The Management Board of Zapf Creation AG, Europe's leading manufacturer of branded play and functional dolls, is taking action to further optimize its group structure. The move is designed to quickly implement the strategic cooperation agreed with MGA Entertainment Inc. The cooperative venture covers the areas of sales and sourcing and is an important step on the way to putting the company on a sustainable competitive basis.

The sales and marketing units previously located at the company's Roedental headquarters will be bundled in Darmstadt, the location of MGA Entertainment's German subsidiary, and new jobs will be created. Processes and structures in Roedental will be streamlined once again, which means that about 45 jobs will be reduced. Taking into account employee transfers and natural fluctuation, the number of actual redundancies is expected to be lower. Talks with employee representatives on fair settlements will be started immediately. Furthermore, all product design operations are to be combined at Zapf Creation’s headquarters in Roedental, which will create 6 new jobs there. New jobs will also be created at Zapf Creation’s sales units in France and Spain.

Once this and other minor structural adjustments have been made, Zapf Creation Group's workforce will be down to about 240 (from 334 on September 30, 2006). This figure takes into account the just under 90 redundancies in Hong Kong and China resulting from the planned transfer of sourcing and technical product development to MGA Entertainment as of January 1, 2007. MGA Entertainment is taking on about half the employees made redundant there.

This corporate realignment and the cooperation with MGA are designed to further reduce costs, increase internal value creation and put the Roedental location on a sound long-term basis. This move will lay the foundation for a clear improvement in the group's operational performance in 2007