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, 2000

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

           Nevada                        0-26046                87-02623643
           ------                      ----------               -----------
(State or other jurisdiction      (Commission File No.)        (IRS Employer
      of incorporation)                                     Identification No.)

                     Room 2105, West Tower, Shun Tak Centre,
                  200 Connaught Road C., Sheung Wan, 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 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.): $1,735,000 as of April 4, 2001.

         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. 837,797 shares of
Common Stock, $.001 par value (as of March 30, 2000).

         DOCUMENTS INCORPORATED BY REFERENCE: Definitive Proxy Statement for
2000 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, 2000, 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, 2000, which was US$1.00 = HK$7.80.
The Renminbi is not freely convertible into foreign currencies and the quotation
of exchange rates does not imply convertibility of Renminbi into U.S. Dollars or
other currencies. All foreign exchange transactions take place either through
the Bank of China or other banks authorized to buy and sell foreign currencies
at the exchange rates quoted by the People's Bank of China. No representation is
made that the Renminbi or U.S. Dollar amounts referred to herein could have been
or could be converted into U.S. Dollars or Renminbi, as the case may be, at the
PBOC Rate or at all.

         References to "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. All per share references to Common Stock
have been adjusted to give effect to a one-for-ten reverse split on December 31,
1996, and a one-for-ten reverse split on June 11, 1999.

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

         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.

                                       2
<PAGE>

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

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

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

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

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

         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
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.


                                       3
<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 108,000 shares of the Company's Common Stock. 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). Following the acquisition, the Company's effective interest
in HARC became 61%. The remaining interest in HARC of 39% is held by the Farming
Bureau.

         Before January 1, 2000, 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 Hainan
State Farms and sold the natural rubber to customers throughout the PRC, such as
tire manufacturers, rubber processing plants, and import and export companies.
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. In the view of management, the performance of natural rubber
distribution and the materials and supplies procurement business had been
unsatisfactory for some time since 1998. Management estimated that the poor
operating environment of these businesses persisted for the foreseeable future.
Management determined that it was in the best interest of the Company to cease
the operations of these two businesses. The cessation was expected to reduce
selling and administrative and improve operating and management efficiency,
allowing management to focus on exploring other investment opportunities.

                                       4
<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 a wholly-owned
subsidiary of HARC and is mainly engaged in the operation of a supermarket in
Zhuhai, PRC, which sells food and daily products.

         Hainan Weilin 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 which is owned and controlled
by the Farming Bureau, and is mainly engaged in the sale of processed timber
wooden blocks.

         Silver Moon is a British Virgin Islands company incorporated on March
24, 2000. The principal business of Silver Moon and its wholly-owned subsidiary,
Medi-China (formerly known as Sky Creation Technology Limited), a Hong Kong
company incorporated on October 15, 1999, is the provision of online Internet
healthcare content, through its website, medi-china.com, which offers
health-related content in both English and Chinese, with a focus on Chinese
herbal medicine and therapies. On June 30, 2000, the Company acquired an 80%
equity interest in Silver Moon for total consideration of US$1.5 million through
the issuance of 244,897 shares of unregistered restricted common stock to Silver
Moon's former sole equity owner, E-link Investment Limited. The number of shares
issued was based upon a per share price of US$6.125, which was the closing bid
price of the Company's common stock as quoted on the Nasdaq SmallCap Market on
June 29, 2000. For the year ended December 31, 2000, neither Silver Moon nor
Medi-China has revenue contribution to the Company.

         The following chart illustrates the equity ownership by percentage of
each of the Company's principal operating subsidiaries as of December 31, 2000:
<TABLE>
<CAPTION>
<S>     <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% |                 /                                        |
                          |           ------------------------------- /                                         |
                          |  5%      |   HAINAN ZHONGWEI AGRICULT-   |                                          |
                           --------- |    URAL RESOURCES CO. LTD.,   |                                          |
                                     |        a PRC company          |                                          |
                                   / -------------------------------- \                                         |
                                  /                  |                 \                                        |
                                 /                   |                  \                                       |
                                /                    | 58%               \                                      |
 -----------------------       /        --------------------------        \        -----------------------      |
|   ZHUHAI ZHONGWEI,    |100% /        |      HAINAN WEILIN,      |        \ 95%  |  ZHONGWEI TRADING,    | 5%  |
|    a PRC company      |----          |      a PRC company       |         ----- |    a PRC company      |-----
 -----------------------                --------------------------                 -----------------------

</TABLE>



         Organizational and Management Structure of HARC

         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, Second Supply and Sales Centre. 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 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. The restructuring plan
reduces 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. After
the restructuring plan, First Supply, Second Supply and Sales Centre have become
dormant.

                                       5
<PAGE>

         As part of the restructuring, HARC has set up several new lines of
businesses, including supermarket operations (through Zhuhai Zhongwei) and sale
of processed timber wooden blocks (through Hainan Weilin). However, the scale of
operation of the new businesses remained relatively small during 2000, and
timber processing operations have been temporarily suspended.

         HARC has a two-tier structure with a board of directors and a
supervisory committee. 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). The board of directors is also responsible for exploring business
opportunities and making investment decisions. As of December 31, 2000, the
board of directors was made up of 5 members, of which two were nominated by the
Farming Bureau and three were nominated by Billion Luck. The Chairman of HARC
was nominated by the Farming Bureau, and the Vice-Chairman 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, 2000, 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.


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). For the years ended December 31, 1999 and 1998,
the Company had two reportable segments, marketing and distribution of natural
rubber and the procurement of production material, supplies and other
agricultural products businesses, ceased as of January 1, 2000. The reportable
segments for the year ended December 31, 2000 were supermarket operations and
sale of processed timber. See Financial Statements and Notes included therein
attached as Appendix A hereto.

<TABLE>
<CAPTION>


                                      Year Ended December 31,
------------------------------------------------------------------------------------------------------

                                                1998          1999          2000         2000
                                                ----          ----          ----         ----
                                                (Rmb)         (Rmb)         (Rmb)        (US$)

<S>                                           <C>           <C>           <C>          <C>
Net sales to external customers:
  Natural rubber:
    Net sales to unaffiliated customers        453,952       442,841          --            --
    Net sales to affiliates                     16,121          --            --            --
                                              --------      --------      --------      --------
                                               470,073       442,841          --            --
                                              --------      --------      --------      --------

  Materials, supplies and other
    agricultural products:
      Net sales to unaffiliated customers       43,367         9,120           306            37
      Net sales to affiliates                   14,252        23,718          --            --
                                              --------      --------      --------      --------
                                                57,619        32,838           306            37
                                              --------      --------      --------      --------

  Supermarket operations:
    Net sales to unaffiliated customers           --             688         5,253           634
    Net sales to affiliates                       --            --            --            --
                                              --------      --------      --------      --------
                                                  --             688         5,253           634
                                              --------      --------      --------      --------

  Processed timber:
    Net sales to unaffiliated customers           --            --           1,395           169
    Net sales to affiliates                       --            --            --            --
                                              --------      --------      --------      --------
                                                  --            --           1,395           169
                                              --------      --------      --------      --------



Total consolidated net sales                   527,692       476,367         6,954           840
                                              ========      ========      ========      ========

                                       6
<PAGE>
<CAPTION>

                                      Year Ended December 31,
------------------------------------------------------------------------------------------------------

                                                1998          1999          2000         2000
                                                ----          ----          ----         ----
                                                (Rmb)         (Rmb)         (Rmb)        (US$)

<S>                                           <C>           <C>           <C>          <C>
Depreciation and amortization
expenses:
  Natural rubber                                 1,287           723          --            --
  Materials, supplies and other
    agricultural products                           45           333           280            34
  Supermarket operations                          --               7           119            14
  Processed timber                                --            --             317            38
                                              --------      --------      --------      --------

Total segment depreciation and
  amortization expenses                          1,332         1,063           716            86

Reconciling item:
  Depreciation and amortization expenses
    attributable to corporate assets                38            28         3,134           379
                                              --------      --------      --------      --------



Total consolidated depreciation and
  amortization expenses                          1,370         1,091         3,850           465
                                              ========      ========      ========      ========
Segment profit/(loss):
  Natural rubber                                 3,465         5,634          --            --
  Materials, supplies and other
    agricultural product                        (7,967)        3,040            10             1
  Supermarket operations                          --             117         1,045           126
  Processed timber                                --            --            (503)          (60)
                                              --------      --------      --------      --------

Total segment profit/(loss)                     (4,502)        8,791           552            67

Reconciling items:
  Corporate expenses                           (15,852)      (15,056)      (28,416)       (3,432)
  Loss on impairment of an investment          (49,969)         --            --            --
  Interest income                                6,862           944        11,749         1,419
  Interest expenses                               (289)           (1)         --            --
                                              --------      --------      --------      --------

Total consolidated loss before
income taxes                                   (63,750)       (5,322)      (16,115)       (1,946
                                              ========      ========      ========      ========

Segment assets:
  Natural rubber                               258,090       115,651          --            --
  Materials, supplies and other
    agricultural product                        16,298       105,631          --            --
  Supermarket operations                          --           6,290         6,416           775
  Processed timber                                --           4,281         7,303           882
                                              --------      --------      --------      --------

Total segment assets                           274,388       231,853        13,719         1,657

Reconciling item:
  Corporate assets                               8,046        53,912       135,746        16,394
  Investments                                  119,301       117,808       184,374        22,268
  Intersegment receivables                     (31,009)      (26,477)         --            --
                                              --------      --------      --------      --------

Total consolidated assets                      370,726       377,096       333,839        40,319
                                              ========      ========      ========      ========

                                       7
<PAGE>
<CAPTION>

                                      Year Ended December 31,
------------------------------------------------------------------------------------------------------

                                                1998          1999          2000         2000
                                                ----          ----          ----         ----
                                                (Rmb)         (Rmb)         (Rmb)        (US$)

<S>                                           <C>           <C>           <C>          <C>
Expenditure for additions to
long-lived assets:
    Natural rubber                                 332          --            --            --
    Materials, supplies and other
      agricultural products                         58            54          --            --
    Supermarket operations                        --           4,223           387            47
    Processed timber                              --           1,326         3,250           392
                                              --------      --------      --------      --------

Total segment expenditure for
additions to long-lived assets                     390         5,603         3,637           439


Reconciling item:
  Corporate assets                                 700           557         2,718           328
                                              --------      --------      --------      --------
Total consolidated expenditure for
  additions to long-lived assets                 1,090         6,160         6,355           767
                                              ========      ========      ========      ========

</TABLE>



         SUPERMARKET OPERATIONS

         The Company, through Zhuhai Zhongwei, has been engaged in the
supermarket operations since the fourth quarter of 1999. The supermarket which
Zhunhai Zhongwei operates is located in Zhuhai City of Guangdong Province. The
supermarket sells food and consumer products to customers in the PRC.

         Zhuhai Zhongwei maintains numerous suppliers for its sources of
consumer products, and no single supplier accounted for more than 10% of total
purchases of consumer products in either 1999 or 2000. The value of total
purchases of consumer products was approximately Rmb1.1 million (US$133,000) and
Rmb4.3 million (US$519,000) in 1999 and 2000, respectively. The top five
suppliers accounted for approximately 28% and 24% of total purchases in 1999 and
2000, respectively. All purchases were made in Renminbi on either cash basis or
open account basis payable within 7 to 30 days.

         Zhuhai Zhongwei targets the residents of Zhuhai City as its customers
and no single customer accounted for more than 5% of total revenues from the
sales of consumer products in either 1999 or 2000, due to the nature of retail
business. All sales from supermarket operations are in Renminbi on cash basis.


         PROCESSED TIMBER

         The Company, through Hainan Weilin, has been engaged in the processing
and sale of timber with an annual production capacity of 5,000 cubic meters. The
processing factory has been operated from early 2000 through October 2000 at one
third of its full capacity. Due to the high cost of production, as a result of
limited sources of supply of raw materials, and the poor market condition, the
Company has decided to temporarily suspend processed timber operations.


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.

                                       8
<PAGE>

         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.

         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.

                                       9
<PAGE>

         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
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.

                                       10
<PAGE>

         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.


[Item 2]                           PROPERTIES

         The office space, supermarket, timber processing factory 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 with a total gross area of 720
square meters. The structure and building in respect of the timber processing
business was rented by Hainan Weilin from Haikou Mechanical Factory for a period
of 1 year ended on November 1, 2000 with a total gross area of 7,000 square
meters. The total rental was Rmb400,000 (US$48,000).

         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, covering additional portions
of the same building. 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). On July 1, 2000,
pursuant to mutual agreement, both parties agreed to terminate the additional
rental agreement.

         HARC also maintains a branch office in Shenzhen with a total gross area
of 708 square meters. The rental agreement is for a period of 8 years from
December 1, 1999 to December 1, 2007 at an annual rental of Rmb509,540
(US$61,538).


[Item 3]                        LEGAL PROCEEDINGS

         There are no material legal proceedings pending or threatened against
the Company or any of its subsidiaries as of December 31, 2000.


                                       11
<PAGE>

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

         On October 12, 2000, the Company held its annual meeting of
shareholders, at which a quorum of shares held of record on September 14, 2000
were present in person or represented by proxy, and the following proposals by
the Board of Directors were approved by the holders of a majority of the
outstanding shares of the Company:

1.       ratification of the issuance of 244,897 shares of the Company's
         unregistered restricted common stock, $0.001 par value (496,808 votes
         for, 14,371 votes withheld, 10 abstentions); and

2.       approval of an amendment to the Amended and Restated 1995 Stock Option
         Plan to modify the pricing procedure for the exercise of nonqualified
         stock options and to eliminate the requirement for shareholder approval
         of any modification of the Plan that would materially increase the
         benefits accruing to participants in the Plan (729,140 votes for,
         26,926 votes withheld, 20 abstentions); and

3.       the election of Tam Cheuk Ho and Wong Wah On to serve as directors in
         Class I (745,133 votes for, 10,953 abstentions); and

4.       the ratification of the appointment of Ernst & Young as the Company's
         independent accountants for the fiscal year ending December 31, 2000
         (748,471 votes for, 7,615 votes against).

         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.


                                    [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 1999 and 2000.
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>
         2000 Fiscal Year, quarter ended:
                  March 31, 2000.....................       $10.1                $7.2
                  June 30, 2000......................        17.8                 3.9
                  September 30, 2000.................         6.4                 4.8
                  December 31, 2000..................         4.8                 2.6
         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
</TABLE>

         On March 30, 2001, there were 2,449 holders of record of the Company's
Common Stock.

                                       12
<PAGE>

         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 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 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 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, 1996, 1997, 1998,
1999 and 2000, 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,

                                    1996            1997            1998           1999            2000            2000
                                    (Rmb)           (Rmb)           (Rmb)          (Rmb)           (Rmb)           (US$)
                                 ------------   -------------    ------------   ------------    --------------  -------------
<S>                               <C>             <C>            <C>             <C>             <C>             <C>
Income Statement Data
Net sales                         1,827,499       1,149,171         527,692         476,367           6,954             840
Cost of sales                    (1,677,056)     (1,092,972)       (510,631)       (467,936)         (6,402)           (773)
                                 ----------      ----------      ----------      ----------      ----------      ----------
Gross Profit                        150,443          56,199          17,061           8,431             552              67
Depreciation                         (1,813)         (1,429)         (1,343)         (1,091)         (1,009)           (122)
Amortization                           --              --              --              --            (2,841)           (343)
Provision for doubtful
accounts                               --              --            (4,740)           --              --              --
Loss on impairment of an
investment                             --              --           (49,969)           --              --              --
Selling, general and
administrative expenses             (50,488)        (32,934)        (35,419)        (23,864)        (19,424)         (2,347)

Financial income/(expense),         (19,870)            145           6,590             864           7,871             951
net
Other income/(expenses), net          6,054          30,580           4,070          10,338          (1,264)           (153)
                                 ----------      ----------      ----------      ----------      ----------      ----------
Income/(loss) before income
taxes                                84,326          52,561         (63,750)         (5,322)        (16,115)         (1,947)
Income taxes                        (13,991)         (9,798)           --              --            (2,887)           (348)
                                 ----------      ----------      ----------      ----------      ----------      ----------
Income/(loss) before
minority interests                   70,335          42,763         (63,750)         (5,322)        (19,002)         (2,295)
Minority interests                  (34,513)        (24,563)         11,079          (1,674)         (4,198)           (507)
                                 ----------      ----------      ----------      ----------      ----------      ----------
Net income/(loss)                    35,822          18,200         (52,671)         (6,996)        (23,200)         (2,802)
                                 ==========      ==========      ==========      ==========      ==========      ==========

                                       13
<PAGE>
<CAPTION>

                                 --------------------------------------------------------------------------------------------
                                                          In Thousands, Except Per Share Amounts

                                                                  Year Ended December 31,

                                    1996            1997            1998           1999            2000            2000
                                    (Rmb)           (Rmb)           (Rmb)          (Rmb)           (Rmb)           (US$)
                                 ------------   -------------    ------------   ------------    --------------  -------------
<S>                               <C>             <C>            <C>             <C>             <C>             <C>

Earnings/(loss) per share*
  Basic                               101.4           30.55          (87.91)         (11.80)         (32.43)          (3.92)
                                 ==========      ==========      ==========      ==========      ==========      ==========
  Diluted                             100.2           30.46          (87.91)         (11.80)         (32.43)          (3.92)
                                 ==========      ==========      ==========      ==========      ==========      ==========
Other financial data
Income/(loss)  before
  income taxes, minority
  interests,  depreciation
and amortization                     86,166          53,990         (62,407)         (4,231)        (12,265)         (1,481)
                                 ==========      ==========      ==========      ==========      ==========      ==========

Balance sheet data
Current assets                      685,216         281,692         243,188         248,052         128,301          15,495
Working capital                     301,474         217,927         167,851         162,789          79,634           9,618
Total assets                        705,113         437,880         370,726         377,096         333,839          40,319
Current liabilities                 383,742          63,765          75,337          85,263          48,667           5,878
Minority interests                  108,580         133,143         107,945         111,399         115,480          13,947
Total liabilities and
minority interests                  492,322         196,908         183,282         196,662         164,147          19,825
Shareholders' equity                212,791         240,972         187,444         180,434         169,692          20,494
</TABLE>

  *      The computation of diluted earnings/(loss) per share did not
         assume the conversion of the stock option in 2000, 1999, 1998 and 1997
         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.

                                       14
<PAGE>

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. In the fourth quarter of 1999 and the first
quarter of 2000, the Company undertook several new lines of businesses as part
of the restructuring, including its new supermarket operations and the processed
timber operation. Processed timber operations were suspended in October 2000.
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 each of the three fiscal years
ended December 31, 1998, 1999 and 2000. 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:

<TABLE>
<CAPTION>

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

                                                             Year Ended December 31,

(In thousands)                                  1998           1999           2000          2000
                                                (Rmb)          (Rmb)         (Rmb)          (US$)

<S>                                            <C>            <C>           <C>           <C>
Net sales:
  Natural rubber                               470,073        442,841           --             --
  Materials and supplies and
   other agricultural products                  57,619         32,838            306             37
  Supermarket operations                          --              688          5,253            634
  Processed timber                                --             --            1,395            169
                                              --------       --------       --------       --------

                                               527,692        476,367          6,954            840

Gross profit                                    17,061          8,431            552             67
Gross profit margin                                3.2%           1.8%           7.9%           7.9%

Loss before income taxes                       (63,750)        (5,322)       (16,115)        (1,947)
Income taxes                                      --             --           (2,887)          (348)
                                              --------       --------       --------       --------

Loss before minority interests                 (63,750)        (5,322)       (19,002)        (2,295)
Minority interests                              11,079         (1,674)        (4,198)          (507)
                                              --------       --------       --------       --------

Net loss                                       (52,671)        (6,996)       (23,200)        (2,802)
                                              ========       ========       ========       ========
</TABLE>


                                       15
<PAGE>

Year Ended December 31, 2000 Compared to Year Ended December 31, 1999

Sales - Materials, Supplies and Other Agricultural Products

         The materials, supplies and other agricultural products had been
discontinued effective as of January 1, 2000. The sales in 2000 represented the
sales of old inventories as of December 31, 1999.

Sales - Supermarket Operations

         The significant increase in sales was mainly due to the supermarket
operations commenced during the fourth quarter of 1999. There was a full year
operations in 2000

Sales - Processed Timber

         Processed timber operations were set up in early 2000 and, therefore,
there was no sales in 1999.

Gross Profit and Gross Profit Margin

         Supermarket operations had gross profit and gross profit margin of
Rmb1.0 million (US$121,000) and 19.9%, respectively, for the year ended December
31, 2000. The sale of processed timber had a gross loss of Rmb503,000
(US$61,000) or 36.1% on sales for the year ended December 31, 2000, as the
processing factory was only operated at one-third of its full capacity during
2000.

Selling, General and Administrative Expenses

         Selling and administrative expenses decreased by Rmb4.4 million
(US$536,000) or 18.6% to Rmb19.4 million (US$2.3 million) in 2000 from Rmb23.9
million (US$2.9 million) in 1999. The decrease was mainly due to the reduction
of sales activities in 2000.

Financial Income, Net

         Net financial income increased from Rmb864,000 (US$104,000) in 1999 to
Rmb7.9 million (US$951,000) in 2000. The significant increase was mainly
attributable to interest income earned of Rmb11 million (US$1.3 million) in 2000
from a short term loan granted to an unaffiliated third party. The interest
income was partly offset by a realized currency exchange loss amounted to Rmb3.8
million (US$459,000), arising from the conversion of Renminbi to Hong Kong
dollars.

Other Income/(Expenses), Net

         Other income decreased by Rmb11.6 million (US$1.4 million) to net
expenses of Rmb1.3 million (US$153,000) in 2000 from net income of Rmb10.3
million (US$1.2 million) in 1999. 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. Net expenses in 2000 mainly represented the
net gain on trading of marketable securities of Rmb1.5 million (US$183,000), net
loss on write-off of inventories of Rmb1.1 million (US$133,000) and loss on
disposal of property and equipment of Rmb1 million (US$121,000).

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

Sales - 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).

                                       16
<PAGE>

Sales - Materials, Supplies and Other Agricultural Products

         Net sales decreased by Rmb24.8 million (US$3.0 million) or 43.0% to
Rmb32.8 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.

Sales - Supermarket Operations

         Supermarket operations were commenced during the fourth quarter of 1999
and, therefore, there was no revenue contribution for 1998.

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.

Loss on Impairment of an Investment

         For the year ended December 31, 1998, the Company wrote down, in the
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.

                                       17
<PAGE>

LIQUIDITY AND CAPITAL RESOURCES

         The Company's and its subsidiaries' primary liquidity needs are to fund
inventories, trade receivable and operating expenses, and to expand business
operations. The Company has financed its working capital requirements through
the internally generated cash.

         Net cash provided by/(used in) operating activities was Rmb35 million,
(Rmb42 million) and Rmb175,000 (US$21,000) in fiscal 1998, 1999 and 2000,
respectively. Net cash flows from the Company's operating activities are
attributable to the Company's income and changes in operating assets and
liabilities.

         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, which
amounted to Rmb70,527,000 (US$8,518,000).

         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 conditions and changes in the policies of the PRC
government, such as changes in laws and regulations (or the interpretation
thereof), including 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 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.
However, the Company may suffer exchange loss when it converts Renminbi to other
currencies, such as Hong Kong dollars or United States dollars

         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
of December 31, 2000, 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.

         As of December 31, 2000, the Company had short-term investments in
marketable securities in the Hong Kong stock market with a total market value of
Rmb62 million (US$7.5 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.

         The Company wrote a call option to purchase certain marketable
securities in Hong Kong on December 11, 2000 with an expiry date on February 11,
2001, which exposed the Company to market risk of an unfavourable change in the
price of the security underlying the written option. The call option was
subsequently left unexercised upon the expiry date.

         The Company has a margin loan payable balance of Rmb19 million (US$2.2
million) as at December 31, 2000 which was used to purchase marketable
securities listed on the Hong Kong Stock Exchange. This margin loan bears
interest at 12% as of December 31, 2000. The margin loan is due and repaid as
the securities are sold.

                                       18
<PAGE>


Quarterly Results of Operations

         The following is a summary of the quarterly results of operations for
the years ended December 31, 2000 and 1999.
<TABLE>
<CAPTION>

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

(In thousands, except share and per share          March 31        June 30     September 30   December 31
data)                                                (Rmb)          (Rmb)         (Rmb)          (Rmb)
---------------------------------------------------------------------------------------------------------
<S>                                                    <C>            <C>           <C>            <C>
2000:
  Net sales                                            1,397          2,316         1,445          1,796
  Cost of sales                                        1,296          2,548         1,135          1,423
  Net income/(loss)                                    2,137        (2,184)       (8,813)       (14,340)
  Earnings/(loss) per common share:
    Basic                                                3.6          (3.7)        (13.2)         (19.1)
    Diluted                                              3.6          (3.7)        (13.2)         (19.1)

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)
</TABLE>

         The computation of diluted earnings/(loss) per share did not assume the
conversion of the stock options in 2000 and 1999 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, 2000, 1999 and 1998 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.



                                       19
<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 30, 2001, and the ages of and positions with
the Company held by each of such persons:
<TABLE>
<CAPTION>

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

<S>                                    <C>             <C>
Ching Lung Po                          54              Chairman of the Board of Directors, President and Chief Executive
                                                       Officer

Lin Yu Quan                            53              Vice Chairman of the Board of Directors

Tam Cheuk Ho                           38              Director and Chief Financial Officer

Wong Wah On                            37              Director, Secretary and Financial Controller

Wan Ying Lin                           52              Director

Ng Kin Sing                            39              Director

Lo Kin Cheung                          36              Director

Li Fei Lie                             34              Vice President
</TABLE>

         Mr. Ching Lung Po has been a director of the Company since February 4,
1998. He was appointed Chairman of the Board of Directors on January 25, 1999,
Chief Executive Officer and President of the Company on February 1, 1999 and
June 1, 1999, respectively. Mr. Ching has also 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.

                                       20
<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. 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. He
is a fellow of both the Chartered Association of Certified Accountants and the
Hong Kong Society of Accountants, and an associate of 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, and also serves as a member of the Audit Committee. 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 Audit Committee. From April 1998 to the
present, Mr. Ng has been the managing director of Action Plan Limited, a
securities investment company. From November 1995 until March 1998, Mr. Ng was
sales and dealing director for NatWest Markets (Asia) Limited; and from May 1985
until October 1996, he was the dealing director of BZW Asia Limited, an
international securities brokerage house. Mr. Ng holds a Bachelor's degree in
Business Administration from the Chinese University of Hong Kong.

         Mr. Lo Kin Cheung has been a director of the Company since May 30,
2000, and also serves as a member of the Audit Committee. From March 1998 to the
present, Mr. Lo has been the executive director of Wiltec Holdings Limited, a
Hong Kong listed company, where he is responsible for the corporate development
and day-to-day operations. From July 1986 until March 1998, Mr. Lo was the audit
manager at Ernst & Young, Hong Kong. He is a fellow of both the Hong Kong
Society of Accountants and the Chartered Association of Certified Accountants.
He holds a Bachelor's degree of Science from the University of Hong Kong.

         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.

         At the annual meeting of shareholders on October 12, 2000, Messrs. Tam
Cheuk Ho and Wong Wah On were elected to serve as Class I Directors until the
annual meeting to be held in 2003 and until their successors have been duly
elected and qualified. Messrs. Wan Ying Lin, Ng Kin Sing and Lo Kin Cheung serve
in Class III until the annual meeting to be held in 2002 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.


                                       21
<PAGE>


COMPLIANCE WITH SECTION 16(A) OF THE EXCHANGE ACT

         Based solely upon a review of Forms 3, 4 and 5 furnished to the Company
for the fiscal year ended December 31, 2000, Mr. Lo Kin Cheung failed to timely
file Form 3 to report his appointment as a director.

<TABLE>
<CAPTION>

[Item 11]                    EXECUTIVE COMPENSATION
                           SUMMARY COMPENSATION TABLE

                                                                                -----------------
                                                                                    Long Term
                                                   Annual Compensation            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 and      2000    276,923      -0-           -0-              -0-               -0-
Chief Executive Officer           1999    253,846      -0-           -0-              -0-               -0-
                                  1998      -0-        -0-           -0-              -0-               -0-


Li Fei Lie, Vice President,       2000     69,231      -0-           -0-             1,000              -0-
President of HARC                 1999     69,231      -0-           -0-             1,000              -0-
                                  1998     46,795      -0-         22,436            1,000              -0-


Tam Cheuk Ho, Director and        2000    230,769      -0-           -0-               60               -0-
Chief Financial Officer           1999    212,538      -0-           -0-               60               -0-
                                  1998      -0-        -0-           -0-               60               -0-


Wong Wah On, Director,            2000    153,846      -0-           -0-               60               -0-
Secretary and Financial           1999    141,026      -0-           -0-               60               -0-
Controller                        1998      -0-        -0-           -0-               60               -0-
================================ ======== ========= ========== ================ ================= =================
</TABLE>

(1) As of December 31, 2000, 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, 2000, was US$2.94 per share.

                                       22
<PAGE>

         Li Fie Lie, Vice President of the Company and President and a director
of HARC, was paid annual compensation of HK$540,000 (US$69,231) for each of the
three years ended December 31, 1998, 1999 and 2000. 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$30,769) plus allowances of HK$300,000 (US$38,462) 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 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$69,231) 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 Tam Cheuk Ho. In accordance with the terms of the Employment Agreement, Mr.
Tam has been employed by the Company as the Chief Financial Officer and to
perform such duties as the Board of Directors shall from time to time determine.
Mr. Tam shall receive a base salary of HK$1,800,000 (US$230,769) annually, which
base salary shall be adjusted on each anniversary of the Employment Agreement to
reflect a change in the applicable consumer price index or such greater amount
as the Company's Board of Directors may determine. The 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
Secretary and to perform such duties as the Board of Directors shall from time
to time determine. Mr. Wong shall receive a base salary of HK$1,200,000
(US$153,846) annually, which base salary shall be adjusted on each anniversary
of the Employment Agreement to reflect a change in the applicable consumer price
index or such greater amount as the Company's Board of Directors may determine.
The 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$276,923) 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.

         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
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, 2000, 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.


                                       23
<PAGE>

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,
2000, 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 shares of
the Company's Common Stock or Series B Preferred Stock outstanding as of March
30, 2001 the number of shares owned by each such person and the
percentage of the outstanding shares and vote represented thereby.
<TABLE>
<CAPTION>

                                                     Amount and
         Name and Address                             Nature of                              Percent of               Percent of
        of Beneficial Owner                     Beneficial Ownership (1)                        Class                    Vote
        -------------------                     ------------------------                        -----                    -----

<S>                                         <C>                                                  <C>                     <C>
Winsland Capital Limited                    33,480 Common Stock                                  4.00%                   30.53%
TrustNet Chambers                          320,000 Series B Preferred                          100.00%
P.O. Box 3444, Road Town
Tortola, British Virgin Islands

Worlder International Company               48,600 Common Stock                                  5.80%                    4.20%
Limited (2)
21/F., Great Eagle Centre
No. 23 Harbour Road
Hong Kong

Anka Capital Limited                       244,897 Common Stock                                 29.23%                   21.15%
Room 2105, West Tower
Shun Tak Centre, 200 Connaught Rd. C.
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.


                                       24
<PAGE>

SHARE OWNERSHIP OF OFFICERS AND DIRECTORS

         The following table sets forth certain information with respect to the
beneficial ownership and voting power of Common Stock or Series B Preferred
Stock as of March 30, 2001, 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 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 of                             Nature of                            Percent of               Percent of
         Beneficial Owner                   Beneficial Ownership (1)                     Class                     Vote
         ----------------                   ------------------------                     -----                     ----

<S>                                         <C>                                           <C>                      <C>
         Ching Lung Po                       33,480 Common Stock (5)                       4.00%                   30.53%
                                            320,000 Series B Preferred                   100.00%

         Lin Yu Quan                                    -0-                               N/A                       N/A

         Tam Cheuk Ho                       244,957 Common Stock (2)                      29.24%                   21.16%

         Li Fei Lie                           1,000 Common Stock (3)                       *                         *

         Wong Wah On                        250,277 Common Stock (4)                      29.84%                   21.60%

         Wan Ying Lin                                   -0-                               N/A                       N/A

         Ng Kin Sing                                    -0-                               N/A                       N/A

         Lo Kin Cheung                                  -0-                               N/A                       N/A

         All executive officers             284,817 Common Stock                          33.91%                   52.10%
         and directors as a group           320,000 Series B Preferred                   100.00%
</TABLE>

*  Less than 1.0%.

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

(2) Anka Capital Limited ("Anka") owns 244,897 shares of Common Stock. Anka is
50% owned by Tam Cheuk Ho and 50% owned by Wong Wah On. Tam Cheuk Ho disclaims
beneficial ownership of the securities held by Anka, except to the extent of his
pecuniary interest in the shares. In addition, 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) Of the shares of Common Stock indicated, Brender Services Limited, which is
beneficially owned by Wong Wah On, owns 4,320 shares of Common Stock. The
remaining 244,897 shares represent shares of Common Stock owned by Anka which is
50% owned by Wong Wah On. Wong Wah On disclaims beneficial ownership of the
seurities held by Anka, except to the extent of his pecuniary interest in the
shares. In addition, Brender Services Limited was granted options to purchase
1,000 shares of Common Stock under the Company's Stock Option Plan, and Wong Wah
On 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 and 320,000
shares of Series B Preferred Stock. Winsland Capital Limited is beneficially
owned by Ching Lung Po.

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 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.

                                       25
<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. On October 12, 2000,
by virtue of an amendment adopted by the shareholders of the Company, the
requirement of shareholder approval of any modification of the Plan that would
materially increase the benefits accruing to participants in the Plan was
eliminated.

         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. On October 12,
2000, by virtue of an amendment adopted by the shareholders of the Company to
modify the pricing procedure for the exercise of nonqualified stock options, the
price per share deliverable upon the exercise of each nonqualified stock option
shall not be less than 80% of the fair market value of the shares of 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)                     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

         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                        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                                       100 shares
                  Kwok Kwan Hung                                  3,860 shares
                  Fu Yang Guang                                   2,000 shares
                  Lin Jia Ping                                    2,700 shares

                                       26
<PAGE>

         All of the stock options were issued in accordance with the terms of
the Plan at an exercise price of US$378 (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,
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$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).


[Item 13]       CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

         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.
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. For each of the two years ended
December 31, 1999 and 2000, HARC paid rental of Rmb170,240 (US$20,560) to
Farming Bureau.

         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. For the years ended December 31, 1999 and

                                       27
<PAGE>

2000, HARC, First Supply and Second Supply purchased natural rubber from the
Hainan State Farms amounting to Rmb450,704,000 (US$54,433,000) and nil,
respectively. 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. For the
years ended December 31, 1999 and 2000, First Supply and Second Supply received
guaranteed profit from Farming Bureau amounting to Rmb6,350,000 (US$767,0000 and
nil, respectively.

         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. For the years ended
December 31, 1999 and 2000, HARC, First Supply and Second Supply sold production
materials and other commodities to the Hainan State Farms amounting to
Rmb23,718,000 (US$2,864,000) and nil, respectively.

         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).

         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 640,000 outstanding
shares of the Company's Series A Preferred Stock held by Everbright were
exchanged for 3,200,000 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.

                                       28
<PAGE>

         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 3,200,000
shares of restricted Common Stock were exchanged for 320,000 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 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.
Based on the valuation, there were no material differences between the fair
value and the net book value of those assets and liabilities as of December 31,
1999 and the purchase price was Rmb70,527,000 (US$8,518,000). There was no gain
or loss recognized by the Company.

         In addition to these transactions, the following business relationships
existed during the fiscal year ended December 31, 2000, 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.

         As disclosed in "Stock Options" hereinabove, the Company has adopted a
Stock Option Plan to grant stock option to officers, directors, key employees,
consultants and affiliates of the Company.

         As disclosed in "Executive Compensation" hereinabove, Li Fie Lie, Ching
Lung Po, Tam Cheuk Ho and Wong Wah On are parties to employment agreements with
the Company.


                                       29
<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, 1998, 1999 and 2000

                  b.       Consolidated statements of changes in shareholders'
                           equity for the three years ended December 31, 1998,
                           1999 and 2000

                  c.       Consolidated balance sheets as of December 31, 1999
                           and 2000

                  d.       Consolidated statements of cash flows for the three
                           years ended December 31, 1998, 1999 and 2000

                  e.       Notes to consolidated financial statements.

         The information required in Schedule 11 valuation and qualifying
         accounts is included in the notes to the consolidated financial
         statements on page F-7. All other schedules for which provision is made
         in the applicable accounting regulation of the Securities and Exchange
         Commission are not required under the related instructions or are
         unapplicable and therefore have been omitted.


         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.)

                                       30
<PAGE>

         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     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.)

         10.2     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.)

         10.3     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.)

         10.4     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.)

         10.5     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.)

         10.6     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.)

         10.7     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.)

         10.8     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.)

                                       31
<PAGE>

         10.9     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.)

         10.10    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.)

         10.11    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.)

         10.12    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.)

         10.13    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.)

         10.14    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.)

         10.15    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.)

         10.16    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.)

         10.17    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.)

         10.18    Acquisition Agreement among the Registrant, E-link Investment
                  Limited and Silver Moon Technologies Limited, dated June 30,
                  2000 (Filed as Exhibit 10.25 to Current Report on Form 8-K
                  dated June 30, 2000, and incorporated herein by reference.)

         10.19    Stock Purchase Agreement by and between HARC and Guilinyang
                  Farm dated July 28, 2000 (Certified English translation of
                  original Chinese version filed as Exhibit 10.26 to Current
                  Report on Form 8-K dated July 28, 2000, and incorporated
                  herein by reference.)

         11.3     Computation of Earnings Per Share for Fiscal Year ended
                  December 31, 2000 (Contained in Financial Statements filed
                  herewith.)

         21       Subsidiaries of the Registrant (Filed herewith.)

         99.2     Notice of Annual Meeting, Proxy Statement and Proxy
                  distributed to shareholders in advance of annual meeting held
                  on October 12, 2000 (Filed with Schedule 14A dated October 2,
                  2000, and incorporated herein by reference.)

         During the last quarter of the fiscal year ended December 31, 2000, the
         Company filed no reports on Form 8-K.


                                       32
<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.


   Signature                            Title                         Date



/s/ Ching Lung Po               President,  Chairman  of the      April 13, 2001
-------------------             Board  of  Directors,  Chief
Ching Lung Po                   Executive Officer




/s/ Lin Yu Quan                 Vice Chairman of the              April 13, 2001
-------------------             Board of Directors
Lin Yu Quan



/s/ Tam Cheuk Ho                Chief Financial Officer/          April 13, 2001
-------------------             Director
Tam Cheuk Ho



/s/ Wong Wah On                 Financial Controller/             April 13, 2001
-------------------             Director/Secretary
Wong Wah On



/s/ Wan Ying Lin                Director                          April 13, 2001
-------------------
Wan Ying Lin



/s/ Ng Kin Sing                 Director                          April 13, 2001
-------------------
Ng Kin Sing



/s/ Lo Kin Cheung               Director                          April 13, 2001
-------------------
Lo Kin Cheung

<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, 1998, 1999 and 2000

                  b.       Consolidated statements of changes in shareholders'
                           equity for the three years ended December 31, 1998,
                           1999 and 2000

                  c.       Consolidated balance sheets as of December 31, 1999
                           and 2000

                  d.       Consolidated statements of cash flows for the three
                           years ended December 31, 1998, 1999 and 2000

                  e.       Notes to consolidated financial statements.

<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-36





<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, 2000 and 1999, and the
related consolidated statements of operations, shareholders' equity, and cash
flows for each of the three years in the period ended December 31, 2000. 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, 2000 and 1999, and the
consolidated results of their operations and their cash flows for each of the
three years in the period ended December 31, 2000, in conformity with accounting
principles generally accepted in the United States of America.







Ernst & Young
Hong Kong
February 9, 2001


                                      F-1
<PAGE>


CHINA RESOURCES DEVELOPMENT, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF OPERATIONS

(Amounts in thousands, except share and per share data)
<TABLE>
<CAPTION>

                                                              Year ended December 31,
                                       Notes       1998         1999          2000          2000
                                                    RMB          RMB           RMB           US$

<S>                                       <C>    <C>           <C>             <C>             <C>
NET SALES*                                3      527,692       476,367         6,954           840

COST OF SALES*                            3     (510,631)     (467,936)       (6,402)         (773)
                                                --------      --------      --------      --------

GROSS PROFIT                                      17,061         8,431           552            67

DEPRECIATION                                      (1,343)       (1,091)       (1,009)         (122)

AMORTIZATION                                         (27)         --          (2,841)         (343)

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

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

SELLING, GENERAL AND
  ADMINISTRATIVE EXPENSES*                       (35,392)      (23,864)      (19,424)       (2,347)

FINANCIAL INCOME, NET*                    5        6,590           864         7,871           951

OTHER INCOME/(EXPENSE), NET*              6        4,070        10,338        (1,264)         (153)
                                                --------      --------      --------      --------

LOSS BEFORE INCOME TAXES                         (63,750)       (5,322)      (16,115)       (1,947)

INCOME TAXES                              7         --            --          (2,887)         (349)
                                                --------      --------      --------      --------

LOSS BEFORE MINORITY INTERESTS                    (3,750)       (5,322)      (19,002)       (2,296)

MINORITY INTERESTS                                11,079        (1,674)       (4,198)         (507)
                                                --------      --------      --------      --------

NET LOSS                                         (52,671)       (6,996)      (23,200)       (2,803)
                                                ========      ========      ========      ========

LOSS PER SHARE:                           8
    BASIC                                         (87.91)       (11.80)       (32.43)        (3.92)
                                                ========      ========      ========      ========

    Diluted                                       (87.91)       (11.80)       (32.43)        (3.92)
                                                ========      ========      ========      ========
</TABLE>

* Including the following amounts resulting from transactions with related
parties (note 15):
<TABLE>
<CAPTION>

                                                              Year ended December 31,
                                                   1998         1999          2000           2000
                                                    RMB          RMB           RMB            US$

<S>                                               <C>           <C>
Net sales                                         30,373        23,718          --            --
Cost of sales                                   (374,039)     (453,071)         (100)          (12)
LOSS ON IMPAIRMENT OF AN
  INVESTMENT                                     (28,718)         --            --            --
Selling, general and
  administrative expenses                         (4,411)       (1,028)         (393)          (47)
Financial income, net                               (235)         --            --            --
Other income, net                                   --            --           1,354           164

</TABLE>

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

                                      F-2
<PAGE>


CHINA RESOURCES DEVELOPMENT, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY

(Amounts in thousands, except share and per share data)
<TABLE>
<CAPTION>

                                                                                            Retained    Accumulated
                                                        Series B  Additional               earnings/          other
                                               Common  preferred     paid-in            (accumulated  comprehensive
                                      Notes     stock      stock     capital    Reserves    deficits)    gain/(loss) Total
                                      --------------------------------------------------------------------------------------
                                                 RMB        RMB       RMB         RMB         RMB          RMB        RMB

<S>                                   <C>     <C>        <C>        <C>          <C>         <C>         <C>           <C>
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                   --         --         (853)       --          --          --          (853)

Net loss                                          --         --         --          --       (52,671)       --       (52,671)
Currency translation adjustments         21       --         --         --          --          --            (4)         (4)
                                                                                                                    --------
Comprehensive loss                                --         --         --          --          --          --       (52,675)
                                                                                                                    --------

Transfer to reserves                     20       --         --         --           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         21       --         --         --          --          --           (14)        (14)
                                                                                                                    --------
Comprehensive loss                                --         --         --          --          --          --        (7,010)
                                                                                                                    --------

Transfer to reserves                     20       --         --         --           556        (556)       --          --
                                              --------   --------   --------    --------    --------    --------    --------

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

Issuance of 244,897 shares
  of common stock                         4          2       --       12,420        --          --          --        12,422
Net loss                                          --         --         --          --       (23,200)       --       (23,200)
Currency translation adjustments         21       --         --         --          --          --            36          36
                                                                                                                    --------
Comprehensive loss                                --         --         --          --          --          --       (10,742)
                                                                                                                    --------

Transfer to reserves                     20       --         --         --         1,198      (1,198)       --          --
                                              --------   --------   --------    --------    --------    --------    --------

Balance at December 31, 2000                         7          3    169,052      28,028     (27,416)         18     169,692
                                              ========   ========   ========    ========    ========    ========    ========
</TABLE>


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


                                      F-3

<PAGE>


CHINA RESOURCES DEVELOPMENT, INC. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

(Amounts in thousands, except share and per share data)
<TABLE>
<CAPTION>



                                                                                          December 31,
                                                             Notes             1999            2000             2000
                                                                         -------------------------------------------
                                                                                RMB             RMB              US$
<S>                                                          <C>                <C>             <C>               <C>
ASSETS

CURRENT ASSETS
Cash and cash equivalents                                                    38,138          37,547            4,535
Marketable securities                                          9             57,035          62,384            7,536
Trade receivables, less allowance of
  RMB529 in 1999                                                              3,619              88               11
Inventories - finished goods                                                  8,116           1,884              228
Other receivables, deposits and prepayments,
  less allowance of RMB1,309 in 1999                                         13,141          11,721            1,416
Short term loan receivable                                                   45,000               -                -
Amount due from Farming Bureau                                16             47,013          13,509            1,632
Amounts due from related companies                            16             35,990           1,168              141
                                                                            -------         -------          -------

TOTAL CURRENT ASSETS                                                        248,052         128,301           15,499

PROPERTY AND EQUIPMENT                                        10             11,402          13,304            1,607

INVESTMENTS                                                   11            117,642         184,374           22,272

INTANGIBLE ASSETS                                              4                  -           7,860              950
                                                                            -------         -------          -------

TOTAL ASSETS                                                                377,096         333,839           40,328
                                                                            =======         =======          =======

</TABLE>

                                      F-4
<PAGE>


CHINA RESOURCES DEVELOPMENT, INC. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS (continued)

(Amounts in thousands, except share and per share data)
<TABLE>
<CAPTION>

                                                                                           December 31,
                                                             Notes             1999            2000             2000
                                                                         -------------------------------------------
                                                                                RMB             RMB              US$
<S>                                                         <C>                 <C>                <C>               <C>
LIABILITIES AND SHAREHOLDERS' EQUITY

CURRENT LIABILITIES
Accounts payable                                                             15,253             748               91
Other payables and accrued liabilities                        12             24,629          16,653            2,012
Margin loan payable                                           13                  -          18,572            2,243
Due to investment adviser                                                         -          12,253            1,480
Income taxes payable/(recoverable)                                           16,366            (225)             (27)
Amounts due to related companies                              16             29,015             666               80
                                                                            -------         -------          -------

TOTAL CURRENT LIABILITIES                                                    85,263          48,667            5,879

MINORITY INTERESTS                                                          111,399         115,480           13,950
                                                                            -------         -------          -------

TOTAL LIABILITIES AND
  MINORITY INTERESTS                                                        196,662         164,147           19,829
                                                                            -------         -------          -------

COMMITMENTS AND CONTINGENCIES                                 22

SHAREHOLDERS' EQUITY Common stock, US$0.001 par value:
  Authorized - 200,000,000 shares
  Issued and outstanding - 837,797 shares
    in 2000 and 592,900 shares in 1999                                            5               7                1
Preferred stock, authorized -
  10,000,000 shares in 2000 and 1999:
      Series B preferred stock, US$0.001 par value:
        Authorized - 320,000 shares in 2000 and 1999
        Issued and outstanding - 320,000 shares in
           2000 and 1999                                                          3               3                1
Additional paid-in capital                                                  156,632         169,052           20,421
Reserves                                                      20             26,830          28,028            3,386
Accumulated deficits                                          20             (3,018)        (27,416)          (3,312)
Accumulated other comprehensive loss/(gain)                   21                (18)             18                2
                                                                            -------         -------          -------

TOTAL SHAREHOLDERS' EQUITY                                                  180,434         169,692           20,499
                                                                            -------         -------          -------

TOTAL LIABILITIES AND
  SHAREHOLDERS' EQUITY                                                      377,096         333,839           40,328
                                                                            =======         =======          =======
</TABLE>


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

                                      F-5

<PAGE>


CHINA RESOURCES DEVELOPMENT, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

(Amounts in thousands, except share and per share data)
<TABLE>
<CAPTION>



                                                                              Year ended December 31,
                                                              1998             1999            2000             2000
                                                       -------------------------------------------------------------
                                                               RMB              RMB             RMB              US$
<S>                                                      <C>                  <C>         <C>              <C>
OPERATING ACTIVITIES
Net income/(loss)                                          (52,671)          (6,996)        (23,200)          (2,803)
Adjustments to reconcile net income/(loss) to net cash
  provided by/(used in) operating activities:
    Depreciation and amortization                            1,370            1,091           3,850              465
    Provision for doubtful accounts                          4,740                -               -                -
    Provision for inventory write-downs                      1,554                -           1,129              136
    Loss on impairment of an investment                     49,969                -               -                -
    Stock-based compensation issued to non-employees         4,990              983             279               34
    Minority interests                                     (11,079)           1,674           4,198              507
    Loss on disposal of property and equipment, net              -              910               -                -
    Loss on disposal of an equity method investment              -              662               -                -
    Write-off of goodwill                                        -              994               -                -

Changes in operating assets and liabilities:
  Marketable securities                                          -          (57,035)         (5,349)            (646)
  Trade receivables                                          2,257            4,844           3,531              426
  Inventories                                               49,669            2,453           5,103              617
  Other receivables, deposits and prepayments               (7,614)          17,308           1,168              141
  Amount due from Farming Bureau                           (18,750)         (13,346)         10,889            1,315
  Amounts due from related companies                          (655)          (5,188)         34,822            4,207
  Accounts payable                                          (8,080)           3,049         (14,505)          (1,752)
  Other payables and accrued liabilities                    (5,630)           9,153          22,850            2,760
  Income taxes payable                                      (6,009)               -         (16,591)          (2,004)
  Amounts due to related companies                          31,291           (2,276)        (28,349)          (3,424)
                                                           -------          -------         -------          -------
Net cash provided by/(used in) operating activities         35,352          (41,720)           (175)             (21)
                                                           -------          -------         -------          -------

INVESTING ACTIVITIES
Purchases of property and equipment                         (1,090)          (6,160)         (2,911)            (352)
Proceeds from disposal of investments                            -                -             883              107
Acquisition of subsidiaries                                      -                -              25                3
Deposit for the purchase of an investment                  (28,718)               -               -                -
Short term loan                                                  -          (45,000)              -                -
                                                           -------          -------         -------          -------
Net cash used in investing activities                      (29,808)         (51,160)         (2,003)            (242)
                                                           -------          -------         -------          -------

FINANCING ACTIVITIES
Advance from minority interest                                   -            1,780           1,587              192
Purchases of common stock for retirement                      (853)               -               -                -
                                                           -------          -------         -------          -------
Net cash provided by/(used in) financing activities           (853)           1,780           1,587              192
                                                           -------          -------         -------          -------

NET INCREASE/(DECREASE) IN CASH AND CASH
   EQUIVALENTS                                               4,691          (91,100)           (591)             (71)

Cash and cash equivalents, at beginning of year            124,547          129,238          38,138            4,606
                                                           -------          -------         -------          -------

Cash and cash equivalents, at end of year                  129,238           38,138          37,547            4,535
                                                           =======          =======         =======          =======
</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") through December 31, 1999.

         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 the fourth quarter of 1999,
         the Group established several new lines of business, including the
         operation of supermarkets and processed timber operations in the PRC.
         In addition, as described in Note 4, during 2000 the Group acquired an
         80% interest in an entity which provides health care information
         through an Internet website. The Group continues to consider other new
         investment opportunities.

         Information on the Group's operations by segment are included in note
         26 to the consolidated financial statements.


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, 2000 and 1999, cash and cash equivalents
                  included foreign currency deposits equivalent to RMB5,418
                  (US$65 and HK$4,601) and RMB1,686 (US$63 and HK$1,088),
                  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 primarily comprised of finished goods and are
                  stated at the lower of cost or market. 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>                                                   <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 has been an
                  other-than-temporary impairment in value, in which event they
                  are written-down to their net realizable value.

         (h)      Intangible assets
                  -----------------
                  Intangible assets consist of acquired website technology which
                  are amortized on the straight-line basis over two years.
                  Intangible assets are periodically reviewed for impairment
                  based on an assessment of future operations. Accumulated
                  amortization was RMB2,841 at December 31, 2000.

         (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 15.

                  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 SFAS 109, "Accounting for Income Taxes".

         (m)      Earnings/(loss) per share
                  -------------------------
                  Basic and diluted earnings/(loss) per share are calculated in
                  accordance with SFAS 128, "Earnings per Share".


                                      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)      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 SFAS 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.

                  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,
                  2000 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, 2000 or at any other
                  date.

         (o)      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.

         (p)      Commodity futures contracts
                  ---------------------------
                  In 1998, as part of its risk management strategy, the Group
                  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. This transaction
                  does not meet the definition of a hedge in accordance with
                  SFAS 133, "Accounting for Derivative Instruments and Hedging
                  Activities", and therefore, adoption of SFAS 133 would not
                  have an effect on the Group's results of operations. The Group
                  entered into no futures contracts during 1999 or 2000.


                                      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)      Short term loan receivable
                  --------------------------
                  The short term loan receivable outstanding in 1999 was secured
                  by certain equity interest in an unlisted PRC company, which
                  invests in Hainan Sundiro Motorcycle Co., Ltd. ("Sundiro"),
                  and was repayable on demand. On July 28, 2000, the loan was
                  exchanged for additional shares of Sundiro (note 11).

         (r)      Written call
                  ------------
                  Premiums on options written by the Group are recorded as
                  liabilities and the option is adjusted to the current fair
                  value at the balance sheet date. Premiums received from
                  writing options that expire unexercised are treated by the
                  Group on the expiration date as realized gains from
                  investments. The difference between the premiums and the
                  amount paid on effecting a closing purchase transaction, is
                  also treated as a realized gain, or, if the premium is less
                  than the amount paid for the closing purchase transaction, as
                  a realized loss. The Group as writer of options bears the
                  market risk of an unfavorable change in the price of the
                  security underlying the written option.

         (s)      Due to investment adviser
                  -------------------------
                  According to agreement made between the Group and Sanya
                  Zhongya Trust and Investment Company ("SZTI"), SZTI would use
                  the Group's deposits (approximately Rmb45 million) for the
                  trading of securities on behalf of the Group and guarantee a
                  minimum return. The excess of the actual return over the
                  minimum return is shared between both parties on an agreed
                  proportion. During the year ended December 31 2000, the
                  balance of the deposit had been fully withdrawn and the actual
                  return exceeded the guaranteed return by RMB12,253.

                                      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 subsidiary 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 "Operating Subsidiaries").

         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, and, therefore, no gain or loss was recognized upon
         Transfer.


4.       INVESTMENTS AND BUSINESS ACQUISITIONS

         During 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. The impact of the increase in equity interest on the results of
         operations has been accounted for since the date of acquisition.

         On June 30, 2000 the Group entered into an acquisition agreement
         ("Acquisition") to acquire an 80% equity interest in Silver Moon
         Technologies Limited("Silver Moon"), a British Virgin Islands
         corporation which was incorporated on March 24, 2000, for a
         consideration of US$1,500 (approximately RMB12,400) by issuing 244,897
         shares of the Company's unregistered restricted common stock of $0.001
         par value to Silver Moon's former sole equity owner, E-link Investment
         Limited ("E-link"). The principal activities of Silver Moon and its
         wholly-owned subsidiary, Zhongwei Medi-China.com Limited (formerly
         known as Sky Creation Technology Limited), a Hong Kong company, is
         providing healthcare content on the Internet which focuses on Chinese
         herbal medicine and therapies.

         The transaction was accounted for as a purchase; the cost of the
         acquisition exceeds the fair value of the net assets acquired by
         RMB10,701 which has been classified as acquired website technology and
         is being amortized over two years. The impact of the increase in equity
         interest on the results of operations has been accounted for since the
         date of acquisition.

                                      F-12
<PAGE>


CHINA RESOURCES DEVELOPMENT, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

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


4.       INVESTMENTS AND BUSINESS ACQUISITIONS (continued)

         Silver Moon did not report any revenues through the date of acquisition
         by the Group. Pro forma net loss and net loss per share for the year
         ended December 31, 2000, assuming the acquisition had been consummated
         as at January 1, 2000, are RMB30,286 and RMB36.15, respectively.


5.       FINANCIAL INCOME, NET

         Financial income, net represents:
<TABLE>
<CAPTION>

                                                                               Year ended December 31,
                                                                      1998                 1999                 2000
                                                                 ---------------------------------------------------
                                                                       RMB                  RMB                  RMB

<S>                                                                  <C>                    <C>               <C>
         Interest income                                             6,862                  948               11,749
         Interest expense                                             (289)                  (5)                   -
         Foreign exchange gains/(losses), net                           17                  (79)              (3,878)
                                                                    ------               ------               ------

                                                                     6,590                  864                7,871
                                                                    ======               ======               ======
</TABLE>


6.       OTHER INCOME/(EXPENSE), NET

         Other income/(expense), net represents:
<TABLE>
<CAPTION>

                                                                                    Year ended December 31,
                                                                               1998            1999             2000
                                                                          ------------------------------------------
                                                                                RMB             RMB              RMB
<S>                                                                         <C>               <C>           <C>
         Dividend income from cost method
           investments                                                            -           6,664                -
         Rental income                                                          900             788                -
         Net gains on trading of commodity
           futures contracts                                                  1,889               -                -
         Net gain on trading of marketable
           securities                                                             -             384            3,470
         Loss on disposal of
           property and equipment, net                                            -            (910)          (1,000)
         Net loss on write-off of an equity
           method investment                                                      -            (659)               -
         Recovery of bad debts written-off                                        -           2,902                -
         Share of income received from joint investment                           -               -            9,195
         Net loss on write-off of inventories                                     -               -           (1,129)
         Unrealized loss on marketable securities                                 -               -          (11,151)
         Others                                                               1,281           1,169             (649)
                                                                             ------          ------           ------

                                                                              4,070          10,338           (1,264)
                                                                             ======          ======           ======
</TABLE>

                                      F-13
<PAGE>


CHINA RESOURCES DEVELOPMENT, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

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


7.       INCOME TAXES

         Pre-tax loss from continuing operations for the years ended December 31
         was taxed in the following jurisdictions:
<TABLE>
<CAPTION>

                                                                               Year ended December 31,
                                                                      1998                 1999                 2000
                                                                 ---------------------------------------------------
                                                                       RMB                  RMB                  RMB

<S>                                                                <C>                    <C>                 <C>
         PRC                                                       (19,410)               4,801               10,036
         Other countries                                           (44,340)             (10,123)             (23,795)
                                                                    ------               ------               ------

                                                                   (63,750)              (5,322)             (13,759)
                                                                    ======               ======               ======
</TABLE>

         The provision for income tax for continuing operations consists of the
following:
<TABLE>
<CAPTION>

                                                                               Year ended December 31,
                                                                      1998                 1999                 2000
                                                                 ---------------------------------------------------
                                                                       RMB                  RMB                  RMB
<S>                                                                <C>                   <C>                   <C>
         Current:
           PRC federal income tax                                        -                    -                2,887
                                                                    ======               ======               ======
</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 income taxes/(tax 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:
<TABLE>
<CAPTION>

                                                                               Year ended December 31,
                                                                      1998                 1999                 2000
                                                                 ---------------------------------------------------
                                                                       RMB                  RMB                  RMB

<S>                                                                    <C>                  <C>                  <C>
         PRC federal statutory tax rate                                15%                  15%                  15%

         Computed expected income taxes (tax benefit)               (9,563)                (798)              (2,417)
         Higher effective income tax rates
           of another countries                                     (1,857)              (2,025)                (735)
         Net increase in valuation allowance                         5,068                  373                3,152
         Tax on foreign personal holding
           company income                                                -                2,450                    -
         Non-deductible expenses                                     6,352                    -                    -
         Others, net                                                     -                    -                2,887
                                                                    ------               ------               ------

         Income tax expense for the year                                 -                    -                2,887
                                                                    ======               ======               ======
</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 (continued)

         The deferred tax asset of the Group is comprised of the following:
<TABLE>
<CAPTION>

                                                                                                 December 31,
                                                                                           1999                 2000
                                                                                          --------------------------
                                                                                            RMB                  RMB
<S>                                                                                      <C>                  <C>
         Deferred tax asset:
           Net operating loss carryforwards                                              10,265               13,094
           Less: Valuation allowance for deferred tax asset                             (10,265)             (13,094)
                                                                                         ------               ------

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

         No undistributed earnings of the Company's foreign subsidiaries was
         available at December 31, 2000. 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, 2000, the Company had net operating loss carryforwards
         ("NOLs") of approximately RMB30 million for U.S. income tax purposes
         that expire in various years through 2020. At December 31, 2000, the
         Group's subsidiaries in the PRC had NOLs amounting to approximately
         RMB3 million for PRC income tax purposes that expire in 2005.

                                      F-15
<PAGE>


CHINA RESOURCES DEVELOPMENT, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

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


8.       LOSS PER SHARE

         The following table sets forth the computation of basic and diluted
         loss per share:
<TABLE>
<CAPTION>

                                                                               Year ended December 31,
                                                                      1998                 1999                 2000
                                                                 ---------------------------------------------------
                                                                       RMB                  RMB                  RMB
<S>                                                             <C>                 <C>                   <C>
         Numerator
           Numerator for basic and diluted loss per share:
               loss attributable to common
                 shareholders                                      (52,671)              (6,996)             (23,200)
                                                                 =========            =========            =========

         Denominator
           Denominator for basic loss per share:
               Weighted-average number of shares                   599,150              592,900              715,349
                                                                 =========            =========            =========

         Basic loss per share                                       (87.91)              (11.80)             (32.43)
                                                                 =========            =========            =========

         Diluted loss per share                                     (87.91)              (11.80)             (32.43)
                                                                 =========            =========            =========
</TABLE>

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

         The computation of diluted loss per share did not assume the conversion
         of the stock options of the Company in 2000, 1999 and 1998 and the
         warrants of the Company in 2000 and 1999 because their inclusion would
         have been antidilutive.


                                      F-16
<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,
                                                                                           1999                 2000
                                                                                      ------------------------------
                                                                                            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                    -
                                                                                         ======               ======

         Trading securities listed on the Hong Kong
           Stock Exchange
             At cost                                                                          -               78,798
             Less: unrealized loss                                                            -              (16,414)
                                                                                        -------              -------

         Fair value                                                                           -               62,384
                                                                                        =======              =======
</TABLE>

         As of December 31, 2000, portfolio securities valued at RMB46,878 were
         held in escrow by the custodian as cover for call options written by
         the Group.


10.      PROPERTY AND EQUIPMENT

         Property and equipment comprise:
<TABLE>
<CAPTION>

                                                                                               December 31,
                                                                                           1999                 2000
                                                                                      ------------------------------
                                                                                            RMB                  RMB
<S>                                                                                       <C>                  <C>
         At cost:
           Buildings and leasehold improvements                                           9,115                4,843
           Machinery, equipment and motor vehicles                                        8,044               10,913
                                                                                         ------               ------
                                                                                         17,159               15,756

         Accumulated depreciation                                                        (5,757)              (2,452)
                                                                                         ------               ------

                                                                                         11,402               13,304
                                                                                         ======               ======
</TABLE>

                                      F-17

<PAGE>


CHINA RESOURCES DEVELOPMENT, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

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


11.      INVESTMENTS

         Cost method investments comprise:
<TABLE>
<CAPTION>

                                                                                               December 31,
                                                                                           1999                 2000
                                                                                      ------------------------------
                                                                                            RMB                  RMB
<S>                                                                                     <C>                  <C>
         Investments in:
           Hainan Sundiro Motorcycle Co., Ltd.
             ("Sundiro")                                                                112,000              179,615
           PRC joint venture                                                              4,759                4,759
           Others                                                                           883                    -
                                                                                        -------              -------

                                                                                        117,642              184,374
                                                                                        =======              =======
</TABLE>

         Cost method investments are interests in unlisted shares/equity of PRC
         companies in which the Group does not have a significant influence over
         their operating and financial policies.

         At December 31, 1999, the investment in Sundiro represents a 5.3%
         equity interest. In 2000, the Group acquired 24,587,200 additional
         shares of Sundiro in satisfaction of a short term loan receivable of
         RMB45 million, related interest receivable of approximately RMB11
         million and other receivables of approximately RMB11 million. As a
         result of this transaction, at December 31, 2000, the Group owns an
         equity interest of 8.7% of Sundiro.

         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-18
<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,
                                                                                           1999                 2000
                                                                                      ------------------------------
                                                                                            RMB                  RMB

<S>                                                                                      <C>                  <C>
         Other payables                                                                  16,982               10,783
         Accrued liabilities                                                              7,647                2,688
         Call options written, at fair value
            (premium received RMB3,182)                                                       -                3,182
                                                                                         ------               ------

                                                                                         24,629               16,653
                                                                                         ======               ======
</TABLE>


13.      MARGIN LOAN PAYABLE

         The Group has a margin loan payable balance of RMB18,572 as of December
         31, 2000 which was used to purchase marketable securities listed on the
         Hong Kong Stock Exchange. This margin loan bears interest at a variable
         rate. The rate was 12 percent as of December 31, 2000. Interest expense
         on the margin loan for the year ended December 31, 2000 was
         approximately RMB73. The margin loan is due and repaid as the
         securities are sold.


14.      SHARE CAPITAL

         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.


15.      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, 2000.

                                      F-19
<PAGE>


CHINA RESOURCES DEVELOPMENT, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

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


15.      STOCK OPTIONS (continued)

         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 the 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 1998, 1999 and 2000.

         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.

         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,
                                                                      1998                 1999                 2000
                                                                 ---------------------------------------------------
                                                                       RMB                  RMB                  RMB

<S>                                                                <C>                  <C>                  <C>
         Pro forma net loss                                        (60,101)             (14,426)             (30,630)
                                                                    ======               ======               ======

         Pro forma loss per share:
             Basic                                                 (100.31)              (24.33)              (42.82)
                                                                    ======               ======               ======

             Diluted                                               (100.31)              (24.33)              (42.82)
                                                                    ======               ======               ======

</TABLE>

                                      F-20
<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)


15.      STOCK OPTIONS (continued)

         The Company's stock option activities and related information for the
         years ended December 31, 2000, 1999 and 1998 are summarized as follows:
<TABLE>
<CAPTION>

                                                  1998                      1999                       2000
                                                       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, 2000 have an exercise price
         of US$42 (RMB347.8). The weighted average remaining contractual life of
         those options is 5.4 years.

         Shares of common stock reserved for future issuance at December 31,
         2000 are 24,000.



                                      F-21
<PAGE>


CHINA RESOURCES DEVELOPMENT, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

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


16.      RELATED PARTY BALANCES AND TRANSACTIONS

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

                                                                                                 December 31,
                                                                                           1999                 2000
                                                                                      ------------------------------
                                                                                            RMB                  RMB

<S>                                                                                      <C>                  <C>
         Due from Farming Bureau                                                         47,013               13,509
                                                                                         ======               ======

         Due from related companies:
           Jin Long Corporation ("Jin Long")                                             16,025                    -
           Jin Huan Corporation ("Jin Huan")                                              8,843                    -
           Other related companies                                                       11,122                1,168
                                                                                         ------               ------

                                                                                         35,990                1,168
                                                                                         ======               ======

         Due to related companies:
           Other related companies                                                       29,015                  666
                                                                                         ======               ======
</TABLE>

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


                                      F-22
<PAGE>


CHINA RESOURCES DEVELOPMENT, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

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


16.      RELATED PARTY BALANCES AND TRANSACTIONS (continued)

         In addition to those transactions set out in notes 3, 4, 11 22(a) and
         24, 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               1998               1999               2000
                                                                 ---------------------------------------------------
                                                                           RMB                RMB                RMB
<S>                                                   <C>           <C>               <C>                 <C>
         Farming Bureau and related companies
         controlled by the Farming Bureau:

         Purchase of natural rubber                    (a)            (386,754)          (450,704)                 -
                                                                     =========          =========          =========

         Purchase of woods                                                   -                  -               (100)
                                                                     =========          =========          =========

         Guaranteed gross profit received              (a)              12,715              6,350                  -
                                                                     =========          =========          =========

         Net sales of materials, supplies and
           other agricultural products                 (b)              14,252             23,718                  -
                                                                     =========          =========          =========

         Net sales of natural rubber                                    16,121                  -                  -
                                                                     =========          =========          =========

         Interest expense paid                                            (235)                 -                  -
                                                                     =========          =========          =========

         Rental expenses paid                                             (628)              (739)              (306)
                                                                     =========          =========          =========

         Manufacturing expenses paid                                         -                  -                (87)
                                                                     =========          =========          =========

         Shareholders/directors of the Company:

         Consultancy fees paid                         (c)              (3,783)              (289)                 -
                                                                     =========          =========          =========
</TABLE>

                                      F-23


<PAGE>


CHINA RESOURCES DEVELOPMENT, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

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


16.      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) (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.

                  As more fully described Note 3, effective January 1, 2000, the
                  Group transfered all of the assets, liabilities operations and
                  staff of the Operating Subsidiaries to the Farming Bureau.
                  Consequently, the Group neither purchased nor sold rubber
                  under the terms of the S&P Agreement during 2000.

         (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.


                                      F-24

<PAGE>


CHINA RESOURCES DEVELOPMENT, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

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


16.      RELATED PARTY BALANCES AND TRANSACTIONS (continued)

         (c)      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, and the agreement was terminated on February 1, 1999.


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

                                                                                 Year ended December 31,
                                                                          1998               1999               2000
                                                                 ---------------------------------------------------
                                                                           RMB                RMB                RMB
<S>                                                                    <C>                 <C>              <C>
         Cash paid during the year for:
           Interest expense                                                 53                  5                  -
           Income tax                                                    6,011                  -                  -
                                                                       =======            =======            =======

         Non-cash investing and financing activities:
           Addition of intangible assets                                     -                  -             10,701
           Acquisition of a minority interest in a
             subsidiary (note 4)                                         7,000                  -             12,400
                                                                       =======            =======            =======
</TABLE>

                                      F-25

<PAGE>


CHINA RESOURCES DEVELOPMENT, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Amounts in thousands except share and per share data)


18.      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-26

<PAGE>


CHINA RESOURCES DEVELOPMENT, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

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


19.      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
                  sheets 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 sheets 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.

         (vi)     Written call option

                  The fair value of written call options was estimated using the
                  Black-Scholes option pricing model.


                                      F-27

<PAGE>


CHINA RESOURCES DEVELOPMENT, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

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


20.      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, 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
         Appropriation for the year                                   599                   599                1,198
                                                                  -------               -------              -------

         Balance at December 31, 2000                              14,014                14,014               28,028
                                                                  =======               =======              =======
</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 and 1998 that are
         available for distribution are RMB76,143 and RMB70,615, respectively.
         HARC has no retained earnings available for distribution as of December
         31, 2000.

                                      F-28

<PAGE>


CHINA RESOURCES DEVELOPMENT, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

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


21.      ACCUMULATED OTHER COMPREHENSIVE GAIN/(LOSS)

         The component of other comprehensive gain/(loss) is as follows:

                                                             Currency
                                                          translation
                                                          adjustments
                                                                  RMB

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

         Balance at December 31, 1999                             (18)
         Currency translation adjustment                           36
                                                              -------

         Balance at December 31, 2000                              18
                                                              =======

         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.


22.      COMMITMENTS

         (a)      Lease commitments

                  At December 31, 2000, 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 consist of the following:

                                                             RMB
                  Payable in:
                    2001                                     170
                    2002                                     170
                    2003                                     170
                    2004                                     128
                    2005                                     128
                    Thereafter                               128
                                                           -----

                  Total minimum lease payments               894
                                                           =====

                  Rental expenses under operating leases for the years ended
                  December 31, 2000, 1999 and 1998 amounted to RMB242, RMB242
                  and RMB242, respectively.

                                      F-29
<PAGE>


CHINA RESOURCES DEVELOPMENT, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

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


22.      COMMITMENTS (continued)

         (b)      Machinery

                  Pursuant to a purchase agreement dated July 10, 1999, the
                  Group was obligated to purchase machinery totaling RMB2,600.
                  Deposit of RMB1,560 was paid.

                  Subsequent to December 31, 2000, the purchase agreement was
                  canceled and the related deposit was repaid in the form of 49
                  percent of interest in an subsidiary of the Group that having
                  a fair value of RMB901 and cash of RMB712.


23.      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.


24.      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 amount of contributions paid by the Operating Subsidiaries, which
         were charged to the consolidated statements of operations, amounted to
         RMB262 and RMB287 for the years ended December 31, 1999 and 1998,
         respectively. As more fully described in Note 3, effective January 1,
         2000, the Group disposed of these operations. There are nil amount of
         contributions paid by the Operating Subsidiaries.


                                      F-30
<PAGE>


CHINA RESOURCES DEVELOPMENT, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

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


25.      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
         Charged to costs and expenses                                   -                1,129                1,129
                                                                     -----                -----                -----

         Balance at December 31, 2000                                1,838                2,683                4,521
                                                                     =====                =====                =====
</TABLE>


26.      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 the years 1998 and 1999
         presented in the consolidated financial statements. The Group did not
         have any export sales during the three years ended December 31, 2000,
         1999 and 1998.

         Description of products by segment
         ----------------------------------
         In 1999 and 1998, the Group had two reportable segments: (i) rubber and
         (ii) materials, supplies and other agricultural products. As more fully
         described in Note 3, effective January 1, 2000, the Group disposed of
         these operations. The reportable segments in 2000 are supermarket
         operations and processed timber. Accordingly, the segment result in
         1999 had been restated. 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. The Group's supermarket division primarily
         sold foods and grocery products to customers in the PRC. And the
         Group's timber division primarily sold processed timber wooden blocks
         to 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-31
<PAGE>


CHINA RESOURCES DEVELOPMENT, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

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


26.      SEGMENT FINANCIAL INFORMATION (continued)

         Operating segment information
         -----------------------------
<TABLE>
<CAPTION>

                                                                                 Year ended December 31,
                                                                          1998               1999               2000
                                                                 ---------------------------------------------------
                                                                           RMB                RMB                RMB
<S>                                                                    <C>                <C>             <C>
         Net sales to external customers:
           Natural rubber:
             Net sales to unaffiliated customers                       453,952            442,841                  -
             Net sales to affiliates                                    16,121                  -                  -
                                                                     ---------          ---------          ---------
                                                                       470,073            442,841                  -
                                                                     ---------          ---------          ---------
           Materials, supplies and other agricultural products:
               Net sales to unaffiliated customers                      43,367              9,120                306
               Net sales to affiliates                                  14,252             23,718                  -
                                                                     ---------          ---------          ---------
                                                                        57,619             32,838                306
                                                                     ---------          ---------          ---------
         Supermarket operations:
           Net sales to unaffiliated customers                               -                688              5,253
           Net sales to affiliates                                           -                  -                  -
                                                                     ---------          ---------          ---------
                                                                             -                688              5,253
                                                                     ---------          ---------          ---------
         Processed timber:
           Net sales to unaffiliated customers                               -                  -              1,395
           Net sales to affiliates                                           -                  -                  -
                                                                     ---------          ---------          ---------
                                                                             -                  -              1,395
                                                                     ---------          ---------          ---------

         Total consolidated net sales                                  527,692            476,367              6,954
                                                                     =========          =========          =========

         Depreciation and amortization expenses:
           Natural rubber                                                1,287                723                  -
           Materials, supplies and other
             agricultural products                                          45                333                280
           Supermarket operations                                            -                  7                119
           Processed timber                                                  -                  -                317
                                                                     ---------          ---------          ---------

         Total segment depreciation and amortization
           expenses                                                      1,332              1,063                716

         Reconciling item:
           Depreciation and amortization expenses
             attributable to corporate assets                               38                 28              3,134
                                                                     ---------          ---------          ---------
         Total consolidated depreciation and
           amortization expenses                                         1,370              1,091              3,850
                                                                     =========          =========          =========
</TABLE>

                                      F-32

<PAGE>


CHINA RESOURCES DEVELOPMENT, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

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


26.      SEGMENT FINANCIAL INFORMATION (continued)

         Operating segment information (continued)
         -----------------------------
<TABLE>
<CAPTION>

                                                                                 Year ended December 31,
                                                                          1998               1999               2000
                                                                 ---------------------------------------------------
                                                                           RMB                RMB                RMB
<S>                                                                  <C>               <C>                <C>
         Segment profit/(loss):
           Natural rubber                                                3,465              5,634                  -
           Materials, supplies and other
             agricultural products                                      (7,967)             3,040                 10
           Supermarket operations                                            -                117              1,045
           Processed timber                                                  -                  -               (503)
                                                                     ---------          ---------          ---------
         Total segment profit/(loss)                                    (4,502)             8,791                552

         Reconciling items:
           Corporate expenses                                          (15,852)           (15,056)           (28,416)
           Loss on impairment of an investment                         (49,969)                 -                  -
           Interest income                                               6,862                944             11,749
           Interest expense                                               (289)                (1)                 -
                                                                     ---------          ---------          ---------
         Total consolidated loss before
           income taxes                                                (63,750)            (5,322)           (16,115)
                                                                     =========          =========          =========
</TABLE>

<TABLE>
<CAPTION>

                                                                                        December 31,
                                                                          1998               1999               2000
                                                                 ---------------------------------------------------
                                                                           RMB                RMB                RMB
<S>                                                                    <C>                <C>                 <C>
         Segment assets:
           Natural rubber                                              258,090            115,651                  -
           Materials, supplies and other
             agricultural products                                      16,298            105,631                  -
           Supermarket operations                                            -              6,290              6,416
           Processed timber                                                  -              4,281              7,303
                                                                     ---------          ---------          ---------
         Total segment assets                                          274,388            231,853             13,719

         Reconciling items:
           Corporate assets                                              8,046             53,912            135,746
           Investments                                                 119,301            117,808            184,374
           Intersegment receivables                                    (31,009)           (26,477)                 -
                                                                     ---------          ---------          ---------

         Total consolidated assets                                     370,726            377,096            333,839
                                                                     =========          =========          =========
</TABLE>

                                      F-33
<PAGE>


CHINA RESOURCES DEVELOPMENT, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

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


26.      SEGMENT FINANCIAL INFORMATION (continued)

         Operating segment information (continued)
         -----------------------------
<TABLE>
<CAPTION>

                                                                                 Year ended December 31,
                                                                          1998               1999               2000
                                                                 ---------------------------------------------------
                                                                           RMB                RMB                RMB
<S>                                                                        <C>              <C>                <C>
         Expenditure for additions to long-lived assets:
           Natural rubber                                                  332                  -                  -
           Materials, supplies and other
             agricultural products                                          58                 54                  -
           Supermarket operations                                            -              4,223                387
           Processed timber                                                  -              1,326              3,250
                                                                       -------            -------            -------

         Total segment expenditure for additions to
           long-lived assets                                               390              5,603              3,637

         Reconciling item:
           Corporate assets                                                700                557              2,718
                                                                       -------            -------            -------

         Total consolidated expenditure for
           additions to long-lived assets                                1,090              6,160              6,355
                                                                       =======            =======            =======
</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,
                                                                          1998               1999               2000
                                                                 ---------------------------------------------------
                                                                           RMB                RMB                RMB

<S>                                                                     <C>                <C>              <C>
         Materials and supplies                                         28,180             32,838                  -
         Other agricultural products                                    29,439                  -                306
         Supermarket operations                                              -                688              5,253
         Processed timber                                                    -                  -              1,395
                                                                       -------            -------            -------

                                                                        57,619             33,526              6,954
                                                                       =======            =======            =======
</TABLE>

                                      F-34

<PAGE>


CHINA RESOURCES DEVELOPMENT, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

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


26.      SEGMENT FINANCIAL INFORMATION (continued)

         Major customers
         ---------------
         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 2000,
         1999 and 1998.


27.      RECENT ACCOUNTING PRONOUNCEMENTS

         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 applies 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 determined there is no impact or effect of SFAS
         No. 133 on the results and financial position of the Group.

         In March 2000, the FASB issued FASB Interpretation No.44 (Fin No.44),
         "Accounting for Certain Transactions Involving Stock Compensation, an
         interpretation of APB Option No. 25." FIN No.44 became effective July
         1, 2000 and provides guidance for applying APB Option No. 25
         "Accounting for Stock Issued to Employees." FIN No.44 had no impact on
         the financial condition or results of operations of the Group.

         In March 2000, the Emerging Issues Task Force of the FASB reached
         consensus on Issue No. 00-2 "Accounting for Website Development Cost."
         ("EITF 00-2"). EITF 00-2 establishes how an entity should account for
         costs incurred to develop a Web site. It requires that an entity
         capitalize costs during the Web application and infrastructure and
         graphics development stages of development. The consensus is effective
         for all costs incurred beginning after June 30, 2000, although earlier
         adoption is encouraged. EITF 00-2 did not have a material impact on the
         Group's financial condition or its results of operations.

                                      F-35

<PAGE>


CHINA RESOURCES DEVELOPMENT, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

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


28.     QUARTERLY FINANCIAL DATA (UNAUDITED)

        The following table summarizes the quarterly financial data for the
        years ended December 31, 2000 and 1999. Net loss per share calculations
        for each of the quarters are based on the weighted average number of
        shares for each period; therefore, the sum of the quarters may not
        necessarily be equal to the full year per share amount.
<TABLE>
<CAPTION>

                                                                                                           NET LOSS
                                                                                GROSS                      PER SHARE
                                                                   COST       PROFIT/      NET GAIN       (BASIC AND
                                                    REVENUES        OF         (LOSS)      /(LOSS)          DILUTED)
                                                     RMB           SALES         RMB          RMB            RMB
                                                   --------       -------     -------      ---------        --------
<S>                                                  <C>           <C>           <C>          <C>             <C>
        2000
           March 31, 2000                            1,397         1,296         101          2,137           (3.60)
           June 30, 2000                             2,316         2,548        (232)        (2,184)          (3.68)
           September 30, 2000                        1,445         1,135         310         (8,813)         (13.47)
           December 31, 2000                         1,796         1,423         373        (14,340)         (10.90)
        Year Ended December 31, 2000                 6,954         6,402         552        (23,200)         (32.43)

        1999
           March 31, 1999                           21,355        21,140         215         (4,349)          (0.73)
           June 30, 1999                            83,960        81,928       2,032            228            0.38
           September 30, 1999                      190,190       186,900       3,290           (826)          (1.39)
           December 31, 1999                       180,862       177,968       2,894         (2,049)          (3.45)
        Year Ended December 31, 1999               476,367       467,936       8,431         (6,996)         (11.80)

</TABLE>


                                      F-36




<PAGE>


                                    EXHIBITS


<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     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.)

         10.2     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.)

<PAGE>

         10.3     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.)

         10.4     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.)

         10.5     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.)

         10.6     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.)

         10.7     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.)

         10.8     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.)

         10.9     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.)

         10.10    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.)

         10.11    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.)

         10.12    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.)
<PAGE>

         10.13    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.)

         10.14    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.)

         10.15    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.)

         10.16    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.)

         10.17    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.)

         10.18    Acquisition Agreement among the Registrant, E-link Investment
                  Limited and Silver Moon Technologies Limited, dated June 30,
                  2000 (Filed as Exhibit 10.25 to Current Report on Form 8-K
                  dated June 30, 2000, and incorporated herein by reference.)

         10.19    Stock Purchase Agreement by and between HARC and Guilinyang
                  Farm dated July 28, 2000 (Certified English translation of
                  original Chinese version filed as Exhibit 10.26 to Current
                  Report on Form 8-K dated July 28, 2000, and incorporated
                  herein by reference.)

         11.3     Computation of Earnings Per Share for Fiscal Year ended
                  December 31, 2000 (Contained in Financial Statements filed
                  herewith.)

         21       Subsidiaries of the Registrant (Filed herewith.)

         99.2     Notice of Annual Meeting, Proxy Statement and Proxy
                  distributed to shareholders in advance of annual meeting held
                  on October 12, 2000 (Filed with Schedule 14A dated October 2,
                  2000, and incorporated herein by reference.)