Major Shareholder:

• Mr. Cheung Po Lun - 75.0% interest

Company Subsidiary:

• Pearl Delta (100%): Manufacturing and trading of stuffed toys
• Sewco Toys (100%): Investment holdings and trading of hard toys
• ZS Sewco (PRC) (100%): Manufacturing of hard toys

The Group is principally engaged in the manufacture and sale of a wide range of hard toys and stuffed toys on an OEM basis. For the three years 31st December, 2000 and the seven months ended 31st July, 2001, the Group manufactured more than 500 types of hard toys and 100 types of stuffed toys with different features according to the orders and specifications of its customers. During the same period, the Group's products were sold under more than 20 brandname given by its customers.

The Group has three major customers, namely Bandai, Mattel and TMSW, which are either toy specialist companies or agent of internationally well-known fast food chain store. The Directors consider that the Group has established itself as a reputable OEM manufacturer in the toy manufacturing industry in Hong Kong and the PRC. With its commitment to product quality, the Group has gained confidence of its customers, including its three major customers, which have been maintaining business relationships with the Group for over 14 years.

The Group operates three principal production facilities, all of which are located in Gankou Zhen with a total gross floor area of approximately 72,800 sq.m. and a workforce of approximately 7,000 workers. There production facilities are equipped with 39 production lines of hard toys, 80 injection moulding machines and six electric assembly lines and 11 production lines of stuffed toys.

The Directors believe that the Group has the following competitive advantages:

• Extensive experience and expertise of its management in the toy manufacturing industry;
• Strong market recognition and good reputation in the toy manufacturing industry;
• Well established and long-term relationship with its customers, supplier, and employees;
• High morale and harmonious relationship between the workers and management of the Group as a result of successful implementation of localization policy in the Group's human resources management in its PRC operations;
• Strong capability to adapt to changing requirements of and specifications from, different customers; and
• Insistence on stringent quality control assurance procedures.

• Fluctuations in net profit margin may have adverse impact on the Group's operating results and financial position;
• As an OEM manufacturer, the Group's success depends on its ability to meet customer's requirements;
• Fluctuations in price and supply of new materials may change the Group's production cost;
• The Group is relying on processing arrangements for manufacturing staffed toys.

The plans to expand its hard toys production capacity by setting up a new factory complex on a parcel of self-held land in Gankou Zhen. Construction of the new production facilities is scheduled to commence in the first half of 2003 and be completed in late 2003. The Directors plan that the new production facilities will commence full operation in the first quarter of 2004.

In order to enhance the efficiency and productivity of the Group's existing prediction facilities, the Group plans to purchase additional machinery and equipment and to upgrade its existing production facilities. The Directors plan that enhancement of production facilities will also be completed in late 2003.

Leveraging on the its solid customer base, the Group intends its sales and marketing activities to solicit more new customers. The Directors consider that an enlargement of the sales and marketing team of the Group will widen the sales network and customer base of the Group, thus help promote the Group's products and collect the latest market information and customers requirements.

The net proceeds from the Placing, after deducting the related expenses, are estimated to amount to approximately HK$36 million (based on the offer price HK$0.55 per share). The Group at present intends to apply the net proceeds as follows: