UNITED STATES
                       SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549

                                    FORM 20-F
(MARK ONE)

[ ] REGISTRATION STATEMENT PURSUANT TO SECTION 12(B) OR (G) OF THE SECURITIES
    EXCHANGE ACT OF 1934

                                       OR

[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES
    EXCHANGE ACT OF 1934 FOR THE FISCAL YEAR ENDED DECEMBER 31, 2005

                                       OR

[ ] TRANSITIONAL REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES
    EXCHANGE ACT OF 1934

    FOR THE TRANSITION PERIOD FROM ______________ TO ____________________

                                       OR

[ ] SHELL COMPANY REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES
    EXCHANGE ACT OF 1934

    DATE OF EVENT REQUIRING SHELL COMPANY REPORT ___________

Commission file number: 0-26046
                        -------

                          CHINA NATURAL RESOURCES, INC.
                          -----------------------------
             (Exact name of Registrant as specified in its Charter)

                                 Not Applicable
                                 --------------
                 (Translation of Registrant's name into English)

                             British Virgin Islands
                             ----------------------
                 (Jurisdiction of incorporation or organization)

                     Room 2105, West Tower, Shun Tak Centre,
                  200 Connaught Road C., Sheung Wan, Hong Kong
                  --------------------------------------------
                    (Address of principal executive offices)

Securities registered or to be registered pursuant to Section 12(b) of the Act:
None
----

Securities registered or to be registered pursuant to Section 12(g) of the Act:

                        Common Shares, without par value
                        --------------------------------
                                (Title of class)

Securities for which there is a reporting obligation pursuant to Section 15(d)
of the Act:  None
             ----

Indicate the number of outstanding shares of each of the issuer's classes of
capital or common stock as of the close of the period covered by the annual
report. 1,247,823 Common Shares as of December 31, 2005; 11,548,416 Common
Shares as of May 31, 2006.

<PAGE>

Indicate by check mark if the issuer is a well-known seasoned issuer, as defined
in Rule 405 of the Securities Act.

                                                              Yes [ ]     No [X]

If this report is an annual or transition report, indicate by check mark if the
registrant is not required to file reports pursuant to Section 13 or 15(d) of
the Securities Exchange Act of 1934.

                                                              Yes [ ]     No [X]

Note - Checking the box above will not relieve any registrant required to file
reports pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
from their obligations under those Sections.

Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.

                                                              Yes [X]     No [ ]

Indicate by check mark whether the registrant is a large accelerated filer, an
accelerated filer or a non-accelerated filer. See definition of "accelerated
filer and large accelerated filer" in Rule 15b-2 of the Exchange Act. (Check
one):

Large Accelerated Filer [ ]   Accelerated Filer [ ]   Non-Accelerated Filer [X]

Indicate by check mark which financial statement item the registrant has elected
to follow.

                                                     Item 17 [X]     Item 18 [ ]

If this is an annual report, indicate by check mark whether the registrant is a
shell company (as defined in Rule 12b-2 of the Exchange Act.

                                                              Yes [ ]     No [X]

                                       2
<PAGE>
                                   CONVENTIONS
                                   -----------

         Unless otherwise specified, all references in this report to "U.S.
Dollars," "Dollars," "US$," or "$" are to United States dollars; all references
to "Hong Kong Dollars" or "HK$" are to Hong Kong dollars; and all references to
"Renminbi" or "RMB" are to Renminbi yuan, which is the lawful currency of the
People's Republic of China ("China" or "PRC"). The accounts of the Company and
its subsidiaries are maintained in either Hong Kong Dollars or Renminbi. The
financial statements of the Company and its subsidiaries are prepared in
Renminbi. Translations of amounts from Renminbi to U.S. Dollars and from Hong
Kong Dollars to U.S. Dollars are for the convenience of the reader. Unless
otherwise indicated, any translations from Renminbi to U.S. Dollars or from U.S.
Dollars to Renminbi have been made at the single rate of exchange as quoted by
the People's Bank of China (the "PBOC Rate") on December 31, 2005, which was
U.S.$1.00 = Rmb8.07. Translations from Hong Kong Dollars to U.S. Dollars have
been made at the single rate of exchange as quoted by the Hongkong and Shanghai
Banking Corporation Limited on December 31, 2005, which was US$1.00 = HK$7.80.
The Renminbi is not freely convertible into foreign currencies and the quotation
of exchange rates does not imply convertibility of Renminbi into U.S. Dollars or
other currencies. All foreign exchange transactions take place either through
the Bank of China or other banks authorized to buy and sell foreign currencies
at the exchange rates quoted by the People's Bank of China. No representation is
made that the Renminbi or U.S. Dollar amounts referred to herein could have been
or could be converted into U.S. Dollars or Renminbi, as the case may be, at the
PBOC Rate or at all.

         References to "CNRI" are to China Natural Resources, Inc. (formerly
known as Billion Luck Company Ltd.), a British Virgin Islands company, which was
the surviving company after a merger between China Resources and CNRI on
December 9, 2004 (the "Redomicile Merger").

         References to "Central Government" refer to the national government of
the PRC and its various ministries, agencies, and commissions.

         References to "common stock" are to the common stock, $.001 par value,
of China Resources. References to "common shares" are to the common shares,
without par value, of CNRI after the Redomicile Merger.

         References to "China Resources" are to China Resources Development,
Inc., a Nevada company, and the predecessor to CNRI.

         References to "Company" are to CNRI, and include, unless the context
requires otherwise, the operations of its predecessor and subsidiaries (all as
hereinafter defined).

         References to "First Supply" are to First Goods And Materials Supply
And Sales Corporation, a company organized in the PRC and a wholly-owned
subsidiary of HARC.

         References to "FMH" are to Feishang Mining Holdings Limited, a British
Virgin Islands corporation and, since February 3, 2006, a wholly-owned
subsidiary of China Natural.

         References to "GAAP" or "U.S. GAAP" are to generally accepted
accounting principles of the United States.

         References to "Hainan" are to Hainan Province of the PRC.

         References to "HARC" are to Hainan Cihui Industrial Company Limited, a
Sino-foreign joint stock company organized in the PRC, and a wholly-owned
subsidiary of the Company.

         References to "iSense" are to iSense Limited, a Hong Kong company whose
capital was 100% acquired by the Company on August 29, 2003.

         References to "Local Governments" are to governments in the PRC,
including governments at all administrative levels below the Central Government,
including provincial governments, governments of municipalities directly under
the Central Government, municipal governments, county governments, and township
governments.

                                       3
<PAGE>

         References to "Medi-China" are to Zhongwei Medi-China.com Limited, a
Hong Kong company and a wholly-owned subsidiary of Silver Moon.

         References to the "PRC" or "China" include all territory claimed by or
under the control of the Central Government, except Hong Kong, Macau, and
Taiwan.

         References to "PRC Government" include the Central Government and Local
Governments.

         References to "Provinces" include provinces, autonomous regions, and
municipalities directly under the Central Government.

         References to "Second Supply" are to Second Goods And Materials Supply
And Sales Corporation, a company organized in the PRC and a wholly-owned
subsidiary of HARC.

         References to "Series B Preferred Stock" are to the Series B Preferred
Stock, $.001 par value, of China Resources. References to "Series B Preferred
Shares" are to the Series B Preferred Shares, without par value, of CNRI, after
the Redomicile Merger.

         References to "Silver Moon" are to Silver Moon Technologies Limited, a
British Virgin Islands company, whose capital is 80% owned by the Company.

         References to "Sunwide" are to Sunwide Capital Ltd., a British Virgin
Islands company, which is a wholly-owned subsidiary of the Company.

         References to "Wuhu" are to Wuhu Feishang Mining Development Co.
Limited, a company organized in the PRC and a wholly-owned subsidiary of FMH.

         References to "Xubu" are to Shenzhen Xubu Investment Co. Ltd., a
company organized in the PRC and, until its sale in February 2004, a
wholly-owned subsidiary of HARC.

         References to "Zhongwei Trading" are to Hainan Zhongwei Trading Company
Limited, a company organized in the PRC, whose capital is owned 95% by HARC and
5% by the Company.

         References to "Zhuhai Zhongwei" are to Zhuhai Zhongwei Development
Company Limited, a company organized in the PRC and, until its sale in April
2003, a wholly-owned subsidiary of HARC.

FORWARD-LOOKING STATEMENTS

         This report contains statements that constitute forward-looking
statements. Those statements appear in a number of places in this report and
include, without limitation, statements regarding the intent, belief and current
expectations of the Company, its directors or its officers with respect to the
Company's policies regarding investments, dispositions, financings, conflicts of
interest and other matters; and trends affecting the Company's financial
condition or results of operations. Any such forward-looking statement is not a
guarantee of future performance and involves risks and uncertainties, and actual
results may differ materially from those in the forward-looking statement as a
result of various factors. The accompanying information contained in this
report, including without limitation the information set forth above and the
information set forth under the heading, "Operating and Financial Review and
Prospects," identifies important factors that could cause such differences. With
respect to any such forward-looking statement that includes a statement of its
underlying assumptions or bases, the Company cautions that, while it believes
such assumptions or bases to be reasonable and has formed them in good faith,
assumed facts or bases almost always vary from actual results, and the
differences between assumed facts or bases and actual results can be material
depending on the circumstances. When, in any forward-looking statement, the
Company, or its management, expresses an expectation or belief as to future
results, that expectation or belief is expressed in good faith and is believed
to have a reasonable basis, but there can be no assurance that the stated
expectation or belief will result or be achieved or accomplished.

                                       4
<PAGE>
                                     PART I

[Item 1]    IDENTITY OF DIRECTORS, SENIOR MANAGEMENT AND ADVISORS

         Not applicable.

[Item 2]    OFFER STATISTICS AND EXPECTED TIMETABLE

         Not applicable.

[Item 3]    KEY INFORMATION

A.       SELECTED FINANCIAL INFORMATION

         The following selected financial data of the Company and its
subsidiaries for the years ended December 31, 2001, 2002, 2003, 2004 and 2005,
are derived from the audited consolidated financial statements for the periods
indicated and should be read in conjunction therewith. This information does not
give effect to the Company's February 3, 2006 acquisition of FMH and its wholly
owned subsidiary Wuhu. Details of the Company's acquisition of FMH are described
elsewhere in this report.
<TABLE>
<CAPTION>
                                                          In thousands, except share amounts
                                                               Year ended December 31,
                                               2001            2002            2003            2004            2005
                                           ------------------------------------------------------------------------
                                                Rmb             Rmb             Rmb             Rmb             Rmb
<S>                                        <C>             <C>             <C>             <C>             <C>
OPERATING STATEMENT DATA
Net sales                                    4,093           1,948           3,049           3,970           3,890
Operating expenses                          (9,995)         (7,267)         (6,401)         (8,019)         (6,733)
Loss  from  continuing  operations
   before income taxes                     (24,628)        (56,200)        (29,100)        (22,429)        (13,834)
Loss from continuing operations            (26,206)        (56,200)        (29,100)        (22,440)        (13,864)
Loss from discontinued operations           (5,136)         (4,032)         (2,637)             --              --
Net loss                                   (30,144)        (60,232)        (31,737)        (22,440)        (13,864)
Basic and diluted loss per share
  Continuing operations                     (29.85)         (67.08)         (30.20)         (18.79)         (11.11)
  Discontinued operations                    (6.13)          (4.81)          (2.74)             --              --
                                           -------         -------         -------       ---------       ---------
                                            (35.98)         (71.89)         (32.94)         (18.79)         (11.11)
                                           =======         =======         =======       =========       =========
Weighted average number of shares
  Basic and diluted                        837,797         837,797         963,478       1,194,118       1,247,823

BALANCE SHEET DATA
Total assets                               157,217          89,112          66,684          46,869          32,714
Current assets                              35,636          16,520          15,122          13,147           6,294
Current liabilities                         17,636           9,656           6,015           3,816           3,561
Working capital                             18,000           6,864           9,107           9,331           2,733
Long term debt                                  --              --             321             206              36
Shareholders' equity                       139,581          79,456          60,348          42,847          29,117
</TABLE>

         The Company has not paid any dividends with respect to its common
shares and has no present plan to pay any dividends in the foreseeable future.
The Company intends to retain its earnings to support the development of its


                                       5
<PAGE>

business. Any dividends paid in the future by the Company will be paid at the
discretion of the Company's Board of Directors and will be dependent upon
distributions, if any, made by its subsidiaries. Applicable PRC law requires
that, before distributing profits to investors, companies such as the Company
must (1) satisfy all taxes; and (2) allocate a specified percentage of after-tax
profits to surplus reserve (10% of after-tax profits) and collective welfare
fund (5-10% of after-tax profits). In addition to the foregoing, any future
determination to pay a dividend to holders of its Common Shares will depend on
the Company's results of operations, its financial condition and other factors
deemed relevant by the Board of Directors. Since the acquisition of CNRI by
China Resources in December 1994, the Company has not received any distributions
from any of its subsidiaries and has not made any distributions to its
shareholders.

EXCHANGE RATES

         The Company's reporting currency is Renminbi. Translations of amounts
from Renminbi to U.S. Dollars are for the convenience of the reader. The rate of
exchange means the quote made by the People's Bank of China (the "PBOC Rate").
The average rate means the average of the exchange rates of the last date of
each month during a year.
<TABLE>
<CAPTION>
YEAR                               2001            2002           2003            2004          2005
----                               ----            ----           ----            ----          ----
<S>                              <C>             <C>            <C>             <C>           <C>            <C>
High                             8.2786          8.2776         8.2778          8.2775        8.2767
Low                              8.2763          8.2760         8.2765          8.2763        8.0702
Average for period               8.2772          8.2770         8.2771          8.2768        8.1826
End of period                    8.2765          8.2770         8.2767          8.2765        8.0702

MONTH                            Dec 05          Jan 06         Feb 06          Mar 06        Apr 06         May 06
-----                            ------          ------         ------          ------        ------         ------
High                             8.0808          8.0702         8.0616          8.0505        8.0240         8.0265
Low                              8.0702          8.0601         8.0402          8.0172        8.0050         8.0025
</TABLE>

         The exchange rate on June 5, 2006 was 8.0077.

B.       CAPITALIZATION AND INDEBTEDNESS

         Not applicable.

C.       REASONS FOR THE OFFER AND USE OF PROCEEDS

         Not applicable.

D.       RISK FACTORS

POLITICAL AND ECONOMIC CONSIDERATIONS

         Since 1997, the PRC government has been making efforts to promote
reforms of its economic system. These reforms have brought about marked economic
growth and social progress, and the economy of China has shifted from a planned
economy to a socialist market economy. Wuhu has also benefited from the economic
reforms implemented by the PRC government and the economic policies and
measures. However, revisions or amendments may be made to these policies and
measures from time to time, and Wuhu is not in a position to predict whether any
change in the political, economic or social conditions may adversely affect the
operating results of Wuhu.

LEGAL CONSIDERATIONS

         The PRC legal system is a statutory law system. Unlike the common law
system, decided legal cases have little significance for guidance, and rulings
by the court can only be used as reference with little value as precedents.
Since 1979, the PRC government has established a commercial law system, and
significant progress has been made in promulgating laws and regulations relating
to economic affairs. Examples are the organization of companies and their


                                       6
<PAGE>

regulation, foreign investment, commerce, taxation and trade. However, these
regulations are relatively new and the availability of public cases as well as
the judicial interpretation of them are limited in number. Moreover, as they are
not binding, both the implementation and interpretation of these regulations are
uncertain in many areas. The interpretation of PRC laws may also be subject to
policy changes reflecting domestic political changes, and new laws, changes to
existing laws and the pre-emption of local regulations by national laws may
adversely affect foreign investors. The activities of our subsidiaries in China
are subject to PRC regulations governing PRC companies.

GEOGRAPHIC LIMITATIONS MAY MAKE IT DIFFICULT TO OBTAIN JURISDICTION OVER OUR
COMPANY OR OUR ASSETS

         During 2004, we became a British Virgin Islands company and our
officers and directors are non-residents of the United States, our assets are
located in the PRC and our operations are conducted in the PRC. Therefore, it
may not be possible to effect service of process on such persons in the United
States, and it may be difficult to enforce any judgments rendered against us or
them. Moreover, there is doubt whether courts in the British Virgin Islands or
the PRC would enforce (a) judgments of United States courts against us, or our
directors or officers based on the civil liability provisions of the securities
laws of the Unites States or any state, or (b) in original actions brought in
the British Virgin Islands or the PRC, liabilities against us or any
non-residents based upon the securities laws of the United States or any state.

THE RIGHTS OF OUR SHAREHOLDERS ARE SUBJECT TO BRITISH VIRGIN ISLANDS LAW, THE
PROVISIONS OF WHICH MAY NOT BE AS FAVORABLE TO SHAREHOLDERS AS US LAW

         Since we are a British Virgin Islands company, the rights of our
shareholders may be more limited than those of shareholders of a United States
corporation. In this regard, our directors are permitted to take action that,
under the laws of most states of the United States require shareholder approval.
These actions include authorizing reorganizations, asset sales (of less than 50%
of our total assets) and amendments to our Memorandum and Articles of
Association (that do not vary the rights of shareholders).

OUR STATUS AS A "FOREIGN PRIVATE ISSUER" RESULTS IN LESS INFORMATION BEING
AVAILABLE ABOUT US THAN DOMESTIC REPORTING COMPANIES

         We are foreign private issuer and are not required to file as much
information about us as United States issuers are required to file. In this
regard we are not required to file quarterly reports on Form 10-Q or Current
Reports on Form 8-K; we are exempt from the provisions of Regulation FD aimed at
preventing issuers from making selective disclosures; the SEC proxy statement
and information statement rules do not apply; and our officers, directors and
principal shareholders are not required to file reports detailing their
beneficial ownership of our shares. There is generally greater information
available about United States issuers than about foreign private issuers such as
us, and the lack of information about us makes it more difficult to make
investment decisions about us.

WE DO NOT INTEND TO PAY DIVIDENDS IN THE FORESEEABLE FUTURE AND THERE ARE
RESTRICTIONS ON THE CONVERSION OF LOCAL CURRENCY

         We do not intend to pay dividends for the foreseeable future as we
intend to reinvest earnings from operations, if any, back into our operations.
In addition, our holding company structure creates restrictions on our payment
of dividends. The payment of dividends is also subject to numerous restrictions
imposed under PRC law, including restrictions on the conversion of local
currency into United States dollars and other currencies.

AS A "FOREIGN PRIVATE ISSUER" WE ARE NOT SUBJECT TO CERTAIN RULES PROMULGATED BY
NASDAQ THAT OTHER NASDAQ-LISTED ISSUERS ARE REQUIRED TO COMPLY WITH

         Our common shares are currently listed on the Nasdaq Capital Market
and, for so long as our securities continue to be listed, we will remain subject
to the rules and regulations established by Nasdaq applicable to listed
companies. As permitted under Nasdaq rules applicable to foreign private issuers
such as China Natural Resources, we have determined not to comply with the
following Nasdaq rules:

         o        a majority of our board of directors are not independent as
                  defined by Nasdaq rules;
         o        our independent directors do not hold regularly scheduled
                  meetings in executive session;
         o        the compensation of our executive officers is not determined
                  by an independent committee of the board or by the independent
                  members of the board of directors, and our CEO may be present
                  in the deliberations concerning his compensation;

                                       7
<PAGE>

         o        related party transactions are not required to be reviewed or
                  approved by our audit committee or other independent body of
                  the board of directors;
         o        we are not required to solicit shareholder approval of stock
                  plans, including those in which our officers or directors may
                  participate; stock issuances that will result in a change in
                  control; the issuance of our stock in related party
                  acquisitions or other acquisitions in which we may issue 20%
                  or more of our outstanding shares; or, below market issuances
                  of 20% or more of our outstanding shares to any person; and
         o        we are not required to participate in an electronic link with
                  a specified registered depository in connection with any
                  direct registration program that we may establish in the
                  future.

We may in the future determine to voluntarily comply with one or more of the
foregoing provisions.

THERE ARE A LIMITED NUMBER OF OUR COMMON SHARES IN THE PUBLIC FLOAT AND TRADING
IN OUR SHARES IS NOT ACTIVE; THEREFORE, OUR COMMON SHARES TEND TO EXPERIENCE
PRICE VOLATILITY

         There are currently approximately 1,233,131 of our common shares in the
public float and, in general, there has not been an active trading market for
our shares. Our shares tend to trade along with other shares of public companies
whose operations are based in the People's Republic of China. These shares tend
to exhibit periods of extreme volatility and price fluctuations, even when there
are no events peculiar to the Company that appear to warrant price changes. We
cannot assure you that price volatility will not continue in the future or, as a
result thereof, that market prices will reflect actual values of our company.

         As a consequence of this lack of liquidity, the trading of relatively
small quantities of shares by our shareholders may disproportionately influence
the price of those shares in either direction. The share price could, for
example, decline precipitously in the event that a large number of shares are
sold on the market without commensurate demand, as compared to a seasoned issuer
which could better absorb those sales without adverse impact on its share price.
As a consequence of this enhanced risk, more risk-adverse investors may, under
the fear of losing all or most of their investment in the event of negative new
or lack of progress, be more inclined to sell their shares on the market more
quickly and at greater discounts than would be in the case with the stock of a
seasoned issuer.

WUHU'S EARNINGS MAY BE AFFECTED BY METALS PRICE VOLATILITY

         The majority of Wuhu's revenue is derived from the sale of iron and
zinc and, as a result, our earnings are directly related to the prices of these
metals. At present, the price of these metals in the PRC is generally in line
with that in the international market. There are many factors influencing the
price of iron and zinc including expectations for inflation; global and regional
demand and production; political and economic conditions; and production costs
in major producing regions.

         These factors are beyond Wuhu's control and are impossible for it to
predict. As a result, changes in the price of zinc and iron may adversely affect
Wuhu's operating results. Wuhu has not engaged in hedging transactions or
alternative measures to manage possible price fluctuations.

WUHU'S ORE RESERVE ESTIMATES MAY BE IMPRECISE

         Both the quantity of ores and metal reserves are primarily based on
estimates and there is no assurance that estimated reserves can be fully
recovered. Investors are strongly cautioned not to place undue reliance on
reserve estimates. Reserve estimation is an interpretive process based upon
available data and various assumptions that are believed to be reasonable. The
estimates may prove to be inaccurate, in which event Wuhu's mineral production
and our operating results may be adversely affected The economic value of ore
reserves may be adversely affected by price fluctuations in the metal market,
reduced recovery rates or a rise in production costs as a result of inflation or
other technical problems arising in the course of extraction.

                                       8
<PAGE>

RELIANCE ON OPERATING PERFORMANCE OF A SINGLE MINE

         The principal operating asset of Wuhu is the Yang Chong Mine. Over 80%
of the turnover of Wuhu was generated from the Yang Chong Mine. Since its
acquisition in May 2003 until December 31, 2005, 100 % of Wuhu's sales of zinc
and approximately 70% of Wuhu's sales of iron were derived from metal output
from Yang Chong Mine. Although Wuhu plans to increase its production levels by
opening two additional mine shafts in the Yang Chong Mine, as well as by
acquiring additional mining rights in the PRC, there is no assurance that these
development projects will be successful. If these development plans are
unsuccessful, Wuhu may suffer a decrease in overall profit margins, operating
performance and investment return, and may adversely affect the operating
results of Wuhu.

AMORTIZATION POLICY FOR MINING RIGHTS

         Wuhu's mining rights are amortized based on actual units of production
over estimated reserves of the mines. Wuhu reviews the production plans and the
reserve levels of the mines periodically. Accordingly, any material change in
the production plan of Wuhu's mines or modification of reserve levels may have a
negative impact on Wuhu's operating results.

RELIANCE ON SUB-CONTRACTOR

         Wuhu sub-contracts its ore extraction work to a third party. To some
extent, the operations of Wuhu are affected by the performance of the
contractor, whose activities are not within Wuhu's control. If the contractor
fails to achieve the guaranteed monthly extraction volume, or the contractor
otherwise fails to perform its obligations under its agreement with Wuhu, the
agreement may be terminated by Wuhu; however, termination of the relationship
could adversely affect the operating results of Wuhu.

RISKS AND HAZARDS ASSOCIATED WITH THE MINING INDUSTRY

         Wuhu's business is subject to a number of risks and hazards including:

         o        environment hazards;
         o        industrial accidents;
         o        unusual or unexpected geologic formations;
         o        explosive rock failures; and
         o        flooding and periodic interruptions due to inclement or
                  hazardous weather conditions.

         Such risks could result in:

         o        damage to or destruction of mineral properties or production
                  facilities;
         o        personal injury or death;
         o        environmental damage;
         o        delays in mining;
         o        monetary losses; and
         o        legal liability.

         Wuhu emphasizes environmental protection in its operations and related
activities. A significant financial commitment has been made towards the
construction of environmental protection facilities and the establishment of a
sound environmental protection management and monitoring system. Although Wuhu
is currently in compliance with applicable environmental regulations of the PRC
government, any changes to these regulations may increase the operating costs of
the Company and may adversely affect the operating results of the Company.

            During the course of its mining activities, Wuhu uses dangerous
materials. Although Wuhu has established stringent rules relating to the
storage, handling and use of such dangerous materials, there is no assurance
that accidents will not occur. Should Wuhu be held liable for any such accident,
Wuhu may be subject to penalties and possible criminal proceedings may be
brought against its employees.

DEPENDENCE ON SINGLE CUSTOMER

         Wuhu's entire production of zinc for the years ended December 31, 2003,
2004 and 2005 were sold to a single customer, Huludao Zinc Industry Co. Ltd


                                       9
<PAGE>

(also known as Wulo Island Zinc Stock Company Limited), the largest zinc smelter
in Asia. Wuhu is a party to a one-year sales contract with Huludao, subject to
renewal every year. In the event Wuhu and Huludao are unable to agree upon
renewal terms or Wuhu's sales contract with Huludao is not renewed for any other
reason, Wuhu will have to identify one or more alternative outlets for its
mineral production. While the sales contract has been renewed on an annual basis
in the past, in the event the contract is not renewed in the future, our results
of operations may be adversely affected.

COMPETITION FOR RESOURCES

         Mines have limited lives and as a result, Wuhu continually seeks to
expand its reserves through the acquisition of mining rights at new. As there is
a limited supply of desirable mineral deposits in the PRC, Wuhu faces strong
competition for mining rights from other mining companies, some of which have
greater financial resources than Wuhu, Wuhu may not be able to acquire
attractive mineral rights on terms that Wuhu considers acceptable.


[Item 4]    INFORMATION ON THE COMPANY

A.       HISTORY AND DEVELOPMENT OF THE COMPANY

         China Resources was incorporated as Magenta Corp. on January 15, 1986,
in the State of Nevada. It was formed to acquire businesses that would provide a
profit to the Company. China Resources had no operating business until control
of it was acquired in December 1994, by the former shareholders of CNRI, who
exchanged all of the issued and outstanding shares of capital stock of CNRI for
108,000 shares of China Resources' common stock. As a result of the acquisition,
the former shareholders of CNRI acquired 90% of the then issued and outstanding
shares of common stock of China Resources, and China Resources became the owner
of all the outstanding shares of capital stock of CNRI. CNRI was incorporated in
the British Virgin Islands on December 14, 1993.

         On December 9, 2004, China Resources merged with and into CNRI (the
"Redomicile Merger"). The Redomicile Merger was effected by an exchange of
shares of China Resources into shares of CNRI on a one-for-one basis. As a
result of the Redomicile Merger, the Company became domiciled in the British
Virgin Islands and CNRI has succeeded to the rights and obligations of China
Resources under its existing agreements and relationships. Prior to the
Redomicile Merger, the Company's common shares were traded on the Nasdaq Capital
market under the symbol "CHRB". Following the Redomicile Merger, the trading
symbol was changed to "CHNR".

         On February 3, 2006 the Company consummated the acquisition of all of
the issued and outstanding capital stock of FMH from Feishang Group Limited (the
"Shareholder"), a British Virgin Islands company, the former owner of all of the
issued and outstanding common stock of FMH. Mr. Li Feilie, our President, Chief
Executive Officer and Chairman is the sole beneficial owner of the Shareholder.

         Under the terms of the Acquisition Agreement governing the acquisition,
the Company issued 9,980,593 of its common shares to the Shareholder,
representing approximately 86.4% of its issued and outstanding common shares
(after giving effect to the issuance and the exchange of 320,000 currently
outstanding preferred shares for 320,000 common shares, as described below), and
issued to the Shareholder warrants (the "Warrants") to purchase an additional
4,500,000 common shares. Ching Lung Po, director, President, Chief Executive
Officer and Chairman of the Company resigned at the closing of the acquisition,
and Li Feilie, Chairman of FMH, was appointed as director, President, Chief
Executive Officer and Chairman of the Company. The Company's other directors and
executive officers remain unchanged following the acquisition.

         The Warrants entitle the holder to purchase: 2,000,000 common shares at
an exercise price of $4.00 per share for a period of two years from the closing
date; 1,500,000 common shares at an exercise price of $4.50 per share for a
period of three years from the closing date; and 1,000,000 shares at an exercise
price of $5.00 per share for a period of four years from the closing date. Other
than the exercise price and exercise period, all other terms and conditions of
the Warrants are identical. The Warrants provide that the exercise price is
subject to adjustment in the event of stock splits, dividends and
reclassifications. The expiration date of the Warrants is subject to
acceleration in the event of the sale, conveyance or disposal of all or
substantially all of the Company's property or business or a merger with or into
or consolidation with another company or other transaction or series of
transactions in which more than 50% of the voting power of the Company is


                                       10
<PAGE>

disposed of, except for a merger undertaken solely for the purpose of changing
the domicile of the Company or in connection with an equity financing in which
the Company is the surviving corporation.

         In connection with the acquisition, Winsland Capital Limited, a
corporation wholly owned by Ching Lung Po, the former president and chief
executive officer of the Company, exchanged 320,000 Series B preferred shares of
the Company for 320,000 common shares. Under the Acquisition Agreement, the
Shareholder has irrevocably agreed that prior to February 3, 2008 it will not
sell, transfer, pledge, mortgage or otherwise dispose of any of the common
shares it received in the transaction.

         The Company's principal place of business is located at Room 2105, West
Tower, Shun Tak Centre, 200 Connaught Road C., Sheung Wan, Hong Kong, telephone
(852) 2810-7205.

B.       BUSINESS OVERVIEW

         Since 2000, the Company has been primarily engaged in identifying,
acquiring and operating business opportunities and, when management deems it
advisable, disposing of acquired businesses. Since the disposition of businesses
may, from time-to-time, consist of the sale of assets, the Company maintains
ownership over numerous direct and indirect currently inactive wholly owned
subsidiaries, organized under the laws of various jurisdictions, that may be
used in connection with business opportunities in the future.

         As of December 31, 2005, the Company's only active business operations
consisted of its advertising, promotion and public relations business. The
Company has been engaged in advertising, promotion and public relations services
since the third quarter of 2003 through the acquisition of iSense. iSense is an
integrated marketing company dedicated to providing creative advertising and
promotions services to both local and international customers engaged in various
industries, including technology and new media, healthcare products and consumer
goods.

         The advertising business is not seasonal in nature. Since its
incorporation, iSense has serviced over 50 customers. For the period from
acquisition to December 31, 2003, one advertising customer accounted for 11% of
total sales. For the year ended December 31, 2004, five advertising customers
accounted for 89% of total sales. For the year ended December 31, 2005, two
advertising customers accounted for 62% of total sales. All sales were made in
Hong Kong dollars.

         The Company commenced operations of a supermarket in the PRC, through
Zhuhai Zhongwei, in the fourth quarter of 1999. As the contribution of
supermarket operations to the Company's profitability was insignificant since
its establishment, the Company disposed of its entire interest in Zhuhai
Zhongwei on April 22, 2003 for consideration of RMB6,000,000 (US$743,000). On
August 29, 2003, the Company acquired a 100% equity interest in iSense for total
consideration of US$724,000 through the issuance of 100,000 shares of the
Company's unregistered restricted common stock to the former sole equity owners
of iSense. The Company acquired iSense to provide advertising, promotion and
public relations services in Hong Kong and mainland China to both local and
international customers. The Company also trades copper occasionally through
HARC in the PRC. In light of the foregoing transactions, operating results of
prior years should not be viewed as being indicative of operating results that
may be expected in future years.

         The Company has not been a party to any bankruptcy, receivership or
similar proceedings, trade suspensions or cease trade orders by any regulatory
authority.

         The following describes activities conducted by the Company's
subsidiaries during the year ended December 31, 2005.

ISENSE
------

         iSense was Incorporated in March 2000 in Hong Kong and is an integrated
marketing company. On August 29, 2003, the Company acquired all of the issued
and outstanding capital stock of iSense for total consideration of US$724,000,
in exchange for the issuance of 100,000 shares of the Company's unregistered
restricted common stock to the former sole equity owners of iSense. The number


                                       11
<PAGE>

of shares issued was based upon the US$7.24 closing price of the Company's
common shares (as quoted on the Nasdaq SmallCap Market) on August 22, 2003. The
Company acquired iSense to provide advertising, promotion and public relations
services in Hong Kong and mainland China to both local and international
customers.

HARC
----

         HARC is a Sino-foreign joint stock company incorporated in the PRC on
June 28, 1994 with a registered capital of RMB100 million (US$12.4 million).
HARC owns a 5.3% equity interest in unlisted shares of Hainan Sundiro Motorcycle
Co., Ltd., a PRC company listed on the Shenzhen Stock Exchange in the PRC. HARC
also trades copper occasionally for its own account.

SUNWIDE
-------

         Sunwide was incorporated in the British Virgin Islands on January 22,
2001. Sunwide is mainly engaged in investing in marketable securities, traded in
US markets, as short-term investments.

SILVER MOON AND MEDI-CHINA
--------------------------

         Silver Moon is a British Virgin Islands company incorporated on March
24, 2000. The principal business of Silver Moon and its wholly-owned subsidiary,
Medi-China (formerly known as Sky Creation Technology Limited), a Hong Kong
company incorporated on October 15, 1999, is to provide online Internet
healthcare content, through its website, medi-china.com, which offers
health-related content in both English and Chinese, with a focus on Chinese
herbal medicine and therapies. Neither Silver Moon nor Medi-China is currently
engaged in active business operations, however, they are poised to recommence
their healthcare-related website to the extent that the e-commerce industry
stabilizes and demonstrates signs of revival.

FMH AND WUHU
------------

HISTORY OF FMH

         FMH was incorporated under the laws of the British Virgin Islands in
September 2004. FMH beneficially owns 100% of the capital stock of Wuhu, a
company established under the laws of the PRC. FMH treats the business of Wuhu,
a mining enterprise principally engaged in the mining of zinc, iron and other
minerals for distribution in the PRC, as its principal business activity.

         Wuhu was established as a sino-foreign joint stock limited liability
company between Wuhu Feishang Enterprise Development Company Limited ("WFED")
(50%) and Feishang International Holdings Limited ("FIH") on June 21, 2002 with
a tenure of 20 years from the date of its business license. The tenure can be
extended by agreement between the joint venture partners with the necessary
approval from the relevant government agencies. In May 2003, Wuhu acquired the
entire business of Anhui Fanchang Zinc and Iron Mine. In April 2005, WFED and
FIH transferred their interests in Wuhu to FMH, at cost, and since the date of
such transfer, FMH has been the owner of 100% of the capital stock of Wuhu.

BUSINESS OF FMH

         FMH conducts its operations through Wuhu. Wuhu's principal activities
are the mining of zinc, iron and other minerals for distribution in the PRC. At
present, Wuhu owns the mining rights to two mines located in Wuhu City, Anhui
Province, the PRC: The Yang Chong Mine contains iron and zinc minerals and the
Zao Yun Mine contains mainly iron minerals. The two mines produced 47,000 tons
of iron and 8,600 tons of zinc in 2005. The majority of the iron and zinc ore is
mined from Yang Chong Mine. Yang Chong Mine has a total mining area of 0.186
square kilometers. Zao Yun Mine has a total mining area of approximately 0.0136
square kilometers. Wuhu City is located in the northwestern Yangtze River Delta
and the center of East China, approximately 384 kilometers from Shanghai.

                                       12
<PAGE>

         The table below summarizes the production quantity and sales quantity
for each of the year ended December 31, 2003, 2004 and 2005 included in
continuing operations.

                                            2003            2004           2005
Production quantity (tons):
  Zinc                                     8,170           7,800          8,650
  Iron                                    48,265          58,160         46,800
  Micaceous iron oxide - grey                766           1,072            524

Sales quantity (tons):
  Zinc                                     8,345           7,782          8,841
  Iron                                    51,786          58,326         46,201
  Micaceous iron oxide - grey                723           1,089            612

         The Yang Chong Mine has been in production since 1999. In 2005, the
daily mining capacity of the Yang Chong Mine was approximately 400 tons of ore.

         The Zao Yun Mine has been in operation since 1998. In 2005, the monthly
mining capacity of the Zao Yun mine was approximately 4,000 tons of iron ore.

         Since all mineral resources in the PRC are owned by the State, the
Company's right to extract minerals at the mines is licensed to Wuhu by the
State for a period of years (see "Government Regulation," below). The Company is
the only party that is currently licensed to mine the Yang Chong Mine and the
Zao Yun Mine. The Company's current license to mine the Yang Chong Mine expires
on December 31, 2011, and may be renewed upon expiry. The Company's current
license to mine the Zao Yun Mine expires on August 11, 2006, and may be renewed
upon expiry.

         Wuhu outsources mine extraction to an unrelated third party. Under two
agreements both dated October 1, 2002, Wuhu entered into sub-contracting
agreements with Zhejiang Universal Tunnel Engineering Co. Ltd. for outsourcing
the mine extraction work for Yang Chong Mine and Zao Yun Mine. For Yang Chong
Mine, the subcontractor guarantees an extraction volume of 5,000 tons per month
and charges a service fee of RMB41.2 (US$ 5.0) per ton of ore extracted,
RMB1,188 (US$ 143) per extra meter of deeper mine extracted and RMB13 (US$1.6)
per ton of useless stone removal. For Zao Yun Mine, the subcontractor charges a
service fee of RMB68 (US$8.2) per ton of ore extracted. Except for the mining of
raw mineral stones, which is outsourced to an unrelated third party, all the
procedures of the refinery process are performed by Wuhu. Raw mineral stones
extracted from Yang Chong Mine are refined into iron and zinc metals in
factories located near the mine. Wuhu's production process for iron and zinc
metals is illustrated below:

                                       13
<PAGE>
                     __________________________________
                    |                                  |
                    |             Mining               |
                    |__________________________________|
                                     |
                     __________________________________
                    |                                  |
                    |            Breaking              |
                    |__________________________________|
                                     |
                     __________________________________
                    |                                  |
                    |            Grinding              |
                    |__________________________________|
                                     |
                     __________________________________
                    |                                  |
                    |            Grading               |
                    |__________________________________|
                                     |
                     __________________________________
                    |                                  |
                    |            Sorting               |
                    |__________________________________|
                    /                                  \
 __________________/                                    \____________________
|                  |                                    |                    |
|    Zinc ore      |                                    |Magnetic separation |
|__________________|                                    |____________________|
         |                                                         |
 ________|_________                                      __________|_________
|                  |                                    |                    |
|    Pooling       |                                    | Finished iron ore  |
|__________________|                                    |____________________|
         |
 ________|_________
|                  |
|  Dehydration     |
|__________________|
         |
 ________|_________
|                  |
|Finished zinc ore |
|__________________|

         Wuhu's management believes that prospects in the PRC iron and zinc
markets will continue to present it with attractive opportunities for growth and
expansion. Wuhu plans to increase the existing daily mining capacity to 900 tons
in 2007 by opening two additional mine shafts. One mine shaft opened in December
2005 and the other is expected to open in late 2006.

         The daily refining capacity of Wuhu is approximately 600 tons. Wuhu
plans to increase its current processing capacity by expanding the existing
processing facilities in 2006 and it expects the daily refining capacity will
gradually increase to 800 tons in 2009 with the expanded processing facilities.
The expansion work has not yet been commenced and management estimates the total
budget for the expansion work will be approximately RMB2 million (US$248,000).

                                       14
<PAGE>

INDUSTRY OVERVIEW

         Iron ore is one of the key compounds for producing crude steel which is
used mainly by the infrastructure, real estate, shipbuilding and automobile
sectors. Most of the world productions are concentrated in Australia, Brazil,
the PRC and India, which together accounts for 70% of the world total. As the
PRC economy continues to record strong growth, the PRC has become the dominant
source of iron ore demand growth. The PRC is also the largest importer of iron
ore in the world.

         Zinc metal is used in a multitude of applications. Since zinc has a
relatively high place in the galvanic series of metals and consequently
demonstrates excellent resistance to atmospheric corrosion, the major
application of zinc is in galvanizing - a zinc coating on steel to prevent
corrosion. Most of the world productions are concentrated in Australia, Canada,
the PRC and Peru, which together accounts for 60% of the world total. Due to the
rapid growth in the infrastructure, housing and automotive sectors in the PRC,
there has been a steep rise in the demand of zinc metal.

SUPPLIERS

         As a mining enterprise, Wuhu's ore is mined from Yang Chong Mine and
Zao Yun Mine. Wuhu purchases explosives and other auxiliary raw material from
suppliers mainly located in Anhui Province, the PRC. For explosives, the
purchases are made on a cash on delivery basis. For other auxiliary materials,
normal credit terms are granted by major suppliers ranging from 30 to 60 days on
an open account basis.

         During the years ended December 31, 2003, 2004 and 2005, the largest
five suppliers accounted for 47%, 44% and 59%, respectively, of Wuhu's
purchases. During the years ended December 31, 2003, 2004 and 2005, one supplier
accounted for 22%, 14% and 24%, respectively, of Wuhu's purchases.

CUSTOMERS

         Wuhu sells zinc and iron products to companies in the PRC. All of
Wuhu's zinc products were sold to a single customer, Huludao Zinc Industry Co.,
Ltd., also known as Wulo Island Zinc Stock Company Limited ("Huludao"), which is
the largest zinc smelter in Asia. Wuhu has a one-year sales contract with
Huludao subject to renewal every year. All sales to Huludao were made on a cash
on delivery basis. For iron and other products, sales are generally made under
sales contracts with customers, typically with a one-year term. Approximately
90% of these sales are made on cash on delivery basis. For the others,
management may extend up to one month's credit to customers who are determined
to be creditworthy.

         At December 31, 2003, 2004 and 2005, the largest five customers
accounted for 84%, 95% and 99% of trade receivables, respectively. During the
year ended December 31, 2004, three customers accounted for 47%, 24% and 10%,
respectively, of Wuhu's sales. During the year ended December 31, 2005, three
customers accounted for 65%, 12% and 8%, respectively, of Wuhu's sales.

COMPETITION

         Wuhu faces competition from Nanjing Xixia Lead Zinc Silver Mine
("Nanjing") which produces 20,000 tons of zinc annually. Huludao sources zinc
metal from both Nanjing and Wuhu. However, as the annual demand of zinc metal of
Huludao is 300,000 and Wuhu has a long-standing sales relationship with Huludao,
management believes that Wuhu will be able to renew its sales contract with
Huludao as it has in the past. In addition, Wuhu faces competition from other
smaller mines around the region for its iron products. However, management
believes that Wuhu enjoys a competitive advantage based upon its high product
quality and purity, and low cost of production.

GOVERNMENT REGULATION

         Under the "Mineral Resources Law", all mineral resources of the PRC are
owned by the State. Mining rights are granted by the State permitting recipients
to conduct mining activities in a specific mining area during the license
period. On December 31, 2005, Wuhu renewed its mining rights to 0.186 square


                                       15
<PAGE>

kilometers covering Yang Chong Mine, which will expire in December 2011, subject
to renewal upon expiry. Although Wuhu believes that it will be able to renew
licenses as it has done in the past, there can be no assurance that Wuhu will be
able to exploit the entire mineral resources of its mines during its license
period. If Wuhu fails to renew its mining rights upon expiry or it cannot
effectively utilize the resources within a license period, the operation and
performance of Wuhu may be adversely affected.

         Wuhu's mining rights entitle it to undertake mining activities and
infrastructure and ancillary work, in compliance with applicable laws and
regulations, within the specific area covered by the license during the license
period. Wuhu is required to submit mining proposal and feasibility studies to
the relevant authority. Wuhu is obligated to pay a natural resources fee to the
State in an amount equal to 2% of annual sales. Wuhu paid and/or accrued license
fees of RMB3 million (US$372,000) when it renewed the license in December 2005.

ENVIRONMENTAL PROTECTION

         The State Environmental Protection Administration Bureau is responsible
for the supervision of environmental protection in, the implementation of
national standards for environmental quality and discharge of pollutants for,
and the supervision of the environmental management system of the PRC.
Environmental protection bureaus at the country level or above are responsible
for environmental protection within their jurisdictions.

         The laws and regulations governing environmental protection require
each company to lodge environmental impact statements for a construction project
with the environmental protection bureaus at the country level. These statements
must be filed prior to the commencement of construction, expansion or
modification of a project. The environmental protection bureaus inspect new
production facilities and determine compliance with applicable environmental
standards, prior to the commencement of operations.

         The "Environmental Protection Law requires production facilities that
may cause pollution or produce other toxic materials to take steps to protect
the environment and establish an environmental protection and management system.
The system includes the adopting of effective measures to prevent and control
exhaust gas, sewage, waste residues, dust or other waste materials. Entities
discharging pollutants must register with the relevant environmental protection
authorities.

         Penalties for breaching the Environmental Protection Law include a
warning, payment of a penalty calculated on the damage incurred, or payment of a
fine. When an entity fails to adopted preventive measures or control facilities
that meet the requirements of environmental protection standards, it is subject
to suspension of production or operations and for payment of a fine. Material
violations of environmental laws and regulations causing property damage or
casualties may result in criminal liabilities.

         Management believes that Wuhu is in material compliance with all
applicable environmental protection requirements of the State.

EMPLOYEES

         FMH presently has two employees consisting of its Chairman and Chief
Financial Officer. Wuhu currently employs 377 persons on a full time basis,
including 62 technicians and professionals. FMH believes that its relations and
those of Wuhu with their employees are generally good.

                                       16
<PAGE>

C.       ORGANIZATIONAL STRUCTURE

         The following chart illustrates the equity ownership by percentage of
each of the Company's subsidiaries as of December 31, 2005: The chart does not
reflect the Company's February 3, 2006 acquisition of FMH and its subsidiary
Wuhu.
<Table>
<Caption>
      <S>                      <C>                           <C>                   <C>

                     __________________________________
                    |                                  |
                    |         CHINA NATURAL            |__________________________________
                    |        RESOURCES, INC.           |                     |            |
                    |a British Virgin Islands company  |                     |            |
                    |__________________________________|                     |            |
                                     |                                       |            |
                                     |                                       |            |
          ___________________________|_________________________              |            |
         |                           |                         |             |            |
         | 100%                      | 100%                    | 100%        |            |80%
   ______________             _______________          __________________    |    __________________
  |              |           |               |        |                  |   |   |                  |
  |    ISENSE    |           |     HARC      |        |      SUNWIDE     |   |   |   SILVER MOON    |
  |  a Hong Kong |           |    a PRC      |        | a British Virgin |   |   | a British Virgin |
  |    company   |           |   company     |        |  Islands company |   |   | Islands company  |
  |______________|           |_______________|        |__________________|   |   |__________________|
                                     |                                       |            |
                                     |                                       |            |
                 ___________________________________________                 |            |
                |                    |                      |                |            |
                |                    |                      |                |            |
           100% |               100% |                      | 95%            |            | 100%
       __________________    __________________    __________________        |    ________________
      |                  |  |                  |  |                  |       |   |                |
      |   FIRST SUPPLY   |  |  SECOND SUPPLY   |  | ZHONGWEI TRADING |5%     |   |   MEDI-CHINA   |
      |  a PRC company   |  |  a PRC company   |  |  a PRC company   |_______|   |  a Hong Kong   |
      |    (inactive)    |  |    (inactive)    |  |    (inactive)    |           |    company     |
      |__________________|  |__________________|  |__________________|           |________________|

</Table>

D.       PROPERTY, PLANTS AND EQUIPMENT

         The Company's administrative offices and its principal subsidiaries are
located in Hong Kong and Hainan in the PRC.

         Pursuant to an office sharing agreement dated September 1, 2000, the
Company's head office in Hong Kong is shared on an equal basis between the
Company and Anka Consultants Limited, a private Hong Kong company which is owned
by certain directors of the Company. The total area of the office is
approximately 230 square meters. For the years ended December 31, 2003, 2004 and
2005, the Company paid its share of rental expenses to Anka Consultants Limited
amounting to RMB249,000 (US$30,000), RMB232,000 (US$29,000) and RMB211,000
(US$26,000), respectively. The office sharing agreement provides that the
Company share certain costs and expenses in connection with its use of the
office.

         Pursuant to an informal arrangement, iSense shares offices with an
unaffiliated third party for a monthly rental of RMB1,000 (US$124). The total
area of the office is approximately 140 square meters.

         The Company is also a party to a rental agreement entered into between
HARC and Haikou Nanyang Building Co. Ltd., an unaffiliated third party, covering
office space in Hainan with a total gross area of 138 square meters. The rental
agreement was for a period of 2 years from June 4, 2003 to June 3, 2005 at a
monthly rental of RMB3,988 (US$494). The rental agreement was renewed for a
period of 2 years from June 4, 2005 to June 3, 2007 at a monthly rental of
RMB3,580 (US$443).

         For the years ended December 31, 2003, 2004 and 2005, the Company
incurred capital expenditures of RMB958,000 (US$119,000), RMB111,000 (US$14,000)
and RMB25,000 (US$3,000), respectively. The capital expenditures for 2003 and
2004 were mainly for acquisition of motor vehicles, and the capital expenditures
for 2005 were mainly for acquisition of office equipment.

         FMH's administrative offices are located in Hong Kong. The offices,
mining sites and other processing facilities of Wuhu are all located in Wuhu
City, Anhui Province in the PRC. Yang Chong Mine has a total mining area of
0.186 square kilometers. Zao Yun Mine has a total mining area of approximately
0.0136 square kilometers. Wuhu's office premises, processing facilities and
warehouses cover a total gross area of approximately 26,000 square meters. As is
typical in the PRC, the PRC government owns all of the land on which the
improvements and mines are situated. Wuhu assumed the rights to use the land and
its leasehold properties when it acquired the entire business of Anhui Fanchang
Zinc and Iron Mine (the "Predecessor"). The registration process for the
transfer of the land use rights from the Predecessor has not yet been completed.
Wuhu has been granted mining rights to Yang Chong Mine and Zao Yun Mine to
conduct mining activities in a specific mining area during the license period.
On December 31, 2005, Wuhu renewed its mining rights to 0.186 square kilometers
covering Yang Chong Mine, which will expire in December 2011, and is subject to
renewal upon expiry. On August 11, 2003, Wuhu renewed its mining rights to


                                       17
<PAGE>

0.0136 square kilometers covering Zao Yun Mine, which will expire in August
2006, and is subject to renewal upon expiry.

[ITEM 4A]  UNRESOLVED STAFF COMMENTS

         Not applicable.

[Item 5]    OPERATING AND FINANCIAL REVIEW AND PROSPECTS

         The following discussion and analysis of the results of operations and
the Company's financial position should be read in conjunction with the December
31, 2005 consolidated financial statements and accompanying notes. The following
discussion does not give effect to the Company's acquisition of FMH and it
wholly-owned subsidiary Wuhu, in February 2006.

A.       OPERATING RESULTS

SALES AND GROSS PROFIT-COPPER

         From 2003 to 2005 the Company occasionally traded copper. For the year
ended December 31, 2003, sales and gross profit amounted to RMB1,904,000
(US$236,000) and nil, respectively. For the year ended December 31, 2004, sales
and gross profit amounted to RMB1,842,000 (US$228,000) and RMB1,000 (US$124),
respectively. For the year ended December 31, 2005, sales and gross profit
amounted to RMB1,989,000 (US$246,000) and RMB1,000 (US$124), respectively.

SALES AND GROSS PROFIT- ADVERTISING AND PROMOTION

         The Company has been engaged in advertising, promotion and public
relations services since its acquisition of iSense on August 29, 2003. For the
year ended December 31, 2003, net sales and gross profit amounted to
RMB1,145,000 (US$142,000) and RMB277,000 (US$34,000), respectively. For the year
ended December 31, 2004, net sales and gross profit amounted to RMB2,128,000
(US$264,000) and RMB588,000 (US$73,000), respectively. For the year ended
December 31, 2005, net sales and gross profit amounted to RMB1,901,000
(US$236,000) and RMB567,000 (US$70,000), respectively.

VALUATION ALLOWANCES

         For the year ended December 31, 2003, valuation allowances included the
impairment loss on the Company's investment in Hainan Sundiro Motorcycle Co.
Ltd. ("Sundiro") amounting to RMB19,000,000 (US$2,354,000), the write off of VAT
receivable of RMB3,126,000 (US$387,000) and the write off of loan and interest
receivables of RMB2,684,000 (US$333,000). For the year ended December 31, 2004,
valuation allowances included the impairment loss on the Company's investment in
Sundiro amounting to RMB13,000,000 (US$1,611,000) and the write off of loan and
interest receivables of RMB304,000 (US$38,000). For the year ended December 31,
2005, valuation allowances included the impairment loss on the Company's
investment in Sundiro amounting to RMB6,300,000 (US$781,000), and the write off
of loan receivable of RMB205,000 (US$25,000).

SELLING, GENERAL AND ADMINISTRATIVE EXPENSES

         Selling, general and administrative expenses increased by RMB1,618,000
(US$200,000) or 25.3% to RMB8,019,000 (US$994,000) in 2004 from RMB6,401,000
(US$793,000) in 2003. The increase was mainly due to increased legal and
professional fees in connection with the redomicile in 2004. Selling, general
and administrative expenses decreased by RMB1,286,000 (US$159,000) or 16.0% to
RMB6,733,000 (US$834,000) in 2005 from RMB8,019,000 (US$994,000) in 2004. The
decrease was mainly due to reduction of legal and professional fees as explained
above, partly offset by the increase in legal and professional fees in
connection with the Feishang acquisition transaction.

                                       18
<PAGE>

INTEREST INCOME/(EXPENSE), NET

         Interest income decreased by 93.6% from RMB313,000 (US$39,000) in 2003
to RMB20,000 (US$2,000) in 2004. The decrease was mainly attributable to the
default of a short-term loan and related interest receivable of RMB304,000
(US$38,000). Net interest expense for 2005 represent interest paid on finance
leases of approximately RMB19,000 (US$2,000), offset by interest income on bank
balances of RMB14,000 (US$2,000).

OTHER INCOME/(EXPENSES), NET

         Net other income in 2003 mainly consisted of a net gain on trading of
marketable securities of RMB1,157,000 (US$143,000). Net other income in 2004
mainly consisted of a net gain on trading of marketable securities of RMB373,000
(US$46,000) and the recovery of bad debts and related costs of RMB2,850,000
(US$353,000). Net other expenses in 2005 mainly represented the net loss on
trading of marketable securities of RMB618,000 (US$77,000), recovery of bad
debts of RMB88,000 (US$11,000) and a gain on the elimination of payables of
RMB293,000 (US$36,000).

INCOME TAXES

         Prior to the Redomicile Merger, it was management's intention to
reinvest all income attributable to the Company earned by its operations outside
the US. Accordingly, no US federal and state income taxes have been provided in
the consolidated financial statements. Following the Redomicle Merger,
management believes that the Company is no longer subject to US taxes.

         Income taxes in 2004 and 2005 consisted of Hong Kong profits tax
computed at 17.5% on assessable income of iSense.

SALES AND GROSS PROFIT- SUPERMARKET OPERATIONS (DISCONTINUED OPERATIONS)

         The Company ceased its supermarket operations following the disposition
of its entire interest in Zhuhai Zhongwei on April 22, 2003. Net sales included
in discontinued operations totaled RMB1,758,000 (US$218,000) with gross profit
of RMB201,000 (US$25,000) for the year ended December 31, 2003. Profit from
discontinued supermarket operations is reported net of income tax expense, if
any.

B.       LIQUIDITY AND CAPITAL RESOURCES

         The Company's and its subsidiaries' primary liquidity needs are to fund
operating expenses, and to expand business operations.

         Net cash (used in)/provided by operating activities was RMB4,529,000
(US$561,000), (RMB3,652,000) (US$453,000) and (RMB10,755,000) (US$1,333,000), in
fiscal 2003, 2004 and 2005, respectively. Net cash flows from the Company's
operating activities are attributable to the Company's income and changes in
operating assets and liabilities.

         The following summarizes the Company's financial condition and
liquidity at the dates indicated:

                                                       At December 31,
                                                       ---------------
                                                    2005              2004
                                                    ----              ----
         Current ratio                              1.8x              3.4x
         Working capital                       2,733,000         9,331,000
         Ratio of long-term debt to total
           shareholders' equity                    .005x            0.001x

         Net cash provided by investing activities was RMB42,000 (US$5,000),
RMB449,000 (US$56,000) and RMB62,000 (US$8,000), in fiscal 2003, 2004 and 2005,
respectively. Net cash provided by/(used in) financing activities was
RMB3,665,000 (US$454,000), RMB4,773,000 (US$591,000) and (RMB183,000)
(US$23,000) in fiscal 2003, 2004 and 2005, respectively. Net cash flows from the
Company's financing activities in 2003 and 2004 were attributable to proceeds
from issuance of common stock from the exercise of stock options.

                                       19
<PAGE>

         Except as disclosed above, there have been no significant changes in
the financial condition and liquidity during the years ended December 31, 2004
and 2005. The Company believes that, following the FMH acquisition, its
internally generated funds will be sufficient to satisfy its anticipated working
capital needs for at least the next 12 months.

C.       RESEARCH AND DEVELOPMENT, PATENTS AND LICENSES, ETC.

         The Company did not spend any significant amounts on company-sponsored
research and development activities during each of the last three fiscal years.

D.       TREND INFORMATION

         The Company does not believe that there have been recent trends in
production, sales and inventory, the state of the order book and costs and
selling prices since the latest financial year, nor any known trends,
uncertainties, demands, commitments or events that are reasonably likely to have
a material effect of the Company's net sales or revenues, income from continuing
operations, profitability, liquidity or capital resources, or that would cause
reported financial information not necessarily to be indicative of future
operating results or financial condition.

         Notwithstanding the foregoing, on February 3, 2006, the Company
acquired all of the issued and outstanding capital stock of FMH and its
subsidiary Wuhu, and thereby acquired the mining operations of Wuhu. Inasmuch as
the acquisition was accounted for as a reverse acquisition that resulted in a
change of control of the Company, in future filings, the operations of FMH and
Wuhu will be presented on a consolidated basis and the historic operations of
the Company will be those of FMH. Following the acquisition, we will be
substantially dependent upon the operations of FMH and Wuhu in order to generate
meaningful revenue and profitable operations. A description of the Company's
acquisition of FMH is contained elsewhere in this report.

E.       OFF BALANCE SHEET ARRANGEMENTS

         Under SEC regulations, we are required to disclose our off-balance
sheet arrangements that have or are reasonably likely to have a current or
future effect on our financial condition, changes in financial condition,
revenues or expenses, results of operations, liquidity, capital expenditures or
capital resources that are material to investors. An off-balance sheet
arrangement means a transaction, agreement or contractual arrangement to which
any entity that is not consolidated with us is a party, under which we have:

         o        Any obligation under certain guarantee contracts;
         o        Any retained or contingent interest in assets transferred to
                  an unconsolidated entity or similar arrangement that serves as
                  credit, liquidity or market risk support to that entity for
                  such assets;
         o        Any obligation under a contract that would be accounted for as
                  a derivative instrument, except that it is both indexed to our
                  stock and classified in stockholder's equity in our statement
                  of financial position; and
         o        Any obligation arising out of a material variable interest
                  held by us in an unconsolidated entity that provides
                  financing, liquidity, market risk or credit risk support to
                  us, or engages in leasing, hedging or research and development
                  services with us.

         As of December 31,. 2005, the Company has no off-balance sheet
arrangements that have or are reasonably likely to have a current or future
effect on our financial condition, changes in financial condition, revenues or
expenses, results of operations, liquidity, capital expenditures or capital
resources that is material to investors. The Company has not assumed any
off-balance sheet arrangements upon the FMH acquisition.

F.       TABULAR DISCLOSURE OF CONTRACTUAL OBLIGATIONS

         The Company has no contractual obligations and commercial commitments
as at December 31, 2005 except the following:

                                Total             <1 year          2-5 years
                                -----             -------          ---------
         Operating leases       68,000               48,000           20,000
         Capital lease         203,000              167,000           36,000


                                       20
<PAGE>

G.       SAFE HARBOR

         No disclosure is required in response to this item.

CRITICAL ACCOUNTING POLICIES
----------------------------

         Our financial statements reflect the selection and application of
accounting policies which require management to make significant estimates and
assumptions. We believe that the following are some of the more significant
judgment areas in the application of our accounting policies that currently
affect our financial condition and results of operations.

INTANGIBLE ASSETS

         The Company's intangible assets consisted of goodwill arising from the
acquisition of iSense. Management performs an analysis to determine the
recoverability of the asset's carrying value and management will provide a
provision if impairment loss of intangible assets is determined.

INVESTMENTS

         Investments in equity securities, not being a subsidiary and which do
not have a readily determinable fair value, are accounted for by the cost
method. The Company periodically reviews investments for other than temporary
declines based on market prices, earning trends, dividend payment, assets
quality and the long-term prospect of the investment. The Company will make a
provision if other than temporary declines of the investment are determined.

DEFERRED TAX ASSETS

         The Company is required to assess the ultimate realization of deferred
tax assets generated from net operating loss carryforwards. This assessment
takes into consideration the availability and character of future taxable
income. As management estimates that there will be no taxable income generated
for the foreseeable future, no deferred tax assets are recognized in the
financial statements.

REVENUE RECOGNITION

         Revenue from product sales is recognized at the point of sale for
retail sales and upon the delivery of goods or completion of services for other
sales, when all performance obligations have been completed and there is
reasonably assured collectibility.

RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS
-----------------------------------------

          In December 2004, the Financial Accounting Standards Board ("FASB")
issued SFAS No. 123 (R) Share Based Payment which addresses the accounting for
share-based payment transactions. SFAS No. 123 (R) eliminates the ability to
account for share-based compensation transactions using APB No.25, and generally
requires instead that such transactions be accounted and recognized in the
statement of income based on their fair values. SFAS No. 123 (R) will be
effective for public companies that file as small business issuers as of the
first interim period that begins after December 15, 2005. The Company is
evaluating the provisions of SFAS No. 123 (R). Depending upon the numbers and
terms of options that may be granted in future periods, the implementation of
this standard could have a material impact on the Company's financial position
and results of operations.



                                       21
<PAGE>

[Item 6]    DIRECTORS, SENIOR MANAGEMENT AND EMPLOYEES

A.       DIRECTORS AND SENIOR MANAGEMENT

         The following table sets forth the current directors and executive
officers of the Company, and their ages and positions with the Company:

Name                      Age                         Position
----                      ---                         --------
Li Feilie                 39              Chairman of the Board of Directors,
                                          President and Chief Executive Officer

Tam Cheuk Ho              43              Director and Chief Financial Officer

Wong Wah On Edward        42              Director, Secretary and
                                          Financial Controller

Lam Kwan Sing             36              Non-employee Director

Ng Kin Sing               43              Non-employee Director

Lo Kin Cheung             41              Non-employee Director

         Mr. Li Feilie was appointed as a director, Chief Executive Officer,
Chairman of the Board and President of CNRI on February 3, 2006 to replace Mr.
Ching Lung Po following the consummation of the acquisition of FMH. Mr. Li has
served as a director of FMH since September 2004. Mr. Li served as the Chairman
of Wuhu from June 2002 to June 2004. Mr. Li has been the chairman of Shenzhen
Feishang Industrial Development Co. Ltd., Wuhu Feishang Industry Development Co.
Ltd. and Wuhu Port Co. Ltd., companies beneficially owned by him, since June
2000, December 2001 and October 2002, respectively. He has also served as
director of Pingxiang Iron & Steel Co. Ltd. since July 2003. From March 2002 to
April 2004, Mr. Li served as the chairman of Fujian Dongbai (Group) Co. Ltd. Mr.
Li graduated from the Economic Department of Peking University and was awarded a
Master's degree from the Graduate School of Peking University.

         Mr. Tam Cheuk Ho has served as a director of CNRI since December 23,
1993, and as its Chief Financial Officer since November 22, 2004. He served as
the Chief Financial Officer and a director of China Resources from December 2,
1994 until completion of the Redomicile Merger. From July 1984 through January
1992, he worked as Audit Manager at Ernst & Young, Hong Kong, and from February
1992 through September 1992, as Financial Controller at Tack Hsin Holdings
Limited, a listed company in Hong Kong, where he was responsible for accounting
and financial functions. From October 1992, through December, 1994, Mr. Tam was
Finance Director of Hong Wah (Holdings) Limited. He is a fellow of both the Hong
Kong Institute of Certified Public Accountants and the Association of Chartered
Certified Accountants. He is also a certified public accountant (practicing) in
Hong Kong. He holds a Bachelor's degree in Business Administration from the
Chinese University of Hong Kong. Mr. Tam is also a director of Anka Capital
Limited, a privately-held corporation, through which he is a principal
shareholder of the Company.

         Mr. Wong Wah On Edward has been a director of CNRI since January 25,
1999, as its Secretary since February 1, 1999 and as Financial Controller since
November 22, 2004. He served as Financial Secretary, Financial Controller and a
director of China Resources from December 30, 1997 until completion of the
Redomicile Merger. He is responsible for assisting the Chief Financial Officer
with the Company's treasury, accounting and secretarial functions. From October
1992 through December 1994, Mr. Wong was the Deputy Finance Director of Hong Wah
(Holdings) Limited. From July 1988 through October 1992, he was an audit
supervisor at Ernst & Young, Hong Kong. Mr. Wong is also a director of Anka
Capital Limited, a privately-held corporation, through which he is a principal
shareholder of the Company. He received a professional diploma in Company
Secretaryship and Administration from the Hong Kong Polytechnic University. He
is a fellow of both the Hong Kong Institute of Certified Public Accountants and
the Association of Chartered Certified Accountants, and an associate of the Hong
Kong Institute of Chartered Secretaries. He is also a certified public
accountant (practicing) in Hong Kong.

         Mr. Lam Kwan Sing has been a director and a member of CNRI's audit
committee since November 22, 2004. He served as a director and a member of the
Audit Committee of China Resources from March 20, 2003 until completion of the
Redomicile Merger. Mr. Lam has been the executive director of New Times Group
Holdings Limited, a Hong Kong listed company, where he is responsible for the
overall corporate finance and accounting operations. From 2000 to 2002, Mr. Lam
was the business development manager of China Development Corporation Limited, a
Hong Kong listed company. From 1997 to 2000, he was the business development
manager of Chung Hwa Development Holdings Limited, a Hong Kong listed company.
From 1995 to 1997, Mr. Lam was the assistant manager (Intermediaries
supervision) of Hong Kong Securities and Futures Commission. Mr. Lam holds a
Bachelor's degree in Accountancy from the City University of Hong Kong.

                                       22
<PAGE>

         Mr. Ng Kin Sing has been a director and a member of CNRI's audit
committee since November 22, 2004. He served as a director and a member of the
Audit Committee of China Resources from February 1, 1999 until completion of the
Redomicile Merger. From April 1998 to the present, Mr. Ng has been the managing
director of Action Plan Limited, a securities investment company. From November
1995 until March 1998, Mr. Ng was sales and dealing director for NatWest Markets
(Asia) Limited; and from May 1985 until October 1996, he was the dealing
director of BZW Asia Limited, an international securities brokerage house. Mr.
Ng holds a Bachelor's degree in Business Administration from the Chinese
University of Hong Kong.

         Mr. Lo Kin Cheung has been a director and a member of CNRI's audit
committee since November 22, 2004. He served as a director and a member of the
Audit Committee of China Resources from May 30, 2000 until completion of the
Redomicile Merger. From September 2001 to present, Mr. Lo has been the chief
financial officer of Lee Fung - Asco Printers Holdings Limited, a Hong Kong
listed company, where he is responsible for the overall corporate financial
operations. From March 1998 to August 2001, Mr. Lo was the executive director of
Wiltec Holdings Limited, a Hong Kong listed company, where he was responsible
for corporate development and day-to-day operations. From July 1986 until March
1998, Mr. Lo was the principal at Ernst & Young, Hong Kong. He is a fellow of
both the Hong Kong Institute of Certified Public Accountants and the Association
of Chartered Certified Accountants. He holds a Bachelor's degree of Science from
the University of Hong Kong.

         The following table sets forth the senior management of FMH and Wuhu,
and their ages and positions with FMH and Wuhu:

Name                     Age                         Position
----                     ---                         --------
Chan Him Alfred          42              Chief Financial Officer of FMH

Tang Mian                42              Director and General Manager of Wuhu

         Mr. Chan Him Alfred has been the Chief Financial Officer of FMH since
September 2004. He is responsible for the finance, accounting and secretarial
functions of FMH and its subsidiary Wuhu. From January 2004 through June 2004,
he was the financial controller and company secretary of Beijing Beida Jade Bird
Universal Sci-Tech Company Limited, a PRC based company listed on the Hong Kong
Stock Exchange. From July 2001 through January 2004, Mr. Chan was the financial
controller and company secretary of Loulan Holdings Limited, a PRC based company
listed on the Hong Kong Stock Exchange. From November 2000 through June 2001, he
was the deputy CEO of the Kingcomics.com Limited. From April 1999 through
October 2000, he was the financial controller and company secretary of The
Bigstoreasia.com. Limited. From January 1998 through October 1998, he was an
audit manager at Moores Rowland. From October 1996 through December 1997, he was
the financial controller and company secretary of Richman Group Limited. He
joined Ernst & Young Hong Kong in July 1987 as a staff accountant, and worked
with Ernst & Young until June 1996, at which time he served as an audit senior
manager. Mr. Chan received a professional diploma in Accounting from the Hong
Kong Polytechnic University. He is a fellow of both the Association of Chartered
Certified Accountants and the Hong Kong Institute of Certified Public
Accountants.

         Mr. Tang Mian has been the Director and General Manager of Wuhu since
its incorporation in June 2002. From September 1996 to June 2002, he was the
manager of Anhui Fanchang Zinc and Iron Mine, the predecessor of Wuhu. Mr. Tang
holds a master's degree in business administration.



                                       23
<PAGE>

B.       COMPENSATION

         The following table sets forth the amount of compensation that was
paid, and the grant of options to purchase common shares during the fiscal year
ended December 31, 2005, to each of the individuals listed in Item 6(A) above.
<TABLE>
<CAPTION>
                                                           Number of options to    Exercise price
Name                              Compensation (US$)      purchase common stock       (US$/share)   Expiration date
----                              ------------------      ---------------------       -----------   ---------------
<S>                                          <C>                             <C>               <C>               <C>
Ching Lung Po*                                30,769                         --                --                --
Tam Cheuk Ho                                 230,769                         --                --                --
Wong Wah On Edward                           153,846                         --                --                --
Lam Kwan Sing                                     --                         --                --                --
Ng Kin Sing                                       --                         --                --                --
Lo Kin Cheung                                     --                         --                --                --
</TABLE>
----------
* Mr. Ching resigned from the Company effective February 3, 2006, at the time of
  the Company's acquisition of FMH.

         On February 1, 1999, the Company entered into a Service Agreement with
Ching Lung Po. In accordance with the terms of the Service Agreement, Mr. Ching
was employed by the Company as Chief Executive Officer and to perform such
duties as the Board of Directors shall from time to time determine. Mr. Ching
received a base salary of HK$2,160,000 (US$276,923) annually. The Employment
Agreement had a term of two years and was automatically renewed unless earlier
terminated as provided therein. On June 1, 2002, the Company entered into a
Supplemental Service Agreement with Ching Lung Po, reducing his base salary to
HK$240,000 (US$30,769) per annum with all other terms of the Service Agreement
remained in full force and effect. The Service Agreement was terminated on
February 3, 2006 following the resignation of Mr. Ching.

         On February 1, 1999, the Company entered into an Employment Agreement
with Tam Cheuk Ho. In accordance with the terms of the Employment Agreement, Mr.
Tam has been employed by the Company as the Chief Financial Officer and to
perform such duties as the Board of Directors shall from time to time determine.
Mr. Tam shall receive a base salary of HK$1,800,000 (US$230,769) annually, which
base salary shall be adjusted on each anniversary of the Employment Agreement to
reflect a change in the applicable consumer price index or such greater amount
as the Company's Board of Directors may determine. The initial two year term of
Employment Agreement has expired, and the term of the Agreement continues to
automatically renew each year, until terminated as provided therein.

         On February 1, 1999, the Company entered into an Employment Agreement
with Wong Wah On. In accordance with the terms of the Employment Agreement, Mr.
Wong has been employed by the Company as the Financial Controller and Corporate
Secretary and to perform such duties as the Board of Directors shall from time
to time determine. Mr. Wong shall receive a base salary of HK$1,200,000
(US$153,846) annually, which base salary shall be adjusted on each anniversary
of the Employment Agreement to reflect a change in the applicable consumer price
index or such greater amount as the Company's Board of Directors may determine.
The initial two year term of the Employment Agreement has expired, and the
Agreement continues to automatically renew each year, until terminated as
provided therein.

         The Company has no other employment contracts with any of its officers
or directors and maintains no retirement, fringe benefit or similar plans for
the benefit of its officers or directors. The Company may, however, enter into
employment contracts with its officers and key employees, adopt various benefit
plans and begin paying compensation to its officers and directors as it deems
appropriate to attract and retain the services of such persons.

                                       24
<PAGE>

SECURITIES AUTHORIZED FOR ISSUANCE UNDER EQUITY COMPENSATION PLANS

         The following table sets forth information relating to our outstanding
stock option plans as of December 31, 2005:
<TABLE>
<CAPTION>
                                                                                                 Number of Securities
                                    Number of Securities to                                      Remaining Available for
                                    Be Issued Upon               Weighted-average                Future Issuance Under
                                    Exercise Of Outstanding      Exercise Price of               Equity Compensation
                                    Options,                     Outstanding Options,            Plan (excluding securities
                                    Warrants and Rights          Warrants and Rights             reflected in column a)
---------------------------------------------------------------------------------------------------------------------------
<S>                                      <C>                            <C>                        <C>
Equity Compensation
Plan Approved by
Security Holders

   2003 Equity Compensation Plan         0                              N/A                        231,955

Equity Compensation
Plans Not Approved by
Security Holders                         0                                0                              0
--------------------------------------------------------------------------------------------------------------------------

Total                                    0                                                         231,955
                                  ========                                                         =======
</TABLE>

STOCK OPTION PLANS

         The Company has adopted two equity incentive plans. The purposes of the
plans are to:

         o        Encourage ownership of our common shares by our officers,
                  directors , employees and advisors;
         o        Provide additional inventive for them to promote our success
                  and our business; and
         o        Encourage them to remain in our employ by providing them with
                  the opportunity to benefit from any appreciation of our common
                  stock.

A brief description of each plan is as follows:

         2003 Plan. On December 18, 2003, the shareholders of the Company
approved and adopted the 2003 Equity Compensation Plan (the "2003 Plan"). The
2003 Plan allows the Board to grant various incentive equity awards not limited
to stock options. The Company has reserved a number of common shares equal to
20% of the issued and outstanding common shares of the Company, from
time-to-time, for issuance pursuant to options granted ("Plan Options") or for
restricted stock awarded ("Stock Grants") under the 2003 Plan. Stock
Appreciation Rights may be granted as a means of allowing participants to pay
the exercise price of Plan Options. Stock Grants may be made upon such terms and
conditions as the Board or Committee designated by the Board determines. Stock
Grants may include deferred stock awards under which receipt of Stock Grants is
deferred, with vesting to occur upon such terms and conditions as the Board or
Committee determines.

         The 2003 Plan is administered by the Board of Directors or a Committee
designated by the Board. The Board or Committee will determine, from time to
time, those of our officers, directors, employees and consultants to whom Stock
Grants and Plan Options will be granted, the terms and provisions of the
respective Stock Grants and Plan Options, the dates such Plan Options will
become exercisable, the number of shares subject to each Plan Option, the
purchase price of such shares and the form of payment of such purchase price.
Plan Options and Stock Grants will be awarded based upon the fair market value
of our common stock at the time of the award. All questions relating to the
administration of the 2003 Plan, and the interpretation of the provisions
thereof are to be resolved at the sole discretion of the Board or Committee.

                                       25
<PAGE>

         Options granted under the 2003 may be either incentive stock options
within the meaning of Section 422 of the Internal Revenue Code of 1986, as
amended, or non-qualified options. The exercise price of incentive stock options
may not be less than 100% of the fair market value of the underlying shares as
of the date of grant. The exercise price of non-qualified options ay not be less
than 85% of the fair market value of the underlying shares as of the date of
grant.

         During the year ended December 31, 2004, options to purchase 80,000
common shares had been granted under the 2003 Plan and had been exercised. A
total of 231,955 shares were available for grant as of December 31, 2005. As a
result of shares issuance upon the acquisition of Feishang, a total of 2,309,682
common shares were available for grant as of March 31, 2006. The 2003 Plan
terminates on December 18, 2013.

         In connection with the Redomicile Merger, CNRI succeeded to and assumed
the obligations of China Resources under the 2003 Plan.

         1995 Plan: The Company has adopted a Stock Option Plan (the "1995
Plan") as of March 31, 1995. The 1995 Plan allows the Board of Directors, or a
committee thereof at the Board's discretion, to grant stock options to officers,
directors, key employees, consultants and affiliates of the Company. The number
of shares that may be granted on exercise of options granted under the 1995 Plan
may not exceed 20% of our outstanding common shares determined at the time of
grant. Through December 31, 2004, options to purchase 233,000 shares had been
granted under the 1995 Plan, of which options to purchase 230,000 shares of had
been exercised and options to purchase 3,000 shares had expired. Options to
purchase 81,955 shares were available for grant as of December 31, 2004; however
the 1995 Plan terminated on March 31, 2005. In connection with the Redomicile
Merger, CNRI succeeded to and assumed the obligations of China Resources under
the 1995 Plan.

C.       BOARD PRACTICES

         As provided by Article 74 of our Memorandum and Articles of
Association, directors, solely for purposes of determining the term for which
they will serve, are classified as Class I, Class II and Class III directors,
with approximately one-third of the total number of directors being allocated to
each Class. Each director is to hold office for a three-year term expiring at
the annual meeting of shareholders held three years following the annual meeting
at which he or she was elected. However, for our first annual meeting of members
following the Redomicile Merger at which directors were elected, the Class I
directors so elected held office for a one-year term, and the Class II directors
so elected will hold office for a two-year term.

         At the annual meeting of members on December 31, 2004, Messrs. Ching
Lung Po and Ng Kin Sing were elected to serve as Class I Directors until the
annual meeting held in 2005 and until their successors were duly elected and
qualified; Messrs. Lam Kwan Sing and Lo Kin Cheung serve as Class II Directors
until the annual meeting to be held in 2006 and until their successors have been
duly elected and qualified; and Messrs. Tam Cheuk Ho and Wong Wah On serve as
Class III Directors until the annual meeting to be held in 2007 and until their
successors have been duly elected and qualified.

         At the annual meeting of members on December 20, 2005, Messrs. Ching
Lung Po and Ng Kin Sing were elected to serve as Class I Directors until the
annual meeting to be held in 2008 and until their successors have been duly
elected and qualified. Mr. Li Feile succeeded to Mr. Ching's position as a Class
I Director on February 3, 2006.

         The officers of the Company are elected annually at the first Board of
Directors meeting following the annual meeting of shareholders, and hold office
until their respective successors are duly elected and qualified, unless sooner
displaced.

         The Company does not pay fees to directors for their attendance at
meetings of the Board of Directors or of committees; however, the Company may
adopt a policy of making such payments in the future. The Company will reimburse
out-of-pocket expenses incurred by directors in attending Board and Committee
meetings. During the fiscal year ended December 31, 2005, no long-term incentive
plans or pension plans were in effect with respect to any of the Company's
officers, directors or employees.

                                       26
<PAGE>

Audit Committee
---------------

         The Company's audit committee, whose members currently consists of Lo
Kin Cheung, Lam Kwan Sing and Ng Kin Sing, reviews the professional services
provided by the independent auditors, the independence of the auditors from
management, annual financial statements and the Company's internal accounting
controls. The audit committee also reviews other matters with respect to the
accounting, auditing and financial reporting practices and procedures as it may
find appropriate or may be brought to its attention. Each of the Company's audit
committee members is an "independent" director, as such term is used in (a)
Section 10A-3(m)(3) of the Exchange Act, and (b) Nasdaq Marketplace Rule 4200-1.

Nominating and Corporate Governance Committee; Shareholder Nominees for Director
--------------------------------------------------------------------------------

         Our board of directors has established a nominating and corporate
governance committee that operates pursuant to a written charter. The nominating
and corporate governance committee is responsible for providing oversight on a
broad range of issues surrounding the composition and operation of our board of
directors. In particular, the responsibilities of the nominating and corporate
governance committee include:

         o        identifying individuals qualified to become members of the
                  board of directors;
         o        determining the slate of nominees to be recommended for
                  election to the board of directors;
         o        reviewing corporate governance principles applicable to us,
                  including recommending corporate governance principles to the
                  board of directors and administering our Code of Ethics;
         o        assuring that at least one audit committee member is an "audit
                  committee financial expert" within the meaning of regulatory
                  requirements;
         o        carrying out such other duties and responsibilities as may be
                  determined by the board of directors.

         The nominating and corporate governance committee is required to meet
at least once annually, and more frequently if the committee deems it to be
appropriate. The committee may delegate authority to one or more members of the
committee; provided that any decisions made pursuant to such delegated authority
are presented to the full committee at its next scheduled meeting. Discussions
pertaining to the nomination of directors are required to be held in executive
session. The current members of the nominating and corporate governance
committee are Ng Kin Sing, Lam Kwan Sing and Lo Kin Cheung. Each member of the
nominating and corporate governance committee is an "independent" director, as
such term is used in Nasdaq Marketplace Rule 4200-1.

         The nominating and corporate governance committee will consider
candidates for directors proposed by security holders, although no formal
procedures for submitting the names of candidates for inclusion on management's
slate of director nominees have been adopted. Until otherwise determined by the
nominating and corporate governance committee, a member who wishes to submit the
name of a candidate to be considered for inclusion on management's slate of
nominees at the next annual meeting of members must notify our Corporate
Secretary, in writing, no later than June 30 of the year in question of its
desire to submit the name of a director nominee for consideration. The written
notice must include information about each proposed nominee, including name,
age, business address, principal occupation, telephone number, shares
beneficially owned and a statement describing why inclusion of the candidate
would be in our best interests. The notice must also include the proposing
member's name and address, as well as the number of shares beneficially owned. A
statement from the candidate must also be furnished, indicating the candidate's
desire and ability to serve as a director. Adherence to these procedures is a
prerequisite to the board's consideration of the member's candidate. Once a
candidate has been identified the nominating and corporate governance committee
reviews the individual's experience and background, and may discuss the proposed
nominee with the source of the recommendation. If the nominating and corporate
governance committee believes it to be appropriate, committee members may meet
with the proposed nominee before making a final determination whether to include
the proposed nominee as a member of management's slate of director nominees to
be submitted for election to the board.

Compensation Committee
----------------------

         The Company does not have a formal compensation committee. The board of
directors, acting as a compensation committee, periodically meets to discuss and
deliberate on issues surrounding the terms and conditions of executive officer
compensation, including base salaries, bonuses, awards of stock options and
reimbursement of certain business related costs and expenses.

                                       27
<PAGE>

Nasdaq Requirements
-------------------

         Our common shares are currently listed on the Nasdaq Capital Market
and, for so long as our securities continue to be listed, we will remain subject
to the rules and regulations established by Nasdaq as being applicable to listed
companies. Nasdaq recently adopted amendments to its Rule 4350 to impose various
corporate governance requirements on listed securities. Section (a)(1) of Rule
4350 provides that foreign private issuers such as our company are required to
comply with certain specific requirements of Rule 4350, but, as to the balance
of Rule 4350, foreign private issuers are not required to comply if the laws of
their home jurisdiction do not otherwise require compliance.

         We currently comply with the specifically mandated provisions of Rule
4350. In addition, we have elected to voluntarily comply with certain other
requirements of Rule 4350, notwithstanding that our home jurisdiction does not
mandate compliance; although we may in the future determine to cease voluntary
compliance with those provisions of Rule 4350. However, we have determined not
to comply with the following provisions of Rule 4350 since the laws of the
British Virgin Islands do not require compliance:

         o        a majority of our board of directors are not independent as
                  defined by Nasdaq rules;
         o        our independent directors do not hold regularly scheduled
                  meetings in executive session;
         o        the compensation of our executive officers is not determined
                  by an independent committee of the board or by the independent
                  members of the board of directors, and our CEO may be present
                  in the deliberations concerning his compensation;
         o        related party transactions are not required to be reviewed or
                  approved by our audit committee or other independent body of
                  the board of directors;
         o        we are not required to solicit shareholder approval of stock
                  plans, including those in which our officers or directors may
                  participate; stock issuances that will result in a change in
                  control; the issuance of our stock in related party
                  acquisitions or other acquisitions in which we may issue 20%
                  or more of our outstanding shares; or, below market issuances
                  of 20% or more of our outstanding shares to any person; and
         o        we are not required to participate in an electronic link with
                  a specified registered depository in connection with any
                  direct registration program that we may establish in the
                  future.

We may in the future determine to voluntarily comply with one or more of the
foregoing provisions of Rule 4350.

D.       EMPLOYEES

         The following table sets out the number of employees and consultants
with contracts at the end of each of the past three financial years, including
their main category of activity and geographic location.
<TABLE>
<CAPTION>
                                                                                Years ended December 31,
                                                                          2005            2004            2003

<S>                                                                         <C>             <C>            <C>
Hong Kong             Accounting, administration and management             4               4              4
                      Advertising and promotion                             2               2              2
                      Others                                                1               1              1
--------------------------------------------------------------------------------------------------------------------
                                                                            7               7              7

The PRC               Accounting, administration and management             2               2              8
                      Purchasing and supplies                              --              --              -
                      Cashier                                               1               1              2
                      Others                                                2               2              3
--------------------------------------------------------------------------------------------------------------------
                                                                            5               5              13

--------------------------------------------------------------------------------------------------------------------
Total                                                                      12              12              20
--------------------------------------------------------------------------------------------------------------------
</TABLE>

                                       28
<PAGE>

E.       SHARE OWNERSHIP

         The following table sets forth, as of May 31, 2006, the share ownership
of the Company's common shares by each of our directors and executive officers.

         As of May 31, 2006, there were 11,548,416 common shares issued and
outstanding. Unless otherwise indicated, each person has sole investment and
voting power with respect to all shares shown as beneficially owned. A person is
deemed to be the beneficial owner of securities that can be acquired by such
person within 60 days upon exercise of options, warrants or convertible
securities or pursuant to agreement or understanding.
<TABLE>
<CAPTION>
        ----------------------------------- ----------------------------------- ----- ----------------
             NAME OF BENEFICIAL OWNER        AMOUNT AND NATURE OF BENEFICIAL            PERCENT OF
                                                        OWNERSHIP                          CLASS
        ----------------------------------- ----------------------------------- ----- ----------------
<S>                                                                 <C>                         <C>
        Li Feilie                                                   14,480,593  (1)             90.2%
        ----------------------------------- ----------------------------------- ----- ----------------
        Tam Cheuk Ho                                                    80,000
        ----------------------------------- ----------------------------------- ----- ----------------
        Wong Wah On Edward                                              80,000
        ----------------------------------- ----------------------------------- ----- ----------------
        Lam Kwan Sing                                                       --                     --
        ----------------------------------- ----------------------------------- ----- ----------------
        Ng Kin Sing                                                         --                     --
        ----------------------------------- ----------------------------------- ----- ----------------
        Lo Kin Cheung                                                       --                     --
        ----------------------------------- ----------------------------------- ----- ----------------
        Officers and directors as a group                           14,640,593
        (6 persons)
        ----------------------------------- ----------------------------------- ----- ----------------
</TABLE>
----------
(1)      Shares are held in the name of Feishang Group Limited, a British Virgin
         Islands corporation that is wholly owned by Mr. Li. Includes 9,980,593
         outstanding common shares and 4,500,000 common shares issuable upon
         exercise of the Warrants.

[Item 7] MAJOR SHAREHOLDERS AND RELATED PARTY TRANSACTIONS

A.       MAJOR SHAREHOLDERS

         The following table sets forth, as of May 31, 2006, to the knowledge of
management, the share ownership of each person who is the beneficial owner of
more than 5% of our outstanding common shares.

         As of May 31, 2006, there were 11,548,416 common shares issued and
outstanding. Unless otherwise indicated, each person has sole investment and
voting power with respect to all shares shown as beneficially owned. A person is
deemed to be the beneficial owner of securities that can be acquired by such
person within 60 days upon exercise of options, warrants or convertible
securities or pursuant to agreement or understanding.

         The Company's major shareholders do not have different voting rights
than other shareholders of the Company.
<TABLE>
<CAPTION>
        ----------------------------------- ------------------------------ ------ --------------------
             NAME OF BENEFICIAL OWNER           AMOUNT AND NATURE OF               PERCENT OF CLASS
                                                BENEFICIAL OWNERSHIP
        ----------------------------------- ------------------------------ ------ --------------------
<S>                                                            <C>                              <C>
        Li Feilie                                              14,480,593  (1)                  90.2%
        ----------------------------------- ------------------------------ ------ --------------------
</TABLE>
----------
(1)      Shares are held in the name of Feishang Group Limited, a British Virgin
         Islands corporation that is wholly owned by Mr. Li. Includes 9,980,593
         outstanding common shares and 4,500,000 common shares issuable upon
         exercise of the Warrants.

         As of May 8, 2006, our common shares were held of record by a total of
186 persons, of which 867,894 common shares were held of record by Cede & Co.

         To our knowledge, there are no arrangements the operations of which
may, at a subsequent date, result in a change in control of the Company, other
than the change of control that took place on February 3, 2006 when we acquired
FMH. Details of the acquisition are provided elsewhere in this report.

B.       RELATED PARTY TRANSACTIONS

         On September 1, 2000, the Company and Anka Consultants Limited
("Anka"), a private Hong Kong company that is owned by certain directors of the


                                       29
<PAGE>

Company, entered into an office sharing agreement, based upon which the
Company's head office in Hong Kong is shared on an equal basis between the two
parties. The office sharing agreement also provides that the Company and Anka
shall share certain costs and expenses in connection with its use of the office.
For the years ended December 31, 2003, 2004 and 2005, the Company paid rental
expenses to Anka Consultants Limited amounted to RMB249,000 (US$31,000),
RMB232,000 (US$29,000) and RMB211,000 (US$26,000), respectively.

         At December 31, 2003, the Company owed RMB1,603,000 (US$199,000) to an
officer for unpaid salary. This was paid in full during 2004.

         At December 31, 2003 and 2004, the Company owed RMB296,000 (US$37,000)
to related companies. These amounts were eliminated during 2005.

         At December 31, 2004 and 2005, the Company owed RMB205,000 (US$25,000)
and RMB122,000 (US$15,000), respectively, to a director of iSense for advances
received. These advances are unsecured, interest-free and are repayable on
demand.

C.       INTERESTS OF EXPERTS AND COUNSEL

         Not applicable.

[Item 8] FINANCIAL INFORMATION

A.       CONSOLIDATED STATEMENTS AND OTHER FINANCIAL INFORMATION

         The Company's Consolidated Financial Statements for the fiscal years
ended December 31, 2003, 2004 and 2005 are included herewith as Appendix A and
are incorporated herein by reference.

         There are no legal or arbitration proceedings, including those relating
to bankruptcy, receivership or similar procedures and those involving any third
party, which may have, or have had in the recent past, significant effects on
our financial position or profitability. We are not aware of any governmental
proceedings pending or known to be contemplated.

         We have no direct business operations, other than the ownership of our
subsidiaries. While we have no current intention of paying dividends, should we,
as a holding company, decide in the future to do so, our ability to pay
dividends and meet other obligations depends upon the receipt of dividends or
other payments from our operating subsidiaries and other holdings and
investments. In addition, our operating subsidiaries are subject to restrictions
on their ability to make distributions to us, including as a result of
restrictions imposed under PRC law.

B.       SIGNIFICANT CHANGES

         On February 3, 2006, the Company acquired all of the issued and
outstanding capital stock of FMH and its subsidiary Wuhu, and thereby acquired
the mining operations of Wuhu. Inasmuch as the acquisition was accounted for as
a reverse acquisition that resulted in a change of control of the Company, in
future filings, the operations of FMH and Wuhu will be presented on a
consolidated basis and the historic operations of the Company will be those of
FMH. Following the acquisition, we will be substantially dependent upon the
operations of FMH and Wuhu in order to generate meaningful revenue and
profitable operations. A description of the Company's acquisition of FMH is
contained elsewhere in this report. Pro-forma financial information of the
Company, giving effect to the Company's acquisition of FMH, is contained in the
consolidated financial statements of the Company and subsidiaries filed as
Appendix A to this report.

[Item 9] THE OFFER AND LISTING

A.       OFFER AND LISTING DETAILS

         Our common shares have been listed on the Nasdaq Capital market since
November 22, 2004, under the symbol "CHNR." From August 7, 1995 until November
22, 2004, our common stock was listed under the symbol "CHRB."


                                       30
<PAGE>


         The following table sets forth the annual high and low last trade
prices of our common shares as reported by The Nasdaq Stock Market for each of
the five preceding fiscal years. The prices are inter-dealer prices, without
retail markup, markdown or commission, and do not necessarily reflect actual
transactions.

                      Period                               High             Low
                      ------                               ----             ---

         Fiscal Year ended:
                  December 31, 2005..................       $7.49          $2.88
                  December 31, 2004..................       13.37           3.30
                  December 31, 2003..................       13.30           1.70
                  December 31, 2002..................        2.99           1.20
                  December 31, 2001..................        4.00           2.15


         The following table sets forth the high and low last trade prices of
our common shares as reported by The Nasdaq Stock Market for each fiscal quarter
of 2004 and 2005. The prices are inter-dealer prices, without retail markup,
markdown or commission, and do not necessarily reflect actual transactions.

                      Period                               High             Low
                      ------                               ----             ---

         2004 Fiscal Year, quarter ended:
                  March 31, 2004.....................      $13.37          $7.67
                  June 30, 2004......................        7.90           5.47
                  September 30, 2004.................        5.77           3.30
                  December 31, 2004..................        8.05           3.48
         2005 Fiscal Year, quarter ended:
                  March 31, 2005.....................       $7.49          $3.90
                  June 30, 2005......................        5.46           3.81
                  September 30, 2005.................        4.71           3.90
                  December 31, 2005                          5.98           2.88

         The following table sets forth the monthly high and low last trade
prices of our common shares as reported by The Nasdaq Stock Market for each
month from July 2005 through December 31, 2005. The prices are inter-dealer
prices, without retail markup, markdown or commission, and do not necessarily
reflect actual transactions.

                      Period                               High             Low
                      ------                               ----             ---

         Month ended:
                  December 31, 2005..................       $4.47          $3.50
                  November 30, 2005..................        5.98           2.88
                  October 31, 2005...................        4.10           3.50
                  September 30, 2005.................        4.48           3.90
                  August 31, 2005....................        4.43           4.00
                  July 31, 2005......................        4.71           4.23

B.       PLAN OF DISTRIBUTION

         Not applicable.



                                       31
<PAGE>

C.       MARKETS

         Our common shares have been listed on The Nasdaq Capital Market since
November 22, 2004, under the symbol "CHNR." From August 7, 1995 until November
22, 2004, our Common Stock was listed under the symbol "CHRB."

D.       SELLING SHAREHOLDERS

         Not applicable.

E.       DILUTION

         Not applicable.

F.       EXPENSES OF THE ISSUE

         Not applicable.

[Item 10] ADDITIONAL INFORMATION

A.       SHARE CAPITAL

         Not applicable.

B.       MEMORANDUM AND ARTICLES OF ASSOCIATION

         Charter. Our charter documents consist of our Memorandum of Association
and our Articles of Association. The Memorandum of Association loosely resembles
the Articles of Incorporation of a Untied States corporation, and the Articles
of Association loosely resembles the bylaws of a Untied States corporation. A
brief description of our Memorandum of Association and Articles of Association
follows, including a summary of material differences between the corporate laws
of the United States and those of the British Virgin Islands. This description
and summary does not purport to be complete and does not address all differences
between United States and British Virgin Islands corporate laws. Copies of our
Memorandum of Association and Articles of Association have been filed as
exhibits to this report and readers are urged to review these exhibits in their
entirety for a complete understanding of the provisions of our charter
documents.

         Corporate Powers. We have been registered in the British Virgin Islands
since December 14, 1993, under British Virgin Islands International Business
Company number 102930. Clause 4 of our Articles of Association states that the
objects for which we are established are to engage in any act or activity which
is not prohibited by any laws in force in the British Virgin Islands.

         Directors. Article 73 of our Articles of Association provides that our
board of directors shall consist of not less than three nor more than 25
directors. Article 74 of our Articles of Association provides that directors,
solely for purposes of determining the term for which they will serve, are
classified as Class I, Class II and Class III directors, with approximately
one-third of the total number of directors being allocated to each Class. Each
director is to hold office for a three-year term expiring at the annual meeting
of members held three years following the annual meeting at which he or she was
elected. However, for our first annual meeting of members following the
Redomicile Merger at which directors are elected, the Class I directors so
elected will hold office for a one-year term, and the Class II directors so
elected will hold office for a two-year term.

                                       32
<PAGE>

         With the prior or subsequent approval by a resolution of members, the
directors may, by a resolution of directors, fix the emoluments of directors
with respect to services to be rendered in any capacity to us. The directors
may, by a resolution of directors, exercise all the powers of the Company to
borrow money. There is no age limit requirement for retirement or non-retirement
of directors. A director shall not require a share qualification.

         Directors may be natural persons or companies, in which event the
company may designate a person as its representative as director. Directors may
remove a director for cause. A director may appoint an alternate to attend
meetings and vote in the place and stead of the director. No agreement or
transaction between us and one or more of our directors or any person in which
any of our directors has a financial interest is void or voidable by reason of
the presence, vote or consent by such interested director at the meeting at
which such agreement or transaction is approved if the material facts of the
interest of each director are disclosed in good faith or known to the other
directors. Directors do not have the authority to appoint new auditors - such
appointment must be made by the shareholders.

         Share Rights, Preferences and Restrictions. We are authorized to issue
210,000,000 shares consisting of 200,000,000 common shares of no par value, and
10,000,000 preferred shares of no par value. The preferred shares may be issued
in series having such rights, preferences and limitations as are determined by
our board of directors at the time of issuance. In accordance with our
Memorandum of Association, our board of directors has designated a series of
preferred shares, consisting of 320,000 shares and designated Series B Preferred
Shares. Series B preferred shares are entitled to one vote for each share, shall
be entitled to vote on each matter that is submitted for a vote of common
shareholders and shall be aggregated with outstanding common shares for all
voting purposes. Series B preferred shares have no preemptive or other
subscription rights and are not subject to future calls or assessments. There
are no redemption or sinking fund provisions applicable to the Series B
preferred shares and holders thereof have no rights whatsoever to dividends or
to distributions upon our liquidation.

         No purchase, redemption or other acquisition of shares shall be made
unless out of surplus (as defined by the International Business Companies Act)
and unless the directors determine that immediately after the purchase,
redemption or other acquisition we will be able to satisfy our liabilities as
they become due in the ordinary course of business, and the realizable value of
our assets will not be less than the sum of our total liabilities, other than
deferred taxes, as shown in the books of account, and our capital and, in the
absence of fraud, the decision of the directors as to the realizable value of
our assets is conclusive, unless a question of law is involved. All dividends
unclaimed for three years after having been declared may be forfeited by
resolution of the directors for our benefit. Cumulative voting for directors is
not authorized. We may redeem any of our own shares for fair value. All common
shares have the same rights with regard to dividends and distributions upon our
liquidation.

         Changing Share Rights. The rights of each class and series of shares
that we are authorized to issue shall be set out in the Memorandum of
Association unless the Memorandum of Association states that such rights are to
be fixed by the resolution of directors. If the authorized capital is divided
into different classes, the rights attached to any class may be varied with the
consent in writing of the holders of not less than three-fourths of the issued
shares of that class and of the holders of not less than three-fourths of the
issued shares of any other class which may be affected by such variation.

         Shareholder Meetings. The directors may convene meetings of our members
at such times and in such manner and places as the directors consider necessary
or desirable. The directors shall convene such a meeting upon the written
request of members holding 30 percent or more of our outstanding voting shares.
At least seven days' notice of the meeting shall be given to the members whose
names appear on the share register. A majority of our outstanding shares
entitled to vote must be present at a meeting of shareholders in order to
constitute a quorum and the affirmative vote of a majority of those present and
entitled to vote shall be required in order to approve action by shareholders.
However, in the event a meeting of shareholders is adjourned due to the absence
of a quorum, the minimum number of shares that must be present in order to
constitute a quorum shall be reduced to one-third.

         Restrictions on Rights to Own Securities. There are no limitations on
the rights to own our securities.

         Change in Control Provisions. There are no provisions of our Memorandum
of Association or Articles of Association that would have an effect of delaying,
deferring or preventing a change in our control and that would have operate only
with respect to a merger, acquisition or corporate restructuring involving us.

                                       33
<PAGE>

         Disclosure of Share Ownership. There are no provisions of our
Memorandum of Association or Articles of Association governing the ownership
threshold above which shareholder ownership must be disclosed.

         Dispute Resolution. Our Articles of Association provides that any
differences between us and our members or their legal representatives relating
to the intent, construction, incidences or consequences of our Articles of
Association or the British Virgin Islands International Business Companies Act,
including any breach or alleged breach of our Articles of Association or the
International Business Companies Act, or relating to our affairs shall be
resolved by arbitration before two arbitrators (unless the parties agree to
arbitrate before one arbitrator), who shall jointly appoint an umpire.

         Applicable Law. Under the laws of most jurisdictions in the US,
majority and controlling shareholders generally have certain fiduciary
responsibilities to the minority shareholders. Shareholder action must be taken
in good faith and actions by controlling shareholders which are obviously
unreasonable may be declared null and void. British Virgin Islands law
protecting the interests of minority shareholders may not be as protective in
all circumstances as the law protecting minority shareholders in US
jurisdictions.

         While British Virgin Islands law does permit a shareholder of a British
Virgin Islands company to sue its directors derivatively, that is, in the name
of, and for the benefit of, our company and to sue a company and its directors
for his benefit and for the benefit of others similarly situated, the
circumstances in which any such action may be brought, and the procedures and
defenses that may be available in respect of any such action, may result in the
rights of shareholders of a British Virgin Islands company being more limited
than those of shareholders of a company organized in the US.

         Our directors have the power to take certain actions without
shareholder approval, including an amendment of our Memorandum of Association or
Articles of Association (unless such amendment varies the rights attached to
shares) or an increase or reduction in our authorized capital, which would
require shareholder approval under the laws of most US jurisdictions. In
addition, the directors of a British Virgin Islands company, subject in certain
cases to court approval but without shareholder approval, may, among other
things, implement a reorganization, certain mergers or consolidations with a
subsidiary, the sale, transfer, exchange or disposition of any assets, property,
part of the business, or securities of the company, or any combination (provided
the assets do not represent more than 50% of the total assets of the company and
the sale is not outside of the usual or ordinary course of the company's
business), if they determine it is in the best interests of the company. Our
ability to amend our Memorandum of Association and Articles of Association
without shareholder approval could have the effect of delaying, deterring or
preventing a change in our control without any further action by the
shareholders, including a tender offer to purchase our common shares at a
premium over then current market prices.

         The International Business Companies Act of the British Virgin Islands
permits the creation in our Memorandum and Articles of Association of staggered
terms of directors, cumulative voting, shareholder approval of corporate matters
by written consent, and the issuance of preferred shares. Currently, our
Memorandum and Articles of Association provide for (a) shareholder approval of
corporate matters by majority written consent, (b) staggered terms of directors
and (c) the issuance of preferred shares.

         As in most US jurisdictions, the board of directors of a British Virgin
Islands company is charged with the management of the affairs of the company. In
most US jurisdictions, directors owe a fiduciary duty to the corporation and its
shareholders, including a duty of care, under which directors must properly
apprise themselves of all reasonably available information, and a duty of
loyalty, under which they must protect the interests of the corporation and
refrain from conduct that injures the corporation or its shareholders or that
deprives the corporation or its shareholders of any profit or advantage. Many US
jurisdictions have enacted various statutory provisions which permit the
monetary liability of directors to be eliminated or limited.

         Under British Virgin Islands law, liability of a corporate director to
the corporation is primarily limited to cases of willful malfeasance in the
performance of his duties or to cases where the director has not acted honestly
and in good faith and with a view to the best interests of the company. However,
under our Memorandum of Association, we are authorized to indemnify any director


                                       34
<PAGE>

or officer who is made or threatened to be made a party to a legal or
administrative proceeding by virtue of being one of our directors or officers,
provided such person acted honestly and in good faith and with a view to our
best interests and, in the case of a criminal proceeding, such person had no
reasonable cause to believe that his conduct was unlawful. Our Memorandum of
Association also enable us to indemnify any director or officer who was
successful in such a proceeding against expense and judgments, fines and amounts
paid in settlement and reasonably incurred in connection with the proceeding.

         Unlike most corporate laws in the United States, directors of a British
Virgin Islands company may be companies. Moreover, any director may appoint an
alternate to attend meetings and vote in the place and stead of the director
appointing the alternate. It is unclear of the effect of such an appointment on
the fiduciary obligations of the director making the appointment.

         Changes in Capital. Requirements to effect changes in capital are not
more stringent than is required by law.

C.       MATERIAL CONTRACTS

         Other than contracts disclosed elsewhere in this annual report or
entered into the ordinary course of business, the Company has not entered into
any contracts during the two preceding fiscal years, which can reasonably be
determined as being material to the Company. Subsequent to December 31, 2005,
the Company entered into an Acquisition Agreement relating to its acquisition of
all of the issued and outstanding shares of capital stock of FMH. The
Acquisition Agreement is described elsewhere in this report and a copy of the
Acquisition Agreement is filed as an exhibit to this report.

D.       EXCHANGE CONTROLS

         There are no material British Virgin Islands laws, decrees, regulations
or other legislation that impose foreign exchange controls on us or that affect
our payment of dividends, interest or other payments to non-resident holders of
our capital stock. British Virgin Islands law and our Memorandum of Association
and Articles of Association impose no limitations on the right of non-resident
or foreign owners to hold or vote our common shares. However, we operate through
subsidiaries and the payment of dividends by PRC companies is subject to
numerous restrictions imposed under PRC law, including restrictions on the
conversion of local currency into United States dollars and other currencies.

         The principal regulation governing foreign currency exchange in the PRC
is the Foreign Currency Administration Rules (1996) as amended. Under these
rules, the Renminbi is freely convertible for trade and service-related foreign
exchange transactions, but not for direct investment, loans or investments in
securities outside the PRC without the prior approval of the State
Administration of Foreign Exchange of the PRC ("SAFE").

         Pursuant to the Foreign Currency Administration Rules, foreign-invested
enterprises in the PRC may purchase foreign exchange without the approval of
SAFE for trade and service-related exchange transactions by providing commercial
documents evidencing these transactions. They may also retain foreign exchange,
subject to a cap approved by SAFE, to satisfy foreign exchange liabilities or to
pay dividends. However, the relevant PRC authorities may limit or eliminate the
ability of foreign-invested enterprises to purchase and retain foreign
currencies in the future. In addition, foreign exchange transactions for direct
investment, loan and investment in securities outside the PRC remain subject to
limitations and require approvals from SAFE.

         The principal regulations governing distribution of dividends by
foreign-invested companies include:

         o        The Sino-foreign Equity Joint Venture Law (1979), as amended;
         o        The Regulations of Implementation of the Sino-foreign Equity
                  Joint Venture Law (1983) as amended;
         o        The Foreign Investment Enterprise Law (1986) as amended; and
         o        The Regulations of Implementation of the Foreign Investment
                  Enterprise Law (1990) as amended.

         Under these regulations, foreign-invested enterprises in the PRC may
pay dividends only out of their accumulated profits, if any, determined in
accordance with PRC accounting standards and regulations. In addition, wholly
foreign-owned enterprises in the PRC are required to set aside at least 10% of
their respective accumulated profits each year, if any, to fund certain reserve
funds unless such reserve funds have reached 50% of their respective registered
capital. These reserves are not distributable as cash dividends.

                                       35
<PAGE>

         In addition, our wholly owned subsidiaries are required to allocate
portions of their after-tax profits to their enterprise expansion funds and
staff welfare and bonus funds at the discretion of their boards of directors.
Our affiliated PRC entities are required to allocate at least 5% of their
respective after-tax profits to their respective statutory welfare funds.
Allocations to these statutory reserves and funds can only be used for specific
purposes and are not transferable to us in the forms of loans, advances or cash
dividends.

E.       TAXATION

         The following is a summary of anticipated material U.S. federal income
and British Virgin Islands tax consequences of an investment in our common
shares. The summary does not deal with all possible tax consequences relating to
an investment in our common shares and does not purport to deal with the tax
consequences applicable to all categories of investors, some of which, such as
dealers in securities, insurance companies and tax-exempt entities, may be
subject to special rules. In particular, the discussion does not address the tax
consequences under state, local and other non-U.S. and non-British Virgin
Islands tax laws. Accordingly, each prospective investor should consult its own
tax advisor regarding the particular tax consequences to it of an investment in
the common shares. The discussion below is based upon laws and relevant
interpretations in effect as of the date of this annual report, all of which are
subject to change.

United States Federal Income Taxation

         The following discussion addresses only the material U.S. federal
income tax consequences to a U.S. person, defined as a U.S. citizen or resident,
a U.S. corporation, or an estate or trust subject to U.S. federal income tax on
all of its income regardless of source, making an investment in the common
shares. For taxable years beginning after December 31, 1996, a trust will be a
U.S. person only if:

         o        a court within the United States is able to exercise primary
                  supervision over its administration; and
         o        one or more United States persons have the authority to
                  control all of its substantial decisions.

         In addition, the following discussion does not address the tax
consequences to a person who holds or will hold, directly or indirectly, 10% or
more of our common shares, which we refer to as a "10% Shareholder". Non-U.S.
persons and 10% Shareholders are advised to consult their own tax advisors
regarding the tax considerations incident to an investment in our common shares.

         A U.S. investor receiving a distribution of our common shares will be
required to include such distribution in gross income as a taxable dividend, to
the extent of our current or accumulated earnings and profits as determined
under U.S. federal income tax principles. Any distributions in excess of our
earnings and profits will first be treated, for U.S. federal income tax
purposes, as a nontaxable return of capital, to the extent of the U.S.
investor's adjusted tax basis in our common shares, and then as gain from the
sale or exchange of a capital asset, provided that our common shares constitutes
a capital asset in the hands of the U.S. investor. U.S. corporate shareholders
will not be entitled to any deduction for distributions received as dividends on
our common shares.

         Gain or loss on the sale or exchange of our common shares will be
treated as capital gain or loss if our common shares is held as a capital asset
by the U.S. investor. Such capital gain or loss will be long-term capital gain
or loss if the U.S. investor has held our common shares for more than one year
at the time of the sale or exchange.

         A holder of common shares may be subject to "backup withholding" at the
rate of 31% with respect to dividends paid on our common shares if the dividends
are paid by a paying agent, broker or other intermediary in the United States or
by a U.S. broker or certain United States-related brokers to the holder outside
the United States. In addition, the proceeds of the sale, exchange or redemption
of common shares may be subject to backup withholding, if such proceeds are paid
by a paying agent, broker or other intermediary in the United States.

         Backup withholding may be avoided by the holder of common shares if
such holder:

         o        is a corporation or comes within other exempt categories; or


                                       36
<PAGE>

         o        provides a correct taxpayer identification number, certifies
                  that such holder is not subject to backup withholding and
                  otherwise complies with the backup withholding rules.

         In addition, holders of common shares who are not U.S. persons are
generally exempt from backup withholding, although they may be required to
comply with certification and identification procedures in order to prove their
exemption.

         Any amounts withheld under the backup withholding rules from a payment
to a holder will be refunded or credited against the holder's U.S. federal
income tax liability, if any, provided that amount withheld is claimed as
federal taxes withheld on the holder's U.S. federal income tax return relating
to the year in which the backup withholding occurred. A holder who is not
otherwise required to file a U.S. income tax return must generally file a claim
for refund or, in the case of non-U.S. holders, an income tax return in order to
claim refunds of withheld amounts.

British Virgin Islands Taxation

         Under the International Business Companies Act of the British Virgin
Islands as currently in effect, a holder of common shares who is not a resident
of British Virgin Islands is exempt from British Virgin Islands income tax on
dividends paid with respect to the common shares and all holders of common
shares are not liable for British Virgin Islands income tax on gains realized
during that year on sale or disposal of such shares; British Virgin Islands does
not currently impose a withholding tax on dividends paid by a company
incorporated under the International Business Companies Act.

         There are no capital gains, gift or inheritance taxes levied by the
British Virgin Islands on companies incorporated under the International
Business Companies Act. In addition, the common shares are not subject to
transfer taxes, stamp duties or similar charges.

         There is no income tax treaty or convention currently in effect between
the United States and the British Virgin Islands.

F.       DIVIDENDS AND PAYING AGENTS

         Not applicable.

G.       STATEMENT BY EXPERTS

         Not applicable.

H.       DOCUMENTS ON DISPLAY

         The documents concerning the Company that are referred to in this
annual report may be inspected at the Company's principal executive offices at
Room 2105, West Tower, Shun Tak Centre, 200 Connaught Road C., Sheung Wan, Hong
Kong. Certain documents described in response to Item 19 of this annual report
are incorporated by reference to documents filed by the Company with the United
States Securities and Exchange Commission. The documents that are incorporated
by reference can be viewed on the SEC's web site at www.sec.gov.

I.       SUBSIDIARY INFORMATION

         Not applicable.

[Item 11] QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

o        All of the Company's sales and purchases are made domestically and are
         denominated in either Renminbi and Hong Kong dollars. As the reporting
         currency of the Company's consolidated financial statements is
         Renminbi, the Company has material market risk with respect to currency
         fluctuation between Hong Kong dollars and Renminbi and translation
         difference may arise on consolidation. The Company may also suffer an
         exchange loss when it converts Renminbi to other currencies, such as
         Hong Kong dollars or United States dollars.

                                       37
<PAGE>

o        The Company's interest income is sensitive to changes in the general
         level of Renminbi and Hong Kong dollars interest rates. In this regard,
         changes in interest rates affect the interest earned on the Company's
         cash equivalents. As of December 31, 2005, the Company's cash
         equivalents are mainly Renminbi and Hong Kong Dollar deposits with
         financial institutions, bearing market interest rates without fixed
         term.

o        As of December 31, 2005, the Company had short-term investments in
         marketable securities in the Hong Kong stock market with a total market
         value of RMB4,257,000 (US$528,000). These investments expose the
         Company to market risks that may cause the future value of these
         investments to be lower than the original cost of such investments at
         the time of purchase.

o        As at December 31, 2005, the Company owned an equity interest of 5.3%
         of Hainan Sundiro Motorcycle Co. Ltd. ("Sundiro"). The Company monitors
         its investment in Sundiro by reference to the fair market value of
         Sundiro's publicly traded shares. These investments expose the Company
         to market risks as the future value of these investments may be lower
         than the original cost of such investments at the time of purchase.

[Item 12] DESCRIPTION OF SECURITIES OTHER THAN EQUITY SECURITIES

         Not applicable.

                                     PART II

[Item 13] DEFAULTS, DIVIDEND ARREARAGES AND DELINQUENCIES

         No disclosure is required in response to this item.

[Item 14] MATERIAL MODIFICATIONS TO THE RIGHTS OF SECURITY HOLDERS AND USE OF
          PROCEEDS

         No disclosure is required in response to this item.

[Item 15] CONTROLS AND PROCEDURES

         As of December 31, 2005, the Company's management has concluded its
evaluation of the effectiveness of the design and operation of the Company's
disclosure controls and procedures (the evaluation date). Disclosure controls
and procedures are controls and procedures designed to reasonably assure that
information required to be disclosed in our reports filed under the Securities
Exchange Act of 1934, such as this Annual Report, is recorded, processed,
summarized and reported within the time periods prescribed by SEC rules and
regulations, and to reasonably assure that such information is accumulated and
communicated to our management, including the Chief Executive Officer and Chief
Financial Officer, as appropriate, to allow timely decisions regarding required
disclosure.

         The Company's management, including the Chief Executive Officer and
Chief Financial Officer, does not expect that our disclosure controls and
procedures will prevent all error and all fraud. A control system, no matter how
well designed and operated, can provide only reasonable, not absolute, assurance
that the control system's objectives will be met. Further, the design of a
control system must reflect the fact that there are resource constraints, and
the benefits of controls must be considered relative to their costs. Because of
the inherent limitations in all control systems, no evaluation of controls can
provide absolute assurance that all control issues and instances of fraud, if
any, have been detected. These inherent limitations include the realities that
judgments in decision-making can be faulty, and that breakdowns can occur
because of simple error or mistake. The design of any system of controls is
based in part upon certain assumptions about the likelihood of future events,
and there can be no assurance that any design will succeed in achieving its
stated goals under all potential future conditions.

         As of the evaluation date, the Company's Chief Executive Officer and
its Chief Financial Officer concluded that the Company maintains disclosure


                                       38
<PAGE>

controls and procedures that are effective in providing reasonable assurance
that information required to be disclosed in the Company's reports under the
Exchange Act is recorded, processed, summarized and reported within the time
periods prescribed by SEC rules and regulations, and that such information is
accumulated and communicated to the Company's management, including its Chief
Executive Officer and its Chief Financial Officer, as appropriate, to allow
timely decisions regarding required disclosure.

         There have been no significant changes in the Company's internal
controls or in other factors that could significantly affect these controls
subsequent to the evaluation date.

[Item 16A] AUDIT COMMITTEE FINANCIAL EXPERT

         Two members of the Company's audit committee are "audit committee
financial experts." In general, an "audit committee financial expert" is an
individual member of the audit committee who (a) understands generally accepted
accounting principles and financial statements, (b) is able to assess the
general application of such principles in connection with accounting for
estimates, accruals and reserves, (c) has experience preparing, auditing,
analyzing or evaluating financial statements comparable to the breadth and
complexity to the Company's financial statements, (d) understands internal
controls over financial reporting and (e) understands audit committee functions.
The Company's "audit committee financial experts" are Lam Kwan Sing and Lo Kin
Cheung. Each "audit committee financial expert" is independent within the
meaning of Section 10A-3(m)(3) of the Exchange Act and Nasdaq Marketplace Rule
4200.

[Item 16B] CODE OF ETHICS

         A Code of Ethics is a written standard designed to deter wrongdoing and
to promote:

         o        honest and ethical conduct,
         o        full, fair, accurate, timely and understandable disclosure in
                  regulatory filings and public statements,
         o        compliance with applicable laws, rules and regulations,
         o        the prompt reporting violation of the code, and
         o        accountability for adherence to the Code of Ethics.

We have adopted a Code of Ethics that is applicable to all of our employees, and
also contains provisions that apply only to our Chief Executive Officer,
principal financial and accounting officers and persons performing similar
functions. A copy of our Code of Ethics was filed as an exhibit to our annual
report on Form 10-KSB for the year ended December 31, 2003.

                                       39
<PAGE>

[Item 16C] PRINCIPAL ACCOUNTANT FEES AND SERVICES

         The following table shows the fees that we paid or expect to pay for
the audit and other services provided by GHP Horwath, P.C. for the fiscal years
2004 and 2005.

                             Fiscal 2004                     Fiscal 2005
                             -----------                     -----------

Audit Fees                       $67,100                         $53,000
Audit-Related Fees                    --                              --
Tax Fees                              --                              --
All Other Fees                        --                              --
                                 -------                         -------
Total                            $67,100                         $53,000
                                 =======                         =======

         Audit Fees -- This category includes the audit of our annual financial
statements and services that are normally provided by the independent auditors
in connection with engagements for those fiscal years. This category also
includes advice on audit and accounting matters that arose during, or as a
result of, the audit or the review of interim financial statements.

         Audit-Related Fees -- This category consists of assurance and related
services by the independent auditors that are reasonably related to the
performance of the audit or review of our financial statements and are not
reported above under "Audit Fees." The services for the fees disclosed under
this category include consultation regarding our correspondence with the SEC and
other accounting consulting.

         Tax Fees -- This category consists of professional services rendered by
GHP Horwath, P.C. for tax compliance and tax advice. The services for the fees
disclosed under this category include tax return preparation and technical tax
advice.

         All Other Fees -- This category consists of fees for other
miscellaneous items.

         The Audit Committee has adopted a procedure for pre-approval of all
fees charged by GHP Horwath, P.C., the Company's independent registered public
accounting firm. Under the procedure, the Audit Committee approves the
engagement letter with respect to audit, tax and review services. Other fees are
subject to pre-approval by the entire Committee, or, in the period between
meetings, by a designated member of the Audit Committee. Any such approval by
the designated member is disclosed to the entire Audit Committee at the next
meeting. The audit fees paid to GHP Horwath, P.C. with respect to fiscal year
2004 were pre-approved by the Audit Committee.

[Item 16D] EXEMPTION FROM THE LISTING STANARDS FOR THE AUDIT COMMITTEE

           No disclosure is required in response to this item.

[Item 16E] PURCHASE OF EQUITY SECURITIES BY THE ISSUER AND AFFILIATED
           PURCHASERS

           No disclosure is required in response to this item.

                                       40
<PAGE>
                                    PART III

[Item 17] FINANCIAL STATEMENTS

         The following financial statements are filed as a part of this Form
20-F in Appendix A hereto:

                  Report of Independent Registered Public Accounting Firm,
                  together with consolidated financial statements for the
                  Company and subsidiaries, including:

                  a.       Consolidated statements of operations for the
                           years ended December 31, 2003, 2004 and 2005

                  b.       Consolidated balance sheets as of December 31, 2004
                           and 2005

                  c.       Consolidated statements of shareholders' equity
                           for the years ended December 31, 2003, 2004 and 2005

                  d.       Consolidated statements of cash flows for the
                           years ended December 31, 2003, 2004 and 2005

                  e.       Notes to consolidated financial statements.

[Item 18] FINANCIAL STATEMENTS

Not applicable.

[Item 19] EXHIBITS

         The following Exhibits are filed as part of this Form 20-F:

         Exhibit No.       Exhibit Description
         -----------       -------------------

         1.1      Articles of Association Incorporation of the Registrant (Filed
                  as Annex B to Form S-4 filed September 24, 2004, and
                  incorporated herein by reference.)

         1.2      Amended and Restated Memorandum of Association of the
                  Registrant (Filed as Annex A to Form S-4 filed September 24,
                  2004, and incorporated herein by reference.)

         1.3      Board of Directors Resolutions Designating Series B Preferred
                  Stock and Establishing Rights, Preferences and Limitations
                  (Filed as Exhibit 1.3 to Annual Report on Form 20-F for the
                  fiscal year ended December 31, 2004, and incorporated herein
                  by reference.)

         4.1      China Resources Development, Inc., Amended and Restated 1995
                  Stock Option Plan, as amended on December 30, 1996 (Filed as
                  Exhibit 10.34 to Annual Report on Form 10-K/A for the fiscal
                  year ended December 31, 1996, and incorporated herein by
                  reference.) *

         4.2      China Resources Development, Inc., 2003 Equity Compensation
                  Plan (Filed as Appendix B to Schedule 14A, filed November 20,
                  2003,, and incorporated herein by reference.) *

         4.3      Employment Agreement between the Company and Tam Cheuk Ho,
                  dated February 1, 1999 (Filed as Exhibit 10.43 to Annual
                  Report on Form 10-K for the fiscal year ended December 31,
                  1998, and incorporated herein by reference.) *

         4.4      Employment Agreement between the Company and Wong Wah On,
                  dated February 1, 1999 (Filed as Exhibit 10.44 to Annual
                  Report on Form 10-K for the fiscal year ended December 31,
                  1998, and incorporated herein by reference.) *

                                       41
<PAGE>
         Exhibit No.       Exhibit Description
         -----------       -------------------

         4.5      Service Agreement between the Company and Ching Lung Po, dated
                  February 1, 1999 (Filed as Exhibit 10.45 to Annual Report on
                  Form 10-K for the fiscal year ended December 31, 1998, and
                  incorporated herein by reference.) *

         4.6      Agreement for the Sale and Purchase of Shares in Zhuhai
                  Zhongwei Development Co. Ltd. by and between HARC and Li Qing
                  Quan dated April 22, 2003 (Certified English translation of
                  original Chinese version filed as Exhibit 10.15 to Quarterly
                  Report on Form 10-QSB for the quarter ended March 31, 2003,
                  and incorporated herein by reference.)

         4.7      Agreement for the Sale and Purchase of Shares in Zhuhai
                  Zhongwei Development Co. Ltd. by and between Lin Jia Ping and
                  Li Qing Quan dated April 22, 2003 (Certified English
                  translation of original Chinese version filed as Exhibit 10.16
                  to Quarterly Report on Form 10-QSB for quarter ended March 31,
                  2003, and incorporated herein by reference.)

         4.8      Acquisition Agreement by and among the Registrant, Isense
                  Limited, Ngan Chiu Wai Jenny and Kwok Kwan Hung dated August
                  25, 2003 (Filed as Exhibit 10.17 to Quarterly Report on Form
                  10-QSB for quarter ended September 30, 2003, and incorporated
                  herein by reference.)

         4.9      Agreement for the Sale and Purchase of Shares in Shenzhen Xubu
                  Investment Co. Ltd. by and between HARC and Su Wei Min dated
                  February 10, 2004 (Certified English translation of original
                  Chinese version filed as Exhibit 10.18 to Current Report on
                  Form 8-K filed February 25, 2004, and incorporated herein by
                  reference.)

         4.10     Agreement for the Sale and Purchase of Shares in Shenzhen Xubu
                  Investment Co. Ltd. by and between Li Fei Lie, as nominee for
                  HARC and Su Wei Min dated February 10, 2004 (Certified English
                  translation of original Chinese version filed as Exhibit 10.19
                  to Current Report on Form 8-K filed February 25, 2004, and
                  incorporated herein by reference.)

         4.11     Acquisition Agreement dated as of January 24, 2006 by and
                  between China Natural Resources, Inc., Feishang Mining
                  Holdings Limited and Feishang Group Limited (Filed as Exhibit
                  10.1 to the Current Report on Form 6-K filed January 25, 2006,
                  and incorporated herein by reference.)

         6        Computation of Earnings Per Share for Fiscal Year ended
                  December 31, 2005 (Contained in Financial Statements filed
                  herewith.)

         8        Subsidiaries of the Registrant (Filed herewith.)

         11       Code of Ethics (Filed as Exhibit 14 to Annual Report on Form
                  10-KSB for the fiscal year ended December 31, 2003, and
                  incorporated herein by reference.)

         12.1     CEO Certification Pursuant to Section 302 of the
                  Sarbanes-Oxley Act of 2002 (Filed herewith.)

         12.2     CFO Certification Pursuant to Section 302 of the
                  Sarbanes-Oxley Act of 2002 (Filed herewith.)

         12.1     CEO Certification Pursuant to Section 906 of the
                  Sarbanes-Oxley Act of 2002 (Filed herewith.)

         12.2     CFO Certification Pursuant to Section 906 of the
                  Sarbanes-Oxley Act of 2002 (Filed herewith.)

----------
* Compensatory plan.

                                       42

<PAGE>

                                   SIGNATURES

         The registrant hereby certifies that it meets all of the requirements
for filing on Form 20-F and that it has duly caused and authorized the
undersigned to sign this annual report on its behalf.


                                          CHINA NATURAL RESOURCES, INC.



Date: June 9, 2006                            By: /s/ Li Feilie
                                                  ----------------
                                              Li Feilie, President

                                       43
<PAGE>


                                   APPENDIX A

                              FINANCIAL STATEMENTS

                  Report of Independent Registered Public Accounting Firm,
                  together with consolidated financial statements for the
                  Company and subsidiaries, including:

                  a.       Consolidated statements of operations for the years
                           ended December 31, 2003, 2004 and 2005

                  b.       Consolidated balance sheets as of December 31, 2004
                           and 2005

                  c.       Consolidated statements of shareholders' equity for
                           the years ended December 31, 2003, 2004 and 2005

                  d.       Consolidated statements of cash flows for the years
                           ended December 31, 2003, 2004 and 2005

                  e.       Notes to consolidated financial statements.

                                      A-1

<PAGE>
                          CHINA NATURAL RESOURCES, INC.

                   INDEX TO CONSOLIDATED FINANCIAL STATEMENTS

                  YEARS ENDED DECEMBER 31, 2003, 2004 AND 2005


                                                                   Pages


Report of independent registered public accounting firm             F-2

Consolidated statements of operations                               F-3

Consolidated balance sheets                                      F-4 - F-5

Consolidated statements of shareholders' equity                     F-6

Consolidated statements of cash flows                            F-7 - F-8

Notes to consolidated financial statements                      F-9 - F-30


                                      F-1
<PAGE>
             REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

The Board of Directors and Shareholders
China Natural Resources, Inc.

We have audited the accompanying consolidated balance sheets of China Natural
Resources, Inc. and subsidiaries as of December 31, 2004 and 2005, and the
related consolidated statements of operations, shareholders' equity, and cash
flows for each of the three years in the period ended December 31, 2005. These
financial statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.

We conducted our audits in accordance with the standards of the Public Company
Accounting Oversight Board (United States). Those standards require that we plan
and perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.

In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the financial position of China Natural
Resources, Inc. and subsidiaries at December 31, 2004 and 2005, and the results
of their operations and their cash flows for each of the three years in the
period ended December 31, 2005, in conformity with accounting principles
generally accepted in the United States of America.

As discussed in Note 2, on February 3, 2006, the Company consummated the
acquisition of Feishang Mining Holdings Limited ("FMH"). Subsequent to the
acquisition, the former FMH shareholder holds 86.4% of the outstanding common
shares of the Company. As a result, the acquisition of FMH by the Company is
treated as a reverse acquisition.

GHP Horwath, P.C.
Denver, Colorado

April 27, 2006

                                      F-2
<PAGE>
                          CHINA NATURAL RESOURCES, INC.

                      CONSOLIDATED STATEMENTS OF OPERATIONS

                  YEARS ENDED DECEMBER 31, 2003, 2004 AND 2005

                  (AMOUNTS IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
                                                                                 Year ended December 31,
                                                        Notes      2003            2004          2005           2005
                                                                    RMB             RMB           RMB            US$
<S>                                                     <C>     <C>             <C>           <C>             <C>
NET SALES                                                         3,049           3,970         3,890            482

COST OF SALES                                                    (2,772)         (3,381)       (3,322)          (412)
                                                                 ------          ------        ------         ------

GROSS PROFIT                                                        277             589           568             70

DEPRECIATION                                                       (192)           (248)         (257)           (32)

IMPAIRMENT LOSS ON GOODWILL                               3          --          (4,696)         (770)           (95)

VALUATION ALLOWANCE                                      16     (24,810)        (13,304)       (6,505)          (806)

SELLING, GENERAL AND
   ADMINISTRATIVE EXPENSES, including
     expenses incurred to related parties of RMB249,
     RMB232 and RMB211 in 2003, 2004 and 2005,
     respectively                                                (6,401)         (8,019)       (6,733)          (834)

INTEREST INCOME/(EXPENSE), NET                                      313              20            (5)            (1)

OTHER INCOME/(EXPENSE), NET                               5       1,713           3,229          (132)           (16)
                                                                 ------          ------        ------         ------

LOSS FROM CONTINUING OPERATIONS
  BEFORE INCOME TAXES                                           (29,100)        (22,429)      (13,834)        (1,714)

INCOME TAXES                                                         --             (11)          (30)            (4)
                                                                 ------          ------        ------         ------

LOSS FROM CONTINUING OPERATIONS                                 (29,100)        (22,440)      (13,864)        (1,718)

DISCONTINUED OPERATIONS
   Income from operations of
     discontinued supermarket segment (including
     gain on disposal of RMB327, net of taxes of Nil in
     2003), and loss from discontinued Xubu operations    4      (2,637)             --            --             --
                                                                 ------          ------        ------         ------

NET LOSS                                                        (31,737)        (22,440)      (13,864)        (1,718)
                                                                =======         =======       =======        =======
LOSS PER SHARE:
Basic and diluted
   Loss from continuing operations                               (30.20)         (18.79)       (11.11)         (1.38)
   Loss from discontinued operations                              (2.74)             --            --            --
                                                                 ------          ------        ------         ------

                                                                 (32.94)         (18.79)       (11.11)         (1.38)
                                                                =======         =======       =======        =======
</TABLE>

The accompanying notes are an integral part of these consolidated financial
statements.

                                      F-3
<PAGE>
                          CHINA NATURAL RESOURCES, INC.

                           CONSOLIDATED BALANCE SHEETS

                           DECEMBER 31, 2004 AND 2005

                    (AMOUNTS IN THOUSANDS, EXCEPT SHARE DATA)
<TABLE>
<CAPTION>
                                                                                       December 31,
                                                                       2004                2005                2005
                                                      Notes            RMB                 RMB                 US$
<S>                                                   <C>            <C>                  <C>                  <C>
ASSETS

CURRENT ASSETS
Cash and cash equivalents                                            12,039                1,297                 161
Trading securities                                      7                54                4,257                 528
Trade receivables                                                       640                  617                  76
Other receivables, deposits and prepayments                             122                  123                  15
Short term loans receivable                             8               292                   --                   -
                                                                     ------               ------              ------

TOTAL CURRENT ASSETS                                                 13,147                6,294                 780
                                                                     ------               ------              ------

PROPERTY AND EQUIPMENT                                  9             1,122                  890                 110

INVESTMENTS                                            10            31,000               24,700               3,061

GOODWILL                                                3             1,600                  830                 103
                                                                     ------               ------              ------

TOTAL ASSETS                                                         46,869               32,714               4,054
                                                                     ======               ======              ======

LIABILITIES AND SHAREHOLDERS' EQUITY

CURRENT LIABILITIES
Accounts payable                                                        514                  432                  54
Other payables and accrued liabilities                 11             2,610                2,825                 350
Current portion of capital lease                       12               180                  167                  21
Amounts due to related parties                         15               501                  122                  15-
Income taxes payable                                    6                11                   15                   2
                                                                     ------               ------              ------

TOTAL CURRENT LIABILITIES                                             3,816                3,561                 442

Capital lease, net of current portion                  12               206                   36                   4
                                                                     ------               ------              ------

TOTAL LIABILITIES                                                     4,022                3,597                 446
                                                                     ------               ------              ------
</TABLE>

                                   (Continued)

                                      F-4
<PAGE>

                          CHINA NATURAL RESOURCES, INC.

                     CONSOLIDATED BALANCE SHEETS (CONTINUED)

                           DECEMBER 31, 2004 AND 2005

                    (AMOUNTS IN THOUSANDS, EXCEPT SHARE DATA)
<TABLE>
<CAPTION>
                                                                                       December 31,
                                                                      2004                2005                2005
                                                      Notes           RMB                 RMB                 US$
<S>                                                    <C>         <C>                  <C>                  <C>
COMMITMENTS                                            20

SHAREHOLDERS' EQUITY
Preferred shares, authorized -10,000,000 shares:
     Series B preferred shares, no par:                14
       Authorized - 320,000 shares
       Issued and outstanding - 320,000 shares                            3                    3                  --
Common shares, no par:
   Authorized - 200,000,000 shares
   Issued and outstanding - 1,247,823 shares           13                10                   10                   1
Additional paid-in capital                                          186,622              186,622              23,126
Reserves                                               19            28,028               28,028               3,473
Accumulated deficit                                                (171,969)            (185,833)            (23,028)
Accumulated other comprehensive income                                  153                  287                  36
                                                                     ------               ------              ------

TOTAL SHAREHOLDERS' EQUITY                                           42,847               29,117               3,608
                                                                     ------               ------              ------
TOTAL LIABILITIES AND
   SHAREHOLDERS' EQUITY                                              46,869               32,714               4,054
                                                                     ======               ======              ======
</TABLE>

The accompanying notes are an integral part of these consolidated financial
statements.

                                      F-5
<PAGE>

                          CHINA NATURAL RESOURCES, INC.

                 CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY

                  YEARS ENDED DECEMBER 31, 2003, 2004 AND 2005

                    (AMOUNTS IN THOUSANDS, EXCEPT SHARE DATA)
<TABLE>
<CAPTION>
                         Number of shares                                                        Accumulated
                         ----------------
                      Series B           Series B          Additional                                  other
                     Preferred    CommonPreferred    Common  paid-in               Accumulated comprehensive
                        shares    shares   shares    shares  capital    Reserves       deficit        income   Total
                        --------------------------------------------------------------------------------------------
                                              RMB       RMB      RMB         RMB           RMB           RMB     RMB
                                                                        (note 20)
<S>                    <C>       <C>            <C>   <C>    <C>          <C>         <C>                <C>  <C>
Balance at
  January 1,
  2003                 320,000   837,823        3         7  169,052      28,028      (117,792)          158  79,456

Issuance of common
  shares upon
  exercise
  of options                     206,000                  1    6,636                                           6,637

Issuance of
  common shares
  in business
  acquisition                    100,000                  1    5,993                                           5,994

Net loss                                                                               (31,737)              (31,737)

Currency
  translation
  adjustments                                                                                             (2)     (2)
                                                                                                              ------
Comprehensive loss                                                                                           (31,739)
                        ------    ------   ------    ------   ------      ------        ------        ------  ------

Balance at
  December 31,
  2003                 320,000 1,143,823        3         9  181,681      28,028      (149,529)          156  60,348

Issuance of common
  shares upon exercise
  of options                     104,000                  1    4,941                                           4,942

Net loss                                                                               (22,440)              (22,440)

Currency
  translation
  adjustments                                                                                             (3)     (3)
                                                                                                              ------
Comprehensive loss                                                                                           (22,443)
                        ------    ------   ------    ------   ------      ------        ------        ------  ------

Balance at
  December 31,
  2004                 320,000 1,247,823        3        10  186,622      28,028      (171,969)          153  42,847

Net loss                                                                               (13,864)              (13,864)

Currency
  translation
  Adjustments                                                                                            134     134
                                                                                                              ------
Comprehensive loss                                                                                           (13,730)
                        ------    ------   ------    ------   ------      ------        ------        ------  ------

Balance at
  December 31,
  2005                 320,000 1,247,823        3        10  186,622      28,028      (185,833)          287  29,117
                        ======    ======   ======    ======   ======      ======        ======        ======  ======
</TABLE>

The accompanying notes are an integral part of these consolidated financial
statements.

                                      F-6
<PAGE>

                          CHINA NATURAL RESOURCES, INC.

                      CONSOLIDATED STATEMENTS OF CASH FLOWS

                  YEARS ENDED DECEMBER 31, 2003, 2004 AND 2005

             (AMOUNTS IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)
<TABLE>
<CAPTION>
                                                                                    Year ended December 31,
                                                                   2003          2004            2005           2005
                                                                    RMB           RMB             RMB            US$
                                                      (Revised - Note 3)
<S>                                                             <C>           <C>             <C>             <C>
OPERATING ACTIVITIES
Net loss                                                        (31,737)      (22,440)        (13,864)        (1,718)
Adjustments to reconcile net loss to net cash
    (used in)/provided by operating activities:
       Depreciation                                                 192           248             257             32
       Write off of property and equipment                           --             7              --             --
       Valuation allowance on investment                         19,000        13,000           6,300            780
       Impairment of goodwill                                        --         4,696             770             95
       Valuation allowance on loan receivable                     2,226           304             205             25
     Valuation allowance on VAT receivable                        3,124            --              --             --
     Gain on elimination of payables                                 --            --            (295)           (37)

Changes in operating assets and liabilities:
    Trading securities                                              587           544          (4,203)          (521)
    Trade receivables                                              (623)           82              23              3
    Other receivables, deposits and prepayments                   6,360            47              (1)            --
    Amounts due to related parties                                  263          (128)            (84)           (10)
    Accounts payable                                                270            47             (82)           (10)
    Other payables and accrued liabilities                        2,126           302             215             27
    Amount due to an officer                                        115        (1,603)             --             --
    Income taxes payable                                             --            11               4              1
    Discontinued operations *                                     2,626         1,231              --             --
                                                                 ------        ------          ------         ------

Net cash (used in)/provided by operating activities               4,529        (3,652)        (10,755)        (1,333)
                                                                 ------        ------          ------         ------
</TABLE>

                                   (Continued)

                                      F-7
<PAGE>
                          CHINA NATURAL RESOURCES, INC.

                CONSOLIDATED STATEMENTS OF CASH FLOWS (CONTINUED)

                  YEARS ENDED DECEMBER 31, 2003, 2004 AND 2005

             (AMOUNTS IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)
<TABLE>
<CAPTION>
                                                                                    Year ended December 31,
                                                                   2003          2004            2005           2005
                                                                    RMB           RMB             RMB            US$
<S>                                                              <C>            <C>           <C>             <C>
INVESTING ACTIVITIES
    Purchases of property and equipment                            (321)          (28)            (25)            (3)
    Proceeds from disposal of property and equipment                151            --              --             --
    Repayment of a short term loan from a third party               212           477              87             11
                                                                 ------        ------          ------         ------

Net cash provided by investing activities                            42           449              62              8
                                                                 ------        ------          ------         ------

FINANCING ACTIVITIES
    Proceeds from issuance of common stock                        6,637         4,942              --             --
    Cash received in acquisition of a subsidiary                    189            --              --             --
    Repayment of principal of capital lease                        (165)         (169)           (183)           (23)
    Repayment to a former vice president                         (2,996)           --               -              -
                                                                 ------        ------          ------         ------

Net cash (used in)/provided by financing activities               3,665         4,773            (183)           (23)
                                                                 ------        ------          ------         ------

Effect of exchange rate changes on cash                              (2)           (3)            134             17
                                                                 ------        ------          ------         ------

NET (DECREASE)/INCREASE IN CASH AND CASH
  EQUIVALENTS                                                     8,234         1,567         (10,742)        (1,331)

CASH AND CASH EQUIVALENTS, AT BEGINNING
 OF YEAR                                                          2,238        10,472          12,039          1,492
                                                                 ------        ------          ------         ------

CASH AND CASH EQUIVALENTS, AT END
 OF YEAR                                                         10,472        12,039           1,297            161
                                                                =======       =======         =======        =======

SUPPLEMENTAL DISCLOSURE OF CASH FLOW
   INFORMATION
   Interest - capital lease                                          39            28              19              2
                                                                =======       =======         =======        =======
   Taxes                                                             --            --              23              3
                                                                =======       =======         =======        =======

SUPPLEMENTAL DISCLOSURE OF NON-CASH
  INVESTING ACTIITIES:
    Property and equipment acquired under capital lease             637            83              --             --
                                                                =======       =======         =======        =======

Business acquisition:
    Fair value of assets acquired                                 6,599            --              --             --
    Liabilities assumed                                            (605)           --              --             --
                                                                 ------        ------          ------         ------

    Common stock issued                                           5,994            --              --             --
                                                                =======       =======         =======        =======
</TABLE>
----------
* Cash flows from investing and financing activities of discontinued operations
  were not significant in 2003 and 2004.

The accompanying notes are an integral part of these consolidated financial
statements.

                                      F-8
<PAGE>

                          CHINA NATURAL RESOURCES, INC.

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

                  YEARS ENDED DECEMBER 31, 2003, 2004 AND 2005

             (AMOUNTS IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)

1.       ORGANIZATION AND PRINCIPAL ACTIVITIES

         The following depicts China Natural Resources, Inc. and its
         subsidiaries (collectively the "Group") at December 31, 2005:

<Table>
<Caption>

      <S>                      <C>                           <C>                   <C>

                     __________________________________
                    |                                  |
                    |         CHINA NATURAL            |__________________________________
                    |        RESOURCES, INC.           |                     |            |
                    |a British Virgin Islands company  |                     |            |
                    |__________________________________|                     |            |
                                     |                                       |            |
                                     |                                       |            |
          ___________________________|_________________________              |            |
         |                           |                         |             |            |
         | 100%                      | 100%                    | 100%        |            |80%
   ______________             _______________          __________________    |    __________________
  |              |           |               |        |                  |   |   |                  |
  |    ISENSE    |           |     HARC      |        |      SUNWIDE     |   |   |   SILVER MOON    |
  |  a Hong Kong |           |    a PRC      |        | a British Virgin |   |   | a British Virgin |
  |    company   |           |   company     |        |  Islands company |   |   | Islands company  |
  |______________|           |_______________|        |__________________|   |   |__________________|
                                     |                                       |            |
                                     |                                       |            |
                 ___________________________________________                 |            |
                |                    |                      |                |            |
                |                    |                      |                |            |
           100% |               100% |                      | 95%            |            | 100%
       __________________    __________________    __________________        |    ________________
      |                  |  |                  |  |                  |       |   |                |
      |   FIRST SUPPLY   |  |  SECOND SUPPLY   |  | ZHONGWEI TRADING |5%     |   |   MEDI-CHINA   |
      |  a PRC company   |  |  a PRC company   |  |  a PRC company   |_______|   |  a Hong Kong   |
      |    (inactive)    |  |    (inactive)    |  |    (inactive)    |           |    company     |
      |__________________|  |__________________|  |__________________|           |________________|

</Table>

         China Natural Resources, Inc. ("CNRI"), (formerly known as Billion Luck
         Company, Limited ("Billion Luck")) is a British Virgin Islands ("BVI")
         holding company incorporated in 1993. China Resources Development, Inc.
         ("CRDI") was a U.S. holding company, incorporated in Nevada in 1986.
         CRDI owned all the outstanding capital stock of Billion Luck. On
         December 9, 2004, CRDI completed a merger (the "Merger") with and into
         Billion Luck. The Merger was effected by an exchange of shares of CRDI
         into shares of Billion Luck on a one-for-one basis. As a result of the
         Merger, CRDI became domiciled in the British Virgin Islands and its
         name was changed to China Natural Resources, Inc. All assets,
         liabilities, contracts and obligations of CRDI became the assets,
         liabilities, contracts and obligations of CNRI. References to the
         Company are to CNRI as successor to CRDI and its subsidiaries.

         Hainan Cihui Industrial Company Limited ("HARC") is a People's Republic
         of China ("PRC") company incorporated in 1994. During 2003 to 2005,
         HARC performed limited commodity trading. HARC is a wholly owned
         subsidiary of CNRI.

         Sunwide Capital Limited ("Sunwide") is a BVI company incorporated in
         2001 and engaged in the investment in US-listed securities. Sunwide is
         a wholly-owned subsidiary of CNRI and is currently inactive.

         First Goods and Materials Supply and Sales Corporation ("First Supply")
         and Second Goods and Materials Supply and Sales Corporation ("Second
         Supply") are wholly-owned subsidiaries of HARC. Hainan Zhongwei Trading
         Company Limited ("Zhongwei Trading") is owned 95% by HARC and 5% by
         CNRI. First Supply, Second Supply and Zhongwei Trading are inactive PRC
         companies.

                                      F-9
<PAGE>
                          CHINA NATURAL RESOURCES, INC.

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

                  YEARS ENDED DECEMBER 31, 2003, 2004 AND 2005

             (AMOUNTS IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)

1.       ORGANIZATION AND PRINCIPAL ACTIVITIES (continued)

         Silver Moon Technologies Limited ("Silver Moon") is a BVI company
         incorporated in 2000 with its primary operations to be the provision of
         online internet healthcare information. Zhongwei Medi-China.com Limited
         ("Medi-China") is a Hong Kong company incorporated in 1999 to conduct
         the business of Silver Moon. Neither Silver Moon nor Medi-China is
         currently engaged in active business operations, however, they are
         poised to recommence their healthcare-related website to the extent
         that the e-commerce industry stabilizes and demonstrates signs of
         revival. Silver Moon is 80% owned by CNRI and Medi-China is 100% owned
         by Silver Moon.

         iSense Limited ("iSense") is a Hong Kong company incorporated in 2000
         and acquired by the Company in 2003. iSense provides advertising,
         promotion and public relations services in Hong Kong and mainland China
         to both local and international customers.

2.       SUBSEQUENT EVENT

         On February 3, 2006 (the "Acquisition Date"), the Company consummated
         the acquisition of all of the issued and outstanding capital stock of
         Feishang Mining Holdings Limited ("FMH"), a British Virgin Islands
         corporation (the "Acquisition"). FMH, through its wholly owned
         subsidiary, Wuhu Feishang Mining Development Co. Ltd., is principally
         engaged in the mining of zinc, iron and other minerals for distribution
         in the PRC. The transaction was structured as a reorganization of FMH
         with and into the Company. As consideration for the Acquisition, the
         Company issued to the former FMH shareholder 9.980,593 of the Company's
         common shares, as well as warrants (the "Warrants") to purchase an
         additional 4,500,000 of the Company's common shares. In connection with
         the Acquisition, the 320,000 series B preferred shares were converted
         into 320,000 common shares. The Warrants entitle the holder to
         purchase: 2,000,000 common shares of the Company at an exercise price
         of US$4.00 per share for a period of two years from the Acquisition
         Date; 1,500,000 common shares at an exercise price of US$4.50 per share
         for a period of three years from the Acquisition Date; and 1,000,000
         common shares at an exercise price of US$5.00 per share for a period of
         four years from the Acquisition Date. Other than the exercise price and
         exercise period, all other terms and conditions of the Warrants are
         identical.

         The acquisition of FMH by the Company is accounted for using the
         purchase method of accounting and is treated as a reverse acquisition
         because on a post-merger basis, the former FMH shareholder holds 86.4%
         of the outstanding common shares of the Company. As a result, FMH is
         deemed to be the acquirer for accounting purposes.

         The following table summarizes the initial estimated fair values of the
         Company's assets and liabilities acquired by FMH at the Acquisition
         Date. The purchase price was determined by multiplying the number of
         outstanding shares immediately prior to consummating the acquisition of
         1,567,823 by the closing price of our common shares the day prior to
         the public announcement of the Acquisition Agreement between the
         Company and FMH. The allocation of the purchase price is preliminary
         and subject to refinement:

                                      F-10
<PAGE>
                          CHINA NATURAL RESOURCES, INC.

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

                  YEARS ENDED DECEMBER 31, 2003, 2004 AND 2005

             (AMOUNTS IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)

2.       SUBSEQUENT EVENT (continued)

         (In thousands)

         Purchase price (including direct costs)                       47,309
         Current assets                               6,294
         Property and equipment                         890
         Investments                                 24,700
                                                     ------
         Total assets                                31,884
         Total liabilities assumed                   (3,597)
                                                     ------
         Net assets acquired                                           28,287
                                                                       ------
         Goodwill resulting from the acquisition                       19,022
                                                                       ======

         The goodwill resulting from the acquisition is not expected to be
         deductible for tax purposes.

         The following represents the unaudited pro forma balance sheet as of
         December 31, 2005 assuming the Acquisition was completed on December
         31, 2005.

         (In thousands, except share and per share data)
<TABLE>
<CAPTION>
                                                 As reported in
                                                   Accompanying                     Proforma
                                           Financial Statements           FMH    Adjustments      Proforma      Proforma
                                                            RMB           RMB            RMB           RMB           US$
<S>                                                      <C>          <C>             <C>          <C>            <C>
         ASSETS
         CURRENT ASSETS:
           Cash and cash equivalents                      1,297        41,202                       42,499         5,266
           Trading securities                             4,257            --                        4,257           528
           Trade receivables                                617         4,622                        5,239           649
           Bills receivables                                 --           450                          450            56
           Other receivables, deposits and
             Prepayments                                    123           422                          545            68
           Amount due from a related company                 --        20,503                       20,503         2,540
           Inventories                                       --         3,788                        3,788           469
                                                         ------       -------                      -------        ------

         TOTAL CURRENT ASSETS                             6,294        70,987                       77,281         9,576
         INVESTMENTS                                     24,700            --                       24,700         3,061
         GOODWILL                                           830            --         18,192 a,b    19,022         2,357
         PROPERTY AND EQUIPMENT, NET                        890        33,656                       34,546         4,281
                                                         ------       -------                      -------        ------

         TOTAL ASSETS                                    32,714       104,643                      155,549        19,275
                                                         ======       =======                      =======        ======
</TABLE>

                                   (CONTINUED)

                                      F-11
<PAGE>
                          CHINA NATURAL RESOURCES, INC.

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

                  YEARS ENDED DECEMBER 31, 2003, 2004 AND 2005

             (AMOUNTS IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)

2. SUBSEQUENT EVENT (continued)
<TABLE>
<S>                                                      <C>          <C>             <C>          <C>            <C>
         LIABILITIES AND SHAREHOLDERS'
            EQUITY
         CURRENT LIABILITIES:
           Accounts payable                                 432           934                        1,366           169
           Other payables and accrued liabilities         2,825        20,200           (862) c     22,163         2,746
           Advance from customers                            --         1,174                        1,174           145
           Current portion of capital lease                 167            --                          167            21
           Amount due to related parties                    122         6,476            862  c      7,460           925
           Amount due to a director                          --        23,644                       23,644         2,930
           Dividends payable                                 --             5                            5             1
           Income taxes payable                              15         2,545                        2,560           317
                                                       --------       -------                      -------        ------

         TOTAL CURRENT LIABILTIES                         3,561        54,978                       58,539         7,254

         Capital lease, net of current portion               36            --                           36             4
                                                       --------       -------                      -------        ------

         TOTAL LIABILTIES                                 3,597        54,978                       58,575         7,258
                                                       --------       -------                      -------        ------

         SHAREHOLDERS' EQUITY
           Common shares                                     13            --         19,268  a,b   19,281         2,389
           Additional paid-in capital                   186,622            --       (186,622) a b       --            --
           Reserves                                      28,028         3,912                       31,940         3,958
           (Accumulated deficit)/retained earnings     (185,833)       45,513        185,833  a     45,513         5,640
           Accumulated other comprehensive income           287           240           (287) a        240            30
                                                       --------       -------                      -------        ------

         TOTAL SHAREHOLDERS' EQUITY                      29,117        49,665                       96,974        12,017
                                                       --------       -------                      -------        ------

         TOTAL LIABILITIES AND
           SHAREHOLDERS' EQUITY                          32,714       104,643                      155,549        19,275
                                                       ========       =======                      =======        ======
</TABLE>

         Notes to Unaudited Proforma Balance Sheet as of December 31, 2005:

         (a) To eliminate CNRI's goodwill, equity accounts and accumulated
             deficit; to eliminate CNRI's accumulated other comprehensive
             income; to conform FMH's equity accounts to CHRI's capital
             structure.

         (b) To record the fair value of the goodwill of RMB19,022 (US$2,354).

         (c) To classify certain CNRI payables owed to companies that are
             affiliated with FMH.

                                      F-12
<PAGE>
                          CHINA NATURAL RESOURCES, INC.

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

                  YEARS ENDED DECEMBER 31, 2003, 2004 AND 2005

             (AMOUNTS IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)

3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

         (a)      Principles of consolidation
                  ---------------------------
                  The consolidated financial statements of CNRI and its
                  subsidiaries (the "Company" or the "Group") are prepared in
                  accordance with accounting principles generally accepted in
                  the United States of America ("US GAAP") and include the
                  accounts of the Company and its subsidiaries. Significant
                  intercompany accounts and transactions have been eliminated on
                  consolidation.

         (b)      Use of estimates
                  ----------------
                  The preparation of the consolidated financial statements in
                  conformity with US GAAP requires management to make estimates
                  and assumptions that affect the reported amounts of assets and
                  liabilities and disclosure of contingent assets and
                  liabilities at the date of the consolidated financial
                  statements and the reported amounts of revenues and expenses
                  during the reporting year. Actual results could differ from
                  those estimates.

         (c)      Cash and cash equivalents
                  -------------------------
                  The Group considers all highly liquid investments and cash
                  deposits with financial institutions with original maturities
                  of three months or less to be cash equivalents.

         (d)      Trading securities
                  ------------------
                  Equity securities that are bought and held principally for the
                  purpose of selling them in the near term are classified as
                  trading securities and are reported at fair value, with
                  unrealized gains and losses included in current operations.

                                      F-13
<PAGE>
                          CHINA NATURAL RESOURCES, INC.

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

                  YEARS ENDED DECEMBER 31, 2003, 2004 AND 2005

             (AMOUNTS IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)

3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)

         (e)      Property and equipment
                  ----------------------
                  Property and equipment are stated at cost less accumulated
                  depreciation. Expenditures for routine repairs and maintenance
                  are expensed as incurred.

                  Depreciation is calculated on the straight-line basis to write
                  off the cost less estimated residual value of each asset over
                  its estimated useful life. Estimated useful lives are as
                  follows:

                  Buildings                                         25 years
                  Machinery, equipment and motor vehicles        4 - 5 years
                  Fixtures and furniture                             5 years

                  Management assesses the carrying values of its long-lived
                  assets for impairment when circumstances warrant such a
                  review. Generally, long-lived assets are considered impaired
                  if the estimated fair value is less than the assets' carrying
                  values. If an impairment is indicated, the loss is measured
                  based on the amounts by which the carrying values of the
                  assets exceed their fair values.

         (f)      Investments
                  -----------
                  Long-term investments, which are neither subsidiaries nor
                  equity investments are stated at cost less valuation
                  allowances.

         (g)      Goodwill
                  --------
                  Goodwill consists of the excess of cost over net assets
                  acquired of iSense Limited. Effective with the adoption of
                  Statement of Financial Accounting Standards ("SFAS") No. 142,
                  Goodwill and Other Intangible Assets ("SFAS No. 142"),
                  management of the Company evaluates the carrying value of
                  goodwill annually or whenever a possible impairment is
                  indicated.

                  The Company performs its impairment test annually during the
                  fourth quarter of the fiscal year. Due to an increase in
                  competition in the advertising industry, operating profits and
                  cash flows were lower than expected and the earnings forecasts
                  for the next five years were revised. In the fourth quarters
                  of 2004 and 2005, impairment losses of RMB4,696 (US$582) and
                  RMB770 (US$95), respectively, were recorded in the Company's
                  advertising segment. The fair value of the advertising
                  business was estimated using the present value of expected
                  future cash flows.

                                      F-14
<PAGE>
                          CHINA NATURAL RESOURCES, INC.

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

                  YEARS ENDED DECEMBER 31, 2003, 2004 AND 2005

             (AMOUNTS IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)

3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)

         (h)      Stock-based compensation
                  ------------------------
                  Statement of Financial Accounting Standards ("SFAS") No. 123
                  "Accounting for Stock-Based Compensation" allows companies to
                  choose whether to account for employee stock-based
                  compensation on a fair value method, or to continue accounting
                  for such compensation under the intrinsic value method
                  prescribed in Accounting Principles Board Opinion No 25,
                  Accounting for Stock Issued to Employees ("APB 25"). The
                  Company applies APB Opinion No. 25 and related interpretations
                  in accounting for its stock-based employee compensation plans.
                  Accordingly, no compensation expense has been recognized for
                  options granted to employees at fair market value. The
                  following table illustrates the effect on net income/(loss)
                  and income/(loss) per share if the Company had applied the
                  fair value recognition provisions of FASB Statement No. 123,
                  Accounting for Stock-Based Compensation, to its stock-based
                  employee plans.
<TABLE>
<CAPTION>
                                                                                   Year ended December 31,
                                                                              2003             2004             2005
                                                                       ---------------------------------------------
                                                                               RMB              RMB              RMB
<S>                                                                        <C>              <C>              <C>
                  Net loss, as reported                                    (31,737)         (22,440)         (13,864)
                  Add: Total stock-based employee
                    compensation expense determined
                    under fair value based method                               --             (946)              --
                                                                           -------          -------          -------

                                                                           (31,737)         (23,386)         (13,864)
                                                                           =======          =======          =======

                  Loss per share:
                  Basic and diluted- as reported                            (32.94)          (18.79)          (11.11)
                                                                           =======          =======          =======

                  Basic and diluted- pro forma                              (32.94)          (19.58)          (11.11)
                                                                           =======          =======          =======
</TABLE>

                  The fair value of the options granted in 2004 was estimated at
                  the date of grant using the Black-Scholes option pricing model
                  with the following assumptions: risk-free interest rate of
                  0.96%; no dividend yield; volatility factor of the expected
                  market price of the Company's common stock of 109.10%; and the
                  life of the options of 2 months.

                  The Black-Scholes option pricing model was developed for use
                  in estimating the fair value of traded options which have no
                  vesting restrictions and are fully transferable. In addition,
                  option valuation models require the input of highly subjective
                  assumptions including the expected stock price volatility.
                  Because the Company's stock options have characteristics
                  significantly different from those of traded options, and
                  because changes in the subjective input assumptions can
                  materially affect the fair value estimate, in management's
                  opinion, the existing models do not necessarily provide a
                  reliable single measure of the fair value of its stock
                  options.

                                      F-15
<PAGE>
                          CHINA NATURAL RESOURCES, INC.

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

                  YEARS ENDED DECEMBER 31, 2003, 2004 AND 2005

             (AMOUNTS IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)

3.       SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)

         (i)      Revenue recognition
                  -------------------
                  Revenue from product sales is recognized at the point of sale
                  for retail sales and upon the delivery of goods or completion
                  of services for other sales, when all performance obligations
                  have been completed and collectibility is reasonably assured.

         (j)      Income taxes
                  ------------
                  Deferred tax assets and liabilities are recognized for the
                  estimated future tax consequences attributable to differences
                  between the financial statement carrying amounts of existing
                  assets and liabilities and their respective tax bases.
                  Deferred tax assets and liabilities are measured using enacted
                  tax rates expected to apply to taxable income in the years in
                  which those temporary differences are expected to be recovered
                  or settled.

         (k)      Loss per share
                  --------------
                  Basic earnings (loss) per share amounts are calculated using
                  the weighted average number of common shares outstanding
                  during the period. Diluted earnings per share assumes the
                  conversion, exercise or issuance of all potential common stock
                  instruments, such as options or warrants, unless the effect is
                  to reduce a loss or increase earnings per share. The basic and
                  diluted weighted average shares outstanding during each of the
                  years ended December 31, 2003, 2004 and 2005 were 963,478,
                  1,194,118 and 1,247,823, respectively.

         (l)      Foreign currency translation
                  ----------------------------
                  The functional currency of substantially all the operations of
                  the Group is Renminbi ("RMB"), the national currency of the
                  PRC. The financial statements of subsidiary operations with
                  functional currency other than RMB have been translated into
                  RMB using the closing rate method and all balance sheet
                  accounts have been translated using the exchange rates in
                  effect at the balance
                  sheet date and statements of operations amounts have been
                  translated using the weighted average exchange rate for the
                  year. Resulting translation adjustments are reported as a
                  separate component of comprehensive income.

                  Transactions denominated in currencies other than RMB are
                  translated into RMB at the applicable rates of exchange
                  prevailing at the dates of the transactions. Monetary assets
                  and liabilities denominated in other currencies have been
                  translated into RMB at the rate of exchange at the balance
                  sheet date. The resulting exchange gains or losses are
                  credited or charged to the consolidated statements of
                  operations.

                  The financial statements are stated in Renminbi. The
                  translation of amounts from RMB into US$ is included solely
                  for the convenience of the reader and has been made at the
                  rate of exchange quoted by the People's Bank of China on
                  December 31, 2005 of US$1.00 = RMB8.07. No representation is
                  made that the RMB amounts could have been, or could be,
                  converted into US$ at that rate on December 31, 2005 or at any
                  other date.

                                      F-16
<PAGE>
                          CHINA NATURAL RESOURCES, INC.

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

                  YEARS ENDED DECEMBER 31, 2003, 2004 AND 2005

             (AMOUNTS IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)

3.       SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)

         (m)      Interest income
                  ---------------
                  Interest on short-term loans receivable is recorded when
                  earned.

         (n)      Recently issued accounting pronouncements
                  -----------------------------------------
                  In December 2004, the Financial Accounting Standards Board
                  ("FASB") issued SFAS No. 123 (R) Share Based Payment which
                  addresses the accounting for share-based payment transactions.
                  SFAS No. 123 (R) eliminates the ability to account for
                  share-based compensation transactions using APB No.25, and
                  generally requires instead that such transactions be accounted
                  and recognized in the statement of income based on their fair
                  values. SFAS No. 123 (R) will be effective for public
                  companies that file as small business issuers as of the first
                  interim period that begins after December 15, 2005. The
                  Company is evaluating the provisions of SFAS No. 123 (R).
                  Depending upon the numbers and terms of options that may be
                  granted in future periods, the implementation of this standard
                  could have a material impact on the Company's financial
                  position and results of operations.

         (o)      In 2005, the Company has separately disclosed the operating,
                  investing and financing portions of the cash flows
                  attributable to its discontinued operations, which in prior
                  years were reported on a combined basis as a single amount.

4.       DISPOSITION OF ASSETS

         Pursuant to an agreement dated April 22, 2003, the Company disposed of
         its entire interest in Zhuhai Zhongwei Development Company Limited
         ("Zhuhai Zhongwei") (a PRC company engaged in the operation of a
         supermarket in Zhuhai) to a third party affiliated with a former vice
         president. The Company recognised a gain of approximately RMB327
         (US$41) from the disposition. The sales price was RMB6,000 (US$743) and
         was fully settled by offsetting against amounts due to a company owned
         by the former vice president. As a result of the disposition, the
         Company ceased supermarket operations. The results of operations of
         Zhuhai Zhongwei have been retroactively restated as discontinued
         operations. Revenues from discontinued supermarket operations were
         RMB1,758 (US$218), nil and nil for the years ended December 31, 2003,
         2004 and 2005, respectively. Profit before income taxes from
         discontinued supermarket operations were RMB39 (US$5), nil and nil for
         the years ended December 31, 2003, 2004 and 2005, respectively.

         On February 10, 2004, the Company's subsidiary, HARC, disposed of its
         entire interest in Shenzhen Xubu Investment Co. Ltd. ("Xubu") to an
         unaffiliated third party for total consideration of RMB17,256
         (US$2,136) (the "Purchase Consideration"). The Purchase Consideration
         was offset by capital in the amount of RMB16,026 (US$1,986) that had
         been withdrawn from Xubu By HARC. The net Purchase Consideration of
         RMB1,231 (US$153) was received by the Company on May 5, 2004. The
         results of operations of Xubu have been retroactively restated as
         discontinued operations. Revenues from discontinued Xubu operations
         were nil for each of the three years ended December 31, 2005. Losses
         before income taxes from discontinued operations were RMB3,003
         (US$372), nil and nil for the years ended December 31, 2003, 2004 and
         2005, respectively.

                                      F-17
<PAGE>
                          CHINA NATURAL RESOURCES, INC.

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

                  YEARS ENDED DECEMBER 31, 2003, 2004 AND 2005

             (AMOUNTS IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)

5.       OTHER INCOME/(EXPENSE), NET

         Other income/(expense), net represents:
<TABLE>
<CAPTION>
                                                                                   Year ended December 31,
                                                                              2003             2004             2005
                                                                       ---------------------------------------------
                                                                               RMB              RMB              RMB
<S>                                                                        <C>              <C>              <C>
         Net gain on trading of marketable securities                        1,235              373               37
         Unrealized loss on marketable securities                              (78)              --             (649)
         Recovery of bad debts and related costs                                --            2,850               88
         Gain on elimination of payables                                        --               --              295
         Other                                                                 556                6               97
                                                                           -------          -------          -------

                                                                             1,713            3,229             (132)
                                                                           =======          =======          =======
</TABLE>

6.       INCOME TAXES

         Pre-tax loss from continuing operations for the years ended December
         31, 2003, 2004 and 2005 was taxable in the following jurisdictions:
<TABLE>
<CAPTION>
                                                                                   Year ended December 31,
                                                                              2003             2004             2005
                                                                       ---------------------------------------------
                                                                               RMB              RMB              RMB
<S>                                                                        <C>              <C>              <C>
         PRC (excluding Hong Kong)                                         (22,451)         (13,617)          (6,890)
         Other countries:
             USA (through the date of the Merger)                           (5,978)          (7,129)              --
             Hong Kong                                                        (671)          (4,581)            (613)
             BVI                                                                --            2,898           (6,331)
                                                                           -------          -------          -------

                                                                           (29,100)         (22,429)         (13,834)
                                                                           =======          =======          =======
</TABLE>

         Prior to the Merger, it was management's intention to reinvest all the
         income attributable to the Group earned by its operations outside the
         United States of America (the "U.S."). Accordingly, no U.S. corporate
         income taxes were provided in these consolidated financial statements.
         After the Merger, management believes that the Company is no longer
         subject to US taxes.

         Under the current laws of the BVI, dividends and capital gains arising
         from the Company's investments in the BVI are not subject to income
         taxes and no withholding tax is imposed on payments of dividends to the
         Company.

                                      F-18
<PAGE>
                          CHINA NATURAL RESOURCES, INC.

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

                  YEARS ENDED DECEMBER 31, 2003, 2004 AND 2005

             (AMOUNTS IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)

6. INCOME TAXES (continued)

         The reconciliation of income taxes/(tax benefit) for income tax
         computed at the PRC federal statutory tax rate applicable to foreign
         investment enterprises operating in Hainan, Zhuhai and Shenzhen Special
         Economic Zones in the PRC, to income tax expense is as follows:
<TABLE>
<CAPTION>
                                                                                   Year ended December 31,
                                                                              2003             2004             2005
                                                                      ----------------------------------------------
                                                                               RMB              RMB              RMB
         PRC federal statutory tax rate                                        15%             15%            15%
<S>                                                                         <C>              <C>              <C>
         Computed expected income taxes (tax benefit)                       (4,365)          (3,364)          (2,075)
         Non-deductible expenses                                               997            1,332            2,016
         Net increase in valuation allowance                                 3,368            2,043               89
                                                                            ------           ------           ------

         Income tax expense for the year, all current                           --               11               30
                                                                            ======           ======           ======
</TABLE>

         The deferred tax asset of the Group is comprised of the following:
<TABLE>
<CAPTION>
                                                                                               December 31,
                                                                                           2004                 2005
                                                                                      ------------------------------
                                                                                            RMB                  RMB
<S>                                                                                      <C>                  <C>
         Deferred tax asset:
             Net operating loss carry forwards                                              422                  511
             Less: Valuation allowance                                                     (422)                (511)
                                                                                         ------               ------
                                                                                             --                   --
                                                                                         ======               ======
</TABLE>

         No undistributed earnings of the Group's foreign subsidiaries were
         available at December 31, 2004 and 2005. Prior to the Merger, upon
         distribution of those earnings in the form of dividends or otherwise,
         the Group would have been subject to U.S. income taxes. Determination
         of the amount of unrecognized deferred U.S. income tax liability was
         not practicable because of the complexities associated with its
         hypothetical calculation.

         Through December 31, 2003, the Group had net operating loss carry
         forwards ("NOLs") of approximately RMB36,000 (US$4,348) for U.S. income
         tax purposes that were to expire in various years through 2023. The
         NOLs expired effective with the Merger. At December 31, 2005, the
         Group's subsidiaries in the PRC had NOLs amounting to approximately
         RMB3,406 (US$422) for PRC income tax purposes that expire in 2008.

                                      F-19
<PAGE>
                          CHINA NATURAL RESOURCES, INC.

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

                  YEARS ENDED DECEMBER 31, 2003, 2004 AND 2005

             (AMOUNTS IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)

7.       TRADING SECURITIES
<TABLE>
<CAPTION>
                                                                                                December 31,
                                                                                            2004                 2005
                                                                                            RMB                  RMB
<S>                                                                                      <C>                  <C>
         Trading securities listed on Hong Kong
             Stock Exchange
                At cost                                                                      54                4,906
                Less: unrealized loss                                                        --                 (649)
                                                                                         ------               ------
         Fair value                                                                          54                4,257
                                                                                         ======               ======
</TABLE>

8.       SHORT TERM LOANS RECEIVABLE

         As of December 31, 2004, short term loans receivable represented
         advances to an unaffiliated party of RMB292 (US$36). During the year
         ended December 31, 2005, loans of RMB87 (US$11) were repaid and loans
         of RMB205 (US$25) were written off. During the year ended December 31,
         2004, loans of RMB291 (US$36) and interest thereon of RMB13 (US$2) were
         written off.

9.       PROPERTY AND EQUIPMENT

         Property and equipment consisted of:
<TABLE>
<CAPTION>
                                                                                                December 31,
                                                                                            2004              2005
                                                                                            RMB               RMB
<S>                                                                                      <C>                  <C>
         At cost:
            Buildings                                                                       509                  509
            Machinery, equipment and motor vehicles                                       1,150                1,175
                                                                                         ------               ------
                                                                                          1,659                1,684

         Accumulated depreciation                                                          (537)                (794)
                                                                                         ------               ------
                                                                                          1,122                  890
                                                                                         ======               ======
</TABLE>

                                      F-20
<PAGE>
                          CHINA NATURAL RESOURCES, INC.

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

                  YEARS ENDED DECEMBER 31, 2003, 2004 AND 2005

             (AMOUNTS IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)

10.      INVESTMENTS

         Cost method investments comprise:
<TABLE>
<CAPTION>
                                                                                                December 31,
                                                                                           2004               2005
                                                                                           RMB                RMB
<S>                                                                                     <C>                   <C>
         Investment balance in Hainan Sundiro Motorcycle Co., Ltd.
             ("Sundiro") at beginning of years                                           44,000               31,000
         Valuation allowance                                                            (13,000)              (6,300)
                                                                                        -------               ------

                                                                                         31,000               24,700
                                                                                        =======               ======
</TABLE>

         Cost method investments are interests in unlisted shares/equity of PRC
         companies in which the Group does not have a significant influence over
         their operating and financial policies. As of December 31, 2004 and
         2005, the Group owns an equity interest of 5.3% of Sundiro. The Company
         monitors its investment in Sundiro by reference to the fair market
         value of Sundiro's publicly traded shares. During the second half of
         2004 and 2005, the Company determined that there had been an other-than
         temporary decline in the value of its investment and recorded a
         write-down of RMB13,000 (US$1,609) and RMB6,300 (US$780), respectively.

11.      OTHER PAYABLES AND ACCRUED LIABILITIES

         Other payables and accrued liabilities consisted of:
<TABLE>
<CAPTION>
                                                                                                December 31,
                                                                                           2004               2005
                                                                                           RMB                RMB
<S>                                                                                      <C>                  <C>
         Other payables                                                                   1,789                1,891
         Accrued liabilities                                                                821                  934
                                                                                         ------               ------

                                                                                          2,610                2,825
                                                                                         ======               ======
</TABLE>

                                      F-21
<PAGE>
                          CHINA NATURAL RESOURCES, INC.

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

                  YEARS ENDED DECEMBER 31, 2003, 2004 AND 2005

             (AMOUNTS IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)

12.      CAPITAL LEASE

         The Company leases two automobiles under capital leases which expire in
         November 2006 and April 2008, respectively. Total monthly lease
         payments are approximately RMB17 (US$2) with interest of 6% and 3.5%,
         respectively. At December 31, 2005, the total amount of assets
         including cash paid at lease inception of RMB321 (US$38) recorded under
         the capital leases was RMB1,064 (US$132) and accumulated depreciation
         related to the assets was RMB572 (US$71). Future minimum lease payments
         under the leases are as follows:

                                                Year ending             Amount
                                               December 31,              (RMB)
                                               ------------             ------

                                                 2006                     185
                                                 2007                      24
                                                 2008                       8
                                                                         ----
                                                                          217
                      Less amount representing interest                   (14)
                                                                         ----
                                                                          203
                                   Less current portion                  (167)
                                                                         ----
                                      Long-term portion                    36
                                                                         ====

13.      STOCK OPTIONS

         The Group adopted a stock option plan (the "1995 Plan") as of March 31,
         1995. The 1995 Plan allows the Board of Directors, or a committee
         thereof at the Board's discretion, to grant stock options up to 20% of
         the Company's then-outstanding common stock to officers, directors, key
         employees, consultants and affiliates of the Group. Such shares may
         represent authorized but unissued shares as well as repurchased or
         forfeited shares for any grant under the 1995 Plan that was expired or
         unexercised. The Board of Directors has the ability to set a holding
         period of less than one year for non-qualified stock options.

         Pursuant to a special resolution of the Board of Directors on June 15,
         2001, 163,000 stock options were granted to officers, directors and key
         employees of the Group at an exercise price of RMB24.43 (US$2.95) per
         share (the fair market value of the common stock as of June 15, 2001).
         The options were exercisable from December 15, 2001 to June 14, 2004.
         During the year ended December 31, 2003, options to purchase 160,000
         shares of the Company's Common Stock for RMB24.43 (US$2.95) per share
         were exercised and the Company issued 160,000 shares for RMB3,906
         (US$472).

         During the year ended December 31, 2003, the board of directors granted
         options to certain employees to purchase 46,000 shares of the Company's
         Common Stock at an exercise price of RMB59.33 (US$7.165), exercisable
         through August 2006. In August 2003, the options to purchase the 46,000
         shares of the Company's Common Stock for US$7.165 per share were
         exercised and the Company issued the shares for RMB2,731 (US$330).

                                      F-22
<PAGE>
                          CHINA NATURAL RESOURCES, INC.

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

                  YEARS ENDED DECEMBER 31, 2003, 2004 AND 2005

             (AMOUNTS IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)

13.      STOCK OPTIONS (continued)

         On December 18, 2003, the shareholders of the Company approved and
         adopted the 2003 Equity Compensation Plan (the "2003 Plan"). The 2003
         Plan allows the Board to grant various incentive equity awards not
         limited to stock options. The Company has reserved a number of shares
         of common stock equal to 20% of the issued and outstanding common stock
         of the Company, from time-to-time, for issuance pursuant to options
         granted ("Plan Options") or for restricted stock awarded ("Stock
         Grants") under the 2003 Plan. Stock Appreciation Rights may be granted
         as a means of allowing participants to pay the exercise price of Plan
         Options.

         During the year ended December 31, 2004, the board of directors granted
         options to certain employees and officers to purchase 104,000 shares of
         the Company's Common Stock, of which 24,000 shares are under the 1995
         Plan and 80,000 shares are under the 2003 Plan, at an exercise price of
         RMB47.03 (US$5.68), exercisable through May, 2007. In May 2004, the
         options to purchase the 104,000 shares of the Company's Common Stock
         for US$5.68 per share were exercised and the Company issued the shares
         for RMB4,891 (US$591). The 1995 Plan terminated on March 31, 2005.

         A summary of the status of the Company's stock option plans as of
         December 31, 2003, 2004 and 2005 and the changes during the years then
         ended is as follows:
<TABLE>
<CAPTION>
                                              2003                           2004                            2005
                                              ----                           ----                            ----
                                                   Weighted                       Weighted                       Weighted
                                      Shares       Average           Shares       Average           Shares        Average
                                                   exercise                       exercise                       exercise
                                                    price                          price                           price
                                                     RMB                            RMB                             RMB
<S>                                    <C>          <C>               <C>          <C>                     <C>      <C>
        Outstanding at
            beginning of year           163,000     24.43                3,000     24.43                   --       --
        Granted                          46,000     59.33              104,000     47.03                   --       --
        Exercised                      (206,000)    32.11             (104,000)    47.03                   --       --
        Expired                                                         (3,000)    24.43                   --       --
                                       --------                       --------                      ---------
        Outstanding at
            end of year                   3,000     24.43                   --        --                   --       --
                                       ========                       ========                      =========
</TABLE>

14.      PREFERRED SHARES

         The preferred shares entitle the holders to voting rights to the same
         extent and in the same manner as common shares; has no preemptive or
         other subscription rights and is not subject to any future calls or
         assessments. There are no redemption or sinking fund provisions
         applicable to the preferred shares and they have no rights to dividends
         or to distribution upon liquidation or dissolution of the Company.

                                      F-23
<PAGE>
                          CHINA NATURAL RESOURCES, INC.

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

                  YEARS ENDED DECEMBER 31, 2003, 2004 AND 2005

             (AMOUNTS IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)

15.      RELATED PARTY BALANCES AND TRANSACTIONS


         At December 31, 2003, the Company owed RMB1,603 (US$199) to an officer
         for unpaid salary. This was paid in full during 2004.

         At December 31, 2003 and 2004, the Company owed RMB296 (US$37) to
         related companies. These amounts were written off during 2005.

         At December 31, 2004 and 2005, the Company owed RMB205 (US$25) and
         RMB122 (US$15), respectively, to a director of iSense for advances
         received. These advances are unsecured, interest-free and are repayable
         on demand.

16.      VALUATION ALLOWANCE

         Valuation allowance consists of the following:
<TABLE>
<CAPTION>
                                                                                   Year ended December 31,
                                                                              2003             2004             2005
                                                                      ----------------------------------------------
                                                                               RMB              RMB              RMB

<S>                                                                         <C>              <C>               <C>
         Short-term loans receivable, and related interest                   2,684              304              205
         Investments (Sundiro)                                              19,000           13,000            6,300
         VAT receivable allowance                                            3,126               --               --
                                                                            ------           ------            -----
                                                                            24,810           13,304            6,505
                                                                            ======           ======            =====
</TABLE>

17.      CONCENTRATION OF RISK

         Concentration of credit risk:

         Financial instruments that potentially subject the Group to significant
         concentration of credit risk consist principally of cash deposits,
         trading securities, trade receivables, short term loans receivable, and
         cost method investments.

         (i)    Cash and cash deposits

                The Group maintains its cash and cash deposits primarily with
                various Hong Kong based financial institutions. The Group
                performs periodic evaluations of the relative credit standing of
                those financial institutions.

                                      F-24
<PAGE>
                          CHINA NATURAL RESOURCES, INC.

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

                  YEARS ENDED DECEMBER 31, 2003, 2004 AND 2005

             (AMOUNTS IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)

17.      CONCENTRATION OF RISK (continued)

         (ii)   Trade receivables

                The Group extends credit to its customers in the normal course
                of business. The group performs ongoing credit evaluations and
                generally does not require collateral. The Group maintains
                reserves for potential credit losses based upon its loss history
                and aging analysis. Such losses have been within management's
                expectations. At December 31, 2004, five customers accounted for
                31%, 22%, 14%, 12% and 10% of trade receivables. At December 31,
                2005, two customers accounted for 70% and 12% of trade
                receivables in the Company's advertising segment. During the
                year ended December 31, 2005, two customers accounted for 39%
                and 23%, respectively, of sales in the Company's advertising
                segment. During the year ended December 31, 2004, five customers
                accounted for 31%, 22%, 14%, 12% and 10%, respectively, of sales
                in the Company's advertising segment. During the year ended
                December 31, 2003, two customers accounted for 48% and 11%,
                respectively, of sales in the Company's advertising segment.
                During the year ended December 31, 2003, two customers accounted
                for 77% and 23%, respectively, of sales in the Company's
                commodity trading segment. During the year ended December 31,
                2004, one customer accounted for 100% of sales in the Company's
                commodity trading segment. During the year ended December 31,
                2005, one customer accounted for 100% of sales in the Company's
                commodity trading segment.

         (iii)  Short term loans receivable

                The Group carefully assesses the recoverability of loans not
                guaranteed or secured by collateral, and maintains reserves for
                potential credit losses based upon its analysis and upon its
                continued communication with its debtors. During the year ended
                December 31, 2003 the Group wrote off short-term loans
                receivable of approximately RMB2,226 (US$276). In 2004, the
                Group recovered the loans receivable, related interest and costs
                totaling RMB2,850 (US$353).During the year ended December 31,
                2004, the Group wrote off short-term loans receivable of
                approximately RMB291 (US$35) and related interest of
                approximately RMB13 (US$2). During the year ended December 31,
                2005, the Company wrote off short-term loans receivable of
                approximately RMB205 (US$25).

         (iv)   Cost method investments

                The Group's cost method investments consist of interests in
                unlisted shares/equity of PRC companies in which the Group does
                not have a significant influence over their operating and
                financial policies.

                                      F-25
<PAGE>
                          CHINA NATURAL RESOURCES, INC.

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

                  YEARS ENDED DECEMBER 31, 2003, 2004 AND 2005

             (AMOUNTS IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)

18.      FAIR VALUE OF FINANCIAL INSTRUMENTS

         The following methods and assumptions were used by the Group in
         estimating the fair value of its financial instruments:

         (i)      Cash and cash equivalents

                  The carrying amount reported in the consolidated balance sheet
                  for cash and cash equivalents approximates their fair values.

         (ii)     Marketable securities

                  The carrying amount reported in the consolidated balance
                  sheets for marketable securities represents their fair values.
                  The fair values for marketable securities are based on quoted
                  market prices.

         (iii)    Short term loans receivable, accounts payable and other
                  payables

                  The carrying amounts reported in the balance sheet for short
                  term loans receivable, accounts payable and other payables
                  approximate their fair values due to their short maturities.

         (iv)     Amounts due from/to related parties

                  The fair values of amounts due from/to the related parties
                  cannot be determined due to the related party nature of those
                  balances.

         (v)      Cost method investments

                  The Group believes that the carrying amounts represent the
                  Group's best estimate of current economic values of these
                  investments.

19.      RESERVES AND DISTRIBUTION OF PROFITS

         In accordance with the relevant PRC regulations and the Articles of
         Association of HARC (the "Articles of Association"), appropriations
         representing 10% of the net income as reflected in HARC's PRC statutory
         financial statements are allocated to the surplus reserve and 10% to
         the collective welfare fund.

         Subject to certain restrictions set out in the relevant PRC regulations
         and the Articles of Association, the surplus reserve may be distributed
         in the form of share bonus issues.

                                      F-26
<PAGE>
                          CHINA NATURAL RESOURCES, INC.

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

                  YEARS ENDED DECEMBER 31, 2003, 2004 AND 2005

             (AMOUNTS IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)

19.      RESERVES AND DISTRIBUTION OF PROFITS (Continued)

         In accordance with the relevant PRC regulations and the Articles of
         Association, the collective welfare fund must be used for capital
         expenditure on staff welfare facilities. Such facilities are for the
         use of the staff and are owned by HARC.

         According to relevant laws and regulations in the PRC, distributable
         reserves of HARC and its subsidiaries are determined in accordance with
         the relevant PRC accounting rules and regulations. HARC had no retained
         earnings available for distribution as of December 31, 2004 and 2005.

         There were no appropriations to the surplus reserve or to the
         collective welfare fund for the years ended December 31, 2004 and 2005.

20.      COMMITMENTS

         The Company leases office space in Hainan and in Hong Kong. The lease
         in Hainan will expire in June 2007 and provides for monthly rent
         expense of approximately RMB4 (US$1). The Company leases additional
         Hong Kong office space from a company affiliated with certain directors
         of the Company on a month to month basis with monthly rent expense of
         approximately RMB17 (US$2). For the years ended December 31, 2003, 2004
         and 2005, rental expenses paid to related parties amounted to RMB249
         (US$31), RMB232 (US$28) and RMB211 (US$26), respectively. Total rental
         expenses under operating leases for the years ended December 31, 2003,
         2004 and 2005 amounted to RMB840 (US$104), RMB306 (US$38) and RMB264
         (US$33), respectively.

         At December 31, 2005, future minimum payments under non-cancelable
         operating leases payable in 2006 and 2007 are RMB48 (US$6) and RMB20
         (US$2), respectively.

                                      F-27
<PAGE>
                          CHINA NATURAL RESOURCES, INC.

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

                  YEARS ENDED DECEMBER 31, 2003, 2004 AND 2005

             (AMOUNTS IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)

21.      FOREIGN CURRENCY EXCHANGE

         The RMB is not freely convertible into foreign currencies.

         From January 1, 1994 through July 2, 2005, a single rate of exchange
         was quoted daily by the People's Bank of China (the "Unified Exchange
         Rate"). Beginning July 23, 2005, the rate of exchange was revalued by
         2.1% and the RMB is now to fluctuate according to the value of a group
         of currencies (the "managed float"). However, the unification or
         managed float of the exchange rates does not imply convertibility of
         RMB into US$ or other foreign currencies. All foreign exchange
         transactions continue to take place either through the Bank of China or
         other banks authorized to buy and sell foreign currencies at the
         exchange rates quoted by the People's Bank of China.

22.      SEGMENT FINANCIAL INFORMATION

         The Company classifies its business into two operating segments, which
         are defined by the products offered as follows:

         Commodity trading (Copper)
         --------------------------
         The Group's materials, supplies and other commodity products division
         primarily traded materials, supplies and other commodity products to
         farms, manufacturers and other distributors in the PRC.

         Advertising
         -----------
         The Group's advertising division primarily provided advertising,
         promotion and public relations services in Hong Kong and mainland China
         to both local and international customers.

         The Group evaluates performance and allocates resources based on profit
         or loss from operations before interest, gains and losses on the
         Group's investment portfolio, and income taxes. The accounting policies
         of the reportable segments are the same as those described in the
         summary of significant accounting policies. Intersegment sales and
         transfers between reportable segments are not material to any period
         presented.

                                      F-28
<PAGE>
                          CHINA NATURAL RESOURCES, INC.

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

                  YEARS ENDED DECEMBER 31, 2003, 2004 AND 2005

             (AMOUNTS IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)

22.      SEGMENT FINANCIAL INFORMATION (continued)

         Operating segment information
         -----------------------------
<TABLE>
<CAPTION>
                                                                                   Year ended December 31,
                                                                              2003             2004             2005
                                                                      ----------------------------------------------
                                                                               RMB              RMB              RMB
<S>                                                                        <C>              <C>              <C>
         Net sales:
             Copper:
                 Net sales to unaffiliated customers                         1,904            1,842            1,989
             Advertising:
                 Net sales to unaffiliated customers                         1,145            2,128            1,901
                                                                           -------          -------          -------
         Total consolidated net sales                                        3,049            3,970            3,890
                                                                           =======          =======          =======

         Depreciation and amortization expenses:
             Copper                                                             34               34               35
             Advertising                                                         4               19               29
                                                                           -------          -------          -------

         Total segment depreciation and amortization expenses                   38               53               64

         Reconciling item:
             Depreciation and amortization expenses
                 attributable to corporate assets                              154              195              193
                                                                           -------          -------          -------

         Total consolidated depreciation and
             amortization expenses                                             192              248              257
                                                                           =======          =======          =======

         Income tax expense:
             Advertising                                                        --               11               30
                                                                           =======          =======          =======

         Segment income/(loss):
             Copper                                                             --                1                1
             Advertising                                                       231           (4,580)            (634)
                                                                           -------          -------          -------
         Total segment income/(loss)                                           231           (4,579)            (633)

         Reconciling items:
             Corporate expenses                                            (29,644)         (17,881)         (13,226)
             Interest income/(expense), net                                    313               20               (5)
                                                                           -------          -------          -------

         Total consolidated loss from continuing operations                (29,100)         (22,440)         (13,864)
                                                                           =======          =======          =======
</TABLE>

                                      F-29
<PAGE>
                          CHINA NATURAL RESOURCES, INC.

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

                  YEARS ENDED DECEMBER 31, 2003, 2004 AND 2005

             (AMOUNTS IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)

22.      SEGMENT FINANCIAL INFORMATION (continued)
<TABLE>
<CAPTION>
                                                                                  Year ended December 31,
                                                                         2003              2004                 2005
                                                                      ----------------------------------------------
                                                                          RMB               RMB                  RMB
<S>                                                                    <C>               <C>                  <C>
         Segment assets:
             Copper                                                                         597                  621
             Advertising                                                                    876                  859
                                                                                         ------               ------

         Total segment assets                                                             1,473                1,480

         Reconciling items:
             Corporate assets                                                            14,396                6,534
             Investments                                                                 31,000               24,700

                                                                                         ------               ------

         Total consolidated assets                                                       46,869               32,714
                                                                                         ======               ======

         Expenditure for additions to long-lived assets:
             Copper                                                        --                 7                    8
             Advertising                                                   --                21                   17
             Corporate                                                    321                --                   --
                                                                       ------            ------               ------

         Total consolidated segment expenditure for
             additions to long-lived assets                               321                28                   25
                                                                       ======            ======               ======
</TABLE>

         Long-lived assets of reportable segments and corporate assets
         consisting of property and equipment are located in the PRC and Hong
         Kong.

                                      F-30