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Important Trends

(numbers refer to bibliography entries that follow)

I. Zindart's Peter Gardiner has now passed on chief executive duties to George Volanakis, an experienced toy company veteran, whom he had previously brought in to head Corgi. Volanakis will continue building Corgi brand and cutting redundant costs.

George Volanakis named CEO; 124

George Volanakis appointed President and CEO of Zindart's Corgi division; 108, 94

Peter Gardiner; 113, 107, 100, 99, 89, 65, 57, 39, 33

Special Board meeting set for December 30, 2004; 110

New board of directors selected at special meeting of shareholders; 112, 107, 106, 102

New growth strategy emphasizes branded products, U.S. expansion, and global marketing;

121, 116, 111, 103, 101, 99, 71, 68, 66, 63, 61, 60, 59, 58, 48, 46, 43, 40, 39, 38, 37, 36, 35, 33

Cost reductions and balance sheet improvements; 116, 108, 103, 99, 97, 96, 87, 74, 72, 70, 66

Corgi acquisition global strategy; 116, 111, 99, 63, 17, 16, 14, 13

Hua Yang printing unit sold for $24 million; 96

Specialty book publishing sells direct in U.S.; 68, 52, 46, 43, 42, 36

Hua Yang acquisition spotlights fiscal 1998; 4, 1

Hua Yang new production facility; 78

Executive biographies: 111, 94, 70, 56, 55, 41,

Link to SEC documents

Japanese toy industry consolidates; 120

Corgi growth reflects U.S. strategy; 123, 121, 111, 97, 71, 68, 63, 61, 60, 59, 58, 52, 48, 46, 44, 43, 40, 39, 36, 35, 28

Corgi establishes marketing agreement targeting U.S. specialty market; 119

Corgi USA lands Marvel licensing agreement; 123

George Volanakis President and CEO of Corgi; 103, 99, 97, 94

John Dunkel new VP and General Manager of Corgi USA; 71, 61, 60, 38, 26

Corgi acquires Lledo brand; 25

New accounts up 12% since RCHTA show; 44, 34, 20

Unsung Heroes line honors Vietnam era; 60, 52, 50, 48, 38, 28, 27

Batmobile 2000 wins Buyer's Choice award; 111

Batmobiles to gain marketing momentum; 117

New line honors Battle of Britain; 32

Warner Bros. global licensing agreement for Batman products; 122, 116, 91

Balance sheet data; 121, 116, 87, 74, 72, 57, 52, 48, 46, 43, 36

Final payment on $30 million term debt made; 84

Financing packages bolster cash flow and working capital; 95, 39, 37

Institutional holders and insider transactions; 109

Yahoo fundamental valuation page

Stock performance 77

Corgi places convertible notes and warrants; expects strong second half growth; 127

Corgi to seek buyer for Manufacturing unit; 122, 121, 118,

Plant utilization rates higher in fiscal 2004; 108, 103, 98, 87, 83

Gross margin on the rise; 99, 85, 76, 72

New retail/OEM customers; 114, 99, 48, 46, 36, 35, 31, 27, 11

Expansion into new high-volume children's products; 36

Manufacturing unit builds industry-leading reputation; 114, 66, 32, 21

Hallmark Preferred Quality Supplier Status; 23

Pokemon contracts; 31, 29, 27, 22

Hasbro relationship expanding; 20, 16

Mattel; 80, 18, 16, 14, 10, 9, 8, 5

Jada Toys; 99

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Analysts, financial news & newsletters;

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Fine Toy and Collectibles Companies 67

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Corgi International Limited announced the successful placement of $5.65 million in convertible notes and warrants, the proceeds of which will be used to strengthen the firm’s balance sheet at a time that management is planning an aggressive product rollout. The company’s “2006 product development plan … includes our unique ICAR product, GO GO Rollerz, Streakerz, Twisterz, James Bond die-cast replicas and other new generation toy lines which are being enthusiastically welcomed by our customers.” The product rollout and an increased number of retail outlets has management expecting a strong second half." In fact, management “expects the ICAR product to turn into its biggest single-year seller in the history of the Company.” The ICAR can be attached to the base of either an IPOD or MP3 player and “will rock and roll to the speed of the music, wheels spinning and lights flashing in unison.”

The company also announced the “announced today the appointment of Charles C. McGettigan as a non-executive director of the Board.” Mr. McGettigan brings a wealth of corporate finance and merchant banking-related experience. Corgi Board Chairman John Clough commented, "We are very pleased to have Charles join us on the Corgi Board. We expect that his experience and breadth of knowledge will contribute to helping Corgi grow. We welcome his expertise at an exciting time for the Company."

For the full release, see http://biz.yahoo.com/bw/051027/275708.html?.v=1

Zindart Limited has changed its name to Corgi International Limited. The change reflects the firm's "focus on further strengthening the company's franchise for die-cast collectible products and children's toy lines." The company's stock now trades under the symbol CRGI on the Nasdaq. George Volanakis, president and CEO, comments, "Corgi is one of the oldest and most renown brands in the collectibles market, with collectors and fans worldwide. Our name change leverages that franchise by giving us a visible platform on which to create broader awareness of our brand, score more consumers and create a whole new generation of collectors."

For the full release, see http://biz.yahoo.com/bw/051027/275708.html?.v=1

In a move approved by shareholders, Zindart will change its name to Corgi International Limited. Mr. Volanakis, Zindart CEO, comments, "Changing our name to Corgi International clarifies that the main focus of the company, going forward, will be on the marketing of branded Corgi products throughout the world." The name change will take effect as soon as the registration is completed in Hong Kong. The company's stock symbol will become CRGI.

For the full release, see http://biz.yahoo.com/bw/050929/295235.html?.v=1

Zindart announced that George Volanakis will succeed Peter Gardiner as CEO. Most recently, Mr. Volanakis headed Zindart's Corgi division. The move is in line with Zindart's increasing focus on Corgi as its primary operating division. Zindart also announced that John Clough has been appointed Non-Executive Chairman of the Board.

For the full release, see http://biz.yahoo.com/bw/050927/275341.html?.v=1

Corgi Classics Limited, a wholly owned Zindart Subsidiary, announced that its Corgi USA unit has acquired a license from Marvel Entertainment to produce "high end metal figurines of some of the hottest characters in the comic book world," including "Spider-Man, Captain America, Hulk and Thor." David Davenport, Corgi's General Manager of the Americas, comments, "We've quickly become known among collectors as the leading source for high-quality metal comics collectibles."

For the full release, see http://biz.yahoo.com/bw/050926/265472.html?.v=1

Zindart announced fiscal year 2006 first quarter revenues from continuing operations – Hua Yang and Zindart manufacturing operations are classified as non-operating – of $10.4 million versus $9.2 million in the year-earlier period. The net loss from continuing operations narrowed to $1.5 million from $1.9 million. Zindart Chairman, Peter Gardiner, comments, "We are initiating several new strategic efforts to lower variable costs through industrial engineering efforts, implementing various efforts to reduce fixed costs through restructuring and shifting our customer strategy to focus on fewer, larger customers. Zindart is also evaluating how we can bring more of Corgi's die-cast production in-house in an effort to capture significant gross profits currently lost to third-party manufacturers."

The firm’s Batman replicas sold well during the debut of the movie “Batman Begins,” and the company continues to focus on new products. To better reflect the nature of the firm’s ongoing operations, shareholders will be asked to approve the change of the company’s name to Corgi International Limited. The annual meeting is scheduled for September 27, 2005.

For the full release, see http://biz.yahoo.com/bw/050908/85920.html?.v=1.

Zindart announced that for fiscal 2005 ended March 31 it generated revenues of $43.2 million, down from fiscal 2004’s $49.7 million. The bottom line showed a loss of $7.1 million versus $5.3 in the year-earlier period. Fiscal 2005 results reflected the classification of Hua Yang (sold in May 2004) and Zindart Manufacturing (announced for sale in March 2005) as discontinued operations.

Progress was reported on several fronts, including a stronger balance sheet. Working capital was improved as reflected by the ratio of cash and cash equivalents to current liabilities rising from 0.04 to 0.61. And the company now reports it is free of any long-term debt. Since Zindart’s Chairman Peter Gardiner took control five years ago, the company has eliminated $18 million in long-term debt.

The company also reports on the installation of a new top management team at Corgi. Corgi CEO George Volanakis has capitalized on the company’s investment in product development by “acquiring more highly visible product licenses” and rolling out new products, including “the introduction of a line of 12 high-quality, authentically produced Batman vehicles that hit stores this summer.” For the upcoming holiday season, Corgi will be selling a line of micro racing cars, Streakerz. Sales will be bolstered by an evolving global marketing strategy that includes locating marketing and sales personnel directly into local markets. Corgi was able to capture “several of the big five mass merchandisers in the U.S., which control a major portion of the consumer goods retail market.” And “orders from the bigger chains are starting to grow,” according to Mr. Gardiner.

The company’s 20-F (2005 Annual Report) can be accessed at http://www.zindart.com/Form%2020-F_033105.pdf.

In what the author describes as “the latest move in a realignment of the Japanese toy-and-game industry,” the Takara and Tomy companies have acknowledged that they are engaged in talks about integrating operations. The talks have evolved since Konami “sold its stake in Takara to terminate a nearly five-year capital tie-up.” The combined firm would result in a company with annual sales of about US$1.7 billion.

Corgi, Zindart’s die-cast replica operating unit, has entered into a distribution agreement with Reeves International whereby Reeves will handle distributing Corgi’s collectibles in the specialty trade market in the U.S. Reeves is a 60-year-old private company that has established a dominant position in the specialty market with its Breyer model horse and Bosun Boats lines. Corgi will continue to market directly to retailers the U.S. mass market “as well as selected specialty accounts.” Corgi President and CEO comments, “The new agreement makes tremendous sense for both companies. It maximizes the sales and marketing strength of each partner.”

For the full release, see http://biz.yahoo.com/bw/050419/195452.html?.v=1

Zindart announced today its intention to seek a buyer for its manufacturing operations so as to become even more focused on expanding the company’s branded-products division, Corgi. Zindart has retained Lattitude Capital Group, a Hong-Kong based investment banking firm to help seek a buyer. Peter Gardiner, Zindart CEO, echoed the sentiments of the board by commenting, “The Board believes that the most shareholder value will arise from adding marketing and distribution strength to the company’s consumer brands.” Zindart’s Corgi unit makes and markets high-quality miniature die-cast collectible products that are sold through both specialty stores and mass market “chains in the U.K., Europe, Canada, Mexico, the Unities States and elsewhere.” Commenting on Corgi’s future, Peter Gardiner says, “Progress during the past year has included expanding the geographic distribution of the Corgi Brand and increasing the number of retail stores carrying our product lines. On top of that, we have launched several new product lines. We are optimistic that our investment in these areas will soon begin to pay off.”

For the full release, see http://biz.yahoo.com/bw/050412/125853.html?.v=1

The Wall Street Journal’s Stephanie Kang reports that a “slugfest” is about to begin in the market for action-movie toys as the latest in the Stars Wars episodes goes up against new Batman and Fantastic Four releases. “Some think the rush of high-profile films opening this summer will help revive the movie-based toy businesses." Among the new toys will be a remote-controlled Batmobile. Mattel’s Brand President Matt Bousquette believes “the point is not to just make souvenirs but cool stuff to play with.”

In a related story of March 4, Reuters reports on the success of a new category of toys, office toys – toys marketed to sit on workers’ desks – are showing strong growth. While the NPD Group, an industry observer, doesn’t track office toys, it’s reported to be expecting a rebound in action-figure toys in 2005 following weakness in the last two years due, in part, to “retailers’ bankruptcies in the last few years.” Zindart’s 1950s Batmobile and Rock N’ Rollin Rides cars are considered to be “among the collectibles with office toy appeal.” Batman products have already been a strong performer for the Corgi unit of Zindart, and management expects that 2005 will bring more of the same.

Zindart reported that its fiscal 2005 third-quarter results of $22.9 million in sales and a net loss from continuing operations of $2.4 million “reflects a general softness in the toy industry, worldwide and particularly in fourth quarter 2004 in the U.S.” Despite the results, the company has made headway in strengthening the balance sheet, globally branding its products, and investing in new product development. Long-term debt has been eliminated while cash as a percent of total assets has more than doubled from 4.3% in December 2000 to 9.1% at the end of calendar 2004. A dramatic reduction in the average days of sales in account receivables has also been achieved. Zindart’s also been “strengthened” as “new, experienced senior managers are in place at both the corporate and division levels.”

Zindart’s Corgi unit has rolled out a number of new collectible toy products and more are scheduled in 2005. “In 2004, Corgi launched a Batman Collectibles Die-Cast Editions line, realistic renditions of some of DC Comics’ most well know Batman vehicles. In 2005, Corgi will be rolling out 12 all-new Batman vehicles that will be in stores in time to take advantage of interest driven by the new Warner Bros. movie “Batman Begins” . . . slated for release in June 2005.” Corgi will be unveiling three new product lines: Streakerz micro racing cars for boys; Lil’Handfuls miniature baby dolls for girls; and Rock N Rollin’ Rides, scale models of classic cars of the 50’s and 60’s, for adults. It will also be unveiling new additions to its Little Red Tractor line, a toy line based on the No. 1 children’s TV show in Great Britain. Reflecting on Corgi’s overall global branding strategy, Chairman and CEO Mr. Peter Gardiner comments, “We are just starting to see the payoff, as buyers are responding and we’re getting more stores and more shelf space both in the U.S. and worldwide.”

For the full release, see http://biz.yahoo.com/bw/050218/185125_1.html

NPD Group

Toy Industry Association

Reuters

The New York Times

On the heels of a 3% decline in 2003, the sale of traditional toys fell another 3% in 2004. The NPD Group, an industry observer, reports that the 2004 slump would have been worse were it not for a rebound in electronic toy sales in December. Reuters writes, “The U.S. toy industry is grappling with years of intense price competition, slipping revenues, higher costs, store closings and high-profile bankruptcies. The remaining retailers know they have to stand out from the crowd to survive.”

The impact of discounters and digital music players will continue to impact the industry going forward. The New York Times recently reported on the blurring distinction between more advanced electronics and toys in an article by Michel Marriott titled Gadget or Plaything? Let a Child Decide. Industry observers “have made note of a major shift to toys that not only incorporate more advanced electronics than before, but also blur the distinction between toys and electronic items typically marketed to older consumers.” They’ve even come up with a name to describe the phenomenon, ‘age compression.’ David Riley of the NPD Group observes that $300 iPods, cellphones, and portable DVD players are increasingly being found in the hands of grade school children. Funosophy, a research/consulting group, recently reported that 40% of 1000 children polled between the ages of 6 to 14 felt that “electronics were the best kind of present to get last year.”

In a research report dated January 19, 2005, CapStone Investments placed a Buy rating on Zindart with a price target of $6.00. Among the catalysts expected to fuel Zindart’s growth are three new product lines that the firm’s Corgi unit unveiled at Toy Fair 2005. CapStone also likes the synergy of Zindart Manufacturing being able to increasingly manufacture Corgi products as well as the “new heads of sales, marketing and product development” that will expand the firm’s product line and spur sales growth. A new line of Batmobiles licensed from Warner Brothers has “helped corgi get increased shelf space in the top 5 US retailers, including Wal-Mart and Target.” Zindart Manufacturing, operating at 100% plant utilization, has diversified its base by adding “a line of bathroom plumbing products . . . sold through B&O in the UK (similar to Home Depot).”

Zindart's board has named Peter A. J. Gardiner as chairman and CEO. Mr. Gardiner served as Zindart Chairman from November 2000 to September 2004. He began a tenure as interim CEO last October. It was also announced that Dan Widdicombe will serve as Chairman of the company's audit committee.

For the full release, see http://biz.yahoo.com/bw/050118/185503_1.html

Zindart expanded its board at an extraordinary general meeting of shareholders that was held on December 30 by electing Dan Widdicombe and John Clough to "serve for the ensuing year until the conclusion of the 2005 annual general meeting." Widdicombe brings senior financial executive experience from positions as CFO of I-Quest Corp. and as Managing Director with Bear Stearns Asia Limited. Mr. Clough also brings executive experience garnered as Board member of chinadotcom, as a special advisor to General Atlantic partners and as co-founder of CSSL, a consulting firm specializing banking , finance, manufacturing and distribution systems.

For the full release, see http://biz.yahoo.com/bw/050107/75219_1.html

In late December, Zindart announced the strengthening of its Corgi unit's global marketing effort. David Wootliff has been selected to spearhead Corgi's European marketing initiatives, while David O'Neill joined the Corgi USA team to expand the firm's presence in the U.S., "with an emphasis on providing marketing support for mass market retailers."

Mr. Wootliff's most recent position was as UK manager of Warner Bros. Consumer Products; he also brings experience from positions with Disney and Hasbro. Mr. O'Neill brings toy-industry experience, most recently as Director of Product Development Preschool and Boys Toys for KB Toys. Previously, he'd held high-level positions with Mattel and The Ertl Company. For the full release, click through to http://biz.yahoo.com/bw/041227/275013_1.html.

Corgi made news earlier in the month when its new Batmobile 2000 won the Buyer's Choice award for collectibles at the iHobby Expo in Rosemount, Illinois. Inspired by DC Comic's Batman Comic Book Series and originally designed for the mass consumer market, Corgi USA found that specialty retailers were ordering in large numbers to meet demand from their "discriminating collector customers as well." Corgi has unveiled eleven models covering six decades of comic books from 1:43 to 1:16 scale. For more on this release please click through http://biz.yahoo.com/bw/041220/205173_1.html.

Zindart has announced that its extraordinary shareholder meeting will take place on December 30 in San Francisco. The principal item before shareholders will be the election of two additional directors: the nominees being Dan Widdicombe, former CFO of chinadotcom Corp., and John Clough, a special advisor to General Atlantic Partners of Hong Kong.

Shareholders will also vote on authorizing the Board of Directors to issue all of part of Zindart's currently authorized but unissued shares. The authority is required under Hong Kong law in order to issue the shares as might be deemed necessary, "including as compensation to the company's board and executive officers."

For the full release, see http://biz.yahoo.com/bw/041214/145243_1.html

According to information available at the NASDAQ, the top five institutional holders of Zindart stock are Gruber & McBaine Capital Management, Heartland Advisors, Thomson Horstmann & Bryant, Kennedy Capital Management, and Northern Trust Co of Connecticut. Also, 19 of 23 insider purchases have come in the last three months. For more information, please click through here.

Zindart reported that sales jumped 12% for both its fiscal 2005 second-quarter and six-month periods ended September 30. The gains were led by the firm’s manufacturing division that experienced improved orders from current as well as new customers and operated at full capacity. Revenues grew 33% for the division over the first six months. Profitability was crimped – loss of $2.0 million for the six months – due to a shortage of labor in southern China and rising oil prices. Even so, management has been able to bolster the balance sheet as indicated by $11 million in cash at September 30. According to interim CEO, Peter Gardiner, the Corgi division is making headway under the direction of George Volanakis. Corgi Europe has hired a new marketing executive, evidence of the company’s commitment to become a more forceful marketing organization. New products, including three new product lines, and a new website will help the company better serve both collectors and the general consumer.

For the full release, see http://biz.yahoo.com/bw/041116/165572_1.html

Mr. Peter Gardiner has been appointed Interim CEO of Zindart. He will serve until a new Board of Directors is elected and has time to determine who will best serve the company's leadership needs. In the Interim role, Mr. Gardiner will continue implementing his strategic vision to make the company a global marketer of collectibles, toys and other product lines, support Corgi's aggressive marketing and product development programs, and assist Mr. Koulos and Mr. Shemano, Zindart's current Board members, in evaluating and recruiting a new Board of Directors. Mr. Koulos commented, "I am delighted that Peter is willing to see us through this phase. We have just begun no see some sustained growth. We have to make sure we do not lose momentum. Continuity of management and of strategy will  help get us up to the next level."

For the full release, see http://biz.yahoo.com/bw/041013/135341_1.html

Gary Shemano, 35-year securities industry veteran and founder of an investment banking group bearing his name, has joined Zindart's board of directors. Mr. Shemano has agreed to serve until Zindart shareholders are able to elect a new Board of Directors at an extraordinary shareholder meeting scheduled for December 2004.

For the full release, see http://biz.yahoo.com/bw/041012/125480_1.html

Though oil and technology stocks of Aisan companies listed in the U.S. were weak, strong gains in leisure, services, and electronics shares lifted The Bank of New York's Asian ADR Index to a 0.66 point gain. Among leisure goods and services, Zindart "was the biggest gainer, rising 18.5%."

For the full release, see click here

Corgi USA has signed a three-year agreement for the National Motor Museum Mint (NMMM) to market and distribute Corgi's line of precision die-cast collectibles. NMMM will utilize direct mail, print space, catalog and broadcast media to facilitate direct contact with consumers, thus helping to build brand awareness and sales in the U.S. marketplace. The NMMM, having grown in five years to 2 million customers and $30 million in sales, considers the Corgi association "to be one of the most exciting and rewarding relationships that we have taken on during our rapid and highly profitable growth period," according to Martin Lipset, NMMM founder.

For the full release, see http://biz.yahoo.com/bw/041006/65324_1.html

Zindart reported June-quarter (fiscal 2005 first quarter) results that showed a 13% rise in sales to $22.2 million and an improvement in the bottom line to a smaller loss of $0.10 per share. Reflecting the sale of its Hua Yang printing division, the firm's net tangible assets (stockholder' equity minus goodwill) improved by $8.9 million to $31.9 million. The sale of the Hua Yang printing division also led to a positive current ratio and "a dramatic improvement in the company's debt-to-equity ratio." Zindart Manufacturing fueled the quarter's gains on the back of increased orders from both current and new customers that allowed the unit to operate at full capacity. The company expects to continue working at full capacity through the end of 2004.

According to the company's interim CEO, Mr. Peter Gardiner, the overall results are reflective of the firm's three-year overhaul of operations. The focus of the turnaround was to turn "three locally-focused companies into a unified global marketing company," a process that included the buildup and divestiture of Hua Yang. The company has now entered the final phase that is calling upon newly installed "globally-oriented management" to slash unnecessary costs, implement new product introductions, and capitalize on new price points established for the specialty and mass markets. The leadership of George Volanakis has revitalized the Corgi unit. He's "set into motion an aggressive marketing and sales plan" and "is developing new products for the mass market." Corgi has moved 64% of its production with Zindart Manufacturing and plans to build on the relationship in order to provide for "smoother product development and maximizing corporate profitability."

For the full release, see http://biz.yahoo.com/bw/041001/15174_1.html

Zindart announced the following results of its annual meeting of shareholders.

A motion to approve the company's audited financial statements for the year ended March 31, 2004 was carried;

A motion to re-elect Leo Paul Koulos to the board of directors was carried;

A motions to re-elect Takaaki Ohya, Gordon Seow, Robert Theleen, Victor Yang and David Yu were not carried;

A motion to allow the company's board of directors to issue additional Ordinary Shares until the date of the company's next annual general meeting was not carried; and

A motion to re-appoint KPMG as the company's independent auditors for the fiscal year ending March 31, 2005 was carried.

Mr. Koulos, the only director currently in office, intends "to develop a slate of new directors and propose them for election at an extraordinary general meeting of the shareholders, to be held during the current fiscal quarter if at all possible." He further "asked Peter Gardiner to postpone his retirement and to continue as Chief Executive Officer during the interim period." He also asked for any shareholder wishing to make a board nomination to do so with the company's corporate secretary, Ms. Rosa Tam.

For the full release, see http://biz.yahoo.com/bw/040930/305797_1.html

Commenting on the news of Peter Gardiner's announcement to retire on September 30, 2004, Robert Theleen, Vice Chairman of Zindart's Board of Directors, states, "Zindart has derived much benefit from Peter's leadership. He has created a marketing focus for the company, restructured our manufacturing operations and eliminated our long-term debt, which has significantly strengthened the balance sheet. We appreciate his many contributions to the company." He is also credited with restructuring Zindart into three operating divisions while reducing overhead and replacing top management throughout the company, including at its UK-based Corgi Classics unit. He also oversaw the recent divestiture of the firm's Hua Yang specialty printing division. Mr. Gardiner will remain a consultant until March 31, 2005.

For the full release, see http://biz.yahoo.com/bw/040827/275092_1.html

In opening remarks at a conference call on corporate strategy, Peter Gardiner, CEO of Zindart Ltd., recapped how Zindart management, having completed the first two phases of a revitalization plan initiated in mid-2002, is now set about realizing the promise of phase three by delivering greater shareholder value. According to our notes, Mr. Gardiner mentioned a number of accomplishments attributable to phase three. New globally minded management has been recruited throughout the company, including the appointment of George Volanakis to head the firm's Corgi die-cast collectibles division. An investment banker has been retained, a new CFO is implementing sophisticated new financial controls and methodologies, and Hua Yang has been sold with a resulting improvement in the balance sheet that now reveals virtually no term debt. Zindart Manufacturing has achieved a 33% compound annual growth rate of sales thus far in fiscal 2004.

Mr. Gardiner also recapped a number of other accomplishments that have achieved since 2002. As mentioned, the balance sheet has been materially improved, and a number of banks now appear ready to engage Zindart going forward. The percentage of Corgi product made by Zindart Manufacturing has risen from 2% to 64%. Improvements in receivables, payables, raw materials management, and other initiatives have reduced the break even level at Zindart Manufacturing by 30%. And major new customers have been added, including Jada Toys and Funline Muscle Machines.

Mr. George Volanakis, the recently appointed President and CEO of the firm's Corgi division, followed Mr. Gardiner with a few comments as to Corgi's three-pronged strategy to achieve growth and financial stability. First, new "seasoned managers and executives" have been brought in and all non-essential, loss-producing activities have been stopped. These efforts have resulted in $1 million in annual savings. Secondly, Corgi will be revitalizing its presence in the U.K., build a worldwide collector business, and enter "the mass market channels worldwide."

Management expects that entering the worldwide mass market channel will "yield significant sales growth" for Corgi. Mr. Volanakis laid out several initiatives on this front. By offering repackaged and repositioned products at lower prices, the company has already "been able to obtain shelf space in the top five U.S. retailers -- during the Q&A session it was revealed that Wal-Mart and Target were among the five. Batman and Little Red Tractor products have helped in this regard. This fall and next spring, the company will introduce three "unique die-cast vehicle lines" in the U.S. and U.K. mass markets. Our notes record Mr. Volanakis as commenting, "We feel comfortable that these entries will set Corgi apart from the rest and will mark a major return of the Corgi brand name to the mass market." The company also plans on releasing a product line for girls that will be developed by a "prestigious US toy inventing" company. Lastly, Corgi plans on further exploiting its relationship with Zindart Manufacturing. It is planned to eventually place all of Corgi's production with Zindart Manufacturing, thus taking advantage of the manufacturing unit's expertise, ensuring more on-time delivery, and generally boosting the overall profitability of Zindart Ltd.

Prior to the question and answer period, Hugh Peyman, an industry analyst with Research Works, commented on the highly competitive situation that has existed in Southern China's Pearl River Delta region. By way of introduction, Mr. Gardiner summarized that many competitors have been eliminated and that has helped restore Zindart's pricing power. Mr. Peyman followed by delineating the sources of competition, including many world leading manufacturers who've relocated to the area, an emerging Chinese private sector that has thrived against all odds, and state-sponsored companies that have benefited from years of special subsidies and easy finance.

Questions and answers ranged from issues relating to Zindart's board and ChinaVest's investment interest to growth strategies, new customers, and Corgi's new mass marketing channel initiative. Mr. Gardiner gave reassurance that Zindart was firmly focused on growth and releasing shareholder value through a higher stock price, but clearly the Board would have a responsibility to evaluate any bona-fide offer that materialize for the company. He pointed to the synergy now being achieved between Corgi and Zindart Manufacturing and the strengthened balance sheet in the wake of selling the firm's Hua Yang division.

As to new orders, Mr. Gardiner mentioned that it was the firm's proprietary painting technique that helped it win orders from Jada Toys, and that Funline Muscle Machines was attracted to the firm's ability to turn on huge volume. It was reported that the company has also won contracts for power-shower products for the do-it-yourself bathroom market in the U.K. that will be distributed through B&Q, the U.K.'s equivalent of Home Depot. Zindart Manufacturing ran at 100% capacity during Fiscal 2005's first quarter which ended June 30 (see citation 98 below).

Mr. Volanakis found opportunity to expound on Corgi's mass-market channel strategy, a strategy he's used successfully on two previous occasions. Corgi has developed unique products priced below $10 that it has already shown to several mass marketers, including Wal-Mart and Toys R Us. Commenting on the "magical" nature of one new product, Mr. Volanakis described how by inserting a key in the backend of the vehicle, the hood opens, the engine rises up, and even the convertible top goes down. There will be a "smattering" of product available in November/December, but the majority will be unveiled in early 2005. He further went on to emphasize that this is strictly a mass-market strategy that would be separate from the firm's higher-end collectibles products.

Mr. Gardiner summarized the call once again acknowledging the firm's in the third and final stage of its turnaround strategy. The first two phases included building a global marketing effort, particularly in the USA and Europe and a revamping of the firm's operating model to a lower cost structure and shorter lead times. The third phase includes the move by Corgi into the mass-market channel. He also restated that the company will begin reporting quarterly results even though it isn't required to do so under its current listing status on NASDAQ.

Zindart reported today that on the strength of orders from current customers and new customers and product categories, production at the firm's Zindart Manufacturing unit ran at 100% for the first quarter of fiscal 2005 ended June 30, up from 70% in the year-earlier period. New die-cast customers include Jada Toys and Funline Muscle Machines, who was recently purchased by ActionPerformance. The new Funline relationship "gave Zindart the opportunity to diversify into radio-controlled products." It was also reported that the firm's Luen Tat mold and tool company operated at 90% capacity.

For the full release, see http://biz.yahoo.com/bw/040706/65394_1.html

Zindart announced that it has sold its Hua Yang printing unit for $24 million -- $10 million debt and $14 million cash. The sale will allow management to focus attention on the synergies available between the firm's branded and OEM die-cast divisions. The sale included significant cash that will improve the balance sheet and increase overall operating flexibility. Management stated its intention on using the cash infusion to support Corgi's expansion in the U.S. Corgi has been strengthened by the recent hiring of toy-industry veteran George Volanakis. Zindart Chairman, Mr. Peter Gardiner, comments, "George has (also) reviewed and revitalized Corgi's entire sales and marketing organization, both in the U.S. and the U.K., and has implemented company-wide improvements that are starting to produce favorable results."

For the full release, see http://biz.yahoo.com/bw/040525/255375_1.html

Through expanded relationships with current lenders and new banking partners, Zindart has expanded its overall banking facilities from $30 million to $50 million. The new arrangements include trading lines and capital leasing agreements. Mr. Peter Gardiner, Zindart Chairman, comments that "the new facilities are being used to support increased sales . . . " The expanded banking relationships are with Hongkong & Shanghai Bank (NYSE: HBC), KBC Bank N.A., and Bank of Communications; new relationships include the International Bank of Asia, Development Bank of Singapore (SGX: DBS), East Asia Heller, and the Agricultural Bank of China.

For the full release, see http://biz.yahoo.com/bw/040511/115476_1.html

Zindart has retained Latitude Capital Group, an Asian investment banking concern, to help the company evaluate strategic alternatives. Mr. Peter Gardiner, Zindart Chairman, commented that, "Zindart is looking at a number of strategic initiatives" with "an eye to building shareholder value."

For the full release, see http://biz.yahoo.com/bw/040505/55390_1.html

Zindart Limited has appointed toy industry veteran George Volanakis as President and CEO of its Corgi Classics division with "full P&L responsibility for Corgi's worldwide operations." George Volanakis has held several senior level positions in the toy industry over the last 30 years, including at Ertl, Mattel, MatchBox and Milton Bradley. Most recently, he was Executive Vice President of Hasbro. Regarding the appointment, Zindart Chairman Peter Gardiner commented, "Clearly, we're delighted to have recruited such a senior industry executive to take the helm at Corgi. Everywhere George has been he's grown the business significantly, as well as improving performance." Mr. Volanakis' skills appear to fit well with the beginning of "an intensive marketing period for Corgi" that is part of the "final phase of (a) strategic plan" capitalizing on changes that "have been implemented within the last two years," including the installation of an "on-time delivery system."

For the full release, see http://biz.yahoo.com/bw/040318/185419_1.html

Jason Diamond of CapStone Investments has reiterated his Strong Buy rating on Zindart while lowering his target price to $9 from $10. His price target applies a price-earnings multiple of 14 to his estimate of 2005 earnings. His view is buttressed by the prospects for the sale of a business unit that would leave the company with about $5 to $6 in cash per share. The inability of Zindart to sell its Corgi unit or successfully turn it around would crimp his earnings estimate. In the report, Mr. Diamond chronicles recent significant developments at Zindart, including the appointment of George Volanakis as President and CEO of Corgi Classics. Mr. Volanakis was previously Executive VP of Hasbro and President and COO of both MatchBox Toys and Playskool. He was also President and CEO of die-cast manufacturer Ertl, "where he increased sales from $80 to $250 million annually before selling the company to Racing Champions."

Zindart announced today that it expects to report a net loss for the year ended March 31, 2004. A considerable shortfall at Corgi, due, in part, to currency movements, appears to be the primary cause of the weaker performance. Hua Yang printing experienced some weakness as the year came to a close, but Zindart Manufacturing "continues to exhibit strong revenue performance."

For the full release, see http://biz.yahoo.com/bw/040318/185225_1.html

Zindart's Corgi Classics unit has announced that it will benefit from Warner Brother's DC Comics' Batman brand by entering into a global license "to produce and market a line of high quality die-cast Batmobiles . . . for the toy and collectible market." The new line of products was unveiled at toy fairs in Germany and England; the line will debut in the U.S. at this week's toy fair in New York. Peter Gardiner, Zindart Chairman, states, "By fall, new Batmobiles, based on content from Batman comic books, will be in all the major markets: Japan, the UK, Germany, France, Australia, Mexico, Brazil, China and, of course, the U.S." Retailer commitments have already been received from Wal-Mart, Toys "R" Us, Shop Co and Kmart, as well as DC Comics stores and more than 1,100 specialty collector outlets." Collectors can also go direct to www.corgiclassics.com.

For the full release, see http://biz.yahoo.com/bw/040217/175410_1.html

Having reviewed Zindart's results for the first half of fiscal 2004, Mr. Diamond has raised his investment rating on Zindart to Strong Buy while lowering his price target $0.50 to $10.00. Results for the first half were below his expectations, but he is encouraged by both the Hua Yang and Zindart Manufacturing divisions operating at higher utilization rates. He is also encouraged that while Zindart management is taking steps to turn around results at Corgi, the units eventual sale will improve Zindart's financials and improve profitability. Continued diversification, including the development of a new line of home-improvement products, new specialty-packaging awards for branded perfumes and board games, and expanded manufacturing capabilities are also considered catalysts for growth.

Though cautioning against buying Chinese stocks whose names are familiar enough to roll off the tip of your tongue, The China Dispatch, in an article written by Editor Andrew C. Carpenter, made Zindart its monthly recommendation for December 2003. The newsletter encapsulates Zindart as a "comeback story" with "great new management" with a "commitment to excellence."

The recommendation chronicles the effect of the recession on Zindart, including how it changed customers' buying habits to Zindart's detriment. New board members were added, including A. J. Gardiner who was subsequently given operating control. Mr. Gardiner "has made fundamental changes," including expanded marketing initiatives and product lines. The effect of which was to reduce the company's dependency on Hallmark and Mattel from 57% of Zindart's business to 17%. The "building (of) modern factories and aggressively seeking new business" were contributors to the company's renewal, including the ability to "now produce its goods quickly and not be held hostage by seasonal demands." Replacing "14 of the company's top managers" has also helped Zindart to respond "decisively in the global marketplace."

The numbers are beginning to reflect the turnaround; the company fully paid off a $30 million line of credit in September 2003, and then reported in October a "$10.8 million improvement in profitability." Mr. Carpenter concludes that Zindart is "a great value investment and company I suspect we'll want to hold onto for a number of years. Buy Zindart (NASDAQ: ZNDT) at the market up to $9.85."

Zindart announced that its obligation to "negotiate exclusively with the management" team of Corgi regarding the potential sale of Corgi has expired. Management also announced that they are in early discussions with other parties that have shown an interest in buying Corgi as they develop "strategic alternatives for Corgi."

Toy manufacturing, particularly in China, has changed dramatically in recent years. Not only have toys become more sophisticated with the introduction of computer chip technology, but buyers, such as LeapFrog, have also changed the way they forecast demand and production requirements. Essentially, as chronicled in this The Wall Street Journal article by Mr. Fowler and Mr. Pereira, computer technology, including the Internet, and a willingness of toy retailers to open their sales figures in real time has allowed toy companies to make rapid-fire adjustments to their ordering practices. That, in turn, pressured toy manufacturers themselves to find ways to more quickly adjust their manufacturing schedules.

Improvement in the global supply chain are designed to reduce overstocking, but more importantly, to be able to ramp up quickly to meet the demand of a surprise blockbuster. Toy shortages for the likes of Cabbage Patch Dolls, Teenage Mutant Ninga Turtles, and Tickle Me Elmos will hopefully be a phenomenon of the past. The end result is that many China-based manufacturing operations are no longer the "simple sweatshops" of the 1980s nor make use of "hand-made" factory tools as was the case just ten years ago. Western business practices combined with computer-automated-design software have dramatically improved manufacturing efficiencies.

Zindart announced that revamped operating and marketing strategies at its manufacturing units -- Hua Yang and Zindart Manufacturing -- helped progress on revenues. Both divisions reported higher net sales and operating profits, and they were running at 83% of capacity, up from 51% a year ago. Orders for the Cranium board game and Christian Dior perfume packaging sparked the Hua Yang unit, while Zindart Manufacturing added several new customers and diversified into new markets. The firm's Corgi Classics unit, a maker of high quality die-cast replica items, fell short of sales forecasts; management is being buttressed and the marketing approach is being more tightly focused.

Management reports that long-term debt, having paid off a $30 million letter of credit in October, is now approximately US$3 million.