Japan's Gaga Films and animation house Gonzo will collaborate on an animatedfeature adaptation of French children's book Peggy Sue And The Ghosts: Sleep Of The Demon, written by SergeBrussolo.

The book is the second in aseries of eight best-sellers which have been published in France, the first six of which have been translated intoJapanese. Kadokawa publishes the books in Japan.

It tells the story of 14-year-oldPeggy and her telepathic blue dog who go on a fantastical journey to the landof mirages. Gaga is aiming to release the film in the second half of 2008.

Gonzo, the core brand of theGDH group of animation-related companies, is one of the leading animationhouses in Japan. Gonzo entered the animated feature film arenaearlier this year with Gin-Iro No Kami NoAgito (Agito's Silver Coloured Hair),followed by the upcoming Brave Story,Fuji TV's first foray into animated features, set to open in Japan this July and premiering at Cannes.

Gonzo's feature slate aimsto appeal to both young and adult audiences, and some see Brave Story as competition to Studio Ghibli's box-office dominatingfeatures. Gonzo is also developing AfroSamurai, with Samuel Jackson to serve as lead voice actor and co-producer.

Long-time foreign anddomestic film distributor Gaga Communications established Gaga Films last yearto produce domestic and international co-productions, underwritten by a $259m(Y30bn) contents fund set up by Gaga parent Usen Corp and Daiwa SecuritiesSMBC.