRC Parties. The Company's oldest factory, the Zhong Xin
Facility, located in the Tian He district of Guangzhou, is owned by a local
economic development authority (the "Subcontractor") and operated under a
subcontract operating agreement. The factory located in the Henan district of
Guangzhou, the Xin Xing Facility, and the Dongguan Facility are each owned by
Sino-foreign contractual joint ventures in which the Company has a majority
interest. The other parties to these contractual joint ventures are entities
(the "PRC Co-Venturers") that are controlled by PRC governmental bodies. The
efficient and cost-effective operation of these facilities depends upon the
cooperation and support of the Subcontractor and the PRC Co-Venturers
(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 with the PRC Parties. Any
lack of cooperation by 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.

Dependence on Raw Materials. The Company uses zinc alloy and various
plastic resins 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 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 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 increases the Company was not able to pass on fully
to its customers. See "Management's Discussion and Analysis of Financial
Condition and Results of Operations." 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 purchased more than five percent of its raw materials from the
following companies in one or more of fiscal years 1994, 1995 and 1996 and the
nine months ended December 31, 1996: Sogen (Far East) Limited, Starlite Printers
Limited, Wing Fu Carton & Printing Company Limited, Lee Kee Metal Company
Limited, Y.T. Cheng (Ching Tai) Limited, and Cominco Ltd. The Company has no
formal written agreements with any of its suppliers. The Company purchases zinc
alloy and over 12 different types of plastics from approximately 10 major
suppliers and 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, but no assurance can be given that the Company
will be able to obtain sufficient quantities of such raw materials to meet its
needs. 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. The 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. However, to
the extent the Company is unable to obtain needed raw

11
13

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.
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. See
"Management." Successful expansion of the Company's business will require
additional management resources and may require the hiring of additional senior
management personnel.

Potential Product Liability. The Company is engaged in a business 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. The Company does not maintain 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 articles
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 Canada and Europe. 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. The Company has established a strong quality assurance program to
meet the Company's objective of conforming to its customers' design
specifications and delivering high-quality, safe products to its customers.
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 appropriate 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 business, financial condition and
results of operations of the Company.

Reduced Revenue in the Fourth Fiscal Quarter, Possible Fluctuation in
Quarterly Results. The Company ceases production for a two-week period during
January or February of each year due to the Chinese New Year holiday, which
business cessation in the past has caused revenue during the fourth fiscal
quarter of each year to be somewhat lower than revenue during the other three
quarters. The Company may also experience fluctuations in quarterly sales and
related net income compared with the prior year's comparable quarter due to the
timing of receipt of orders from customers for die-cast collectibles, toys and
molds and the shipment of such products. As a result, it is possible that the
Company may experience quarterly variations in operating results, and
accordingly, the trading price of the Company's ADSs may be subject to
fluctuations in response to such quarterly variations. See "Management's
Discussion and Analysis of Financial Condition and Results of Operations."

Control by Principal Shareholders. Following this Offering, Zindart Pte
Limited, a Singapore
corporation ("Zindart Singapore") will own approximately 78.1% of the
outstanding Shares (approximately 75.6% if the Over-allotment Option is
exercised in full). As majority shareholder, Zindart Singapore will have the
ability to control the election of the Company's directors and most corporate
actions of the Company. Zindart Singapore is controlled by ZIC Holdings Limited,
a Cayman Islands corporation ("ZICHL"), which owns approximately 76.0% of the
shares of Zindart Pte Limited. ZICHL, in turn, is currently controlled by
limited life private equity funds managed by ChinaVest (the "ChinaVest private
equity funds"), which own in the aggregate approximately 67.8% of the ordinary
shares of ZICHL and which therefore will be indirectly in

12
14

control of the Company. See "Principal Shareholders." In addition, Feather S.Y.
Fok, Chief Operating Officer, Chief Financial Officer and a director of the
Company, is a director of Zindart Singapore. Alexander M.K. Ngan, a director of
the Company, is a partner in ChinaVest. Robert A. Theleen, who is director of
the Company, is a partner in ChinaVest. Subject to an agreement with the
Representative not to sell or dispose of any Shares of the Company for a lock-up
period of 180 days following the closing of the Offering, the ChinaVest private
equity funds have the right, acting in their own interest, to sell or dispose of
such Shares. Further, since these funds must dissolve by 2003, these funds will
need to liquidate their investments, whether by way of sale, distribution or
otherwise, prior to that date. Accordingly, although the Company has been
advised that ChinaVest has no present intention to cause these funds to sell or
dispose of their investments in the Company at any particular time, no assurance
can be given that any current shareholder of the Company, including the
ChinaVest private equity funds, will maintain any interest in the Company beyond
the 180 day lock-up period.

Taxation. During the past five years, under applicable Hong Kong and PRC
tax laws, only 50% of the Company's profits have been subject to tax in Hong
Kong and the Company has been exempt from taxation in the PRC pursuant to a tax
holiday, which tax holiday will change over time from a complete exemption to a
partial exemption, then to no exemption based on profitability of the Company's
joint ventures. See "Taxation -- Hong Kong Taxation" and "-- PRC Taxation." As a
result, during the past five years, the Company has enjoyed a relatively low
effective tax rate of between 8.0% and 10.0%. No assurance can be given that the
Company's effective tax rate will not increase in the future. The Hong Kong
statutory income tax rate is currently 16.5%, and the PRC tax rate on joint
ventures is currently 27.0%. Since the Company has historically derived its
revenues primarily from its sales activities in Hong Kong and since the
Company's PRC joint ventures historically have produced minimal profits and are
not expected to produce significant profits in the future, the Company does not
believe that the expiration or loss of the PRC tax holiday will have a material
impact on the Company's net income. In the event that certain special United
States federal income tax rules are applicable to the Company, there is a risk
that holders of ADSs who are U.S. taxpayers may be required to recognize income
prior to the receipt of dividends or distributions from the Company. See
"Taxation -- United States Federal Income Taxation -- Special United States
Federal Income Tax Considerations."

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 have an adverse
effect on the Company's business, financial condition and results of operations
and its 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 and oil-based paints. 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 which fails to
comply with orders requiring it to cease or cure certain activities deemed by
such authorities to be causing environmental damage. The Company believes that
it has complied, and it intends to continue to comply, with all applicable
environmental protection laws and regulations. There can be no assurance that
the Company will at all future times remain in compliance with such laws and
regulations and 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 regions in the PRC for the
purpose of working for wages higher than are

13
15

available in such rural regions. These employees typically work for the Company
for two to five years and then return to their communities. Accordingly,
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 communities 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 strife. Union organizing and
worker unrest are not common in the PRC. No assurance can be given, however,
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.

Lack of Dividends. The Company does not contemplate the payment of
dividends in the foreseeable future. In addition, the Company's lines of credit
prohibit the payment of dividends in excess of 25% of net income. See "Dividends
and Dividend Policy."

Dilution. Purchasers of ADSs offered hereby will incur immediate and
substantial dilution in the net tangible book value per Share of $6.50 from the
initial public offering price, assuming an offering price of $11.00 per Share.
Existing shareholders will incur an immediate increase in the net tangible book
value per Share from $3.15 to $4.50, an increase of $1.35 per Share. See
"Dilution."

No Assurance of Public Market; Possible Volatility of Market Price of
ADSs. Prior to this Offering, there has been no public trading market for the
ADSs or the Shares. There can be no assurance that an active trading market for
the ADSs will develop after this Offering or that, if developed, it will be
sustained. Further, there will be no public market for the Shares. In the past
several years, many foreign issuers with market capitalizations similar to that
of the Company after this Offering have been unable to sustain an active trading
market for their securities. The initial public offering price for the ADSs
being sold by the Company in this Offering has been determined by negotiations
between the Company and the Representative and does not necessarily reflect the
Company's book value or other established criteria of value. The market price
for the ADSs following this Offering may be highly volatile, as has been the
case with the securities of other companies in emerging businesses. The market
price of the ADSs may fluctuate substantially in response to various factors
affecting the collectible, holiday ornament and toy markets generally.

Shares Eligible for Future Sale. No prediction can be made as to the
effect, if any, that future sales of ADSs, or the availability of ADSs for
future sale, will have on the market price of the ADSs prevailing from time to
time. Sales of a substantial number of ADSs in the public market, or the
perception that such sales may occur, could adversely affect the prevailing
market price of the ADSs or the ability of the Company to raise capital through
a sale of its equity securities. See "Shares Eligible For Future Sale." The
Company and its shareholder have agreed not to sell or otherwise dispose of any
ADSs for a period of 180 days after the closing of this Offering without the
prior written consent of the Representative. See "Underwriting."

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 MIS
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 and the PRC. Accordingly,
the Company may be subject to political and economic risks, including political
instability, currency controls and exchange rate fluctuations, and changes in
import/export regulations, tariffs, duties and quotas.

Exchange Rate Risk

All of the Company's sales are denominated either in U.S. Dollars or Hong
Kong Dollars. The largest portion of the Company's expenses are denominated in
Hong Kong Dollars, followed by Renminbi 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, the Hong Kong Dollar and Renminbi. The Company does not currently
hedge its foreign exchange positions. Any material increase in the value of the
Hong Kong Dollar or Renminbi 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.

14
16

Since 1983, the Hong Kong government has maintained a policy of linking the
U.S. Dollar and the Hong Kong Dollar at an exchange rate of approximately
HK$7.80 to U.S. $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. There has been significant volatility
in the exchange rates of Renminbi to U.S. Dollars in recent years. Over the last
five years, the Renminbi has experienced significant devaluation against most
major currencies. The January 1, 1994 establishment of the current exchange rate
system produced a significant devaluation of the Renminbi from $1.00 to Rmb 5.7
to approximately $1.00 to Rmb 8.7. The rates at which exchanges of Renminbi into
U.S. Dollars may take place in the future may vary.

Inflation Risk

The annual inflation rate in Hong Kong was approximately 9.4%, 8.5%, 8.1%
and 8.8% in 1992, 1993, 1994 and 1995, respectively. The annual inflation rate
in the PRC was approximately 14.7%, 21.7% and 14.8% in 1993, 1994 and 1995,
respectively. The Company does not consider that inflation in Hong Kong or the
PRC has had a material impact on its results of operations in recent years. See
"Management's Discussion and Analysis of Financial Condition and Results of
Operations." No assurance can be given that inflation in Hong Kong or the PRC
will not have a material adverse effect on the business, financial condition and
results of operations of the Company in the future.

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 will be
transferred from the United Kingdom to the PRC, and Hong Kong will become 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 will have a
high degree of autonomy except in foreign affairs and defense. Under the Basic
Law, the Hong Kong SAR is to have its own legislature, legal and judicial system
and economic autonomy for 50 years. Based on the current political conditions
and the Company's understanding of the Basic Law, the Company does not believe
that the transfer of sovereignty over Hong Kong 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 China. 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. Economic
development may be limited as well by the imposition of austerity measures
intended to reduce inflation, 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. Moreover, economic reforms and growth in the PRC have
been more successful in certain provinces than others, and the continuation or
increase of such disparities could affect the political or social stability of
the PRC.

MFN Status. The PRC currently enjoys Most-Favored-Nation ("MFN") status
granted by the United States, pursuant to which the United States imposes the
lowest applicable tariffs on PRC exports to the United States. The United States
annually reconsiders the renewal of MFN trading status for the PRC. No assurance
can be given that the PRC's MFN status will be renewed in future years. The
PRC's loss of MFN status could adversely affect the Company's business by
raising prices for its products in the United States, which could result in a
reduction in demand for the Company's products by its U.S. customers.
Furthermore, trade friction between the PRC and the United States may have an
influence on after-market prices of the ADSs offered hereby.

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

15
17

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 be difficult to enforce
these contracts in the PRC. 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. 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.

Government Control Over Economy. The PRC only recently has permitted
greater provincial and local economic autonomy and private economic activities.
The PRC central government has exercised and continues to exercise substantial
control over virtually every sector of the PRC economy. 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 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.

16
18

USE OF PROCEEDS

The net proceeds to the Company from the sale of the ADSs offered hereby
are estimated to be approximately $13,000,000 at an assumed initial public
offering price of $11.00 per ADS, after deducting offering expenses and
underwriting discounts and commissions, which are estimated to be approximately
$2,400,000. The net proceeds will be applied as follows: (i) approximately
$7,000,000 to finance Phase II of the construction of the Dongguan Facility;
(ii) approximately $1,480,000 to reduce the outstanding amount of long-term bank
loans and an equipment lease (including current portions thereof); (iii)
approximately $1,600,000 for plant and equipment purchases; and (iv)
approximately $300,000 to establish a combined sales and marketing and investor
relations office in the U.S. in 1997. The balance of the proceeds will be used
for general working capital.

The Company intends to apply the amount specified in clause (ii) above as
follows:

APPROXIMATE INTEREST RATE OF MATURITY DATE OF
AMOUNT LOAN/LEASE LOAN/LEASE
----------- ---------------- ----------------

647,000 9.5% December 1997
97,000 9.5% December 1998
65,000 9.5% December 1998
121,000 9.5% March 1999
550,000 9.5% May 1999
-----
Total.... $ 1,480,000

Pending application of the net proceeds of this Offering to the uses
described above, the Company intends to invest the net proceeds of the Offering
in bank time deposits or other short-term investment-grade, interest-bearing
instruments.

DIVIDENDS AND DIVIDEND POLICY

The Company intends to retain earnings for expansion of its operations in
accordance with its business strategy and does not contemplate the payment of
dividends in the foreseeable future. In addition, the Company's present lines of
credit prohibit the payment of dividends in excess of 25% of net income. The
Company currently intends that dividends, if paid, would be paid to holders of
ADSs in U.S. Dollars. See "Description of Shares -- Dividends" and "Description
of American Depositary Receipts -- Dividends, Other Distributions and Rights."

In the fiscal years 1992 through 1995, the Company declared and paid
dividends per Share in the amount of $0.44, $0.29, $0.39, and $0.21,
respectively. The aggregate amount of dividends paid in these fiscal years was
$2,222,000, $1,473,000, $1,959,000, and $1,073,000, respectively. In fiscal year
1996, the Company distributed a dividend in kind of approximately $0.60 per
Share consisting of $2,994,000 of a loan receivable and amounts due from a
debtor of the Company. The Company did not declare a cash dividend in fiscal
year 1996.

17
19

DILUTION

As of December 31, 1996, the net tangible book value of the Company was
approximately $15,766,000, or $3.15 per Share. Net tangible book value per Share
is determined by dividing the tangible net worth of the Company (total assets
less liabilities) by the number of Shares outstanding. Without taking into
account any change in such net tangible value after December 31, 1996, other
than to give effect to the 20 for 1 stock split and the sale of 1,400,000 ADSs
offered hereby (assuming an offering price of $11.00 per Share), and after
deducting estimated offering expenses and underwriting discounts and
commissions, the pro forma net tangible book value per Share as of December 31,
1996, on a consolidated basis, would have been approximately $28,788,000, or
$4.50 per Share. This represents an immediate increase in the net tangible book
value of $1.35 per Share to existing shareholders and an immediate dilution of
$6.50 per Share to persons purchasing ADSs in this Offering. The following table
illustrates this per ADS dilution:

Initial public offering price per Share........................... $ 11.00
Net tangible book value per Share as of December 31, 1996......... $ 3.15
Increase per Share attributable to the Offering................... 1.35
-------
Pro forma net tangible book value per Share after the Offering.... 4.50
--------
Dilution to purchasers of ADSs in the Offering.................... $ 6.50
========

The computations in the table set forth above assume that the
Over-allotment Option is not exercised. If the Over-allotment Option is
exercised in full, the pro forma net tangible book value at December 31, 1996
would have been $30,936,000 or $4.68 per Share, resulting in dilution to
purchasers of ADSs of $6.32 per Share.

The following table summarizes, on a pro forma basis at December 31, 1996,
the number of Shares or ADSs purchased, the total consideration paid to the
Company, and the average price per Share or ADS paid by the existing
shareholders and by new investors purchasing ADSs in this Offering at an initial
public offering price of $11.00 per Share.

SHARES OR ADSS AVERAGE
PURCHASED TOTAL CONSIDERATION PRICE
--------------------- --------------------- PER
NUMBER PERCENT AMOUNT PERCENT SHARE
--------- ------- ----------- ----- ------

Existing Shareholders.......... 5,000,000 78.1% $15,836,000 50.7% $ 3.17
New investors (1).............. 1,400,000 21.9% 15,400,000 49.3% 11.00
---------
Total................ 6,400,000 100.0% $31,236,000 100.0%
=========

- ---------------
(1) Assuming no exercise of the Over-allotment Option. If such Over-allotment
Option were exercised in full, the Number of Shares or ADSs Purchased would
be 1,610,000, the Percent of Shares or ADSs Purchased would be 24.4% and the
aggregate Amount of Total Consideration would be $33,546,000.

18
20

CAPITALIZATION

The following table sets forth the pro forma consolidated capitalization of
the Company at December 31, 1996, as adjusted to give effect to the sale by the
Company of the ADSs offered hereby and the application of the estimated net
proceeds to be received by the Company therefrom, at an initial offering price
of $11.00 per ADS and after deducting the underwriting discounts and estimated
offering expenses payable by the Company. The capitalization information set
forth in the table below is unaudited and should be read in conjunction with the
more detailed consolidated financial statements and notes thereto included
elsewhere in this Prospectus.

AT DECEMBER 31, 1996
-----------------------
ACTUAL AS ADJUSTED
------- -----------
(DOLLARS IN THOUSANDS)

Short-term debt:
Short-term bank borrowings........................................... $ 4,446 $ 4,446
Current portion of long-term loans................................... 834 187
Current portion of capital lease obligations......................... 431 431
------ ------
Total short-term debt........................................ 5,711 5,064
------ ------
Long-term debt:
Long-term bank loans................................................. 1,161 328
Capital lease obligations, long-term................................. 666 666
------ ------
Total long-term debt......................................... 1,827 994
Minority interest...................................................... 1,335 1,335
Shareholders' equity:
Ordinary shares; 5,000,000 shares issued and outstanding;
6,400,000 shares issued and outstanding, as adjusted.............. 323 414
Additional paid-in capital........................................... -- 12,931
Retained earnings.................................................... 15,513 15,513
------ ------
Total shareholders' equity................................... 15,836 28,858
------ ------
Total capitalization................................................... $18,998 $31,187
====== ======

19
21

SELECTED FINANCIAL DATA

The selected consolidated income statement data for the fiscal years ended
March 31, 1994, 1995 and 1996 and the selected consolidated balance sheet data
as of March 31, 1995 and 1996 set forth below have been prepared in accordance
with U.S. GAAP and are derived from the consolidated financial statements and
notes thereto included elsewhere in this Prospectus which have been audited by
Arthur Andersen & Co., independent public accountants, whose report thereon is
also included elsewhere in this Prospectus. The selected consolidated income
statement data for the fiscal years ended March 31, 1992 and 1993 and the
selected consolidated balance sheet data as of March 31, 1992, 1993 and 1994 not
included elsewhere in this Prospectus have been prepared in accordance with U.S.
GAAP and are derived from Zindart's audited financial statements. The selected
consolidated income statement data for the nine months ended December 31, 1995
and 1996 and the selected balance sheet data as of December 31, 1996, are
unaudited, but in the opinion of management, such unaudited consolidated
financial statements include all adjustments necessary for a fair presentation
of such data. The selected consolidated financial data should be read in
conjunction with "Management's Discussion and Analysis of Financial Condition
and Results of Operations," the consolidated financial statements and the notes
thereto and other financial information which appears elsewhere in this
Prospectus.

NINE MONTHS ENDED
YEARS ENDED MARCH 31, DECEMBER 31,
----------------------------------------------- ---------------------
1992 1993 1994 1995 1996 1995 1996
------- ------- ------- ------- ------- ------- -----------
(IN THOUSANDS, EXCEPT PER SHARE DATA)

INCOME STATEMENT DATA:

Net sales..................................... $29,116 $35,603 $35,583 $36,879 $46,930 $35,423 $48,670
Cost of goods sold............................ 22,079 27,309 25,037 25,644 34,116 25,417 36,280
------ ------ ------ ------ ------ ------ ------
Gross profit.................................. 7,037 8,294 10,546 11,235 12,814 10,006 12,390
Selling, general and administrative
expenses.................................... 4,859 5,080 6,351 6,806 6,498 5,322 6,560
Operating income.............................. 2,178 3,214 4,195 4,429 6,316 4,684 5,830
Interest expenses............................. 211 165 150 137 402 180 661
Interest income............................... 204 164 129 228 208 195 89
Other income (expense), net................... 52 122 80 492 (416) 70 168
------ ------ ------ ------ ------ ------ ------
Income before income taxes.................... 2,223 3,335 4,254 5,012 5,706 4,769 5,426
Provision for income taxes.................... 219 302 436 483 488 404 464
------ ------ ------ ------ ------ ------ ------
Income before minority interests.............. 2,004 3,033 3,818 4,529 5,218 4,365 4,962
Minority interests(1)......................... 0 0 83 337 622 525 734
------ ------ ------ ------ ------ ------ ------
Net income.................................... $ 2,004 $ 3,033 $ 3,735 $ 4,192 $ 4,596 $ 3,840 $ 4,228
====== ====== ====== ====== ====== ====== ======
Earnings per share(2)......................... $ 0.40 $ 0.61 $ 0.75 $ 0.84 $ 0.92 $ 0.77 $ 0.85
====== ====== ====== ====== ====== ====== ======
Dividends per share(3)........................ $ 0.44 $ 0.29 $ 0.39 $ 0.21 $ 0.60 $ 0.60 $ --
====== ====== ====== ====== ====== ====== ======
Weighted average number of shares............. 5,000 5,000 5,000 5,000 5,000 5,000 5,000
====== ====== ====== ====== ====== ====== ======

AS OF
DECEMBER 31, 1996
AS OF MARCH 31, ---------------------
----------------------------------------------- AS
1992 1993 1994 1995 1996 ACTUAL ADJUSTED(4)
------- ------- ------- ------- ------- ------- -----------
(IN THOUSANDS)

BALANCE SHEET DATA:

Cash and cash equivalents..................... $ 2,692 $ 3,912 $ 4,068 $ 4,123 $ 3,294 $ 4,873 $ 8,193
Working capital............................... 2,621 3,775 3,210 5,399 3,401 6,676 10,643
Property, plant and equipment, net............ 1,528 1,882 2,545 3,902 10,800 11,632 20,232
Total assets.................................. 10,445 13,905 16,846 23,070 31,710 37,187 48,729
Short-term debt(5)............................ 1,528 1,052 1,020 1,780 8,899 5,711 5,064
Long-term debt and capital lease
obligations................................. 566 745 420 859 2,128 1,827 994
Shareholders' equity.......................... 3,552 5,112 6,887 10,011 11,608 15,836 28,858

OTHER DATA:

Capital expenditures.......................... $ 548 $ 1,086 $ 1,491 $ 3,197 $ 7,341 $ 6,785 $ 2,154

- ---------------
(1) Certain third parties own minority equity interests in the Company's
manufacturing and mold-making subsidiaries in the PRC. See
"Business -- Subsidiaries."

(3) Dividends per share are computed by dividing the total amount of dividends
for each year/period by 5,000,000, the weighted average number of ordinary
shares outstanding during the years or periods, on the basis that the 20 for
1 stock split had been consummated prior to the years or periods presented.
For the nine months ended December 31, 1995, and accordingly during the year
ended March 31, 1996, the Company distributed a dividend in kind of
approximately $2,994,000 of a loan receivable and amounts due from a related
company.
(4) As adjusted to reflect the sale of 1,400,000 ADSs at an assumed public
offering price of $11.00 per ADS and the application of the net proceeds
therefrom. See "Use of Proceeds."

(5) Includes current portions of long-term debt and capital lease obligations.

20
22

MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS

THE FOLLOWING DISCUSSION AND ANALYSIS SHOULD BE READ IN CONJUNCTION WITH
THE CONSOLIDATED FINANCIAL STATEMENTS AND NOTES THERETO INCLUDED ELSEWHERE
HEREIN.

The fiscal year ended March 31, 1996 is referred to herein as FY 1996, the
fiscal year ended March 31, 1995 period is referred to herein as FY 1995 and the
fiscal year ended March 31, 1994 is referred to herein as FY 1994.

OVERVIEW

The Company manufactures a wide range of high-quality, detailed die-cast
and injection-molded products including (i) die-cast collectibles, (ii)
collectible holiday ornaments and (iii) action figures and miniature figurine
playsets used primarily as toys. In FY 1996, the Company manufactured products
for approximately 20 customers, most of which are leading U.S. designers and
marketers. Two of these customers accounted for a majority of the Company's
production, as they have for the past five fiscal years.

The Company's dependence on a relatively small number of customers may
increase the volatility of the Company's net sales in response to changes in the
level of demand by such customers for the Company's products. Such demand can
vary both as a result of fluctuations in the business of these customers and
changes in the proportion of such customers' needs for the manufactured products
supplied by the Company. As a result, the Company's net sales can vary from
period to period. The Company intends to seek to reduce its exposure to such
fluctuations in financial performance by expanding its customer base and product
lines. However, the Company is committed to strengthening its relationships with
key customers since the Company believes such relationships are vital to its
long-term success, even if they can expose the Company to short-term variations
in financial performance.

Notwithstanding fluctuations in net sales, the Company has, through
emphasis on improving efficiency, managed to control costs such that the Company
has experienced steady growth both in operating income as a percentage of net
sales and in net income. For example, for fiscal years 1992 through 1996,
operating income as a percentage of net sales increased from 7.5% to 13.5%; for
the same period, net income grew from $2.0 million to $4.6 million, a compounded
annual growth rate of 23.1%. While on an absolute basis operating and net income
may increase in FY 1997 as compared with FY 1996, the Company expects that, as a
percentage of net sales, each is likely to be below FY 1996 percentages of net
sales due primarily to expenses related to operating the Dongguan Facility at
less than full capacity, training new employees and the manufacture of a larger
percentage of toy products, which have a lower profit margin than the Company's
collectible and giftware products. The Company intends to seek to reduce its
cost of goods sold by (i) maintaining the same overall percentage of toy sales
but focusing on high margin toy products; and (ii) improving operating
efficiency by consolidating its operations in the Dongguan Facility. There can
be no assurance, however, that the Company will be able to achieve a reduction
in the cost of goods sold due to several factors beyond the Company's control,
including lower customer demand for higher margin products, and an increase in
raw material prices, personnel costs, inflation and other costs.

21
23

RESULTS OF OPERATIONS

The table below sets forth certain statement of operations data as a
percentage of net sales for the fiscal years ended March 31, 1994, 1995 and 1996
and the nine months ended December 31, 1995 and 1996.

NINE MONTHS
ENDED
YEAR ENDED MARCH 31, DECEMBER 31,
------------------------- ---------------
1994 1995 1996 1995 1996
----- ----- ----- ----- -----

Net sales.......................................... 100.0% 100.0% 100.0% 100.0% 100.0%
Gross profit....................................... 29.6% 30.5% 27.3% 28.2% 25.5%
Selling, general, and administrative expenses...... 17.9% 18.5% 13.8% 15.0% 13.5%
Operating income................................... 11.8% 12.0% 13.5% 13.2% 12.0%
Income before income taxes......................... 12.0% 13.6% 12.2% 13.5% 11.1%
Provision for income taxes......................... 1.2% 1.3% 1.0% 1.1% 1.0%
Minority interests................................. 0.2% 0.9% 1.3% 1.5% 1.5%
Net income......................................... 10.5% 11.4% 9.8% 10.8% 8.7%

NINE MONTHS ENDED DECEMBER 31, 1996 COMPARED TO NINE MONTHS ENDED DECEMBER 31,
1995

Net Sales. Net sales for the nine months ended December 31, 1996 totaled
$48,670,000, compared to $35,423,000 in the nine months ended December 31, 1995,
an increase of $13,247,000 or 37.4%. This increase resulted from an increase in
sales volume in all finished product categories. Sales of the Company's die-cast
collectibles increased from $13,802,000 to $18,854,000 or 36.6%, due to
increased sales to Ertl. Sales of collectible holiday ornaments increased from
$8,546,000 to $13,633,000, or 59.5%. Sales of action figures and miniature
figurine playsets increased from $5,020,000 to $8,727,000, or 73.8%, primarily
due to sales to two new customers. Mold sales remained at approximately $8
million, because during the period ended December 31, 1996 the Company's
mold-making subsidiaries focused on manufacturing molds for the Company's
products rather than for sales to third parties.

Gross Profit. Gross profit for the nine months ended December 31, 1996
totaled $12,390,000, compared to $10,006,000 in the nine months ended December
31, 1995, an increase of $2,384,000, or 23.8%. The increase in gross profit was
principally due to the increase in sales volume in all finished product
categories. Gross profit as a percentage of net sales ("Gross Margin") decreased
from 28.2% to 25.5% because of costs associated with operating the Dongguan
Facility at less than full capacity, training new employees and an increase in
the production of the Company's lower-margin toy products.

Selling, General and Administrative Expenses. Selling, general and
administrative ("SG&A") expenses for the nine months ended December 31, 1996
totaled $6,560,000, compared to $5,322,000 for the nine months ended December
31, 1995, an increase of $1,238,000, or 23.3%, as a result of increased sales
and a corresponding increase in selling expenses. As a percentage of net sales,
SG&A declined from 15.0% to 13.5%.

Operating Income. Income from operations for the nine months ended
December 31, 1996 totaled $5,830,000, compared to $4,684,000 for the nine months
ended December 31, 1995, an increase of $1,146,000, or 24.5%, due to the factors
described above. Income from operations as a percentage of net sales decreased
from 13.2% to 12.0%.

Other Income (Expense), Net. Other income (expense) for the nine months
ended December 31, 1996 totaled $168,000, compared to $70,000 for the nine
months ended December 31, 1995, an increase of $98,000, or 140.0%.

Interest Expense. Interest expense for the nine months ended December 31,
1996 totaled $661,000, compared to $180,000 for the nine months ended December
31, 1995, an increase of $481,000, or 167.2%. The increase in interest expense
resulted from the Company's assumption of additional indebtedness to finance
Phase I of the construction of the Dongguan Facility. Approximately $1,480,000
of the proceeds from this Offering will be used to repay indebtedness.

22
24

Provision for Income Taxes. The effective tax rate remained relatively
constant at approximately 8.6% of pre-tax income in for the nine months ended
December 31, 1996, and 8.5% for the nine months ended December 31, 1995.

Net Income. Net income during the nine months ended December 31, 1996 was
$4,228,000, compared to $3,840,000 for the nine months ended December 31, 1995,
an increase of $388,000, or 10.1%, due to the factors described above.

COMPARISON OF RESULTS OF OPERATIONS FOR FISCAL 1996 AND 1995

Net Sales. Net sales in FY 1996 totaled $46,930,000, an increase of
$10,051,000, or 27.3%, from $36,879,000 in FY 1995. This growth resulted from an
increase in sales volume in all finished product categories. Sales of die-cast
collectibles increased by 13.9%, from $17,500,000 to $19,934,000. Sales of
collectible holiday ornaments increased by 10.0%, from $11,496,000 to
$12,650,000. Sales of action figures and miniature figurine playsets increased
by 63.9%, from $3,492,000 to $5,722,000. Mold sales increased by 96.4%, from
$4,391,000 to $8,624,000, as a result of the Company's acquisition of a 51%
majority interest of Luen Tat Mould Manufacturing Limited ("Luen Tat Mould") and
the subsequent consolidation of Luen Tat Mould's financial results with those of
the Company, as well as an increase in Luen Tat Mould's sales.

Gross Profit. Gross profit totaled $12,814,000 in FY 1996, an increase of
$1,579,000, or 14.1%, from $11,235,000 in FY 1995. Gross Margin was 27.3% in FY
1996 compared to 30.5% in FY 1995. The Gross Margin decreased because the sale
of action figures and miniature figurine playsets and molds as a percentage of
total net sales increased. These products generally have a lower Gross Margin
than the Company's other products. Sales of die-cast collectibles decreased from
47.5% of net sales to 42.5% of net sales, and sales of collectible holiday
ornaments decreased from 31.2% of net sales to 27.0% of net sales. Sales of
action figures and miniature figurine playsets increased from 9.5% of net sales
to 12.2% of net sales, and sales of molds increased from 11.8% of net sales to
18.3% of net sales. The prices of the Company's raw materials, zinc
(approximately 13% of net sales) and plastic (approximately 7% of net sales)
increased substantially in the first half of FY 1996. The Company was able to
pass on the increase in the cost of zinc to its customers but had to absorb part
of the increase in the cost of plastic. In FY 1996, the annual average price of
zinc alloy increased by approximately 6.5% over the annual average price in FY
1995, but the Company was able to increase the average price of zinc alloy
charged to its customers by approximately 5.6%, nearly offsetting the price
increase. The price of a plastic resin frequently used by the Company increased
by approximately 16.9% from FY 1995 to FY 1996, and the Company was unable to
pass on the majority of this additional cost to its customers. As a result, the
Company's gross profit margin suffered in FY 1996. The Company does not believe
that increases in the price of raw materials have materially affected the
Company's results of operations in any other period.

Selling, General and Administrative Expenses. SG&A expenses totaled
$6,498,000 in FY 1996 compared to $6,806,000 in FY 1995, a decrease of $308,000,
or 4.5%, as a result of the transfer of certain engineering and administrative
functions from Hong Kong to the PRC. SG&A expenses were 13.8% of net sales in FY
1996 as compared to 18.5% of net sales in FY 1995, a decrease of 4.7%.

Operating Income. Income from operations totaled $6,316,000 in FY 1996
compared to $4,429,000 in FY 1995, an increase of $1,887,000, or 42.6%. The
operating margin increased from 12.0% of net sales in FY 1995 to 13.5% of net
sales in FY 1996.

Other Income (Expense), Net. Other income (expense) totaled a net expense
of $435,000 for FY 1996 compared to a net income of $455,000, a decrease of
$890,000. The decrease was due primarily to (i) a difference of $342,000
resulting from aggregate losses from foreign currency transactions in FY 1996,
versus aggregate gains from foreign currency transactions in FY 1995 and (ii) a
$358,000 write-off related to listing expenses for a proposed public offering in
Singapore that was not completed during FY 1996.

Interest Expense. Interest expense increased from $137,000 in FY 1995 to
$402,000 in FY 1996 because the Company increased borrowings to undertake Phase
I of the construction of the Dongguan Facility.

23
25

Provision for Income Taxes. The effective income tax rate was 8.6% in FY
1996 and 9.6% in FY 1995. The effective rate decreased because profit
contributions from subsidiaries of the Company are not taxable and the
proportion of profits contributed from such subsidiaries was higher in FY 1996
than in FY 1995.

Net Income. Net income totaled $4,596,000 in FY 1996, an increase of
$404,000, or 9.6% from $4,192,000 for FY 1995.

COMPARISON OF RESULTS OF OPERATIONS FOR FISCAL 1995 TO FISCAL 1994

Net Sales. Net sales in FY 1995 totaled $36,879,000, an increase of
$1,296,000, or 3.6%, from $35,583,000 in FY 1994. During FY 1995, the Company
did not emphasize increasing sales revenues, but instead focused on the
introduction of its Turnkey Manufacturing Service, implementing cost control
measures and increasing production efficiency. Also during FY 1995 sales of
die-cast collectible products decreased by $939,000, or approximately 5.1% from
$18,439,000 to $17,500,000 in FY 1995 due to a reduction in sales to a major
customer. Sales of collectible holiday ornaments increased by $1,510,000, or
approximately 15.1% from $9,986,000 to $11,496,000 in FY 1995. Sales of action
figures and miniature figurine playsets increased by $466,000 or approximately
15.4%, from $3,026,000 to $3,492,000 in FY 1995. Mold sales increased 6.3% from
$4,132,000 in 1994 to $4,391,000 in FY 1995.

Gross Profit. Gross profit totaled $11,235,000 in FY 1995, an increase of
$689,000, or 6.5%, from $10,546,000 in FY 1994. The Gross Margin increased from
29.6% in FY 1994 to 30.5% in FY 1995, principally as a result of a higher
percentage of sales of collectible holiday ornaments relative to other products
and improvement in cost controls and efficiency.

Selling, General and Administrative Expenses. SG&A expenses totaled
$6,806,000 in FY 1995 as compared to $6,351,000 in FY 1994, an increase of
$455,000, or 7.2%, due to the hiring of additional employees for the Turnkey
Manufacturing Service. SG&A as a percentage of net sales increased from 17.9% in
FY 1994 to 18.5% in FY 1995.

Operating Income. Income from operations increased by $234,000, or 5.6%,
from $4,195,000 in FY 1994 to $4,429,000 in FY 1995, due to the factors
described above. Operating margins increased from 11.8% of net sales in FY 1994
to 12.0% of net sales in FY 1995.

Other Income (Expense), Net. Other income (expense) totaled a net income
of $492,000 for FY 1995, compared to a net income of $80,000 for FY 1994, and
increase of $412,000, due primarily to aggregate gains from foreign currency
transactions in FY 1995 versus aggregate losses from foreign currency
transactions in FY 1994, as well as other miscellaneous receipts and
adjustments.

Provision for Income Taxes. The effective income tax rate as a percentage
of pre-tax income remained relatively constant at approximately 10.0%.

Net Income. Net income totaled $4,192,000 in FY 1995, an increase of
$457,000, or 12.2%, from $3,735,000 in FY 1994.

LIQUIDITY AND CAPITAL RESOURCES

The Company has financed its operations primarily through cash generated
from operations and borrowings from banks and other third parties. Cash and cash
equivalents were $3,294,000 at March 31, 1996, and $4,873,000 at December 31,
1996, while total indebtedness at March 31, 1996 was $11,027,000 and $7,538,000
at December 31, 1996.

Cash flows from operating activities were $5,471,000, $4,485,000,
($360,000) and $7,828,000 for FY 1994, FY 1995, FY 1996, and the nine-month
period ended December 31, 1996, respectively. The Company's operating activities
are historically financed by cash flows from operations; the anomalous cash flow
figure for FY 1996 was due to a significant increase in accounts receivable and
inventories. Cash flows from investing activities were ($1,388,000),
($1,989,000), ($7,507,000) and ($2,153,000) for FY 1994, FY 1995, FY 1996 and
the nine-month period ended December 31, 1996, primarily as a result of
expenditures for the acquisition of property, plant and equipment. Cash flows
from financing activities were ($3,927,000),

24
26

($2,446,000), $7,043,000 and ($4,096,000) in FY 1994, FY 1995, FY 1996 and the
nine-month period ended December 31, 1996.

The Company obtained a term loan in the amount of $2,600,000 from The Hong
Kong and Shanghai Banking Corporation Limited in FY 1995 in connection with
Phase I of the construction of the Dongguan Facility. This loan is partially
secured by a mortgage on the Company's Hong Kong property and certain other
assets. The term loan is repayable in 48 monthly installments, commencing on
August 1, 1994. As of December 31, 1996, the outstanding principal amount of
this loan was $1,500,000. The Company intends to use a portion of the proceeds
from this Offering to repay a portion of the remaining balance of this loan.

In FY 1995 and FY 1996, the Company obtained equipment lease financings in
the aggregate amount of $3,700,000 from three different equipment lessors. One
lease requires repayment of the outstanding balance in February 1997 (the "First
Lease") and the second and third leases (the "Second and Third Leases") require
repayment in 48 monthly installments. The First Lease carries an interest rate
of 10.0% and the Second and Third Leases carry interest rates of 9.3% and 7.2%,
respectively. As of December 31, 1996, the aggregate outstanding amount under
these three leases was $1,097,000.

The Company has revolving lines of credit with three banks -- Standard
Chartered Bank, The Hong Kong and Shanghai Banking Corporation Limited and Bank
of China. As of December 31, 1996, these lines of credit allow for aggregate
borrowings of up to $26,711,000. As of December 31, 1996, the Company had
$16,066,000 of loans and letters of credit outstanding under these revolving
lines of credit. The Company draws down from the lines of credit primarily to
finance purchases of raw materials. The lines of credit contain covenants
requiring the maintenance of minimum net worth, and limitations on payment of
dividends and bonuses to management without the consent of the lender.

Consistent with practice in the giftware and collectibles industry, the
Company offers accounts receivable terms to its customers. This practice has
created working capital requirements that the Company generally has financed
with net cash balances, internally generated cash flow and borrowing. The
Company's accounts receivable balance at March 31, 1996, was $8,315,000. The
Company has never experienced any significant problems with collection of
accounts receivable from its customers.

Capital expenditure for FY 1994, FY 1995, FY 1996, and the nine-month
period ended December 31, 1996, was $1,491,000, $3,197,000, $7,341,000, and
$2,154,000, respectively. The Company believes that cash flow generated from its
operations, the proceeds from this Offering and its existing credit facilities
will be sufficient to satisfy its working capital and capital expenditure
requirements for at least the next 18 months.

FOREIGN EXCHANGE

All of the Company's sales are denominated either in U.S. Dollars or Hong
Kong Dollars. The largest portion of the Company's expenses are denominated in
Hong Kong Dollars, followed by Renminbi and U.S. Dollars. The exchange rate of
the Hong Kong Dollar is currently pegged to the U.S. Dollar, but during the past
several years the market exchange rate has fluctuated within a narrow range. The
PRC government sets the exchange rate between the Renminbi and all other
currencies. As a result, the exchange rate between the Renminbi and the U.S.
Dollar and the Hong Kong Dollar has fluctuated in the past and may fluctuate in
the future. If the value of the Renminbi or the Hong Kong Dollar decreases
relative to the U.S. Dollar, such fluctuation may have a positive effect on the
Company's results of operations. If the value of the Renminbi or the Hong Kong
Dollar increases relative to the U.S. Dollar, such fluctuation may have a
negative effect on the Company's results of operations. See "Risk
Factors -- Country Risks -- Exchange Rate Risk." The Company does not currently
hedge its foreign exchange positions.

EFFECT OF INFLATION

During the past three years, the rate of inflation in Hong Kong has been
approximately 8% to 10% per year and the rate of inflation in the PRC has been
approximately 14% to 22% per year. However, the Company has been able to reduce
the impact of inflation on profitability by increasing the prices of its
products and reducing operating costs. For example, in FY 1995 and FY 1996,
respectively, the Company increased the price of its products by 4.0% and 3.0%,
and reduced operating costs by 0.2% and 1.5%. No assurance can be given that the
Company will be able to minimize the impact of inflation on profitability in the
future.

25
27

BUSINESS

Zindart manufactures high-quality, detailed die-cast and injection-molded
products, including: (i) die-cast collectibles, (ii) collectible holiday
ornaments, and (iii) action figures and miniature figurine playsets used
primarily as toys. Zindart's corporate headquarters are located in Hong Kong and
its manufacturing operations are located in the neighboring Guangdong Province
in the PRC.

DEVELOPMENT OF THE COMPANY

Since its inception, Zindart's goal has been to become the leading
manufacturer of high-quality die-cast and injection-molded products for the
premier U.S. designers and marketers of die-cast collectibles, collectible
holiday ornaments and toys. Zindart was founded in Hong Kong in 1978 by George
K.D. Sun, who believed that, in order to succeed, Asian light manufacturers had
to build industry partnerships with their customers by providing them with
consistently high-quality, mass-produced products at affordable prices. It was
Mr. Sun's plan to meet the needs of Zindart's customers and forge the desired
industry partnerships by seeking to manage the entire product engineering and
manufacturing process rather than acting simply as a volume contract
manufacturer. Zindart's long-term relationships with its two largest customers
exemplify the type of industry partnerships envisioned by Mr. Sun. See
"Business -- Markets, Products and Customers."

In the early 1980s, Zindart decided to capitalize on opportunities in the
PRC by moving its manufacturing operations to Guangdong Province. In so doing,
Zindart realized substantial savings in labor and operating costs and gained
access to a large pool of technically trained craftsmen for its mold- and
model-making operations and other capable but relatively inexpensive laborers
for its manufacturing and assembly operations. Zindart also developed and
trained a local PRC management team, resulting both in cost savings and
increased synergy between labor and management. In 1982, Zindart opened the
Zhong Xin factory in the Tian He district of Guangzhou. In 1987, due to
expanding sales and the need for additional production capacity, Zindart opened
a second production facility in the PRC -- the Xin Xing factory in the Henan
district of Guangzhou.

In 1987, in order to secure PRC governmental support for the Company's
operations in the PRC, Mr. Sun, Ertl and certain members of management
collectively sold a controlling interest in the Company to certain PRC entities.
In 1993, in order to enable the Company to gain access to U.S. management
expertise and capital markets, Mr. Sun asked the PRC entities to sell their
shares in the Company to funds under the management of ChinaVest, Advent and
certain other shareholders, which they did, and concurrently Mr. Sun sold a
majority of his shares to these parties. See "Principal Shareholders."

By late 1994, in response to growth in sales, Zindart decided to build the
Dongguan Facility in order to expand and consolidate its manufacturing
operations. Phase I of the construction of the Dongguan Facility was completed
in 1996. Upon completion of Phase II of the construction of the Dongguan
Facility, Zindart will increase its current manufacturing space in the Dongguan
Facility by 470,773 square feet and will have doubled the amount of its
manufacturing space from the manufacturing space in its two original facilities.
See "Business -- Properties." During the past two decades, Mr. Sun recruited and
trained the Company's current executive team, and in the past few years
gradually transferred to them responsibility for managing all of the Company's
day-to-day operations. Mr. Sun continues to be responsible for providing
leadership to, and engaging in strategic planning for, the Company. See
"Management."

The Company's Xin Xing and Dongguan facilities are owned by Sino-foreign
joint ventures ("CJVs") in which PRC parties own minority interests. The Company
structured these facilities in this format in order to avail itself of certain
tax holidays granted to CJVs and to gain the assistance of local parties in
establishing and operating the facilities. Such assistance principally involves
representing the CJVs to government authorities responsible for the allocation
and use of land, the provision of municipal services and labor relations. The
Company continues to rely on such PRC parties for the efficient provision of
services that are material to the conduct of operations at these facilities. See
"Notes to Financial Statements -- Note 14" and "Risk Factors -- Dependence on
PRC Parties."

26
28

MARKETS, PRODUCTS AND CUSTOMERS

Die-cast Collectibles

Zindart manufactures a wide range of metal die-cast collectible scale
model replicas of automobiles, such as Mercedes Benz, BMW, Corvette and
Mustang, trucks, planes, farm implements and construction equipment, such as
John Deere and Caterpillar, and classic cars, such as the 1932 Cadillac, the
1964 Aston Martin and the 1956 Ford Thunderbird. These replicas, which come in
various scales from 1/12th to 1/64th of the size of the original product, are
medium- and high-feature products that must meet exacting standards. Many of
the die-cast replicas manufactured by Zindart have complex designs which
require high-quality workmanship and decorative details, with pad printing of
as many as one hundred imprints. The most complex of these models incorporate
up to 200 moveable parts. The die-cast scale model replicas manufactured by
Zindart are sold through hobby shops, collectors' clubs, car and equipment
dealers, toy and gift stores and other channels. These products typically
retail in the U.S. for between $150.00 and $180.00 for the high-feature
products, between $25.00 and $60.00 for the medium-feature products and between
$5.00 and $10.00 for the low-feature products. Many of these products have
nostalgic appeal to adult consumers. In addition, some of these products,
especially the automobile replicas, have attracted a following of collectors
and are traded on a secondary market. It is the Company's belief, based on 15
years of sales experience, that many die-cast collectibles have enduring
consumer appeal. For example, the Company manufactures on an annual basis
several products for which molds were made between five and ten years ago.
These include the '70 Ford Mustang, '68 Pontiac GTO, '67 Corvette convertible,
Ford Roadster, Allis Chalmers Model "C" Tractor and John Deere Skidsteer
Loader.

Zindart's primary customer for die-cast collectibles is Ertl, a leading
U.S. designer and marketer of die-cast collectible replicas with fiscal year
1995 sales of over $200 million. Ertl was Zindart's first customer in 1978 and
has been a customer ever since. In 1982, Ertl's affiliated company, Ertl (Hong
Kong) Limited, acquired a significant equity interest in Zindart. Currently,
Ertl's Chief Executive Officer is a director of the Company. See "Management"
and "Certain Transactions." In fiscal year 1995 and fiscal year 1996, sales to
Ertl accounted for 32.1% and 25.9% of the Company's net sales, respectively.
Other customers of Zindart for die-cast collectibles include other well known
designers and marketers of such products, such as Revell-Monogram, which has
been a customer of Zindart since 1987, and SWG of Germany, which has been a
customer of Zindart since 1989. Revell-Monogram is a leading worldwide designer
and marketer of plastic model kits and die-cast replicas of airplanes,
automobiles and ships marketed under the "Revell" and "Monogram" brand names.
SWG is one of the largest designers and marketers of die-cast replicas in
Germany, which are sold under the brand name "Siku." The Company is currently
manufacturing molds for die-cast collectibles for Mattel, Inc.

Collectible Holiday Ornaments

Hallmark, long known as a leading producer of greeting cards, has
successfully diversified into collectible holiday ornaments and giftware
products. Hallmark relies on Zindart 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 Ornament products also include free-standing decorations such as
die-cast replicas of pedal cars, which were first manufactured by Zindart in
1992. Production of Keepsake Ornament products 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 Zindart are collectibles sold
through authorized retail outlets. These products typically retail in the U.S.
for between $7.00 and $25.00. 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, Pocahontas, the Flintstones, and
Peanuts, and various American icons such as Lou Gehrig and Babe Ruth. Sales to
Hallmark accounted for 31.2% and 27.0% of the Company's net sales in fiscal year
1995 and fiscal year 1996, respectively.

27
29

Action Figures and Miniature Figurine Playsets

Zindart also manufactures action figures and miniature figurine playsets
for various designers and marketers such as Hasbro, Inc., Tyco Toys, Inc. and
Lewis Galoob Toys, Inc. These products include miniature replicas of popular
television and movie characters such as Thomas the Tank Engine & Friends and
various Disney and Sesame Street characters. These products typically retail in
the U.S. for between $5.00 and $15.00. The Company believes that a developing
trend among toymakers is to focus on profitability rather than volume. As a
result, many toymakers are moving into the sale of higher-priced toys, the
production of which requires high-quality and detailed manufacturing skills of
the type offered by Zindart.

MANUFACTURING NEEDS OF ZINDART'S CUSTOMERS

Zindart believes that a significant sourcing problem facing its customers
is locating suppliers who can manufacture: (i) high-quality products, (ii) in
desired volume (i.e., both in large quantities and limited runs) and (iii) in a
timely and cost-effective manner. In addition, a significant problem facing the
Company's customers is eliminating the cost, time and complexity of locating and
managing multiple companies usually required to perform the different steps of
the development and production of a single product. Marketers must often hire
different companies to engage in product engineering, model and mold making, and
manufacturing and packaging of the finished product. 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.

ZINDART'S SOLUTION

- High-quality Production

Zindart has developed the ability to produce high-quality products by
employing a highly trained workforce, including skilled, technically trained
craftsmen using modern equipment for the Company's mold-and model-making
operations, 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

Zindart currently employs over 6,800 persons in its manufacturing
facilities. Upon completion of Phase II of the construction of the Dongguan
Facility, the Company will have an aggregate of 887,000 square feet of
manufacturing space with the capacity for up to 8,000 workers. The Company
believes that this space, together with the anticipated increase in efficiency
for which the Dongguan Facility was designed, will allow the Company to
significantly increase its production capacity. The added flexibility gained
through increased production capacity should enable the Company to further
shorten production cycles, which in turn will enable the Company to offer, among
other things, a just-in-time manufacturing service.

- Commitment to Improvement in 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 expects to achieve greater
efficiencies as a result of the consolidation of its operations in the Dongguan
Facility. In addition, the Company intends to retain production experts to
assist it in achieving further gains in production efficiency.

- Turnkey Manufacturing Service

Zindart's Turnkey Manufacturing Service fulfills a customer's requirements
at every stage in the production process, from computer-aided product
engineering and model and mold making, to manufacturing, assembling and
packaging of the finished product. This coordinated, one-stop production process
provides Zindart's customers with (i) shortened lead times from design to
production; (ii) a single participant in the

28
30

manufacturing process instead of the multiple participants previously required;
and (iii) increased efficiency, resulting in lower per-unit costs. See
"-- Manufacturing."

ZINDART'S STRATEGY

Zindart's goal is to become the leading manufacturer of high-quality
die-cast and injection-molding products for the premier designers and marketers
of die-cast collectibles, collectible holiday ornaments and toys. Zindart's
business strategy to achieve this goal is to focus on the following:

- Develop Additional Major Customers

Currently, Zindart has two major customers, but manufactures products for
an additional 15 premier marketers. Some of these marketers have become
customers in the last few years. The Company expects that it will be able to
develop several of these new customers into major customers as they become
familiar with the benefits of the Company's Turnkey Manufacturing Service. Upon
completion of Phase II of the construction of the Dongguan Facility, Zindart
will be able to offer new major customers a dedicated production team and
dedicated production space, which can provide such customers with attractive
advantages. For example, the Company will be able to customize its production
facility to meet the specific needs of such customers, and the customer will
then be able to exercise greater control over the production process, thereby
enhancing quality control and cost efficiency, increasing confidentiality, and
expediting scheduling and delivery timetables.

- Diversify Product Offerings

Zindart has established itself as a leading manufacturer of die-cast
collectibles and collectible holiday ornaments and toys. Zindart intends to
further diversify the Company's product offerings to include the manufacture of
other consumer products which utilize Zindart's current competitive advantages
and know-how. In this regard, the Company intends to establish a combined sales,
marketing and investor relations office in the U.S. in 1997 to pursue such
efforts.

- Invest in Plant, Equipment and Employees

The completion of Phase II of the construction of the Dongguan Facility
will provide the Company with additional production space. Zindart also intends
to purchase new equipment for this facility and to hire additional employees.
This expansion will increase Zindart's capacity and, the Company believes, the
quality of its operations and overall efficiency, which should in turn enable
Zindart to meet additional demand for its manufacturing services.

29
31

MANUFACTURING

A significant problem facing the Company's customers is eliminating the
cost, time and complexity of locating and managing the multiple companies
usually required to perform the different steps of the product development and
production cycle of a single product. Several different companies are often
hired to engage in product engineering, model and mold making, and manufacturing
and packaging of the finished product. The need to coordinate several different
companies in the manufacturing process can cause production delays,
inefficiencies in management of multiple contractors, and quality and
reliability problems.

To address this problem, the Company in 1994 broadened its manufacturing
capability to provide a fully integrated service known as Turnkey Manufacturing
Service. With this service, Zindart is able to integrate product engineering,
model making and mold making with the production of the finished product, and
thereby meet all of a customer's design engineering and manufacturing needs
(other than the design and printing of product packaging), thus eliminating the
need for a Hong Kong intermediary. Zindart's commitment to providing a
comprehensive product development service is carried out by a team currently
consisting of approximately 130 engineers and technicians, approximately 350
model makers and tool makers and a total workforce of approximately 6,800. By
coordinating product development and process design with production and
packaging, Zindart 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 Turnkey Manufacturing Service comprises the following processes:

LOGO

- Based on a customer's preliminary specifications, Zindart assists in
product engineering through the use of computer-aided design systems
and other means with an eye toward promoting cost effectiveness
throughout the production cycle.

- Zindart builds prototype scale models of the product which are then
reviewed to ensure economical production and adherence to quality
requirements.

- Using the model, Zindart produces tooling casts and then the molds
that are key to the quality, timing and cost of the finished product.

- Zindart employs die-casting and injection-molding processes to shape
zinc alloys or plastic into product parts.

- The product parts are painted through electrostatic painting,
detailed hand spray painting and/or pad printing.

- Zindart's large work force assembles multiple parts to produce the
final product.

- The product undergoes buffing, finishing and quality control
inspection.

- Zindart assembles preprinted boxes, inserts the product and places
the boxes in cartons for delivery as specified by the customer.

30
32

COMPETITION

The Company faces competition from several companies for the manufacture of
die-cast collectibles and from several other companies for the manufacture of
collectible holiday ornaments. The Company faces competition from numerous
companies for the manufacture of toys. The Company believes that the basis for
competition in the manufacture of all of these products is price, quality and
the ability to produce in required volumes and to timely meet delivery
schedules. The Company believes that, to date, it has been able to successfully
compete with respect to each of these criteria. However, no assurance can be
given that the Company will be able to continue to compete successfully or that
it will not face increased competition from new entrants or increased price
competition. The Company expects increased competition from manufacturers of
low-priced toys that may seek to enter the higher margin business of
manufacturing high-quality toys, die-cast collectibles and collectible holiday
ornaments. Some of these potential competitors may have significantly greater
financial, technical, manufacturing and marketing resources than the Company.
See "Risk Factors -- Risks Relating to the Company -- Competition" and "-- Lack
of Barriers to Entry."

PROPERTIES

In 1982, Zindart acquired a facility of approximately 14,700 square feet at
Tai Po in Hong Kong's New Territories, which currently serves as the Company's
headquarters. The Tai Po facility is staffed by approximately 80 persons in the
Company's customer service, quality control, material control and purchasing,
finance and accounting, marketing, project management and engineering, personnel
and other administrative departments. Prior to the transfer of production to the
PRC, Zindart's manufacturing plant was located at its Tai Po facility.

In 1982, Zindart established its Zhong Xin factory in the Tian He district
of Guangzhou, which is approximately 112 miles northwest of Hong Kong, on the
Pearl River. The factory, which is not owned by Zindart, operates under a
subcontract processing agreement with Guangzhou Tian He Dongpu Economic
Development Company, the local economic development authority, which provides
Zindart with the factory building and facilities as well as the pool of labor.
Zindart pays subcontracting fees for the use of these facilities and labor, and
provides machinery, equipment and raw materials. Zindart owns all of the
production machinery and equipment used in the plant. Under the subcontract
processing agreement, Zindart has the right to operate and manage the production
facility, including the authority to hire and dismiss plant workers and to make
decisions on day-to-day operational matters. The Zhong Xin plant has been
expanded over the years and currently provides a factory space of approximately
250,000 square feet and employs a workforce of approximately 2,500. The
subcontract processing agreement expires in December 1999. The parties are
currently negotiating the terms on which this agreement will be terminated when
Zindart moves all production to the Dongguan Facility. See "Risk
Factors -- Reliance on New Production Facility."

Zindart established its Xin Xing factory in the Henan district of Guangzhou
in 1987. The Xin Xing factory now provides a factory space of approximately
170,000 square feet, and employs a workforce of approximately 1,500. In December
1993, Zindart entered into a contractual joint venture agreement with Guangzhou
Xinjiao Huangbu Economic Development Company ("Guangzhou Xinjiao"), the PRC
party that owned the Xin Xing factory, to operate the factory through a
majority-owned subsidiary of Zindart. Pursuant to the contractual joint venture
agreement, Guangzhou Xinjiao receives an annual fee from Zindart approximating
the rent of this facility, but does not share in the profits or losses of the
venture. This agreement will have to be terminated prior to the Company's
transfer of its operations from this facility to the Dongguan Facility. See
"Risk Factors -- Reliance on New Production Facility."

In October 1994, Zindart decided to build its own production facility on
approximately 20 acres of land in the city of Dongguan, which is located
approximately 60 miles north of Hong Kong, near the Pearl River Delta. Virtually
all land in the PRC is state-owned, but can be leased from the government on a
long-term basis. Operation of the Dongguan Facility is structured as a
contractual joint venture with a PRC governmental entity, Dongguan Hengli
Trading General Company ("Dongguan Hengli"), which will receive an annual fee
from Zindart but which does not share in the profits or losses of the venture.
This contractual joint venture acquired a 50-year lease on the 20 acres of land,
and has a term of 15 years. At the end of this

31
33

term, Zindart will continue to own the principle assets of the joint venture,
including the 50-year land lease. Pursuant to the contractual joint venture
agreement, Dongguan Hengli receives an annual service fee, but does not share in
the profits or losses of the venture. Phase I of the construction of the
Dongguan Facility, with a gross floor area of approximately 560,000 square feet,
including living accommodations for up to 3,500 workers, was completed in
February 1996. The Company commenced Phase II of the construction in late 1996,
and intends to complete such construction in early 1998. When Phase II of the
construction of the Dongguan Facility is completed, it will provide
approximately 887,000 square feet of manufacturing space and approximately
385,000 square feet of space for non-production purposes. The Dongguan Facility
has been designed to meet or exceed applicable environmental, worker and fire
safety requirements. Following completion of Phase II of the construction,
Zindart intends to transfer all production activities from the two Guangzhou
factories to the Dongguan Facility.

RAW MATERIALS

Zindart acquires the 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. Zindart's standard
practice is to maintain a supply of raw materials sufficient for approximately
three months' production. See "Risk Factors -- Risks Relating to the
Company -- Dependence on Raw Materials."

SUBSIDIARIES

The Company has a controlling interest in two mold-making subsidiaries. In
August 1994, the Company acquired a 55% interest in Onchart Industrial Limited,
a British Virgin Islands corporation. In December 1994, the Company acquired a
51% interest in Luen Tat Mould. Prior to these acquisitions, the Company had
regularly contracted with these companies to provide mold-making services to the
Company. 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
and model-making capacity in southern China. Both subsidiaries will move their
operations to the Dongguan Facility upon completion of Phase II of the
construction.

Luen Tat Mould owns an 18% interest in Luen Tat Model, which provides
model-making services to Luen Tat Mould.

BACKLOG AND SEASONALITY

Zindart's customers generally place orders two to three months in advance
of target delivery dates. These purchase orders may be cancelled 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. As is customary in the PRC, each
year Zindart closes its facilities for two weeks during the months of January or
February in celebration of the Chinese New Year holidays. As a result, the
Company's fourth fiscal quarter production and revenues have in the past been
lower than in other quarters and are expected to be lower than other quarters in
the future. Except as attributable to the observance of the New Year, the
Company has not experienced seasonality in its operations, although it could
show quarterly fluctuations based on the timing of orders placed by its
customers.

As of December 31, 1996, Zindart had orders on hand of approximately $24.1
million, compared to $20.9 million at December 31, 1995. Less than 1% of
Zindart's total annual customer orders have been canceled in any of the last
three years.

TRADEMARKS AND OTHER PROPRIETARY RIGHTS

Zindart has no registered trademarks or other registered proprietary
rights. The Company's key employees have entered into to confidentiality
agreements with the Company.

ENVIRONMENTAL MATTERS

The plants and equipment owned and operated by Zindart and the construction
activity associated with the expansion program are subject to comprehensive PRC
laws and regulations for environmental protection.

32
34

If Zindart were found to be in violation of any such regulation, it would be
given a period of time to remedy the problem. If it failed to do so, the PRC
government could impose sanctions including, but not limited to, a shut-down of
operations until such time as Zindart complied with such regulations. Each of
Zindart's manufacturing facilities have been subject to periodic environmental
review by the local authorities and have never incurred a fine or penalty for
any breach or violation of any applicable environmental laws. Zindart believes
that its manufacturing and other operations are in compliance in all material
respects with existing applicable environmental laws. See "Risk Factors -- Risks
Relating to the Company -- Environmental Matters."

EMPLOYEES

Zindart currently employs over 6,800 persons, of whom approximately 5,400
are production workers, 600 are administrative staff and 800 are engineering and
technical personnel. See "Risk Factors -- Risks Relating to the
Company -- Employees." As is customary for employers in the PRC, each of
Zindart's production facilities includes housing facilities for workers. Zindart
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, and guidelines
regarding worker safety, wages and hours. Zindart intends to retain outside
consultants to review and assist in improving the working and living conditions
of its employees.

Zindart provides training to its managers and executives in its Hong Kong
headquarters through courses conducted by industry professionals engaged by
Zindart as well by senior management. The courses cover management skills, total
quality management, ISO 9000 requirements and the technical aspects of the
Company's operations. In addition, Zindart sponsors a number of technical staff
to attend night classes and in-house seminars for workers are held semi-annually
by the quality control staff or the factory managers on quality requirements.

LEGAL PROCEEDINGS AND INSURANCE

Zindart is not a party to any material pending legal or arbitration
proceeding with respect to itself or any of its material properties. Zindart has
been informed that two minority shareholders of ZICHL have asserted a claim that
they are entitled to receive additional shares in ZICHL, such that their total
beneficial ownership in the Company would increase from 9.6% to 14.16%. No
assurance can be given that such persons will not initiate litigation to pursue
this claim. See "Principal Shareholders."

Zindart currently maintains insurance coverage with HSCB Insurance Ltd.,
the China Pacific Insurance Co., Ltd. and China Insurance Co., Ltd. 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.

33
35

MANAGEMENT

DIRECTORS AND EXECUTIVE OFFICERS

The following table sets forth certain information with respect to the
directors and executive officers of the Company:

NAME POSITION AGE
- --------------------------------- ---------------------------------------------------- ---

Robert A. Theleen................ Chairman of the Board 51
George K. D. Sun................. Founder, Chief Executive Officer and Director 56
Feather S. Y. Fok................ Chief Operating Officer, Chief Financial Officer and 35
Director
Tony D. H. Lai................... Vice President of Production and Director 55
Andrew C. H. Mok(1).............. Vice President of Marketing 45
Koulman N. Zheng................. Vice President of Engineering 41
Vickie W. K. So.................. Assistant Vice President and Financial Controller 36
Choi S. Leung.................... Assistant Vice President of Marketing and Purchasing 52
Pei J. Yu........................ Assistant Vice President of Production 50
Alexander M. K. Ngan............. Director 45
George B. Volanakis.............. Director 48
James E. Gilleran(2)............. Director 63
Leo Paul Koulos(2)............... Director 63
Stanley Wang(2).................. Director 54

- ------------------

(1) Mr. Mok has informed the Company that he intends to leave the Company's
employ in the third quarter of calendar year 1997 to establish his own
business. In the interim, the Company will undertake a search for another
Vice President of Marketing.
(2) Messrs. Gilleran, Koulos and Wang will join the Board of Directors following
the closing of the Offering.

Robert A. Theleen, 51, serves as Chairman of the Board of the Company and
is the founder and Chairman of ChinaVest. Mr. Theleen joined the Board of
Directors in January, 1997. Mr. Theleen is a director of several privately held
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 MBA from the American School of International
Management.

George K. D. Sun, 56, founded Zindart in 1978 and served as a Director and
Chief Executive Officer from 1978 to 1994. In 1994, Mr. Sun took a sabbatical
from the Company to pursue philanthropic activities, including the creation of
the Zindart (De Zhen) Foundation, the beneficiaries of which include Zindart's
employees and their families, and other charities and churches. Mr. Sun returned
to Zindart in 1996 as a Director and Chief Executive Officer. Mr. Sun has
transferred to the Company's current executive team responsibility for managing
all of the Company's day-to-day operations. Mr. Sun continues to be responsible
for providing leadership to, and engaging in strategic planning for, the
Company.

Feather S. Y. Fok, 35, has served as a Director since August 1993 and has
served as Chief Operating Officer and Chief Financial Officer since 1993. Ms.
Fok joined the Company in January 1989. Before joining the Company, Ms. Fok
worked in the Audit & Business and Advisory Services 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 B.S. degree in Business Administration from the Chinese
University of Hong Kong.

Tony D. H. Lai, 55, has served as a Director and Vice President of
Production since October 1994 and is responsible for production in the PRC. Mr.
Lai graduated from the Shanghai Education University and was a secondary school
teacher for 27 years in the PRC before he emigrated to Hong Kong. He joined the
Company in 1989.

34
36

Andrew C. H. Mok, 45, has served as Vice President of Marketing since
January 1995, and is responsible for customer relations, marketing, product
engineering and costing. Mr. Mok has over 20 years of working experience in the
toy industry. Mr. Mok received a B.S. degree in Mechanical Engineering from the
University of Hong Kong.

Koulman N. Zheng, 41, has served as Vice President of Engineering since
1993, and is responsible for Luen Tat Mould's operations. Prior to joining the
Company, Mr. Zheng worked for many years as an engineer and operations manager
in various companies in the U.S. Mr. Zheng holds a 10% interest in Luen Tat
Mould. Mr. Zheng holds a B.S. and an M.S. degree in Mechanical Engineering from
San Francisco State University and Northeastern University, respectively. Mr.
Zheng also received a B.S. degree in Mechanical Engineering from the South
Chinese Institute of Technology in the PRC.

Vickie W. K. So, 36, has served as the Assistant Vice President and
Financial Controller since September 1996. Prior to joining the Company, Ms. So
worked as Administration Manager, Group Accountant and Financial Controller of
Pacific Dunlop (Asia) Ltd. for more than ten years. Ms. So is a qualified
accountant in Hong Kong. Ms. So received a B.S. degree in Business
Administration from the Chinese University of Hong Kong in 1984 and an M.B.A.
from the Australian Graduate School of Management, University of New South
Wales.

Choi S. Leung, 52, has served as the Assistant Vice President of Marketing
and Purchasing since 1992 and is responsible for customer relations of the
Hallmark account, and purchasing. Prior thereto, Mr. Leung worked for 12 years
for the Hong Kong-based purchasing arm of Hallmark as a buyer and manager for
its PRC operations.

Pei J. Yu, 50, has served as the Assistant Vice President of Production
since October 1993, and is responsible for production in all of the Company's
manufacturing facilities. Prior to joining the Company in 1983, Mr. Yu worked as
an engineer in various companies in the PRC for 15 years. Mr. Yu received a B.S.
degree from the East China Chemical Engineering University.

Alexander M. K. Ngan, 45, has served as a Director since October 1995. Mr.
Ngan is a partner of ChinaVest, which he joined in 1993. Mr. Ngan is a director
of several privately held ChinaVest portfolio companies. Prior thereto, Mr. Ngan
worked for over 20 years in banking and financial consulting in Canada and Hong
Kong. Mr. Ngan received a Bachelors of Mathematics degree from the University of
Waterloo, Ontario. Mr. Ngan is a representative of ChinaVest.

George B. Volanakis, 48, has served as a Director since November 1992. Mr.
Volanakis joined Ertl in 1988 and has served as President and Chief Executive
Officer of Ertl since 1993. Prior to joining Ertl, Mr. Volanakis was Senior Vice
President of Marketing for Mattel Inc. Mr. Volanakis has served as President of
Matchbox Toys U.S.A., Ltd. and as President and Chief Operating Officer of
Playskool Inc., a subsidiary division of Milton Bradley Company, Inc. Mr.
Volanakis is the Chairman of the Toy Manufacturing Association in the United
States. Mr. Volanakis received a B.A. degree from Union College. Mr. Volanakis
is a representative of Ertl.

James E. Gilleran, 63, will join the Board immediately following the
closing of this Offering. Mr. Gilleran has served as Chairman of the Board and
Chief Executive Officer of Bank of San Francisco since 1994. Prior thereto, Mr.
Gilleran served as Superintendent of Banks of the California State Banking
Department. In addition, Mr. Gilleran serves as a director of The Fritz
Companies and Cooper Development Company. Mr. Gilleran received a B.B.A. degree
from Pace University.

Leo Paul Koulos, 63, will join the Board immediately following the closing
of this Offering. Mr. Koulos is President and Chief Executive Officer of
National Coupon Redemption Service, Inc., a national clearinghouse for
manufacturers' cents off coupons. Mr. Koulos is also Chairman and Chief
Executive Officer of Coupon Processing Associates, Inc. and of its Mexican
affiliate, Enlace Vital, S.A. de C.V. Mr. Koulos received a B.S. degree from the
University of San Francisco.

Stanley Wang, 54, will join the Board immediately following the closing of
this Offering. Mr. Wang is President and Chief Executive Officer of PanTronix
Corporation, which provides manufacturing services for

35
37

semiconductor components, subsystems and modules. Mr. Wang received a business
degree from the National Taiwan University and an M.B.A. degree from Temple
University.

BOARD OF DIRECTORS

The Directors of the Company who are not executive officers currently do
not receive compensation for serving on the Board of Directors or any committee
thereof. All directors are reimbursed for their expenses for each Board of
Directors meeting attended.

Pursuant to the listing requirements of the Nasdaq National Market, the
Company is required to have at least two independent directors on its Board of
Directors and to establish an audit committee, at least a majority of whose
members are independent of management. Prior to the Offering, two independent
directors were appointed to the Audit Committee of the Board of Directors.

EXECUTIVE COMPENSATION

The aggregate amount of compensation paid by the Company to all directors,
executive officers and significant employees as a group in fiscal year 1996 was
$979,924, of which $182,859 was paid as discretionary bonuses. In addition,
$27,772 was contributed to the Company's provident fund (i.e., the Company's
defined contribution benefit plan administered by Jardine Matheson) in fiscal
year 1996 on behalf of such persons.

The Company's executive officers and other key employees participate in the
Company's bonus plan, which generally provides for the payment of bonuses in an
aggregate amount not to exceed ten percent of the Company's pre-tax income. The
Chief Operating Officer recommends the size of the bonus pool to the Company's
Board of Directors for its approval and the allocation of the bonus amounts to
the Compensation Committee for its approval. An employee's bonus amount is
determined on the basis of the employee's position, performance during the year,
length of service and other factors. The Compensation Committee is comprised of
three directors, one of whom is the Chief Operating Officer.

OPTIONS TO PURCHASE SECURITIES FROM THE COMPANY

No officer or director of the Company currently has any option or warrant
to purchase any securities of the Company. The Company intends to adopt an
employee stock option plan following the closing of the Offering. The plan is
expected to provide for the issuance of options to purchase up to 10% of the
outstanding Shares following the Offering.

LIMITATION OF LIABILITY

The liability of officers and directors in Hong Kong is governed by common
law, which imposes general fiduciary duties such as the duty to act for the
benefit of the company, to act with due skill, care and attention, and to avoid
conflicts of interest.

Under Hong Kong law, the organizational documents of a company may not
contain any provisions limiting the personal liability of directors to the
Company or its shareholders or indemnifying directors, officers, employees and
agents of the Company for acts performed in such capacity. The Underwriting
Agreement provides for indemnification by the Underwriters of the Company, its
directors and officers, and by the Company of the Underwriters, for certain
liabilities, including liabilities arising under the Securities Act and affords
certain rights of contribution with respect thereto.

Insofar as indemnification for liabilities arising under the Securities Act
may be permitted to directors, officers and controlling persons of the Company
pursuant to the foregoing provisions, or otherwise, the Company has been advised
that in the opinion of the Securities and Exchange Commission such
indemnification is against public policy as expressed in the Securities Act and
is, therefore, unenforceable.

36
38

PRINCIPAL SHAREHOLDERS

The following table sets forth beneficial ownership of the Shares as of
January 31, 1997 and immediately following the completion of this Offering, by
(i) each person known by the Company to own beneficially more than 10% of the
outstanding Shares and (ii) the officers and directors of the Company as a
group.

Zindart Pte Limited ("Zindart Singapore") owns 100% of the Shares prior to
the Offering, and after the closing date will own 78.1% of the Shares, thereby
retaining control of the Company. ZICHL is the largest shareholder of Zindart
Singapore by virtue of its ownership of 76.0% of the shares of Zindart
Singapore. Funds under the management of ChinaVest own 67.8% of the shares of
ZICHL.

The Company is not aware of any present arrangement that may at a
subsequent date result in a change of control of the Company.

PERCENTAGE OF SHARES
OUTSTANDING (2)
---------------------
SHARES BENEFICIALLY BEFORE AFTER
NAME OF BENEFICIAL OWNER OWNED(1) OFFERING OFFERING
- ------------------------------------------------------------------- ------------------- -------- --------

Zindart Singapore(3)............................................... 5,000,000 100.0% 78.1%
ZICHL(4)......................................................... 5,000,000 100.0% 78.1%
ChinaVest IV Funds(5).......................................... 5,000,000 100.0% 78.1%
All executive officers and directors as a group ((2) persons)(6)... 5,000,000 100.0% 78.1%

- ---------------
(1) Beneficial ownership is determined pursuant to Rule 13d-3 of the Exchange
Act.

(2) Based on 5,000,000 Shares outstanding before the Offering and 6,400,000
Shares outstanding after the Offering.

(3) Zindart Singapore is an investment holding company incorporated in
Singapore. The shareholders of Zindart Singapore are ZICHL (76.0%),
Longvest Management Limited (14.0%) and Ertl (Hong Kong) Limited (10.0%).
The address of Zindart Singapore is 138 Cecil St., #18-00 Cecil Court,
Singapore 069538.

(4) ZICHL is an investment holding company incorporated in the Cayman Islands.
The address of ZICHL is P.O. Box 309, Ugland House, South Church St.,
George Town, Grand Cayman, Cayman Islands, British West Indies. The shares
of ZICHL are owned by four shareholders, whose indirect pecuniary interest
in the Company is outlined below:

PERCENTAGE OF SHARES
OUTSTANDING
---------------------
SHARES BENEFICIALLY BEFORE AFTER
NAME OF BENEFICIAL OWNER OWNED OFFERING OFFERING
-------------------------------------------------------- ------------------- -------- --------

ChinaVest IV Funds...................................... 2,577,000 51.5% 40.3%
Advent Funds............................................ 744,000 14.9% 11.6%
Long Gain Limited....................................... 239,500 4.8% 3.7%
Cititrend International Holdings Ltd.................... 239,500 4.8% 3.7%

ChinaVest IV Funds are described in note (5).
Advent Funds consist of the following three limited partnerships: Advent
International Investors II, L.P., a Massachusetts limited partnership;
Advent Asia/Pacific Fund L.P., a Bermuda limited partnership; and
Asia/Pacific Special Situations Fund, L.P., a Delaware limited partnership,
which together hold 19.6% of ZICHL. The address of Advent Funds is c/o
Advent International Corporation, 5th Floor, 101 Federal St., Boston,
Massachusetts 02110.

Long Gain Limited, incorporated in the British Virgin Islands, is the
personal investment holding company of Mr. Henry H.L. Hu, a former director
of ZICHL and a former director and Chief Executive Officer of the Company.
The address of Long Gain Limited is Creque Building, P.O. Box 116,
Roadtown, Tortola, British Virgin Islands.

Cititrend International Holdings Ltd., incorporated in Bermuda, is the
personal investment holding company of Mr. Carl Tong, a former director of
ZICHL and the Company. The address of Cititrend International Holdings Ltd.
is 12B Thomson Commercial Building, 4-10 Thomson Road, Wanchai, Hong Kong.

(5) The ChinaVest IV Funds consist of the following three limited partnerships:
ChinaVest IV, L.P., a Delaware limited partnership; ChinaVest IV-A, L.P., a
Delaware limited partnership; and ChinaVest IV-B, L.P., a Bermuda limited
partnership. The address of ChinaVest IV Funds is c/o ChinaVest Ltd., 19/F,
Dina House, Duddell Street, Central, Hong Kong.

(6) Each of Robert A. Theleen and Alexander M.K. Ngan is a partner of
ChinaVest. On that basis, Messrs. Theleen and Ngan may be deemed to own
beneficially the Shares held by ChinaVest. Messrs. Theleen and Ngan each
disclaims beneficial ownership of such Shares, except to the extent of his
pecuniary interest therein.

37
39

DISPUTE BETWEEN CERTAIN BENEFICIAL SHAREHOLDERS

The Company has been informed that, in January 1997, ChinaVest and Advent
made an offer to Messrs. Hu and Tong to cause ZICHL to redeem the shares that
Messrs. Hu and Tong own in ZICHL in exchange for a payment of cash, the
assignment to Messrs. Hu and Tong of shares held by ZICHL in two companies that
Messrs. Hu and Tong were previously primarily responsible for managing, and the
assignment of a promissory note issued by one such company to ZICHL. In response
to the offer, ChinaVest received a letter from counsel to Messrs. Hu and Tong
asserting certain claims against ChinaVest and Advent, including a claim that
Messrs Hu and Tong are entitled to receive additional shares in ZICHL as a
result of this Offering under their prior employment agreements, such that their
total indirect beneficial ownership of Shares in the Company would equal 14.16%
of the outstanding Shares of the Company prior to the Offering (an increase of
4.56% over their current total indirect beneficial ownership of 9.6% of the
Shares outstanding prior to the Offering). In this letter, Messrs. Hu and Tong
also offered to sell their current holdings in ZICHL and the additional ZICHL
shares that they are demanding to ChinaVest and Advent at a substantial premium
over the offering price of the ADSs in this Offering. In addition, the letter
threatened litigation if the parties do not reach an amicable settlement of this
dispute. ChinaVest has informed the Company that it intends to continue to
pursue settlement or adjudication of the parties' respective claims. Neither the
Company nor ChinaVest is aware of any facts that would cause the Company to be
liable to Messrs. Hu or Tong. However, no assurance can be given that the
Company would not be named as a defendant in any litigation that might be filed
by Messrs. Hu or Tong, or, if such proceedings were commenced, as to the outcome
of such proceedings or the costs associated therewith. Notwithstanding the
foregoing, ZICHL has entered into an Indemnification Agreement with the Company
whereby ZICHL has agreed to indemnify and hold the Company harmless against any
loss or expense arising out of claims by Messrs. Hu or Tong.

38
40

CERTAIN TRANSACTIONS

Ertl has been one of the Company's two largest customers in the past three
fiscal years. Ertl beneficially owns 10% of the Company's Shares and has a
representative on the Company's Board of Directors (the "Board"). All sales
transactions to Ertl are negotiated on an arm's length basis.

In 1992, Zindart granted Mr. George Sun an option to buy from Zindart a
leasehold apartment in Hong Kong, at Zindart's original cost. In 1995, Mr. Sun
exercised his option to buy this leasehold apartment pursuant to the terms of
the option.

In 1994, the Company sold its interest in four associated companies,
Zindart Investment (China) Company Limited, G&D Children Products Company
Limited, Zindart Investment Company Limited and Yuehai Recreation World Limited
to Zindart Entertainment & Leisure Limited ("ZEL"), a company controlled by
ZICHL (the "ZEL Transaction"). The interests were sold by the Company at its
cost, approximately $350,000, and the Company recorded the sale as a loan by the
Company to ZEL with an interest rate of 2.0% above the Hong Kong prime lending
rate. Subsequently, the Company made other advances to ZEL with similar interest
rates such that as of September 30, 1995, the balance owing to the Company by
ZEL was approximately $2,994,000. On September 30, 1995, the Company declared
and distributed a dividend in kind of the debt owing from ZEL at its face value.

The Company advanced ZICHL $95,000 in fiscal year 1994 on an interest-free
basis for working capital purposes. These advances were repaid in fiscal year
1995 (the "ZICHL Advance").

In February 1996, the Company borrowed $259,000 from Hua Yang Printing Co.,
Ltd., a company whose principal shareholders are funds under the management of
ChinaVest and Advent. This loan was unsecured and had an interest rate of 2.0%
above the Hong Kong prime lending rate. This loan was repaid by the Company in
March 1996.

In fiscal year 1995, the Company loaned $517,000 to Sinomex, Inc., a
company in which ZICHL owned a 28.6% equity interest at the time the loan was
made (the "Sinomex Loan"). The loan carried an interest rate of 2.0% above the
Hong Kong prime lending rate, and was used for working capital purposes. The
principal amount of the loan, along with all accrued interest, was repaid in
full in fiscal year 1996.

The Company does not intend to enter into any future transactions with
affiliates similar to the ZEL Transaction, the ZICHL Advance or the Sinomex
Loan, and intends that all future transactions with affiliates will be approved
by a committee of disinterested directors.

39
41

DESCRIPTION OF SHARES

As of January 31, 1997, the authorized shares of the Company consisted of
10,000,000 Ordinary Shares with a par value of approximately $0.065, 5,000,000
of which were issued and outstanding. The following statements are summaries of
the material provisions of the Company's Memorandum of Association and Articles
of Association and the Companies Ordinance (Chapter 32) of the laws of Hong Kong
(the "Companies Ordinance"). These summaries do not purport to be complete and
are qualified in their entirety by reference to the full Memorandum and Articles
of Association which have been filed as exhibits to the Company's Registration
Statement, of which this Prospectus is a part.

GENERAL

All of the Ordinary Shares of the Company offered hereby, when issued, will
be fully paid and non-assessable. Certificates representing the Shares are
issued in registered form. Shareholders of the Company who are non-residents of
Hong Kong for exchange control purposes may freely hold and vote their Shares.
The Shares are not entitled to any sinking fund or redemption rights.

The ADSs have been approved for inclusion on the Nasdaq National Market.
The Shares will not be listed.

VOTING RIGHTS

Under the Companies Ordinance, any action to be taken by the shareholders
in general meeting requires the affirmative vote of either an ordinary or a
special resolution passed at such meeting. An ordinary resolution is one passed
by the majority of such shareholders as are entitled to, and do, vote in person
or by proxy at a general meeting of the Company. A special resolution is one
passed by not less than three-quarters of such shareholders as are entitled to,
and do, vote in person or by proxy at a general meeting of the Company.
Generally, resolutions of the shareholders of the Company are passed by ordinary
resolution. However, the Companies Ordinance stipulates that certain matters,
such as amendment of the Company's Memorandum or Articles of Association,
repurchases of Shares by the Company, removing a director and winding up the
Company, may only be passed as special resolutions.

Subject to any special voting rights granted to any additional class of
shares, on a show of hands every shareholder who is present in person at a
general meeting of the Company shall have one vote, and on a poll every
shareholder who is present in person or by proxy shall have one vote for every
share in the capital of the Company of which it is the holder.

Any action to be taken by the shareholders requires the affirmative vote of
the holders of a majority of the Shares at a meeting of shareholders. There are
no cumulative voting rights. Accordingly, the holders of a majority of the
Shares voting for the election of directors can elect all the directors if they
choose to do so.

MODIFICATION OF RIGHTS

Subject to the Companies Ordinance, any of the rights from time to time
attaching to any class of Ordinary Shares may (whether or not the Company is
being wound up) be altered or abrogated with the consent in writing of the
holders of not less than three-quarters of the issued Ordinary Shares of that
class or with the sanction of a special resolution passed at a separate general
meeting of the holders of Ordinary Shares.

ISSUE OF SHARES

Under the Companies Ordinance, the directors of the Company may, without
prior approval of the shareholders, offer to issue new Shares in the Company to
existing shareholders pro rata. The directors may not issue new Shares of the
Company in any other manner without the prior approval of the shareholders in a
general meeting. Any such approval given in a general meeting shall continue in
force until the conclusion of the following annual general meeting or the
expiration of the period within which the next annual general

40
42

meeting is required by law to be held. If such approval is given, the unissued
Shares of the Company shall be at the disposal of the Board of Directors, which
may offer, allot, grant options over or otherwise dispose of them to such
persons, at such times and for such consideration and upon such terms and
conditions as the directors may determine.

The shareholders may remove any director before the expiration of his term
only upon the vote of not less than three-quarters of the issued Shares.

DIVIDENDS

Subject to the Companies Ordinance and as set out in the Articles of
Association, the shareholders in a general meeting may from time to time declare
dividends to be paid to the shareholders according to their rights and interests
in the profits available for distribution, but no dividend shall be declared in
excess of the amount recommended by the Board of Directors.

In addition to dividends declared in a general meeting upon the
recommendation of the Board of Directors, the Board of Directors may from time
to time declare and pay to the shareholders such interim dividends as appear to
the Board of Directors to be justified by the financial position of the Company;
the Board of Directors may also pay any fixed dividend which is payable on any
Shares of the Company on any other dates, whenever the Company's financial
position, in the opinion of the Board of Directors, justifies such payment.

The Company's loan facility with The Hong Kong and Shanghai Banking
Corporation Limited restricts the Company to an annual dividend not in excess of
25% of net income. See "Dividends and Dividend Policy."

MISCELLANEOUS

The shareholders have no redemption rights, conversion rights or preemptive
rights on the transfer of securities of the Company.

41
43

DESCRIPTION OF AMERICAN DEPOSITARY RECEIPTS

The following is a summary of the material provisions of the Deposit
Agreement (the "Deposit Agreement") to be entered into by the Company, The Bank
of New York, as depositary (the "Depositary") and the owners (the "Owners") and
holders from time to time of American Depositary Receipts ("ADRs") issued
thereunder.

This summary does not purport to be complete and is subject to and
qualified in its entirety by reference to the Deposit Agreement, including the
form of ADRs, which has been filed as an exhibit to the Company's Registration
Statement of which this Prospectus is a part. Terms used herein and not
otherwise defined will have the meanings set forth in the Deposit Agreement.
Copies of the Deposit Agreement, the Memorandum of Association and the Articles
of Association of the Company will be available for inspection at the Corporate
Trust Office of the Depositary, currently located at 101 Barclay Street, New
York, New York 10286, and at the principal office of the agent of the Depositary
(the "Custodian"), currently located at the Hong Kong office of The Hong Kong
and Shanghai Banking Corporation Limited. The Depositary's principal executive
office is located at 48 Wall Street, New York, New York 10286.

AMERICAN DEPOSITARY RECEIPTS

ADRs evidencing ADSs are issuable by the Depositary pursuant to the Deposit
Agreement. Each ADS will represent one Share or evidence of the right to receive
one Share. Only persons in whose names ADRs are registered on the books of the
Depositary will be treated by the Depositary and the Company as Owners.

DEPOSIT, TRANSFER AND WITHDRAWAL

The Depositary has agreed, subject to the terms and conditions of the
Deposit Agreement, that upon delivery to the Custodian of Shares (or evidence of
rights to receive Shares) and pursuant to appropriate instruments of transfer in
a form satisfactory to the Custodian, the Depositary will, upon payment of the
fees, charges and taxes provided in the Deposit Agreement, execute and deliver
at its Corporate Trust Office to, or upon the written order of, the person or
persons named in the notice of the Custodian delivered to the Depositary or
requested by the person depositing such Shares with the Depositary, an ADR or
ADRs, registered in the name or names of such person or persons, and evidencing
the authorized number of ADSs requested by such person or persons.

Upon surrender at the Corporate Trust Office of the Depositary of an ADR
for the purpose of withdrawal of the Shares represented by the ADSs evidenced by
such ADR, and upon payment of the fees of the Depositary for the surrender of
ADRs, governmental charges and taxes provided in the Deposit Agreement, and
subject to the terms and conditions of the Deposit Agreement, the Owner of such
ADR will be entitled to delivery, to it or upon its order, of the number of
Shares at the time represented by the ADS or ADSs evidenced by such ADR. The
forwarding of share certificates, other securities, property, cash and other
documents of title for such delivery will be at the risk and expense of the
Owner.

Subject to the terms and conditions of the Deposit Agreement and any
limitations established by the Depositary, the Depositary may execute and
deliver ADRs prior to the receipt of Shares (a "Pre-Release") and deliver Shares
upon the receipt and cancellation of ADRs which have been Pre-Released, whether
or not such cancellation is prior to the termination of such Pre-Release or the
Depositary knows that such ADR has been Pre-Released. The Depositary may receive
ADRs in lieu of Shares in satisfaction of a Pre-Release. Each Pre-Release must
be (a) preceded or accompanied by a written representation from the person to
whom the ADRs or Shares are to be delivered that such person, or its customer,
owns the Shares or ADRs to be remitted, as the case may be, (b) at all times
fully collateralized with cash or such other collateral as the Depositary deems
appropriate, (c) terminable by the Depositary on not more than five business
days' notice and (d) subject to such further indemnities and credit regulations
as the Depositary deems appropriate. The number of ADSs which are outstanding at
any time as a result of Pre-Releases will not normally exceed thirty percent of
the Shares deposited under the Deposit Agreement; provided, however, that the
Depositary reserves the right to change or disregard such limit from time to
time as it deems appropriate.

42
44

The Depositary may retain for its own account any compensation received by
it in connection with the foregoing.

DIVIDENDS, OTHER DISTRIBUTIONS AND RIGHTS

The Depositary will convert or cause to be converted into U.S. Dollars, to
the extent that in its judgment it can do so on a reasonable basis and can
transfer the resulting U.S. Dollars to the United States, all cash dividends and
other cash distributions denominated in a currency other than Dollars, including
Hong Kong Dollars ("Foreign Currency"), that it receives in respect of the
deposited Shares, and to distribute the resulting U.S. Dollar amount (net of the
expenses incurred by the Depositary in converting such Foreign Currency) to the
Owners entitled thereto, in proportion to the number of ADSs representing such
Shares evidenced by ADRs held by them, respectively. Such distribution may be
made upon an averaged or other practicable basis without regard to any
distinctions among Owners on account of exchange restrictions or the date of
delivery of any ADR or ADRs or otherwise. The amount distributed to the Owners
of ADRs will be reduced by any amount on account of taxes to be withheld by the
Company or the Depositary. See "-- Liability of Owner for Taxes."

If the Depositary determines that in its judgment any Foreign Currency
received by the Depositary cannot be converted on a reasonable basis into U.S.
Dollars, or if any approval or license of any government or agency thereof which
is required for such conversion is denied or in the opinion of the Depositary is
not obtainable, or if any such approval or license is not obtained within a
reasonable period as determined by the Depositary, the Depositary may distribute
the Foreign Currency received by the Depositary to, or in its discretion may
hold such Foreign Currency uninvested and without liability for interest thereon
for the respective accounts of, the Owners entitled to receive the same. If any
such conversion of Foreign Currency, in whole or in part, cannot be effected for
distribution to some of the Owners entitled thereto, the Depositary may in its
discretion make such conversion and distribution in U.S. Dollars to the extent
permissible to the Owners entitled thereto, and may distribute the balance of
the Foreign Currency received by the Depositary to, or hold such balance
uninvested and without liability for interest thereon for, the respective
accounts of, the Owners entitled thereto.

If any distribution upon any Shares consists of a dividend in, or free
distribution of, Shares, the Depositary may, and will if the Company so
requests, distribute to the Owners of outstanding ADRs entitled thereto, in
proportion to the number of ADSs evidenced by the ADRs held by them,
respectively, additional ADRs evidencing the aggregate number of ADSs that
represents the number of Shares received as such dividend or free distribution,
subject to the terms and conditions of the Deposit Agreement with respect to the
deposit of Shares and the issuance of ADSs evidenced by ADRs, including the
withholding of any tax or other governmental charge and the payment of fees of
the Depositary as provided in the Deposit Agreement. The Depositary may withhold
any such distribution of ADRs if it has not received satisfactory assurances
from the Company that such distribution does not require registration under the
Securities Act or is exempt from registration under the provisions of such Act.
In lieu of delivering ADRs for fractional ADSs in the event of any such dividend
or free distribution, the Depositary will sell the number of Shares represented
by the aggregate of such fractions and distribute the net proceeds in accordance
with the Deposit Agreement. If additional ADRs are not so distributed, each ADS
will thenceforth also represent the additional Shares distributed upon the
Shares represented thereby.

If the Company offers or causes to be offered to the holders of any Shares
any rights to subscribe for additional Shares or any rights of any other nature,
the Depositary will have discretion as to the procedure to be followed in making
such rights available to any Owners of ADRs or in disposing of such rights for
the benefit of any Owners and making the net proceeds available in Dollars to
such Owners or, if by the terms of such rights offering or for any other reason,
the Depositary may not either make such rights available to any Owners or
dispose of such rights and make the net proceeds available to such Owners, then
the Depositary shall allow the rights to lapse. If at the time of the offering
of any rights the Depositary determines in its discretion that it is lawful and
feasible to make such rights available to all Owners or to all or certain Owners
but not to other Owners, the Depositary may distribute to any Owner to whom it
determines the distribution to be lawful and feasible, in proportion to the
number of ADSs held by such Owner, warrants or other instruments therefor in
such form as it deems appropriate. If the Depositary determines in its
discretion that it

43
45

is not lawful and feasible to make such rights available to all or certain
Owners, it may sell the rights, warrants or other instruments in proportion to
the number of ADSs held by the Owners to whom it has determined it may not
lawfully or feasibly make such rights available, and allocate the net proceeds
of such sales for the account of such Owners otherwise entitled to such rights,
warrants or other instruments, upon an averaged or other practical basis without
regard to any distinctions among such Owners because of exchange restrictions or
the date of delivery of any ADR or ADRs, or otherwise.

In circumstances in which rights would not otherwise be distributed, if an
Owner of ADRs requests the distribution of warrants or other instruments in
order to exercise the rights allocable to the ADSs of such Owner, the Depositary
will make such rights available to such owner upon written notice from the
Company to the Depositary that (a) the Company has elected in its sole
discretion to permit such rights to be exercised and (b) such owner has executed
such documents as the Company has determined in its sole discretion are
reasonably required under applicable law. Upon instruction pursuant to such
warrants or other instruments to the Depositary from such Owner to exercise such
rights, upon payment by such Owner to the Depositary for the account of such
Owner of an amount equal to the purchase price of the Shares to be received in
exercise of the rights, and upon payment of the fees of the Depositary as set
forth in such warrants or other instruments, the Depositary will, on behalf of
such Owner, exercise the rights and purchase the Shares, and the Company shall
cause the Shares so purchased to be delivered to the Depositary on behalf of
such Owner. As agent for such Owner, the Depositary will cause the Shares so
purchased to be deposited, and will execute and deliver ADRs to such Owner,
pursuant to the Deposit Agreement.

The Depositary will not offer rights to Owners unless both the rights and
the securities to which such rights relate are either exempt from registration
under the Securities Act with respect to a distribution to all Owners or are
registered under the provisions of such Act; provided, that nothing in the
Deposit Agreement will create, or be construed to create, any obligation on the
part of the Company to file a registration statement with respect to such rights
or underlying securities or to endeavor to have such a registration statement
declared effective. If an Owner of ADRs requests the distribution of warrants or
other instruments, notwithstanding that there has been no such registration
under the Securities Act, the Depositary will not effect such distribution
unless it has received an opinion from recognized counsel in the United States
for the Company upon which the Depositary may rely that such distribution to
such Owner is exempt from such registration. The Depositary will not be
responsible for any failure to determine that it may be lawful or feasible to
make such rights available to owners in general or any owner in particular.

Whenever the Depositary receives any distribution other than cash, Shares
or rights in respect of the Shares, the Depositary will cause the securities or
property received by it to be distributed to the Owners entitled thereto, after
deduction or upon payment of any fees and expenses of the Depositary or any
taxes or other governmental charges, in proportion to their holdings,
respectively, in any manner that the Depositary may deem equitable and
practicable for accomplishing such distribution; provided, however, that if in
the opinion of the Depositary such distribution cannot be made proportionately
among the Owners entitled thereto, or if for any other reason (including, but
not limited to, any requirement that the Company or the Depositary withhold an
amount on account of taxes or other governmental charges or that such securities
must be registered under the Securities Act in order to be distributed to Owners
or the Depositary deems such distribution not to be feasible), the Depositary
may adopt such method as it may deem equitable and practicable for the purpose
of effecting such distribution, including, but not limited to, the public or
private sale of the securities or property thus received, or any part thereof,
and the net proceeds of any such sale (net of the fees of the Depositary) will
be distributed by the Depositary to the Owners entitled thereto as in the case
of a distribution received in cash.

If the Depositary determines that any distribution of property (including
Shares and rights to subscribe therefor) is subject to any taxes or other
governmental charges which the Depositary is obligated to withhold, the
Depositary may, by public or private sale, dispose of all or a portion of such
property in such amount and in such manner as the Depositary deems necessary and
practicable to pay such taxes or charges and the Depositary will distribute the
net proceeds of any such sale after deduction of such taxes or charges to the
owners entitled thereto in proportion to the number of ADSs held by them,
respectively.

44
46

Upon any change in nominal or par value, split-up, consolidation or any
other reclassification of Shares, or upon any recapitalization, reorganization,
merger or consolidation or sale of assets affecting the Company or to which it
is a party, any securities which shall be received by the Depositary or
Custodian in exchange for, in conversion of, or in respect of Shares will be
treated as new Shares under the Deposit Agreement, and the ADSs will thenceforth
represent, in addition to the existing Shares, the right to receive the new
Shares so received in exchange or conversion, unless additional ADRs are
delivered pursuant to the following sentence. In any such case the Depositary
may, and will, if the Company so requests, execute and deliver additional ADRs
as in the case of a dividend in Shares, or call for the surrender of outstanding
ADRs to be exchanged for new ADRs specifically representing such new Shares.

RECORD DATES

Whenever any cash dividend or other cash distribution shall become payable
or any distribution other than cash shall be made, or whenever rights shall be
issued with respect to the Shares, or whenever for any reason the Depositary
causes a change in the number of Shares that are represented by each ADS, or
whenever the Depositary shall receive notice of any meeting of holders of
Shares, the Depositary will fix a record date, (a) for the determination of the
Owners who will be (i) entitled to receive such dividend, distribution or
rights, or the net proceeds of the sale thereof, or (ii) entitled to give
instructions for the exercise of voting rights at any such meeting, or (b) on or
after which each ADS will represent the changed number of Shares, all subject to
the provisions of the Deposit Agreement.

VOTING OF SHARES

Upon receipt of notice of any meeting of holders of Shares, if requested in
writing by the Company, the Depositary will, as soon as practicable thereafter,
mail to all Owners a notice, the form of which notice will be in the sole
discretion of the Depositary, containing (a) such information included in such
notice of meeting received by the Depositary from the Company, and (b) a
statement that the Owners as of the close of business on a specified record date
will be entitled, subject to any applicable provision of Hong Kong law and of
the Memorandum of Association and Articles of Association of the Company, to
instruct the Depositary as to the exercise of the voting rights, if any,
pertaining to the amount of Shares or other Deposited Securities represented by
their respective ADSs. Upon the written request of an Owner on such record date,
received on or before the date established by the Depositary for such purpose,
the Depositary will endeavor, insofar as practicable, to vote or cause to be
voted the amount of Shares or other Deposited Securities represented by the ADSs
evidenced by such ADRs in accordance with the instructions set forth in such
request. The Depositary will not vote or attempt to exercise the right to vote
that attaches to the Shares or other Deposited Securities, other than in
accordance with such instructions.

There can be no assurance that the Owners generally or any Owner in
particular will receive the notice described in the preceding paragraph
sufficiently prior to the date established by the Depositary for the receipt of
instructions to ensure that the Depositary will vote the Shares in accordance
with the provisions set forth in the preceding paragraph.

REPORTS AND OTHER COMMUNICATIONS

The Depositary will make available for inspection by Owners at its
Corporate Trust Office any reports and communications, including any proxy
soliciting material, received from the Company, which are both (a) received by
the Depositary as the holder of the Shares and (b) made generally available to
the holders of such Shares by the Company. The Depositary will also, upon
written request, send to the Owners copies of such reports when furnished by the
Company pursuant to the Deposit Agreement. Any such reports and communications,
including any proxy soliciting material, furnished to the Depositary by the
Company will be furnished in English when so required pursuant to any
regulations of the Securities and Exchange Commission.

45
47

AMENDMENT AND TERMINATION OF THE DEPOSIT AGREEMENT

The form of ADRs and any provisions of the Deposit Agreement may at any
time and from time to time be amended by agreement between the Company and the
Depositary in any respect which they may deem necessary or desirable without the
consent of the Owners; provided, however, that any amendment that imposes or
increases any fees or charges (other than taxes and other governmental charges,
registration fees, cable, telex or facsimile transmission costs, delivery costs
or other such expenses), or which otherwise prejudices any substantial existing
right of Owners, will not take effect as to outstanding ADRs until the
expiration of 30 days after notice of any amendment has been given to the
Owners. Every Owner, at the time any amendment so becomes effective will be
deemed, by continuing to hold such ADR, to consent and agree to such amendment
and to be bound by the Deposit Agreement as amended thereby. In no event will
any amendment impair the right of the Owner to surrender its ADR and receive
therefor the Shares represented thereby, except to comply with mandatory
provisions of applicable law.

The Depositary will at any time at the direction of the Company terminate
the Deposit Agreement by mailing notice of such termination to the Owners of the
ADRs then outstanding at least 90 days prior to the date fixed in such notice
for such termination. The Depositary may likewise terminate the Deposit
Agreement by mailing notice of such termination to the Company and the Owners of
all ADRs then outstanding if, any time after 90 days have expired after the
Depositary will have delivered to the Company a written notice of its election
to resign and a successor depositary will not have been appointed and accepted
its appointment, in accordance with the terms of the Deposit Agreement. If any
ADRs remain outstanding after the date of termination of the Deposit Agreement,
the Depositary thereafter will discontinue the registration of transfers of
ADRs, will suspend the distribution of dividends to the Owners thereof and will
not give any further notices or perform any further acts under the Deposit
Agreement, except the collection of dividends and other distributions pertaining
to the Shares, the sale of rights and the delivery of underlying Shares,
together with any dividends or other distributions received with respect thereto
and the net proceeds of the sale of any rights or other property, in exchange
for surrendered ADRs (after deducting, in each case, the fees of the Depositary
for the surrender of an ADR and other expenses set forth in the Deposit
Agreement and any applicable taxes or governmental charges). At any time after
the expiration of one year from the date of termination, the Depositary may sell
the Shares then held thereunder and hold uninvested the net proceeds of such
sale, together with any other cash, unsegregated and without liability for
interest, for the pro rata benefit of the Owners that have not theretofore
surrendered their ADRs, such Owners thereupon becoming general creditors of the
Depositary with respect to such net proceeds. After making such sale, the
Depositary will be discharged from all obligations under the Deposit Agreement,
except to account for net proceeds and other cash (after deducting, in each
case, the fee of the Depositary and other expenses set forth in the Deposit
Agreement for the surrender of an ADR and any applicable taxes or other
governmental charges).

CHARGES OF DEPOSITARY

The Depositary will charge any party depositing or withdrawing Shares or
any party surrendering ADRs or to whom ADRs are issued (including, without
limitation, issuance pursuant to a stock dividend or stock split declared by the
Company or an exchange of stock regarding the ADRs or Shares or a distribution
of ADRs pursuant to the Deposit Agreement) whichever applicable: (a) taxes and
other governmental charges; (b) such registration fees as may from time to time
be in effect for the registration of transfers of Shares generally on the share
register of the Company or Foreign Registrar and applicable to transfers of
Shares to the name of the Depositary or its nominee or the Custodian or its
nominee on the making of deposits or withdrawals; (c) such cable, telex and
facsimile transmission expenses as are expressly provided in the Deposit
Agreement to be at the expense of persons depositing Shares or Owners; (d) such
expenses as are incurred by the Depositary in the conversion of Foreign Currency
pursuant to the Deposit Agreement; (e) a fee of $5.00 or less per 100 ADSs (or
portion thereof) for the execution, delivery and surrender of ADRs pursuant to
the Deposit Agreement; (f) a fee of $.02 or less per ADS (or portion thereof)
for any cash distribution made pursuant to the Deposit Agreement; and (g) a fee
for the distribution of securities pursuant to the Deposit Agreement, such fee
being in an amount equal to the fee for the execution and delivery of ADSs
referred to above which would have been charged as a result of the deposit of
such securities (for purposes of this

46
48

clause (h) treating all such securities as if they were Shares), but which
securities are instead distributed by the Depositary to Owners.

The Depositary, pursuant to the Deposit Agreement, may own and deal in any
class of securities of the Company and its affiliates and in ADRs.

LIABILITY OF OWNER FOR TAXES

If any tax or other governmental charge shall become payable by the
Custodian or the Depositary with respect to any ADR or any Shares represented by
the ADRs, such tax or other governmental charge will be payable by the Owner of
such ADR to the Depositary. The Depositary may refuse to effect any transfer of
such ADR or any withdrawal of Shares underlying such ADR until such payment is
made, and may withhold any dividends or other distributions, or may sell for the
account of the Owner thereof any part or all of the Shares underlying such ADR
and may apply such dividends, distributions or the proceeds of any such sale to
pay any such tax or other governmental charge and the owner of such ADR will
remain liable for any deficiency.

GENERAL

Neither the Depositary nor the Company will be liable to any Owner or
holder of any ADR, if by reason of any provision of any present or future law or
regulation of the United States, or any other country, or of any governmental or
regulatory authority or stock exchange, or by reason of any provision, present
or future, of the Memorandum of Association or Articles of Association of the
Company, or by reason of any act of God or war or other circumstances beyond its
control, the Depositary or the Company shall be prevented, delayed or forbidden
from, or be subject to any civil or criminal penalty on account of, doing or
performing any act or thing which by the terms of the Deposit Agreement it is
provided will be done or performed; nor will the Depositary or the Company incur
any liability to any Owner or holder of any ADR by reason of any nonperformance
or delay, caused as aforesaid, in the performance of any act or thing which by
the terms of the Deposit Agreement it is provided will or may be done or
performed, or by reason of any exercise of, or failure to exercise, any
discretion provided for under the Deposit Agreement. Where, by the terms of a
distribution pursuant to the Deposit Agreement, or an offering or distribution
pursuant to the Deposit Agreement, or for any other reason, such distribution or
offering may not be made available to Owners, and the Depositary may not dispose
of such distribution or offering on behalf of such Owners and make the net
proceeds available to such Owners, then the Depositary will not make such
distribution or offering, and will allow the rights, if applicable, to lapse.

The Company and the Depositary assume no obligation nor will they be
subject to any liability under the Deposit Agreement to Owners or holders of
ADRs except that they agree to perform their respective obligations specifically
set forth under the Deposit Agreement without negligence or bad faith.

The ADRs are transferable on the books of the Depositary, provided that the
Depositary may close the transfer books at any time or from time to time when
deemed expedient by it in connection with the performance of its duties. As a
condition precedent to the execution and delivery, registration or transfer,
split-up, combination or surrender of any Shares, the Depositary, the Custodian
or the Foreign Registrar may require payment from the person presenting the ADR
or the depositor of the Shares of a sum sufficient to reimburse it for any tax
or other governmental charge and any stock transfer or registration fee with
respect thereto (including any such tax or charge and fee with respect to Shares
being deposited or withdrawn) and payment of any applicable fees payable by the
Owners and holders of ADRs. The Depositary may refuse to deliver ADRs, to
register the transfer of any ADR or to make any distribution on, or related to,
Shares until it has received such proof of citizenship or residence, exchange
control approval or other information as it may deem necessary or proper. The
delivery, transfer, registration of transfer of outstanding ADRs and surrender
of ADRs generally may be suspended or refused during any period when the
transfer books of the Depositary, the Company or the Foreign Registrar are
closed or if any such action is deemed necessary or advisable by the Depositary
or the Company, at any time or from time to time. Notwithstanding any other
provision of the Deposit Agreement or the ADRs, the surrender of outstanding
ADRs and withdrawal of the deposited Shares

47
49

may not be suspended subject only to (i) temporary delays caused by closing the
transfer books of the Depositary or the Company or the deposit of Shares in
connection with voting at a shareholders' meeting, or the payment of dividends,
(ii) the payment of fees, taxes and similar charges, and (iii) compliance with
any U.S. or foreign laws or governmental regulations relating to the ADRs or to
the withdrawal of the deposited Shares. Without limitation of the foregoing, the
Depositary shall not knowingly accept for deposit under the Deposit Agreement
any Shares required to be registered under the provisions of the Securities Act
unless a registration statement is in effect as to such Shares.

The Depositary will keep books, at its Corporate Trust Office, for the
registration and transfer of ADRs, which at all reasonable times will be open
for inspection by the Owners, provided that such inspection will not be for the
purpose of communicating with Owners in the interest of a business object other
than the business of the Company or a matter related to the Deposit Agreement or
the ADRs.

The Depositary may appoint one or more co-transfer agents for the purpose
of effecting transfers, combinations and split-ups of ADRs at designated
transfer offices on behalf of the Depositary. In carrying out its functions, a
co-transfer agent may require evidence of authority and compliance with
applicable laws and other requirements by Owners or persons entitled to ADRs and
will be entitled to protection and indemnity to the same extent as the
Depositary.

GOVERNING LAW

The Deposit Agreement will be governed by the laws of the State of New
York.

48
50

SHARES ELIGIBLE FOR FUTURE SALE

Upon completion of the Offering, the Company will have 6,400,000 Shares
issued and outstanding, assuming no exercise of the Over-allotment Option. Of
such Shares, the ADSs representing the 1,400,000 Shares offered hereby will be
freely tradable without restriction or further registration under the Securities
Act, except for any Shares subsequently purchased by "affiliates" of the
Company, which may include the Company's existing shareholders, officers or
directors. All other Shares (including Shares purchased by certain officers and
employees of the Underwriter and its affiliates) will become eligible for sale
in the public market, although, with respect to sales of such Shares by
affiliates of the Company into the U.S. public market, such Shares will be
subject to the volume and other limitations under Rule 144 promulgated by the
Securities and Exchange Commission under the Securities Act ("Rule 144").

Pursuant to an Agreement Regarding Future Share Distributions dated as of
January 31, 1997 among the Representives of the Company and Zindart Singapore
(the "Share Distribution Agreement), the Company and its sole shareholder have
agreed not to offer, sell, contract to sell, grant options to purchase, or
otherwise dispose of any Shares or ADSs of the Company or any securities
convertible into or exercisable or exchangeable for such Shares or ADSs or in
any other manner transfer all or a portion of the economic benefits associated
with the ownership of any such Shares or ADSs, (collectively, "Transfer") except
to the Underwriter pursuant to the Underwriting Agreement, for a period of 180
days after the closing date of the Offering without the prior written consent of
the Representative, subject to certain exceptions.

In addition, the Company and its sole shareholder have agreed in the Share
Distribution Agreement not to Transfer any Shares of the Company for a period of
two years except: (i) in a private transaction not involving a public offering,
(ii) in a registered public distribution in the United States by means of an
offering of ADSs into the U.S. market pursuant to Rule 144, or (iii) in a public
offering outside of the United States as long as the Company and the
Representative mutually agree that a public offering of ADSs could not be
effected in the United States at such time on commercially reasonable terms. The
sole shareholder may transfer Shares to its shareholders if they agree to be
bound by the terms of the Share Distribution Agreement.

In general, Rule 144, as in effect on the date of this Prospectus, permits
a person who has beneficially owned for at least two years (subject to
applicable rules on tacking) restricted shares acquired from the Company or an
affiliate of the Company to sell within any three-month period a number of
shares not exceeding the greater of: (i) one percent of the then outstanding
shares of the class (approximately 64,000 Shares immediately following
completion of this Offering, assuming no exercise of the Over-allotment Option)
and (ii) the average weekly trading volume of such shares on the Nasdaq National
Market during the four calendar weeks preceding the date on which a notice of
sale is filed with the Securities and Exchange Commission. Sales under Rule 144
are subject to certain manner of sale provisions, notice requirements and the
availability of current public information on the Company. A person who is not
deemed an affiliate of the Company at any time during the 90 days preceding a
sale and who beneficially owns shares that were not acquired from the Company or
an affiliate of the Company within the past three years is entitled to sell such
shares under Rule 144(k) without regard to volume limitations, manner of sale
provisions, notice requirements or the availability of current public
information on the Company.

There can be no assurance that a significant public market for the ADSs or
the Shares will be sustained after the Offering. No precise predictions can be
made about the effect, if any, that market sales of ADSs or Shares or the
availability of ADSs or Shares for sale will have on the market price prevailing
from time to time. Nevertheless, sales of a substantial number of ADSs or Shares
in the public market, or the prospect of such sales, may have an adverse impact
on the market price thereof.

49
51

TAXATION

The following discussion under "United States Federal Income Taxation"
generally summarizes the principal United States federal income tax consequences
of an investment in the ADSs. The discussion under "Hong Kong Taxation"
generally summarizes the material Hong Kong tax consequences of an investment in
the ADSs and the material Hong Kong taxes applicable to the Company's operations
in Hong Kong. The discussion under "PRC Taxation" generally summarizes the
material PRC taxes applicable to the Company's investment in the PRC. The
discussion does not deal with all possible tax consequences relating to an
investment in the ADSs and does not purport to deal with the tax consequences
applicable to all categories of investors, some of which (such as dealers in
securities, insurance companies and tax-exempt entities) 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 the
United States, Hong Kong and the PRC. Accordingly, prospective investors should
consult their own tax advisors regarding the particular tax consequences to them
of an investment in the ADSs. The following discussion is based upon laws and
relevant interpretations thereof in effect as of the date of this Prospectus,
all of which are subject to change.

UNITED STATES FEDERAL INCOME TAXATION

The following discussion summarizes, in the opinion of McCutchen, Doyle,
Brown & Enersen, LLP, Palo Alto, California, the United States federal income
tax considerations that are likely to be material to a beneficial owner of ADSs
that is a United States citizen or resident or a United States domestic
corporation who owns the ADSs as a capital asset (a "United States Investor").
For purposes of the following discussion, a United States Investor who acquires
ADSs shall be deemed to own the Shares represented thereby. The summary does not
address the United States federal income tax treatment of certain types of
investors (such as non-United States Investors, life insurance companies,
tax-exempt investors, banks, broker-dealers and investors who or that hold
Shares as part of hedging or conversion transactions), all of whom may be
subject to tax rules that differ significantly from those summarized below.
Prospective investors, including investors other than United States Investors,
are advised to consult their own tax advisor with respect to their particular
circumstances and with respect to the effects of state, local or foreign tax
laws to which they may be subject.

This summary is based on the Internal Revenue Code of 1986, as amended (the
"Code"), Treasury regulations, court decisions and current administrative
rulings and pronouncements of the United States Internal Revenue Service ("IRS")
in effect as of the date of this Prospectus, all of which are subject to change,
possibly with retroactive effect. There can be no assurance that future changes
in applicable law or administrative and judicial interpretations thereof will
not adversely affect the tax consequences discussed herein. Prospective
purchasers are advised to consult their own tax advisors regarding the tax
consequences of acquiring, holding or disposing of the Shares in light of their
particular circumstances.

Taxation of the Company. The Company will be subject to United States
federal income tax only to the extent it has income which has its source in the
United States or is effectively connected with a United States trade or
business. Income derived by the Company from its business in the PRC should not
constitute United States source income. It is possible that the Company may
invest the net proceeds of this Offering, future earnings from the business, or
proceeds derived from the sale of Shares in United States securities or cash
equivalents. Income derived from United States securities or cash equivalents
will generally constitute United States source income and may therefore be
subject to United States federal income tax unless a statutory exemption
applies.

Taxation of Shareholders. The following discussion does not purport to
address the tax consequences to non-United States Investors or to a person who
owns, directly or indirectly (or is deemed to own after the application of
certain complex attribution rules), the Company's Shares giving the holder the
right to exercise 10 percent or more of the total voting power of the Company's
outstanding Shares (a "10-Percent Shareholder" of the Company), other than as
discussed below under "-- Special United States Federal Income Tax
Considerations -- Controlled Foreign Corporations." Non-United States Investors
and any person contemplating becoming a 10-Percent Shareholder are advised to
consult their own tax advisors regarding the tax consequences to them of an
investment in the Shares.

50
52

Basis in Shares. A United States Investor will have a basis in the Shares
equal to his or her purchase price for United States federal tax purposes.

Dividends. A United States Investor receiving a distribution on the Shares
will be required to include such distribution in gross income as a taxable
dividend to the extent such distribution is paid from current or accumulated
earnings and profits of the Company as determined for United States federal
income tax purposes. Distributions in excess of the current and accumulated
earnings and profits of the Company will first be treated, for United States
federal income tax purposes, as a nontaxable return on capital to the extent of
the United States Investor's basis in the Shares and then as gain from the sale
or exchange of a capital asset. Dividends paid by the Company will not be
eligible for the corporate dividends received deduction.

In general, a United States Investor (other than a 10-Percent Shareholder
of the Company) will be entitled to claim a foreign tax credit only for taxes
(such as withholding taxes), if any, imposed on dividends paid to such United
States Investor and not for taxes, if any, imposed on the Company or on any
entity in which the Company has made an investment. Dividends received with
respect to Shares will generally be characterized as "passive income" for
purposes of applying the foreign tax credit limitation. To the extent that the
Company's income is derived from United States sources, dividends which it pays
to United States Investors may be considered United States source income for
purposes of applying the foreign tax credit limitation.

Dispositions of Shares. Subject to the discussion below of the
consequences of the Company being treated as a Passive Foreign Investment
Company or a Foreign Investment Company, gain or loss realized by a United
States Investor (other than a 10-Percent Shareholder of the Company) on the sale
or other disposition of Shares will be subject to United States federal income
tax as capital gain or loss in an amount equal to the difference between such
United States Investor's basis in the Shares and the amount realized on the
disposition. Such capital gain or loss will be long-term capital gain or loss if
the United States Investor has held the Shares for more than one year at the
time of the sale or exchange.

SPECIAL UNITED STATES FEDERAL INCOME TAX CONSIDERATIONS

Passive Foreign Investment Company

The Company has not been a passive foreign investment company ("PFIC") for
United States federal income tax purposes for prior taxable years and believes
that it will not be treated as a PFIC for the current and future taxable years,
but this conclusion is a factual determination made annually and thus subject to
change. The Company will be a PFIC with respect to a United States Investor if,
for any taxable year in which such United States Investor held the Company's
Shares, either (i) at least 75 percent of the gross income of the Company for
the taxable year is passive income, or (ii) at least 50 percent of the value (or
adjusted basis) of the Company's assets is attributable to assets that produce
or are held for the production of passive income (in each case taking into
account the Company's pro rata share of the gross income and the value (or
adjusted basis) of the assets of any company in which the Company owns, directly
or indirectly, 25 percent or more of the stock by value (the "look-through"
rule)). For this purpose, passive income generally includes dividends, interest,
royalties, rents (other than rents and royalties derived in the active conduct
of a trade or business and not derived from a related person), annuities, and
gains from assets that produce passive income. The Company anticipates that,
under the "look-through" rules described above, most of the income that it
derives from manufacturing in the PRC will not constitute passive income and
that most of its investment in such manufacturing will not constitute assets
held for the production of passive income. The Company anticipates, therefore,
that it will not be a PFIC.

If the Company were to be treated as a PFIC, then, unless a United States
Investor who owns Shares in the Company elects to have the Company treated as a
"qualified electing fund" (a "QEF") as described below, the following rules
apply:

1. Distributions made by the Company during a taxable year to a United
States Investor who owns Shares in the Company that are an "excess
distribution" (defined generally as the excess of the amount received with
respect to the Shares in any taxable year over 125 percent of the average
received in the shorter of either the three previous years or such United
States Investor's holding period before the

51
53

taxable year) must be allocated ratably to each day of such shareholder's
holding period. The amount allocated to the current taxable year must be
included as ordinary income in gross income for that year. The amount
allocated to each prior taxable year is taxed as ordinary income at the
highest rate in effect for such shareholder in that prior year and the tax
is subject to an interest charge at the rate applicable to deficiencies in
income taxes.

2. The entire amount of any gain realized upon the sale or other
disposition of the Shares will be treated as an excess distribution made in
the year of sale or other disposition and as a consequence will be treated
as ordinary income and, to the extent allocated to years prior to the year
of sale or disposition, will be subject to the interest charge described
above.

A shareholder that makes a QEF election will be currently taxable on his or
her pro rata share of the Company's ordinary earnings and net capital gain (at
ordinary income and capital gains rates, respectively) for each taxable year of
the Company, regardless of whether or not distributions were received. A
shareholder that makes a QEF election for the first taxable year in which the
Company is a PFIC and in which the shareholder owns shares in the Company and
maintains this election for all subsequent years in which the shareholder owns
shares in the Company will be subject to the foregoing treatment only in such
years in which the Company actually satisfies the income and asset tests for
PFIC status described above. The shareholder's basis in his or her Shares will
be increased to reflect taxed but undistributed income. Distributions of income
that had previously been taxed will result in a corresponding reduction of basis
in the Shares and will not be taxed again as a distribution to the shareholder.

Special rules apply with respect to the calculation of the amount of the
foreign tax credit with respect to excess distributions by a PFIC or inclusions
under a QEF.

A United States Investor who owns Shares in the Company during any year
that the Company is a PFIC must file Internal Revenue Service Form 8621 with the
Internal Revenue Service (as well as attaching a copy to his or her income tax
return).

Controlled Foreign Corporations

Sections 951 through 964 and Section 1248 of the Code relate to controlled
foreign corporations ("CFC"). The CFC provisions may impute some portion of such
a corporation's undistributed income to certain shareholders on a current basis
and convert into dividend income some portion of gains on dispositions of stock
which would otherwise qualify for capital gains treatment. In general, the CFC
provisions will apply to the Company only if 10-Percent Shareholders who are
United States Investors own in the aggregate (or are deemed to own after
application of complex attribution rules), more than 50 percent (measured by
voting power or value) of the Shares of the Company. The Company does not
believe that it will be a CFC after this Offering. It is possible that the
Company could become a CFC in the future. Even if the Company were classified as
a CFC in a future year, however, the CFC rules referred to above would apply
only with respect to 10-Percent Shareholders.

Personal Holding Company/Foreign Personal Holding Company/Foreign
Investment Company

A corporation will be classified as a personal holding company (a "PHC") if
at any time during the last half of a tax year (i) five or fewer individuals
(without regard to their citizenship or residence) directly or indirectly or by
attribution own more than 50 percent in value of the corporation's stock and
(ii) at least 60 percent of its ordinary gross income, as specially adjusted,
consists of personal holding company income (defined generally to include
dividends, interest, royalties, rents and certain other types of passive
income). A PHC is subject to a United States federal income tax of 39.6 percent
on its undistributed personal holding company income (generally limited, in the
case of a foreign corporation, to United States source income).

A corporation will be classified as a foreign personal holding company (an
"FPHC") and not a PHC if at any time during a tax year (i) five or fewer
individual United States citizens or residents directly or indirectly or by
attribution own more than 50 percent of the total combined voting power or value
of the corporation's stock and (ii) at least 60 percent of its gross income
consists of foreign personal holding company income

52
54

(defined generally to include dividends, interest, royalties, rents and certain
other types of passive income). Each United States shareholder in an FPHC is
required to include in gross income, as a dividend, an allocable share of the
FPHC's undistributed foreign personal holding company income (generally the
taxable income of the FPHC, as specially adjusted).

A corporation will be classified as a foreign investment company (a "FIC")
if for any taxable year it (i) is registered under the Investment Company Act of
1940, as amended, as a management company or share investment trust or is
engaged primarily in the business of investing or trading in securities or
commodities (or any interest therein) and (ii) 50 percent or more of the value
or the total combined voting power of all the corporation's stock is owned
directly or indirectly (including stock owned through the application of
attribution rules) by United States persons. In general, unless an FIC elects to
distribute 90 percent or more of its taxable income (determined under United
States tax principles as specially adjusted) to its shareholders, gain on the
sale or exchange of FIC stock is treated as ordinary income (rather than capital
gain) to the extent of such shareholder's ratable share of the corporation's
earnings and profits for the period during which such stock was held.

The Company believes that it is not and will not be a PHC, FPHC or FIC
after this Offering. However, no assurance can be given as to the Company's
future status.

U.S. Information Reporting and Backup Withholding. Dividends paid in the
United States are generally subject to the information reporting requirements of
the Code. Dividends paid in the United States may be subject to backup
withholding at the rate of 31 percent unless the holder provides a taxpayer
identification number on a properly completed Form W-9 or otherwise establishes
an exemption.

The amount of any backup withholding will not constitute additional tax and
will be allowed as a credit against the United States Investor's federal income
tax liability.

Filing of Information Returns. Under a number of circumstances, a United
States Investor acquiring Shares of the Company may be required to file an
information return. In particular, any United States Investor who becomes the
owner, directly or indirectly, of 10 percent or more of the Shares of the
Company will be required to file such a return. Other filing requirements may
apply, and United States Investors should consult their own tax advisors
concerning these requirements.

HONG KONG TAXATION

In the opinion of Robert W.H. Wang & Co., Hong Kong counsel to the Company,
the following correctly 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 16.5% 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 does not have any form of capital gains tax. Neither does it have
any form of dividend taxation or withholding taxes, and hence profits
accumulated in a Hong Kong company can be distributed as dividends without tax
deduction in Hong Kong. However, Hong Kong profits tax will be charged on
trading gains from the sale of property that are derived from or arise 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 ADSs or Shares realized by persons carrying on a
business of trading or dealing in securities in Hong Kong.

53
55

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. 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$1.50 per HK$1,000 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.

PRC TAXATION

In the opinion of the Guangzhou Law Office, PRC counsel to the Company, the
following correctly 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 Foreign
Investment Enterprise Tax Law generally exempts Sino-foreign equity and
contractual joint venture enterprises engaged in manufacturing with an operating
term of more than ten years from state and local income taxes for two years
starting from the first profitable year of operations, followed by a 50%
reduction for the next three years. The first profitable year for the Company's
operations at the Xin Xing facility was the year ended March 31, 1995, and the
first profitable year for the Dongguan Facility has not yet occurred as the
joint venture has just started operations.

Value-Added Tax ("VAT"). Effective January 1, 1994, all goods produced or
processed in the PRC, other than real property 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 VAT rate for the Company is 17% of the sale
price of the item. 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 VAT through the sale of the item. The amount of the
seller's VAT liability to the Tax Bureau is calculated as the amount of sales
multiplied by the applicable VAT rate. The amount of the seller's VAT liability
may be reduced by deducting the invoiced amount of 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 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 VAT liability in
respect of products sold.

Taxation of Dividends from the PRC. Dividends distributed to the Company
can be remitted from the PRC without any PRC taxation. 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 foreign investors from a foreign investment enterprise are exempt
from withholding tax. The Company's PRC subsidiaries are qualified as foreign
investment enterprises, so withholding tax is not applicable to dividends
received by the Company from these subsidiaries.

54
56

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%.

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."

55
57

CERTAIN FOREIGN ISSUER CONSIDERATIONS

The Company is a limited liability company 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 which 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 United States 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.

The rights and liabilities of the shareholders of the Company are governed
by the Companies Ordinance and the Memorandum of Association and Articles of
Association. 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.
See "Taxation -- Hong Kong Taxation."

56
58

UNDERWRITING

The Underwriters named below, acting through their representative, Van
Kasper & Company (the "Representative"), have severally agreed, subject to the
terms and conditions set forth in an Underwriting Agreement with the Company, to
purchase from the Company the number of ADSs set forth opposite their respective
names below:

NUMBER
NAME OF ADSS
-------------------------------------------------------------------------- ---------

Van Kasper & Company......................................................

---------
Total..................................................................... 1,400,000
=========

The ADSs are being offered by the Underwriters named herein, subject to
receipt and acceptance by them, to their right to reject any order in whole or
in part, and to certain other conditions. The Underwriters are committed to
purchase all of the above ADSs being offered if any are purchased.

The Representative has advised the Company that the Underwriters propose to
offer the ADSs to the public at the offering price set forth on the cover page
of this Prospectus and to certain selected dealers at that price less a
concession not in excess of $ per ADS, and such dealers may re-allow to
certain dealers a discount not in excess of $ per ADS. After the
initial Offering, the public offering price, concessions and re-allowance to
dealers may be changed by the Representative as a result of market conditions or
other factors.

Prior to this Offering, there has been no public market for the ADSs or
Shares. Consequently, the initial public offering price will be determined
through negotiation between the Company and the Representative. Among the
factors to be considered in making such determination are the prevailing market
conditions, the Company's financial and operating history and condition, its
prospects and the market prices of securities for companies in businesses
similar to that of the Company.

The Company has granted an option to the Underwriters, exercisable by the
Representative within 30 days after the date of this Prospectus, to purchase up
to 210,000 additional ADSs at the initial offering price, less underwriting
discounts and commissions. The Representative may exercise the Over-allotment
Option solely for the purpose of covering over-allotments, if any, incurred in
the sale of the ADSs offered hereby. To the extent that the Over-allotment
Option is exercised, each of the Underwriters will have a firm commitment to
purchase approximately the same percentage of the additional ADSs as the number
of ADSs to be purchased and offered by that Underwriter in the above table bears
to the total number of ADSs offered hereunder.

The Company has agreed to pay the Underwriters all out-of-pocket costs and
expenses of the Underwriters and their legal counsel, together in an amount not
to exceed $280,000.

The Company has agreed to indemnify the Underwriters for certain
liabilities, including liabilities under the Securities Act.

The Company's sole shareholder has agreed not to sell, offer to sell,
contract to sell or otherwise dispose of any Shares or securities exercisable
for Shares, directly or indirectly, for a period of 180 days after the date of
the closing of this Offering without the prior written consent of the
Representative and the Company. The Representative and the Company may, in their
sole discretion and at any time without notice, release all or any portion of
the securities subject to these lock-up agreements. In addition, the Company has
agreed that for a period of 180 days after the date of the closing of this
Offering, it will not issue, offer, sell, grant options to purchase or otherwise
dispose of any equity securities or securities convertible into or exchangeable
for equity securities, without the prior written consent of the Representative,
except for (i) ADSs offered hereby, (ii) Shares issued pursuant to the exercise
of outstanding options, and (iii) options granted to its associates,

57
59

officers, directors and consultants so long as none of such options become
exercisable during said 180 day period. Sales of such Shares in the future could
adversely affect the market price of the ADSs. In addition, the Company and its
sole shareholders have agreed on certain additional restrictions on the issuance
and sale of Shares of the Company under the Share Distribution Agreement for a
period of two years following the Closing of the Offering. See "Shares Eligible
for Future Sale."

Each of the Underwriters has represented and agreed that: (i) it has not
offered or sold and will not offer or sell the ADSs to persons in the United
Kingdom, other than to persons whose ordinary activities involve them in
acquiring, holding, managing or disposing of investments (as principal or agent)
for the purposes of their businesses or otherwise in circumstances which have
not resulted and will not result in an offer to the public in the United Kingdom
within the meaning of the Public Offers of Securities Regulations 1995 of the
United Kingdom; (ii) it has only issued or passed on and will only issue or pass
on in the United Kingdom any document received by it in connection with the
issue and sale of the ADSs to a person who is of a kind described in Article
11(3) of the Financial Services Act 1986 (Investment Advertisement) (Exemptions)
Order 1996 or is a person to whom such a document may otherwise lawfully be
issued or passed on; and (iii) it has complied and will comply with all
applicable provisions of the Financial Services Act 1986 with respect to
anything done by it in relation to the ADSs, from or otherwise involving the
United Kingdom.

LEGAL MATTERS

The validity of the issuance of the ADSs offered hereby and certain matters
as to United States law are being passed upon for the Company by its United
States counsel, McCutchen, Doyle, Brown & Enersen, LLP, Palo Alto, California.
The validity of the issuance of the Shares and certain legal matters as to Hong
Kong law are being passed upon for the Company by Robert W.H. Wang & Co., Hong
Kong, and certain legal matters as to PRC law are being passed upon for the
Company by the Guangzhou Law Office, Guangzhou, the PRC. Certain legal matters
as to United States law are being passed upon for the Underwriters by Heller
Ehrman White & McAuliffe, Palo Alto, California. The matters included herein
under the heading "Enforceability of Civil Liabilities" have been passed upon by
Robert W.H. Wang & Co. as to Hong Kong law and the Guangzhou Law Office as to
PRC law. The matters included herein under the heading "United States Federal
Income Taxation," "Hong Kong Taxation" and "PRC Taxation" under the caption
"Taxation" have been passed upon by McCutchen, Doyle, Brown & Enersen, LLP as to
United States taxation, Robert W.H. Wang & Co. as to Hong Kong taxation and the
Guangzhou Law Office as to PRC taxation, and are stated herein on their
respective authority.

EXPERTS

The financial statements of the Company as of March 31, 1995 and 1996 and
for the years ended March 31, 1994, 1995 and 1996 included in this Prospectus
have been audited by Arthur Andersen & Co., independent public accountants, as
stated in their report appearing herein and are so included herein in reliance
upon the report of such firm given upon their authority as experts in accounting
and auditing.

58
60

ADDITIONAL INFORMATION

The Company has filed with the Securities and Exchange Commission a
Registration Statement on Form F-1 (together with all amendments and exhibits
thereto, the "Registration Statement") under the Securities Act with respect to
the ADSs being offered in this Offering. This Prospectus does not contain all of
the information set forth in the Registration Statement, certain items of which
are omitted in accordance with the rules and regulations of the Securities and
Exchange Commission. The omitted information may be inspected and copied at the
public reference facilities maintained by the Securities and Exchange Commission
at Judiciary Plaza, 450 Fifth Street, N.W., Washington, D.C. 20549, and at the
Securities and Exchange Commission's regional offices located at Seven World
Trade Center, New York, New York 10048 and CitiCorp Center, 500 West Madison
Street, Chicago, Illinois 60661. Copies of such material can be obtained from
the public reference section of the Securities and Exchange Commission at
prescribed rates. Statements contained in this Prospectus as to the contents of
any contract or other document filed as an exhibit to the Registration Statement
are not necessarily complete and in each instance reference is made to the copy
of the document filed as an exhibit to the Registration Statement, each
statement made in this Prospectus relating to such documents being qualified in
all respects by such reference. For further information with respect to the
Company and the securities being offered hereby, reference is hereby made to
such Registration Statement, including the exhibits thereto and the financial
statements, notes, and schedules filed as a part thereof.

The Company intends to furnish its security holders with annual reports
containing audited financial statements and a report thereon by its independent
public accountants, and quarterly reports containing unaudited financial
information. Such financial statements and financial information will be
prepared in accordance with U.S. GAAP and such quarterly and annual reports will
include a "Management's Discussion and Analysis of Financial Condition and
Results of Operations" section for all relevant periods.

59
61

INDEX TO FINANCIAL STATEMENTS

PAGE
----

ZINDART LIMITED:
Report of Independent Public Accountants............................................ F-2
Consolidated Balance Sheets -- audited as of March 31, 1995 and 1996 and unaudited
as of December 31, 1996.......................................................... F-3
Consolidated Statements of Operations -- audited for each of the three years ended
March 31, 1994, 1995 and 1996 and unaudited for the nine-month periods ended
December 31, 1995 and 1996....................................................... F-4
Consolidated Statements of Cash Flows -- audited for each of the three years ended
March 31, 1994, 1995 and 1996 and unaudited for the nine-month periods ended
December 31, 1995 and 1996....................................................... F-5
Consolidated Statements of Changes in Shareholders' Equity -- audited for each of
the three years ended March 31, 1994, 1995 and 1996 and unaudited for the
nine-month period ended December 31, 1996........................................ F-7
Notes to financial statements....................................................... F-8

F-1
62

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 (a company incorporated in Hong Kong; "the Company") and Subsidiaries
("the Group") as of March 31, 1995 and 1996, and the related consolidated
statements of operations, cash flows and changes in shareholders' equity for the
years ended March 31, 1994, 1995 and 1996. 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 generally accepted auditing
standards in the United States of America. Those standards require that we plan
and perform the audits 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, 1995 and 1996, and the results of their
operations and their cash flows for the years ended March 31, 1994, 1995 and
1996, in conformity with generally accepted accounting principles in the United
States of America.

ARTHUR ANDERSEN & CO.
Certified Public Accountants
Hong Kong

Hong Kong,
January 31, 1997.

F-2
63

ZINDART LIMITED AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS AS OF MARCH 31, 1995 AND 1996 (AUDITED)
AND DECEMBER 31, 1996 (UNAUDITED)
(AMOUNTS EXPRESSED IN UNITED STATES DOLLARS UNLESS OTHERWISE STATED)

MARCH 31, DECEMBER 31,
--------------- 1996
1996 -------------
------ $'000
1995 $'000 (UNAUDITED)
------
$'000

ASSETS
Current assets:
Cash and bank deposits......................................... 4,123 3,294 4,873
Accounts receivable, net....................................... 4,300 8,315 9,123
Due from immediate holding company............................. -- 3 --
Due from ultimate holding company.............................. 95 -- --
Due from related companies..................................... 1,752 -- 49
Deposits and prepayments....................................... 1,575 1,528 1,115
Inventories, net............................................... 5,347 7,514 9,585
------ ------ ------
Total current assets........................................ 17,192 20,654 24,745
Property, plant, equipment and capital leases, net............... 3,902 10,800 11,632
Loan receivable from a related company........................... 1,889 -- --
Long-term investment............................................. -- 179 179
Deferred stock issuance costs.................................... -- -- 561
Goodwill, net.................................................... 87 77 70
------ ------ ------
Total assets................................................ 23,070 31,710 37,187
====== ====== ======
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Short-term bank borrowings..................................... 1,269 7,055 4,446
Long-term bank loans, current portion.......................... 261 811 834
Capital lease obligations, current portion..................... 250 1,033 431
Accounts payable............................................... 2,305 4,107 3,459
Receipts in advance............................................ 1,321 958 1,480
Accrued liabilities............................................ 4,596 2,806 6,598
Due to related companies....................................... 52 -- --
Due to a director.............................................. 66 -- --
Taxation payable............................................... 600 483 821
Dividend payable............................................... 1,073 -- --
------ ------ ------
Total current liabilities................................... 11,793 17,253 18,069
Long-term bank loans............................................. 733 1,754 1,161
Capital lease obligations........................................ 126 374 666
Deferred taxation................................................ 120 120 120
------ ------ ------
Total liabilities........................................... 12,772 19,501 20,016
------ ------ ------
Minority interests............................................... 287 601 1,335
------ ------ ------
Shareholders' equity:
Common stock, par value $0.0646 (equivalent of HK$0.5); 323
authorized, outstanding and fully paid -- 5,000,000
shares...................................................... 323 323
Retained earnings.............................................. 9,683 11,285 15,513
Cumulative translation adjustments............................. 5 -- --
------ ------ ------
Total shareholders' equity.................................. 10,011 11,608 15,836
------ ------ ------
Total liabilities, minority interests and shareholders' 23,070
equity.................................................... 31,710 37,187
====== ====== ======

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

F-3
64

ZINDART LIMITED AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE YEARS ENDED MARCH 31, 1994, 1995 AND 1996 (AUDITED) AND
FOR THE NINE MONTHS ENDED DECEMBER 31, 1995 AND 1996 (UNAUDITED)
(AMOUNTS EXPRESSED IN UNITED STATES DOLLARS)

NINE MONTHS ENDED
DECEMBER 31,
YEAR ENDED MARCH 31, ---------------------------
------------------------------------- 1995 1996
1994 1995 1996 ---------- ----------
--------- --------- --------- $'000 $'000
$'000 $'000 $'000 (UNAUDITED) (UNAUDITED)

Net sales......................... 35,583 36,879 46,930 35,423 48,670
Cost of goods sold................ (25,037) (25,644) (34,116) (25,417) (36,280)
------- ------- ------- ------- -------
Gross profit.................... 10,546 11,235 12,814 10,006 12,390
Selling, general and
administrative expenses......... (6,351) (6,806) (6,498) (5,322) (6,560)
Interest expenses................. (150) (137) (402) (180) (661)
Interest income................... 129 228 208 195 89
Other income (expenses), net...... 80 492 (416) 70 168
------- ------- ------- ------- -------
Income before income taxes...... 4,254 5,012 5,706 4,769 5,426
Provision for income taxes........ (436) (483) (488) (404) (464)
------- ------- ------- ------- -------
Income before minority
interests.................... 3,818 4,529 5,218 4,365 4,962
Minority interests................ (83) (337) (622) (525) (734)
------- ------- ------- ------- -------
Net income...................... 3,735 4,192 4,596 3,840 4,228
======= ======= ======= ======= =======
Earnings per common share......... $ 0.75 $ 0.84 $ 0.92 $ 0.77 $ 0.85
======= ======= ======= ======= =======
Weighted average number of shares
outstanding..................... 5,000 5,000 5,000 5,000 5,000
======= ======= ======= ======= =======

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

F-4
65

ZINDART LIMITED AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED MARCH 31, 1994, 1995 AND 1996 (AUDITED) AND
FOR THE NINE MONTHS ENDED DECEMBER 31, 1995 AND 1996 (UNAUDITED)
(AMOUNTS EXPRESSED IN UNITED STATES DOLLARS)

NINE MONTHS ENDED
DECEMBER 31,
YEAR ENDED MARCH 31, --------------------------
----------------------------------- 1995 1996
1994 1995 1996 ---------- ----------
-------- -------- -------- $'000 $'000
$'000 $'000 $'000 (UNAUDITED) (UNAUDITED)

CASH FLOWS FROM OPERATING ACTIVITIES:
Net income............................. 3,735 4,192 4,596 3,840 4,228
Adjustments to reconcile net income to
net cash provided by (used in)
operating activities
Depreciation of property, plant and
equipment......................... 762 946 1,021 744 1,321
Amortization of goodwill............. -- 10 10 7 7
Net gain on disposals of property,
plant and equipment............... (37) (121) (6) (109) --
Minority interests................... 83 337 622 525 734
Provision for deferred taxation...... 70 -- -- -- --
(Increase) Decrease in operating
assets -- Accounts receivable, net... 46 (1,395) (4,015) (2,279) (808)
Deposits and prepayments............. 24 266 47 (2,004) 413
Inventories, net..................... (104) (1,589) (2,167) (1,546) (2,071)
Increase (Decrease) in operating
liabilities -- Accounts payable...... (503) 82 1,802 2,456 (648)
Receipts in advance.................. (156) 738 (363) 287 522
Accrued liabilities.................. 1,212 1,112 (1,790) (993) 3,792
Taxation payable..................... 339 (93) (117) 288 338
------ ------ ------ ------ ------
Net cash provided by (used in)
operating activities............ 5,471 4,485 (360) 1,216 7,828
------ ------ ------ ------ ------
CASH FLOWS FROM INVESTING ACTIVITIES:
Net cash inflow from acquisition of a
subsidiary........................ -- 168 -- -- --
Acquisition of long-term
investment........................ -- -- (179) (179) --
Acquisition of property, plant and
equipment......................... (1,491) (3,197) (7,341) (6,785) (2,154)
Proceeds from disposals of property,
plant and equipment............... 103 1,040 13 206 1
------ ------ ------ ------ ------
Net cash used in investing
activities...................... (1,388) (1,989) (7,507) (6,758) (2,153)
------ ------ ------ ------ ------

F-5
66

ZINDART LIMITED AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED MARCH 31, 1994, 1995 AND 1996 (AUDITED) AND
FOR THE NINE MONTHS ENDED DECEMBER 31, 1995 AND 1996 (UNAUDITED) -- (CONTINUED)
(AMOUNTS EXPRESSED IN UNITED STATES DOLLARS)

CASH FLOWS FROM FINANCING ACTIVITIES:
Increase (Decrease) in bank
overdraft......................... 105 340 1,910 359 (1,392)
Increase (Decrease) in short-term
bank loans........................ (119) 25 3,876 2,555 (1,217)
New long-term bank loans............. -- 1,035 2,565 2,460 --
Repayment of long-term bank loans.... (120) (283) (994) (421) (570)
New capital lease obligations ....... 209 107 776 585 727
Repayment of capital element of
capital lease obligations......... (470) (300) (330) (150) (1,037)
Stock issuance costs paid............ -- -- -- -- (561)
Due from immediate holding company... -- -- (3) -- 3
Due from ultimate holding company.... -- (95) 95 95 --
Due from related companies........... (466) (1,286) 647 939 (49)
Due to related companies............. (1,545) 52 (52) (52) --
Due from a director.................. (77) 77 -- -- --
Due to a director.................... -- (63) (66) (66) --
Dividends paid....................... (1,473) (1,959) (1,073) (956) --
Finance from minority interests...... 29 (33) -- -- --
Dividends paid by subsidiaries to
their minority shareholders....... -- (63) (308) -- --
------ ------ ------ ------ ------
Net cash (used in) provided by
financing activities............ (3,927) (2,446) 7,043 5,348 (4,096)
------ ------ ------ ------ ------
Effect of cumulative translation
adjustments.......................... -- 5 (5) -- --
------ ------ ------ ------ ------
Net increase (decrease) in cash and
bank deposits........................ 156 55 (829) (194) 1,579
Cash and bank deposits, as of beginning
of years/periods..................... 3,912 4,068 4,123 4,123 3,294
------ ------ ------ ------ ------
Cash and bank deposits, as of end of
years/periods........................ 4,068 4,123 3,294 3,929 4,873
====== ====== ====== ====== ======

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

F-6
67

ZINDART LIMITED AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY
FOR THE YEARS ENDED MARCH 31, 1994, 1995 AND 1996 (AUDITED)
AND FOR THE NINE MONTHS ENDED DECEMBER 31, 1996 (UNAUDITED)
(AMOUNTS EXPRESSED IN UNITED STATES DOLLARS)

COMMON STOCK RETAINED CUMULATIVE
-------------------- EARNINGS TRANSLATION
AMOUNT -------- ADJUSTMENTS
------ $'000 -----------
NUMBER OF $'000 $'000
SHARES
---------
'000

Balance as of April 1, 1993....................... 5,000 323 4,788 --
Net income........................................ -- -- 3,735 --
Dividend -- $0.39 per share....................... -- -- (1,959) --
-- --
---- ----- ------- -
Balance as of March 31, 1994...................... 5,000 323 6,564 --
Net income........................................ -- -- 4,192 --
Dividend -- $0.21 per share....................... -- -- (1,073) --
Translation adjustments........................... -- -- -- 5
-- --
---- ----- ------- -
Balance as of March 31, 1995...................... 5,000 323 9,683 5
Net income........................................ -- -- 4,596 --
Dividend -- $0.60 per share....................... -- -- (2,994) --
Translation adjustments........................... -- -- -- (5)
-- --
---- ----- ------- -
Balance as of March 31, 1996...................... 5,000 323 11,285 --
Net income (Unaudited)............................ -- -- 4,228 --
-- --
---- ----- ------- -
Balance as of December 31, 1996 (Unaudited)....... 5,000 323 15,513 --
==== ===== ======== ====

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

F-7
68

ZINDART LIMITED AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(AMOUNTS EXPRESSED IN UNITED STATES DOLLARS UNLESS OTHERWISE STATED)

1. ORGANIZATION AND PRINCIPAL ACTIVITIES

Zindart Limited, formerly known as Zindart Industrial Company Limited, (the
"Company") was incorporated in Hong Kong in July 1977. Prior to August 1993, the
Company was owned by certain individual shareholders. In August 1993, as a
result of a group reorganization, the Company became wholly owned by Zindart
Holdings Limited ("ZHL"; a company incorporated in the Cayman Islands). In
December 1995, ZHL transferred its 100% interest in the Company to Zindart Pte
Limited ("ZPL"; formerly known as Devenish Pte Limited; a company incorporated
in Singapore) in return for 14,689,998 ordinary shares of S$1 each in Zindart
Pte Limited. ZHL and ZPL are majority owned by ZIC Holdings Limited ("ZICHL"; a
company incorporated in the Cayman Islands).

On December 11, 1996, the Company consummated a 20 for 1 stock split (the
"Share Split") and as a result 5,000,000 shares of common stock, par value
HK$0.50 each, were outstanding. The Company has increased its authorized share
capital from HK$2,500,000 to HK$5,000,000 by authorizing an increase of
5,000,000 ordinary shares of HK$0.50 each, ranking pari passu to the then
existing shares. The Share Split has been reflected retrospectively in the
accompanying balance sheets and in all per share computations. Effective
December 27, 1996, the Company changed its name from Zindart Industrial Company
Limited to Zindart Limited, its present one.

The Company and its subsidiaries are principally engaged in the
manufacturing of die-cast and injection-molded products, including collectibles,
collectible holiday ornaments and toy action figures and figurine playsets in
the People's Republic of China (the "PRC") for sales to customers in North
America and Europe.

2. SUBSIDIARIES

Details of the Company's subsidiaries (which together with the Company are
collectively referred to as the "Group") as of March 31, 1996 were as follows:

PERCENTAGE OF EQUITY
NAME PLACE OF INCORPORATION INTEREST HELD
- ------------------------------------------------ --------------------------- --------------------

Dongguan Xinda Giftware Company Limited......... The PRC Note(a)
Guangzhou Zindart (Xin Xing)(Giftware) Company
Limited....................................... The PRC Note(b)
Luen Tat Mould Manufacturing Limited............ The British Virgin Islands 51% Note(c)
Onchart Industrial Limited...................... The British Virgin Islands 55%
Onchart Industrial Limited...................... Hong Kong 55%
Wealthy Holdings Limited........................ The British Virgin Islands 100%

- ---------------
(a) Dongguan Xinda Giftware Company Limited is a contractual joint venture
established in the PRC to be operated for 15 years up to November 2009.
Under the joint venture contract and the supplemental agreement thereto, the
Group is entitled to 100% of the joint venture's income after paying a pre-
determined annual fee to its joint venture partner.

(b) Guangzhou Zindart (Xin Xing)(Giftware) Company Limited is a contractual
joint venture established in the PRC to be operated for 15 years up to
December 2008. Under the joint venture contract and the supplemental
agreement thereto, the Group is entitled to 100% of the joint venture's
income after paying a pre-determined rental for the factory premises to its
joint venture partner.

(c) According to a shareholders' agreement dated October 10, 1994, the Group is
only entitled to share 41% of the profit of Luen Tat Mould Manufacturing
Limited.

F-8
69

ZINDART LIMITED AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

2. SUBSIDIARIES -- (CONTINUED)
There is no restriction on the distribution of retained earnings by the
subsidiaries.

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. All material intra-group balances and transactions have been
eliminated on consolidation.

b. Goodwill

Goodwill, being the excess of cost over the fair value of the net assets of
a subsidiary acquired during the year ended March 31, 1995, is amortized on a
straight-line basis over ten years. The amortization recorded for the years
ended March 31, 1995 and 1996 was $10,000 and $10,000, respectively, and for the
nine months ended December 31, 1995 and 1996 was approximately $7,000 and
approximately $7,000, respectively. Accumulated amortization as of March 31,
1995 and 1996 and December 31, 1996 was $10,000, $20,000 and approximately
$27,000, respectively.

c. 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, such joint venture is considered as a de facto
subsidiary and is accounted for as a subsidiary.

d. Inventories

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

e. Property, Plant, Equipment and Capital Leases

Property, plant, equipment and capital leases are recorded at cost. Gains
or losses on disposals are reflected in current operations. Depreciation for
financial reporting purpose is provided using the straight-line method over the
estimated useful lives of the assets as follows: properties -- 10 to 20 years,
machinery, tools, furniture and office equipment -- 4 to 5 years. All ordinary
repair and maintenance costs are expensed as incurred.

Interest costs incurred during the years/periods of construction of fixed
assets are capitalized and amortized over the estimated useful lives of the
related assets. Interest costs capitalized during the years ended March 31,
1994, 1995 and 1996 were Nil, approximately $23,000 and approximately $206,000,
respectively, and for the nine months ended December 31, 1995 and 1996 were
approximately $259,000 and $26,000, respectively.

f. Long-term investments

Investments held for the long-term are stated at market value. Income from
long-term investments is accounted for to the extent of dividends received and
receivable.

F-9
70

ZINDART LIMITED AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES -- (CONTINUED)
g. Sales

Sales represent the invoiced value of merchandise/molds supplied to
customers. Sales are recognized upon delivery of goods and passage of title to
customers.

h. Income Taxes

The Group accounts for income tax under the provisions of Statement of
Financial Accounting Standards No. 109, 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
income taxes are provided using the liability method. Under the liability
method, deferred income taxes are recognized for all significant temporary
differences between the tax and financial statement bases of assets and
liabilities.

i. Operating Leases

Operating leases represent those leases under which substantially all the
risks and rewards of ownership of the leased assets remain with the lessors.
Rental payments under operating leases are charged to expense on the
straight-line basis over the period of the relevant leases.

j. Foreign Currency Translation

The Company considers United States dollars as its functional currency as
most of the Group's business activities are based in United States dollars and
Hong Kong dollars ("HK$") (Note: Hong Kong dollars are pegged with United States
dollars at the exchange rate of US$1 to HK$7.8).

The translation of the financial statements of group companies 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 included in shareholders' equity
separately as cumulative translation adjustments. Aggregate gains (losses) from
foreign currency transactions included in the results of operations for the
years ended March 31, 1994, 1995 and 1996 were approximately $(102,000),
$182,000 and $(160,000), respectively, and for the nine months ended December
31, 1995 and 1996 were approximately $22,000 and $72,000, respectively.

k. Earnings Per Common Share

Earnings per common share is computed by dividing net income for each
year/period by 5,000,000, the weighted average number of shares of common stock
outstanding during the years/periods, on the basis that the Share Split (see
Note 1) had been consummated prior to the years/periods presented.

l. 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.

F-10
71

ZINDART LIMITED AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

4. ACCOUNTS RECEIVABLE

Accounts receivable comprised:

MARCH 31, DECEMBER 31,
----------------------- 1996
1996 -------------
--------- $'000
1995 $'000 (UNAUDITED)
---------
$'000

Trade receivables................................. 4,339 8,354 9,162
Less: Allowance for doubtful accounts............. (39) (39) (39)
----- ----- ------
Accounts receivable, net.......................... 4,300 8,315 9,123
===== ===== ======

5. DEPOSITS AND PREPAYMENTS

Deposits and prepayments comprised:

DECEMBER 31,
1996
MARCH 31, -------------
----------------------- $'000
1995 1996 (UNAUDITED)
--------- ---------
$'000 $'000

Deposits for acquisition of molds................. 1,268 1,083 570
Prepayments....................................... 287 352 531
Rental and utility deposits....................... 12 12 11
Other receivables................................. 8 81 3
----- ----- -----
1,575 1,528 1,115
===== ===== =====

6. INVENTORIES

Inventories comprised:

DECEMBER 31,
1996
MARCH 31, -------------
--------------- $'000
1995 1996 (UNAUDITED)
----- -----
$'000 $'000

Raw materials.......................................... 3,840 5,204 7,480
Work-in-process........................................ 903 1,170 946
Finished goods......................................... 663 1,199 1,218
----- ----- -----
5,406 7,573 9,644
Less: Allowance for obsolescence....................... (59) (59) (59)
----- ----- -----
Inventories, net....................................... 5,347 7,514 9,585
===== ===== =====

F-11
72

ZINDART LIMITED AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

7. PROPERTY, PLANT, EQUIPMENT AND CAPITAL LEASES

Property, plant, equipment and capital leases comprised:

MARCH 31, DECEMBER 31,
----------------- 1996
1996 -------------
------ $'000
1995 $'000 (UNAUDITED)
------
$'000

Property, plant and equipment:
Properties.............................................. 2,303 7,940 8,194
Machinery and tools..................................... 3,631 4,212 5,547
Furniture and office equipment.......................... 1,094 1,367 1,621
Capital leases:
Machinery and tools..................................... 711 1,993 1,646
Furniture and office equipment.......................... 566 636 589
----- ------ ------
Cost.................................................... 8,305 16,148 17,597
Less: Accumulated depreciation
Property, plant and equipment........................... (3,558) (3,740) (3,947)
Capital leases.......................................... (845) (1,608) (2,018)
----- ------ ------
Property, plant, equipment and capital leases, net...... 3,902 10,800 11,632
===== ====== ======

As of March 31, 1995 and 1996 and December 31, 1996, properties with a net
book value of approximately $1,409,000, $7,225,000, and $7,165,000,
respectively, were mortgaged to secure certain of the Group's banking
facilities.

8. LONG-TERM INVESTMENT

On March 1, 1996, the Group acquired from several individuals, including a
minority shareholder of a subsidiary, an 18% interest in Luen Tat Model Design
Company Limited (a company incorporated in the British Virgin Islands) for a
cash consideration of $179,000. The cost of $179,000 approximates the market
value of this investment as of March 31, 1996 and December 31, 1996.

9. SHORT-TERM BANK BORROWINGS

Short-term bank borrowings comprised:

MARCH 31,
-----------------------
1996
--------- DECEMBER 31,
1996
1995 $'000 -------------
--------- $'000
$'000 (UNAUDITED)

Bank overdrafts................................... 456 2,366 974
Short-term bank loans............................. 813 4,689 3,472
----- ----- -----
1,269 7,055 4,446
===== ===== =====

Short-term bank borrowings are denominated in Hong Kong dollars, and bear
interest at the floating commercial bank lending rates in Hong Kong, which range
from 8.72% to 10.50% per annum as of March 31, 1996 and from 8.72% to 10.50% per
annum as of December 31, 1996. They are collateralized by certain properties,
bank deposits and inventories of the Group. They are drawn for working capital
purposes and are renewable with the consent of the relevant banks.

F-12
73

ZINDART LIMITED AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

9. SHORT-TERM BANK BORROWINGS -- (CONTINUED)
Supplemental information with respect to short-term bank borrowings for the
year ended March 31, 1996 and for the nine months ended December 31, 1996 are as
follows:

AVERAGE WEIGHTED AVERAGE
AMOUNT INTEREST RATE AT WEIGHTED AVERAGE
OUTSTANDING THE END OF AVERAGE INTEREST RATE
DURING THE YEAR/PERIOD DURING THE YEAR/PERIOD
YEAR/PERIOD ---------------- ----------------------
MAXIMUM -----------
AMOUNT
OUTSTANDING $'000
DURING THE
YEAR/PERIOD
-----------
$'000

MARCH 31, 1996
Bank overdrafts.................. 2,366 1,232 9.66% 9.90%
===== ===== ==== ====
Short-term bank loans............ 5,551 3,632 8.92% 8.41%
===== ===== ==== ====
DECEMBER 31, 1996 (UNAUDITED)

Bank overdrafts.................. 3,646 1,803 10.17% 9.57%
===== ===== ==== ====
Short-term bank loans............ 6,590 4,310 8.97% 8.95%
===== ===== ==== ====

10. ACCRUED LIABILITIES

Accrued liabilities comprised:

MARCH 31,
-----------------------
1996
--------- DECEMBER 31,
1996
1995 $'000 -------------
--------- $'000
$'000 (UNAUDITED)

Accruals for operating expenses
-- Workers, wages and bonus..................... 560 467 1,072
-- Management bonus............................. 1,146 535 513
-- Rental expenses.............................. 457 408 584
-- Subcontracting charges....................... 622 271 254
-- Repair and maintenance....................... 714 -- --
Accruals for plant relocation expenses............ -- -- 65
Accruals for raw materials purchases.............. 75 339 1,822
Payable for land cost in the PRC.................. 531 98 --
Others............................................ 491 688 2,288
----- ----- -----
4,596 2,806 6,598
===== ===== =====

F-13
74

ZINDART LIMITED AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

11. LONG-TERM BANK LOANS

Long-term bank loans are collateralized by certain properties and bank
deposits of the Group. They bear interest rates ranging from 7% to 10% per annum
as of March 31, 1996 and from 7% to 10% per annum as of December 31, 1996 and
are repayable as follows:

MARCH 31, DECEMBER 31,
--------------- 1996
1996 -------------
----- $'000
1995 $'000 (UNAUDITED)
-----
$'000

Payable during the following period:
Within one year...................................... 261 811 834
Over one year but not exceeding two years............ 259 1,594 835
Over two years but not exceeding three years......... 259 160 326
Over three years but not exceeding four years........ 215 --
---- ----- -----
Total bank loans....................................... 994 2,565 1,995
Less: Current maturities............................... (261) (811) (834)
---- ----- -----
Long-term bank loans................................... 733 1,754 1,161
==== ===== =====

12. CAPITAL LEASE OBLIGATIONS

Future minimum lease payments under capital leases as of March 31, 1995 and
1996 and December 31, 1996, together with the present value of the minimum lease
payments are:

MARCH 31, DECEMBER 31,
---------------- 1996
1996 -------------
------ $'000
1995 $'000 (UNAUDITED)
-----
$'000

Payable during the following period:
Within one year..................................... 306 1,151 504
Over one year but not exceeding two years........... 87 438 371
Over two years but not exceeding three years........ 88 -- 327
Over three years but not exceeding four years....... -- -- 87
---- ----- ------
Total minimum lease payments.......................... 481 1,589 1,289
Less: Amount representing interest.................... (105) (182) (192)
---- ----- ------
Present value of minimum lease payments............... 376 1,407 1,097
Less: Current portion................................. (250) (1,033) (431)
---- ----- ------
Non-current portion................................... 126 374 666
==== ===== ======

F-14
75

ZINDART LIMITED AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

13. NET SALES

Net sales comprised:

YEAR ENDED MARCH 31, NINE MONTHS ENDED
------------------------ DECEMBER 31,
1994 1995 1996 -------------------------
------ ------ ------ 1995 1996
$'000 $'000 $'000 ----------- -----------
$'000 $'000
(UNAUDITED) (UNAUDITED)

Sales of merchandise.................... 31,451 32,488 38,306 27,367 41,214
Sales of molds.......................... 4,132 4,391 8,624 8,056 7,456
------ ------ ------ ------ ------
35,583 36,879 46,930 35,423 48,670
====== ====== ====== ====== ======

Substantially all of the sales of merchandise and molds are shipped to
North America.

14. 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 jurisdiction in which they
are domiciled and operate. The Company is subject to Hong Kong profits tax at a
rate of 16.5%. 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 joint venture enterprises established in the PRC are subject to PRC
income taxes at a rate of 27% (24% state unified income tax and 3% local income
tax, in the open coastal areas of the PRC). However, they are exempted from
state unified income tax and local income tax for two years starting from the
first year of profitable operations and then are subject to a 50% reduction in
state unified income tax for the next three years. The first profitable year for
Guangzhou Zindart (Xin Xing) (Giftware) Company Limited was the year ended March
31, 1995; and the first profitable year for Dongguan Xinda Giftware Company
Limited could not be determined as the joint venture has just started
operations.

If the tax holiday for the joint venture enterprises established in the PRC
did not exist, the Group's income tax liabilities would have been increased by
approximately $71,000 and $63,000 for the years ended March 31, 1995 and 1996,
respectively; and approximately $36,000 and $50,000 for the nine months ended
December 31, 1995 and 1996, respectively. Earnings per ordinary share would have
been approximately $0.82 and $0.91 for the years ended March 31, 1995 and 1996,
respectively; and approximately $0.76 and $0.84 for the nine months ended
December 31, 1995 and 1996, respectively.

Significant components of provision for income taxes are:

YEAR ENDED MARCH 31, NINE MONTHS ENDED
--------------------------------- DECEMBER 31,
1994 1995 1996 -------------------------
--------- --------- --------- 1995 1996
$'000 $'000 $'000 ----------- -----------
$'000 $'000
(UNAUDITED) (UNAUDITED)

Current tax
-- Hong Kong profits tax........... 366 483 488 404 464
Deferred tax....................... 70 -- -- -- --
--- --- --- --- ---
436 483 488 404 464
=== === === === ===

F-15
76

ZINDART LIMITED AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

14. INCOME TAXES -- (CONTINUED)
The reconciliation of the Hong Kong statutory tax rate to the effective
income tax rate based on income before income taxes stated in the consolidated
statements of operations is as follows:

YEAR ENDED MARCH 31,
---------------------------------
1994 1995 1996
--------- --------- --------- NINE MONTHS ENDED
DECEMBER 31,
-------------------------
1995 1996
----------- -----------
(UNAUDITED) (UNAUDITED)

Hong Kong statutory tax rate....... 17.5% 16.5% 16.5% 16.5% 16.5%
Effect of tax exemption for
Guangzhou Zindart (Xin Xing)
(Giftware) Company Limited....... -- (1.4%) (1.1%) (0.8%) (0.9%)
Non-taxable income arising from
activities which qualified as
offshore......................... (7.3%) (5.5%) (6.8%) (7.2%) (7.0%)
----- ---- - ---- - ---- - ---- -
Effective income tax rate.......... 10.2% 9.6% 8.6% 8.5% 8.6%
===== ===== ===== ===== =====

Components of deferred tax balances as of March 31, 1995 and 1996 and
December 31, 1996 are as follows:

MARCH 31, DECEMBER 31,
--------------------- 1996
1995 1996 ------------
--------- --------- $'000
$'000 $'000 (UNAUDITED)

Accumulated difference between taxation allowance and
depreciation expenses............................... 120 120 120
=== === ===

15. DIVIDENDS

Dividends comprised:

YEAR ENDED MARCH 31, NINE MONTHS ENDED
--------------------------------- DECEMBER 31,
1994 1995 1996 1996
--------- --------- --------- -----------------
$'000 $'000 $'000 $'000
(UNAUDITED)

Cash dividend............................ 1,959 1,073 -- --
Dividend in kind......................... -- -- 2,994 --
----- ----- ----- -----
1,959 1,073 2,994 --
===== ===== ===== =====

Dividends for the year ended March 31, 1996 of approximately $2,994,000 was
settled in kind by distributing to the shareholder the loan receivable from a
related company of approximately $1,889,000 and the amount due from that related
company of approximately $1,105,000.

16. COMMITMENTS

a. Capital commitments

As of March 31, 1995 and 1996 and December 31, 1996, the Group had capital
commitments amounting to approximately $3,368,000, $975,000 and $4,537,000,
respectively, in respect of construction of factories in the PRC.

F-16
77

ZINDART LIMITED AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

16. COMMITMENTS -- (CONTINUED)
b. Operating Lease Commitments

The Group has various operating lease agreements for factory premises and
office equipment which extend through December 1997. Rental expenses for the
years ended March 31, 1994, 1995 and 1996 were approximately $615,000, $936,000
and $624,000, respectively, and for the nine months ended December 31, 1995 and
1996 were approximately $392,000 and $536,000, respectively. Most leases contain
renewal options. Future minimum rental payments as of March 31, 1996 and
December 31, 1996, under agreements classified as operating leases with
non-cancelable terms in excess of one year, are as follows:

MARCH 31, DECEMBER 31,
1996 1996
--------- ------------
$'000 $'000
(UNAUDITED)

Payable during the following period:
Within one year............................................ 500 66
Over one year but not exceeding two years.................. 63 3
Over two years but not exceeding three years............... 3 1
--- ---
566 70
=== ===

Under the supplementary joint venture agreement for the establishment of
Dongguan Xinda Giftware Company Limited, the Group has committed to pay a
pre-determined annual fee to the third-party joint venture partner for the
period from January 1996 to November 2009. The total commitments for this pre-
determined fee as of March 31, 1996 and December 31, 1996 are analyzed as
follows:

MARCH 31, DECEMBER 31,
1996 1996
--------- ------------
$'000 $'000
(UNAUDITED)

Payable during the following period:
Within one year............................................ 39 39
Over one year but not exceeding two years.................. 39 39
Over two years but not exceeding three years............... 39 39
Over three years but not exceeding four years.............. 39 39
Over four years but not exceeding five years............... 39 39
Thereafter................................................. 348 319
--- ---
543 514
=== ===

17. RETIREMENT PLAN

The Group's employees in the PRC are all hired on a contractual basis and
consequently the Group has no obligation for pension liabilities to these
employees.

The Group's employees in Hong Kong, after completing a probation period,
may join the Group's defined contribution provident fund managed by an
independent trustee. Both the Group and its Hong Kong employees make monthly
contributions to the scheme of 5% of the employees' basic salaries. The Hong
Kong 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
leaving the Group after completing ten years of service or at a reduced scale of
between 30% to 90% after completing three to nine years of service. Any
forfeited contributions made by the Group and the accrued interest thereon are
used to reduce future employer's contributions. The aggregate amount of
employer's contributions made by the Group (net of forfeited contributions)
during the years ended

F-17
78

ZINDART LIMITED AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

17. RETIREMENT PLAN -- (CONTINUED)
March 31, 1994, 1995 and 1996 were approximately $62,000, $97,000, and $71,000,
respectively, and during the nine months ended December 31, 1995 and 1996 were
approximately $4,000 and $32,000, respectively.

The Group has no other post-retirement or post-employment benefit plans.

18. BANKING FACILITIES

As of March 31, 1996 and December 31, 1996, the Group had banking
facilities of approximately $10,754,000 and $15,957,000, respectively, for
overdrafts, loans and trade financing. Unused facilities as of the same dates
amounted to approximately $1,129,000 and approximately $9,516,000, respectively.
These facilities were secured by:

a. Mortgages over the Group's properties with a net book value of
approximately $7,225,000 and $7,165,000 as of March 31, 1996 and December
31, 1996, respectively;

b. Pledges of the Group's bank deposits of approximately $1,770,000 and
$1,770,000 as of March 31, 1996 and December 31, 1996, respectively; and
the Group's inventories held under trust receipt and import bank loans.

In addition, the Group has agreed to observe certain restrictive bank
covenants on maintenance of net worth, and payment of dividends and management
bonuses, and not to create any debenture without a bank's prior consent. The
Group has complied with all such covenants.

19. RELATED PARTY TRANSACTIONS

The Group entered into the following transactions with related parties:

NINE MONTHS ENDED
YEAR ENDED MARCH 31, DECEMBER 31,
------------------------------- ------------------------
1995 1996 1995 1996
--------- --------- ----------- -----------
1994 $'000 $'000 $'000 $'000
--------- (UNAUDITED) (UNAUDITED)
$'000

Sales to ERTL and ERTL's related
company (Note a)................... 13,576 11,824 12,081 9,113 14,451
Management fee paid to ZICHL......... -- 23 -- -- --
Management fee paid to related
companies.......................... -- 171 -- -- --
Rental income from a related
company............................ -- -- 8 -- --
Interest income from related
companies (Note c)................. -- 85 68 82 --
Interest expense paid to a related
company (Note d)................... -- -- 3 -- --
Interest expense paid to a director
(Note d)........................... -- 1 7 -- --
====== ====== ====== ===== ======

F-18
79

ZINDART LIMITED AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

19. RELATED PARTY TRANSACTIONS -- (CONTINUED)
The Group had the following outstanding balances with related parties:

MARCH 31, DECEMBER 31,
--------------------- 1996
1996 -------------
--------- $'000
1995 $'000 (UNAUDITED)
---------
$'000

Accounts receivable from ERTL and its related
company (Note a)................................ 1,140 1,536 2,139
Loan receivable from a related company (Note b)... 1,889 -- --
Due from immediate holding company (Note f)....... -- 3 --
Due from ultimate holding company (Note f)........ 95 -- --
Due from related companies (Notes b, and c and
f).............................................. 1,752 -- 49
Due to related companies (Note f)................. 52 -- --
Due to a director (Note e)........................ 66 -- --
===== ===== =====

Notes

a. ERTL (Hong Kong) Ltd. ("ERTL") is a minority shareholder of Zindart Pte
Limited, the Company's sole shareholder.

b. Loan receivable from a related company as of March 31, 1995 of approximately
$1,889,000 and the amount due from that related company as of March 31, 1995
of approximately $1,105,000 were distributed to Zindart Pte Limited, the
Company's then sole shareholder, as dividends in kind during the year ended
March 31, 1996. No such receivable was outstanding as of March 31, 1996 and
December 31, 1996.

c. Included in amounts due from related companies as of March 31, 1995 of
approximately $1,317,000 were unsecured and bore interest at two percentage
points above the Hong Kong prime lending rate. Interest income earned from
these related companies for the years ended March 31, 1994, 1995 and 1996
were Nil, approximately $85,000 and approximately $68,000, respectively, and
for the nine months ended December 31, 1995 and 1996 were approximately
$82,000 and Nil, respectively. No such receivable was outstanding as of March
31, 1996 and December 31, 1996.

d. During the year ended March 31, 1996, a related company had advanced
approximately $259,000 to the Company. Such advance was unsecured and bore
interest at two percentage points above the Hong Kong prime lending rate.
During the year ended March 31, 1996, the Group paid to this related company
interest of approximately $3,000.

e. Amounts due to a director were unsecured and bore interest at two percentage
points above the Hong Kong prime lending rate. Interest expenses paid to the
director for the years ended March 31, 1994, 1995 and 1996 were Nil,
approximately $1,000 and approximately $7,000, respectively and for the nine
months ended December 31, 1995 and 1996 were approximately Nil and Nil,
respectively.

f. The other outstanding balances with the ultimate and immediate holding
company and related companies were unsecured, non-interest bearing and
without pre-determined repayment terms.

20. SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION

a. Cash paid for interest and income taxes comprised:

NINE MONTHS ENDED
YEAR ENDED MARCH 31, DECEMBER 31,
---------------------- ---------------------------
1995 1996 1995 1996
---- ---- ----------- -----------
1994 $'000 $'000 $'000 $'000
---- (UNAUDITED) (UNAUDITED)
$'000

Interest............................. 150 160 608 439 687
=== === === === ===
Income taxes......................... 165 742 605 82 117
=== === === === ===

F-19
80

ZINDART LIMITED AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

20. SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION -- (CONTINUED)
b. Supplemental disclosure of investing activities:

(i) During the year ended March 31, 1995, the Group acquired from an
unrelated third party certain assets and liabilities with a net book value
of approximately $82,000 at a consideration of approximately $179,000.
Thereafter, it contributed such assets and liabilities to Luen Tat Mould
Manufacturing Limited ("LTMML") in exchange for a 51% interest in LTMML.
According to a shareholders' agreement dated October 10, 1994, the Group is
only entitled to share 41% of the profit of LTMML. Details of net assets
acquired were as follows:

$'000
----

Cash and bank deposits...................................................... 347
Accounts receivable, net.................................................... 372
Deposits and prepayments.................................................... 328
Inventories, net............................................................ 2
Property, plant and equipment............................................... 26
Accounts payable............................................................ (604)
Accrued liabilities......................................................... (157)
Due to a director........................................................... (129)
Taxation payable............................................................ (24)
----
Net assets as of the date of acquisition.................................... 161
Acquired percentage......................................................... 51%
----
Share of net assets as of the date of acquisition........................... 82
Consideration satisfied in cash............................................. (179)
----
Goodwill.................................................................... 97
====
Net cash inflow:
Cash acquired............................................................. 347
Cash paid................................................................. (179)
----
Net cash inflow........................................................... 168
====

(ii) During the nine months ended December 31, 1995 and accordingly during
the year ended March 31, 1996, the Group paid a dividend in kind of
approximately $2,994,000 by distributing a loan receivable from a related
company of approximately $1,889,000 and an amount due from that related company
of approximately $1,105,000.

(iii) During the year ended March 31, 1996, the Group entered into capital
lease arrangements in respect of originally owned assets and obtained cash
finance of $776,000, and (ii) newly acquired assets with a capital value of
approximately $585,000.

21. OPERATING RISK

a. Country risk

The Group's operations are conducted in Hong Kong and the PRC. As a result,
the Group's business, financial condition and results of operations may be
influenced by the political, economic and legal environments in Hong Kong and
the PRC, and by the general state of the Hong Kong and the PRC economies.

On July 1, 1997, sovereignty over Hong Kong will be transferred from the
United Kingdom to the PRC, and Hong Kong will become a Special Administrative
Region of the PRC (a "SAR"). As provided in the

F-20
81

ZINDART LIMITED AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

21. OPERATING RISK -- (CONTINUED)
Sino-British Joint Declaration relating to Hong Kong and the Basic Law of the
Hong Kong SAR of the PRC, the Hong Kong SAR will have full economic autonomy and
its own legislative, legal and judicial systems for fifty years. The Group's
management does not believe that the transfer of sovereignty over Hong Kong will
have an adverse impact on the Group's financial and operating environment. There
can be no assurance, however, that changes in political or other conditions will
not result in such an adverse impact.

The Group's operations in the PRC are 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 the PRC, 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.

b. Dependence on strategic relationship

The Group conducts its manufacturing operations through its contractual
joint ventures established between the Group and two PRC parties. The
deterioration of any of these strategic relationships may have an adverse effect
on the operations of the Group.

c. Concentration of credit risk

A substantial portion of the Group's sales are made to a small number of
customers on an open account basis and generally no collateral is required.
Details of individual customers accounting for more than 5% of the Group's sales
are as follows:

YEAR ENDED MARCH 31, NINE MONTHS
---------------------- ENDED
1994 1995 1996 DECEMBER 31,
---- ---- ---- 1996
------------
(UNAUDITED)

Hallmark Cards (HK) Limited (a subsidiary of
Hallmark Cards Inc.)............................ 28.1% 31.2% 27.0% 28.0%
ERTL and its related company (Note a)............. 38.2% 32.1% 25.9% 29.7%
Hasbro Far East Limited........................... 8.0% 8.1% 9.3% 2.4%
A buying office of Sieper Werke GmbH.............. 7.0% 7.4% 6.2% 7.0%
Drumwell Limited.................................. 0.1% 0.7% 4.5% 6.2%
Revell/Monogram, Inc.............................. 5.8% 4.5% 3.0% 1.2%
==== ==== ==== ======

- ---------------
Note a. ERTL is a minority shareholder of Zindart Pte Limited, the Company's
sole shareholder.

Concentration of accounts receivable as of March 31, 1995 and 1996 and
December 31, 1996 is as follows:

MARCH 31,
-----------------------
1995 1996
--------- --------- DECEMBER 31,
1996
------------
(UNAUDITED)

Five largest accounts receivable.................. 85% 52% 62%
== == ==

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.

F-21
82

ZINDART LIMITED AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

21. OPERATING RISK -- (CONTINUED)
d. Concentration of Suppliers

The Group purchases raw materials from a number of suppliers. Details
of individual suppliers accounting for more than 5% of the Group's
purchases are as follows:

YEAR ENDED MARCH 31,
-------------------------------------
1994 1995 1996
--------- --------- --------- NINE MONTHS
ENDED
DECEMBER 31,
1996
------------
(UNAUDITED)

Sogen (Far East) Limited................ 0.4% 2.5% 9.8% 3.1%
Starlite Printers Limited............... 3.3% 4.8% 8.3% 7.0%
Wing Fu Carton & Printing Company
Limited............................... 5.0% 5.5% 6.3% 4.1%
Lee Kee Metal Company Limited........... 2.0% 9.0% 4.8% 4.9%
Y.T. Cheng (Ching Tai) Limited.......... 4.0% 7.2% 4.7% 2.3%
Cominco Ltd............................. 16.4% 1.2% 0.9% 5.3%
==== === === ===

22. OTHER SUPPLEMENTAL INFORMATION

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

NINE MONTHS ENDED
YEAR ENDED MARCH 31, DECEMBER 31,
--------------------------------- -------------------------
1995 1996 1995 1996
--------- --------- ----------- -----------
1994 $'000 $'000 $'000 $'000
--------- (UNAUDITED) (UNAUDITED)
$'000

Depreciation of property, plant and
equipment
owned assets............................. 458 658 759 553 1,009
assets held under capital leases......... 304 288 262 191 312
Interest expenses for
bank overdrafts and loans................ 70 91 519 380 587
capital lease obligations................ 80 68 79 54 100
amount due to a director................. -- 1 7 5 --
amount due to a related company.......... -- -- 3 -- --
Less: amount capitalized as property, plant
and equipment............................ -- (23) (206) (259) (26)
---- --- ---- ---- ---
150 137 402 180 661
Operating lease rentals for
rented premises.......................... 590 913 613 387 517
machinery and equipment.................. 25 23 11 5 19
Repairs and maintenance expenses........... 636 456 514 409 380
Interest income from
bank deposits............................ 129 143 140 107 89
amount due from related companies........ -- 85 68 88 --
Net foreign exchange (loss) gain........... (102) 182 (160) (22) 72
==== === ==== ==== ===

F-22
83

LOGO
84
APPENDIX
DESCRIPTION OF GRAPHICS AND ART

INSIDE FRONT COVER:

Photo of a die-cast 1932 Cadillac V-16 Sport Phaeton produced by the Company.

IN CONNECTION WITH THIS OFFERING, THE UNDERWRITER MAY OVER-ALLOT OR EFFECT
TRANSACTIONS THAT ARE INTENDED TO STABLIZE OR MAINTAIN THE MARKET PRICE OF THE
ADSs AT A LEVEL ABOVE THAT WHICH MIGHT OTHERWISE PREVAIL IN THE OPEN MARKET.
SUCH TRANSACTIONS MAY BE EFFECTED ON THE NASDAQ NATIONAL MARKET, IN THE
OVER-THE-COUNTER MARKET OR OTHERWISE. SUCH STABILIZING, IF COMMENCED, MAY BE
DISCONTINUED AT ANY TIME.

GATEFOLD:

Three strips of photos of products made by the Company: Hallmark Keepsake
Ornaments, die-cast collectibles and figurines.

Caption 1- "Hallmark Cards, Inc. is a major customer of Zindart. Zindart
manufactures many of Hallmark's Keepsake Ornaments, which consist of a variety
of Christmas ornaments, holiday-themed pieces and other giftware, both in
die-cast zinc alloy and plastic. Production of the Keepsake Ornaments requires
highly developed hand painting skills and attention to quality by each member
of the workforce in order to meet exacting aesthetic and quality requirements."

Caption 2- "Zindart manufactures high-quality, die-cast scale model replicas of
automobiles, trucks, planes, farm implements, construction equipment and
similar items for many of the premier U.S. marketers of such items, including
The Ertl Company, Inc. These die-cast replicas are sold to adults and children
through hobby shops, collectors' clubs, car and equipment dealers, and toy and
gift stores."

Caption 3- "Zindart manufactures high-quality action figures and miniature
figurine playsets for various designers and marketers of toys. The production
of these types of toys requires the high-quality and detailed manufacturing
skills of the type offered by Zindart."

PAGE 8:

ORGANIZATION OF THE COMPANY

This chart shows the organization of the Company, its principal shareholders
and subsidiaries prior to giving effect to the Offering.

OPERATING STRUCTURE

This chart shows the operating structure of the Company's three manufacturing
facilities.

PAGE 30:

This flow chart shows the steps in the manufacturing process that make up the
Turnkey Manufacturing Service.

INSIDE BACK COVER:

A Photo of computer-aided design work being done by a Company engineer. A photo
of the Dongguan Facility.

LAST PAGE OF PROSPECTUS:

A Map of the southern PRC, locating the Dongguan Facility, the Xin Xing
Facility and the Zhong Xin Facility.

======================================================

No person has been authorized to give any information or to make any
representation in connection with the Offering being made hereby not contained
in this Prospectus, and, if given or made, such information or representation
must not be relied upon as having been authorized by the Company, the
Underwriters or any other person. This Prospectus does not constitute an offer
to sell, or a solicitation of an offer to buy any securities offered hereby in
any jurisdiction in which it is unlawful to make such offer or solicitation in
such jurisdiction. Neither the delivery of this Prospectus nor any sale made
hereunder shall under any circumstances create an implication that information
contained herein is correct as of any time subsequent to the date hereof.

------------------------

TABLE OF CONTENTS

PAGE
----

Reports to Securities Holders.......... 3
Currency Conversions................... 4
Enforceability of Civil Liabilities.... 4
Prospectus Summary..................... 5
Risk Factors........................... 9
Use of Proceeds........................ 17
Dividends and Dividend Policy.......... 17
Dilution............................... 18
Capitalization......................... 19
Selected Financial Data................ 20
Management's Discussion and Analysis of
Financial Condition and Results
of Operations........................ 21
Business............................... 26
Management............................. 34
Principal Shareholders................. 37
Certain Transactions................... 39
Description of Shares.................. 40
Description of American Depositary
Receipts............................. 42
Shares Eligible for Future Sale........ 49
Taxation............................... 50
Certain Foreign Issuer
Considerations....................... 56
Underwriting........................... 57
Legal Matters.......................... 58
Experts................................ 58
Additional Information................. 59
Report of Independent Public
Accountants.......................... F-2

------------------------
UNTIL , 1997 (25 DAYS AFTER THE DATE OF THIS PROSPECTUS), ALL
DEALERS EFFECTING TRANSACTIONS IN THE REGISTERED SECURITIES OR ADSS, WHETHER OR
NOT PARTICIPATING IN THIS DISTRIBUTION, MAY BE REQUIRED TO DELIVER A PROSPECTUS.
THIS IS IN ADDITION TO THE OBLIGATION OF DEALERS TO DELIVER A PROSPECTUS WHEN
ACTING AS UNDERWRITERS AND WITH RESPECT TO THEIR UNSOLD ALLOTMENTS OR
SUBSCRIPTIONS.

======================================================
======================================================
1,400,000
AMERICAN DEPOSITARY SHARES

REPRESENTING 1,400,000 ORDINARY SHARES
LOGO
------------------------------
PROSPECTUS
------------------------------
VAN KASPER & COMPANY
, 1997
======================================================
86

PART II

INFORMATION NOT REQUIRED IN PROSPECTUS

ITEM 13. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.

The following table sets forth the expenses in connection with the offering
of the securities being registered, other than the underwriting discount and
commission. All of the amounts are estimates except for the SEC registration fee
and NASD filing fee.

SEC registration fee.................................................. $ 6,662.07
NASD filing fee....................................................... 2,432.00
Blue Sky fees and expenses............................................ 5,000.00
Printing and engraving expenses....................................... 85,000.00
Legal fees and expenses............................................... 700,000.00
Accounting fees and expenses.......................................... 250,000.00
Miscellaneous expenses................................................ 251,000.00
-------------
Total............................................................ $ 1,300,000.00
=============

ITEM 14. INDEMNIFICATION OF DIRECTORS AND OFFICERS.

Reference is made to Section 8 of the Underwriting Agreement, a copy of
which is filed as Exhibit 1.1 hereto, which provides for indemnification of the
directors and officers of the Company who sign the Registration Statement by the
Underwriters against certain liabilities, including those arising under the
Securities Act, in certain circumstances.

Under Hong Kong law, the organizational documents may not contain any
provisions indemnifying directors, officers, employees and agents of the Company
for acts performed in such capacity. The Company intends to purchase standard
directors' and officers' liability insurance on behalf of its directors and
executive officers.

ITEM 15. RECENT SALES OF UNREGISTERED SECURITIES.

None.

ITEM 16. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES.
(a) Exhibits.
*1.1 -- Form of Underwriting Agreement between Zindart Limited and Van Kasper &
Company
*3.1 -- Memorandum of Association of the Company
*3.2 -- Articles of Association of the Company
*4.1 -- Deposit Agreement between Zindart Limited and The Bank of New York
5.1 -- Opinion of Robert W.H. Wang & Co., Hong Kong counsel to the Company as to
certain legal matters with respect to the legality of the Shares
8.1 -- Opinion of McCutchen, Doyle, Brown & Enersen, LLP, as to certain tax matters
in the United States
8.2 -- Opinion of Guangzhou Law Office, the PRC counsel to the Company, as to
certain tax matters in the PRC
*10.1(a) -- 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
*10.1(b) -- Sino-Foreign Co-Operation, Zindart Toys (Dongguan) Company Limited,
Supplemental Contract, between Dongguan Hengli Trading General Company and
Zindart Industrial Company Limited, dated December 5, 1995

II-1
87

*10.1(c) -- Land Use Certificate for State-Owned Land, Dongguan Government State-Owned
(1993) No. 49
*10.1(d) -- Land Use Certificate for State-Owned Land, Dongguan Government State-Owned
(1994) No. 664
*10.1(e) -- Land Use Certificate for State-Owned Land, Dongguan Government State-Owned
(1994) No. 665
*10.1(f) -- Land Use Certificate for State-Owned Land, Dongguan Government State-Owned
(1994) No. 666
*10.2(a) -- Sino-Foreign Co-Operation Contract, Zindart (Xinxing) Toys (Guangdong)
Company Limited, between Guangzhou Xinjiao Huangbu Economic Development
Company and Zindart Industrial Company Limited, dated December 26, 1993
*10.2(b) -- Sino-Foreign Co-Operation, Zindart (Xinxing) Toys (Guangzhou) Company
Limited, Supplemental Contract, between Guangzhou Xinjiao Huangbu Economic
Development Company Xinxing Toys Factory and Zindart Industrial Company
Limited, dated November 1996
*10.3 -- Contract between Guangzhou Tianhe Dongpu Economic Development General Company
and Zindart Industrial Company Limited, dated February 18, 1996
*10.4(a) -- Bank of China, General Banking Facilities, dated May 27, 1991
*10.4(b) -- Bank of China, General Banking Facilities, dated October 26, 1995
*10.5 -- Standard Chartered Bank, Banking Facilities, dated December 24, 1996
*10.6 -- HongKong Bank, Banking Facilities, dated May 22, 1996
*10.7 -- Agreement Regarding Future Share Distributions, between Van Kasper & Company,
Zindart Pte Limited and Zindart Limited
10.8 -- Indemnification Agreement between ZIC Holdings Limited and Zindart Limited
*21.1 -- Subsidiaries of the Registrant
*23.1 -- Consent of Arthur Andersen & Co., independent auditors
*23.2 -- Consent of Robert W.H. Wang & Co. (included in Exhibit 5.1)
*23.3 -- Consent of McCutchen, Doyle, Brown & Enersen, LLP (included in Exhibit 8.1)
*23.4 -- Consent of Guangzhou Law Office (included in Exhibit 8.2)
*23.5 -- Consent of James E. Gilleran
*23.6 -- Consent of Leo Paul Koulos
*23.7 -- Consent of Stanley Wang

- ---------------

* Previously filed under Amendment No. 1

(b) Financial Statement Schedules

Schedule II -- Amounts Receivable from Related Parties
Schedule IV -- Indebtedness of Related Parties -- Not Current
Schedule IX -- Valuation and Qualifying Accounts

All other 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.

ITEM 17. UNDERTAKINGS.

Insofar as indemnification for liabilities arising under the Securities Act
of 1933 may be permitted to directors, officers and controlling persons of the
Registrant pursuant to the foregoing provisions, or otherwise,

II-2
88

the Registrant has been advised that in the opinion of the Securities and
Exchange Commission such indemnification is against public policy as expressed
in the Securities Act and is, therefore, unenforceable. In the event that a
claim for indemnification against such liabilities (other than payment by the
Registrant of expenses incurred or paid by a director, officer or controlling
person of the Registrant in the successful defense of any action, suit or
proceeding) is asserted by such director, officer or controlling person in
connection with the securities being registered, the Registrant will, unless in
the opinion of its counsel the matter has been settled by controlling precedent,
submit to a court of appropriate jurisdiction the question whether such
indemnification by it is against public policy as expressed in the Securities
Act and will be governed by the final adjudication of such issue.

The undersigned Registrant hereby undertakes that:

(1) For purpose of determining any liability under the Securities Act
of 1933, the information omitted from the form of prospectus filed as part
of this Registration Statement in reliance upon Rule 430A and contained in
a form of prospectus filed by the registrant pursuant to Rule 424(b)(1) or
(4) or 497(h) under the Securities Act shall be deemed to be part of this
Registration Statement at the time it was declared effective.

(2) For the purpose of determining any liability under the Securities
Act of 1933, each post-effective amendment that contains a form of
prospectus shall be deemed to be a new Registration Statement relating to
the securities offered therein, and the offering of such securities at that
time shall be deemed to be the initial bona fide offering thereof.

(3) To provide the Underwriter at the closing specified in the
underwriting agreement, certificates in such denominations and registered
in such names as required by the Underwriter to permit prompt delivery to
each purchaser.

II-3
89

SIGNATURES

Pursuant to the requirements of the Securities Act of 1933, the Registrant
certifies it has reasonable grounds to believe that it meets all of the
requirements for filing an Amendment No. 2 to Form F-1 and has caused this
Registration Statement to be signed on its behalf by the undersigned, thereunto
duly authorized, in Hong Kong, on February 21, 1997.

(Registrant)
ZINDART LIMITED

By /s/ GEORGE K.D. SUN
George K.D. Sun
Chief Executive Officer

Pursuant to the requirements of the Securities Act of 1933, the
Registration Statement has been signed below by the following persons in the
capacities and on the dates indicated:

SIGNATURE TITLE DATE
- ---------------------------------------- --------------------------------- ------------------

/s/ GEORGE K.D. SUN Chief Executive Officer and February 21, 1997
- ---------------------------------------- Director (Principal Executive
George K.D. Sun Officer)

/s/ FEATHER S.Y. FOK Chief Operating Officer, Chief February 21, 1997
- ---------------------------------------- Financial Officer and Director
Feather S.Y. Fok (Principal Financial Officer)

/s/ VICKIE W.K. SO Financial Controller (Principal February 21, 1997
- ---------------------------------------- Accounting Officer)
Vickie W.K. So

/s/ ALEXANDER M.K. NGAN Director February 21, 1997
- ----------------------------------------
Alexander M.K. Ngan

/s/ GEORGE VOLANAKIS Director February 21, 1997
- ----------------------------------------
George Volanakis

/s/ TONY D.H. LAI Director February 21, 1997
- ----------------------------------------
Tony D.H. Lai

/s/ ROBERT A. THELEEN Authorized U.S. Representative, February 21, 1997
- ---------------------------------------- Director
Robert A. Theleen

II-4
90

REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS

To the shareholders and Board of Directors of Zindart Limited:

We have audited, in accordance with generally accepted auditing standards
in the United States of America, the consolidated balance sheets of Zindart
Limited (incorporated in Hong Kong; "the Company") and Subsidiaries as of March
31, 1994, 1995 and 1996 and the related consolidated statements of operations,
cash flows and changes in shareholders' equity for the years ended March 31,
1994, 1995 and 1996, included in this registration statement and have issued our
report thereon dated January 31, 1997. Our audit was conducted for the purpose
of forming an opinion on the basic financial statements taken as a whole. The
schedules listed in the index to the schedules are the responsibility of the
Company's management and are presented for the purposes of complying with the
Securities and Exchange Commission's rules and are not part of the basic
financial statements. These schedules have been subjected to the auditing
procedures applied in the audit of the basic financial statements and, in our
opinion, fairly state in all material respects the financial data required to be
set forth therein in relation to the basic financial statements taken as a
whole.

ARTHUR ANDERSEN & CO.
Certified Public Accountants
Hong Kong

Hong Kong,
January 31, 1997.

S-1
91

SCHEDULE II

ZINDART LIMITED AND SUBSIDIARIES

AMOUNTS RECEIVABLE FROM RELATED PARTIES
(AMOUNTS EXPRESSED IN UNITED STATES DOLLARS)

DEDUCTIONS BALANCE AT END
ADDITIONS ----------------------- ---------------------
--------- AMOUNTS AMOUNTS CURRENT NOT CURRENT
NAME OF DEBTOR COLLECTED WRITTEN OFF ------- -----------
- -------------------------------------- BALANCE AT $'000 --------- ----------- $'000 $'000
BEGINNING $'000 $'000
----------
$'000

Year ended March 31, 1994
Zindart Entertainment &
Leisure Limited.................. $ -- $ 152 $ -- $ -- $ 152 $ --
Zindart Investment Company
Limited.......................... -- 194 -- -- 194 --
Premium Gallery Limited............. -- 120 -- -- 120 --
------ ------ ------- ------ ------ ------
$ -- $ 466 $ -- $ -- $ 466 $ --
====== ====== ======= ====== ====== ======
Year ended March 31, 1995
Zindart Entertainment &
Leisure Limited.................. $ 152 $ 880 $ -- $ -- $ 1,032 $ --
Zindart Investment Company
Limited.......................... 194 -- (194) -- -- --
Premium Gallery Limited............. 120 -- (120) -- -- --
Sinomex Hong Kong Limited........... -- 526 -- -- 526 --
Verveine Limited.................... -- 4 -- -- 4 --
Gold Venture Limited................ -- 4 -- -- 4 --
Wealthy Holdings Limited............ -- 7 -- -- 7 --
Luen Tat Model Design Company
Limited.......................... -- 179 -- -- 179 --
------ ------ ------- ------ ------ ------
$ 466 $ 1,600 $ (314) $ -- $ 1,752 $ --
====== ====== ======= ====== ====== ======
Year ended March 31, 1996
Zindart Entertainment &
Leisure Limited.................. $1,032 $ 73 $ (1,105)* $ -- $ -- $ --
Sinomex Hong Kong Limited........... 526 41 (567) -- -- --
Verveine Limited.................... 4 2 (6) -- -- --
Gold Venture Limited................ 4 2 (6) -- -- --
Wealthy Holdings Limited............ 7 -- (7) -- -- --
Luen Tat Model Design Company
Limited.......................... 179 -- (179) -- -- --
------ ------ ------- ------ ------ ------
$1,752 $ 118 $ (1,870) $ -- $ -- $ --
====== ====== ======= ====== ====== ======

- ---------------
* This amount was distributed to Zindart Pte Limited, the Company's then sole
shareholder, as dividends in kind.

S-2
92

SCHEDULE IV

ZINDART LIMITED
AND SUBSIDIARIES

INDEBTEDNESS OF RELATED PARTIES -- NOT CURRENT
(AMOUNTS EXPRESSED IN UNITED STATES DOLLARS)

INDEBTEDNESS OF
------------------------ BALANCE
ADDITIONS DEDUCTIONS AT END
NAME --------- ---------- -------
- ------------------------------------------------ BALANCE $'000 $'000 $'000
AT BEGINNING
------------
$'000

Year ended March 31, 1994
Zindart Entertainment & Leisure Limited....... $ -- $ 1,889 $ -- $ 1,889
====== ====== ======= ======

Year ended March 31, 1995
Zindart Entertainment & Leisure Limited....... $1,889 $ -- $ -- $ 1,889
====== ====== ======= ======

Year ended March 31, 1996
Zindart Entertainment & Leisure Limited....... $1,889 $ -- $ (1,889)* $ --
====== ====== ======= ======

- ---------------
* This amount was distributed to Zindart Pte Limited, the Company's then sole
shareholder, as dividends in kind.

S-3
93

SCHEDULE IX

ZINDART LIMITED AND SUBSIDIARIES

VALUATION AND QUALIFYING ACCOUNTS
(AMOUNTS EXPRESSES IN UNITED STATES DOLLARS)

ADDITIONS:
CHARGED TO DEDUCTIONS BALANCE AT
COST AND ---------- END
DESCRIPTION EXPENSES ----------
- ------------------------------------------------ BALANCE AT ---------- $'000 $'000
BEGINNING $'000
----------
$'000

Year ended March 31, 1994
Provision for doubtful accounts............... $ -- $ 26 $ -- $ 26
Provision for inventories obsolescence........ 59 -- -- 59
--- --- --- ---
$ 59 $ 26 $ -- $ 85
=== === === ===
Year ended March 31, 1995
Provision for doubtful accounts............... $ 26 $ 13 $ -- $ 39
Provision for inventories obsolescence........ 59 -- -- 59
--- --- --- ---
$ 85 $ 13 $ -- $ 98
=== === === ===
Year ended March 31, 1996
Provision for doubtful accounts............... $ 39 $ -- $ -- $ 39
Provision for inventories obsolescence........ 59 -- -- 59
--- --- --- ---
$ 98 $ -- $ -- $ 98
=== === === ===

S-4
94

INDEX TO EXHIBITS

SEQUENTIALLY
EXHIBIT NUMBERED
NUMBER EXHIBITS PAGE
--------- --------------------------------------------------------------------------------------------

*1.1 -- Form of Underwriting Agreement between Zindart Limited and Van Kasper & Company
*3.1 -- Memorandum of Association of the Company
*3.2 -- Articles of Association of the Company
*4.1 -- Deposit Agreement between Zindart Limited and The Bank of New York
5.1 -- Opinion of Robert W.H. Wang & Co., Hong Kong counsel to the Company as to
certain legal matters with respect to the legality of the Shares
8.1 -- Opinion of McCutchen, Doyle, Brown & Enersen, LLP, as to certain tax matters in
the United States
8.2 -- Opinion of Guangzhou Law Office, the PRC counsel to the Company, as to certain
tax matters in the PRC
*10.1(a) -- 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
*10.1(b) -- Sino-Foreign Co-Operation, Zindart Toys (Dongguan) Company Limited, Supplemental
Contract, between Dongguan Hengli Trading General Company and Zindart Industrial
Company Limited, dated December 5, 1995
*10.1(c) -- Land Use Certificate for State-Owned Land, Dongguan Government State-Owned
(1993) No. 49
*10.1(d) -- Land Use Certificate for State-Owned Land, Dongguan Government State-Owned
(1994) No. 664
*10.1(e) -- Land Use Certificate for State-Owned Land, Dongguan Government State-Owned
(1994) No. 665
*10.1(f) -- Land Use Certificate for State-Owned Land, Dongguan Government State-Owned
(1994) No. 666
*10.2(a) -- Sino-Foreign Co-Operation Contract, Zindart (Xinxing) Toys (Guangdong) Company
Limited, between Guangzhou Xinjiao Huangbu Economic Development Company and
Zindart (Xinxing) Toys (Guangzhou) Company Limited, dated December 26, 1993
*10.2(b) -- Sino-Foreign Co-Operation, Zindart (Xinxing) Toys (Guangzhou) Company Limited,
Supplemental Contract, between Guangzhou Xinjiao Huangbu Economic Development
Company Xinxing Toys Factory and Zindart Industrial Company Limited, dated
November 1996
*10.3 -- Contract between Guangzhou Tianhe Dongpu Economic Development General Company
and Zindart Industrial Company Limited, dated February 18, 1996
*10.4(a) -- Bank of China, General Banking Facilities, dated May 27, 1991
*10.4(b) -- Bank of China, General Banking Facilities, dated October 26, 1995
*10.5 -- Standard Chartered Bank, Banking Facilities, dated December 24, 1996
*10.6 -- HongKong Bank, Banking Facilities, dated May 22, 1996
*10.7 -- Agreement Regarding Future Share Distributions, between Van Kasper & Company,
Zindart Pte Limited and Zindart Limited
10.8 -- Indemnification Agreement between ZIC Holdings Limited and Zindart Limited
*21.1 -- Subsidiaries of the Registrant
*23.1 -- Consent of Arthur Andersen & Co., independent auditors
*23.2 -- Consent of Robert W.H. Wang & Co. (included in Exhibit 5.1)
*23.3 -- Consent of McCutchen, Doyle, Brown & Enersen, LLP (included in Exhibit 8.1)
*23.4 -- Consent of Guangzhou Law Office (included in Exhibit 8.2)
*23.5 -- Consent of James E. Gilleran
*23.6 -- Consent of Leo Paul Koulos
*23.7 -- Consent of Stanley Wang

- ------------------

* Previously filed under Amendment No. 1.