As filed with the Securities and Exchange Commission on April 6, 2004

FORM F-4

GRAND TOYS INTERNATIONAL LIMITED

Grand Toys International Limited
Room UG202, Floor UG2
Chinachem Golden Plaza
77 Mody Road
Tsimshatsui East
Kowloon, Hong Kong
(852) 2738-7878

(Name, address and telephone number, including area code, of registrant’s principal executive offices)

CT Corporation System
111 Eighth Avenue, New York, New York 10011
(212) 894-8940
(Name, address and telephone number of agent for service)

Copies to:

          Approximate date of commencement of proposed sale to the public: As soon as practicable after this Registration Statement has been declared effective and all other conditions to the agreement and plan of merger described in the enclosed proxy statement/prospectus have been satisfied or waived.

          If this form is filed to register additional securities for an offering pursuant to Rule 462(b) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. o

          If this form is a post-effective amendment filed pursuant to Rule 462(d) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. o

CALCULATION OF REGISTRATION FEE

REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL REGISTRANT SHALL FILE A 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 THIS REGISTRATION STATEMENT SHALL BECOME EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(a), MAY DETERMINE.

[Date], 2004

Dear Fellow Shareholder:

You are cordially invited to attend a special meeting of shareholders of Grand Toys International, Inc., which we refer to as Grand US, to be held at                     a.m. on                     , 2004, at                                                . At the meeting, we are presenting for your approval proposals for:

The reorganization of Grand US, Grand HK’s acquisition of the shares of Playwell International Limited, which we refer to as Playwell, and the issuance of Grand HK ADSs to Centralink Investments Limited, which we refer to as Centralink, are steps in a single transaction. Grand HK is a subsidiary of Grand US but will, as a result of the reorganization, become the publicly-traded holding company of both Grand US and Playwell. The reorganization will be accomplished through the merger of Grand US and a subsidiary of Grand HK. Grand US will continue to exist, but it will be a wholly-owned subsidiary of Grand HK.

The number of Grand HK ADSs to be owned by you and represented by ADRs immediately after the transaction will be the same as the number of Grand US shares you own immediately prior to the transaction. However, as a result of the issuance to Centralink of 10,000,000 Grand HK ADSs as part of the transaction and Centralink’s further purchase of approximately 924,187 Grand HK ADSs from current significant shareholders of Grand US, Mr. Jeff Hsieh Cheng (to whom we refer as Jeff Hsieh) the ultimate beneficial owner of Centralink, will become the majority beneficial owner of Grand HK, indirectly owning over 71% of all of the outstanding capital stock of Grand HK.

After completion of the transactions described in the enclosed proxy statement/prospectus, Grand HK and its subsidiaries will continue to conduct the business now conducted by Grand US and its subsidiaries. Grand HK will also conduct the business of Playwell and its subsidiaries. In addition, Grand US’ current directors will resign upon completion of the transaction and a new board of directors of Grand HK consisting of five persons, including Elliot L. Bier, the former chairman of Grand US, will direct the operations of Grand HK and its subsidiaries. Grand US common stock is currently traded on the Nasdaq SmallCap Market under the symbol “GRIN”, and Grand HK has applied to have the Grand HK ADSs listed and traded after the reorganization on the Nasdaq SmallCap Market under the symbol “GRINF”.

The proxy statement/prospectus enclosed with this letter provides you with detailed information regarding each of the proposals to be considered at the special meeting. We encourage you to read this entire document carefully. Please consider the risk factors beginning on page 34.

Grand US’ board of directors has unanimously adopted the agreement and plan of merger to facilitate the reorganization and the subscription and exchange agreement which provides for the acquisition of Playwell and the issuance to Centralink of 10,000,000 Grand HK ADSs. Your board recommends that you vote “FOR” approval of the transactions described in those agreements, both of which must be approved if either is to go forward. If our shareholders approve the transactions at the special meeting, we expect to complete the reorganization, the Playwell acquisition and the related subscription transactions promptly following the special meeting. The board appreciates and encourages your participation. Whether or not you plan to attend the meeting, it is important that your shares be represented. PLEASE MARK, SIGN, DATE AND MAIL THE ENCLOSED PROXY IN THE ENVELOPE PROVIDED AT YOUR EARLIEST CONVENIENCE.

Very truly yours,

Elliot L. Bier     
Chairman           

Neither the Securities and Exchange Commission nor any state securities commission has approved the securities of Grand HK to be issued in connection with the reorganization merger and acquisition and subscription transactions. Furthermore, the Securities and Exchange Commission has not determined if this proxy statement/prospectus is accurate or adequate. Any representation to the contrary is a criminal offense. This proxy statement/prospectus is not an offer to sell and it is not soliciting an offer to buy securities in any jurisdiction where offers or sales are not permitted.

This proxy statement/prospectus incorporates important business and financial information about Grand US that is not included in or delivered with this proxy statement/prospectus. This information is available without charge to security holders of Grand US upon oral or written request to Grand Toys International, Inc., 1710 Route Transcanadienne, Dorval, QC H9P 1H7 Canada, Telephone: (514) 685-2180. Security holders must request this information no later than                     , five business days prior to the date of the Grand US special meeting of shareholders.

GRAND TOYS INTERNATIONAL, INC.
1710 Route Transcanadienne
Dorval, Quebec

NOTICE OF SPECIAL MEETING OF SHAREHOLDERS
TO BE HELD ON         , 2004

Notice of Special Meeting of Shareholders

            , 2004

To the Shareholders:

     A special meeting of Shareholders of Grand Toys International, Inc. will be held at                                        for the following purposes:

WHETHER YOU OWN ONE SHARE OR MANY, PLEASE MARK, SIGN, DATE AND RETURN PROMPTLY THE ENCLOSED PROXY IN THE POSTAGE PAID ENVELOPE PROVIDED.

By Order of the board of directors

Elliot L. Bier
Chairman of the Board

Montreal, Quebec

                    , 2004

This Proxy Statement is dated               , 2004, and was first mailed to Grand Toys International, Inc. Shareholders on or about               , 2004

TABLE OF CONTENTS

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INTRODUCTION

     This proxy statement/prospectus is being mailed to shareholders of Grand Toys International, Inc. in connection with the special meeting of shareholders. You should read this proxy statement/prospectus carefully before you vote your shares. The document is organized into four parts.

     Part I – “Summary” summarizes the information set forth in this proxy statement/prospectus.

     Part II - “The Reorganization and the Playwell Acquisition” provides information about proposals 1 and 2, the transaction in which Grand Toys International, Inc. will reorganize by becoming a subsidiary of its current Hong Kong subsidiary, Grand Toys International Limited, and the issuance of 10,000,000 ADSs to Centralink Investments Limited in connection with the acquisition of Playwell International Limited and related transactions immediately after the reorganization.

     Part III — “Information About the Special Meeting and Voting” provides information about the special meeting of shareholders of Grand Toys International, Inc., how shareholders may vote or grant a proxy, and the vote required to approve each proposal.

     Part IV — “Where You Can Find More Information” explains where shareholders of Grand Toys International, Inc. can find more information about Grand Toys International, Inc.

Throughout this proxy statement/prospectus,

All dollar figures, unless otherwise specified, will be denominated in U.S. Dollars.

References to HK$ refers to Hong Kong Dollars.

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CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING STATEMENTS

     This document contains or incorporates by reference “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995 with respect to the reorganization, the issuance of ADSs of Grand HK to the shareholders of Grand US and Centralink and the financial condition, results of operations and business of Grand US and Playwell. The Act protects public companies, such as Grand US, from liability for forward-looking statements in private securities actions if the forward-looking statement is identified and is accompanied by meaningful cautionary statements identifying important factors that could cause actual results to differ materially. Since the Act provides protections from liability for forward-looking statements only to public companies, it may not apply to any statements made by Grand HK at any time prior to the completion of the transaction described in this proxy statement/prospectus. Forward-looking statements by their nature involve a degree of risk and uncertainty, including, but not limited to, the risks and uncertainties referred to under “Risk Factors” and elsewhere herein. All statements regarding the expected benefits of the reorganization, the Playwell acquisition and the acquisition by Centralink of a controlling interest in Grand HK are forward-looking statements. The forward-looking statements include statements for the period following completion of the transaction. You can find many of these statements by looking for words such as “believes,” “expects,” “anticipates,” “estimates,” “continues,” “may,” “intends,” “plans” or similar expressions in this document or in the documents incorporated by reference. You should be aware that any forward looking statements in this document are not guarantees of future performance. Grand HK, Grand US and Playwell have identified factors that could cause actual plans or results to differ materially from those included in any forward-looking statements. These factors include, but are not limited to:

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     Actual results may differ materially from those expressed or implied by forward-looking statements. As you make your decision how to vote, please take into account that forward-looking statements speak only as of the date of this document or, in the case of documents incorporated by reference, the date of any such document.

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QUESTIONS AND ANSWERS
ABOUT THE REORGANIZATION MERGER AND THE ISSUANCE OF SHARES TO CENTRALINK

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     Below is a graphic representation of the structure of Grand US immediately before and Grand HK immediately after the reorganization merger and the Playwell acquisition:

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PART I

SUMMARY

     This document is a prospectus of Grand HK and is a proxy statement of Grand US. This summary highlights the material terms of the reorganization merger and the subsequent acquisition of Playwell and related issuance of Grand HK ADSs to Centralink. To understand the transactions required to complete the reorganization merger of Grand US and the acquisition of Playwell and Centralink subscription more fully, you should read this entire proxy statement/prospectus, including the Annexes. The agreement and plan of merger and the subscription and exchange agreement, as amended, are attached as Annex A and Annex B, respectively, to this proxy statement/prospectus. The Fairness Opinion of Empire Valuation Consultants regarding the transaction contemplated by the subscription and exchange agreement is attached as Annex C.

The Companies (see page 48)

Grand Toys International, Inc.

     Grand Toys International, Inc., or Grand US, is a Nevada corporation. Both directly and through its Canadian subsidiary, Grand Toys Ltd., which is referred to as Grand Canada, Grand US has engaged in the toy business for over 43 years. Grand US, primarily through Grand Canada, develops and distributes a wide variety of toys and ancillary items throughout Canada and markets proprietary products in the United States. Grand US’ business consists of four areas of operation:

     Grand US’ shares are traded on the Nasdaq SmallCap Market under the symbol “GRIN”.

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Playwell International Limited

     Playwell International Limited, or Playwell, is a Hong Kong limited company. All of the shares of Playwell are beneficially owned by Hong Kong-based Centralink Investments Limited, a British Virgin Islands company that is wholly-owned by Cornerstone Overseas Investments, Limited, also a British Virgin Islands company, which is 100% beneficially owned by Mr. Jeff Hsieh. Playwell is a holding company with four operating subsidiaries:

     Playwell Industry Ltd., a subsidiary of Playwell, from August 2001 to May of 2003, is and has been a manufacturer of products for Grand US over the past two years.

Grand Toys International Limited

     Grand Toys International Limited, or Grand HK, is a Hong Kong limited company and is currently wholly-owned by Grand US. Grand HK has no significant assets or capitalization and has engaged in no activities other than in connection with its formation and the reorganization merger and the Centralink transactions. As a result of the reorganization merger, it will become the direct parent holding company of Grand US, Playwell and their respective subsidiaries.

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GTI Acquisition Corp.

     GTI Acquisition Corp. is a Nevada corporation and a wholly-owned subsidiary of Grand HK. GTI Acquisition Corp. was formed to accomplish the proposed reorganization merger. Prior to the reorganization merger, it will have no significant assets or capitalization unrelated to the reorganization merger and will not engage in any activities except in connection with its formation and the reorganization merger and related transactions.

Grand US Special Meeting (see page 120)

Time, date and place (see page 120)

     A special meeting of shareholders of Grand US will be held at [time], local time, on [Month day], 2004, at the offices of [   ].

Purposes of the Grand US Special Meeting (see page 120)

     The purposes of the Grand US special meeting are:

Quorum; Vote Required (see page 120)

     The presence, in person or by proxy, of shareholders holding a majority of the 5,355,244 shares outstanding and entitled to vote at the special meeting shall constitute a quorum.

     Approval of the agreement and plan of merger and of issuance of 10,000,000 Grand HK ADSs pursuant to the subscription and exchange agreement will require the affirmative vote of a majority of the 5,355,244 shares of Grand US outstanding as of the record date. Directors and officers of Grand US own an aggregate of 2,032,822 shares of Grand US common stock, or 38% of the shares of Grand US common stock required for approval of the transactions by Grand US.

     For registered holders and holders for whom brokers hold their shares in “street name,” failure to submit a proxy or to vote will have the effect of a vote against these transactions. In addition, all shareholders abstentions will have the effect of a vote against these transactions.

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The Reorganization and the Acquisition of Playwell (see page 48)

     The reorganization of Grand US pursuant to the agreement and plan of merger and Grand HK’s acquisition of the shares of Playwell and the issuance of Grand HK ADSs to Centralink pursuant to the subscription and exchange agreement are steps in a single transaction.

     Grand HK will, as a result of the reorganization merger and the Centralink transactions, become the publicly-traded holding company of both Grand US and Playwell. The reorganization will be accomplished through the reorganization merger of Grand US and a subsidiary of Grand HK. Grand US will continue to exist, but it will be a wholly-owned subsidiary of Grand HK. In the reorganization merger, each share of Grand US common stock will be converted in the reorganization merger into the right to receive one Grand HK ADR. Each outstanding option and warrant to purchase shares of Grand US will be converted into the right to acquire, upon exercise, the same number of Grand HK ADSs.

     Immediately upon the completion of the reorganization merger, 10,000,000 Grand HK ADSs will be issued to Centralink pursuant to a subscription and exchange agreement entered into by and among Centralink, Grand HK and Grand US. 5,000,000 of the Grand HK ADSs will be issued in exchange for all of the outstanding shares of Playwell, and another 5,000,000 Grand HK ADSs will be issued in consideration for investments by Centralink into Grand HK in the form of cash and other consideration having a total value of $11,000,000.

Recommendation of the Board of Grand US (see page 54)

     After careful consideration, the disinterested members of Grand US’ board of directors unanimously determined that the reorganization merger to be effected pursuant to the agreement and plan of merger and the related acquisition of Playwell and issuance of 10,000,000 Grand HK ADSs to Centralink pursuant to the subscription and exchange agreement are advisable and are fair to and in the best interests of Grand US and its shareholders and unanimously approved the agreement and plan of merger and the subscription and exchange agreement. The disinterested directors of Grand US unanimously recommend that the Grand US shareholders vote:

Exchange of Grand US Stock Certificates (see page 62)

     After the reorganization merger occurs, Grand HK will send a letter to Grand US shareholders that will provide instructions on exchanging their Grand US stock certificates for Grand HK ADRs which will evidence your ownership of Grand HK ADSs. Please do not send any stock certificates at this time.

Grand US’ Reasons for the Subscription and Exchange Transaction (see page 51)

     The principal shareholders and executive officers of Grand US and Playwell have known and transacted business with each other for several years. Affiliates of Playwell supplied products to Grand US. The logic of the parties’ coming together in the current transaction is best understood against the background of the ongoing evolution and consolidation currently taking place in the global toy industry.

     Grand US has historically been essentially a distributor of toy products developed and manufactured by others. Realizing that this has limited its opportunities for growth, Grand US has for some time sought ways of developing brands and proprietary products of its own. Having been largely unsuccessful in that effort, and faced with the consolidation of retailers in the toy industry and what had been declining revenues and profitability, Grand US was more than willing to consider a combination with a company like Playwell.

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     Management of Grand US and Playwell believe that the combination of Playwell’s manufacturing and sourcing expertise, financial resources and cost-management skills and Grand US’ marketing and distribution presence in North America will create a vertically-integrated company that will be much greater than the sum of its parts and together will be a stronger vehicle for future expansion. The wealth of toy industry experience in the new entity will allow Grand HK to expand its product offerings significantly.

     Grand US also believes that the acquisition will provide strategic and financial benefits to the shareholders of Grand US. The board of directors of Grand US believes that the acquisition has the potential to facilitate the Grand HK’s expansion into Asian and other world markets where Playwell has a presence and provide economies of scale. Grand US also believes that the acquisition of Playwell will result in a combined company being larger and financially more stable company. In addition, Grand US believes that certain characteristics resulting from combining Grand US and Playwell, including but not limited to, Grand HK’s larger size, financial stability and international coverage, will afford Grand HK better access to capital which will support future growth.

Grand US’ Reasons for the Reorganization (see page 51)

     Apart from the fact that the reorganization is a condition to the Centralink transaction, nearly all of Grand US’ current business is carried on in Canada through Canadian subsidiaries, and its headquarters are in Canada. It has relatively little business activity in the United States. As a result of the Centralink transaction, including the acquisition of Playwell, the vast majority of Grand HK’s assets and operations will be located in Hong Kong or in nearby southern China, and the seat of management of Grand HK’s operations will also be in Hong Kong. Reorganization of the company as a Hong Kong company will simplify corporate management and facilitate dealings with suppliers and customers in the region, who are accustomed to dealing with Hong Kong companies and sometimes hesitant to do business with United States companies, which are sometimes regarded as unduly litigious.

     The reorganization also makes sense from a tax standpoint. In fact, Centralink would not consummate the Playwell acquisition or the related subscription transaction without the reorganization. It would not have been logical for Centralink, a British Virgin Islands company, to transfer the shares of Playwell, a Hong Kong limited company, which benefits from the relatively low tax rates in Hong Kong, to a United States corporation, thus significantly reducing the after-tax returns of the Playwell business. The reorganization will not, of course, affect the tax position of the current Grand US business, which will continue to be operated through Grand US just as before.

Appraisal Rights (see page 74)

     Grand US shareholders will not be entitled to appraisal rights in connection with any matter to be considered at the Grand US special meeting.

Certain U.S. Federal Income Tax Consequences (see page 79)

     If you are a U.S. shareholder, you generally should not be taxed on your receipt of Grand HK ADSs in exchange for your Grand US common stock pursuant to the reorganization merger, and should carry your tax basis and holding period with respect to your Grand US common stock over to the Grand HK ADSs received by you in the reorganization merger. However, if you hold 5% or more (by either vote or value) of the outstanding shares of Grand US common stock, you may be subject to tax on the exchange unless you file a gain recognition agreement with the U.S. Internal Revenue Service and comply with certain certification requirements for the year in which the reorganization merger occurs and each of the five succeeding calendar years.

     If you are a non-corporate U.S. shareholder, dividends (if any) paid to you by Grand HK will be taxable to you in the same manner as dividends paid by Grand US, and (provided Grand HK ADSs are traded on the Nasdaq Small Cap Market or another U.S. exchange and you satisfy various holding period rules) will be eligible for federal income taxation at a maximum 15% tax rate. However, dividends (if any) paid by Grand HK to U.S. shareholders that are corporations generally will not be eligible for the dividends received deduction. Dividends paid by Grand HK generally will be treated as foreign source income for purposes of calculating a U.S. shareholder’s allowable foreign tax credits.

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     In order for the tax treatment described above to apply, Grand US will have to make various factual showings relating to, among other things, the assets of and the business conducted by one of Playwell’s operating subsidiaries (Hong Kong Toy Centre Limited) outside the United States, and the ownership of shares in Grand HK by U.S. persons. Factual determinations by Grand US will not be binding on any taxing authority or the courts.

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     Determining the actual tax consequences of the reorganization merger to you can be complicated. Your tax consequences will also depend on your specific situation. You should consult with your own tax advisor for a full understanding of the reorganization merger’s tax consequences.

Fairness Opinion (see page 55)

     Empire Valuation Consultants, has delivered a written opinion to the Grand US board of directors as to the fairness, from a financial point of view, to Grand US and Grand US’ shareholders of the transactions contemplated by the subscription and exchange agreement. A copy of the full text of this opinion is attached to this document as Annex C. Grand US encourages you to read the opinion carefully in its entirety for a description of the procedures followed, assumptions made, matters considered and limitations on the review undertaken by Empire Valuation.

     Empire Valuation provided its opinion for the information and assistance of the Grand US board in connection with its determination to proceed with the approval of the transactions contemplated by the subscription and exchange agreement, and such opinion is not a recommendation as to how you should vote with respect to the approval of the issuance of the Grand HK ADSs to Centralink in connection with such transactions. Apart from its compensation for evaluating the fairness of the transactions described in this proxy statement/prospectus, Empire Valuation has no other relationship with Grand US, Grand HK, Centralink or Playwell.

Interests of Grand US Directors and Officers in the Acquisition (see page 57)

     When you consider the recommendation of the Grand US board that Grand US shareholders vote in favor of the proposal to adopt and approve the agreement and plan of merger and the issuance to Centralink of Grand HK ADSs in connection with the Playwell acquisition and its subscription, you should be aware that certain executive officers of Grand US and the members of Grand US’ board of directors have interests in the reorganization merger and acquisition and subscription that may be different from, or in addition to, your interests generally. These interests are described in the section entitled “The Reorganization and the Playwell Acquisition and Subscription — Interests of Grand US Directors and Officers in the Reorganization and subsequent operation of Grand HK” beginning on page include:

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     Grand US’ board of directors was aware of and considered these potentially conflicting interests when the disinterested members of the Grand US board approved the agreement and plan of merger and the subscription and exchange agreement.

Conditions to Completion of the Reorganization and Playwell Acquisition (see page 89)

     Several conditions must be satisfied or waived before Grand HK and Centralink will complete the acquisition of Playwell and the related subscription transactions, including those summarized below:

     The obligation of Grand US to consummate the reorganization merger, the Playwell acquisition and the Centralink subscription is also subject to Playwell or its subsidiaries entering into arms-length supply agreements with certain companies affiliated with Centralink.

Prohibition on Grand US Soliciting Other Offers (see page 88)

     The subscription and exchange agreement contains detailed provisions that prohibit Grand US and its affiliates and representatives from soliciting, discussing or participating in negotiations with any person with respect to an acquisition proposal. However, Grand US may, in response to an unsolicited “superior proposal”, furnish information to any person making a superior proposal. A superior proposal is defined as any proposal made by a third person to acquire, directly or indirectly, more than fifty percent (50%) of the combined voting power of the shares of Grand US or at least 50% or more of the assets of Grand US if:

Termination of the Subscription and Exchange Agreement (see page 71)

     The subscription and exchange agreement may be terminated at any time prior to the completion of the Playwell acquisition and related subscription transaction, whether before or after approval of the reorganization merger by the Grand US shareholders:

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Expenses; Termination Fees (see page 93)

     Generally, each of Grand US and Centralink has agreed to pay its own fees and expenses regardless of whether the reorganization merger, Playwell acquisition and additional Centralink subscription are completed, except that, in the event these transactions are completed, all expenses paid by Centralink will be reimbursed by Playwell, Playwell shall cause to be paid all expenses incurred and estimated to be incurred by Centralink but unpaid prior to closing (including expenses associated with post-closing actions), and Centralink shall cause to be paid or reimbursed all expenses paid or incurred by Grand US prior to closing arising out of or related to the subscription and exchange agreement or the consummation of the transactions contemplated by the subscription and exchange agreement.

     In the event that the subscription and exchange agreement is terminated by either Centralink or Grand US as a result of Grand US’ decision to pursue a superior proposal, Grand would be obligated to pay Centralink a fee of the greater of $500,000 or the actual expenses incurred by Centralink in connection with the negotiations and execution of the transactions contemplated by the subscription and exchange agreement.

Government and Regulatory Approvals (see page 46)

     Except for the listing of the Grand HK ADSs on the Nasdaq SmallCap Market or another nationally recognized stock exchange, neither Grand HK, Grand US nor Centralink is aware of any regulatory approvals or actions that are required prior to the consummation of the agreement and plan of merger or the issuance of the Grand HK ADSs to Centralink and the consummation of the other transactions contemplated by the subscription and exchange agreement. Should any approvals be required, it is presently contemplated that such approvals would be sought, but neither Grand HK, Grand US, nor Centralink can assure you that such approvals would be obtained.

Comparison of Rights of Shareholders (see page 73)

     For a discussion comparing the rights of Grand HK shareholders with Grand US shareholders, please see the discussion under “Rights of Shareholders” on page_.

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Exchange Listing (see page 5)

     Grand HK has applied to have the Grand HK ADSs approved for listing on the Nasdaq SmallCap Market under the symbol “GRINF.”

Anticipated Accounting Treatment of the Reorganization and Acquisition (see page 62)

     The reorganization of Grand US pursuant to the agreement and plan of merger and Grand HK’s acquisition of the shares of Playwell and the issuance of Grand HK ADSs to Centralink pursuant to the subscription and exchange agreement are steps in a single transaction, and will be treated as a “purchase” with Playwell as the acquirer for accounting purposes (notwithstanding the fact that, as a legal matter, Grand HK is acquiring Playwell). Therefore, the purchase price will be allocated to Grand HK’s assets and liabilities based on their estimated fair market values at the completion of the reorganization merger and related subscription and exchange. Any excess of the purchase price over these fair market values will be accounted for as goodwill.

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Recent Developments

     One of the principal reasons why Grand US and Centralink are pursuing the reorganization merger and the transactions contemplated by the subscription and exchange agreement is to combine the businesses of Grand US and Playwell to create a public company with greater revenues and assets which could serve as a platform for future expansion. Grand HK will seek to identify and acquire complementary companies which have experienced management with proven track records, but which lack cost-effective manufacturing and proper sales channels into mass market retailers and large distributors.

     In this regard, Centralink’s parent company, Cornerstone Overseas Investments Limited, which we refer to as Cornerstone, has entered into letters of intent with three companies pursuant to which Cornerstone would acquire all of the stock or assets of these entities. One acquisition candidate is engaged in the business of printing hand-made books, specialty packaging and other paper products; one is engaged in contract manufacturing of party favors for novelty product companies; and one is engaged in the developing, marketing and selling of girl’s toys. Cornerstone has also held preliminary discussions with various other potential acquisition candidates.

     If Cornerstone is successful in acquiring any of these entities either before or after the consummation of the reorganization merger and the transactions contemplated by the subscription and exchange agreement, it is Cornerstone’s intention to seek to contribute these businesses to Grand HK. The terms upon which Cornerstone will contribute these businesses to Grand HK will first be negotiated on an arms-length basis between Cornerstone and the directors of Grand HK who are not affiliated with Cornerstone. If an agreement providing for the contribution of these businesses to Grand HK is reached between Cornerstone and a majority of the directors of Grand HK who are not affiliated with Cornerstone, the consummation of such transaction will be conditioned on the affirmative vote of a majority of the shareholders of Grand HK who are not affiliated with Cornerstone at a general meeting of Grand HK shareholders convened for that purpose.

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SELECTED HISTORICAL AND UNAUDITED PRO FORMA
SUMMARY FINANCIAL INFORMATION

Grand US Selected Historical Consolidated Financial Data

     The following selected historical financial data should be read in conjunction with Grand US’ financial statements and related notes thereto and “Management’s Discussion and Analysis of Financial Condition and Results of Operations of Grand US” which are incorporated by reference elsewhere in this proxy statement/prospectus.

     Income statement data for the years ended December 31, 2003, 2002 and 2001 as well as the balance sheet data as at December 31, 2003 and 2002 are derived from the audited consolidated financial statements incorporated by reference in this proxy statement/prospectus. The income statement data for the years ended December 31, 2000 and 1999 as well as the balance sheet data as at December 31, 2001, 2000 and 1999 are derived from the audited consolidated financial statements of Grand US.

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GRAND TOYS INTERNATIONAL, INC. (Grand US)
AND SUBSIDIARIES
SELECTED CONSOLIDATED FINANCIAL DATA

(In US$ and US GAAP)

Year Ended December 31,

¹Book value per share is determined by using year-end outstanding shares

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Playwell Selected Historical Consolidated Financial Data

     The following selected historical financial data should be read in conjunction with Playwell’s consolidated financial statements and related notes thereto and “Management’s Discussion and Analysis of Financial Condition and Results of Operations of Playwell” which are included elsewhere in this proxy statement/prospectus.

     The Playwell information is presented into three tables, to reflect the fact that Playwell’s primary financial statements are prepared on the basis of Hong Kong GAAP and reconciled to US GAAP. The tables reflect Playwell’s financials statements first in HK dollars and U.S. Generally Accepted Accounting Principles (GAAP), second in HK dollars and HK GAAP and then thirdly, for the benefit of the readers of this information, in US dollars and US GAAP. Playwell publishes its consolidated financial statements in Hong Kong dollars and has included a reconciliation to U.S. GAAP in note 29 of its 2003 audited financial statements. Certain translations of Hong Kong dollar amounts into U.S. dollars at specified rates have been done solely for the convenience of the reader. This does not mean that the assets and liabilities have been converted or could have been converted at those rates. Unless otherwise indicated, the translation of Hong Kong dollars into U.S. dollars has been made at the rate of HK$7.78 to US$1.00.

     Income statement data for the years/period ended December 31, 2003, 2002 and 2001 as well as the balance sheet data as at December 31, 2003 and 2002 are derived from the audited consolidated financial statements included elsewhere in this proxy statement/prospectus.

     Playwell International Limited was incorporated on December 13, 2000 and commenced business in August 2001. As such, historical consolidated financial data is only available for the two years, 2003 and 2002, and the 18 month period ending December 31, 2001.

PLAYWELL INTERNATIONAL LTD.
AND SUBSIDIARIES
SELECTED CONSOLIDATED FINANCIAL DATA
(In HK$ and US GAAP)

Year Ended December 31,

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PLAYWELL INTERNATIONAL LTD.
AND SUBSIDIARIES

Year Ended December 31,

²Under Hong Kong GAAP, one of Playwell’s consolidated subsidiaries, which was incorporated on May 12, 2000, is included since the date of incorporation in the consolidated financial statements for the period ending December 31, 2001. The net profit for this subsidiary from the date of incorporation through December 31, 2000 was approximately HK$1,083,979.

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PLAYWELL INTERNATIONAL LTD.
AND SUBSIDIARIES
SELECTED CONSOLIDATED FINANCIAL DATA
(In US$ and US GAAP)

Year Ended December 31,

Unaudited Pro Forma Consolidated Financial Data

The following unaudited pro forma consolidated financial data gives effect to the proposed business combination of Playwell with Grand US. The acquisition is being accounted for under the purchase method of accounting, as required by Statement of Financial Accounting Standards No. 141 “Business Combinations.” Under this method of accounting, the purchase price has been allocated to the fair value of the net assets acquired, including goodwill.

The unaudited pro forma consolidated financial data is based on the historical financial statements of Grand US for the year ended December 31, 2003, incorporated herein by reference and the historical financial statements of Playwell for the year ended December 31, 2003, which are included elsewhere in this proxy statement/prospectus. The unaudited Pro Forma consolidated balance sheet assumes the acquisition was consummated on December 31, 2003 and combines the audited December 31, 2003 consolidated balance sheet of Playwell with the audited December 31, 2003 consolidated balance sheet of Grand US. The 2003 unaudited Pro Forma consolidated income statement combines the year ended December 31, 2003 audited consolidated statement of operations for Grand US with the year ended December 31, 2003 audited Consolidated Income Statement for Playwell. The unaudited pro forma consolidated income statement assumes the acquisition took place on January 1, 2003.

The unaudited pro forma consolidated financial data is not necessarily indicative of the actual operating results that would have occurred or the future operating results that will occur as a consequence of such transactions. The Pro Forma consolidated financial statements are presented based on Grand US’ financial statement presentation.

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UNAUDITED PRO FORMA CONSOLIDATED BALANCE SHEET
DECEMBER 31, 2003
(in US dollars and US GAAP)
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)

See accompanying notes to pro forma financial information

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UNAUDITED PRO FORMA CONSOLIDATED INCOME STATEMENT
YEAR ENDED DECEMBER 31, 2003
(In US$ and US GAAP)
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)

See accompanying notes to pro forma financial information

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Notes to Pro Forma Financial Statements

1. Accounting Treatment For Business Combination

     The pro forma financial information presents the business combination of Grand US with Playwell. The terms of the transaction are that concurrently the stockholders of Playwell will transfer to Grand US its ownership of the shares of Playwell and cash of $11 million. As consideration, Grand US will issue to Playwell’s shareholder 10,000,000 shares. As a consequence the shareholder of Playwell will own after the transaction approximately 65% of the total shares outstanding of Grand US.

     The purchase method of accounting will be used to account for the business combination. Due to the terms of the acquisition, from an accounting viewpoint, Playwell is deemed to be the acquirer and Grand US will be the subject of the reverse takeover by Playwell, the accounting acquirer.

     Application of purchase accounting results in the following:

2. Pro Forma Assumptions And Adjustments

     The pro forma consolidated balance sheet gives effect to the acquisition as if such acquisition had taken place as at December 31, 2003. The pro forma consolidated statement of income gives effect to the acquisition as if such acquisition had taken place as at January 1, 2003.

     The accounting policies used in the preparation of the pro forma consolidated financial statements are those disclosed in the Grand US consolidated financial statements for the year ended December 31, 2003 which are incorporated by reference in this proxy statement/prospectus.

     The financial information for both Playwell and Grand US are presented in US dollars and in accordance with US GAAP. The financial statements of Playwell have been converted into U.S. dollars using the rate of HK$7.78 to US$1.00 for both the balance sheet and the income statement.

     The consideration of $11,000,000 is assumed to be comprised solely of cash.

     The pro forma consolidated financial statements give effect to the following assumptions and adjustments:

Consolidated Balance Sheet

     The cost of the acquisition was determined as follows:

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     The following table shows the results of the assumptions made with respect to the allocation of the aggregate purchase price to Grand US’s net assets.

     Purchase price allocation:

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     Following are the details of the balance sheet adjustments; these amounts are the net result of entries that would reflect the acquisition, transaction and elimination upon consolidation.

     Grand US pre-acquisition accumulated deficit and cumulative currency translation adjustment are eliminated upon consolidation.

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Consolidated Income Statement

6. Earnings per Share

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MARKET PRICE AND DIVIDEND INFORMATION

     Grand US common stock is quoted on the Nasdaq SmallCap Market under the symbol “GRIN.” For current share price information, you should consult publicly available sources for market quotations. On November 14, 2003, the last trading day before the public announcement of the signing of the subscription and exchange agreement, the last quoted sale price of Grand US common stock on the Nasdaq SmallCap Market was $3.59. On April 5, 2004 the last day for which information was available prior to the date of this proxy statement/prospectus, the last quoted sale price of Grand US shares on the Nasdaq SmallCap Market was $2.88.

     The following table sets forth the range of high and low closing representative bid prices for the Grand US’ common stock from January 1, 2002 through December 31, 2003 as reported by Nasdaq. The figures represent prices between dealers, do not include retail mark-ups, markdowns or commissions and may not represent actual transactions.

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     Grand US has never paid a cash dividend on its common stock. Future dividends declared and paid by Grand HK, if any, will be determined by Grand HK’s board of directors in light of circumstances existing from time to time, including growth prospects, profitability, financial condition, results of operations and other factors that Grand HK’s board of directors deems relevant.

     Because there is no established trading market for Playwell’s ordinary shares, information with respect to the market price of Playwell’s shares on a historical and an equivalent per share basis has been omitted.

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RISK FACTORS

     You should consider the following risk factors in evaluating whether to approve and adopt the agreement and plan of merger and the issuance of 10,000,000 Grand HK ADSs to Centralink pursuant to the subscription and exchange agreement. These factors should be considered in conjunction with the other information contained in this proxy statement/prospectus and the Annexes hereto. If any of the following risks actually occur, the business, financial condition or results of operations of any or all of Grand HK, Grand US and Playwell may be seriously harmed.

Risks Related to the Reorganization Merger

     In deciding whether to vote in favor of the agreement and plan of merger, Grand US stockholders should consider the following risks.

Certain proposed U.S. tax legislation could adversely affect both Grand HK and the current U.S. shareholders of Grand US

     Several members of the U.S. Congress have introduced legislation that, if enacted, could have unfavorable consequences both for Grand HK and for current U.S. shareholders of Grand US. Under each of the proposed bills, for U.S. federal income tax purposes, a domestic corporation that reincorporates in a foreign jurisdiction, in what is sometimes referred to as a corporate “expatriation” or corporate “inversion” transaction, with a view to avoiding U.S. corporate income tax, generally would continue to be treated as a domestic corporation and, thus, would be subject to U.S. federal income tax, unless the applicable transaction satisfied certain requirements. In addition, some of the proposed bills would deprive U.S. shareholders of the domestic corporation of the benefits of certain provisions of the tax laws that would otherwise accord tax-free treatment to these reorganization transactions. Each of the proposed bills would be effective for such corporate transactions completed after specified dates. If any of the proposed bills were enacted with their proposed effective dates, then, depending on the provisions of the legislation ultimately enacted, the anticipated tax-free treatment of the reorganization merger might not be realized and/or Grand HK might be subjected to U.S. taxation on the income of Playwell and its subsidiaries, which are not currently subject to such tax, thus reducing the anticipated net profits after tax of Grand HK.

     While the reorganization merger, unlike those about which some members of Congress are concerned, would not remove from the U.S. tax jurisdiction any entities or income currently subject to such jurisdiction, it is possible that an overbroad form of the proposed legislation might be enacted which could have adverse effects on the reorganization merger, such as those described above. And, although Grand US has the right not to and does not intend to proceed with the reorganization merger if such legislation proposals were enacted or proposed or passed by any committee of the United States Senate or House of Representatives and the proposals would materially and adversely affect the prospective tax treatment of Grand US or its shareholders as compared with the treatment Grand US or its shareholders receive under current law, there can be no assurance that such tax legislation adopted after the completion of the reorganization merger would not be made applicable retroactively to the reorganization merger. Once the reorganization is completed, it will be difficult if not impossible to return to the current structure even if the anticipated tax advantages of the reorganization are not realized.

If you are a U.S. shareholder, you could be taxed as a result of the reorganization merger if the IRS successfully challenges the tax-free treatment of the reorganization merger

     Apart from any changes in U.S. tax laws like those described above, the IRS or other taxing authority could disagree with Grand HK’s assessment of the effects or interpretation of existing laws and regulations, or with certain factual determinations upon which the contemplated tax treatment of the reorganization merger depends. If the IRS were to challenge successfully the tax treatment of the reorganization merger, this could result in U.S. shareholders of Grand US being taxes on their receipt of Grand HK ADSs in exchange for their Grand US common stock pursuant to the reorganization merger. The tax would be imposed on the excess, if any, of the trading price of the Grand HK ADSs received by U.S. shareholder in exchange for Grand US common stock in the reorganization merger over the shareholder’s adjusted tax basis in the shares of Grand US common stock exchanged therefor. Generally, any such gain would be capital gain.

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Risks Relating to the issuance of 10,000,000 Grand HK ADSs to Centralink

     In deciding whether to approve the issuance of the Grand HK ADSs to Centralink in exchange for the shares of Playwell and other consideration pursuant to the subscription and exchange agreement, Grand US shareholders should consider the following risks relating to the issuance of shares to Centralink.

Grand HK will be controlled by a single investor and this control could inhibit potential changes of control

     After the consummation of the reincorporation merger, the acquisition of Playwell, the additional subscription of Grand HK ADSs by Centralink and Centralink’s purchase of certain shares held by two former directors of Grand US, Centralink will own 71.14% of the outstanding Grand HK ADSs. The ultimate beneficial owner of Centralink is Mr. Jeff Hsieh. Accordingly, Mr. Hsieh will have the ability to control the outcome of all matters requiring shareholder approval, including, after the expiration of the shareholders’ agreement, the election and removal of Grand HK’s entire board of directors, any merger, consolidation or sale of all or substantially all of Grand HK’s assets, and the ability to control Grand HK’s management and affairs. This concentrated control could discourage others from initiating any potential merger, takeover or other change of control transaction that may otherwise be beneficial to Grand HK’s businesses. As a result, the market price of Grand HK’s ADSs could be adversely affected.

The issuance of Grand HK ADSs to Centralink will have a dilutive effect on the current holders of Grand US common stock

     After the consummation of the Playwell acquisition and the additional Centralink subscription, there will be 10,000,000 additional Grand HK ADSs outstanding, above the 5,355,244 Grand HK ADSs to be issued to the former owners of Grand US common stock. The Centralink issuance and the related purchase of certain shares held by two former directors of Grand US and the related purchase of certain shares held by two former directors of Grand US will, therefore, decrease the percentage equity ownership in Grand HK held by former owners of Grand US common stock from 100% to approximately 34.9%, thereby diluting the absolute ownership percentage of the Grand US shareholders.

The issuance of 5,000,000 Grand HK ADSs to Centralink pursuant to the subscription and exchange agreement may be below the market price for Grand HK ADSs.

     Under the terms of the subscription and exchange agreement, Centralink is subscribing for two tranches of Grand HK ADSs, one for 3,000,000 Grand HK ADSs at a price of $1.00 per Grand HK ADS and one for 2,000,000 Grand HK ADSs at a price of $4.00 per Grand HK ADS. The $1.00 subscription price was agreed upon in January, 2003 at a time when Grand US’ market price was $1.00 per share and the $4.00 subscription price was orally agreed upon in January, 2004 at a time when Grand US’ market price was $3.00 per share. Grand US believes that the terms of the Centralink subscription were and are fair to the shareholders of Grand US. However, the average price for the Grand HK ADSs to be purchased by Centralink is $2.20 per Grand HK ADS compared to a closing price of Grand US common stock on March 31, 2004 of $3.07 per share. Accordingly, if the market price of Grand US common stock remains above $2.20 per share at the closing of the consummation of the Playwell acquisition and the additional Centralink Grand HK ADS issuance, the issuance of the Grand HK ADSs to Centralink will be below the market price of the Grand HK ADSs.

If the expected benefits of the reorganization merger and Playwell acquisition are not realized, the market price of the Grand HK ADSs may be adversely affected

     Grand HK will operate the combined operations of Grand US and Playwell in a market environment that cannot be predicted and that involves significant risks, many of which will be beyond its control. Although Grand US and Centralink are proceeding on the basis that reorganization merger, the Playwell acquisition and the Centralink purchase of Grand HK ADSs will result in benefits to the shareholders of the combined company, Grand HK may not realize those benefits because of integration and other challenges. The failure of Grand HK to realize any of the anticipated benefits of the reorganization and acquisition, including anticipated cost savings described in this proxy statement/prospectus, could seriously harm the results of operations of Grand HK, thereby reducing earnings and potentially affecting the market price of the Grand HK ADSs. The challenges involved include the following:

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The reorganization merger and Playwell acquisition could negatively impact the combined financial results of Grand US and Playwell

     If the benefits of the reorganization merger and Playwell acquisition do not exceed the costs associated with the reorganization merger and acquisition, including transaction costs and the dilution to Grand HK’s shareholders resulting from the issuance of Grand HK ADSs to Centralink, Grand HK’s financial results, including earnings per share, could be decreased. Grand HK estimates that it will incur, on a consolidated basis, direct transaction costs of approximately $2,500,000 in connection with the proposed reorganization merger and Playwell acquisition, which will be considered as part of the purchase price and will be allocated to the net assets of Grand HK. This amount is a preliminary estimate and could change. Grand HK may incur additional charges in subsequent quarters to reflect costs associated with the proposed reorganization merger and the Playwell acquisition.

Certain relationships among Grand HK’s management and affiliates create various potential and actual conflicts of interest and could adversely affect Grand HK’s business

     Although Grand HK intends to have a board of directors comprised of a majority of “disinterested directors” and to adopt a policy that all transactions with and loans to its affiliates be made on similar terms to those that can be obtained from unaffiliated third parties and for such transactions to be approved by a majority of Grand US directors who do not have an interest in the transaction, certain situations may arise in the future where an interested party would be required to vote on actions that could benefit such person and negatively impact Grand HK, or vice versa.

Risks Related to the Combined Operations of Grand US and Playwell After the Reorganization Merger and the Acquisition of Playwell

     In deciding whether to approve the reorganization merger and the issuance of the Grand HK ADSs to Centralink in exchange for the shares of Playwell and other consideration, Grand US shareholders should consider the following risks that will result from the combined operations of Grand US and Playwell.

Grand HK’s business and operating results are and will continue to be highly dependent on transactions with related companies

     Both Grand US and Playwell are, and will continue to be, very dependent on companies related to Centralink for the manufacturing, marketing and sale of its toy products. This dependency includes the following:

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Grand HK may not be able to obtain sufficient funding for Playwell’s working capital needs

      Historically, Playwell has funded its working capital needs through its cash flow from operations and loans from its affiliates, including Centralink. Therefore, Playwell does not currently have an established line of credit from a financial institution for its working capital needs. Although Grand HK is attempting to secure a working capital facility, in the event that Playwell’s cash flow from operations is not sufficient to meet its working capital needs and Centralink does not advance the required financing, Playwell could be forced to curtail or delay its business activities.

Grand HK’s business and operating results are and will continue to be highly dependent on sales of products licensed from Marvel Enterprises, Inc.

     A significant portion of the revenues of Grand US and Playwell are, and the revenues of Grand HK will continue to be, derived from the manufacture and distribution of toys based on certain Marvel comic and movie characters for Toy Biz. Toy Biz acquired the worldwide right to manufacture and sell toys based on these Marvel comic and movie characters from Marvel Enterprises Inc. through the end of 2006. In the event that Toy Biz is unable to secure the rights to continue to manufacture and sell these Marvel products after 2006, it would have a material adverse effect on the business of Playwell, Grand US and Grand HK, taken as a whole.

Grand HK may be adversely effected by the seasonal aspect of its business

     The business of both Grand US and Playwell is seasonal and a majority of their sales take place in the third and fourth quarters of their fiscal years, therefore, Grand HK’s annual operating results will depend, in large part, on sales during the relatively brief holiday season from September through December. Further, the impact of seasonality is increasing as large retailers become more efficient in their control of inventory levels through quick response management techniques. Rather than maintaining large on-hand inventories throughout the year to meet consumer demand, these customers are timing reorders so that they are being filled by suppliers closer to the time of purchase by retail customers, which to a large extent occur during September through December. While these techniques reduce a retailer’s investment in inventory, they increase pressure on suppliers like Grand US and Playwell to fill orders promptly and shift a significant portion of inventory risk and carrying costs to the supplier. The limited inventory carried by retailers may also reduce or delay retail sales. Additionally, the logistics of supplying more and more products within shorter time periods will increase the risk that Grand US or Playwell may fail to achieve tight and compressed shipping schedules. This seasonal pattern requires significant use of working capital mainly to manufacture inventory during the year, prior to the holiday season, and requires accurate forecasting of demand for products during the holiday season. Grand HK’s failure to accurately predict and respond to consumer demand could result in its under-producing popular items and overproducing less popular items.

Grand HK’s attempts to acquire other companies may not prove fruitful or even if successful could have an adverse effect on its liquidity and earnings

     Grand HK currently plans to pursue an acquisition strategy to expand its business and product offerings. This process will likely divert a significant amount of management time and effort. New acquisition discussions will likely distract Grand HK management from its day-to-day operations. Even if Grand HK does find companies that are worth acquiring, it may be extremely difficult to integrate their operations into its existing operations. In addition, there is no guaranty that its acquisitions will be successfully completed or, if completed will be financially successful. Thus, any such acquisition could have an adverse effect on Grand HK’s future liquidity and earnings.

An inability to obtain financing could adversely impact Grand HK’s ability to expand its operations

     In order to achieve Grand HK’s long-term expansion objectives and to enhance its competitive position in the worldwide toy industry, Grand HK will need additional financial resources over the next several years. The precise amount and timing of its future financing needs cannot be determined at this time and will depend upon a number of factors, including the demand for its products, the management of its working capital and the nature of

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companies which Grand HK plans to acquire. Grand HK may not be able to obtain additional financing on acceptable terms, or at all. If Grand HK is unable to obtain sufficient capital, it could be required to curtail its expansion plans.

Grand HK is dependent upon key personnel whose loss may adversely impact Grand HK’s business

     Grand HK will depend on the expertise, experience and continued services of its senior management employees, including Elliot L. Bier, who is chairman of Grand US and will become an officer and director of Grand HK, Henry Hu, a managing director of Playwell who will become the managing director of Grand HK, Raymond Chan, the chief operating officer of Playwell, David Fremed, who will become the chief financial officer of Grand HK, and Tania M. Clarke, who is the chief financial officer of Grand US and will become a senior financial executive of Grand HK. Each of these individuals has acquired specialized knowledge and skills with respect to Grand US and Playwell, and their respective operations and most decisions concerning the business of Grand US and Playwell will be made or significantly influenced by them. Neither Grand US nor Playwell maintains “key man” insurance on the life of any of these persons. The loss of some of these senior management employees, or an inability to attract or retain other key individuals, could materially adversely affect Grand HK. Growth in Grand HK’s business is dependent, to a large degree, on Grand HK’s ability to retain and attract such employees. Grand HK, Playwell and Grand US seek to compensate and incentivize its key executives, as well as other employees, through competitive salaries, stock ownership and bonus plans, but there can be no assurance that these programs will allow it or Grand US or Playwell to retain key employees or hire new key employees. As a result, if any of these individuals were to leave Grand HK, Grand US or Playwell following the reorganization merger and Centralink transactions, the combined company could face substantial difficulty in hiring qualified successors and could experience a loss in productivity while any such successor obtains the necessary training and experience.

Grand HK may suffer from bad debts and returns of toy products manufactured and sold by Grand US or Playwell

     While both Grand US and Playwell perform full credit checks on all of its customers, Grand HK cannot be assured that any customer will not default on a payment of debt. Such a default could have a significant effect on its results. Furthermore, it is industry practice for retailers to hold back payments on slow moving stock or to request markdowns or returns on such stock. In certain instances, where retailers are unable to sell the quantity of products which have been ordered from Playwell or Grand US, Playwell and Grand US may, in accordance with industry practice, assist retailers to enable them to sell such excess inventory by offering discounts or accepting returns. A portion of firm orders, by their terms, may be canceled if shipment is not made by a certain date. Playwell and Grand US take all commercially reasonable steps to minimize payment defaults, returns or cancellations and to properly accrue and reserve for such events. However, there can be no assurance that these defaults, returns and cancellations will not have a material adverse effect on the business, financial conditions and results of operations of Grand HK.

In order to maintain its business, Grand HK will depend on obtaining and maintaining licenses for the manufacture and distribution of products

     Playwell and Grand US have entered into various licenses and royalty agreements in which they pay fees in exchange for rights to the use of product inventions or trademarked names, shapes and likenesses for use in development of its product line. The two major licenses that Playwell currently holds is the right to certain Walt Disney Company and Crayola branded products. Grand US’ major license is with Toy Biz. These agreements generally include minimum fee guarantees based on a reasonable expectation of the product sales to be generated throughout the life of the agreement. There can be no assurance that Playwell or Grand US will be able to meet these projected expectations and may be obligated to pay unearned fees as a result. License and royalty agreements are also mostly for fixed terms and often contain performance-related covenants. Playwell’s licenses for such Walt Disney Company and Crayola branded products are both short-term agreements, expiring in 2006. Similarly, Grand US has no written agreement with Toy Biz to distribute its products. There is no assurance that Playwell or Grand US will be able to maintain or extend the rights to these or other of its existing licenses. The failure to renew these license agreements or any difficulty in entering into other license agreements with other entertainment companies will have an adverse effect on Grand HK’s business and results of operations.

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The timing of product introduction is very important to Grand HK’s operating results and may sometimes be delayed

     Once a new product is conceived, the principal steps to the introduction of the product include design, sourcing and testing of components, tooling, and purchase and design of graphics and packaging. At any stage in the process, there may be difficulties or delays in completing the necessary steps to meet the contemplated product introduction schedule. It is, for example, common in new product introductions or product revisions to encounter technical and other difficulties affecting manufacturing efficiency and, at times, the ability to manufacture at all, that will typically be corrected or improved over a period of time with continued manufacturing experience and engineering efforts. If one or more aspects necessary for introduction of products are not met in a timely fashion, or if technical difficulties take longer than anticipated to overcome, the anticipated product introductions will be delayed, or in some cases may be terminated. Therefore, no assurances can be given that products will be introduced in a timely fashion. Significant delays in the introduction of, or the failure to introduce, new products or improved products would have an adverse effect on Grand HK’s operating results.

The toy industry traditionally has a high level of volatility

     The toy industry is known for a high level of volatility as a result of changing consumer tastes, competition and over saturation of popular products. Playwell and Grand US have both experienced significant volatility in their results in their past histories. While Grand HK is expected to diversify its business in the future to reduce volatility, there can be no guarantee that this history of volatility will not continue.

Because the life cycle for toy products is usually very short and consumer preferences are unpredictable, Grand HK’s business may be adversely affected by its inability to develop or secure the right to distribute new products

     Grand HK’s business and operating results will depend largely upon the appeal of the toy products manufactured and sold by Grand US and Playwell. Consumer preferences in the toy industry are highly subjective, and there can be no assurance that consumers will continue to find existing products of Grand US or Playwell appealing or will find new products introduced by Playwell or Grand US appealing. As a result of changing consumer preferences, many toy products are successfully marketed for only one or two years. Grand HK’s continued success will depend on the ability of Playwell and Grand US to redesign, restyle and extend its existing toy and fashion accessory products and to develop, acquire the right to, introduce and gain customer acceptance of new products. A decline in the popularity of its existing products and product lines or the failure of new products and product lines to achieve and sustain market acceptance could result in reduced overall revenues and margins, which could have a material adverse effect on Grand HK’s business, financial condition and results of operations. There can be no assurances that

     If the market for new or existing products is less than expected, Playwell and Grand US may build excess quantities of certain products and subsequently may be required to sell inventory of such products at a substantial discount or put inventory provisions in place to mark the value of excess inventory quantities down to their estimated market value.

     Finally, Playwell continues to offer a relatively limited range of products that are all in the categories of generic toys in the infant, preschool, and activity toys for younger children. This exposes Playwell to the risks of any narrowly focused business.

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Grand HK may become subject to U.S. corporate income tax, which would reduce Grand HK’s net income

     Although Grand US and its subsidiaries will continue to be subject to U.S. corporate income tax on their U.S. operations after the reorganization merger, Grand HK anticipates that its non-U.S. operations will not be subject to U.S. corporate income tax other than withholding taxes imposed on certain U.S. source income. However, if Grand HK becomes subject to U.S. corporate income tax, its net income will be reduced.

     Grand HK, Playwell and other non-U.S. affiliates of Grand HK intend to conduct their operations in a manner intended to ensure that they will not be treated as engaging in the conduct of a trade or business in the U.S. Thus, Grand HK, Playwell and its non-U.S. affiliates believe that they should not be required to pay U.S. corporate income tax, other than withholding tax on certain U.S. source income. However, if the IRS successfully contends that Grand HK, Playwell or any of the non-U.S. affiliates of Grand HK are engaged in a trade or business in the U.S., then Grand HK, Playwell or the non-U.S. affiliates of Grand HK would be required to pay U.S. corporate income tax on income that is subject to the taxing jurisdiction of the U.S., and possibly the U.S. branch profits tax.

The toy industry in which Grand HK operates is highly competitive

     Playwell and Grand US face significant competition in the segments of the toy industry in which they operate. Playwell faces significant competition in the infant and pre-school toy industry. The barriers for new producers to enter into Playwell’s markets are relatively low and Playwell expects that it will face increased competition in the future. Some competitors offer products at lower prices, are better established in the industry and are larger than Playwell. In addition, with respect to original design manufacturing, or ODM, and original equipment manufacturing, or OEM, Playwell competes with a number of substantially larger and more experienced manufacturers.

     Grand US primarily operates in the rapidly consolidating toy distribution business. Many other companies involved in the toy distribution industry in Canada and the U.S. have greater financial resources, larger sales forces, greater name recognition, larger facilities for product development and products that may be more competitively priced than Grand US products. As a result, some of Grand US’ competitors may be able to obtain toy products in greater volume or more lucrative distribution contracts than Grand US can. In addition, as the toy industry consolidates, many retailers have begun to deal directly with toy manufacturers, thereby reducing or eliminating the need for distributors such as Grand US.

Grand HK may be involved in disputes regarding its ownership and use of intellectual property

     From time to time, other companies and individuals may assert exclusive patent, copyright, trademark and other intellectual property rights to technologies or marks that are important to the toy industry generally or to Grand HK’s business specifically. Grand HK and its subsidiaries will evaluate each claim relating to its products or other aspects of its business and, if appropriate, will seek a license to use the protected technology. There can be no assurance that Grand HK or its subsidiaries will be able to obtain licenses to intellectual property of third parties on commercially reasonable terms, if at all. In addition, Grand US and Playwell could be at a disadvantage if its competitors obtain licenses for protected technologies on more favorable terms than does Playwell or Grand US. If Playwell, Grand US or their suppliers are unable to license protected technology used in Playwell’s or Grand US’ products, Playwell and Grand US could be prohibited from marketing those products or may have to market products without desirable features. Playwell and Grand US could also incur substantial costs to redesign its products or to defend any legal action taken against Playwell or Grand US. If Playwell’s or Grand US’ products or manufacturing methods should be found to infringe protected technology, Playwell or Grand US could be enjoined from further infringement and required to pay damages to the infringed party. Any of the foregoing could have an adverse effect on the results of operations and financial position of Grand HK.

Grand HK may not be able to protect its intellectual property

     On occasion in the toy industry, successful products are “knocked-off” or copied. While Playwell and Grand US strive to protect their intellectual property, there can be no guarantee that knock-offs will not have a significant negative effect on its business. The costs incurred in protecting Grand US’s and Playwell’s intellectual

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property rights could be significant and there is no assurance that they will be able to successfully protect their rights.

Grand HK may be subject to product liability claims which, if not covered by adequate insurance, could adversely impact its results and financial condition

     Grand US and Playwell are both subject to product liability claims relating to the products they manufacture and distribute. Since most of Playwell’s products are manufactured for infants and pre-school children, safety has been a major concern in the toys that Playwell, in particular, designs, develops and has manufactured. However, neither Playwell nor Grand US can assure total safety of its products and therefore can be subject to possible claims for injury or damage, some or all of which may not be covered by insurance. Playwell is not currently, nor has it been in the past, a defendant in any product liability lawsuit. Grand US is currently a defendant in a product liability claim relating to a third party’s product which was distributed by Grand US. Although Grand US and Playwell maintain product liability insurance in amounts which each of them believes is adequate, a successful claim brought against Playwell or Grand US by a customer or a consumer and the adverse publicity that could accompany any such claim could have a material adverse effect on the business, financial condition and results of operations of Grand HK.

Grand HK is expected to operate across a number of international borders and may face unanticipated assessments from taxing authorities from these jurisdictions

     Grand HK’s operations will involve a significant number of cross-border transactions. Grand HK is expected to establishes provisions for its known and estimated income tax obligations. However, whether through a challenge by one of the many tax authorities in international jurisdictions where Grand HK and its subsidiaries operate, through Grand HK’s transfer pricing, or through challenges to Grand HK’s claim regarding lack of permanent establishment, or other matters that may exist, Grand HK would be exposed to possible additional taxation that will not have been accrued.

Grand HK will be subject to many U.S. regulations when importing toys into the U.S.

     U.S. customers of Grand HK are subject to the provisions of the Federal Hazardous Substances Act and the Federal Consumer Product Safety Act. These laws empower the Consumer Product Safety Commission, or the CPSC, to protect consumers from hazardous toys and other articles. The CPSC has the authority to exclude products from the market 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 U.S., as well as in foreign jurisdictions. While Grand HK expects to design and test the products it purchases or manufactures for compliance with regulatory standards, there can be no assurance that Grand HK’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 Grand HK. In addition, there can be no assurance that more restrictive laws, rules and regulations will not be adopted in the future, or that Grand HK’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 Grand HK’s business, financial condition and results of operations.

Grand HK may be subject to tariffs and quotas when importing its products

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

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Investment Risks

     By voting in favor of the reorganization merger and the issuance of Grand HK ADSs to Centralink, Grand US shareholders will be choosing to invest in Grand HK. Owning Grand HK ADSs will subject holders to a number of risks, some of which are similar to those associated with owning Grand US common stock and some of which are different.

The market price of Grand HK ADSs may decline compared with the market price of Grand US common stock as a result of the reorganization merger and the Playwell acquisition

     Although Grand US’ shares have traded on the Nasdaq SmallCap Market since 1993, the acquisition of Playwell represents a fundamental change in the business and operations of Grand US. Playwell is a larger company than Grand US and is engaged in different lines of business. Accordingly, the historical market price of Grand US should not be used as an indication of the future market price of Grand HK ADSs. In fact, the market price of Grand HK ADSs may decline compared with the market price of Grand US common stock as a result of the reorganization merger and acquisition, if:

The market price of Grand HK ADSs is expected to be volatile

     Market prices of the securities of toy companies are often volatile and Grand US’ historical stock price has reflected this volatility. The trading price of Grand US common stock has been, and the trading price of Grand HK’s ADSs may continue to be, subject to wide fluctuations. For the period from January 1, 2003 through March 31, 2004, the closing sale prices of Grand US common stock on the Nasdaq SmallCap Market ranged from $1.00 to $4.78. These broad market and industry fluctuations may result in the decline of the market price of Grand HK’s ADSs, regardless of its operating performance.

     The market price of Grand US common stock has been, and Grand HK expects that the market price of the Grand HK ADSs will be, affected by many factors, including:

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It may be difficult for Grand HK ADSs to be sold at attractive prices

     Grand US common stock has generally experienced limited liquidity and trading volume, and it is likely that Grand HK ADSs will initially experience lack of liquidity, lack of volume and lack of coverage by analysts and market makers, which may or may not affect the future performance of the Grand HK ADSs. There can be no assurance that a more active trading market for the Grand HK ADSs will develop or that, if developed, will be sustained. Further, there is no public market for the ordinary shares of Grand HK underlying the ADSs. In the past several years, many foreign issuers with market capitalization similar to that of Grand HK have been unable to sustain an active trading market for their securities. The market price for the ADSs going forward may be highly volatile, as has been the case with the ADSs and the securities of other companies located in emerging market countries.

     In addition, the stock market in general has experienced extreme volatility that often has been unrelated to the operating performance of any company. These broad market and industry fluctuations may result in the decline of the price of Grand HK ADSs, regardless of its operating performance.

Future sales of Grand HK ADSs by existing shareholders, option holders and warrant holders could result in a decline of the price of Grand HK ADSs

     The market price of Grand HK ADSs could decline as a result of sales of a large number of its ADSs into the market after the exchange is completed, or the perception that these sales could occur. There are currently options and warrants to purchase 1,046,607 shares of Grand US common stock outstanding. All of these options and warrants will be converted into options and warrants to purchase the same number of Grand HK ADSs upon exercise. If and when these options and warrants are exercised, it might have a depressive impact on the market price of the Grand HK ADSs. This might make it more difficult for Grand HK to sell equity securities in the future at a time and at a price that it deems appropriate.

Grand HK does not expect to pay dividends on its stock

     Neither Grand US nor Playwell has paid any cash or other dividends on its common stock and Grand HK does not expect to declare or pay any cash dividends in the foreseeable future.

It may be difficult to enforce civil liabilities against Grand HK

     Grand HK is a Hong Kong company, and a substantial portion of its assets will be located outside the U.S. In addition, certain of Grand HK’s directors and officers named herein are resident outside the U.S. (principally in Hong Kong and the People’s Republic of China), and all or a substantial portion of the assets of such persons are or may be located outside the U.S. As a result, it may not be possible for investors to effect service of process within the U.S. upon such persons, or to enforce against them or Grand HK judgments obtained in the U.S. courts predicated upon the civil liability provisions of the U.S. securities laws. The availability in Hong Kong, in original actions or in actions for enforcement of judgments of U.S. courts, of remedies provided for under the U.S. securities laws may be subject to the discretion of the Hong Kong courts based on consideration of Hong Kong public policy.

Grand HK has more limited reporting requirements as a foreign private issuer than those to which Grand US is currently subject

     As a foreign private issuer, under the Exchange Act, Grand HK is not required to publish financial statements as frequently, as promptly or containing the same information as U.S. companies. Grand HK will also be exempt from the rules and regulations of 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.

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Risks Specific to Grand US

     In deciding whether to approve the reorganization merger and the issuance of Grand HK ADSs to Centralink, in addition to some of the risks described above, Grand US shareholders should consider the following risks of Grand US if these transactions are not approved and Grand US continues to operate as an independent company.

Doubts about Grand US’ ability to continue as a going concern could have a material adverse effect on its stock price and the liquidity of its shares

     In Grand US’ audited financial statements for the year ended December 31, 2002 and 2001, it recognized that it had certain issues which raised substantial doubts about its ability to continue as a going concern. The reasons cited were its recurring losses and the insufficiency of its line of credit to fund its operations. This was included in the notes in, and in KPMG’s audit report on, those financial statements. In mid-2002, Grand US implemented a plan to stem its losses and return to profitability and, at that time, secured an increase in its line of credit. These efforts led to Grand US’ return to profitability in 2003 and the absence of any going concern note in, and in KPMG’s audit report on, Grand US’ financial statements for the year ended December 31, 2003. However, there can be no assurance that Grand US will be able to sustain profitability and if it cannot, whether Grand US would be able to continue to operate as a going concern.

Grand US has a recent history of losses which makes sustained profitability uncertain

     Although Grand US had net earnings of $1,112,577 for the year ended December 31, 2003, it incurred net losses of $826,848 and $1,371,492 for the year ended December 31, 2002 and 2001 respectively and had not reported an annual profit since the year ended December 31, 1997. Grand US believes that its return to profitability in 2003 resulted form it recent focus on the distribution of products with higher profit margins and the reduction in expenses. Although these efforts were successful in 2003, Grand US cannot be sure that its efforts will result in continued profitability on an annual basis in the future.

Grand US’ shares may not continue to be listed on the Nasdaq SmallCap Market which could adversely affect the price and liquidity of its stock and its ability to obtain financing in the future

     On January 9, 2004, Grand US was advised by Nasdaq that it failed to meet the requirements for continued listing on Nasdaq for failure to hold its 2003 special meeting by December 31, 2003, and that its securities were therefore subject to delisting from the Nasdaq SmallCap Market. Grand US successfully appealed the Nasdaq Staff determination and Grand US’ shares will continue to be listed on the Nasdaq SmallCap Market. However, Grand US’ most recent appeal was the third time since 2001 that it was subject to potential delisting. There can be no assurance that Grand US will be able to continue to meet the requirements for continued listing or that Grand US could successfully appeal a delisting determination in the future. If Grand US’ shares were delisted, Grand US might be able to have its shares listed for quotation on the OTC Bulletin Board or other markets. However, the failure to have Grand US’ shares quoted on the Nasdaq market would likely have an adverse impact on the price and liquidity of Grand US’ shares and Grand US’ ability to obtain financing in the future.

A few customers account for a large portion of Grand US’ net sales and a substantial reduction in or termination of orders from its large customers could adversely affect its business, financial condition and results of operations

     Grand US’ four largest customers accounted for approximately 54% and 65% of its net sales in 2003 and 2002, respectively. Except for outstanding purchase orders for specific products, Grand US does not have written contracts with or commitments from any of its customers. A substantial reduction in or termination of orders from any of its largest customers could adversely affect its business, financial condition and results of operations. In addition, pressure by large customers seeking a reduction in prices, financial incentives, a change in other terms of sale or on Grand US to bear the risks and the cost of carrying inventory could also adversely affect Grand US’ business, financial condition and results of operations.

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The loss of Grand US’ right to distribute Toy Biz products would have a material adverse affect on its business, financial condition and results of operations

     Grand US has operated without a written distribution agreement with Toy Biz Worldwide Ltd. since 2001. However, it has continued to distribute the product lines carried by Toy Biz during 2002 and 2003 and has accepted orders from Toy Biz in 2004. Because Toy Biz is affiliated with Playwell, Grand US’ management believes that its relationship with Toy Biz will continue past 2004 if the Playwell acquisition is consummated. However, if the Playwell acquisition is not consummated, or even if it is, there can be no assurance that Grand US will be able to retain the right to distribute the Toy Biz product line or, even if Grand US does retain this right, that any of the products in this branded product line will retain their current popularity. The loss of Grand US’ distribution rights to any of these product lines or the decrease in the popularity of any one of these branded product lines would adversely affect Grand US’ business, financial condition and results of operations.

Non-compliance with certain Canadian government regulations could seriously harm our business

     Most of Grand US’ business is currently conducted in Canada. Grand US is subject to the provisions of various laws, certain of which have been enacted by the federal government of Canada, the Province of Quebec and other Canadian provinces. The laws of Canada include the Hazardous Products Act which empowers the Canadian government to protect children from hazardous toys and other articles. Under that legislation, the Canadian government has the authority to exclude from the market those products which are found to be hazardous. Grand US is also subject to the Consumer Packaging and Labeling Act enacted by the government of Canada. This legislation prohibits the importation of prepackaged items and the sale or importation or advertising of items which have misleading information on their labels. As a result, if any Canadian governmental entities should allege that any of Grand US’ products are hazardous to children or the packaging is misleading, whether or not such items are dangerous or misleading, Grand US could be precluded from distributing entire lines of toys in Canada until a full investigation is completed. In such case, even if Grand US prevails, a significant portion of the value of the entire line could be lost during a time-consuming investigation because, as discussed above, the life cycle for toy products is usually very short.

Risks Relating To Doing Business In China

     Grand HK will be organized and based in Hong Kong, which is part of the People’s Republic of China, and Grand HK is also expected to purchase most of its products from manufacturers in China. The following addresses some of the risks associated with doing business in China.

Certain of Playwell’s related subsidiaries on which Playwell depends have large operations in China

     Playwell Industry Ltd. and Zhejiang Playwell Toy Co. Ltd., from which Playwell sources most of its supplies of finished products and moulds for manufacturing, have their manufacturing facilities in Mainland China. Should the production capacity of any of these companies be interrupted for whatever reason, including risks inherently associated with doing business in Mainland China, the operations of Playwell would be materially affected.

China may lose its Normal Trade Relations, or NTR, status with the U.S. or the tariff or trade policies between these two countries may change

     Grand HK expects to purchase a majority of its products from manufacturers in China and export them from Hong Kong and China to the U.S. and worldwide. On September 19, 2000, the US Senate voted to permanently normalize trade with China, which provides a favorable category of US import duties. In addition, on December 11, 2001, China was accepted into the World Trade Organization, or WTO, a global international organization of 144 countries that regulates international trade. As a result of opposition to certain policies of the Chinese government and China’s growing trade surpluses with the U.S., there has been, and in the future may be, opposition to the extension of NTR status for China. The loss of NTR status for China, changes in current tariff structures or adoption in the U.S. of other trade policies adverse to China could have an adverse effect on Grand HK’s business.

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Increased Sino-U.S. Political tension may make Grand HK less attractive to investors and clients

     The relationship between the U.S. and China is subject to sudden fluctuations and periodic tension. For example, relations may be compromised if the U.S. becomes a more vocal advocate of Taiwan or proceeds to sell certain military weapons and technology to Taiwan. Any weakening of relations between the U.S. and China could have a material adverse effect on Grand HK’s business. Anti-Chinese sentiment could make Grand HK and its shares less attractive. In addition, changes in political conditions in China and changes in the state of Sino-U.S. relations are difficult to predict and could adversely affect Grand HK’s operations or cause the Greater China market to become less attractive to investors and clients because it operates in China.

Any change in the Chinese government’s economic reform programs may have a negative impact on Grand HK’s operating results

     The success of Grand HK’s current and future operations in China and Hong Kong is highly dependent on the Chinese government’s continued support of economic reform programs that encourage private investment, and particularly foreign private investment. Although the Chinese government has adopted an “open door” policy with respect to foreign investments, there can be no assurance that such policy will continue. A change in policies by the Chinese government could adversely affect Grand HK by, among other things, imposing confiscatory taxation, restricting currency conversion, imports and sources of supplies, or expropriating private enterprises. Although the Chinese government has been pursuing economic reform policies for nearly two decades, no assurance can be given that the Chinese government will continue to pursue such policies or that such policies may not be significantly altered, especially in the event of a change in leadership or other social or political disruption.

Because China does not have a well developed, comprehensive system of laws, it may be difficult for Grand HK and its subsidiaries to protect or enforce their legal rights

     The Chinese 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 U.S. China 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 Chinese legal system 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, discretion and modification, perhaps on a case-by-case basis. As the legal system in China 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. Enforcement of existing laws may be sporadic and implementation and interpretation thereof inconsistent. Furthermore, the Chinese judiciary is relatively inexperienced in enforcing the laws that exist, leading to a higher than usual degree of uncertainty as to the outcome of any litigation. Even where adequate laws exist in China, it may be impossible to obtain swift and equitable enforcement of such laws, or to obtain enforcement of a judgment by a court of another jurisdiction. It is widely believed that China’s entry into the WTO should expedite the uniform interpretation and enforcement of laws throughout China. However, there can be no assurance that Grand HK’s current or future activities in China will have a high degree of certainty under China’s legal system.

If Grand HK is not able to obtain appropriate governmental support and approvals in China, it may not be able to conduct its business activities as planned.

     Grand HK’s activities in China may by law be subject, in some circumstances, to administrative review and approval by various national and local agencies of the Chinese government. Although Grand HK believes that the present level of support from local, provincial and national governmental entities enjoyed by Playwell benefits Playwell’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 Grand HK’s business, financial condition and results of operations.

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Changes in laws relating to Chinese taxation could subject Grand HK to substantial future taxation

     The Chinese tax system is subject to substantial uncertainties and has been subject to recently enacted changes, the interpretation and enforcement of which are also uncertain. There can be no assurance that changes in Chinese tax laws or their interpretation or their application will not subject Grand HK to substantial Chinese taxes in the future.

Any change in the political and economic situation in Hong Kong could have a significant impact on Grand HK’s operations

     After the reorganization merger and the acquisition of Playwell, a significant part of Grand HK’s facilities and operations will be located in Hong Kong. On July 1, 1997, sovereignty over Hong Kong was transferred from the United Kingdom to the People’s Republic of China, and Hong Kong became a Special Administrative Region, or SAR, of China. As provided in the Sino-British Joint Declaration on the Question of Hong Kong and the Basic Law of the Hong Kong SAR of China, Hong Kong is to have a high degree of autonomy from China except in matters related to foreign affairs and defense. Under the Hong Kong Basic Law, Hong Kong has its own legislature, legal and judicial systems and economic autonomy for 50 years. Based on current political conditions and Grand HK’s understanding of the Hong Kong Basic Law, Grand HK does not believe that the transfer of sovereignty of Hong Kong will have a material adverse effect on Grand HK’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.

If the Exchange Rate for the Hong Kong Dollar ceases to be fixed against the U.S. Dollar, Grand HK would be subject to potentially significant adverse exchange rate risks

     The Hong Kong dollar has remained relatively constant against the U.S. dollar due to the U.S. dollar peg and currency board system that has been in effect in Hong Kong since 1983. However, in early 1999, the Hong Kong dollar was subject to currency speculation, and the Hong Kong government substantially supported the market for the Hong Kong dollar, both directly and indirectly through the large-scale purchase of securities listed on the Hong Kong Stock Exchange. There can be no assurance that the historical currency peg of the Hong Kong dollar to the U.S. dollar will be maintained in the future.

A change in currency exchange rates could increase Grand HK’s costs relative to its revenues

     Grand HK’s sales are expected to be mostly denominated in U.S. dollars or Euros. The majority of Grand HK’s expenses are expected to be denominated in Hong Kong dollars, followed by Chinese renminbi, the currency of Mainland China, Euros and U.S. dollars. Grand HK is also expected to generate revenues, expenses and liabilities in other currencies such as Singapore dollars and New Taiwan dollars. However, Grand HK’s quarterly and annual financial results will be reported in U.S. dollars. As a result, Grand HK will be subject to the effects of exchange rate fluctuations with respect to any of these currencies and the related interest rate fluctuations. Grand HK has not entered into agreements or purchase instruments to hedge its exchange rate risks, although it may do so in the future.

Restrictions on currency exchange for the Peoples Republic of China may affect Grand HK’s results of operations

     Although Chinese government policies were introduced in 1996 to allow greater convertibility of the renminbi, significant restrictions still remain. Grand HK can provide no assurance that the Chinese regulatory authorities will not impose greater restrictions on the convertibility of the renminbi. Because a significant amount of Grand HK’s future expenses and liabilities may be in the form of renminbi, any future restrictions on currency exchanges may limit its ability to effectively conduct business in China.

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PART II

THE REORGANIZATION AND THE PLAYWELL ACQUISITION AND SUBSCRIPTION

     This section of this proxy statement/prospectus describes the agreement and plan of merger under which Grand US will reorganize into a subsidiary of a Hong Kong company and the subscription and exchange agreement under which Grand HK will, after its reorganization, issue 10,000,000 Grand HK ADSs to Centralink in connection with the acquisition of Playwell and the additional investment by Centralink.

     This discussion is a summary only and is qualified in its entirety by reference to the agreement and plan of merger and the subscription and exchange agreement, copies of which are attached to this proxy statement/prospectus as Annex A and Annex B and are incorporated into this proxy statement/prospectus by reference.

Background of the Reorganization, the Acquisition of Playwell and the Subscription of Centralink

     Grand US has, for over 40 years, been engaged in the distribution of toys and novelty products. Since Grand US went public in 1993, Grand US has sought to expand its operations beyond the Canadian toy distribution business. These expansion efforts have been focused on expanding product offerings through the development of proprietary products and expanding geographically outside of Canada. Grand US has, for many years distributed products for Toy Biz Worldwide, or Toy Biz, an entity affiliated with Playwell, including the Marvel line of products, the largest source of Grand US’ recent revenues.

     Playwell was formed in 2000 as a holding company for a principal operating subsidiary, Hong Kong Toy Centre Limited, and certain related entities. Hong Kong Toy Centre Limited was formed in 1969 and has been active in the toy business for over 30 years.

     The series of transactions described in this proxy statement/prospectus which, if approved by the shareholders of Grand US, will fundamentally change the constitution and business of Grand US. The transaction consists of two separate elements, each of which, subject to waiver, would happen only if the other is completed. The first element is the reorganization of Grand US, involving a reorganization merger through which Grand US would become a wholly-owned subsidiary of Grand HK. Pursuant to the reorganization, all the stock of Grand US would be converted into ordinary shares of Grand HK which will be traded in the U.S. as Grand HK ADSs. The second element is the acquisition of all of the issued and outstanding shares of Playwell from Centralink in exchange for 5,000,000 Grand HK ADSs and the issuance to Centralink of an additional 5,000,000 Grand HK ADSs for cash and other consideration in a total amount of $11,000,000. As a result of these transactions, Grand HK will become the holding company for Grand US, Playwell and their respective operating subsidiaries.

     Following consummation of the transactions contemplated by the subscription and exchange agreement, Centralink will own a majority of the shares of Grand HK and the Board of Directors of Grand HK will consist of five directors, two of whom will be nominated by Centralink, two of whom will be nominated by David Mars and Stephen Altro, directors and significant shareholders of Grand US and one director who will be selected by the independent directors of Grand HK.

     Since 1996, Grand US has been the exclusive Canadian distributor of toy products for Toy Biz Worldwide. Sales of Toy Biz products, consisting primarily of action figures licensed from Marvel Enterprises, constituted 62%, 67% and 45% of sales by Grand US during the years ended December 31, 2003, 2002 and 2001, respectively. Grand US’s distribution agreement with Toy Biz Worldwide expired on December 31, 2001. Since January 1, 2002, Grand US has distributed Toy Biz products pursuant to an oral agreement. Toy Biz, like Centralink, is wholly-owned by Cornerstone Overseas Investments, Ltd. Playwell Industry Limited and Toy Biz have manufactured products distributed by Grand US. During the years ended December 31, 2003 and 2002, Grand US’ sales of Playwell Industry Limited products were $32,172 and $381,305, respectively. In 2003 and 2002, Grand US received sales commission from Playwell Industry Limited of $9,093 and $20,412, respectively. Grand US paid commissions of $91,770 and $199,537 to Kidbest Ltd, a sister-company of Playwell, in 2003 and 2002 respectively. Except for these arrangements, there are no other contracts, arrangements or understandings between Grand US or its subsidiaries and Cornerstone, Centralink, Playwell or their subsidiaries.

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     As early as 2001, the principals of Grand US and Centralink had spoken about the potential benefits of a combination of their businesses. Grand US had been looking for ways to enhance its distribution business, which had been declining for some time, by creating its own brands and proprietary products. Playwell, conscious of the growing consolidation in the toy industry, was interested in achieving the economies and higher margins associated with vertical integration of the distribution function as well as the acquisition of additional proprietary products and enhanced brand recognition. However, it was not until January of 2003 that discussions began in earnest. Those discussions initially involved a third party, Fun-4-All Corp., a developer and marketer of toy products and concepts.

     In late December of 2002, Mr. David Mars, a director of Grand US, telephoned Mr. Jeff Hsieh, the beneficial owner of Centralink to discuss a potential business combination in anticipation of Mr. Mars’ trip to Hong Kong.

     On or about January 5, 2003, Mr. Mars telephoned Mr. Henry Hu, then a consultant to Cornerstone, to introduce the president and principal shareholder of Fun-4-All, Mr. Scott Bachrach. Mr. Mars had known Mr. Bachrach for a number of years, although Grand US and Fun-4-All had never done business together. Mr. Mars suggested that Playwell consider a business combination with Fun-4-All. Shortly thereafter, Mr. Hu met Mr. Bachrach in Hong Kong.

     Late in the week of January 5, 2003, Mr. Hu and Mr. Mars met at the Marco Polo Hotel in Hong Kong. At that meeting, it was agreed that the parties would explore the possibility of a three-way combination involving Grand US, Playwell and Fun-4-All. A few days after that meeting, Messrs. Hu, Mars and Bachrach met, again in Hong Kong, and agreed to exchange preliminary financial information, which was done shortly thereafter.

     On January 22, 2003, Grand US retained the firm Piper Rudnick LLP to serve as its legal advisor in connection with the proposed transaction.

     On January 25, 2003, a meeting was held in New York at the offices of Lazar Levine, an independent accounting firm, to discuss the terms of the potential combination. The meeting was attended by Elliot L. Bier, Grand US’ chairman; Mr. Mars and Mr. Altro; Mr. Hu, a representative of Centralink; Scott Bachrach; Michael Dinkes of Lazar Levine; and counsel to Fun-4-All and Grand US. At this meeting, the parties outlined the material terms of the proposed transaction.

     During the week of January 27, 2003, representatives of Piper Rudnick circulated a draft letter of intent to those attending the January 25 meeting. Several e-mails were thereafter exchanged concerning the terms of the letter of intent.

     On February 15, 2003, a meeting was held at the offices of Lazar Levine to discuss the potential transaction and to further negotiate the terms of the letter of intent. The meeting was attended by Messrs. Bier, Mars, Hu, Bachrach and Altro. At the meeting, substantially all of the terms of the transaction were agreed upon.

     Between February 15, 2003 and February 26, 2003, drafts of a proposed form of letter of intent were circulated among the parties.

     On February 26, 2003, Grand US, Centralink and Fun-4-All executed a letter of intent containing the terms of the proposed transaction, including the acquisition by Grand US of Playwell and Fun-4-All and the related investment by Centralink into Grand US.

     On March 3, 2003, Centralink retained Dorsey & Whitney to serve as its legal advisor in connection with the proposed transaction.

     On March 22, 2003, Centralink retained BDO Seidman to perform a financial due diligence investigation of Grand US.

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     During the month of March 2003, representatives of Grand US and Centralink commenced legal and financial due diligence on Playwell, Fun-4-All and Grand US.

     On April 2, 2003, representatives of Dorsey & Whitney, Centralink’s counsel, and Piper Rudnick LLP, Grand US’ counsel, met at the offices of Piper Rudnick to discuss the progress of the due diligence. At the meeting, Centralink’s counsel proposed a change to the structure of the transaction in which Grand US would reorganize outside of the United States.

     On May 1, 2003, Tania M. Clarke, Grand US’ chief financial officer, and representatives of Piper Rudnick, Dorsey & Whitney and BDO Seidman, Centralink’s independent accountants, met again at the offices of Piper Rudnick to discuss the proposal to reorganize Grand US outside of the United States.

     On May 7, 2003, Grand US, Centralink and Fun-4-All amended the letter of intent to extend the period for entering into definitive agreements to July 1, 2003.

     On May 19, 2003, Mr. Hu met with Mr. Bier in Vancouver, Canada, to discuss some of the issues that had arisen during the course of the parties’ due diligence. The topics discussed included the composition of the board of directors of Grand HK following the consummation of the transaction and lock-up arrangements for affiliates of Grand US and Centralink.

     On May 22, 2003, a meeting was held at the offices of Dorsey & Whitney in New York. The meeting was attended by Messrs. Bier, Mars and Altro and Ms. Clarke of Grand US, Mr. Hu, who had become executive director of Cornerstone during May 2003, Mr. Bachrach and Steve Krause of Fun-4-All and representatives of BDO Seidman, Dorsey & Whitney and Katten Muchin Zavis Rosenman. The latter firm had been retained by Grand US to replace Piper Rudnick in connection with the transaction. At the meeting, all material issues regarding the transaction were agreed upon and a schedule was provided for completing due diligence and preparing definitive documentation.

     On May 30, 2003, Grand US retained J. Chan, Yip, So & Partners as special Hong Kong counsel in connection with the acquisition of Playwell.

     On June 24, 2003, an initial draft of what ultimately became the subscription and exchange agreement was circulated to all parties.

     Between June 24, 2003 and November 13, 2003, representatives of Grand US, Centralink and Fun-4-All and their respective legal counsel engaged in ongoing due diligence and negotiation of the subscription and exchange agreement and the related documentation.

     On July 1, 2003, Grand US, Centralink and Fun-4-All executed a further amendment to the letter of intent which extended the deadline for entering into definitive agreements from July 1, 2003 to August 15, 2003, and extending the anticipated date of the closing from September 30, 2003 to November 30, 2003.

     On July 16, 2003, Grand US retained KPMG to perform a financial due diligence investigation of Fun-4-All.

     On August 5, 2003, Grand US retained KPMG to perform a financial due diligence investigation of Playwell.

     On September 8 and 9, 2003, Mr. Bier, Mr. Bachrach and counsel for Grand US, Centralink and Fun-4-All met in New York to discuss the draft agreements and the open issues pertaining to the transaction. Mr. Hu participated in some of the discussion by telephone.

     On November 5 and 6, 2003, meetings were held at the offices of Katten Muchin Zavis Rosenman in New York. The meetings were attended by Messrs. Bier and Mars of Grand US, Mr. Hu of Centralink, Mr. Bachrach of Fun-4-All and their respective legal counsel. The meetings were held to discuss and finalize any unresolved issues concerning the terms of the transaction.

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     On November 11, 2003, Grand US’ legal counsel circulated to the board of directors of Grand US the final version of the subscription and exchange agreement together with a memorandum summarizing the terms of the transaction.

     On November 12, 2003, the board of directors of Grand US held a telephonic meeting during which Mr. Bier reviewed the background and terms of the reorganization of Grand US, the acquisition of Playwell and the subscription by Centralink following the reorganization. Legal counsel reviewed in detail the terms of the subscription and exchange agreement and the related documents, and reviewed with the directors their fiduciary duties. Mr. Bier and Grand US’ legal counsel answered questions from the directors with regard to the acquisition. In response to some of the questions raised by members of the board, it was determined to adjourn the meeting to give the members of the board more time to review the terms of the transaction and ask follow up questions.

     On November 14, 2003, the meeting of the board of directors of Grand US was reconvened by conference telephone. The directors continued to ask questions and discussed the terms of the transaction. Following the discussion, by unanimous vote, the Grand US board approved the terms of the reorganization and the other terms of the subscription and exchange agreement, subject to receipt of the opinion from Empire Valuation Consultants that the Playwell acquisition and related investment by Centralink pursuant to the subscription and exchange agreement is fair to the shareholders from a financial point of view. On the same day, the subscription and exchange agreement was signed by Grand US, Grand HK and Centralink.

     From November 14, 2003 until December 11, 2003, representatives of Grand US and Centralink and their counsel continued to negotiate with Fun-4-All and its counsel regarding the terms on which Fun-4-All might participate in the transaction.

     On November 17, 2003, Empire Valuation Consultants was retained by Grand US to render an opinion regarding the fairness, from a financial point of view, of the consideration to be paid to Centralink in connection with the subscription and exchange agreement.

     On December 10, 2003 and December 11, 2003, Mr. Bier and Mr. Hu again had meetings to discuss the terms on which Fun-4-All might participate in the transaction.

     On December 11, 2003, representatives of Katten Muchin Zavis Rosenman, counsel for Grand US, wrote to counsel for Fun-4-All notifying the latter on behalf of Grand US of the termination of negotiations concerning the participation of Fun-4-All in the proposed combination of Grand US and Playwell on the grounds that the board of directors of Grand US had determined that the transaction was not viable on the revised terms that had been discussed since the meeting of September 8 and 9, 2003.

     On February 12, 2004, the board of directors of Grand US held a special meeting. At the meeting, representatives of Empire Valuation Consultants reported to the directors of Grand US on their financial analysis of the terms of the subscription and exchange agreement and delivered their oral opinion that, as of such date and based on and subject to the assumptions, qualifications and limitations set forth in their opinion, it was their conclusion that the consideration to be paid to Grand HK pursuant to the subscription and exchange agreement was fair to the shareholders of Grand US from a financial point of view.

     On March 31, 2004, Empire Valuation Consultants delivered their written opinion that, as of such date and based on and subject to the assumptions, qualifications and limitations set forth in their opinion, it was their conclusion that the consideration to be paid to Grand HK pursuant to the subscription and exchange agreement was fair to the shareholders of Grand US from a financial point of view.

Grand’s Reasons for the Reorganization and the Playwell Acquisition

     In reaching its decision to approve the agreement and plan of merger and the acquisition of Playwell and the related investment by Centralink in Grand HK, the board of directors identified and considered a number of potential benefits for Grand US and its shareholders that supported the board’s decision. These factors include both business and synergistic reasons.

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Business and Financial Benefits

     The potential business and financial benefits include the following:

     In addition to these potential benefits accruing to Grand US and its shareholders from the reorganization merger and the acquisition of Playwell and the related purchase of Grand HK ADSs by Centralink, the board of Grand US considered a number of additional factors that supported the transactions, including the following:

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Reasons for the Reorganization Merger

     The board of directors of Grand US is recommending the reorganization merger be undertaken as a part of the overall transaction on several related grounds:

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result, non-U.S. investors are likely to be significantly more receptive to an investment in Grand HK ADSs, thereby potentially increasing the liquidity in the market for Grand HK ADSs.

Risks Considered

     In reaching its decision to approve the agreement and plan of merger, the acquisition of Playwell and the related transactions, the board of Grand US also identified and considered a number of potentially negative factors that could result from the whole transaction, including the following:

Conclusion and Recommendation of the Board

     Grand US’ board of directors evaluated all of the factors described above in light of their knowledge of Grand US’ business, financial condition and prospects, Playwell’s business, financial condition and prospects, and the market for toy products. In view of the variety of factors considered by Grand US’ board of directors in its evaluation of the transactions, Grand US’ board of directors did not find it practicable to, and did not, quantify or otherwise assign relative weight to the specific factors considered in reaching its decision. In addition, individual members of Grand US’ board of directors may have given different weight to different factors. The list of factors described in this section as having been considered by Grand US’ board of directors is not intended to be the complete list of all factors considered but is believed to include all of the factors considered by Grand US’ board of directors to be material.

     After considering all of the information and factors described in this section, Grand US’ board of directors unanimously approved the reorganization merger, the agreement and plan of merger, the subscription and exchange agreement and the other transactions contemplated by the agreement and plan of merger and the subscription and exchange agreement. Grand US’ board of directors believes that the transactions are fair to, advisable and in the best interests of Grand US and its shareholders. Grand US’ board of directors has unanimously recommended that the Grand US shareholders vote FOR the adoption of the agreement and plan of merger (proposal 1) and the issuance of the shares to Centralink pursuant to the subscription and exchange agreement (proposal 2).

Centralink’s Reasons for the Subscription and Exchange Transaction

     Centralink, as the holding company of Playwell, has been seeking ways of growing the Playwell business, which consists principally of the manufacture and outsourcing of products for third parties on a “private label” basis and only secondarily on the manufacture of its small line of proprietary products, which it wants to expand. Also, in light of the rapid consolidation taking place in the industry, Centralink desires to achieve vertical integration through direct distribution in order to realize the higher margins associated with the marketing end of the business. The original concept of combining the distribution of Grand US and the manufacturing capability of Playwell with the creative product development skills of Fun-4-All was a natural way of achieving the objectives of both Grand US and Centralink. The failure of the Fun-4-All participation to materialize was a disappointment but did not invalidate the basic premise of the combination.

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     Centralink believes that the combination of Playwell’s financial resources and cost-management skills with Grand US’ marketing and distribution presence in North America will create a vertically-integrated company that will be greater than the sum of its parts and together will be a stronger vehicle for future expansion. Centralink also believes that the combination will provide strategic and financial benefits to Grand HK by creating a toy company that has international coverage both in Asia and in North America. The combination should generate economies of scale and create a much larger and financially more stable company.

Opinion of Empire Valuation Consultants

     Pursuant to a letter agreement dated as of November 17, 2003 and executed on November 17, 2003, Empire Valuation Consultants, or Empire, was engaged to provide a fairness opinion to the board of directors of Grand US. Empire focuses on providing business and intangible asset valuations for fairness opinions, financial reporting, tax planning and reporting, employee stock ownership plans, corporate planning, and other purposes. In this capacity, Empire is continually engaged in valuing these businesses and intangible assets and has access to and utilizes different databases of information on business valuation for comparative purposes.

     Empire made an oral presentation to the Grand US board on February 12, 2004, that, as of such date, based upon and subject to the various factors and assumptions described in the Empire presentation, the consideration to be delivered by Grand HK to Centralink pursuant to the subscription and exchange agreement was fair, from a financial point of view, to the shareholders of Grand US. The presentation made by Empire did not constitute a fairness opinion. Other than the retention of Empire in connection with the delivery of the fairness opinion, there is no material relationship between Grand US, Playwell, Centralink and Empire, and there has been no material relationship between these parties at any time during the two years prior to the date of this proxy statement/prospectus.

     Empire’s March 31, 2004 fairness opinion, which describes the assumptions made, matters considered and limitations on the review undertaken by Empire, is attached as Annex C to this proxy statement/prospectus. You are urged to, and should, read the Empire opinion carefully and in its entirety. The Empire opinion is directed to the board of directors of Grand US and addresses only the fairness of the transaction consideration from a financial point of view to holders of Grand US common stock as of the date of the opinion. The Empire opinion does not address any other aspect of the reorganization merger consideration and does not constitute a recommendation to any Grand US shareholder as to how to vote at the Grand US special meeting. The summary of the Empire opinion set forth in this proxy statement/prospectus, although materially complete, is qualified in its entirety by reference to the full text of such opinion.

     In rendering its opinion, Empire, among other things:

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