SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549

                                    FORM 10-K
              ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE
                SECURITIES EXCHANGE ACT OF 1934 [NO FEE REQUIRED]

                   For the fiscal year ended December 31, 1999

                        CHINA RESOURCES DEVELOPMENT, INC.
             (Exact name of Registrant as specified in its Charter)
<TABLE>
<CAPTION>

              Nevada                    33-5628-NY                 87-02623643
              ------                    ----------                 -----------
<S>                                 <C>                        <C>
   (State or other jurisdiction    (Commission File No.)          (IRS Employer
         of incorporation)                                     Identification No.)
</TABLE>

                    Room 2005, 20/F., Universal Trade Centre,
                     3-5A Arbuthnot Road, Central, Hong Kong
                          Telephone: 011-852-2810-7205
          (Address and telephone number of principal executive offices)

Securities registered under Section 12(b) of the Exchange Act:  None
                                                                ----

Securities registered under Section 12(g) of the Exchange Act:

                          Common Stock, $.001 par value
                          -----------------------------
                                (Title of class)

         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 if disclosure of delinquent filers in pursuant
to Item 405 of Regulation S-K (Section 229.405) is not contained herein, and
will not be contained, to the best of registrant's knowledge, in definitive
proxy or information statements incorporated by reference in Part III of this
Form 10-K or any amendment to this Form 10-K.

         State the aggregate market value of the voting stock held by
non-affiliates of the registrant computed by reference to the price at which the
stock was sold, or the average bid and asked prices of such stock, as of a
specified date within 60 days prior to the date of filing. (See definition of
affiliate in Rule 405, 17 CFR 230.405.): $7.625 as of March 31, 1999.

         Note: If a determination as to whether a particular person or entity is
an affiliate cannot be made without involving unreasonable effort and expense,
the aggregate market value of the common stock held by non-affiliates may be
calculated on the basis of assumptions reasonable under the circumstances,
provided that the assumptions are set forth in this Form.

         Indicate the number of shares outstanding of each of the registrant's
classes of common stock, as of the latest practicable date. 592,900 shares of
Common Stock, $.001 par value (as of March 31, 2000).

         DOCUMENTS INCORPORATED BY REFERENCE: Definitive Proxy Statement for
1999 Annual Meeting of Shareholders (Schedule 14A) is incorporated by reference
in Part I, Item 4, hereof.



<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" or "yuan" are to Renminbi yuan, which is the lawful currency
of the People's Republic of China ("China" or "PRC"). The Company and Billion
Luck maintain their accounts in U.S. Dollars and Hong Kong Dollars,
respectively. HARC and its subsidiaries maintain their accounts in 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, 1999, which was
U.S.$1.00 = Rmb8.28. 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, 1999, which was US$1.00 = HK$7.77.
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 "Billion Luck" are to Billion Luck Company Ltd., a
British Virgin Islands company, which is a wholly-owned subsidiary of the
Company.

         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 Development, Inc.

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

         References to "Farming Bureau" are to the Hainan Agricultural
Reclamation General Company, a division of the Ministry of Agriculture, the PRC
government agency responsible for matters relating to agriculture.

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

         References to "Guilinyang Farm" are to Hainan Province Guilinyang State
Farm, a PRC entity which is owned and controlled by the Farming Bureau.

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

         References to "Hainan Reclamation Area" are to the 8,379,000 acres of
formerly barren land in Hainan that the PRC Government has converted to
productive agricultural use since 1952, which includes the largest rubber
production base in China, as well as rubber production facilities, timber
production facilities, cultivation areas for tea and tropical crops, and other
industries.

         References to "Hainan State Farms" are to the rubber farms in Hainan
controlled by the Farming Bureau.

                                       2
<PAGE>

         References to "Hainan Weilin" are to Hainan Weilin Timber Limited
Liability Company, a limited liability company organized in the PRC, whose
capital is owned 58% by HARC and 42% by Haikou Mechanical Factory, a PRC entity
which is owned and controlled by the Farming Bureau.

         References to "HARC" are to Hainan Zhongwei Agricultural Resources
Company Limited (formerly known as Hainan Agricultural Resources Company
Limited), a Sino-foreign joint stock company organized in the PRC, whose capital
is owned 56% by Billion Luck, 39% by the Farming Bureau and 5% by China
Resources Development, Inc.

         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.

         References to "MU" are to an area of approximately 667 square meters.

         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 "Restructuring Agreements" are to the Shareholders'
Agreement on Business Restructuring among Billion Luck, the Farming Bureau and
the Company, and the Assets and Staff Transfer Agreement among HARC, First
Supply, Second Supply, Sales Centre and the Farming Bureau, both of which were
effective as of January 1, 2000.

         References to "Sales Centre" are to Rubber Sales Centre, a company
organized in the PRC and a wholly-owned subsidiary of HARC.

         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 A Preferred Stock" are to the Company's Series A
Preferred Stock, $1.00 par value, of which no shares are outstanding.

         References to "Series B Convertible Preferred Stock" are to the
Company's formerly designated series B convertible preferred stock, $.001 par
value, of which no shares are outstanding and which is no longer so designated.

         References to "Series B Preferred Stock" are to the Company's Series B
Preferred Stock, $.001 par value, of which 320,000 shares are outstanding.

         References to the "State Plan" refer to the plans devised and
implemented by the PRC Government in relation to the economic and social
development of the PRC.

         References to "Tons" are to metric tons.

         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 Billion Luck.

         References to "Zhuhai Zhongwei" are to Zhuhai Zhongwei Development


                                       3
<PAGE>

Company Limited, a company organized in the PRC and 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, "Management's Discussion and Analysis
of Results of Operations and Financial Condition," 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]                            BUSINESS

GENERAL

         The Company was incorporated as Magenta Corp. on January 15, 1986, in
the State of Nevada. The Company was formed to acquire businesses that would
provide a profit to the Company. The Company had no operating business until
control of it was acquired in December, 1994, by the former shareholders of
Billion Luck, who exchanged all of the issued and outstanding shares of capital
stock of Billion Luck for 10,800,000 shares of the Company's Common Stock (which
would now be 108,000 shares). As a result of the acquisition, the former
shareholders of Billion Luck acquired 90% of the issued and outstanding shares
of the then outstanding Common Stock of the Company and the Company became the
owner of all the outstanding shares of capital stock of Billion Luck.

         Billion Luck was incorporated in the British Virgin Islands on December
14, 1993. It conducts its activities through its 56% interest in HARC. HARC was
established in Hainan Province, the People's Republic of China, by Billion Luck,
Guilinyang Farm, and the Farming Bureau. Pursuant to an approval document dated
March 16, 1997, issued by the Hainan Provincial Securities Management Office,
the name of HARC was changed from "Hainan Agricultural Resources Company
Limited" to "Hainan Zhongwei Agricultural Resources Company Limited."

         HARC is a Chinese company incorporated on June 28, 1994, with a
registered capital of Rmb100 million (US$12.08 million). Billion Luck made a
cash contribution of Rmb56 million (US$6.76 million) to purchase a 56% interest
in HARC. The remaining interests in HARC were acquired by Guilinyang Farm (5%)
for a cash contribution of Rmb5 million (US$0.60 million) and by the Farming
Bureau (39%) through the contribution of its interests in two of its
subsidiaries, First Supply and Second Supply, which were valued at Rmb39 million
(US$4.71 million). Pursuant to an agreement dated January 31, 1994, between
Billion Luck, Guilinyang Farm, and the Farming Bureau, the parties thereto
agreed to establish HARC to act as the holding company of First Supply and
Second Supply. Pursuant to an Agreement for the Sale and Purchase of Share in
HARC dated April 30, 1998 between Guilinyang Farm and the Company, the Company
purchased 5,000,000 shares, representing 5% of the total issued and outstanding
share capital of HARC, from Guilinyang Farm for consideration of Rmb7 million
(US$0.85 million). After the said purchase, the Company's effective interest in
HARC became 61%. The remaining interest in HARC of 39% was held by the Farming
Bureau.

         The Company's two primary businesses were the marketing and
distribution of natural rubber and the procurement of production materials,
supplies and other agricultural products. The Company, through HARC, First
Supply and Second Supply, purchased natural rubber produced by the 92 farms on
the island of Hainan in the PRC, which are controlled by the Farming Bureau. In
1998, according to data published in China Statistical Yearbook 1999 and
Statistical Yearbook of Hainan 1999, Hainan Province accounted for approximately
61% of the domestic production of natural rubber in the PRC, of which
approximately 75% of that 61% was from the Hainan State Farms and approximately
25% was from non-state farms. Accordingly, the Hainan State Farms controlled 46%
of the PRC's domestic output of natural rubber. HARC, First Supply and Second
Supply marketed and distributed the rubber to customers throughout the PRC, such
as tire manufacturers, rubber processing plants, and import and export
companies. These customers included state-owned and non-state-owned enterprises.
As part of its risk management strategy, the Company, through HARC, First Supply
and Second Supply, entered into commodity futures contracts to hedge against the
exposure to price risk associated with existing inventories and certain firm
commitments for the purchase of natural rubber. The Company also entered into
natural rubber commodity futures contracts that were not specific hedges, in
anticipation of a rise or fall in the price of natural rubber, based on their
knowledge of the supply and demand situation with respect to natural rubber in
the PRC. In addition, First Supply and Second Supply procured, for the Farming
Bureau, the Hainan State Farms and other affiliated customers, many types of
production materials, such as automobiles, farm equipment, fuel, and chemicals,
as well as for other customers unaffiliated with the Farming Bureau. Pursuant to
a Shareholders' Agreement on Business Restructuring dated March 3, 2000 among
the Company, Billion Luck and the Farming Bureau, the natural rubber
distribution business and the procurement of materials and supplies business of
HARC, First Supply and Second Supply ceased effective as of January 1, 2000.

                                       5
<PAGE>

         Zhongwei Trading was incorporated on September 28, 1998, with a
registered capital of Rmb5 million (US$0.60 million). Zhongwei Trading is owned
95% by HARC and 5% by Billion Luck. Since its commencement of operation in 1999,
Zhongwei Trading has invested in the marketable securities in the China Stock
Market as short-term investments. As opportunities arise, Zhongwei Trading shall
expand its business in the trading of other products.

         Zhuhai Zhongwei, was incorporated on May 18, 1999, with a registered
capital of Rmb6 million (US$0.72 million). Zhuhai Zhongwei is as wholly-owned
subsidiary of HARC and is mainly engaged in the operation of a supermarket in
Zhuhai, PRC.

         The following chart illustrates the equity ownership by percentage of
each of the Company's principal subsidiaries as of December 31, 1999:
<TABLE>
<CAPTION>
<S>                     <C>                                     <C>                   <C>
                        --------------------------------
                                 CHINA RESOURCES
                                DEVELOPMENT, INC.,
                               a Nevada corporation
                         --------------------------------

                                        100%
                         --------------------------------
                               BILLION LUCK COMPANY
                                       LTD.,
                             a British Virgin Islands
                                      company
                         --------------------------------
                                                                                           -------------------------
                                                                                    39%          FARMING BUREAU,
                                                                                             a division of the PRC
                                                                                            Ministry of Agriculture
                                                                                           -------------------------
                                         56%
                        --------------------------------
                            HAINAN ZHONGWEI AGRICULT-
                     5%      URAL RESOURCES CO. LTD.,
                                a PRC company
                        --------------------------------


        100%                                    100%                        100%                       95%
-----------------------         ----------------------           ------------------------      -------------------
   ZHUHAI ZHONGWEI,                 FIRST SUPPLY,                    SECOND SUPPLY,            ZHONGWEI TRADING,        5%
    a PRC company                   a PRC company                     a PRC company              a PRC company
-----------------------         ----------------------           ------------------------      -------------------
</TABLE>

         Organizational and Management Structure of HARC

         The assets of HARC consist primarily of First Supply, Second Supply,
Zhongwei Trading and Zhuhai Zhongwei. HARC's operations were previously divided
into seven trading divisions, one consumer products retail division and one
investment management division. After the restructuring plan that took effect on
January 1, 2000, all assets, liabilities and staff of the seven trading
divisions (in First Supply and Second Supply) were transferred to the Farming
Bureau. First Supply and Second Supply have since become dormant.

         HARC, through the seven trading divisions, engaged in the trading of
natural rubber and procurement of materials and supplies. Each trading division
was a profit center and had its own accounting function. Every quarter, each
division of First Supply and Second Supply submitted its financial statements to
First Supply or Second Supply for consolidation. Those companies, in turn,
submitted the combined accounts to HARC for consolidation. The General Manager
of each division accounted for its results to the General Manager of First
Supply or Second Supply, who, in turn, accounted for the overall results to the
board of directors of HARC. Zhongwei Trading (investment management division)
and Zhuhai Zhongwei (consumer products retail division) also submits their
respective accounts to HARC for consolidation. The General Managers of Zhongwei
Trading and Zhuhai Zhongwei account for their respective results to the board of
directors of HARC.

         HARC has a two-tier structure with a board of directors and a
supervisory board. The board of directors is responsible for the day-to-day
management of and all major decisions relating to HARC (except decisions that
may be made by HARC's shareholders during a general meeting of the shareholders)
and, as of December 31, 1999, was made up of 5 members, of which two were
nominated by the Farming Bureau and three were nominated by Billion Luck. The


                                       6
<PAGE>

Chairman of HARC was nominated by the Farming Bureau, and the Vice-Chairman was
nominated by Billion Luck. The General Manager of HARC is also a member of the
board. The General Manager of HARC was nominated by Billion Luck.

         The supervisory committee is responsible for supervising the board of
directors and the senior management of HARC in order to prevent the abuse of
rights and infringement of the interests of HARC and its shareholders and
employees. Among other responsibilities, members of the supervisory board attend
meetings of the board of directors and observe HARC's managers to ensure that
their acts do not contravene any laws or regulations or HARC's articles of
association or the resolutions of HARC's shareholders in meetings thereof. As of
December 31, 1999, the supervisory board was made up of three members, one of
which was nominated by Billion Luck, the Farming Bureau and the employees of
HARC, respectively.

         The following chart illustrates the organizational and management
structure of HARC as of December 31, 1999:
<TABLE>
<CAPTION>
<S>                                           <C>                                            <C>
                                              ----------------------------                   -------------------------
                                                       BOARD OF                                    SUPERVISORY
                                                       DIRECTORS                                    COMMITTEE
                                              ----------------------------                   -------------------------


                                              ----------------------------
                                                        GENERAL
                                                        MANAGER
                                              ----------------------------


----------------------------    --------------------------    --------------------------     -------------------------
          DEPUTY                         DEPUTY                        DEPUTY                         DEPUTY
      GENERAL MANAGER                GENERAL MANAGER               GENERAL MANAGER               GENERAL MANAGER
----------------------------    --------------------------    --------------------------     -------------------------


----------------------------    --------------------------    --------------------------     -------------------------
           FIRST                         SECOND                        ZHUHAI                       INVESTMENT
        SUPPLY (1)                     SUPPLY (2)                   ZHONGWEI (3)                  MANAGEMENT (4)
----------------------------    --------------------------    --------------------------     -------------------------
</TABLE>


(1)      The principal businesses in which First Supply's trading divisions
         engaged include: Natural Rubber, Fuels & Chemicals, Fertilizers,
         Automobile Trading.

(2)      The principal businesses in which Second Supply's trading divisions
         engaged include: Natural Rubber, Fuels & Chemicals, Fertilizers,
         Automobiles, Farm Equipment & Machinery.

(3)      The principal business of Zhuhai Zhongwei is the operation of a
         supermarket in Zhuhai which sells various kinds of consumer products,
         including food, groceries, clothing, household equipment, cosmetics,
         etc.

(4)      HARC's principal businesses, which are either conducted through its
         newly incorporated subsidiaries or its internal departments, include:
         investment holding and securities trading.

         During the first quarter of 2000, HARC undertook a restructuring plan,
designed to cease the operations of its two primary businesses, the marketing
and distribution of natural rubber and the procurement of production materials,
supplies and other agricultural products, which were originally conducted by
First Supply and Second Supply. The terms of the restructuring are set forth in
a Shareholders' Agreement on Business Restructuring among the Farming Bureau,
the Company and Billion Luck, and an Assets and Staff Transfer Agreement among
the Farming Bureau, HARC, First Supply, Second Supply and Sales Centre, both of
which were effective on January 1, 2000. Certified English translations of these
two Chinese agreements are included as exhibits hereto and incorporated herein
by reference.

         In the view of the Company's management, the performance of HARC's
natural rubber distribution business and the materials and supplies procurement
business has been unsatisfactory for some time, with substantial reported losses
following the occurrence of the Asian financial crisis. Management estimates
that the poor operating environment of these businesses will persist for the
foreseeable future. Management determined that it was in the best interest of
the Company to cease the operations of these two businesses. Under the
restructuring plan, the operations of First Supply, Second Supply and Sales
Centre were ceased and the assets, liabilities and staff related thereto were


                                       7
<PAGE>

transferred to the Farming Bureau, effective as of January 1, 2000. The purchase
price was the book value or the fair value of the net assets transferred, as
determined by an independent valuer, as of December 31, 1999, whichever was
lower. Based on the valuation, there were no material differences between the
fair value and the net book value (as determined under US GAAP) of those assets
and liabilities as of December 31, 1999. The Company expects that this
restructuring plan will reduce selling and administrative expenses as the two
businesses are ceased and improve operating and management efficiency as
non-profitable assets are sold, allowing management to focus on exploring other
investment opportunities.

         Activities of HARC and its Subsidiaries

         HARC, First Supply and Second Supply functioned as affiliated trading
partners of the Farming Bureau and the Hainan State Farms. They purchased raw
natural rubber (both dried and latex) from the Hainan State Farms and sold the
raw natural rubber to customers throughout the PRC. They traded natural rubber
commodity futures to hedge the price risk associated with existing inventories
and certain firm commitments for the purchase of natural rubber. They also
entered into natural rubber commodity futures contracts which were not specific
hedges. However, HARC First Supply and Second Supply ceased the trading of
natural rubber commodity futures contracts in the second quarter of 1998 in view
of the high volatility of the futures market and the risk of potential default
by futures counter-parties. First Supply and Second Supply sold production
materials, including fertilizers, fuels, chemicals, farm equipment and
machinery, and automobiles to the Hainan State Farms, the Farming Bureau, and
other unaffiliated customers.

         In fulfilling their role as trading partners of the Farming Bureau,
HARC, First Supply and Second Supply served as a sales outlet for the raw
natural rubber produced by the Hainan State Farms and procured production
materials for the Farming Bureau and the Hainan State Farms. Pursuant to a
Long-Term Sale and Purchase Agreement dated November 5, 1994 (the "Sale and
Purchase Agreement"), among the Farming Bureau, HARC, First Supply and Second
Supply, the Farming Bureau agreed to direct the Hainan State Farms to sell to
HARC, First Supply and Second Supply on a priority basis, and HARC, First Supply
and Second Supply agreed to purchase from the Hainan State Farms, raw natural
rubber for sale under the same terms and conditions as were offered to other
purchasers. If HARC, First Supply and Second Supply were offered the same
quantity and same price for natural rubber from a Hainan State Farm and a
non-state farm, HARC, First Supply or Second Supply, as the case may be, were
required to purchase from the Hainan State Farm. If the price offered by the
Hainan State Farm was higher than that from a non-state farm, HARC, First Supply
or Second Supply, as the case may be, could purchase from the non-state farm.
Otherwise, there was no condition requiring the purchase of any particular
quantity of raw natural rubber from the Hainan State Farms. The Sale and
Purchase Agreement had a term of 15 years and, subject to applicable law, could
not be terminated except upon the agreement of the parties. HARC, First Supply
and Second Supply determined the selling price according to market conditions.
However, the Farming Bureau guaranteed First Supply and Second Suuply a minimum
gross profit margin of 3.5% on natural rubber purchased from the Hainan State
Farms as set forth in the Sale and Purchase Agreement. Upon a request by the
Farming Bureau, and in view of the existing state of the natural rubber market,
a supplementary agreement dated May 21, 1999, was entered into among the Farming
Bureau, HARC, First Supply and Second Supply. Pursuant to this supplementary
agreement, the minimum gross profit guarantee of 3.5% earned by First Supply and
Second Supply on natural rubber purchased from the Hainan State Farms was
reduced to 1.5% in order to reflect the prevailing market rate more
realistically. The agreement took effect from April 1, 1999. Pursuant to the
Restructuring Agreements, the Farming Bureau, HARC, First Supply and Second
Supply agreed to terminate the Sale and Purchase Agreement effective as of
January 1, 2000.

         With respect to the procurement of materials and supplies, First Supply
and Second Supply generally did not maintain significant levels of inventory,
but instead located suppliers and the necessary products upon the receipt of
orders. The management determined that this policy reduced holding costs and
minimized exposure to price fluctuations. However, in anticipating favorable
market conditions or with respect to certain common items, First Supply and
Second Supply may maintained inventory levels in these limited circumstances
sufficient to satisfy estimated demand for one to three months. With respect to
the distribution of natural rubber, due to the seasonal nature of rubber
production, HARC, First Supply and Second Supply stockpiled a certain amount of
rubber inventory during the peak production season for sales in those periods
with no rubber output (usually the first quarter of each year).

                                       8
<PAGE>

         Zhuhai Zhongwei has been engaged in the operation of a supermarket in
Zhuhai, the PRC, since the fourth quarter of 1999, which sells various kinds of
consumer products, including food, groceries, clothing, household equipment,
cosmetics, etc.

         The Company has also been engaged in the processing and sale of timber
since the first quarter of 2000 through a new subsidiary of HARC, Hainan Weilin,
which was incorporated on June 22, 1999, with a registered capital of Rmb8.56
million (US$1.03 million). Hainan Weilin is owned 58% by HARC and 42% by Haikou
Mechanical Factory, a PRC entity owned and controlled by the Farming Bureau.


INDUSTRY SEGMENTS

         In conformity with Item 101(b) of Regulation S-K, the following table
sets forth the audited historical financial information related to Industry
Segments (amounts in thousands). As the supermarket operation is still in the
start up phase, the revenue contribution to the Company during the year ended
December 31, 1999 was insignificant. Therefore the supermarket operation was
grouped under the procurement of materials and supplies and distribution of
other agricultural products. See Financial Statements and Notes included therein
attached as Appendix A hereto.
<TABLE>
<CAPTION>
                                                            Year Ended December 31,
------------------------------------------------------------------------------------------------------
                                              1997           1998            1999           1999
                                              ----           ----            ----           ----
                                              (Rmb)          (Rmb)           (Rmb)          (US$)
<S>                                            <C>           <C>           <C>            <C>
Net sales to external customers:
  Natural Rubber:
    Net sales to unaffiliated customers        858,211       453,952       442,841        53,483
    Net sales to affiliates                    245,934        16,121            --            --
                                           -----------    ----------    ----------    ----------
                                             1,104,145       470,073       442,841        53,483
                                           -----------    ----------    ----------    ----------
Materials, supplies and other
  agricultural  products
    Net sales to unaffiliated customers         12,909        43,367         9,808         1,185
    Net sales to affiliates                     32,117        14,252        23,718         2,864
                                           -----------    ----------    ----------    ----------
                                                45,026        57,619        33,526         4,049
                                           -----------    ----------    ----------    ----------

Total consolidated net sales                 1,149,171       527,692       476,367        57,532
                                           ===========    ==========    ==========    ==========

Depreciation and amortization expenses:
  Natural rubber                                 1,362         1,287           723            87
  Materials, supplies and other
    agricultural Products                           56            45           340            41
                                           -----------    ----------    ----------    ----------
Total segment depreciation and
  amortization expenses                          1,418         1,332         1,063           128

Reconciling item:
  Depreciation and amortization
    expenses attributable to corporate
    assets                                          39            38            28             4
                                           -----------    ----------    ----------    ----------

Total consolidated depreciation and
  amortization expenses                          1,457         1,370         1,091           132
                                           ===========    ==========    ==========    ==========

Segment profit/(loss):
  Natural rubber                                61,104         3,465         5,634           681
  Materials, supplies and other
    agricultural Products                        4,477        (7,967)        3,157           381
                                           -----------    ----------    ----------    ----------

Total segment profit/(loss)                     65,881        (4,502)        8,791         1,062


<PAGE>

                                                 Year Ended December 31,
------------------------------------------------------------------------------------------------------
                                              1997           1998            1999           1999
                                              ----           ----            ----           ----
                                              (Rmb)          (Rmb)           (Rmb)          (US$)

Reconciling items:
  Corporate expenses                           (13,162)      (15,852)      (15,056)       (1,819)
  Loss on impairment of an investment               --       (49,969)           --            --
  Interest income                               14,849         6,862           944           114
  Interest expenses                            (15,007)         (289)           (1)           --
                                           -----------    ----------    ----------    ----------
Total consolidated income/(loss)
  before income taxes                           52,561       (63,750)       (5,322)         (643)
                                           ===========    ==========    ==========    ==========

Segment assets:
  Natural rubber                               222,507       258,090       115,651        13,968
  Materials, supplies and other
    agricultural Products                       87,916        16,298       105,631        12,757
                                           -----------    ----------    ----------    ----------

Total segment assets                           310,423       274,388       221,282        26,725

Reconciling item:
  Corporate assets                              14,084         8,046        64,483         7,788
  Investments                                  147,671       119,301       117,808        14,228
  Intersegment receivables                     (34,298)      (31,009)      (26,477)       (3,198)
                                           -----------    ----------    ----------    ----------

Total consolidated assets                      437,880       370,726       377,096        45,543
                                           ===========    ==========    ==========    ==========

Expenditure for additions to
  long-lived assets
    Natural rubber                               2,884           332            --            --
    Materials, supplies and other
      agricultural Products                         --            58            54             7
                                           -----------    ----------    ----------    ----------

Total segment expenditure for
  additions to long-lived assets                 2,884           390            54             7

Reconciling item:
  Corporate assets                                  --           700         6,106           737
                                           -----------    ----------    ----------    ----------
Total consolidated expenditure for
  additions to long-lived assets                 2,884         1,090         6,160           744
                                           ===========    ==========    ==========    ==========
</TABLE>

         RUBBER DISTRIBUTION - DISCONTINUED OPERATION

         One of the primary businesses of the Company was the purchase and sale
of natural rubber produced in Hainan. HARC, First Supply and Second Supply
functioned as trading partners of the Farming Bureau and the Hainan State Farms
and were the primary distributors of the natural rubber produced by the Hainan
State Farms, which constitute the largest natural rubber production base in
China. Hainan State Farms' natural rubber output was approximately 211,000 tons
in 1998 (a sales value of approximately Rmb1.8 billion), accounting for
approximately 46% of the total domestic output in China in 1998 (US$217
million). The aggregate rubber output of the Hainan State Farms for the years
1994 to 1998 was 986,000 tons. Due to the continuous improvements of production
and plantation technology, the natural rubber output increased by over 15% from
1994 to 1998. It is anticipated that the natural rubber output of Hainan State
Farms will remain stable in the next few years.

         The natural rubber supplied by First Supply and Second Supply was
provided through free market sales. However, they were guaranteed a minimum
gross profit margin of 3.5%, and subsequently 1.5% effective as of April 1,
1999, for sales of natural rubber purchased from the Hainan State Farms. To the
extent that the gross profit for a particular year was less than this rate, the
Farming Bureau was obligated to pay First Supply and Second Supply the
shortfall. The marketing and distribution of natural rubber business was ceased


                                       10
<PAGE>

effective as of January 1, 2000, pursuant to a restructuring plan undertaken
during the first quarter of 2000.

         Natural rubber occupies a position of strategic importance in the PRC,
comparable to the iron, steel, coal, and oil industries. Industrial rubber
consists of synthetic rubber and natural rubber, which have similar uses but
different characteristics, so the two are not completely interchangeable. Both
types of rubber can be used for making tires, but heavy duty tires, such as for
planes and for some motor vehicles, must be made of natural rubber.

         Natural rubber can only be planted in limited geographical regions in
the world. Today, most of the rubber plantations in the world are located in
South and Southeast Asia, which in 1998 accounted for over 90% of the world's
natural rubber output. According to China Statistical Yearbook 1999, China
ranked fifth in the world in terms of natural rubber output in 1998 which
accounted for 6.8% of the world's natural rubber output in 1998. With its
geographical location and humid tropical climate, Hainan province is the most
suitable area for planting rubber trees in China, and Hainan has become the
single most important production base of natural rubber in China.
<TABLE>
<CAPTION>
                    World Output of Natural Rubber by Country in 1998
                    -------------------------------------------------

                  Country or Region                               Tons
                  -----------------                               ----
                                                              (in thousands)
<S>                                                               <C>
                  Thailand                                        2,160
                  Indonesia                                       1,560
                  Malaysia                                        1,080
                  India                                             540
                  China                                             460
                  Philippines                                       210
                  Vietnam                                           200
                  Ivory Coast                                       120
                  Sri Lanka                                         100
                  Nigeria                                            90
                  Others                                            280
                                                                 ------

                  TOTAL                                           6,800
                                                                 ======
</TABLE>
                  (Source: China Statistical Yearbook 1999)

         Since January 1, 1952, the Farming Bureau, which controls approximately
one quarter of the land area in Hainan, has developed the largest natural rubber
production base in China, with plantations covering approximately 3.7 million MU
(approximately 604,000 acres or 950 square miles) in 1998, according to the
Statistical Yearbook of Hainan 1999.

         The natural rubber market has been unsatisfactory for some time
following the occurrence of the Asian financial crisis. Although the average
unit price of domestic natural rubber in China rebounded from approximately
Rmb7,000 (US$845) per ton in 1998 to Rmb8,300 (US$1,002) per ton in 1999, the
gross profit margin diminished. The rubber price in the international market
varied according to the demand by major rubber consuming countries (the largest
being the United States, followed by China and Japan) and the supply from major
rubber producing countries (such as Thailand, Indonesia and Malaysia). In recent
years, due to continuous weakening of rubber consumption, especially in Japan
and Korea, and the increasing supply from certain major rubber producers in
Asia, large amounts of natural rubber inventory were accumulated. Major Asian
rubber exporting countries, such as Thailand and Indonesia, have targeted China
(the world's second largest consumer of rubber and the third largest importer of
rubber) for the sale of their natural rubber. These exporting countries have
offered China many preferential policies to stimulate export sales of natural
rubber, including longer credit terms, sales discounts and delivery in advance
of payment. China imported approximately 430,000 tons of natural rubber in 1997
and 1998, respectively, at average prices of US$1,064 and US$742 per ton for
1997 and 1998, respectively. This large influx of natural rubber weakened the
demand of domestic natural rubber.

         The Company's gross profit margin on the distribution of natural rubber
was seriously affected due to unsatisfactory market conditions. Although the

                                       11
<PAGE>

Company was previously guaranteed a minimum gross profit margin of 3.5% earned
by First Supply and Second Supply on natural rubber purchased from the Hainan
State Farms, it was subsequently changed to 1.5% in view of the prevailing
market conditions effective as of April 1, 1999. The Company also ceased its
hedging activities in the natural rubber commodity futures market in the second
quarter of 1998 in view of the high volatility of natural rubber prices and
futures market and risk of potential default by futures counter-parties.

         Suppliers

         HARC, First Supply and Second Supply purchased natural rubber from the
92 farms comprising the Hainan State Farms, with the value of purchases totaling
approximately Rmb1,012 million (US$122 million) in 1997, Rmb404 million (US$49
million) in 1998 and Rmb434 million (US$52 million) in 1999. The single largest
supplier accounted for approximately 4% (Rmb42.2 million, US$5.1 million) in
1997, 14% (Rmb55 million, US$6.6 million) in 1998 and 8% (Rmb35 million, US$4.2
million) in 1999. All supplier farms are controlled by the Farming Bureau. The
top five supplier farms accounted for approximately 19% (Rmb187 million, US$23
million) in 1997, 50% (Rmb202 million, US$24 million) in 1998 and 30% (Rmb131
million, US$16 million) in 1999. Purchases were principally made in Renminbi on
an open account basis payable within 30 days, or on a "cash on delivery" basis.
As a majority of their purchases were made in Renminbi, HARC, First Supply and
Second Supply had a limited exposure to fluctuations in exchange rates.

         Pursuant to the Sale and Purchase Agreement, the Farming Bureau agreed
to direct the Hainan State Farms to sell to HARC, First Supply and Second Supply
on a priority basis, and HARC, First Supply and Second Supply agreed to purchase
from the Hainan State Farms, raw natural rubber for sale under the same terms
and conditions as were offered to other purchasers. If HARC, First Supply and
Second Supply were offered the same quantity and same price for natural rubber
from a Hainan State Farm and a non-state farm, HARC, First Supply or Second
Supply, as the case may be, were required to purchase from the Hainan State
Farm. If the price offered by the Hainan State Farm was higher than that from a
non-state farm, HARC, First Supply or Second Supply, as the case may be, could
purchase from the non-state farm. Otherwise, there was no condition requiring
the purchase of any particular quantity of raw natural rubber from the Hainan
State Farms. The Sale and Purchase Agreement had a term of 15 years and, subject
to applicable law, would not be terminated except upon the agreement of the
parties. HARC, First Supply and Second Supply determined the selling price
according to market conditions. Pursuant to the Restructuring Agreements, the
Farming Bureau, HARC, First Supply and Second Supply agreed to terminate the
Sale and Purchase Agreement effective as of January 1, 2000.

         Marketing

         HARC, First Supply and Second Supply maintained a sales team consisting
of approximately 20 persons in the natural rubber business. The sales and
marketing personnel made regular visits to customers and to the Hainan State
Farms to maintain contacts and monitor requirements. All sales and distribution
of raw natural rubber and natural rubber products occurred within the PRC and
the Company was solely dependent upon trade in the PRC. The Company did not
engage in any export trade from the PRC.

         Customers

         Net sales of natural rubber for 1997, 1998 and 1999 were Rmb1,104
million (US$133 million), Rmb470 million (US$57 million) and Rmb443 million
(US$54 million), respectively. The five largest customers for rubber, in the
aggregate, accounted for approximately 37%, 37% and 29% of the total revenue
derived from rubber sales for 1997, 1998 and 1999, respectively. The single
largest customer accounted for approximately 22%, 9% and 7% of such revenue for
1997, 1998 and 1999, respectively.

         For the year ended December 31, 1999, First Supply and Second Supply
had a total of approximately 440 customers for natural rubber and natural rubber
products.

                                       12
<PAGE>

         Seasonality

         The geographic and climatic conditions in Hainan are such that natural
rubber production has high and low seasons. Generally, there is no rubber
harvest in the first quarter. The harvest season commences in April and reaches
the peak during the second half of a year. The rubber output in the second half
year normally accounts for over 70% of the total annual rubber output. Sales of
natural rubber and natural rubber products generally are affected by such
seasonality factor. All sales in the first quarter of a year relate to inventory
maintained from the inventory of the prior year. Sales in the last two quarters
accounted for 59%, 60% and 80% of the total sales for 1997, 1998 and 1999,
respectively.

         Distribution

         First Supply and Second Supply had their own warehouse facilities and
transportation fleet for both natural rubber and materials, consisting of 63
warehouses with a total area of 23,000 square meters, 60 trucks and 135 workers.
Some of the natural rubber was shipped to customers by sea freight from the port
of Haikou, Hainan, to other destination ports within the PRC. HARC, First Supply
and Second Supply also transported rubber from the Hainan State Farms to the
port of Zhangjiang, PRC, which operated as a distribution center from where the
natural rubber was delivered to customers by rail to destinations within the
PRC. Some of the natural rubber was also delivered locally in Hainan.

         Working Capital Items

         HARC, First Supply and Second Supply generally granted their purchasers
the right to return substandard natural rubber, as determined by laboratories
recognized by both parties. Sales returns or losses borne by HARC, First Supply
and Second Supply were reimbursed by the farm that supplied the substandard
rubber. These sales returns could have potentially impacted the working capital
levels of HARC, First Supply and Second Supply if such returns were significant;
however, in the past such sales returns were insignificant.

         HARC, First Supply and Second Supply had established a tight credit
control policy. For old and credit-worthy customers, sales of rubber were made
principally on an open account basis payable within one week, while the others
were made on a "cash on delivery" basis. HARC, First Supply and Second Supply
could also require new customers to place deposits of 5% of the invoiced value
of a purchase upon signing a sales contract or require full payment on or before
delivery. In addition, no sales were made to those customers with long
outstanding balances with HARC, First Supply and Second Supply until past due
accounts receivable were settled. However, in order to maintain good customer
relationships, extended payment terms could be granted to certain customers
based on their credit and payment history with HARC, First Supply and Second
Supply.

         Due to the seasonal nature of rubber production, HARC, First Supply and
Second Supply stockpiled a certain amount of rubber inventory during the peak
production season for sales in those periods with no rubber output.

         Competitors

         There were several companies competing for business in the domestic
natural rubber industry in the PRC. Among the Company's competitors were other
major state-owned rubber producers under the control of different farming
bureaus, with no direct relationship to the Hainan Farming Bureau. The market
shares of these rubber producers are generally significantly less than that of
the Hainan Farming Bureau. There are also certain small, non-state-owned rubber
producers located in the provinces of Hainan, Guangdong, Yunnan, Guangxi, and
Fujian. However, the quantities produced by these non-state-owned farms and
individuals are relatively insignificant.


                                       13
<PAGE>
<TABLE>
<CAPTION>
                              China Output of Natural Rubber by Region in 1998
                              ------------------------------------------------

                  Region                                                                Tons
                  ------                                                                ----
<S>                                                                                    <C>
                  Hainan                                                               280,369
                  Yunnan                                                               154,982
                  Guangdong                                                             25,324
                  Guangxi                                                                1,466
                  Fujian                                                                   203
                                                                                     ---------

                  TOTAL                                                                462,344
                                                                                     =========
</TABLE>
                  (Source:  China Statistical Yearbook 1999)

         According to the China Statistical Yearbook 1999, the rubber output
from Hainan Province was 280,369 tons in 1998. According to the Statistical
Yearbook of Hainan 1999, the rubber output from the Hainan State Farms was
211,067 tons in 1998. Consequently, the rubber output from non-state owned
enterprises in Hainan Province accounted for approximately 69,302 tons,
representing 25% of the total natural rubber output of Hainan Province in 1998.
The natural rubber production by other domestic rubber producers is limited by
the area of land suitable for rubber planting in the region. Due to the specific
tropical climatic conditions required for rubber cultivation, the number of
rubber producers is limited and no new domestic rubber producer is expected to
enter the market. Thus, the competition in the industry may be determined by the
acquisition of land suitable for rubber cultivation. Due to the favorable
climatic conditions in Hainan for rubber plantations and the fact that there is
still land available in Hainan that the Farming Bureau can develop into rubber
plantations, the Farming Bureau will likely remain as China's largest natural
rubber producer in the foreseeable future. According to the China Statistical
Yearbook 1999 and statistics provided by the China Tropical Agriculture
Institute, in 1998, the domestic rubber output and rubber consumption were
462,000 tons and 900,000 tons, respectively. Accordingly, the rubber output of
the Farming Bureau in 1998 accounted for approximately 46% of the total domestic
output of natural rubber and satisfied approximately 24% of the domestic
consumption. However, due to the influx of imported natural rubber of
approximately 430,000 tons in both 1997 and 1998, respectively, and the large
amount of rubber inventory accumulated, the overall supply of natural rubber
exceeded demand, which has caused a large backlog of rubber inventory since
1996. Since the second half year of 1997, the currency crisis in Southeast Asia
caused the currencies of most of the largest natural rubber producing countries,
like Thailand, Indonesia and Malaysia, to deflate against U.S. Dollars and also
induced the rubber producing countries to increase their exports. Competition
from imported rubber and unsatisfactory market conditions caused the Company's
decision to cease the distribution of natural rubber business effective as of
January 1, 2000.

         Environmental Protection

         Management did not believe that there were any material requirements
under PRC environmental law or regulations applicable to the HARC, First Supply
and Second Suuply which could have had a material adverse effect on capital
expenditures, including capital expenditures required in order to comply with
environmental laws and regulations, in the rubber distribution segment of the
business of the Company.

         PROCUREMENT OF MATERIALS AND SUPPLIES AND DISTRIBUTION OF OTHER
                 AGRICULTURAL PRODUCTS - DISCONTINUED OPERATION

         The Company, through HARC, First Supply and Second Supply, engaged in
the procurement of materials and supplies and related commodities, such as fuels
and chemicals, including fertilizers and pesticides; and other products,
including farm equipment and machinery; and automobiles which were connected
with the agricultural production in Hainan. These sourcing and procurement
activities were conducted primarily for the Hainan State Farms. The percentage
of such sales to non-affiliates were 29% in 1997, 75% in 1998 and 29% in 1999.
The significant increase in percentage of sales to non-affiliates in 1998 was
due to the sales of barley to non-affiliates in 1998. There were no such sales
in either 1997 or 1999. All of the Company's sourcing and trading activities of
materials and supplies were provided through free market sales.

         The sourcing and procurement activities generally commenced upon the
receipt by First Supply or Second Supply of an order to obtain certain of the
various materials set forth above. Upon such receipt, First Supply or Second


                                       14
<PAGE>

Supply identified potential suppliers for the required production materials and
obtains quotations from the various suppliers. In order to obtain the most
favorable terms, First Supply and Second Supply would negotiate with many
different suppliers, with pricing and quality being the main points of
negotiation.

         First Supply and Second Supply generally did not maintain a significant
level of inventories, but instead located suppliers and the necessary products
upon the receipt of orders. Management of First Supply and Second Supply
determined that this policy reduced holding costs and minimized exposure to
price fluctuations. However, in anticipating favorable market conditions or with
respect to certain popular items, First Supply and Second Supply could maintain
inventory levels sufficient to satisfy estimated demand for one to three months.

         Pursuant to the Sale and Purchase Agreement, the Farming Bureau agreed
to direct the Hainan State Farms to purchase all of their requirements of
production materials and other commodities offered by HARC, First Supply and
Second Supply under the same terms and conditions as were offered by other
suppliers. In the case of production material and other commodities, a Hainan
State Farm could request a price quote for a specified quantity of a particular
item from HARC, First Supply or Second Supply. Upon receiving the price quote,
the Hainan State Farm could obtain quotes from other suppliers based on the same
quantity of the requested item. The Hainan State Farm might inform HARC, First
Supply or Second Supply, as the case may be, of the amounts of the other quotes
and, if any of the quotes were lower, HARC, First Supply or Second Supply had
the right to lower their quote to the level of the competing quote. In the event
that HARC, First Supply and Second Supply were unable to profitably match the
terms offered to the Hainan State Farms by other sources, HARC, First Supply and
Second Supply would be required to sell to the Hainan State Farms at a loss or
forebear from making such sales. If HARC, First Supply and Second Supply matched
the competing quote based upon the same quantity of the item requested, the
Hainan State Farm were required to purchase the item from them. Otherwise, the
Hainan State Farm could purchase the item from the competing supplier. The Sale
and Purchase Agreement had an original term of 15 years and, subject to
applicable law, could not be terminated except upon the agreement of the
parties. Pursuant to the Restructuring Agreements, the Farming Bureau, HARC,
First Supply and Second Supply agreed to terminate the Sale and Purchase
Agreement effective as of January 1, 2000. Effective as of the same date, HARC,
First Supply and Second Supply ceased the procurement of materials and suppliers
business.

         Suppliers

         During 1999, HARC, First Supply and Second Supply purchased production
materials and supplies from a total of approximately 90 suppliers. The value of
the total purchases of production materials and supplies was approximately Rmb37
million (US$4.5 million) in 1997, Rmb57 million (US$6.9 million) in 1998 and
Rmb29 million (US$3.5 million) in 1999. The single largest supplier accounted
for approximately 34% (Rmb13 million, US$1.4 million) in 1997, 19% (Rmb11
million, US$1.3 million) in 1998 and 24% (Rmb7 million, US$0.8 million) in 1999.
The top five suppliers accounted for approximately 65% (Rmb24 million, US$2.9
million) in 1997, 52% (Rmb30 million, US$3.6 million) in 1998 and 81% (Rmb23
million, US$2.8 million) in 1999. Purchases were principally made in Renminbi on
an open account basis payable within 30 to 90 days. As a majority of the
purchases were made in Renminbi, HARC, First Supply and Second Supply had
limited exposure to fluctuations in exchange rates.

         Marketing

         In accordance with the terms of the Sale and Purchase Agreement, HARC,
First Supply and Second Supply were the principal suppliers of production
materials to the Farming Bureau and the 92 farms comprising the Hainan State
Farms. First Supply and Second Supply maintained a sales and marketing team of
approximately 40 persons for the procurement business. The sales and marketing
team made regular visits to the Farming Bureau, the Hainan State Farms and
unaffiliated purchasers in order to maintain contacts and monitor requirements.

         All activities of HARC, First Supply and Second Supply with respect to
production materials and commodities occurred within the PRC and the Company was
solely dependent upon trade in the PRC. The Company did not engage in any export
trade from the PRC.

                                       15
<PAGE>

         Customers

         Sales of production materials, supplies and other agricultural products
by HARC, First Supply and Second Supply for the years 1997, 1998 and 1999
totaled approximately Rmb45 million (US$5.4 million), Rmb58 million (US$7.0
million) and Rmb34 million (US$4.1 million), respectively. The five largest
customers for production materials and supplies accounted for approximately 8%,
74% and 42% of the total revenue derived from sales of production materials and
supplies for 1997, 1998 and 1999, respectively. HARC, First Supply and Second
Supply had a broad customer base and were not dependent upon any single customer
for sales. Aggregate sales to affiliates of the Farming Bureau accounted for
71%, 25% and 79% of the total revenue derived from sales of production materials
and agricultural products for 1997, 1998 and 1999, respectively.

         Seasonality

         The seasonal fluctuations experienced by First Supply and Second Supply
in the production materials procurement operation were less severe than those
experienced in connection with the rubber distribution operation. However, to
the extent that First Supply and Second Supply could buy goods and materials
related to the rubber industry from suppliers, but sell such goods and materials
on credit to Hainan State Farms, repayment could be affected by the seasonality
of rubber production.

         Working Capital Items

         Sales by HARC, First Supply and Second Supply were principally made in
Renminbi. First Supply and Second Supply established a tight credit control
policy. Most of the sales to unaffiliated customers were on "cash on delivery"
terms. In addition, no sales were made to those unaffiliated customers with long
outstanding balances until past due accounts receivable were settled. However,
in order to maintain good customer relationships, extended payment terms of one
to two weeks could be granted to certain old customers based on their credit and
payment history with First Supply and Second Supply. No extended payment terms
were granted for more than one month. For sales to the Hainan State Farms, more
flexible payment terms could be allowed, depending on credit history and
regularity of purchase orders. Such payment terms could include an open account
basis or the netting of the sales value of materials against the cost of natural
rubber purchases by First Supply and Second Supply.

         Competitors

         Generally, as a result of the Sale and Purchase Agreement, First Supply
and Second Supply had few major competitors in their primary market in Hainan
Province with respect to the sourcing and procurement of the wide range of
production materials and commodities needed by the Farming Bureau, its
affiliates, and the Hainan State Farms. With respect to other unaffiliated
purchasers, First Supply and Second Supply were subject to significant
competition from certain suppliers owned and controlled by the Hainan Provincial
Government and from a number of smaller suppliers of production materials and
commodities in which First Supply and Second Supply traded.

         Listed below were those competitors owned and controlled by the Hainan
Provincial Government and the products with which they competed with HARC, First
Supply and Second Supply:
<TABLE>
<CAPTION>
<S>               <C>                                         <C>
                  Hainan Provincial Production                Pesticides and fertilizers
                  Materials Company

                  Hainan Provincial Automobiles               Automobiles and automobile parts
                  Trading Company

                  Hainan Provincial Farm                      Farm equipment
                  Equipment Company

                  Hainan Provincial Fuels &                   Fuels and chemicals (including coal)
                  Chemical Company
</TABLE>
         The price and quality of products sold by the competitors were similar
to that of the comparable products sold by First Supply and Second Supply.

                                       16
<PAGE>

However, First Supply and Second Supply could arrange more prompt fulfillment of
orders and shipment of goods due to their warehouse facilities and
transportation fleet. Also, First Supply and Second Supply could offer more
flexible payment terms than their competitors with respect to sales to the
Hainan State Farms.

         Environmental Protection

         Due to the business nature of the procurement segment, management did
not believe that there were any material requirements under PRC environmental
laws or regulations applicable to HARC, First Supply and Second Supply which
could have had a material adverse effect on capital expenditures, including
capital expenditures required in order to comply with environmental laws and
regulation, in the procurement business.

         SUPERMARKET OPERATION - CONTINUED OPERATION

         The Company, through Zhuhai Zhongwei, has been engaged in the
supermarket operation since the fourth quarter of 1999. The supermarket which
Zhunhai Zhongwei operates is located in Zhuhai City of Guangdong Province. The
supermarket sells various kinds of consumer products to customers including
food, groceries, clothing, household equipment, cosmetics, etc.

         Zhuhai Zhongwei maintains numerous suppliers for its sources of
consumer products, and no supplier accounted for more than 5% of total purchases
of consumer products in 1999. Zhuhai Zhongwei targets the residents of Zhuhai as
its customers and no single customer that accounted for more than 5% of total
revenues from the sales of consumer products in 1999, due to the nature of
retail business.

PRC LEGAL SYSTEM

         The PRC legal system is based on the PRC Constitution and is made up of
written laws, regulations and directives. Decided court cases do not constitute
binding precedents.

         The National People's Congress of the PRC ("NPC") and the Standing
Committee of the NPC are empowered by the PRC Constitution to exercise the
legislative power of the state. The NPC has the power to amend the PRC
Constitution and to enact and amend primary laws governing the state organs,
civil and criminal matters. The Standing Committee of the NPC is empowered to
interpret, enact and amend laws other than those required to be enacted by the
NPC.

         The State Council of the PRC is the highest organ of state
administration and has the power to enact administrative rules and regulations.
Ministries and commissions under the State Council of the PRC are also vested
with the power to issue orders, directives and regulations within the
jurisdiction of their respective departments. Administrative rules, regulations,
directives and orders promulgated by the State Council and its ministries and
commissions must not be in conflict with the PRC Constitution or any national
laws. In the event that any conflict arises, the Standing Committee of the NPC
has the power to annul such administrative rules, regulations, directives and
orders.

         At the regional level, the people's congresses of provinces and
municipalities and their standing committees may enact local rules and
regulations, and the people's government may promulgate administrative rules and
directives applicable to their own administrative area. These local laws and
regulations may not be in conflict with the PRC Constitution, any national laws
or any administrative rules and regulations promulgated by the State Council.

         Rules, regulations or directives may be enacted or issued at the
provincial or municipal level or by the State Council of the PRC or its
ministries and commissions in the first instance for experimental purposes.
After sufficient experience has been gained, the State Council may submit
legislative proposals to be considered by the NPC or the Standing Committee of
the NPC for enactment at the national level.

                                       17
<PAGE>

         The power to interpret laws is vested by the PRC Constitution in the
Standing Committee of the NPC. According to the Decision of the Standing
Committee of the NPC Regarding the Strengthening of Interpretation of Laws
passed on June 10, 1981, the Supreme People's Court has the power to give
general interpretation on application of laws in judicial proceedings apart from
its power to issue specific interpretation in specific cases. The State Council
and its ministries and commissions are also vested with the power to give
interpretation of the rules and regulations which they promulgated. At the
regional level, the power to give interpretations of the regional laws is vested
in the regional legislative and administration organs which promulgate such
laws. All such interpretations carry legal effect.

         The people's courts are the judicial organs of the PRC. Under the PRC
Constitution and the Law of Organization of the People's Courts of the PRC, the
People's Courts are comprised of the Supreme People's Court, the local people's
courts, military courts and other special people's courts. The local people's
courts are divided into three levels, namely, the basic people's courts,
intermediate people's courts and higher people's courts. The basic people's
courts are divided into civil, criminal and economic divisions. The intermediate
people's courts have divisions similar to those of the basic people's courts and
where the circumstances so warrant, may have other special divisions (such as
intellectual property divisions). The judicial functions of people's courts at
lower levels are subject to supervision of people's courts at higher levels. The
people's procuratorates also have the right to exercise legal supervision over
the civil proceedings of people's courts of the same and lower levels. The
Supreme People's Court is the highest judicial organ of the PRC. It supervises
the administration of justice by the people's courts of all levels.

         The people's courts adopt a two-tier final appeal system. A party may,
before the taking effect of a judgment or order, appeal the judgment or order
first to a local people's court, then to the people's court at the next higher
level. Judgments or orders at the next higher level are final and binding.
Judgments or orders of the Supreme People's Court are also final and binding.
If, however, the Supreme People's Court or a people's court at a higher level
finds an error in a final and binding judgment which has taken effect in any
people's court at a lower level, or the presiding judge of a people's court
finds an error in a final and binding judgment which has taken effect in the
court over which he presides, a retrial of the case may be conducted according
to the judicial supervision procedures.

         The PRC civil procedures are governed by the Civil Procedure Law of the
PRC (the "Civil Procedure Law") adopted on April 9, 1991. The Civil Procedure
Law contains regulations on the institution of a civil action, the jurisdiction
to the people's courts, the procedures in conducting a civil action, trial
procedures and procedures for the enforcement of a civil judgment or order. All
parties to a civil action conducted within the territory of the PRC must comply
with the Civil Procedure Law. A civil case is generally heard by a court located
in the defendant's place of domicile. The jurisdiction may also be selected by
express agreement by the parties to a contract provided that the jurisdiction of
the people's court selected has some actual connection with the dispute, that is
to say, the plaintiff or the defendant is located or domiciled or the contract
was executed or implemented in the jurisdiction selected, or the subject-matter
of the proceedings is located in the jurisdiction. A foreign national or foreign
enterprise is accorded the same litigation rights and obligations as a citizen
or legal person of the PRC. If any party to a civil action refuses to comply
with a judgment or order made by a people's court or an award made by an
arbitration body in the PRC, the aggrieved party may apply to the people's court
to enforce the judgment, order or award. There are time limits on the right to
apply for such enforcement. Where at least one of the parties to the dispute is
an individual, the time limit is one year. If both parties to the dispute are
legal persons or other entities, the time limit is six months.

         A party seeking to enforce a judgment or order of a people's court
against a party who or whose property is not within the PRC may apply to a
foreign court with jurisdiction over the case for recognition and enforcement of
such judgment or order. A foreign judgment or ruling may also be recognized and
enforced according to PRC enforcement procedures by the people's courts in
accordance with the principle of reciprocity or if there exists an international
or bilateral treaty with or acceded to by the foreign country which provides for
such recognition and enforcement, unless the people's court considers that the
recognition or enforcement of the judgment or ruling will violate fundamental
legal principles of the PRC and its sovereignty, security or social or public
interest.

         The Arbitration Law of the PRC (the "Arbitration Law") was promulgated
by the Standing Committee of the NPC on August 31, 1994 and came into effect on
September 1, 1995. It is applicable to, among other matters, trade disputes

                                       18
<PAGE>

involving foreign parties where the parties have entered into a written
agreement to refer the matter to arbitration before an arbitration committee
constituted in accordance with the Arbitration Law. Under the Arbitration Law,
an arbitration committee may, before the promulgation by the PRC Arbitration
Association of arbitration regulations, formulate interim arbitration rules in
accordance with the Arbitration Law and the Civil Procedure Law. Where the
parties have by an agreement provided arbitration as a method for dispute
resolution, the parties are not permitted to institute legal proceedings in a
people's court.

         The China International Economic and Trade Arbitration Commission
("CIETAC"), established in Beijing under the auspices of the China Council for
the Promotion of International Trade with branches in Shenzhen and Shanghai, is
one of two domestic arbitration organizations in the PRC charged with
arbitrating foreign-related disputes. Under the new CIETAC arbitration rules,
which came into effect on June 1, 1994, CIETAC has jurisdiction over any dispute
arising from "international or external economic and trade transactions" with
respect to which an arbitration agreement selecting CIETAC arbitration has been
reached. The other arbitration organization exclusively arbitrates
foreign-related maritime disputes.

         The CIETAC rules provide that an award rendered by a CIETAC tribunal
shall be final and binding on the parties. The Civil Procedure Law also provides
that a PRC court may only refuse to enforce a CIETAC final award in the event of
procedural errors relating to the jurisdiction of CIETAC over a given dispute or
the failure by an arbitration tribunal to abide by CIETAC rules, and may also
deny execution of the award in the event that it determines that doing so would
be against the "public interest".

         In deciding the substantive aspects of a dispute, the CIETAC
arbitration tribunal must look to the governing law of the contract. PRC foreign
economic contract law permits the parties to choose foreign or PRC law as the
governing law in most cases. In the event that the parties have not chosen a
governing law, PRC choice of law rules provide for the selection of the law
which has the closest connection to the subject matter of the dispute.

         Under the Arbitration Law, an arbitral award is final and binding on
the parties and if a party fails to comply with an award, the other party to the
award may apply to the people's court for enforcement. A people's court may
refuse to enforce an arbitral award made by an arbitration commission if there
were mistakes, an absence of material evidence or irregularities over the
arbitration proceedings or the jurisdiction or constitution of the arbitration
committee.

         A party seeking to enforce an arbitral award of a foreign affairs
arbitration body of the PRC against a party who or whose property is not within
the PRC may apply to a foreign court with jurisdiction over the case for
enforcement. Similarly, an arbitral award made by a foreign arbitration body may
be recognized and enforced by the PRC courts in accordance with the principles
of reciprocity or any international treaty concluded or acceded to by the PRC.
In respect to contractual and non-contractual commercial-law-related disputes
which are recognized as such for the purposes of the PRC laws, the PRC has
acceded to the Convention on the Recognition and Enforcement of Foreign Arbitral
Awards (the "New York Convention") adopted on June 10, 1958 pursuant to a
resolution of the Standing Committee of the NPC passed on December 2, 1986. The
New York Convention provides that all arbitral awards made by a state which is a
party to the New York Convention shall be recognized and enforced by other
parties to the New York Convention subject to their right to refuse enforcement
under certain circumstances including where the enforcement of the arbitral
award is against the public policy of the state to which the application for
enforcement is made. It was declared by the Standing Committee of the NPC at the
time of the accession of the PRC that (1) the PRC will only recognize and
enforce foreign arbitral awards on the principle of reciprocity and (2) the PRC
would only apply the New York Convention in disputes considered under PRC laws
to be arising from contractual and non-contractual mercantile legal relations.

         The activities of the Company's principal subsidiaries in China are by
law subject, in some cases, to administrative review and approval by various
national, provincial, and local agencies of the Chinese government. While China
has promulgated an Administrative Procedure Law permitting redress to the courts
with respect to certain administrative actions, this law appears to be largely
untested in this context. Although the Company believes that the support of
local, provincial, and national governmental entities benefits the Company's
operations in connection with administrative reviews and receiving approvals,
there can be no assurance that such approvals, when necessary or advisable, will
be forthcoming.

                                       19
<PAGE>


[Item 2]                         PROPERTIES

         The office space, supermarket and other facilities of HARC and its
principal subsidiaries are located in Hainan, Zhuhai and Shenzhen in the PRC.
HARC, First Supply and Second Supply previously used warehouse and other
facilities consisting of a total gross area of approximately 11,000 square
meters for their distribution of natural rubber business and procurement of
materials and supplies business, which were transferred to the Farming Bureau
pursuant to the Restructuring Agreements effective as of January 1, 2000. The
structure and building in respect of the supermarket which the Company operates
is owned by Zhuhai Zhongwei.

         The Farming Bureau has also entered into a rental agreement with HARC
with respect to the rental of a portion consisting of 532 square meters of a
building located in Haikou City, PRC, in which HARC's offices are located. Such
rental agreement is for a period of 10 years at an annual rental of Rmb170,240
(US$20,560) payable in equal semi-annual installments. The rental agreement
further provides that HARC shall be responsible for certain costs and expenses
in connection with its use of the property. On August 9, 1996, an additional
rental agreement was entered into between HARC and the Hainan Farming Bureau
Testing Center, an affiliate of the Farming Bureau, on the same building to
expand the office space. The term of the lease is for a period of eight years
(through September 30, 2004), and it covers an area of approximately 314 square
meters at an annual rental rate of Rmb72,000 (US$8,696).


[Item 3]                      LEGAL PROCEEDINGS

         In the opinion of management, there are no material legal proceedings
pending or threatened against the Company or any of its subsidiaries as of
December 31, 1999.


[Item 4]                SUBMISSION OF MATTERS TO A VOTE
                              OF SECURITY HOLDERS

         On May 28, 1999, pursuant to proper notice, the Company held its annual
meeting of shareholders. Several matters were submitted to a vote of the
shareholders of the Company, and proxies were properly solicited from the
holders of shares of the Company's common stock on April 30, 1999, the record
date for the meeting established by the Company's Board of Directors. A quorum
of shares entitled to vote was present at the meeting or represented by proxies,
and the following matters were approved by the holders of a majority of the
outstanding shares of the Company:

         1.  a proposal by the Board of Directors to effect a one-for-ten
             reverse stock split of the Company's Common Stock, par value $0.001
             per share, and of the Company's Series B Preferred Stock, par value
             $0.001 per share (5,370,843 votes for, 71,328 votes withheld,
             188,920 abstentions); and

         2.  the election of Wan Ying Lin (5,545,285 votes for, 575 votes
             withheld, 85,231 abstentions) and Ng Kin Sing (5,542,705 votes for,
             3,155 votes withheld, 85,231 abstentions) to serve as directors in
             Class III; and,

         3.  the ratification of the appointment of Ernst & Young as the
             Company's independent accountants for the fiscal year ending
             December 31, 1999 (5,598,041 votes for, 29,540 votes against, 3,510
             abstentions).

         The proxy materials sent to the shareholders of the Company, which
included the notice to shareholders and the full text of each of the above
proposals as proposed and adopted, are incorporated herein by reference.

                                       20

<PAGE>


                                    [PART II]

[Item 5]             MARKET FOR REGISTRANT'S COMMON EQUITY
                         AND RELATED STOCKHOLDER MATTERS

         The Company's Common Stock is quoted on the electronic inter-dealer
quotation system operated by The Nasdaq Stock Market, Inc. ("The Nasdaq Stock
Market"), a subsidiary of the National Association of Securities Dealers, Inc.
("NASD"), in the category of Small Cap Issues. The Company's Common Stock has
been traded since August 7, 1995, on The Nasdaq Stock Market under the symbol
"CHRB." Prior to such date, the Company's Common Stock was traded in the
over-the-counter market on the OTC Bulletin Board (the "Bulletin Board")
operated by the NASD under the symbol "CEVL." Until August 7, 1995, there was
only a limited trading market for the Company's Common Stock. The following
table sets forth the high and low bid prices for the Company's Common Stock as
reported by The Nasdaq Stock Market for each fiscal quarter of 1998 and 1999.
The bid prices are inter-dealer prices, without retail markup, markdown or
commission, and may not necessarily reflect actual transactions. All of the
below quotations were obtained from Bloomberg Business News, and the quotations
have been adjusted to give retroactive effect to the one-for-ten reverse stock
split that was effective as of June 11, 1999:
<TABLE>
<CAPTION>

                      Period                             High Bid               Low Bid
                      ------                             --------               -------
<S>                                                          <C>                 <C>
         1999 Fiscal Year, quarter ended:
                  March 31, 1999.....................        $8.1                $3.4
                  June 30, 1999......................         6.3                 3.5
                  September 30, 1999.................         7.1                 4.1
                  December 31, 1999..................        24.5                 3.9
         1998 Fiscal Year, quarter ended:
                  March 31, 1998.....................       $25.6               $19.4
                  June 30, 1998......................        28.8                15.0
                  September 30, 1998.................        16.3                 9.4
                  December 31, 1998..................        10.6                 5.0
</TABLE>

         On April 13, 2000, there were 297 holders of record of the Company's
Common Stock.

         The one-for-ten reverse stock split approved by the shareholders of the
Company was made effective by the Company's Board of Directors at the close of
business on June 11, 1999.

         The Company has not paid any dividends with respect to its Common Stock
and has no present plan to pay any dividends in the foreseeable future. The
Company intends to retain its earnings to support the growth and expansion of
its 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 HARC's subsidiaries through HARC to the Company's
wholly-owned subsidiary, Billion Luck. Applicable PRC law and HARC's Articles of
Association (the "Articles") require that, before HARC, as a limited joint stock
company, distributes profits to investors, it must (1) satisfy all taxes; (2)
provide for all losses incurred in previous years; and (3) allocate a specified
percentage of remaining profits to each of the following: a surplus reserve (in
the amount of 10% of such remaining profits), a collective welfare fund (in the
amount of 10% of such remaining profits), and an incentive fund (in an amount
between 5% and 10% of such remaining profits). The Articles provide that the
foregoing may be adjusted by the HARC'S board of directors based upon HARC's
business performance and development needs, subject to the approval of HARC's
shareholders. Distributions of profits by HARC's subsidiaries to HARC, and by
HARC to Billion Luck are required to be pro rata in proportion to such party's
investment in such company. In addition to the foregoing, any future
determination to pay a dividend to holders of shares of Common Stock 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


                                       21
<PAGE>

Billion Luck by the Company in December, 1994, the Company has not received any
distributions from any of its subsidiaries and has not made any distributions to
its shareholders.


[Item 6]                         SELECTED FINANCIAL DATA

         The following table sets forth selected financial data of the Company
and its subsidiaries. The selected historical consolidated financial data in the
table for the Company's five fiscal years ended December 31, 1995, 1996, 1997,
1998 and 1999, are derived from the consolidated financial statements elsewhere
herein. The data should be read in conjunction with, and qualified in their
entirety by reference to, "Management's Discussion and Analysis of Results of
Operations and Financial Condition", the Consolidated Financial Statements of
the Company and related Notes thereto, and other financial information.
<TABLE>
<CAPTION>

                              ---------------------------------------------------------------------------------
                                                   In Thousands, Except Per Share Amounts
                                                          Year Ended December 31,
                                 1995          1996         1997         1998          1999           1999
                                 (Rmb)        (Rmb)         (Rmb)        (Rmb)         (Rmb)        (U.S.$)
                              ------------ ------------- ------------ ------------ -------------- -------------
<S>                             <C>           <C>          <C>            <C>            <C>            <C>
Income Statement Data
Net sales                       1,957,243     1,827,499    1,149,171      527,692        476,367        57,532
Cost of sales                  (1,851,186)   (1,677,056)  (1,092,972)    (510,631)      (467,936)      (56,514)
                              -----------   -----------  -----------    ---------      ---------      --------
Gross Profit                      106,057       150,443       56,199       17,061          8,431         1,018
Depreciation                       (2,820)       (1,813)      (1,429)      (1,343)        (1,091)         (132)
Provision for doubtful accounts         -                          -       (4,740)             -             -
Loss on impairment of an
investment                              -             -            -      (49,969)             -             -
Selling, general and
administrative expenses           (54,442)      (50,488)     (32,934)     (35,419)       (23,864)       (2,882)
Financial income/(expense), net   (33,212)      (19,870)         145        6,590            864           104
Other income, net                  28,654         6,054       30,580        4,070         10,338         1,249
                              -----------   -----------  -----------    ---------      ---------      --------
Income/(loss) before income
taxes                              44,237        84,326      (52,561)     (63,750)        (5,322)         (643)
Income taxes                       (6,909)      (13,991)      (9,798)           -              -             -
                              -----------   -----------  -----------    ---------      ---------      --------
Income/(loss) before
minority interests                 37,328        70,335      (42,763)     (63,750)        (5,322)         (643)
Minority interests                (18,153)      (34,513)     (24,563)      11,079         (1,674)         (202)
                              -----------   -----------  -----------    ---------      ---------      --------
Net income/(loss)                  19,175        35,822       18,200      (52,671)        (6,996)         (845)
                              ===========   ===========  ===========    =========      =========      ========
Earnings/(loss) per share*
  Basic                             159.8         101.4        30.55       (87.91)        (11.80)        (1.43)
                              ===========   ===========  ===========    =========      =========      ========
  Diluted                           154.9         100.2        30.46       (87.91)        (11.80)        (1.43)
                              ===========   ===========  ===========    =========      =========      ========
Other financial data
Income/(loss) before
  income taxes, minority
  interests, depreciation
  and amortization                 47,085        86,166       53,990      (62,407)        (4,231)         (511)
                              ===========   ===========  ===========    =========      =========      ========
Balance sheet data
Current assets                    633,958       685,216      281,692      243,188        248,052        29,958
Working capital                   143,986       301,474      217,927      167,851        162,789        19,661
Total assets                      668,488       705,113      437,880      370,726        377,096        45,543
Current liabilities               489,972       383,742       63,765       75,337         85,263        10,297
Minority interests                 74,067       108,580      133,143      107,945        111,399        13,454
Total liabilities and
minority interests                564,039       492,322      196,908      183,282        196,662        23,751
Shareholders' equity              104,449       212,791      240,972      187,444        180,434        21,792
</TABLE>

                                       22
<PAGE>

  *      The earnings per share information for the periods presented represents
         earnings/(loss) per share of the Company as if the reverse stock splits
         in 1996 and 1999 had been completed at the beginning of the respective
         periods.

  *      The computation of diluted earnings/(loss) per share did not assume the
         conversion of the stock option in 1999, 1998 and 1997 and the warrants
         in 1999 and 1998 because their inclusion would have been antidulutive.


 [Item 7]             MANAGEMENT'S DISCUSSION AND ANALYSIS
                OF RESULTS OF OPERATIONS AND FINANCIAL CONDITION

         The following discussion should be read in conjunction with the
Consolidated Financial Statements of the Company and related Notes thereto, and
other financial information included elsewhere herein. The financial statements
of the Company are prepared in conformity with U.S. GAAP.

OVERVIEW

The Company

         The Company is a Nevada holding company which controls a 61% interest
in HARC (56% interest of HARC is owned by Billion Luck and a 5% interest of HARC
is owned by the Company), a limited liability joint stock company organized in
the PRC. The Company, through HARC, First Supply and Second Supply, previously
engaged in marketing and distribution of natural rubber and rubber products
produced by the Hainan State Farms and non-state farms in the PRC, procurement
of production materials and supplies, including chemicals, farm equipment and
machinery, automobiles and other commodities for use primarily by the Hainan
State Farms and other unaffiliated customers, and trading in natural rubber
commodity futures contracts. Pursuant to a Shareholders' Agreement on Business
Restructuring dated March 3, 2000, among the Company, Billion Luck and the
Farming Bureau, the natural rubber distribution business and the procurement of
materials and supplies business ceased effective as of January 1, 2000. Pursuant
to an Assets and Staff Transfer Agreement dated March 3, 2000, among the Farming
Bureau, HARC, First Supply, Second Supply and Sales Centre, the assets,
liabilities and staff related to the ceased businesses were transferred to the
Farming Bureau effective as of January 1, 2000. The restructuring resulted in
the discontinuation of substantially all of the existing operations of the
Company as of December 31, 1999. Notwithstanding the discontinuation of the
distribution of natural rubber and the procurement of materials and supplies
businesses, the Company has contemplated to set up several new lines of
businesses as part of the restructuring, including its new supermarket
operations in the PRC in the fourth quarter of 1999. The assets and liabilities
of these new businesses for the year ended December 31, 1999 and the revenues
generated from and expenses incurred by these new businesses for the year ended
December 31, 1999 were insignificant. All new operations of the Company are
still in the start-up phase. Because of the restructuring undertaken by the
Company, operating results of prior years are not indicative of the operating
results that may be expected in future years.


         The Statements under "Results of Operations" and "Liquidity and Capital
Resources" relate to the operations and financial condition of the Company and
its subsidiaries.


Results of Operations

         The following table shows the selected consolidated income statement
data of the Company and its subsidiaries for the three fiscal years ended
December 31, 1997, 1998 and 1999. The data should be read in conjunction with,
and qualified in their entirety by reference to, the Consolidated Financial
Statements of the Company and related Notes thereto and other financial
information included elsewhere therein:


                                       23
<PAGE>
<TABLE>
<CAPTION>
---------------------------------------------------------------------------------------------------------
                                                                Year Ended December 31,
(In thousands)                                       1997           1998           1999          1999
                                                     (Rmb)          (Rmb)         (Rmb)          (US$)
<S>                                                <C>              <C>           <C>             <C>

Net sales:
  Distribution of natural rubber                   1,104,145        470,073       442,841         53,483
  Procurement of materials and supplies
   and distribution of other agricultural
   products                                           45,026         57,619        33,526          4,049
                                                  ----------     ----------    ----------       --------

                                                   1,149,171        527,692       476,367         57,532


Gross profit                                          56,199         17,061         8,431          1,018
Gross profit margin                                      4.9%           3.2%          1.8%           1.8%

Income/(loss) before income taxes                     52,561        (63,750)       (5,322)          (643)
Income taxes                                          (9,798)             -             -              -
                                                  ----------     ----------    ----------       --------

income/(loss) before minority interests               42,763        (63,750)       (5,322)          (643)
Minority interests                                   (24,563)        11,079        (1,674)          (202)
                                                  ----------     ----------    ----------       --------

Net income/(loss)                                     18,200        (52,671)       (6,996)          (845)
                                                  ==========     ==========    ==========       ========
</TABLE>

Year Ended December 31, 1999 Compared to Year Ended December 31, 1998

Sales - Distribution of Natural Rubber

         Total net sales for the year ended December 31, 1999, decreased by
Rmb27 million (US$3.3 million) or 5.8% to Rmb443 million (US$53.5 million),
compared to Rmb470 million (US$56.8 million) for the corresponding period in
1998. Although the average selling price of natural rubber increased from
Rmb7,000 (US$845) per ton in 1998 to Rmb8,300 (US$1,002) per ton in 1999, the
sales volume decreased by approximately 20% in 1999 compared to that of 1998.
The decrease in sales volume was mainly due to the closure of China Commodity
Futures Exchange ("CCFE") in Hainan, which was engaged in the trading of natural
rubber commodity futures. This affected the overall demand for natural rubber as
speculators in the futures market purchased a substantial quantity of natural
rubber to hedge their exposure in the futures market in the past. The increase
in selling price was mainly due to the stabilization of most Asian currencies in
1999. Therefore, the domestic natural rubber has become more competitive
compared to imported natural rubber in terms of selling price (including VAT and
import tariff).

Sale - Procurement of Materials and Supplies and Distribution of Other
Agricultural Products

         Net sales decreased by Rmb24.1 million (US$2.9 million) or 41.8% to
Rmb33.5 million (US$4.0 million) in 1999 from Rmb57.6 million (US$7.0 million)
in 1998. The decrease was mainly due to sales of barley that amounted to Rmb29
million (US$3.5 million) in 1998, which was a one-off transaction. As this
product was unprofitable, management decided to suspend the trading of this
product. On the other hand, there was a sales contribution from the supermarket
operation that was commenced during the fourth quarter of 1999, amounting to
Rmb688,000 (US$83,000).

Gross Profit and Gross Profit Margin

         Gross profit decreased by Rmb8.6 million (US$1.0 million) or 50.6% to
Rmb8.4 million (US$1.0 million) in 1999 from Rmb17.1 million (US$2.1 million) in
1998. The gross profit margin decreased from 3.2% in 1998 to 1.8% in 1999. The
reason for the decline in gross profit margin was due to the fact that the
Company was previously guaranteed a minimum gross profit margin of 3.5% on
natural rubber purchased from the Hainan State Farms by the Farming Bureau, the
guarantee was subsequently changed to 1.5% in view of the prevailing market
conditions pursuant to an agreement effective as of April 1, 1999.


                                       24
<PAGE>

Loss on Impairment of an Investment

         For the year ended December 31, 1998, the Company wrote down, in
aggregate, Rmb50 million (US$6.0 million) against a long-term investment and an
investment purchase deposit in a PRC listed company, due to an adverse change in
the business environment in the PRC.

Selling, General and Administrative Expenses

         Selling and administrative expenses decreased by Rmb11.6 million
(US$1.4 million) or 32.6% to Rmb23.9 million (US$2.9 million) in 1999 from
Rmb35.4 million (US$4.3 million) in 1998. The decrease was mainly due to the
reduction of sales activities by approximately 20% in 1999, better cost control
on expenses, such as reduction of legal and professional fees, public relations
and salaries expenses, and the write-off of margin deposits paid to two futures
brokers amounted to Rmb4 million (US$483,000) in 1998.

Financial Income, Net

         Net financial income decreased from Rmb6.6 million (US$797,000) in 1998
to Rmb864,000 (US$104,000) in 1999. The significant decrease was mainly due to
the decrease in average cash and cash equivalents as funds were shifted to
short-term investments. In addition, part of the cash and cash equivalent was
deposited to two securities companies in the PRC in 1998, which offered a better
interest rate than that of other financial institutions.

Other Income, Net

         Other income increased by Rmb6.3 million (US$757,000) or 154% to
Rmb10.3 million (US$1.2 million) in 1999 from Rmb4.1 million (US$492,000) in
1998. Other income in 1999 represented the recovery of a margin deposit paid to
a future broker of Rmb3 million (US$362,000) which was provided for in 1998,
dividend income from the Company's long-term investment that amounted to Rmb6.7
million (US$809,000) and a net gain on trading of marketable securities. Other
income in 1998 represented the net gain on trading of commodity futures
contracts, compensation received from an insurance company and the recovery of
bad debts written-off in prior years.


Year Ended December 31, 1998 Compared to Year Ended December 31, 1997

Sales - Distribution of Natural Rubber

         Net sales decreased by Rmb634 million (US$76.6 million) or 57.4% to
Rmb470 million (US$56.7 million), compared to Rmb1,104 million (US$133.3
million) for the corresponding period in 1997. The decrease in natural rubber
sales was due to the decrease in average natural rubber price from approximately
Rmb9,300 (US$1,123) per ton in 1997 to approximately Rmb7,000 (US$845) per ton
in 1998, and the decrease in sales quantity in 1998 as compared with the
corresponding period in 1997. The decreases in rubber price and unit sales were
due to the keen competition from overseas suppliers, the currency deflation of
most rubber producing countries such as Thailand, Indonesia and Malaysia, and an
overall decrease in domestic demand. The gradual decrease in PRC import tariff
made imported rubber more attractive to domestic customers due to a decrease in
price difference between domestic and imported rubber. In addition, in order to
foster the growth of certain state-owned enterprises involved in the
manufacturing of rubber related products, the PRC government granted various
tariff exemptions to them. Together with the favorable credit terms provided by
overseas suppliers, many customers switched to imported rubber, which caused a
significant decrease in domestic demand of natural rubber.

Sales - Procurement of Materials and Supplies and Distribution of Other
Agricultural Products

         Net sales increased by Rmb13 million (US$1.6 million) or 28.0% to Rmb58
million (US$7.0 million), compared to Rmb45 million (US$5.4 million) for the
corresponding period in 1997. The increase of net sales from procurement of
materials and supplies was mainly due to the sales of barley that amounted to
Rmb29 million (US$3.5 million) during 1998. This was a one-off transaction, as
this product was not profitable and management decided to suspend the trading of
this product. However, this increase was partly offset by the reduction of sales


                                       25
<PAGE>

of production materials due to intense competition from other suppliers located
in proximity to various rubber farms, and to the sluggish consumption market.

Gross Profit and Gross Profit Margin

         Gross profits decreased by Rmb39.1 million (US$4.7 million) or 69.6% to
Rmb17.1 million (US$2.1 million) in 1998 from Rmb56.2 million (US$6.8 million)
in 1997. The gross profit margin also decreased from 4.9% in 1997 to 3.2% in
1998. The decrease was mainly due to a lower gross profit margin achieved by the
Company related to sales of rubber inventory which was purchased at much higher
cost in prior years. In addition, there was a gross loss arose from the sale of
barley that amounted to Rmb2 million (US$242,000) during 1998.

Loss on Impairment of an Investment

         For the year ended December 31, 1998, the Company wrote down, in
aggregate, Rmb50 million (US$6.0 million) against a long-term investment and an
investment purchase deposit in a PRC listed company, due to an adverse change in
the business environment in the PRC.

Selling and Administrative Expenses

         Selling and administrative expenses increased by Rmb2.5 million
(US$300,000) or 7.5% to Rmb35.4 million (US$4.3 million) in 1998 from Rmb32.9
million (US$4.0 million) in 1997. The increase was primarily due to the
write-off of margin deposits paid to two futures brokers after the closure of
CCFE in Hainan in late 1998.

Financial Income, Net

         The increase in net financial income from Rmb145,000 (US$18,000) in
1997 to Rmb6.6 million (US$797,000) in 1998 was mainly due to an increase in
interest earned on cash and cash equivalents after the withdrawal of futures
margin deposits, and there was an interest expense of Rmb2 million (US$242,000)
in 1997 on a temporary advance for the acquisition of a long-term investment.

Other Income, Net

         Other income decreased by Rmb26.5 million (US$3.2 million) or 86.7% to
Rmb4.1 million (US$495,000) in 1998 from Rmb30.6 million (US$3.7 million) in
1997. This significant decrease was primarily due to the decrease in gains on
trading of rubber futures contracts for non-hedging purposes. The Company ceased
the trading of rubber futures contracts during the second quarter of 1998 as a
result of the increased volatility of the futures market and the reduction of
natural rubber demand in the open market.

LIQUIDITY AND CAPITAL RESOURCES

         The Company's and its subsidiaries' primary liquidity needs are to fund
accounts receivable, inventories and, to a lesser extent, to expand business
operations. The Company has financed its working capital requirements through
the internally generated cashflows.

         Net cash provided by/(used in) operating activities was (Rmb3 million),
Rmb35 million and (Rmb41.7 million) in fiscal 1997, 1998 and 1999, 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 Farming Bureau has guaranteed the recoverability of current
accounts receivable from the Hainan State Farms and other related companies
controlled and owned by the Farming Bureau. Pursuant to an Assets and Staff
Transfer Agreement dated March 3, 2000, the Farming Bureau purchased assets and
assumed liabilities and staff related to the ceased businesses effective as of
January 1, 2000. The purchase price was the book value or fair value of the net
assets transferred (which was not differ materially from the book value),
determined as of January 1, 2000, whichever was the lower.

                                       26
<PAGE>

         The Company believes that the internally generated funds will be
sufficient to satisfy its anticipated working capital needs for at least the
next 12 months.


Inflation

         The Company's operations and financial results could be adversely
affected by economic and changes in the policies of the PRC government, such as
changes in laws and regulations (or the interpretation thereof), measures which
may be introduced to regulate or stimulate the rate of economic growth. The rate
of deflation of the PRC economy, based on published consumer price information,
was 2.6 percent for 1998 and 3.0 percent for the 10 months ended October 31,
1999. The PRC government has taken certain measures to stimulate domestic demand
and consumption. There can be no assurance that these measures will be
successful.


Market Risk and Risk Management Policies

         All of the Company's sales and purchases are made domestically and are
denominated in Renminbi. Accordingly, the Company and its subsidiaries do not
have material market risk with respect to currency fluctuation. As the reporting
currency of the Company's consolidated financial statements is also Renminbi,
there is no significant translation difference arising on consolidation.

         The Company's interest income is most sensitive to changes in the
general level of Renminbi interest rates. In this regard, changes in Renminbi
interest rates affect the interest earned on the Company's cash equivalents. As
at December 31, 1999, the Company's cash equivalents are mainly Renminbi, Hong
Kong Dollar and United States Dollar deposits with financial institutions,
bearing market interest rates without fixed term.

         The Company's board of directors adopted a risk management resolution
authorizing the management to enter natural rubber commodities futures contracts
for hedging the price risk associated with certain firm commitments for the
purchase of natural rubber. The Company also traded natural rubber commodity
futures contracts which were not specific hedges. As at December 31, 1999, the
Company had neither a position in natural rubber commodity futures contracts,
nor firm commitments for the purchase of natural rubber.

         As at December 31, 1999, the Company had short-term investments in
marketable securities mainly in the PRC stock market that amounted to Rmb57
million (US$6.9 million). 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.


Year 2000 Issue

         The Year 2000 issue is the result of information technology systems and
embedded systems using a two-digit format, as opposed to four digits, to
indicate the year. The Company and its subsidiaries use a limited amount of
computer software primarily in connection with their accounting and financial
reporting systems. Such programs have been upgraded so that they are year 2000
compatible. In addition to software issues, certain of the computer hardware of
the Company and its subsidiaries have been replaced with more current
technology.

         As of March 31, 2000, the Company has not experienced any disruptions
or failures to its normal operations as a result of the transition into calendar
year 2000.


Quarterly Results of Operations

         The following is a summary of the quarterly results of operations for
the years ended December 31, 1999 and 1998.


                                       27
<PAGE>
<TABLE>
<CAPTION>
---------------------------------------------------------------------------------------------------------
(In thousands, except share and per share data)     March 31       June 30     September 30   December 31
                                                     (Rmb)          (Rmb)         (Rmb)          (Rmb)
---------------------------------------------------------------------------------------------------------
<S>                                                   <C>            <C>          <C>            <C>
1999:
  Net sales                                           21,355         83,960       190,190        180,862
  Cost of sales                                       21,140         81,928       186,900        177,968
  Net income/(loss)                                   (4,349)           228          (826)        (2,049)
  Earnings/(loss) per common share:
    Basic                                               (7.3)           0.4          (1.4)          (3.5)
    Diluted                                             (7.3)           0.4          (1.4)          (3.5)

1998:
  Net sales                                           93,227        120,140       155,122        159,203
  Cost of sales                                       90,324        113,680       148,944        157,683
  Net income/(loss)                                   (5,475)         1,841          (462)       (48,575)
  Earnings/(loss) per common share:
    Basic                                               (9.1)           3.1          (0.8)         (81.1)
    Diluted                                             (9.1)           3.1          (0.8)         (81.1)
</TABLE>

         The earnings per share information for the periods presented represents
earnings/(loss) per share of the Company as if the reverse stock split in 1999
had been completed at the beginning of the respective periods.

         The computation of diluted earnings/(loss) per share did not assume the
conversion of the stock options and warrants in 1999 and 1998 because their
inclusion would have been antidilutive.


[Item 8]                  FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

         The Company's Consolidated Financial Statements for the three fiscal
years ended December 31, 1999, 1998 and 1997 are included herewith as Appendix A
and incorporated herein by reference.


[Item 9]                CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS
                            ON ACCOUNTING AND FINANCIAL DISCLOSURE

         Not applicable.

                                       28


<PAGE>

                                   [PART III]


[Item 10]            DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT

IDENTIFICATION OF DIRECTORS AND EXECUTIVE OFFICERS

         The following table sets forth the current directors and executive
officers of the Company as of March 31, 2000, and the ages of and positions with
the Company held by each of such persons:
<TABLE>
<CAPTION>
                                      Age                         Position
                                      ---                         --------
<S>                                    <C>             <C>
Ching Lung Po                          53              Chairman of the Board of Directors and President

Lin Yu Quan                            52              Vice Chairman of the Board of Directors

Tam Cheuk Ho                           37              Director and Chief Financial Officer

Wong Wah On                            36              Director, Secretary and Financial Controller

Wan Ying Lin                           51              Director

Ng Kin Sing                            38              Director
</TABLE>

         Mr. Ching Lung Po has been a director of the Company since February 4,
1998, and was appointed Chairman of the Board of Directors on January 25, 1999,
and President of the Company on June 1, 1999. Mr. Ching also has been the
Chairman of the Board of Directors and President of OVM International Holding
Corp. (OTC Bulletin Board: OVMI), which is included on the OTC Bulletin Board
operated by the Nasdaq, since September 1996, and the Chariman of Asia Fiber
Holdings Limited (OTC Bulletin Board: AFBR), which is included on the OTC
Bulletin Board operated by the Nasdaq, since January 2000. Mr. Ching has been
involved for more than 20 years in the management of production and technology
for industrial enterprises in PRC. He worked in Heilongjiang Suihua Electronic
Factory as an engineer from 1969 to 1976 and was the Head of the Heilongjiang
Suihua Industrial Science & Technology Research Institute from 1975 to 1976. Mr.
Ching joined the Heilongjiang Qingan Factory in 1976 and has been the General
Manager since 1976. In 1988, Mr. Ching started his own business and established
the Shenzhen Hongda Science & Technology Company Limited in Shenzhen, which
manufactures electronic products. Mr. Ching graduated from the Harbin Military
and Engineering Institute and holds the title of Senior Engineer.

         Mr. Lin Yu Quan has been a director and the Vice Chairman of the
Company since July 20, 1998. He is also the Chairman of HARC. Mr. Lin is a
graduate of the School of Central Communist Party with a major in economic
development. From July 1984 to July 1989, he was the Deputy Mayor of Dan County
of the Hainan Province. From August 1989 to July 1996, Mr. Lin was the Mayor and
Secretary of the Communist Party of Wanning County. From July 1996 to December
1997, he served as the Mayor of the Wanning City. In January 1998, Mr. Lin was
appointed Director of the Hainan Farming Bureau.

         Mr. Tam Cheuk Ho has been a director and the Chief Financial Officer of
the Company since December, 1994. Prior to joining the Company, 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 Society of Accountants and the Chartered
Association of Certified Accountants. He is also a certified public accountant
in Hong Kong. He holds a Bachelor's degree in Business Administration from the
Chinese University of Hong Kong.


                                       29
<PAGE>

         Mr. Wong Wah On has been a director of the Company since December 30,
1997. Mr. Wong is also the Financial Controller and Secretary of the Company and
a member of the supervisory committee of HARC. 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 the audit supervisor at Ernst & Young, Hong Kong. He
received a professional diploma in Company Secretaryship and Administration from
the Hong Kong Polytechnic University and is a fellow of the Chartered
Association of Certified Accountants, the Hong Kong Society of Accountants, and
the Institute of Chartered Secretaries and Administrators. He is also a
certified public accountant in Hong Kong.

         Mr. Wan Ying Lin has been a director of the Company since February 4,
1998. Mr. Wan was graduated from the Guangxi Liuzhou Institute of Medical
Specialty specializing in administration and management. From January 1986
through December 1987, he was the manager of Lam Ko Mould Company in charge of
the China marketing and development division in Hong Kong. Then in January 1988
through February 1993, he worked as the marketing manager of Wai Tong Trading
Company in Hong Kong. In 1993, he joined the Hong Kong Prestressing Concrete
Engineering Company Limited, where he serves as manager.

         Mr. Ng Kin Sing has been a director of the Company since February 1,
1999, and also serves as a member of the Board's Audit Committee. From April
1998 till now, 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.

         At the annual meeting of shareholders on May 28, 1999, Messrs. Wan Ying
Lin and Ng Kin Sing were elected to serve as Class III Directors until the
annual meeting to be held in 2002 and until their successors have been duly
elected and qualified. Messrs. Tam Cheuk Ho and Wong Wah On serve in Class I
until the annual meeting to be held in 2000 and until their successors have been
duly elected and qualified; and Messrs. Ching Lung Po and Lin Yu Quan serve in
Class II until the annual meeting to be held in 2001 and until their successors
have been duly elected and qualified.

         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.

IDENTIFICATION OF SIGNIFICANT EMPLOYEES

         The following table sets forth certain significant employees of the
Company as of December 31, 1999 and the ages of and positions with the Company
held by each of such persons:

         Name                         Age                 Position
         ----                         ---                 --------

         Li Fei Lie                    33              Vice President

         Mr. Li Fei Lie is the Vice President of the Company. He is also the
president and a director of HARC, where he is responsible to oversee the
management and operation of HARC. In 1987, he obtained a Bachelor's degree in
Economics from the Beijing University. In 1990, he obtained a Master's degree in
Economics from the same university. From 1990 through April 1991, he was the
Vice Chairman of the Beijing Agency of Guangxi Wuzhou Boiler Factory. From
April, 1991 through October, 1992, he was the General Manager of the Development
Department of Shenzhen Hong Wah Industrial and Commerce Company Ltd., a
Sino-foreign limited liability joint stock company. In October, 1992, Mr. Li
became Assistant to the General Manager of Hong Wah (Holdings) Limited and was
responsible for the preparatory work relative to the incorporation of HARC.

                                       30
<PAGE>
COMPLIANCE WITH SECTION 16(A) OF THE EXCHANGE ACT

         Based solely upon the Company's review of Forms 3,4 and 5 furnished to
the Company with respect to its fiscal year ended December 31, 1999, the
Company notes that director Ng Kin Sing filed a Form 3 on February 17, 1999 to
report his status as a director, which commenced on February 1, 1999. The
Company is also aware that Li Shunxing and Everbright Investment & Management
Limited may have had reporting obligations in 1999, but the Company has not
received copies of any such reports.

<TABLE>
<CAPTION>

[Item 11]                    EXECUTIVE COMPENSATION

                           SUMMARY COMPENSATION TABLE

                                                                                -----------------
                                                   Annual Compensation              Long Term
                                                                                  Compensation
                                          ------------------------------------- -----------------
                                                                     Other         Securities
                                                                    Annual         Underlying         All Other
                                           Salary     Bonus      Compensation        Options        Compensation
Name and Principal Position       Year      (US$)     (US$)          (US$)             (1)              (US$)
-------------------------------- -------- --------- ---------- ---------------- ----------------- -----------------
<S>                               <C>     <C>           <C>           <C>              <C>               <C>
Ching Lung Po, President          1999    254,826      -0-           -0-              -0-               -0-

                                  1998      -0-        -0-           -0-              -0-               -0-

                                  1997      -0-        -0-           -0-              -0-               -0-


Li Fei Lie, Vice President,       1999     46,975      -0-         22,523            1,000              -0-
President of HARC
                                  1998     30,888      -0-         38,610            1,000              -0-

                                  1997     30,888     2,574        38,610            1,000              -0-


Tam Cheuk Ho, Director and        1999    212,355      -0-           -0-               60               -0-
Chief Financial Officer
                                  1998      -0-        -0-           -0-               60               -0-

                                  1997      -0-        -0-           -0-               60               -0-


Wong Wah On, Director,            1999    141,570      -0-           -0-               60               -0-
Secretary and Financial
Controller
                                  1998      -0-        -0-           -0-               60               -0-

                                  1997      -0-        -0-           -0-               60               -0-
================================ ======== ========= ========== ================ ================= =================
</TABLE>

(1) As of December 31, 1999, none of the stock options held by Mr. Li, Mr. Tam
and Mr. Wong were exercisable. None of such options was "in-the-money" at such
date, as the fair market value (as defined in the Company stock option plan and
adjusted as a result of the one-for-ten reverse stock split) of the common stock
on December 31, 1999, was US$8.56 per share.

         The Company paid its President, Ching Lung Po, annual salary of
US$254,826 in 1999. Except for Ching Lung Po, Tam Cheuk Ho and Wong Wah On, no
director or executive officer of the Company or any of its subsidiaries was paid
a total annual salary and bonus in excess of US$100,000 during the fiscal years
ended December 31, 1997, 1998 and 1999.

         Li Fie Lie, Vice President of the Company and President and a director
of HARC, was paid annual compensation of HK$560,000 (US$72,072) for the year
ended December 31, 1997, HK$540,000 (US$69,498) for each of the two years ended
December 31, 1998 and 1999. As of August 1, 1995, Billion Luck entered into an
Employment Agreement with Li Fei Lie. In accordance with the terms of the
Employment Agreement, Mr. Li was employed by Billion Luck to perform such duties
with respect to Billion Luck as Billion Luck's Board of Directors shall from
time to time determine. Mr. Li received a base salary of HK$240,000 (US$30,888)
plus allowances of HK$300,000 (US$38,610) annually, which base salary was
adjusted on each anniversary of the Employment Agreement to reflect a change in
the applicable consumer price index or such greater amount as Billion Luck's
Board of Directors determined. The Employment Agreement had a term of three (3)

                                       31
<PAGE>

years and was terminated on July 31, 1998. As of August 1, 1998, the Company
entered into an Employment Agreement with Mr. Li. In accordance with the terms
of the Employment Agreement, Mr. Li has been employed by the Company to perform
such duties as the Board of Directors shall from time to time determine. Mr. Li
shall receive a base salary of HK$540,000 (US$69,498) 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 Employment Agreement has
a term of two years and shall be automatically renewed unless earlier terminated
as provided therein. See "Certain Relationships and Related Transactions."

         On May 1, 1997, the Company entered into a consulting agreement with
Brender Services Limited, a British Virgin Islands company beneficially owned by
Mr. Wong Wah On, the Director, Secretary and Financial Controller of the
Company, pursuant to which Brender Services Limited agreed to provide consulting
services to the Company for a period of three years commencing on May 1, 1997.
In consideration of the services to be rendered by Brender Services Limited, the
Company agreed to pay a consultancy fee of HK$270,000 (US$34,749) per month. The
Company also agreed to reimburse Brender Services Limited for all out-of-pocket
costs incurred in connection with rendering services under the agreement. During
the year ended December 31, 1999, a consulting fee of HK$270,000 (US$34,749),
was paid to Brender Services Limited. See "Certain Relationships and Related
Transactions." The Consulting Agreement was terminated effective February 1,
1999.

         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$231,660) 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 Employment Agreement has
a term of two years and shall be automatically renewed unless earlier terminated
as provided therein. See "Certain Relationships and Related Transactions."

         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$154,440) 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 Employment Agreement has a term of two years and shall be automatically
renewed unless earlier terminated as provided therein. See "Certain
Relationships and Related Transactions."

         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
has been employed by the Company as an Chief Executive Officer and to perform
such duties as the Board of Directors shall from time to time determine. Mr.
Ching shall receive a base salary of HK$2,160,000 (US$277,992) 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 Employment Agreement has
a term of two years and shall be automatically renewed unless earlier terminated
as provided therein. See "Certain Relationships and Related Transactions."

         Except for the foregoing, the Company has no 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.

         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


                                       32
<PAGE>

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, 1999, no holder of stock
options exercised such options, and all stock options granted remained
outstanding. Also during such fiscal year, no long-term incentive plans or
pension plans were in effect with respect to any of the Company's officers,
directors or employees.


COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION

         The Company's Board of Directors did not have a compensation committee
or a committee performing similar functions during the year ended December 31,
1999, and no other relationship existed during such year for which disclosure is
required pursuant to Item 401(j) of Regulation S-K.


[Item 12]        SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
                                 AND MANAGEMENT

BENEFICIAL OWNERS OF MORE THAN 5%
OF THE COMPANY'S COMMON STOCK

         The following table sets forth, to the knowledge of management, each
person or entity who is the beneficial owner of more than 5% of the outstanding
shares of the Company's Common Stock or Series B Preferred Stock outstanding as
of March 31, 2000 the number of shares owned by each such person and the
percentage of the outstanding shares represented thereby.
<TABLE>
<CAPTION>
                                                          Amount and
         Name and Address                                  Nature of                          Percent of
        of Beneficial Owner                        Beneficial Ownership (1)                      Class
        -------------------                        ------------------------                      -----
<S>                                         <C>                                                  <C>
Winsland Capital Limited                    33,480 Common Stock                                  5.65%
TrustNet Chambers                           320,000 Series B Preferred                            100%
P.O. Box 3444, Road Town
Tortola, British Virgin Islands

Worlder International Company               48,600 Common Stock                                  8.20%
 Limited (2)
21/F., Great Eagle Centre
No. 23 Harbour Road
Hong Kong
</TABLE>

(1) The inclusion herein of any shares deemed beneficially owned does not
constitute an admission of beneficial ownership of these shares.

(2) Of the 48,600 shares of Common Stock indicated, Worlder International
Company Limited ("Worlder") directly owns 35,100 shares, and the remaining
13,500 shares represent shares of Common Stock owned by Silverich Limited, which
is wholly-owned by Worlder.


SHARE OWNERSHIP OF OFFICERS AND DIRECTORS

         The following table sets forth certain information with respect to the
beneficial ownership of Common Stock as of March 31, 2000, by (i) each director
of the Company, (ii) each executive officer of the Company named in the summary
compensation table, and (iii) all directors and executive officers of the
Company as a group. All information with respect to beneficial ownership has

                                       33

<PAGE>

been furnished by the respective director or executive officer (in the case of
shares beneficially owned by each of them). Unless otherwise indicated in a
footnote, each stockholder possesses sole voting and investment power with
respect to the shares indicated as beneficially owned.
<TABLE>
<CAPTION>

                                                    Amount and
         Name and Address                            Nature of                               Percent of
        of Beneficial Owner                   Beneficial Ownership (1)                         Class
        -------------------                   ------------------------                         -----
<S>                                         <C>                                                  <C>
         Ching Lung Po                      33,480 Common Stock (5)                              5.65%

         Lin Yu Quan                                    -0-                                      N/A

         Tam Cheuk Ho                                   -0- (2)                                  N/A

         Li Fei Lie                                     -0- (3)                                  N/A

         Wong Wah On                          4,320 Common Stock (4)                             0.73%

         Wan Ying Lin                                   -0-                                      N/A

         Ng Kin Sing                                    -0-                                      N/A

         All executive officers              37,800 Common Stock                                 6.38%
         and directors as a group
</TABLE>

(1) The inclusion herein of any shares deemed beneficially owned does not
constitute an admission of beneficial ownership of these shares.

(2) Tam Cheuk Ho was granted options to purchase 60 shares of Common Stock under
the Company's Stock Option Plan as described under "Stock Options," below.

(3) Li Fei Lie was granted options to purchase 1,000 shares of Common Stock
under the Company's Stock Option Plan as described under "Stock Options," below.

(4) Brender Services Limited owns 4,320 shares of Common Stock. Brender Services
Limited is beneficially owned by Wong Wah On, the Director, Secretary and
Financial Controller of the Company. In addition, Brender was granted options to
purchase 1,000 shares of Common Stock under the Company's Stock Option Plan, and
Mr. Wong was granted options to purchase 60 shares of Common Stock under the
Plan, as described under "Stock Options," below.

(5) Winsland Capital Limited owns 33,480 shares of Common Stock. Winsland
Capital Limited is beneficially owned by Ching Lung Po, the Chairman of the
Board of Directors of the Company.

STOCK OPTIONS

         The Company adopted a Stock Option Plan (the "Plan") as of March 31,
1995. The 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. Initially, 2,400,000
shares of common stock could be issued and sold pursuant to options granted
under the Plan. "Incentive Stock Options" within the meaning of Section 422 of
the Internal Revenue Code of 1986, as amended (the "Code"), may be granted to
employees, including officers, whether or not they are members of the Board of
Directors, and nonqualified stock options may be granted to any such employee or
officer and to directors, consultants, and affiliates who perform substantial
services for or on behalf of the Company or its subsidiaries.

                                       34
<PAGE>

         The Board of Directors, or a committee appointed by the Board (the
"Committee"), is vested with authority to (i) select persons to participate in
the Plan; (ii) determine the form and substance of grants made under the Plan to
each participant, and the conditions and restrictions, if any, subject to which
grants will be made; (iii) interpret the Plan; and (iv) adopt, amend, or rescind
such rules and regulations for carrying out the Plan as it may deem appropriate.
The Board of Directors has the power to modify or terminate the Plan and from
time to time may suspend, and if suspended may reinstate, any or all of the
provisions of the Plan except that (i) no modification, suspension, or
termination of the Plan may, without the consent of the grantee affected, alter
or impair any grant previously made under the Plan; and (ii) no modification
shall become effective without prior consent of the shareholders of the Company
that would (a) increase the maximum number of shares reserved for issuance under
the Plan, except for certain adjustments allowed by the Plan; (b) change the
classes of employees eligible to participate in the Plan; or (c) materially
increase the benefits accruing to participants in the Plan.

         The Plan provides that the price per share deliverable upon the
exercise of each Incentive Stock Option shall not be less than 100% of the fair
market value of the shares on the date the option is granted, as the Committee
determines. In the case of the grant of any Incentive Stock Option to an
employee who, at the time of the grant, owns more than 10% of the total combined
voting power of all classes of stock of the Company or any of its subsidiaries,
such price per share, if required by the Code at the time of grant, shall not be
less than 110% of the fair market value of the shares on the date the option is
granted. The price per share deliverable upon the exercise of each nonqualified
stock option shall not be less than the higher of (i) the net tangible assets
per share of the Company as of the end of the fiscal year immediately preceding
the date of such granting; or (ii) 80% of the fair market value of the shares on
the date the option is granted, as the Committee determines.

         Options may be exercised in whole or in part upon payment of the
exercise price of the shares to be acquired. Payment shall be made in cash or,
in the discretion of the Committee, in shares previously acquired by the
participant or in a combination of cash and shares of Common Stock. The fair
market value of shares of Common Stock tendered on exercise of options shall be
determined on the date of exercise.

         As of July 1, 1995, pursuant to the recommendation of a committee of
disinterested persons appointed by the board of directors in accordance with the
terms of the Plan, the board of directors granted options to the following
officers and directors to purchase shares of the Company's Common Stock:

                  Yiu Yat Hung (former director)                  6,000 shares
                  Tam Cheuk Ho                                    6,000 shares
                  Han Jian Zhun (former director)                 6,000 shares
                  Wong Wah On                                     6,000 shares
                  Li Fei Lie                                    100,000 shares

In addition, the board of directors granted options to the following employees
and consultant to purchase shares of the Company's Common Stock:

                  Brender Services Limited                      100,000 shares
                  Cheung Yu Shum                                500,000 shares
                  Tse Chi Kai                                   300,000 shares
                  Ma Sin Ling                                   500,000 shares
                  Cheung Siu Yin                                 10,000 shares
                  Woo Pui Yan                                    10,000 shares
                  Kwok Kwan Hung                                386,000 shares
                  Fu Yang Guang                                 200,000 shares
                  Lin Jia Ping                                  270,000 shares

All of the stock options were issued in accordance with the terms of the Plan at
an exercise price of US$3.78 (the fair market value of the Common Stock as of
July 1, 1995) and would have been exercisable beginning on July 1, 1996, and
until July 1, 2005.

         As of May 20, 1996, the board of directors, in accordance with the
recommendation, with respect to stock options granted to directors and officers,

                                       35
<PAGE>

of a committee of disinterested persons appointed by the board of directors in
accordance with the terms of the Plan, reduced the exercise prices of all of the
outstanding options to US$0.42 (the fair market value of the Common Stock as of
May 20, 1996). By virtue of this action, the outstanding options are now
exercisable beginning on May 20, 1997, and until May 20, 2006.

         On December 30, 1996, the shareholders of the Company adopted an
amendment to the Plan (a) to change the number of shares of Common Stock subject
to the Plan to that number of shares which would, in the aggregate and if deemed
outstanding, constitute 20% of the Company's then-outstanding shares of Common
Stock, as determined at the time of granting stock options, and (b) to allow
Nonqualified Stock Options, as defined in the Plan, to be exercisable in less
than one year (no currently outstanding options were changed by such amendment).
By virtue of the one-for-ten reverse stock split approved by the shareholders on
December 30, 1996, and made effective by the board of directors on December 31,
1996, the number of shares subject to each outstanding option was reduced by a
factor of ten, and the exercise price for the outstanding options was increased
to US$4.20 per share (the fair market value of the Common Stock as of May 20,
1996, multiplied by ten). Other terms of the outstanding options were not
affected. Also, by virtue of the one-for-ten reverse stock split approved by the
shareholders on May 28, 1999, and made effective by the board of directors on
June 11, 1999, the number of shares subject to each outstanding option was
further reduced by a factor of ten, and the exercise price for the outstanding
options was increased to US$42.0 per share (the fair market value of the Common
Stock as of May 20, 1996, multiplied by 100). Other terms of the outstanding
options were not affected, and the following stock options, which have been
granted with respect to 24,000 shares of Common Stock, remain outstanding:

                  Yiu Yat Hung (former director)                     60 shares
                  Tam Cheuk Ho                                       60 shares
                  Han Jian Zhun (former director)                    60 shares
                  Wong Wah On                                        60 shares
                  Li Fei Lie                                      1,000 shares
                  Brender Services Limited                        1,000 shares
                  Cheung Yu Shum                                  5,000 shares
                  Tse Chi Kai                                     3,000 shares
                  Ma Sin Ling                                     5,000 shares
                  Cheung Siu Yin                                    100 shares
                  Woo Pui Yan                                     1,000 shares
                  Kwok Kwan Hung                                  3,860 shares
                  Fu Yang Guang                                   2,000 shares
                  Lin Jia Ping                                    2,700 shares


 [Item 13]              CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

         The following transactions with the management of the Company and
others are noted:

         On January 31, 1994, the Farming Bureau, Guilinyang Farm, and Billion
Luck entered into a Contract On Investment For The Setting Up Of Hainan
Agricultural Resources Company Ltd. pursuant to which such parties agreed to
establish HARC as a limited liability joint stock company under the Rules for
Standardized Incorporated Companies in the PRC and the regulations of Hainan
Province. The agreement provided that HARC's total initial capitalization of
Rmb100 million (US$12 million) in assets and cash was to be contributed as
follows: the Farming Bureau (39%), Guilinyang Farm (5%) and Billion Luck (56%).

         On July 7, 1994, HARC entered into a Contract of Investment in the
Xilian Timber Mill with the Xilian State Rubber Farm, a subsidiary farm owned
and controlled by the Farming Bureau, pursuant to which HARC subscribed for a
12.64% equity interest in the Xilian Farm Timber Mill ("Xilian Mill"), a timber
factory in Hainan, PRC, for consideration of Rmb5.21 million (US$629,227).
According to the agreement, HARC will be entitled to a fixed 20% return on its
investment in Xilian Mill for a three-year period from the date of subscription.


                                       36
<PAGE>

Thereafter, HARC will be entitled to Xilian Mill's profit in proportion to its
percentage ownership of shares therein, subject to a minimum return of 20% on
its investment. On December 24, 1994, the parties entered into a supplementary
agreement reducing the amount of HARC's investment to Rmb5 million (US$603,865)
but keeping unchanged HARC's percentage ownership of Xilian Mill at 12.64%.

         On July 15, 1994, the Farming Bureau and HARC entered into a Rental
Agreement for the rental of 532 square meters of a building located in Haikou
City, PRC, in which HARC's corporate headquarters are located. Such rental
agreement is for a period of 10 years at an annual rental of Rmb170,240
(US$20,560) payable in equal semi-annual installments. The rental agreement
further provides that HARC shall be responsible for certain costs and expenses
in connection with its use of the property.

         On November 5, 1994, the Farming Bureau, HARC, First Supply and Second
Supply entered into a Sale and Purchase Agreement. With respect to the natural
rubber segment, the Farming Bureau agreed to direct the Hainan State Farms to
sell to HARC, First Supply and Second Supply on a priority basis, and HARC,
First Supply and Second Supply agreed to purchase from the Hainan State Farms
under the same terms and conditions as are offered to other purchasers. If HARC,
First Supply or Second Supply was offered the same quantity and same price for
natural rubber from a Hainan State Farm and a non-state farm, HARC, First Supply
or Second Supply, as the case may be, were required to purchase from the Hainan
State Farm. If the price offered by the Hainan State Farm was higher than that
from a non-state farm, HARC, First Supply or Second Supply, as the case may be,
were required to purchase from the non-state farm. Otherwise, there was no
condition requiring the purchase of any particular quantity of raw natural
rubber from the Hainan State Farms. First Supply and Second Supply were also
guaranteed a minimum gross profit margin of 3.5% for sales of natural rubber
purchased from the Hainan State Farms. On May 21, 1999, by a Supplementary
Agreement among the Farming Bureua, HARC, First Supply and Second Supply, the
minimum gross profit margin of 3.5% earned by First Supply and Second Supply on
natural rubber sales had been reduced to 1.5% which was made effective on April
1, 1999.

         With respect to the production materials segment, the Sale and Purchase
Agreement provided that the Farming Bureau agreed to direct the Hainan State
Farms to purchase all of their production materials and other commodities
offered by HARC, First Supply and Second Supply under the same terms and
conditions as were offered by other suppliers. In the case of production
material and other commodities, a Hainan State Farm could request a price quote
for a specified quantity of a particular item from HARC, First Supply or Second
Supply.. Upon receiving the price quote, the Hainan State Farm could obtain
quotes from other suppliers based on the same quantity of the requested item.
The Hainan State Farm were required to inform HARC, First Supply or Second
Supply, as the case may be, of the amounts of the other quotes and, if any of
the quotes were lower, HARC, First Supply or Second Supply had the right to
lower its quote to the level of the competing quote. If HARC, First Supply or
Second Supply matched the competing quote based upon the same quantity of item
requested, the Hainan State Farm were required to purchase the item from HARC,
First Supply or Second Supply. Otherwise, the Hainan State Farm could purchase
the item from the competing supplier. The Sale and Purchase Agreement had a term
of 15 years and, subject to applicable law, may not be terminated earlier except
upon the agreement of the parties. Pursuant to the Restructuring Agreements, the
Farming Bureau, HARC, First Supply and Second Supply agreed to terminate the
Sale and Purchase Agreement effective as of January 1, 2000.

         As of March 31, 1995, the Company entered into an Exchange Agreement
with several of its shareholders whereby the Company's outstanding indebtedness
to those shareholders, in the amount of approximately US$6,400,000, was
exchanged for 6,400,000 shares of Series A Preferred Stock, which was authorized
and issued by the Company as of that date. The shares of Series A Preferred
Stock were issued pursuant to the Exchange Agreement to the shareholders as
follows: Hong Wah Investment Holdings Limited (2,432,000 shares), China
Everbright Financial Holdings Limited. (1,184,000 shares), Worlder International
Company Limited (1,184,000 shares), and Silverich Limited (1,600,000 shares).

         As of March 31, 1995, the Company adopted a Stock Option Plan (the
"Plan") pursuant to which the Company's Board of Directors, or a committee
thereof at the Board's discretion, is authorized to grant stock options to
officers, directors, key employees, consultants and affiliates of the Company.
Initially, 2,400,000 shares of Common Stock were authorized for issuance under
the Plan. As of July 1, 1995, the Board, in accordance with the recommendation,

                                       37
<PAGE>

with respect to stock options granted to directors and officers, of a committee
of disinterested persons appointed by the board of directors in accordance with
the terms of the Plan, granted options for all 2,400,000 shares of Common Stock
authorized under the Plan to various officers, directors and employees of the
Company and to a consultant of the Company. As of May 20, 1996, the Board, in
accordance with the recommendation, with respect to stock options granted to
directors and officers, of a committee of disinterested persons appointed by the
board of directors in accordance with the terms of the Plan, reduced the
exercise prices of all of the outstanding options to US$0.42 (the fair market
value of the Common Stock as of May 20, 1996). By virtue of this action, the
outstanding options became exercisable beginning on May 20, 1997, and until May
20, 2006. On December 30, 1996, the shareholders of the Company adopted an
amendment to the Plan (a) to change the number of shares of Common Stock subject
to the Plan to that number of shares which would, in the aggregate and if deemed
outstanding, constitute 20% of the Company's then-outstanding shares of Common
Stock, as determined at the time of granting stock options, and (b) to allow
Nonqualified Stock Options, as defined in the Plan, to be exercisable in less
than one year (no currently outstanding options were changed by such amendment).
By virtue of the one-for-ten reverse stock split approved by the shareholders on
December 30, 1996, and made effective by the board of directors on December 31,
1996, the number of shares subject to each outstanding option was reduced by a
factor of ten, and the exercise price for the outstanding options was increased
to US$4.20 per share (the fair market value of the Common Stock as of May 20,
1996, multiplied by ten). Other terms of the outstanding options were not
affected. Also, by virtue of the one-for-ten reverse stock split approved by the
shareholders on May 28, 1999, and made effective by the board of directors on
June 11, 1999, the number of shares subject to each outstanding option was
further reduced by a factor of ten, and the exercise price for the outstanding
options was increased to US$42.0 per share (the fair market value of the Common
Stock as of May 20, 1996, multiplied by a hundred). Other terms of the
outstanding options were not affected, and all of the outstanding stock options,
which have been granted with respect to 24,000 shares of Common Stock, remain
outstanding. See "Security Ownership of Certain Beneficial Owners and
Management" and the China Resources Development, Inc., Amended and Rested 1995
Stock Option Plan, which is attached hereto as Exhibit 10.34 and incorporated
herein by reference.

         As of April 30, 1995, the Company entered into a consulting agreement
with Brender Services Limited pursuant to which Brender Services Limited agreed
to provide accounting and consulting services to the Company for a period of
five years commencing on May 1, 1995. In consideration of the services rendered
by Brender Services Limited, the Company agreed to pay a consultancy fee of
HK$170,000 (US$21,879) per month during the first two years of the term of the
consulting agreement and a fee to be agreed upon by the parties, but not less
than HK$170,000 (US$21,879) per month, for the remaining three years of the
term. The Company also agreed to reimburse Brender Services Limited for all
out-of-pocket costs incurred in connection with rendering services under the
agreement. As of April 30, 1997, the Company renewed the consulting agreement
with Brender Services Limited pursuant to which the Company agreed to pay a
consultancy fee of HK$270,000 (US$34,749) per month effective May 1, 1997 for a
three-year term in consideration of the accounting and consulting services
rendered by Brender Services Limited. During the year ended December 31, 1999, a
consulting fee of HK$270,000 (US$34,749) was paid to Brender Services Limited.
The consulting agreement was terminated effective February 1, 1999.

         As of August 1, 1995, Billion Luck entered into an Employment Agreement
with Li Fei Lie. Mr Li is presently the Vice President of the Company and the
president and a director of HARC, but, in accordance with the terms of the
Employment Agreement, Mr. Li had been employed by Billion Luck to perform such
duties with respect to Billion Luck as Billion Luck's Board of Directors shall
from time to time determine. Mr. Li received a base salary of HK$240,000
(US$30,888) annually. The Employment Agreement had a term of three (3) years and
was terminated on July 31, 1998. As of August 1, 1998, the Company entered into
an Employment Agreement with Li Fei Lie. In accordance with the terms of the
Employment Agreement, Mr. Li has been employed by the Company as Vice President
and to perform such duties with respect to the Company as the Company's Board of
Directors shall from time to time determine. Mr. Li shall receive a base salary
of HK$540,000 (US$69,498) annually. The Employment Agreement had a term of one
(1) year and was to be automatically renewed thereafter unless earlier
terminated as provided therein.

         During the three fiscal years ended December 31, 1997, 1998 and 1999,
Second Supply engaged in the trading of natural rubber futures contracts through
a broker owned by Jin Huan Corporation ("Jin Huan"), a PRC company which is
owned by the Farming Bureau. These transactions resulted in payments of handling
fees by Second Supply to the broker which

                                       38
<PAGE>

amounted to Rmb0.3 million (US$36,232), nil and nil, in 1997, 1998 and 1999,
respectively.

         On March 25, 1996, HARC entered into a Loan Agreement with the Farming
Bureau by which HARC borrowed Rmb35,867,857 (US$4,331,867) in order to more
effectively utilize capital raised and to enable HARC to more effectively plan
for its production operations and new investment projects. The loan is
interest-free and is to be repaid by conversion of the loan into registered
capital of HARC upon the approval for such conversion by relevant government
authorities. On December 31, 1996, a supplementary agreement was entered into
between the same parties by which a new article was created to impose a right of
set off against the loan or any additional loan made by the Farming Bureau to
HARC against any amounts due to HARC by the Farming Bureau and/or its subsidiary
companies and affiliates.

         On March 25, 1996, HARC entered into a Loan Agreement with the Company
by which HARC borrowed Rmb45,650,000 (US$5,513,285) in order to more effectively
utilize capital raised and to enable HARC to more effectively plan for its
production operations and new investment projects. The loan is interest-free,
and it is to be repaid by conversion of the loan into registered capital of HARC
upon the approval for such conversion by relevant government authorities.

         On July 22, 1996, the Company entered into an Exchange Agreement with
China Everbright Financial Holdings Limited (formerly known as "Everbright
Finance and Investment Co. Ltd."), pursuant to which all 6,400,000 outstanding
shares of the Company's Series A Preferred Stock held by Everbright were
exchanged for 32,000,000 shares of Common Stock, which were subject to
substantial restrictions. Such restrictions included a waiver for seven years of
rights to dividends and distributions upon dissolution and liquidation of the
Company, and a waiver for eight years of the ability to have the shares included
in any registration statement filed by the Company.

         On August 9, 1996, HARC entered into a rental agreement with the Hainan
Farming Bureau Testing Center, an affiliate of the Farming Bureau located on the
same floor of the building where HARC's headquarters is located. The term of the
lease is for a period of eight years (through September 30, 2004) at an annual
rental of Rmb72,000 (US$8,696), and it covers an area of approximately 314
square meters.

         As of December 31, 1996, the Company entered into another Exchange
Agreement with China Everbright Financial Holdings Limited (formerly known as
"Everbright Finance and Investment Co. Ltd."), pursuant to which the 32,000,000
pre-reverse-split shares of restricted Common Stock were exchanged for 3,200,000
post-reverse-split shares of the Company's Series B Preferred stock. The terms
of the Series B Preferred stock were amended by the Board of Directors in
connection with the new Exchange Agreement, and such Series B Preferred stock is
not convertible and has no dividend rights or rights to receive distributions
upon dissolution and liquidation of the Company. The Series B Preferred stock
also may not be included in any registration statement filed by the Company, and
the Company will not take any action to facilitate the registration of the
Series B Preferred stock, until after July 22, 2000.

         As of April 30, 1998, the Company entered into an agreement with
Guilinyang Farm pursuant to which Guilinyang Farm agreed to sell and the Company
agreed to buy 5,000,000 shares, representing 5% of the total issued and
outstanding share capital of HARC, for consideration of Rmb7 million
(US$845,411).

         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$231,660) 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 Employment Agreement has
a term of two years and shall be automatically renewed unless earlier 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


                                       39
<PAGE>

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$154,440) 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 Employment Agreement has a term of two years and shall be automatically
renewed unless earlier terminated as provided therein.

         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
has been employed by the Company as an Chief Executive Officer and to perform
such duties as the Board of Directors shall from time to time determine. Mr.
Ching shall receive a base salary of HK$2,160,000 (US$277,992) 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 Employment Agreement has
a term of two years and shall be automatically renewed unless earlier terminated
as provided therein.

         On March 3, 2000, the Company, the Farming Bureau and Billion Luck
entered into a Shareholders' Agreement of Business Restructuring where they, as
the shareholders of HARC, approved the cessation of the natural rubber
distribution business and the procurement of materials and supplies business,
effective as of January 1, 2000.

         On March 3, 2000, the Farming Bureau, HARC, First Supply, Second Supply
and Sales Centre entered into an Assets and Staff Transfer Agreement, by which
the Farming Bureau purchased assets and assumed liabilities and staff related to
the ceased businesses, effective as of January 1, 2000. The purchase price was
the book value or the fair value of net assets transferred, as determined by an
independent professional valuer, as of December 31, 1999, whichever was lower.

         In addition to these transactions, the following business relationships
existed during the fiscal year ended December 31, 1999, for which disclosure is
required: As disclosed in "Management and Certain Security Holders,"
hereinabove, Lin Yu Quan, the Vice Chairman of the Board of Directors of the
Company, also serves as the Director of the Farming Bureau. The nature and scope
of the relationship between the Company and the Farming Bureau is set forth in
"Business" and elsewhere hereinabove.


                                       40
<PAGE>

                                    [PART IV]

[Item 14]           EXHIBITS, FINANCIAL STATEMENT SCHEDULES,
                             AND REPORTS ON FORM 8-K


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


                  Independent auditors' report, together with consolidated
                  financial statements for the Company and subsidiaries,
                  including:

                  a.     Consolidated statements of income for the three
                         years ended December 31, 1997, 1998 and 1999

                  b.     Consolidated statements of changes in shareholders'
                         equity for the three years ended December 31, 1997,
                         1998 and 1999

                  c.     Consolidated balance sheets as of December 31, 1998
                         and 1999

                  d.     Consolidated statements of cash flows for the three
                         years ended December 31, 1997, 1998 and 1999

                  e.     Notes to consolidated financial statements.


         The following Exhibits are filed as part of this Form 10-K:

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

        3.1       Articles of Incorporation of the Registrant, filed on January
                  15, 1986 (Filed with Annual Report on Form 10-K/A for the
                  fiscal year ended December 31, 1994, and incorporated herein
                  by reference.)

        3.2       By-laws of the Registrant (Filed with Annual Report on Form
                  10-K/A for the fiscal year ended December 31, 1994, and
                  incorporated herein by reference.)

        3.3       Certificate of Amendment of Articles of Incorporation of the
                  Registrant, filed on November 18, 1994 (Filed with Annual
                  Report on Form 10-K/A for the fiscal year ended December 31,
                  1994, and incorporated herein by reference.)

        3.4       Certificate of Amendment of Articles of Incorporation of the
                  Registrant, filed on November 18, 1994 (Filed with Annual
                  Report on Form 10-K/A for the fiscal year ended December 31,
                  1994, and incorporated herein by reference.)

        3.5       Certificate of Amendment of Articles of Incorporation of the
                  Registrant, effective March 31, 1995, and filed on June 19,
                  1995 (Filed with Quarterly Report on Form 10-Q/A for the
                  fiscal quarter ended March 31, 1995, and with Current Report
                  on Form 8-K dated June 19, 1995, and incorporated herein by
                  reference.)

        3.6       Certificate of Amendment of Articles of Incorporation of the
                  Registrant, effective December 30, 1996 (Filed with Annual
                  Report on Form 10-K/A for the fiscal year ended December 31,
                  1996, and incorporated herein by reference.)

                                       41
<PAGE>

        3.7       Amended and Restated By-laws of the Registrant, as amended on
                  December 30, 1996 (Filed with Annual Report on Form 10-K/A for
                  the fiscal year ended December 31, 1996, and incorporated
                  herein by reference.)

        4.1       Certificate of Designation of Series B Convertible Preferred
                  Stock, filed on December 13, 1995 (Filed with Current Report
                  on Form 8-K dated March 8, 1996, and incorporated herein by
                  reference.)

        4.2       Certificate of Amendment of Certificate of Designation of
                  Series B Convertible Preferred Stock, effective December 31,
                  1997 (Filed with Annual Report on Form 10-K/A for the fiscal
                  year ended December 31, 1996, and incorporated herein by
                  reference.)

       10.1       Land Use Agreement dated November 5, 1994, by and between
                  Hainan Province Agricultural Reclamation No. 1 Materials
                  Supply & Sales Company (First Supply) and Hainan Province
                  Agricultural Reclamation Jin Long Materials General Company
                  (Original Chinese version with certified English translation
                  filed as Exhibit 10.10 to Annual Report on Form 10-K/A for the
                  fiscal year ended December 31, 1994, and incorporated herein
                  by reference.)

       10.2       Land Use Agreement dated November 5, 1994, by and between
                  Hainan Province Agricultural Reclamation No. 2 Materials
                  Supply & Sales Company (Second Supply) and Hainan Province
                  Agricultural Reclamation Jin Huan Materials General Company
                  (Original Chinese version with certified English translation
                  filed as Exhibit 10.11 to Annual Report on Form 10-K/A for the
                  fiscal year ended December 31, 1994, and incorporated herein
                  by reference.)

       10.3       Long-Term Sale and Purchase Agreement dated November 5, 1994,
                  by and among Hainan Province Agricultural Reclamation General
                  Company (the Farming Bureau), Hainan Agricultural Resources
                  Company Ltd., Hainan Province Agricultural Reclamation No. 1
                  Materials Supply & Marketing Company (First Supply), and
                  Hainan Province Agricultural Reclamation No. 2 Materials
                  Supply & Marketing Company (Second Supply) (Original Chinese
                  version with English translation filed as Exhibit 10.12 to
                  Annual Report on Form 10-K/A for the fiscal year ended
                  December 31, 1994, and incorporated herein by reference.)

       10.4       Rental Agreement, by and between General Bureau of Hainan
                  State Farms (the Farming Bureau) and Hainan Agricultural
                  Resources Company Limited (Original Chinese version with
                  English Translation filed as Exhibit 10.14 to Annual Report on
                  Form 10-K/A for the fiscal year ended December 31, 1994, and
                  incorporated herein by reference.)

       10.5       Guaranty Agreement, by and among Hainan Province Agricultural
                  Reclamation General Company (the Farming Bureau), Hainan
                  Agricultural Reclamation No. 1 Materials Supply & Sales
                  Company (First Supply) and Hainan Agricultural Reclamation No.
                  2 Materials Supply & Sales Company (Second Supply) (Original
                  Chinese version with certified English Translation filed as
                  Exhibit 10.15 to Annual Report on Form 10-K/A for the fiscal
                  year ended December 31, 1994, and incorporated herein by
                  reference.)

       10.6       China Resources Development, Inc., 1995 Stock Option Plan,
                  adopted as of March 31, 1995 (Filed as Exhibit 10.18 to
                  Quarterly Report on Form 10-Q/A for the fiscal quarter ended
                  March 31, 1995, and the Current Report on Form 8-K dated June
                  19, 1995, and incorporated herein by reference.)

       10.7       Contract on Investment in the Xilian Timber Mill between HARC
                  and the State-Run Xilian Farm of Hainan Province dated July 7,
                  1994, and Supplementary Agreement dated December 24, 1994
                  (Original Chinese version with English translation filed as
                  Exhibit 10.26 to Annual Report on Form 10-K for the fiscal
                  year ended December 31, 1995, and incorporated herein by
                  reference.)

                                       42
<PAGE>

       10.8       Loan Agreement between HARC and the Farming Bureau, dated
                  March 25, 1996, and the supplementary agreement dated December
                  31, 1996 (Certified English translation of original Chinese
                  version filed as Exhibit 10.28 to Annual Report on Form 10-K/A
                  for the fiscal year ended December 31, 1996,and incorporated
                  herein by reference.)

       10.9       Loan Agreement between HARC and the Registrant, dated March
                  25, 1996 (Certified English translation of original Chinese
                  version filed as Exhibit 10.29 to Annual Report on Form 10-K/A
                  for the fiscal year ended December 31, 1996, and incorporated
                  herein by reference.)

       10.10      Rental Agreement between HARC and the Hainan Farming Bureau
                  Testing Center, dated August 9, 1996 (Certified English
                  translation of original Chinese version filed as Exhibit 10.30
                  to Annual Report on Form 10-K/A for the fiscal year ended
                  December 31, 1996, and incorporated herein by reference.)

       10.11      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.)

       10.12      Advertising and Media Agreement by and between the Registrant
                  and Marketing Direct Concepts, Inc., dated April 1, 1997
                  (Filed as Exhibit 10.36 to Quarterly Report on Form 10-Q for
                  the fiscal quarter ended June 30, 1997, and incorporated
                  herein by reference.)

       10.13      Financial Consulting Agreement by and between the Registrant
                  and Integrated Capital Development Group, Inc., dated May 1,
                  1997 (Filed as Exhibit 10.37 to Quarterly Report on Form 10-Q
                  for the fiscal quarter ended June 30, 1997, and incorporated
                  herein by reference.)

       10.14      Consulting Agreement between the Registrant and Brender
                  Services Limited, dated April 30, 1997 (Filed as Exhibit 10.38
                  to Annual Report on Form 10-K for the fiscal year ended
                  December 31, 1997, and incorporated herein by reference.)

       10.15      Stock Purchase Agreement, by and between HARC and Guilinyang
                  Farm, dated December 29, 1997. (Certified English translation
                  of original Chinese version filed as Exhibit 10.39 to Annual
                  Report on Form 10-K for the fiscal year ended December 31,
                  1997, and incorporated herein by reference.)

       10.16      Agreement for the Sale and Purchase of Share in Hainan Zhongya
                  Aluminum Company Ltd., dated December 29, 1997, by and between
                  First Supply and Guilinyang Farm. (Certified English
                  translation of original Chinese version filed as Exhibit 10.40
                  to Annual Report on Form 10-K for the fiscal year ended
                  December 31, 1997, and incorporated herein by reference.)

       10.17      Agreement for the Sale and Purchase of Share in Hainan
                  Zhongwei Agricultural Resources Company Ltd., dated April 30,
                  1998, by and between Guilinyang Farm and the Company
                  (Certified English translation of original Chinese version
                  filed as Exhibit 10.41 to Quarterly Report on Form 10-Q for
                  the fiscal quarter ended June 30, 1998, and incorporated
                  herein by reference.)

       10.18      Employment Agreement between the Company and Li Feilie, dated
                  August 1, 1998 (Filed as Exhibit 10.42 to Annual Report on
                  Form 10-K for the fiscal year ended December 31, 1998, and
                  incorporated herein by reference.)

       10.19      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.)

       10.20      Employment Agreement between the Company and Wong Wah On,
                  dated February 1, 1999 (Filed as Exhibit 10.44 to Annual

                                       43
<PAGE>

                  Report on Form 10-K for the fiscal year ended December 31,
                  1998, and incorporated herein by reference.)

       10.21      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.)

       10.22      Long-Term Sale and Purchase Supplementary Agreement No. 3 by
                  and among Farming Bureau, HARC, First Supply and Second
                  Supply, dated May 21, 1999 (Certified English translation of
                  original Chinese version filed as Exhibit 10.22 to Quarterly
                  Report on Form 10-Q for the fiscal quarter ended June 30,
                  1999, and incorporated herein by reference.)

       10.23      Assets and Staff Transfer Agreement by and among the Farming
                  Bureau, HARC, First Supply, Second Supply and Sales Centre
                  dated March 3, 2000 (Certified English translation of original
                  Chinese version filed as Exhibit 10.23 to Current Report on
                  Form 8-K dated March 18, 2000, and incorporated herein by
                  reference.)

       10.24      Shareholders' Agreement on Business Restructuring by and among
                  the Farming Bureau, the Registrant and Billion Luck dated
                  March 3, 2000 (Certified English translation of original
                  Chinese version filed as Exhibit 10.24 to Current Report on
                  Form 8-K dated March 18, 2000, and incorporated herein by
                  reference.)

       11.3       Computation of Earnings Per Share for Fiscal Year ended
                  December 31, 1999 (Contained in Financial Statements filed
                  herewith.)

       21         Subsidiaries of the Registrant  (Filed herewith.)

       27.4       Financial Data Schedule  (Filed herewith. For SEC use only.)

       99.2       Notice of Annual Meeting, Proxy Statement and Proxy
                  distributed to shareholders in advance of annual meeting held
                  on May 28, 1999 (Filed with Schedule 14A dated May 14, 1999,
                  and incorporated herein by reference.)

         During the last quarter of the fiscal year ended December 31, 1999, the
         Company filed no reports on Form 8-K. However, on March 18, 2000, the
         Company filed a report on Form 8-K dated March 3, 2000, which reported,
         in Item 2, the corporate restructuring and the transfer of assets,
         liabilities and staff related thereto. No financial statements were
         filed.

                                       44
<PAGE>

                                   SIGNATURES

         Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the registrant has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized.


                                       CHINA RESOURCES DEVELOPMENT, INC.



                                       By:/s/ Ching Lung Po
                                       --------------------
                                       Ching Lung Po, President

         Pursuant to the requirements of the Securities Exchange Act of 1934,
this report has been signed below by the following persons on behalf of the
registrant and in the capacities and on the dates indicated.

<TABLE>
<CAPTION>

                  Signature                                     Title                              Date
                  ---------                                     -----                              ----
<S>                                                 <C>                                       <C>
/s/ Ching Lung Po                                   President, Chairman of the                April 14, 2000
--------------------------                          Board of Directors, Chief
Ching Lung Po                                       Executive Officer



/s/ Lin Yu Quan                                     Vice Chairman of the                      April 14, 2000
--------------------------                          Board of Directors
Lin Yu Quan


/s/ Tam Cheuk Ho                                    Chief Financial Officer/                  April 14, 2000
--------------------------                          Director
Tam Cheuk Ho


/s/ Wong Wah On                                     Financial Controller/                     April 14, 2000
--------------------------                          Director/Secretary
Wong Wah On


/s/ Wan Ying Lin                                    Director                                  April 14, 2000
--------------------------
Wan Ying Lin


/s/ Ng Kin Sing                                     Director                                  April 14, 2000
--------------------------
Ng Kin Sing
</TABLE>

                                       45


<PAGE>

                                   APPENDIX A

                              Financial Statements



                  Independent auditors' report, together with consolidated
                  financial statements for the Company and subsidiaries,
                  including:

                  a.       Consolidated statements of income for the three years
                           ended December 31, 1997, 1998 and 1999

                  b.       Consolidated statements of changes in shareholders'
                           equity for the three years ended December 31, 1997,
                           1998 and 1999

                  c.       Consolidated balance sheets as of December 31, 1998
                           and 1999

                  d.       Consolidated  statements  of cash flows for the
                           three years ended  December 31, 1997, 1998 and 1999

                  e.       Notes to consolidated financial statements.



                                       46

<PAGE>

                        Consolidated Financial Statements


               CHINA RESOURCES DEVELOPMENT, INC. AND SUBSIDIARIES






<PAGE>


CHINA RESOURCES DEVELOPMENT, INC. AND SUBSIDIARIES

INDEX TO CONSOLIDATED FINANCIAL STATEMENTS


                                                                    Pages


Report of independent auditors                                       F-1

Consolidated statements of operations                                F-2

Consolidated statements of shareholders' equity                      F-3

Consolidated balance sheets                                       F-4 - F-5

Consolidated statements of cash flows                                F-6

Notes to consolidated financial statements                       F-7 - F-39





<PAGE>


REPORT OF INDEPENDENT AUDITORS

The Board of Directors and Shareholders

China Resources Development, Inc.


We have audited the accompanying consolidated balance sheets of China Resources
Development, Inc. and subsidiaries as of December 31, 1999 and 1998, and the
related consolidated statements of operations, shareholders' equity, and cash
flows for each of the three years in the period ended December 31, 1999. 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 auditing standards generally accepted
in the United States of America. 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 financial statements referred to above present fairly, in
all material respects, the consolidated financial position of China Resources
Development, Inc. and subsidiaries at December 31, 1999 and 1998, and the
consolidated results of their operations and their cash flows for each of the
three years in the period ended December 31, 1999, in conformity with accounting
principles generally accepted in the United States of America.







Ernst &Young
Hong Kong
February 11, 2000, except for
Notes 1 and 3, as to which the
date is March 8, 2000


                                      F-1

<PAGE>
<TABLE>
<CAPTION>


CHINA RESOURCES DEVELOPMENT, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF OPERATIONS

(Amounts in thousands, except share and per share data)

                                                                         Year ended December 31,
                                             Notes            1997             1998            1999             1999
                                                   -----------------------------------------------------------------
                                                               RMB              RMB             RMB              US$
<S>                                                      <C>                <C>             <C>               <C>
NET SALES*                                               1,149,171          527,692         476,367           57,532

COST OF SALES*                                         ( 1,092,972)   (     510,631)  (     467,936)  (       56,514)
                                                   ---------------  --------------- ---------------  ---------------

GROSS PROFIT                                                56,199           17,061           8,431            1,018

DEPRECIATION                                           (     1,429)   (       1,343)  (       1,091)  (          132)

PROVISION FOR DOUBTFUL
  ACCOUNTS                                                       -    (       4,740)              -                -

LOSS ON IMPAIRMENT OF AN
  INVESTMENT*                                 11                 -    (      49,969)              -                -

SELLING, GENERAL AND
  ADMINISTRATIVE EXPENSES*                             (    32,934)   (      35,419)  (      23,864)  (        2,882)

FINANCIAL INCOME, NET*                         5               145            6,590             864              104

OTHER INCOME, NET*                             6            30,580            4,070          10,338            1,249
                                                   ---------------  ---------------  --------------   --------------

INCOME/(LOSS) BEFORE INCOME TAXES                           52,561    (      63,750)  (       5,322)  (          643)

INCOME TAXES                                   7       (     9,798)               -               -                -
                                                   ---------------  ---------------  --------------   --------------

INCOME/(LOSS) BEFORE MINORITY
  INTERESTS                                                 42,763    (      63,750)  (       5,322)  (          643)

MINORITY INTERESTS                                     (    24,563)          11,079   (       1,674)  (          202)
                                                   ---------------  --------------- ---------------   --------------

NET INCOME/(LOSS)                                           18,200    (      52,671)  (       6,996)  (          845)
                                                   ===============  =============== ===============   ==============

EARNINGS/(LOSS) PER SHARE:                     8
    BASIC                                                    30.55    (       87.91)  (       11.80)  (         1.43)
                                                   ===============  ===============  ==============   ==============

    DILUTED                                                  30.46    (       87.91)  (       11.80)  (         1.43)
                                                   ===============  ===============  ==============   ==============
</TABLE>

* Including the following amounts resulting from transactions with related
parties (note 15):
<TABLE>
<CAPTION>
                                                                         Year ended December 31,
                                                              1997             1998            1999             1999
                                                      --------------------------------------------------------------
                                                               RMB              RMB             RMB              US$
<S>                                                        <C>               <C>             <C>               <C>
   NET SALES                                               278,051           30,373          23,718            2,864
   COST OF SALES                                      (    993,557)    (    374,039)   (    453,071)   (      54,719)
   LOSS ON IMPAIRMENT OF AN
     INVESTMENT                                                  -     (     28,718)              -                -
   SELLING, GENERAL AND
     ADMINISTRATIVE EXPENSES                          (      6,981)    (      4,411)   (      1,028)   (         124)
   FINANCIAL INCOME, NET                                    10,509     (        235)              -                -
   OTHER INCOME, NET                                         1,485                -               -                -

</TABLE>

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

                                      F-2
<PAGE>
<TABLE>
<CAPTION>


CHINA RESOURCES DEVELOPMENT, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY

(Amounts in thousands, except share and per share data)

                                                                                         Retained    Accumulated
                                                     Series B  Additional               earnings/          other
                                           Common   preferred     paid-in            (accumulated  comprehensive
                                  Notes     stock       stock     capital   Reserves     deficits)          loss   Total
                                           ------------------------------------------------------------------------------
                                              RMB         RMB         RMB        RMB          RMB            RMB     RMB
<S>                                <C>          <C>        <C>  <C>         <C>          <C>           <C>        <C>
Balance at December 31, 1996                    4          3    147,505     17,748       47,531              -    212,791

Issuance of 25,000 shares
  of common stock                  13           1                 6,299                                             6,300
Issuance of 35,000 common
  stock warrants to non-employees  14                             3,681                                             3,681
Net income and comprehensive
  income                                                                                 18,200              -     18,200
Transfer to reserves               19                                        7,766      ( 7,766)                        -
                                           ------     ------    -------     ------      -------         ------    -------

Balance at December 31, 1997                    5          3    157,485     25,514       57,965              -    240,972

Repurchase and retirement of
  10,000 shares of common stock    13                           (   853)                                          (   853)

Net loss                                                                                (52,671)                  (52,671)
Currency translation adjustments   20                                                                   (    4)   (     4)
                                                                                                                  -------
Comprehensive loss                                                                                                (52,675)
                                                                                                                  -------

Transfer to reserves               19                                          760      (   760)                        -
                                           ------     ------    -------     ------      -------         ------    -------

Balance at December 31, 1998                    5          3    156,632     26,274        4,534         (    4)   187,444

Net loss                                                                                ( 6,996)                  ( 6,996)
Currency translation adjustments   20                                                                   (   14)   (    14)
                                                                                                                  -------
Comprehensive loss                                                                                                ( 7,010)
                                                                                                                  -------

Transfer to reserves               19                                          556      (   556)                        -
                                           ------     ------    -------     ------      -------         ------    -------

Balance at December 31, 1999                    5          3    156,632     26,830      ( 3,018)        (   18)   180,434
                                           ======     ======    =======     ======      =======         ======    =======

</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.

                                      F-3


<PAGE>
<TABLE>
<CAPTION>
CHINA RESOURCES DEVELOPMENT, INC. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

(Amounts in thousands, except share and per share data)



                                                                                        December 31,
                                                             Notes             1998            1999             1999
                                                                            ----------------------------------------
                                                                                RMB             RMB              US$
<S>                                                                         <C>              <C>               <C>
ASSETS

CURRENT ASSETS
Cash and cash equivalents                                                   129,238          38,138            4,606
Marketable securities                                          9                  -          57,035            6,888
Trade receivables, less allowance of
  RMB529 in 1999 and 1998                                                     8,463           3,619              437
Inventories - finished goods                                                 10,569           8,116              980
Other receivables, deposits and prepayments,
  less allowance of RMB1,309 in 1999
  and RMB4,211 in 1998                                                       30,449          13,141            1,587
Short term loan receivable                                                        -          45,000            5,435
Amount due from Farming Bureau                                15             33,667          47,013            5,678
Amounts due from related companies                            15             30,802          35,990            4,347
                                                                            -------         -------          -------

TOTAL CURRENT ASSETS                                                        243,188         248,052           29,958

PROPERTY AND EQUIPMENT                                        10              7,243          11,402            1,377

INVESTMENTS                                                   11            119,301         117,642           14,208

GOODWILL                                                                        994               -                -
                                                                            -------         -------          -------

TOTAL ASSETS                                                                370,726         377,096           45,543
                                                                            =======         =======          =======
                                      F-4



<PAGE>


CHINA RESOURCES DEVELOPMENT, INC. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS (continued)

(Amounts in thousands, except share and per share data)

                                                                                        December 31,
                                                             Notes             1998            1999             1999
                                                                            ----------------------------------------
                                                                                RMB             RMB              US$

LIABILITIES AND SHAREHOLDERS' EQUITY

CURRENT LIABILITIES
Accounts payable                                                             12,204          15,253            1,842
Other payables and accrued liabilities                        12             15,476          24,629            2,974
Income taxes payable                                                         16,366          16,366            1,977
Amounts due to related companies                              15             31,291          29,015            3,504
                                                                            -------         -------          -------

TOTAL CURRENT LIABILITIES                                                    75,337          85,263           10,297

MINORITY INTERESTS                                                          107,945         111,399           13,454
                                                                            -------         -------          -------

TOTAL LIABILITIES AND
  MINORITY INTERESTS                                                        183,282         196,662           23,751
                                                                            -------         -------          -------

COMMITMENTS AND CONTINGENCIES                                 21

SHAREHOLDERS' EQUITY
Common stock, US$0.001 par value:
  Authorized - 200,000,000 shares in 1999 and 1998
  Issued and outstanding - 592,900 shares
    in 1999 and 1998                                          13                  5               5                1
Preferred stock, authorized -
  10,000,000 shares in 1999 and 1998:
      Series B preferred stock, US$0.001 par value:
        Authorized - 320,000 shares in 1999 and 1998
        Issued and outstanding - 320,000 shares in
           1999 and 1998                                      13                  3               3                1
Additional paid-in capital                                                  156,632         156,632           18,917
Reserves                                                      19             26,274          26,830            3,240
Retained earnings/(accumulated deficits)                      19              4,534         ( 3,018)         (   365)
Accumulated other comprehensive loss                          20            (     4)        (    18)         (     2)
                                                                            -------         -------          -------

TOTAL SHAREHOLDERS' EQUITY                                                  187,444         180,434           21,792
                                                                            -------         -------          -------

TOTAL LIABILITIES AND
  SHAREHOLDERS' EQUITY                                                      370,726         377,096           45,543
                                                                            =======         =======          =======
</TABLE>

The accompanying notes are an integral part of these consolidated financial
statements.
                                      F-5

<PAGE>
<TABLE>
<CAPTION>


CHINA RESOURCES DEVELOPMENT, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

(Amounts in thousands, except share and per share data)



                                                                         Year ended December 31,
                                                              1997             1998            1999             1999
                                                         -----------------------------------------------------------
                                                               RMB              RMB             RMB              US$
<S>                                                         <C>           <C>             <C> <C>         <C>    <C>
OPERATING ACTIVITIES
Net income/(loss)                                           18,200        (  52,671)      (   6,996)      (      845)
Adjustments to reconcile net income/(loss) to net cash
  provided by/(used in) operating activities:
    Depreciation and amortization                            1,457            1,370           1,091              132
    Provision for doubtful accounts                              -            4,740               -                -
    Provision for inventory write-downs                          -            1,554               -                -
    Loss on impairment of an investment                          -           49,969               -                -
    Stock-based compensation issued to non-employees         3,680           4,990              983              119
    Minority interests                                      24,563        (  11,079)          1,674              202
    Loss on disposal of property and equipment, net            463               -              910              110
    Loss on disposal of an equity method investment              -               -              662               80
    Write-off of goodwill                                        -                -             994              120

Changes in operating assets and liabilities:
  Marketable securities                                          -                -       (  57,035)      (    6,888)
  Trade receivables                                     (    7,037)           2,257           4,844              585
  Inventories                                           (    6,340)          49,669           2,453              297
  Other receivables, deposits and prepayments               25,917        (   7,614)         17,308            2,090
  Amount due from Farming Bureau                        (    8,911)       (  18,750)      (  13,346)      (    1,612)
  Amounts due from related companies                    (   27,823)       (     655)      (   5,188)      (      627)
  Accounts payable                                      (    5,564)       (   8,080)          3,049              368
  Other payables and accrued liabilities                (   22,189)       (   5,630)          9,153            1,106
  Income taxes payable                                       5,312        (   6,009)              -                -
  Amounts due to related companies                      (    4,976)          31,291       (   2,276)      (      275)
                                                        ----------        ---------       ---------       ----------
Net cash provided by/(used in) operating activities     (    3,248)          35,352       (  41,720)      (    5,038)
                                                        ----------        ---------       ---------       ----------

INVESTING ACTIVITIES
Purchases of property and equipment                     (    2,884)       (   1,090)      (   6,160)      (      744)
Purchases of investments                                (      327)               -               -                -
Deposit for the purchase of an investment                        -        (  28,718)              -                -
Short term loan                                                  -                -       (  45,000)      (    5,435)
                                                        ----------        ---------       ---------       ----------
Net cash used in investing activities                   (    3,211)       (  29,808)      (  51,160)      (    6,179)
                                                        ----------        ---------       ---------       ----------

FINANCING ACTIVITIES
Advance from minority interest                                   -                -           1,780              215
Purchases of common stock for retirement                         -        (     853)              -                -
                                                        ----------        ---------       ---------       ----------
Net cash provided by/(used in) financing activities              -        (     853)          1,780              215
                                                        ----------        ---------       ---------       ----------

NET INCREASE/(DECREASE) IN CASH AND CASH
   EQUIVALENTS                                           (   6,459)           4,691       (  91,100)      (   11,002)

Cash and cash equivalents, at beginning of year            131,006          124,547         129,238           15,608
                                                        ----------        ---------       ---------       ----------

Cash and cash equivalents, at end of year                  124,547          129,238          38,138            4,606
                                                        ==========        =========       =========       ==========
</TABLE>

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

                                      F-6

<PAGE>

CHINA RESOURCES DEVELOPMENT, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Amounts in thousands, except share and per share data)


1.       ORGANIZATION AND PRINCIPAL ACTIVITIES

         China Resources Development, Inc. (the "Company") and its subsidiaries
         (collectively the "Group") were principally engaged in the distribution
         of natural rubber, procurement of materials and supplies and the
         distribution other agricultural products in the People's Republic of
         China (the "PRC") for all the years presented in the consolidated
         financial statements. Information on the Group's operations by segment
         are included in note 25 to the consolidated financial statements.

         Pursuant to a business restructuring as detailed in note 3 to the
         consolidated financial statements, the Group discontinued all the above
         operations effective on January 1, 2000. In addition, as part of the
         business restructuring, the Group has set up its new supermarket
         operations in the PRC in the fourth quarter of 1999 and is in the
         process of identifying new investment opportunities.


2.       SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

         (a)      Principles of consolidation
                  ---------------------------
                  The consolidated financial statements 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 amounts reported in the
                  consolidated financial statements and accompanying notes.
                  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.

                  At December 31, 1999 and 1998, cash and cash equivalents
                  included foreign currency deposits equivalent to RMB1,686
                  (US$63 and HK$1,088) and RMB5,387 (US$67 and HK$4,522),
                  respectively.

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

                                      F-7
<PAGE>


CHINA RESOURCES DEVELOPMENT, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Amounts in thousands, except share and per share data)


2.       SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)

         (e)      Inventories
                  -----------
                  Inventories, are stated at the lower of cost or market,
                  comprising finished goods. Cost is determined using the
                  first-in, first-out method.

         (f)      Property and equipment
                  ----------------------
                  Property and equipment are stated at cost less accumulated
                  depreciation.

                  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 used
                  for this purpose are as follows:
<TABLE>
<CAPTION>
<S>                                                                                          <C>
                  Buildings                                                                  25 years
                  Leasehold improvements                                 Over the terms of the leases
                  Machinery, equipment and motor vehicles                             10 - 12.5 years
</TABLE>

         (g)      Investments
                  -----------
                  Investments in companies that are 20% to 50% owned, and over
                  which the Group is in a position to exercise significant
                  influence but does not control the financial and operating
                  decisions, are accounted for by the equity method.

                  All other equity investments, not being a subsidiary and which
                  do not have a readily determinable fair value, are accounted
                  for by the cost method, unless there have been an
                  other-than-temporary impairment in value, in which event they
                  are written-down to their net realizable value.

         (h)      Goodwill
                  --------
                  Goodwill was amortized on the straight-line basis over 40
                  years. Goodwill is periodically reviewed for impairment based
                  on an assessment of future operations. Accumulated
                  amortization was RMB110 on December 31, 1998. In 1999, an
                  impairment based on an assessment of future operations was
                  identified and the entire goodwill balance of RMB994 was
                  written-off.

         (i)      Retirement benefits
                  -------------------
                  The contributions to the retirement plans of employees under
                  defined contribution retirement plans are charged to earnings
                  as services are provided.

                                      F-8
<PAGE>


CHINA RESOURCES DEVELOPMENT, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Amounts in thousands, except share and per share data)


2.       SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)

         (j)      Stock-based compensation
                  ------------------------
                  The Group has elected to follow Accounting Principles Board
                  Opinion No. 25, "Accounting for Stock Issued to Employees"
                  ("APB 25"), and related interpretations in accounting for its
                  employee stock options, because the Group believes the
                  alternative fair value accounting provided for under Financial
                  Accounting Standards Board ("FASB") Statement of Financial
                  Accounting Standards No. 123, "Accounting for Stock-Based
                  Compensation" ("SFAS 123"), requires the use of option
                  valuation models that were not developed for use in valuing
                  employee stock options. Under APB 25, because the exercise
                  price of the Group's employee stock options equals the market
                  price of the underlying stock on the date of grant, no
                  compensation expense is recognized. For disclosure purposes,
                  pro forma information in accordance with SFAS 123 has been
                  included in note 14.

                  In accordance with SFAS 123, except for transactions with
                  employees that are within the scope of APB 25, all
                  transactions in which services are received and the
                  consideration given is the issuance of equity instruments are
                  accounted for based on the fair value of the consideration
                  received or the fair value of the equity instruments issued.
                  The cost of such services is charged to the consolidated
                  statement of operations over the respective service period.

         (k)      Revenue recognition
                  -------------------
                  Revenue from product sales is recognized upon the delivery of
                  goods. Sales commission income is recognized when the services
                  are rendered. Rental income is recognized on the straight-line
                  basis over the lease terms. Dividend income is recognized upon
                  the establishment of the right to receive such payment.

         (l)      Income taxes
                  ------------
                  Income taxes have been provided using the liability method in
                  accordance with FASB Statement of Financial Accounting
                  Standards No. 109, "Accounting for Income Taxes".

         (m)      Reverse stock split
                  -------------------
                  On May 28, 1999, the Company's shareholders approved a
                  ten-to-one reverse split of the Company's common stock (the
                  "Reverse Stock Split"). With the par value unchanged at
                  US$0.001 per share, the Reverse Stock Split was effected by a
                  transfer to the additional paid-in capital account. All
                  references in the consolidated financial statements referring
                  to share, stock option and per share amounts of the common
                  stock of the Company have been adjusted retroactively for the
                  Reverse Stock Split.

                                      F-9

<PAGE>


CHINA RESOURCES DEVELOPMENT, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Amounts in thousands, except share and per share data)


2.       SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)

         (n)      Earnings/(loss) per share
                  -------------------------
                  Basic and diluted earnings/(loss) per share are calculated in
                  accordance with FASB Statement of Financial Accounting
                  Standards No. 128, "Earnings per Share" ("SFAS 128"). All
                  earnings/(loss) per share amounts for all periods have been
                  presented, and where appropriate, restated to conform to the
                  requirements of SFAS 128.

         (o)      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 operations with functional
                  currency other than RMB have been translated into RMB in
                  accordance with FASB Statement of Financial Accounting
                  Standards No. 52, "Foreign Currency Translation". All balance
                  sheet accounts have been translated using the exchange rates
                  in effect at the balance sheet date. Statements of operations
                  amounts have been translated using the average exchange rate
                  for the year. The gains and losses resulting from the changes
                  in exchange rates from year to year have been reported in
                  other comprehensive income/loss. The effect on comprehensive
                  income of translation adjustments was insignificant for all
                  years prior to 1998.

                  Transactions and monetary assets and liabilities denominated
                  in currencies other than RMB are translated into RMB at the
                  respective applicable rates of exchange quoted by the People's
                  Bank of China (the "Exchange Rate"). Monetary assets and
                  liabilities denominated in other currencies are translated
                  into RMB at the applicable Exchange Rate at the respective
                  balance sheet dates. The resulting exchange gains or losses
                  are credited or charged to the consolidated statements of
                  operations.

                  The translation of amounts from RMB into US$ for the
                  convenience of the reader has been made at the rate of
                  exchange quoted by the People's Bank of China on December 31,
                  1999 of US$1.00 = RMB8.28, and accordingly, differs from the
                  underlying foreign currency amounts. No representation is made
                  that the RMB amounts could have been, or could be, converted
                  into US$ at that rate on December 31, 1999 or at any other
                  date.

         (p)      Short term loan receivable
                  --------------------------
                  The short term loan receivable is secured by certain equity
                  interest in an unlisted PRC company, which invests in Hainan
                  Sundiro Motorcycle Co., Ltd. (note 11 (b)), and is repayable
                  on demand.

                                      F-10
<PAGE>


CHINA RESOURCES DEVELOPMENT, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Amounts in thousands, except share and per share data)


2.       SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)

         (q)      Commodity futures contracts
                  ---------------------------
                  As part of its risk management strategy, the Group entered
                  into commodity futures contracts in 1997 to hedge against the
                  exposure to price risk associated with existing inventories
                  and certain firm commitments for the purchase of goods. Such
                  contracts were designated as hedges, were short term in nature
                  to correspond to the exposure/commitment periods, and were
                  effective in hedging the Group's exposure to price changes.
                  Unrealized changes in fair values of contracts no longer
                  effective as hedges were recognized in income from the date
                  the contract became ineffective until their expiration.

                  The Group in 1998 and 1997 also entered into natural rubber
                  commodity futures contracts that were not specific hedges and
                  gains or losses resulting from changes in the market value of
                  these types of futures contracts on a mark to market basis
                  were recognized as gains/losses in the period of the change.

         (r)      Recent accounting pronouncement
                  -------------------------------
                  The FASB recently issued Statement of Financial Accounting
                  Standards ("SFAS") No. 137, "Accounting for Derivative
                  Instruments and Hedging Activities-Deferral of Effective Date
                  of SFAS No. 133" ("SFAS 137"). SFAS No. 137 defers for one
                  year the effective date of SFAS No. 133, "Accounting for
                  Derivative Instruments and Hedging Activities". The rule now
                  will apply to all fiscal quarters of all fiscal years
                  beginning after June 15, 2000. In June 1998, the FASB issued
                  SFAS No. 133, which is required to be adopted in years
                  beginning after June 15, 1999. SFAS No. 133 permits early
                  adoption as of the beginning of any fiscal quarter after its
                  issuance. SFAS No. 133 will require the Group to recognize all
                  derivatives on the balance sheet at fair value. Derivatives
                  that are not hedges must be adjusted to fair value through
                  income. If the derivative is a hedge, depending on the nature
                  of the hedge, changes in the fair value of derivatives will
                  either be offset against the change in fair value of the
                  hedged assets, liabilities, or firm commitments through
                  earnings or recognized in other comprehensive income until the
                  hedged item is recognized in earnings. The ineffective portion
                  of a derivative's change in fair value will be immediately
                  recognized in earnings. The Group has not yet determined if it
                  will early adopt and what the effect of SFAS No. 133 will be
                  on the results and financial position of the Group.

         (s)      Comparative amounts
                  -------------------
                  Certain comparative amounts have been reclassified to conform
                  with the current year's presentation.

                                      F-11
<PAGE>


CHINA RESOURCES DEVELOPMENT, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Amounts in thousands, except share and per share data)


3.       DISCONTINUED OPERATION AND BUSINESS RESTRUCTURING

         In the fourth quarter of 1999, the Group initiated a plan to
         restructure its business in Hainan, the PRC. On March 3, 2000, the
         board of directors of the Company approved a business restructuring
         involving Hainan Zhongwei Agricultural Resources Company Limited
         ("HARC"), a 61%-owned subsidiaries of the Company, and certain
         subsidiaries of HARC (the "Restructuring"). The Restructuring when
         completed would result in the discontinuation of substantially all of
         the existing operations of the Group as of December 31, 1999, including
         its two principal lines of business, the distribution of natural rubber
         and the procurement of materials, supplies and other agricultural
         products (collectively the "Rubber and Procurement Operations").

         On March 3, 2000, HARC and certain of its subsidiaries (the "HARC
         Subsidiaries") entered into an Assets and Staff Transfer Agreement with
         the Hainan Farming Bureau (the "Farming Bureau"), a division of the
         Ministry of Agricultural of the PRC and a 39% minority shareholder of
         HARC, pursuant to which the HARC Subsidiaries would transfer all the
         assets, liabilities and staff related to the Rubber and Procurement
         Operations to the Farming Bureau, effective from January 1, 2000 (the
         "Transfer"). The consideration for the net assets transferred was
         determined based on the lower of their net book value or their fair
         value, as determined by an independent professional valuer, as of
         December 31, 1999. Based on the valuation, there were no material
         differences between the fair value and the net book value (as
         determined under US GAAP) of those assets and liabilities as of
         December 31, 1999.

         Based on the valuation by the independent professional valuer, the fair
         values of the assets and liabilities of the HARC Subsidiaries as at
         December 31, 1999 that were transferred to the Farming Bureau are as
         follows:
<TABLE>
<CAPTION>

                                                                       RMB
<S>                                                                <C>
         Current assets                                            110,703
         Property and equipment                                      1,547
         Cost method investments                                       928
         Current liabilities                                       (42,651)
                                                                   -------

                                                                    70,527
                                                                   =======
</TABLE>

         Notwithstanding the discontinuation of the Rubber and Procurement
         Operations subsequent to the Transfer, the Group has contemplated to
         set up several new lines of businesses as part of the Restructuring,
         including its new supermarket operations in the PRC in the fourth
         quarter of 1999. The assets and liabilities of these new businesses as
         of December 31, 1999 and the revenues generated from and expenses
         incurred by these new businesses for the year ended December 31, 1999
         are insignificant. As the Group has no prior experience in any of these
         new businesses, there can be no assurance that such businesses will
         generate any economic benefits to the Group in the foreseeable future.

                                      F-12
<PAGE>


CHINA RESOURCES DEVELOPMENT, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Amounts in thousands, except share and per share data)


4.       ACQUISITION OF MINORITY INTEREST IN A SUBSIDIARY

         On April 30, 1998, the Group acquired an additional 5% equity interest
         in HARC from Guilinyang State Farm ("Guilinyang") for a consideration
         of RMB7,000. Guilinyang is controlled by the Farming Bureau. The
         purchase consideration of Hainan Agricultural was used to offset the
         amount due from Guilinyang. After the acquisition, the Group's equity
         interest in HARC increased from 56% to 61%. The transaction was
         accounted for as a purchase and the excess of fair value of the net
         assets acquired over cost ("negative goodwill"), amounting to RMB7,119,
         was allocated to reduce proportionately the values of long term
         non-monetary non-current assets (note 11). The impact of the increase
         in equity interest on the results of operations has been accounted for
         since the date of acquisition.

         The pro forma unaudited results of operations for the years ended
         December 31, 1998 and 1997, assuming the acquisition had been
         consummated as of January 1, 1997, are as follows:
<TABLE>
<CAPTION>

                                                       Year ended December 31,
                                                      1997                 1998
                                                 ------------------------------
                                                       RMB                  RMB
<S>                                              <C>                    <C>
         Net sales                               1,149,171              527,692
         Net income/(loss)                          20,992        (      53,551)
         Earnings/(loss) per share:
           Basic                                     35.23        (      89.37)
           Diluted                                   35.12        (      89.37)

</TABLE>

                                      F-13
<PAGE>


CHINA RESOURCES DEVELOPMENT, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Amounts in thousands, except share and per share data)


5.       FINANCIAL INCOME, NET
<TABLE>
<CAPTION>
         Financial income, net represents:

                                                                                  Year ended December 31,
                                                                      1997                 1998                 1999
                                                                    ------------------------------------------------
                                                                       RMB                  RMB                  RMB
<S>                                                                 <C>                   <C>                    <C>
         Interest income                                            14,849                6,862                  948
         Interest expense                                          (15,007)              (  289)              (    5)
         Foreign exchange gains/(losses), net                          303                   17               (   79)
                                                                    ------               ------               ------

                                                                       145                6,590                  864
                                                                    ======               ======               ======
</TABLE>

         In connection with the restructuring of operations as set out in note
         15(c), with effect from October 1, 1996, the amounts due from certain
         related companies have become interest-free and the interest expense on
         bank loans of the Group was borne by the Farming Bureau until the
         effective transfer of the bank loans to the Farming Bureau in March
         1997 (note 15(c)).


6.       OTHER INCOME, NET
<TABLE>
<CAPTION>
         Other income, net represents:
                                                                                       Year ended December 31,
                                                             Notes             1997            1998             1999
                                                                          ------------------------------------------
                                                                                RMB             RMB              RMB
<S>                                                                           <C>               <C>              <C>
         Dividend income from cost method
           investments                                                            -               -            6,664
         Rental income                                                        1,024             900              788
         Net gains on trading of commodity
           futures contracts                                 2(q)            28,375           1,889                -
         Net gain on trading of marketable
           securities                                                             -               -              384
         Sales commission received from
           a related company                                  15              1,833               -                -
         Loss on disposal of
           property and equipment, net                                       (  463)              -          (   910)
         Net loss on written-off of an equity
           method investment                                                      -               -          (   659)
         Recovery of bad debts written-off                                        -               -            2,902
         Others                                                              (  189)          1,281            1,169
                                                                             ------          ------          -------

                                                                             30,580           4,070           10,338
                                                                             ======          ======          =======
</TABLE>


                                      F-14
<PAGE>


CHINA RESOURCES DEVELOPMENT, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Amounts in thousands, except share and per share data)


7.       INCOME TAXES
<TABLE>
<CAPTION>
         Pre-tax loss from continuing operations for the years ended December 31
         was taxed in the following jurisdictions:
                                                                                   Year ended December 31,
                                                                      1997                 1998                 1999
                                                                    ------------------------------------------------
                                                                       RMB                  RMB                  RMB
<S>                                                                 <C>                 <C>                    <C>
         PRC                                                        65,624              (19,410)               4,801
         Other countries                                           (13,063)             (44,340)             (10,123)
                                                                    ------               ------               ------

                                                                    52,561              (63,750)             ( 5,322)
                                                                    ======               ======               ======
</TABLE>

         The provision for income tax for continuing operations consists of the
         following:
<TABLE>
<CAPTION>
                                                                                   Year ended December 31,
                                                                      1997                 1998                 1999
                                                                    ------------------------------------------------
                                                                       RMB                  RMB                  RMB
<S>                                                                  <C>                 <C>                   <C>
         Current:
           PRC federal income tax                                    9,798                    -                    -
                                                                    ======               ======               ======
</TABLE>

         It is management's intention to reinvest all the income attributable to
         the Company earned by its operations outside the United States of
         America (the "U.S."). Accordingly, no U.S. federal and state income
         taxes have been provided in these consolidated financial statements.

         The reconciliation of expert income taxes/(tax benefit) benefit for
         income tax computed at the PRC federal statutory tax rate applicable to
         foreign investment enterprises operating in Hainan, a Special Economic
         Zone in the PRC, to income tax expense is as follows:

                                      F-15
<PAGE>


CHINA RESOURCES DEVELOPMENT, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Amounts in thousands, except share and per share data)


7.       INCOME TAXES (continued)
<TABLE>
<CAPTION>


                                                                                   Year ended December 31,
                                                                      1997                 1998                 1999
                                                                  --------------------------------------------------
                                                                       RMB                  RMB                  RMB
<S>                                                                    <C>                  <C>                  <C>
         PRC federal statutory tax rate                                 15%                  15%                  15%

         Computed expected income taxes (tax benefit)                7,884             (  9,563)            (    798)
         Higher effective income tax rates
           of another countries                                   (  1,840)            (  1,857)            (  2,025)
         Net increase in valuation allowance                         3,293                5,068                  373
         Tax on foreign personal holding
           company income                                                -                    -                2,450
         Non-deductible expenses                                       521                6,352                    -
         Others, net                                              (     60)                   -                    -
                                                                  --------             --------             --------

         Income tax expense for the year                             9,798                    -                    -
                                                                  ========             ========             ========
</TABLE>

         The deferred tax asset of the Group is comprised of the following:

<TABLE>
<CAPTION>
                                                                                                   December 31,
                                                                                           1998                 1999
                                                                                         ---------------------------
                                                                                            RMB                  RMB
<S>                                                                                       <C>                 <C>
         Deferred tax asset:
           Net operating loss carryforwards                                               9,892               10,265
           Less: Valuation allowance for deferred tax asset                              (9,892)             (10,265)
                                                                                         ------              -------

                                                                                              -                    -
                                                                                         ======              =======
</TABLE>

         Undistributed earnings of the Company's foreign subsidiaries amounted
         to approximately RMB66 million at December 31, 1999. Because those
         earnings are considered to be permanently invested, no provision for
         U.S. federal and state income taxes on those earnings has been
         provided. Upon distribution of those earnings in the form of dividends
         or otherwise, the Company would be subject to U.S. income taxes.
         Determination of the amount of unrecognized deferred U.S. income tax
         liability is not practicable because of the complexities associated
         with its hypothetical calculation.

         At December 31, 1999, the Company had net operating loss carryforwards
         ("NOLs") of approximately RMB28 million for U.S. income tax purposes
         that expire in various years through 2018. At December 31, 1999, the
         Group's subsidiaries in the PRC had NOLs amounting to approximately
         RMB3 million for PRC income tax purposes that expire in 2004.


                                      F-16
<PAGE>


CHINA RESOURCES DEVELOPMENT, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Amounts in thousands, except share and per share data)


8.       EARNINGS/(LOSS) PER SHARE

         The following table sets forth the computation of basic and diluted
         earnings/(loss) per share:
<TABLE>
<CAPTION>
                                                                                   Year ended December 31,
                                                                      1997                 1998                 1999
                                                                 ---------------------------------------------------
                                                                       RMB                  RMB                  RMB
<S>                                                                 <C>               <C>                  <C>
         Numerator
         ---------
           Numerator for basic and diluted
             earnings/(loss) per share:
               Income/(loss) attributable to common
                 shareholders                                       18,200            (  52,671)           (   6,996)
                                                                 =========            =========            =========

         Denominator
         -----------
           Denominator for basic earnings/(loss) per share:
               Weighted-average number of shares                   595,817              599,150              592,900

           Effect of dilutive securities:
             Stock options                                               -                    -                    -
             Warrants                                                1,745                    -                    -
                                                                 ---------            ---------            ---------

           Dilutive potential common shares                          1,745                    -                    -
                                                                 ---------            ---------            ---------

           Denominator for diluted earnings/(loss) per share:
               Adjusted weighted-average number of
                 shares and assumed conversions                    597,562              599,150              592,900
                                                                 =========            =========            =========

         Basic earnings/(loss) per share                             30.55           (    87.91)           (   11.80)
                                                                 =========            =========            =========

         Diluted earnings/(loss) per share                           30.46           (    87.91)           (   11.80)
                                                                 =========            =========            =========
</TABLE>

         For the years ended December 31, 1999, 1998 and 1997, the weighted
         average number of shares used in computing basic and diluted
         earnings/(loss) per share were adjusted as if the Reverse Stock Split
         had been completed on January 1, 1997.

         Details of the stock options and warrants of the Company are set out in
         note 14.

         The computation of diluted earnings/(loss) per share did not assume the
         conversion of the stock options of the Company in 1999, 1998 and 1997
         and the warrants of the Company in 1999 and 1998 because their
         inclusion would have been antidilutive.

                                      F-17

<PAGE>


CHINA RESOURCES DEVELOPMENT, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Amounts in thousands, except share and per share data)


9.       MARKETABLE SECURITIES
<TABLE>
<CAPTION>
                                                                                                   December 31,
                                                                                           1998                 1999
                                                                                         ---------------------------
                                                                                            RMB                  RMB
<S>                                                                                      <C>                  <C>
         Trading securities listed on the Shenzhen Stock
           Exchange, PRC
             At cost                                                                          -               55,023
             Add: unrealized gain                                                             -                4,367
             Less: unrealized loss                                                            -               (2,355)
                                                                                         ------               ------

         Fair value                                                                           -               57,035
                                                                                         ======               ======

</TABLE>

10.      PROPERTY AND EQUIPMENT

         Property and equipment comprise:
<TABLE>
<CAPTION>
                                                                                                  December 31,
                                                                                           1998                 1999
                                                                                         ---------------------------
                                                                                            RMB                  RMB
<S>                                                                                       <C>                  <C>
         At cost:
           Buildings and leasehold improvements                                           6,052                9,115
           Machinery, equipment and motor vehicles                                        6,904                8,044
                                                                                         ------               ------
                                                                                         12,956               17,159

         Accumulated depreciation                                                        (5,713)              (5,757)
                                                                                         ------               ------

                                                                                          7,243               11,402
                                                                                         ======               ======
</TABLE>

                                      F-18

<PAGE>


CHINA RESOURCES DEVELOPMENT, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Amounts in thousands, except share and per share data)


11.      INVESTMENTS

         Investments comprise:
<TABLE>
<CAPTION>
                                                                                                  December 31,
                                                                     Notes                 1998                 1999
                                                                                        ----------------------------
                                                                                            RMB                  RMB
<S>                                                                                       <C>                <C>
         Equity method investment                                     (a)                 1,659                    -
         Cost method investments                                      (b)               117,642              117,642
                                                                                        -------              -------

                                                                                        119,301              117,642
                                                                                        =======              =======
</TABLE>

         As stated in note 4, the negative goodwill arising on the acquisition
         of certain minority interests in a subsidiary in 1998 of RMB7,119 was
         allocated to reduce proportionately the values of the above
         investments.

         (a)      Equity method investment represents HARC's 30% equity interest
                  in Hainan Far East Rubber Development Company Limited ("Far
                  East"). In 1999, management of Far East applied the necessary
                  procedures to wind up the company and provision for loss on
                  dissolution of Far East was expensed. Accordingly, the
                  investment cost was written-off in 1999. Before winding-up,
                  Far East had not yet commenced operations and there was no
                  income or loss attributable to the equity investee.

         (b)      Cost method investments comprise:
<TABLE>
<CAPTION>
                                                                                                   December 31,
                                                                                           1998                 1999
                                                                                        ----------------------------
                                                                                            RMB                  RMB
<S>                                                                                     <C>                  <C>
                  Investments in:
                    Hainan Sundiro Motorcycle Co., Ltd.
                      ("Sundiro")                                                       112,000              112,000
                    PRC joint venture                                                     4,759                4,759
                    Others                                                                  883                  883
                                                                                        -------              -------

                                                                                        117,642              117,642
                                                                                        =======              =======
</TABLE>

                                      F-19

<PAGE>


CHINA RESOURCES DEVELOPMENT, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Amounts in thousands, except share and per share data)


11.      INVESTMENTS (continued)

         (b)      Cost method investments comprise: (continued)

                  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.

                  The investment in Sundiro represents a 5.3% equity interest.
                  In 1998, the Company made a deposit of RMB28,718 to Guilinyang
                  for the intended acquisition of an additional 3.8% equity
                  interest in Sundiro (the "Acquisition").

                  The Group originally anticipated that its relationship with
                  Sundiro would lead to additional procurement of materials and
                  supplies from the Group. Nevertheless, such expected business
                  relationship with Sundiro did not occur.

                  Based on an analysis of the opportunity cost and expected
                  future benefits, the Group decided not to proceed with the
                  Acquisition. Under the circumstances, the Group does not
                  believe that it will be able to recover the deposit.
                  Accordingly, the deposit was written-off as of December 31,
                  1998.

                  The write-off of the deposit also triggered an impairment
                  review of the Group's existing interest in Sundiro. As a
                  result, a write-down of RMB21,251 was made in 1998 based on
                  the decline in the estimated net realizable value of the
                  investment below its carrying value which management believed
                  is other-than-temporary. The net realizable value was
                  estimated with reference to the quoted market price of
                  securities with similar, but not identical characteristics,
                  and adjusted for the lack of marketability of the investment.


                                      F-20


<PAGE>


CHINA RESOURCES DEVELOPMENT, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Amounts in thousands, except share and per share data)


12.      OTHER PAYABLES AND ACCRUED LIABILITIES
<TABLE>
<CAPTION>
                                                                                                  December 31,
                                                                                           1998                 1999
                                                                                         ---------------------------
                                                                                            RMB                  RMB
<S>                                                                                       <C>                 <C>
         Other payables                                                                   8,748               16,982
         Accrued liabilities                                                              6,728                7,647
                                                                                         ------               ------

                                                                                         15,476               24,629
                                                                                         ======               ======
</TABLE>
13.      SHARE CAPITAL

         On April 1, 1997, the Company entered into an agreement (the
         "Advertising and Media Agreement") with an independent public relations
         company (the "PR Company"). Pursuant to that agreement, 15,000 shares
         of common stock of the Company were issued and 35,000 warrants were
         granted (note 14) to the PR Company as consideration for Internet and
         other public relations services to be provided by the PR Company.

         On May 1, 1997, the Company entered into a financial consultancy
         agreement with an independent financial consulting company, pursuant to
         which 10,000 shares of common stock of the Company were issued as
         consideration for the financial consultancy services to be rendered by
         that company.

         During the year ended December 31, 1998, the Company repurchased and
         retired 10,000 shares of common stock of the Company as treasury stock
         under its share repurchase program for a total consideration of RMB853.

         On May 28, 1999, the Company's shareholders approved the Reverse Stock
         Split.

                                      F-21

<PAGE>


CHINA RESOURCES DEVELOPMENT, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Amounts in thousands, except share and per share data)


14.      STOCK OPTIONS AND WARRANTS

         Stock options
         -------------
         The Company adopted a stock option plan (the "Plan") as of March 31,
         1995. The 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. Initially,
         24,000 shares of common stock of the Company, after adjusting for the
         Reverse Stock Split in 1999, were permitted to be issued and sold
         pursuant to options granted under the Plan. All of the stock options
         were issued in accordance with the terms of the Plan on July 1, 1995 to
         certain officers, directors, employees and consultants of the Group at
         an exercise price of US$37.8 (RMB314.5) per share (the fair market
         value of the common stock as of July 1, 1995) and are exercisable from
         July 1, 1996 to July 1, 2005. On May 20, 1996, pursuant to a "Unanimous
         Written Consent" of the committee appointed pursuant to the Plan and a
         resolution of a special meeting of the Board of Directors of the
         Company, the exercise price was changed to US$42.0 (RMB348.6) per share
         (the fair market value of the common stock as of May 20, 1996), after
         adjusting for the Reverse Stock Split in 1999 and 1996. By virtue of
         that action, the outstanding options are now exercisable beginning on
         May 20, 1997 until May 20, 2006. All stock options remained outstanding
         as of December 31, 1999.

         On December 30, 1996, a shareholders' meeting was held authorizing an
         amendment of the Plan increasing the number of common stock issuable
         under the Plan to 20% of the Company's outstanding common stock, as
         determined at the time of granting of the stock options. Such shares
         may represent authorized but unissued shares as well as repurchased or
         forfeited shares for any grant under the Plan that was expired or
         unexercised. Further amendments were made to give the Board of
         Directors the ability to set a holding period of less than one year for
         non-qualified stock options.

         Pro forma information regarding net income and earnings per share is
         required by SFAS 123, and has been determined as if the Company had
         accounted for its stock options under the fair value method of that
         statement. The fair value for these options was estimated at the date
         of grant using a Black-Scholes option pricing model with the following
         weighted average assumptions for the date of grant and the date of
         subsequent modification in 1995 and 1996, respectively: risk-free
         interest rates of 6.50% and 6.78%; no dividend yield; volatility
         factors of the expected market price of the Company's common stock of
         141.38% and 42.13%; and a weighted average expected life of the options
         of 6 years. No options were granted in 1997, 1998 and 1999.

         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 the management's opinion,
         the existing models do not necessarily provide a reliable single
         measure of the fair value of its stock options.


                                      F-22

<PAGE>


CHINA RESOURCES DEVELOPMENT, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Amounts in thousands, except share/option/warrant and per share/option/warrant
data)


14.      STOCK OPTIONS AND WARRANTS (continued)

         For the purposes of pro forma disclosures, the estimated fair value of
         the options is amortized to expense over the options' vesting period.
         The Company's pro forma information is as follows:
<TABLE>
<CAPTION>

                                                                                  Year ended December 31,
                                                                      1997                 1998                 1999
                                                                    ------------------------------------------------
                                                                       RMB                  RMB                  RMB
<S>                                                                 <C>                 <C>                  <C>
         Pro forma net income/(loss)                                10,770              (60,101)             (14,426)
                                                                    ======             ========             ========

         Pro forma earnings/(loss) per share:
             Basic                                                   18.08             ( 100.31)            ( 24.33)
                                                                    ======             ========             ========

             Diluted                                                 18.02             ( 100.31)            ( 24.33)
                                                                    ======             ========             ========
</TABLE>
         The Company's stock option activities and related information for the
         years ended December 31, 1999, 1998 and 1997 are summarized as follows:
<TABLE>
<CAPTION>

                                                  1997                      1998                       1999
                                                       Weighted                  Weighted                   Weighted
                                                        average                   average                    average
                                                       exercise                  exercise                   exercise
                                           Options        price      Options        price       Options        price
                                           --------------------      --------------------       --------------------
                                              `000          US$         `000          US$          `000          US$
<S>                                             <C>          <C>          <C>          <C>           <C>          <C>
         Outstanding at
           beginning of year                    24           42           24           42            24           42
         Granted                                 -            -            -            -             -            -
         Exercised                               -            -            -            -             -            -
         Forfeited                               -            -            -            -             -            -
                                              ----                      ----                       ----

         Outstanding at end
           of year                              24           42           24           42            24           42
                                              ====                      ====                       ====
</TABLE>
         The weighted average fair value of options modified during the year
         ended December 31, 1996 was US$528 (RMB4,372).

         All options outstanding as of December 31, 1999 have an exercise price
         of US$42 (RMB347.8). The weighted average remaining contractual life of
         those options is 6.4 years.


                                      F-23
<PAGE>


CHINA RESOURCES DEVELOPMENT, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Amounts in thousands, except share/option/warrant and per share/option/warrant
data)


14.      STOCK OPTIONS AND WARRANTS (continued)

         Warrants
         --------
         Pursuant to the Advertising and Media Agreement set out in note 13,
         35,000 warrants for the subscription of 35,000 shares of common stock
         of the Company, after adjusting for the Reverse Stock Split in 1999,
         were granted to the PR Company on April 1, 1997. All warrants have a
         term of three years from April 1, 1997 and are exercisable on April 1,
         1997.

         The Company's warrants activities and related information for the years
         ended December 31, 1999, 1998 and 1997 are summarized as follows:
<TABLE>
<CAPTION>

                                                  1997                      1998                       1999
                                                       Weighted                  Weighted                   Weighted
                                                        average                   average                    average
                                                       exercise                  exercise                   exercise
                                           Options        price      Options        price       Options        price
                                           --------------------      --------------------       --------------------
                                              `000          US$         `000          US$          `000          US$
<S>                                        <C>           <C>              <C>       <C>              <C>       <C>
         Outstanding at the
           beginning of year                     -            -           35        41.40            35        41.40
         Granted                                35        41.40            -            -             -            -
         Exercised                               -            -            -            -             -            -
         Forfeited                               -            -            -            -             -            -
                                              ----                      ----                       ----

         Outstanding at the end of
           year                                 35        41.40           35        41.40            35        41.40
                                              ====                      ====                       ====
</TABLE>

         The weighted average fair value of warrants granted during the year
         ended December 31, 1997 was US$444 (RMB3,676).

         Exercise prices of warrants outstanding as of December 31, 1999 ranged
         from US$26.90 (RMB222.73) to US$55.00 (RMB455.40) per share. The
         weighted average remaining life of those warrants is 0.2 year.

                                      F-24

<PAGE>


CHINA RESOURCES DEVELOPMENT, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Amounts in thousands, except share and per share data)


15.      RELATED PARTY BALANCES AND TRANSACTIONS

         The Group's amounts due from/to Farming Bureau and related companies
         controlled by the Farming Bureau or a shareholder of the Company
         comprise:
<TABLE>
<CAPTION>

                                                                                                  December 31,
                                                                                           1998                 1999
                                                                                         ---------------------------
                                                                                            RMB                  RMB
<S>                                                                                      <C>                  <C>
         Due from Farming Bureau                                                         33,667               47,013
                                                                                         ======               ======

         Due from related companies:
           Jin Long Corporation ("Jin Long")                                             16,160               16,025
           Jin Huan Corporation ("Jin Huan")                                              3,552                8,843
           Other related companies                                                       11,090               11,122
                                                                                         ------               ------

                                                                                         30,802               35,990
                                                                                         ======               ======

         Due to related companies:
           Other related companies                                                       31,291               29,015
                                                                                         ======               ======

</TABLE>
         The balances with the Farming Bureau and related companies are
         unsecured, interest-free and are repayable on demand.

                                      F-25

<PAGE>


CHINA RESOURCES DEVELOPMENT, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Amounts in thousands, except share and per share data)


15.      RELATED PARTY BALANCES AND TRANSACTIONS (continued)

         In addition to those transactions set out in notes 3, 4, 11(b), 21(a)
         and 23, the Group had the following transactions with the Farming
         Bureau, certain related companies controlled by the Farming Bureau and
         certain shareholders/directors of the Company.
<TABLE>
<CAPTION>

                                                                                 Year ended December 31,
                                                      Notes               1997               1998               1999
                                                                   -------------------------------------------------
                                                                           RMB                RMB                RMB
<S>                                                   <C>          <C>               <C>                <C>

         Farming Bureau and related companies
          controlled by the Farming Bureau:

         Purchase of natural rubber                    (a)         ( 1,011,662)      (    386,754)      (    450,704)
         Guaranteed gross profit received              (a)              18,105             12,715              6,350
         Net sales of materials, supplies and
           other agricultural products                 (b)              32,117             14,252             23,718
         Net sales of natural rubber                                   245,934             16,121                  -
         Interest income and rental in
           lieu of interest received                                    11,947                  -                  -
         Interest expense paid                                     (     1,438)      (        235)                 -
         Rental expenses paid                                      (     3,948)      (        628)      (        739)
         Handling fee paid for the trading
           of natural rubber futures                               (       348)                 -                  -
         Sales commission received                                       1,833                  -                  -
         Transfer of assets and liabilities            (c)             292,560                  -                  -
         Acquisition of equity interest in
           Sundiro                                     (d)             140,000                  -                  -
         Disposal of equity interest in a PRC
           joint venture                               (d)         (     5,000)                 -                  -
                                                                   ===========       ============       ============

         Shareholders/directors of the Company:

         Consultancy fees paid                         (e)         (     3,033)      (      3,783)      (        289)
                                                                   ===========       ============       ============
</TABLE>


                                      F-26

<PAGE>


CHINA RESOURCES DEVELOPMENT, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Amounts in thousands, except share and per share data)


15.      RELATED PARTY BALANCES AND TRANSACTIONS (continued)

         (a)      Purchase of natural rubber
                  --------------------------
                  Pursuant to a sales and purchase agreement dated November 5,
                  1994 and as subsequently amended (the "S&P Agreement") amongst
                  Hainan Agricultural, First Goods And Materials Supply And
                  Sales Corporation, Second Goods And Materials Supply And Sales
                  Corporation (collectively the "Principal Subsidiaries") and
                  the Farming Bureau, the Farming Bureau agreed to guarantee the
                  supply of natural rubber to the Principal Subsidiaries for a
                  period of 15 years from November 5, 1994, under the same terms
                  and conditions as are offered to other purchasers of natural
                  rubber with a first right of refusal to the Principal
                  Subsidiaries.

                  The Farming Bureau allows the Principal Subsidiaries to set
                  the selling price of natural rubber according to market
                  conditions and guarantees a minimum gross profit margin of
                  3.5% (the "Guaranteed Margin") earned by First Goods And
                  Materials Supply And Sales Corporation and Second Goods And
                  Materials Supply And Sales Corporation (collectively the
                  "Operating Subsidiaries") on natural rubber purchased from
                  farms controlled by the Farming Bureau (the "Farms"). Pursuant
                  to an amendment to the S&P Agreement, the Guaranteed Margin
                  was reduced to 1.5% with effect from April 1, 1999.

         (b)      Procurement of materials and supplies
                  -------------------------------------
                  Pursuant to the S&P Agreement, the Farming Bureau also agreed
                  to purchase certain products sourced by the Principal
                  Subsidiaries for a period of 15 years from November 5, 1994 at
                  prices acceptable to all parties with a first right of refusal
                  to the Principal Subsidiaries.

         (c)      Restructuring of operations
                  ---------------------------
                  In the third quarter of 1996, the Group initiated a plan to
                  restructure its operations in Hainan, the PRC (the "1996
                  Restructuring"). Pursuant to a Shareholders' Agreement on
                  Business Restructuring (the "Restructuring Agreement"), the
                  operations of the Principal Subsidiaries were restructured
                  effective from October 1, 1996. The 1996 Restructuring has
                  resulted in the simplification of the corporate structure by
                  consolidating the operations of several trading and servicing
                  divisions and the transfer of certain assets, liabilities,
                  including certain amounts due from the Farms and other related
                  companies of the Farming Bureau, and surplus employees to the
                  Farming Bureau. In addition, as part of the 1996
                  Restructuring, bank loans of the Principal Subsidiaries were
                  transferred to the Farming Bureau in March 1997 when the
                  proper approval was obtained from the relevant banks. Despite
                  the downsizing of several operations, the 1996 Restructuring
                  has not resulted in the discontinuance of any line of business
                  as all the operations have been taken up by the remaining
                  divisions.

                                      F-27
<PAGE>


CHINA RESOURCES DEVELOPMENT, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Amounts in thousands, except share and per share data)


15.      RELATED PARTY BALANCES AND TRANSACTIONS (continued)

         (c)      Restructuring of operations (continued)
                  ---------------------------
                  Pursuant to an Asset and Staff Transfer Agreement, the values
                  of the assets and liabilities transferred were determined
                  based on their fair values at the effective date of transfer
                  as determined by a professional independent valuer in the PRC.
                  Based on their valuation, there were no material differences
                  between the fair values and the carrying values (as determined
                  under US GAAP) of those assets and liabilities at the date of
                  transfer. After the 1996 Restructuring, the Farming Bureau
                  took over all the transferred employees and arrangements were
                  made with an insurance company controlled by the Farming
                  Bureau to transfer the retirement plan (note 23) of those
                  employees to the Farming Bureau.

                  Based on the valuation by the independent valuer, the fair
                  value of bank loans of the Principal Subsidiaries that were
                  transferred to the Farming Bureau in 1997 was RMB292,560. The
                  net liabilities transferred to the Farming Bureau, recorded as
                  an adjustment to the amount due from the Farming Bureau, was
                  RMB64,610.

                  In connection with the 1996 Restructuring and effective from
                  October 1, 1996, the amounts due from the Farming Bureau and
                  other related companies controlled by the Farming Bureau have
                  become interest-free. Starting from October 1, 1996, interest
                  expense on bank loans of the Group were borne by the Farming
                  Bureau until the effective transfer of the bank loans to the
                  Farming Bureau in March 1997.

         (d)      Acquisition and disposal of equity interest in cost based
                  ---------------------------------------------------------
                  investments
                  -----------
                  Pursuant to a stock purchase agreement dated December 29,
                  1997, the Group acquired from Guilinyang a 5.3% equity
                  interest in Sundiro for a total consideration of RMB140,000.

                  During 1997, the Group disposed of its interest in a PRC joint
                  venture to Guilinyang for a total consideration of RMB5,000.

                  The purchase consideration of Sundiro and the sales proceeds
                  of the PRC joint venture were used to offset the amount due
                  from Guilinyang (note 16).

                                      F-28
<PAGE>


CHINA RESOURCES DEVELOPMENT, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Amounts in thousands, except share and per share data)


15.      RELATED PARTY BALANCES AND TRANSACTIONS (continued)

         (e)      Consultancy fees
                  ----------------
                  Pursuant to a mandate letter dated February 1, 1994, which was
                  amended on November 1, 1994, between Billion Luck and Brender
                  Services Limited ("Brender"), which is beneficially owned by a
                  director of the Company, Billion Luck agreed to pay Brender
                  consultancy fees of HK$80 (RMB89) per month, and pursuant to a
                  revised consulting agreement dated April 30, 1995, Brender
                  agreed to provide accountancy and consulting services to the
                  Company for a period of 5 years commencing on May 1, 1995. In
                  consideration of the services to be rendered, the monthly
                  consultancy fee paid by Billion Luck was increased to HK$170
                  (RMB184) per month during May 1, 1995 to April 30, 1997. In
                  1997, the consultancy agreement was renewed for another three
                  years effective from May 1, 1997, and in consideration of the
                  additional advisory and coordination works to be performed,
                  the monthly consultancy fee was revised to HK$270 (RMB289) per
                  month.


16.      SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION
<TABLE>
<CAPTION>

                                                                                     Year ended December 31,
                                                                          1997               1998               1999
                                                                       ---------------------------------------------
                                                                           RMB                RMB                RMB
<S>                                                                      <C>                   <C>                 <C>
         Cash paid during the year for:
           Interest expense                                              2,178                 53                  5
           Income tax                                                    4,486              6,011                  -
                                                                       =======            =======            =======

         Non-cash investing and financing activities:
           Transfer of assets and liabilities to the
             Farming Bureau pursuant to the 1996
             Restructuring (note 15(c)), net                           292,560                  -                  -
           Acquisition of a minority interest in a
             subsidiary (note 4)                                             -              7,000                  -
           Acquisition of an investment (note 15(d))                   140,000                  -                  -
           Disposal of an investment (note 15(d))                        5,000                  -                  -
                                                                       =======            =======            =======
</TABLE>

                                      F-29
<PAGE>


CHINA RESOURCES DEVELOPMENT, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Amounts in thousands except share and per share data)


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,
         trade receivables and amounts due from the Farming Bureau and related
         companies.

         (i)      Cash and cash deposits

                  The Group maintains its cash and cash deposits primarily with
                  various PRC government authorised financial institutions. The
                  Group performs periodic evaluations of the relative credit
                  standing of those financial institutions that are considered
                  in the Group's investment strategy.

         (ii)     Trade receivables

                  The Group sells to customers located throughout the PRC.
                  Concentrations of credit risk with respect to trade
                  receivables are limited due to the large number of entities
                  comprising the Group's customer base. The Group carefully
                  assesses the financial strength of its customers and generally
                  does not require collateral.

         (iii)    Amounts due from the Farming Bureau and related companies

                  The Farming Bureau has guaranteed the recoverability of a
                  substantial portion of the amounts due from related companies,
                  all of which are State-owned entities controlled by the
                  Farming Bureau. The Group carefully assesses the
                  recoverability of those balances not guaranteed by the Farming
                  Bureau and generally does not require collateral.

         (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-30

<PAGE>


CHINA RESOURCES DEVELOPMENT, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(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 its fair value disclosures for financial instruments:

         (i)      Cash and cash equivalents

                  The carrying amount reported in the consolidated balance
                  sheets for cash and cash equivalents approximate their fair
                  value.

         (ii)     Marketable securities

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

         (iii)    Trade receivables, accounts payable and other payables

                  The carrying amounts reported in the balance sheet for trade
                  receivables, accounts payable and other payables approximate
                  their fair values.

         (iv)     Amounts due from/to the Farming Bureau and related companies

                  The fair values of amounts due from/to the Farming Bureau and
                  related companies cannot be determined due to their related
                  party nature of those balances.

         (v)      Cost method investments

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


                                      F-31

<PAGE>


CHINA RESOURCES DEVELOPMENT, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Amounts in thousands, except share and per share data)


19.      RESERVES AND DISTRIBUTION OF PROFITS

         The movements in reserves during the years were as follows:
<TABLE>
<CAPTION>

                                                                                     Collective
                                                                  Surplus               welfare
                                                                  reserve                  fund                Total
                                                                  --------------------------------------------------
                                                                      RMB                   RMB                  RMB
<S>                                                                 <C>                   <C>                 <C>
         Balance at December 31, 1996                               8,874                 8,874               17,748
         Appropriation for the year                                 3,883                 3,883                7,766
                                                                  -------               -------              -------

         Balance at December 31, 1997                              12,757                12,757               25,514
         Appropriation for the year                                   380                   380                  760
                                                                  -------               -------              -------

         Balance at December 31, 1998                              13,137                13,137               26,274
         Appropriation for the year                                   278                   278                  556
                                                                  -------               -------              -------

         Balance at December 31, 1999                              13,415                13,415               26,830
                                                                  =======               =======              =======
</TABLE>

         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 its statutory
         financial statements will be allocated to each of surplus reserve and
         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.

         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. The amounts of
         retained earnings of HARC and its subsidiaries that are included in the
         consolidated balance sheets as of December 31, 1999, 1998 and 1997 that
         are available for distribution are RMB76,143, RMB70,615 and RMB86,448,
         respectively.


                                      F-32
<PAGE>


CHINA RESOURCES DEVELOPMENT, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Amounts in thousands, except share and per share data)


20.      ACCUMULATED OTHER COMPREHENSIVE LOSS
<TABLE>
<CAPTION>
         The component of other comprehensive loss is as follows:
                                                                                                            Currency
                                                                                                         translation
                                                                                                         adjustments
                                                                                                       -------------
                                                                                                                 RMB
<S>                                                                                                     <C>
         Balance at December 31, 1997                                                                              -
         Currency translation adjustment                                                                (          4)
                                                                                                       -------------

         Balance at December 31, 1998                                                                   (          4)
         Currency translation adjustment                                                                (         14)
                                                                                                       -------------

         Balance at December 31, 1999                                                                   (         18)
                                                                                                       =============
</TABLE>

         The earnings associated with the Group's investment in its foreign
         subsidiaries are considered to be permanently invested and no provision
         for U.S. federal and state income taxes on those earnings or
         translation adjustments has been provided.


21.      COMMITMENTS AND CONTINGENCIES

         (a)      Lease commitments

                  At December 31, 1999, future minimum payments under
                  non-cancelable operating leases for the leasing of buildings
                  in Hainan, the PRC, from the Farming Bureau and companies
                  controlled by the Farming Bureau consisted of the following:
<TABLE>
<CAPTION>
                                                                                                                 RMB
                  Payable in:
<S>                 <C>                                                                                          <C>
                    2000                                                                                         242
                    2001                                                                                         170
                    2002                                                                                         170
                    2003                                                                                         170
                    2004                                                                                         128
                    Thereafter                                                                                   128
                                                                                                               -----

                  Total minimum lease payments                                                                 1,008
                                                                                                               =====
</TABLE>

                  Rental expenses under operating leases for the years ended
                  December 31, 1999, 1998 and 1997 amounted to RMB242, RMB242
                  and RMB242, respectively.

                                      F-33
<PAGE>


CHINA RESOURCES DEVELOPMENT, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Amounts in thousands, except share and per share data)


21.      COMMITMENTS AND CONTINGENCIES (continued)

         (b)      Machinery

                  Pursuant to a purchase agreement dated July 10, 1999, the
                  Group was obligated to purchase machinery totaling RMB24,440.
                  Deposit of RMB1,560 was paid.


22.      FOREIGN CURRENCY EXCHANGE

         The RMB is not freely convertible into foreign currencies.

         Effective from January 1, 1994, a single rate of exchange is quoted
         daily by the People's Bank of China (the "Unified Exchange Rate").
         However, the unification 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.


23.      RETIREMENT BENEFITS

         As stipulated by the PRC regulations, the Operating Subsidiaries
         participate in a defined contribution retirement plan (the "Retirement
         Plan") administered by a State-owned insurance company controlled by
         the Farming Bureau. The Operating Subsidiaries are required to make
         contributions to the Retirement Plan at a rate of 21% of the aggregate
         of basic salaries, allowances and bonuses of its existing staff. All
         staff of the Operating Subsidiaries are covered under the Retirement
         Plan and upon retirement, the retired staff are entitled to a monthly
         pension payment borne by the above-mentioned insurance company under
         the Retirement Plan. The Operating Subsidiaries are not responsible for
         any payments beyond the contributions to the Retirement Plan as noted
         above.

         The amounts of contributions paid by the Operating Subsidiaries, which
         were charged to the consolidated statements of operations, amounted to
         RMB262, RMB287 and RMB368 for the years ended December 31, 1999, 1998
         and 1997, respectively.

                                      F-34

<PAGE>


CHINA RESOURCES DEVELOPMENT, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Amounts in thousands, except share and per share data)


24.      VALUATION AND QUALIFYING ACCOUNTS
<TABLE>
<CAPTION>
                                                             Provision for        Provision for
                                                                  doubtful            inventory
                                                                  accounts          write-downs                Total
                                                             -------------------------------------------------------
                                                                      RMB                   RMB                  RMB
<S>                                                          <C>                        <C>                   <C>
         Balance at December 31, 1997                                    -                    -                    -
         Charged to costs and expenses                               4,740                1,554                6,294
                                                                   -------                -----              -------

         Balance at December 31, 1998                                4,740                1,554                6,294
         Recovery of bad debts written-off                         ( 2,902)                   -              ( 2,902)
                                                                   -------                -----              -------

         Balance at December 31, 1999                                1,838                1,554                3,392
                                                                   =======                =====              =======
</TABLE>

25.      SEGMENT FINANCIAL INFORMATION

         The Group was principally engaged in the distribution of natural
         rubber, the procurement of materials and supplies, and the distribution
         of other agricultural products in the PRC for all the years presented
         in the consolidated financial statements. The Group did not have any
         export sales during the three years ended December 31, 1999, 1998 and
         1997.

         Description of products by segment
         ----------------------------------
         The Group had two reportable segments: (i) rubber and (ii) materials,
         supplies and other agricultural products for 1999, 1998 and 1997. The
         Group's rubber division primarily sold natural rubber to manufacturers
         and other distributors in the PRC. The Group's materials, supplies and
         other agricultural products division primarily sold materials, supplies
         and other agricultural products to farms, manufacturers and other
         distributors in the PRC.

         Measurement of segment profit or loss and segment assets
         --------------------------------------------------------
         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
         immaterial for all the periods presented.

         Factors management used to identify the Group's reportable segments
         -------------------------------------------------------------------
         The Group's reportable segments are business units that offer different
         products. The reportable segments are each managed separately because
         they distribute distinct products.

                                      F-35
<PAGE>


CHINA RESOURCES DEVELOPMENT, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Amounts in thousands, except share and per share data)


25.      SEGMENT FINANCIAL INFORMATION (continued)
<TABLE>
<CAPTION>

         Operating segment information
         -----------------------------
                                                                                     Year ended December 31,
                                                                          1997               1998               1999
                                                                      ----------------------------------------------
                                                                           RMB                RMB                RMB
<S>                                                                    <C>                <C>                <C>
         Net sales to external customers:
           Natural rubber:
             Net sales to unaffiliated customers                       858,211            453,952            442,841
             Net sales to affiliates                                   245,934             16,121                  -
                                                                     ---------          ---------          ---------
                                                                     1,104,145            470,073            442,841
                                                                     ---------          ---------          ---------

           Materials, supplies and other agricultural products:
               Net sales to unaffiliated customers                      12,909             43,367              9,808
               Net sales to affiliates                                  32,117             14,252             23,718
                                                                     ---------          ---------          ---------
                                                                        45,026             57,619             33,526
                                                                     ---------          ---------          ---------

         Total consolidated net sales                                1,149,171            527,692            476,367
                                                                     =========          =========          =========

         Depreciation and amortization expenses:
           Natural rubber                                                1,362              1,287                723
           Materials, supplies and other
             agricultural products                                          56                 45                340
                                                                     ---------          ---------          ---------

         Total segment depreciation and amortization
           expenses                                                      1,418              1,332              1,063

         Reconciling item:
           Depreciation and amortization expenses
             attributable to corporate assets                               39                 38                 28
                                                                     ---------          ---------          ---------

         Total consolidated depreciation and
           amortization expenses                                         1,457              1,370              1,091
                                                                     =========          =========          =========
</TABLE>

                                      F-36
<PAGE>


CHINA RESOURCES DEVELOPMENT, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Amounts in thousands, except share and per share data)


25.      SEGMENT FINANCIAL INFORMATION (continued)

<TABLE>
<CAPTION>
         Operating segment information (continued)
         -----------------------------
                                                                                     Year ended December 31,
                                                                          1997               1998               1999
                                                                     -----------------------------------------------
                                                                           RMB                RMB                RMB
<S>                                                                     <C>                 <C>                <C>
         Segment profit/(loss):
           Natural rubber                                               61,104              3,465              5,634
           Materials, supplies and other
             agricultural products                                       4,777      (       7,967)             3,157
                                                                     ---------      -------------     --------------

         Total segment profit/(loss)                                    65,881      (       4,502)             8,791

         Reconciling items:
           Corporate expenses                                        (  13,162)     (      15,852)    (       15,056)
           Loss on impairment of an investment                               -      (      49,969)                 -
           Interest income                                              14,849              6,862                944
           Interest expense                                          (  15,007)     (         289)    (            1)
                                                                     ---------      -------------     --------------

         Total consolidated income/(loss) before
           income taxes                                                 52,561      (      63,750)    (        5,322)
                                                                     =========      =============     ==============
</TABLE>
<TABLE>
<CAPTION>

                                                                                         December 31,
                                                                          1997               1998               1999
                                                                       ---------------------------------------------
                                                                           RMB                RMB                RMB
<S>                                                                    <C>                <C>                <C>
         Segment assets:
           Natural rubber                                              222,507            258,090            115,651
           Materials, supplies and other
             agricultural products                                      87,916             16,298            105,631
                                                                       -------            -------            -------

         Total segment assets                                          310,423            274,388            221,282

         Reconciling items:
           Corporate assets                                             14,084              8,046             64,483
           Investments                                                 147,671            119,301            117,808
           Intersegment receivables                                    (34,298)           (31,009)           (26,477)
                                                                       -------            -------            -------

         Total consolidated assets                                     437,880            370,726            377,096
                                                                       =======            =======            =======
</TABLE>

                                      F-37
<PAGE>


CHINA RESOURCES DEVELOPMENT, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Amounts in thousands, except share and per share data)


25.      SEGMENT FINANCIAL INFORMATION (continued)
<TABLE>
<CAPTION>
         Operating segment information (continued)
         -----------------------------
                                                                                    Year ended December 31,
                                                                          1997               1998               1999
                                                                       ---------------------------------------------
                                                                           RMB                RMB                RMB
<S>                                                                      <C>                  <C>            <C>
         Expenditure for additions to long-lived assets:
           Natural rubber                                                2,884                332                  -
           Materials, supplies and other
             agricultural products                                           -                 58                 54
                                                                       -------            -------            -------

         Total segment expenditure for additions to
           long-lived assets                                             2,884                390                 54

         Reconciling item:
           Corporate assets                                                  -                700              6,106
                                                                       -------            -------            -------

         Total consolidated expenditure for
           additions to long-lived assets                                2,884              1,090              6,160
                                                                       =======            =======            =======
</TABLE>

         Long-lived assets of reportable segments and corporate assets consisted
         of property and equipment.

         Net sales to external customers of the materials, supplies and other
         agricultural products division included the following product lines:

<TABLE>
<CAPTION>
                                                                                     Year ended December 31,
                                                                          1997               1998               1999
                                                                       ---------------------------------------------
                                                                           RMB                RMB                RMB
<S>                                                                     <C>                <C>                <C>
         Materials and supplies                                         45,026             28,180             32,838
         Other agricultural products                                         -             29,439                  -
                                                                       -------            -------            -------

                                                                        45,026             57,619             32,838
                                                                       =======            =======            =======
</TABLE>

                                      F-38

<PAGE>


CHINA RESOURCES DEVELOPMENT, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Amounts in thousands, except share and per share data)


25.      SEGMENT FINANCIAL INFORMATION (continued)

         Major customers
         For the year ended December 31, 1997, sales under the distribution of
         natural rubber segment to Jin Long amounted to approximately 21% of the
         total net sales of the Group.

         For the year ended December 31, 1998, sales under the distribution of
         natural rubber segment to two unaffiliated customers, Jilin Hualin
         Rubber Factory and Zhanjiang Sugar and Wine Company, amounted to
         approximately 20% of the total net sales of the Group.

         Except for the above, the Group did not have any major customers which
         represented more than 10% of the total consolidated net sales in 1999,
         1998 and 1997.




                                      F-39



<PAGE>
                                 EXHIBITS INDEX


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

        3.1       Articles of Incorporation of the Registrant, filed on January
                  15, 1986 (Filed with Annual Report on Form 10-K/A for the
                  fiscal year ended December 31, 1994, and incorporated herein
                  by reference.)

        3.2       By-laws of the Registrant (Filed with Annual Report on Form
                  10-K/A for the fiscal year ended December 31, 1994, and
                  incorporated herein by reference.)

        3.3       Certificate of Amendment of Articles of Incorporation of the
                  Registrant, filed on November 18, 1994 (Filed with Annual
                  Report on Form 10-K/A for the fiscal year ended December 31,
                  1994, and incorporated herein by reference.)

        3.4       Certificate of Amendment of Articles of Incorporation of the
                  Registrant, filed on November 18, 1994 (Filed with Annual
                  Report on Form 10-K/A for the fiscal year ended December 31,
                  1994, and incorporated herein by reference.)

        3.5       Certificate of Amendment of Articles of Incorporation of the
                  Registrant, effective March 31, 1995, and filed on June 19,
                  1995 (Filed with Quarterly Report on Form 10-Q/A for the
                  fiscal quarter ended March 31, 1995, and with Current Report
                  on Form 8-K dated June 19, 1995, and incorporated herein by
                  reference.)

        3.6       Certificate of Amendment of Articles of Incorporation of the
                  Registrant, effective December 30, 1996 (Filed with Annual
                  Report on Form 10-K/A for the fiscal year ended December 31,
                  1996, and incorporated herein by reference.)

        3.7       Amended and Restated By-laws of the Registrant, as amended on
                  December 30, 1996 (Filed with Annual Report on Form 10-K/A for
                  the fiscal year ended December 31, 1996, and incorporated
                  herein by reference.)

        4.1       Certificate of Designation of Series B Convertible Preferred
                  Stock, filed on December 13, 1995 (Filed with Current Report
                  on Form 8-K dated March 8, 1996, and incorporated herein by
                  reference.)

        4.2       Certificate of Amendment of Certificate of Designation of
                  Series B Convertible Preferred Stock, effective December 31,
                  1997 (Filed with Annual Report on Form 10-K/A for the fiscal
                  year ended December 31, 1996, and incorporated herein by
                  reference.)

       10.1       Land Use Agreement dated November 5, 1994, by and between
                  Hainan Province Agricultural Reclamation No. 1 Materials
                  Supply & Sales Company (First Supply) and Hainan Province
                  Agricultural Reclamation Jin Long Materials General Company
                  (Original Chinese version with certified English translation
                  filed as Exhibit 10.10 to Annual Report on Form 10-K/A for the
                  fiscal year ended December 31, 1994, and incorporated herein
                  by reference.)

       10.2       Land Use Agreement dated November 5, 1994, by and between
                  Hainan Province Agricultural Reclamation No. 2 Materials
                  Supply & Sales Company (Second Supply) and Hainan Province
                  Agricultural Reclamation Jin Huan Materials General Company



<PAGE>

                  (Original Chinese version with certified English translation
                  filed as Exhibit 10.11 to Annual Report on Form 10-K/A for the
                  fiscal year ended December 31, 1994, and incorporated herein
                  by reference.)

       10.3       Long-Term Sale and Purchase Agreement dated November 5, 1994,
                  by and among Hainan Province Agricultural Reclamation General
                  Company (the Farming Bureau), Hainan Agricultural Resources
                  Company Ltd., Hainan Province Agricultural Reclamation No. 1
                  Materials Supply & Marketing Company (First Supply), and
                  Hainan Province Agricultural Reclamation No. 2 Materials
                  Supply & Marketing Company (Second Supply) (Original Chinese
                  version with English translation filed as Exhibit 10.12 to
                  Annual Report on Form 10-K/A for the fiscal year ended
                  December 31, 1994, and incorporated herein by reference.)

       10.4       Rental Agreement, by and between General Bureau of Hainan
                  State Farms (the Farming Bureau) and Hainan Agricultural
                  Resources Company Limited (Original Chinese version with
                  English Translation filed as Exhibit 10.14 to Annual Report on
                  Form 10-K/A for the fiscal year ended December 31, 1994, and
                  incorporated herein by reference.)

       10.5       Guaranty Agreement, by and among Hainan Province Agricultural
                  Reclamation General Company (the Farming Bureau), Hainan
                  Agricultural Reclamation No. 1 Materials Supply & Sales
                  Company (First Supply) and Hainan Agricultural Reclamation No.
                  2 Materials Supply & Sales Company (Second Supply) (Original
                  Chinese version with certified English Translation filed as
                  Exhibit 10.15 to Annual Report on Form 10-K/A for the fiscal
                  year ended December 31, 1994, and incorporated herein by
                  reference.)

       10.6       China Resources Development, Inc., 1995 Stock Option Plan,
                  adopted as of March 31, 1995 (Filed as Exhibit 10.18 to
                  Quarterly Report on Form 10-Q/A for the fiscal quarter ended
                  March 31, 1995, and the Current Report on Form 8-K dated June
                  19, 1995, and incorporated herein by reference.)

       10.7       Contract on Investment in the Xilian Timber Mill between HARC
                  and the State-Run Xilian Farm of Hainan Province dated July 7,
                  1994, and Supplementary Agreement dated December 24, 1994
                  (Original Chinese version with English translation filed as
                  Exhibit 10.26 to Annual Report on Form 10-K for the fiscal
                  year ended December 31, 1995, and incorporated herein by
                  reference.)

       10.8       Loan Agreement between HARC and the Farming Bureau, dated
                  March 25, 1996, and the supplementary agreement dated December
                  31, 1996 (Certified English translation of original Chinese
                  version filed as Exhibit 10.28 to Annual Report on Form 10-K/A
                  for the fiscal year ended December 31, 1996,and incorporated
                  herein by reference.)

       10.9       Loan Agreement between HARC and the Registrant, dated March
                  25, 1996 (Certified English translation of original Chinese
                  version filed as Exhibit 10.29 to Annual Report on Form 10-K/A
                  for the fiscal year ended December 31, 1996, and incorporated
                  herein by reference.)

       10.10      Rental Agreement between HARC and the Hainan Farming Bureau
                  Testing Center, dated August 9, 1996 (Certified English
                  translation of original Chinese version filed as Exhibit 10.30
                  to Annual Report on Form 10-K/A for the fiscal year ended
                  December 31, 1996, and incorporated herein by reference.)

<PAGE>

       10.11      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.)

       10.12      Advertising and Media Agreement by and between the Registrant
                  and Marketing Direct Concepts, Inc., dated April 1, 1997
                  (Filed as Exhibit 10.36 to Quarterly Report on Form 10-Q for
                  the fiscal quarter ended June 30, 1997, and incorporated
                  herein by reference.)

       10.13      Financial Consulting Agreement by and between the Registrant
                  and Integrated Capital Development Group, Inc., dated May 1,
                  1997 (Filed as Exhibit 10.37 to Quarterly Report on Form 10-Q
                  for the fiscal quarter ended June 30, 1997, and incorporated
                  herein by reference.)

       10.14      Consulting Agreement between the Registrant and Brender
                  Services Limited, dated April 30, 1997 (Filed as Exhibit 10.38
                  to Annual Report on Form 10-K for the fiscal year ended
                  December 31, 1997, and incorporated herein by reference.)

       10.15      Stock Purchase Agreement, by and between HARC and Guilinyang
                  Farm, dated December 29, 1997 (Certified English translation
                  of original Chinese version filed as Exhibit 10.39 to Annual
                  Report on Form 10-K for the fiscal year ended December 31,
                  1997, and incorporated herein by reference.)

       10.16      Agreement for the Sale and Purchase of Share in Hainan Zhongya
                  Aluminum Company Ltd., dated December 29, 1997, by and between
                  First Supply and Guilinyang Farm (Certified English
                  translation of original Chinese version filed as Exhibit 10.40
                  to Annual Report on Form 10-K for the fiscal year ended
                  December 31, 1997, and incorporated herein by reference.)

       10.17      Agreement for the Sale and Purchase of Share in Hainan
                  Zhongwei Agricultural Resources Company Ltd., dated April 30,
                  1998, by and between Guilinyang Farm and the Company
                  (Certified English translation of original Chinese version
                  filed as Exhibit 10.41 to Quarterly Report on Form 10-Q for
                  the fiscal quarter ended June 30, 1998, and incorporated
                  herein by reference.)

       10.18      Employment Agreement between the Company and Li Feilie, dated
                  August 1, 1998 (Filed as Exhibit 10.42 to Annual Report on
                  Form 10-K for the fiscal year ended December 31, 1998, and
                  incorporated herein by reference.)

       10.19      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.)

       10.20      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.)

       10.21      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.)

<PAGE>

       10.22      Long-Term Sale and Purchase Supplementary Agreement No. 3 by
                  and among Farming Bureau, HARC, First Supply and Second
                  Supply, dated May 21, 1999 (Certified English translation of
                  original Chinese version filed as Exhibit 10.22 to Quarterly
                  Report on Form 10-Q for the fiscal quarter ended June 30,
                  1999, and incorporated herein by reference.)

       10.23      Assets and Staff Transfer Agreement by and among Farming
                  Bureau, HARC, First Supply, Second Supply and Sales Centre
                  dated March 3, 2000 (Certified English translation of original
                  Chinese version filed as Exhibit 10.23 to Current Report on
                  Form 8-K dated March 18, 2000, and incorporated herein by
                  reference.)

       10.24      Shareholders' Agreement on Business Restructuring by and among
                  Farming Bureau, the Registrant and Billion Luck dated march 3,
                  2000 (Certified English translation of original Chinese
                  version filed as Exhibit 10.24 to Current Report on Form 8-K
                  dated March 18, 2000, and incorporated herein by reference.)

       11.3       Computation of Earnings Per Share for Fiscal Year ended
                  December 31, 1999 (Contained in Financial Statements filed
                  herewith.)

       21         Subsidiaries of the Registrant  (Filed herewith.)

       27.4       Financial Data Schedule  (Filed herewith. For SEC use only.)

       99.2       Notice of Annual Meeting, Proxy Statement and Proxy
                  distributed to shareholders in advance of annual meeting held
                  on May 28, 1999 (Filed with Schedule 14A dated May 14, 1999,
                  and incorporated herein by reference.)