Whilst up to mischief in the local park, James Baggit and his gang stumble across a derelict old theatre. Amongst the theatrical props, they discover a treasure chest containing an old pirate coat. Stuck in the lining of one of its pockets, James finds a magic ring. The ring gives him wonderful storytelling powers that bring the characters in his stories to life. Ghosts and pirates magically appear at the most inopportune moments, causing all sorts of mayhem. The ring leads James and his friends in search of buried treasure and whilst stranded on an island, his younger brother is kidnapped by Mad Pete, a bloodthirsty pirate of the most fearsome kind. To make matters worse, James and his gang are pursued relentlessly by Mr Fiddling, the school caretaker and his nephew Groucho Gribbling, the school bully, who are out to snatch the ring at every opportunity.