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

                                   FORM 10-KSB

[X]  ANNUAL REPORT  PURSUANT TO SECTION 13 OR 15(d) OF THE  SECURITIES  EXCHANGE
     ACT OF 1934 For the fiscal year ended December 31, 2000

[_]  TRANSITION  REPORT  PURSUANT  TO  SECTION  13 OR  15(d)  OF THE  SECURITIES
     EXCHANGE ACT OF 1934 For the transition period from _________ to __________


                          Asian Alliance Ventures, Inc.
             (Exact name of registrant as specified in its charter)

Nevada                                                                98-0204780
(State or other jurisdiction                (I.R.S. Employer Identification No.)
of incorporation or organization)

Suite 1000-355 Burrard Street, Vancouver, British Columbia, Canada       V6C 2G8
(Address of registrant's principal executive offices)                 (Zip Code)

                                  604.482.1288
              (Registrant's Telephone Number, Including Area Code)

Securities registered under Section 12(b) of the Act:

  Title of Each Class                             Name of Each Exchange on which
  to be so Registered:                           Each Class is to be Registered:
  --------------------                           -------------------------------
          None                                                 None

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

Common Stock, Par Value $.001
(Title of Class)

Preferred Stock, Par Value $.001
(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.  [X] Yes    [_] No

Check if there is no disclosure of delinquent  filers in response to Item 405 of
Regulation  S-B is not  contained  in  this  form,  and no  disclosure  will  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-KSB
or any amendment to this Form 10-KSB.  [_]

State issuer's revenues for its most recent fiscal year. $0.00

State the aggregate market value of the voting and non-voting common equity held
by non-affiliates  computed by reference to the price at which the common equity
was sold,  or the average bid and asked  price of such  common  equity,  as of a
specified  date within the past 60 days.  (See  definition  of affiliate in Rule
12b-2 of the Exchange Act.) As of March 30, 2001, approximately $0.00.

As of March 30, 2001,  there were  5,000,000  shares of the  issuer's  $.001 par
value common stock issued and  outstanding.  As of March 30, 2001, there were no
shares of the issuer's $.001 par value preferred stock issued and outstanding.

Documents  incorporated  by reference.  There are no annual  reports to security
holders, proxy information statements,  or any prospectus filed pursuant to Rule
424 of the Securities Act of 1933 incorporated herein by reference.

Transitional Small Business Disclosure format (check one):  [X] Yes    [_] No


                                       1
<PAGE>


                                     PART I

Item 1. Description of Business.

Our Business.  Following extensive research and feasibility  studies, in August,
1999,  we  finalized  a Joint  Venture  Agreement  ("Agreement")  with  Shandong
Hengtong Chemical Industrial Company,  Ltd.  ("Shandong  Industrial"),  a large,
well established company in Linyi City,  partially owned by the Peoples Republic
of China ("PRC") located in the Southeast of Shandong Province,  adjacent to the
Beijing-Shanghai  highway. This is an advantageous  geographical position with a
rich coal and water supply with access to the heartland of China's  agricultural
output.   Shandong  Industrial  was  incorporated  in  China  in  1993.  It  was
restructured from a state-owned enterprise to a joint-stock ownership company in
1996. Its authorized share capital is $15,164,082.00.  The Tancheng  state-owned
Assets  Management Bureau holds 64.25% of the equity interest and 35.75% is held
by the individuals who work in Shandong Industrial's  fertilizer plant. Shandong
Industrial  owns and  operates  three  plants in Linyi  which  produce  chemical
fertilizer,  chemical and  thermoelectricity.  The Chemical Fertilizer Plant and
the  Thermoelectricity  Plant  are  to be  sold  to  Shandong  Development.  The
Fertilizer  Plant  manufactures  urea and refined  methyl  alcohol for sale. The
Thermoelectricity  Plant  generates  electricity and steam for sale to the local
power  grid.  Shandong  Industrial  also  utilizes a portion of the  electricity
generated  by the  Thermoelectricity  Plant.  All sales are made to customers in
China.   Shandong   Industrial  is  registered  with  the  Shandong   Provincial
Administrative Bureau for Industry and Commerce.  Its business license number is
3700001805541.

The Agreement  provides for the establishment of Shandong  Hengtong  Development
Chemical Co. Ltd ("Shandong Development") as our majority-owned  subsidiary. The
Agreement  provides  for  Shandong  Development  to  acquire  all the  assets of
Shandong  Industrial  necessary to manufacture  chemical fertilizer ("urea") and
thermoelectricity.  Current  urea  produced  by Shandong  Industrial  amounts to
200,000 tons per year. We hope to increase  that  production to 300,000 tons per
year.  Current  levels of  thermoelectricity  produced  by  Shandong  Industrial
amounts to 200 Million KWh per year.  We anticipate  that the  thermoelectricity
can be increased to 375,000 KWh per year.

Under  the  Agreement,   Shandong   Industrial   will  contribute  its  existing
manufacturing facilities in exchange for a 49% interest in the Joint Venture. In
exchange for a 51% ownership  interest in Shandong  Development,  we will infuse
approximately  Thirteen Million Dollars ($13,000,000) into Shandong Development.
Negotiations  have begun with  several  international  companies  interested  in
providing  the  necessary  funds for our  initial  capital  infusion in Shandong
Development. All discussions are preliminary,  however, and we have not executed
any  written  agreements.  We  anticipate  that we will enter into such  written
agreements  with these  private  investors  by the end of the second  quarter of
2001. The initial funds provided by us to Shandong  Development  will be used to
increase  urea and  thermoelectric  power  production  capacity in order to meet
existing  market  demand.  The balance of our capital  infusion will be used for
financing expenses, project development and working capital.

Urea. We believe China is a large developing country,  with a solid agricultural
foundation  providing food for a population of 1.2 billion  people.  In the past
decade,  the traditional  cultivation  method utilizing manure, is rapidly being
replaced  by  the  scientific  method  of  fertilizer  application.  Nitrogenous
fertilizer  is a type of  fertilizer  that is in demand  for a great  variety of
crops.  Nitrogen is an important element of fertilizer.  Nitrogen can help crops
produce protein. Unfortunately,  Nitrogen is very easily washed out of the soil;
therefore,  constant application of Nitrogen is required to maintain or expand a
crops  yield.  Urea  occupies  the  first  position  in the list of  nitrogenous
fertilizers.  It  contains  46%  nitrogen  which  is  the  highest  among  solid
fertilizers.  We believe urea is easy to handle, slow in its release of nutrient
nitrogen and  non-toxic,  factors we believe make it more and more popular among
the Chinese farming community.

In general,  the Chinese government has always promoted the fertilizer industry.
For years, they have subsidized power used for producing fertilizers;  e.g., the
current  "Subsidized  Utility  Price" is  approximately  87% of the market  rate
charged by the local state-owned Power Bureau.  Moreover,  the government offers
the chemical  fertilizer  manufacturers a tax exemption from the value-added tax
assessed on imports.  The import tariff for chemical fertilizer in China is low,
about 5%,  which  means that even if China is  allowed  to join the World  Trade
Organization in the near future,  we believe the advantages of the  relationship
established by the Agreement will not be significantly reduced.

Geographically,  the  project is located  on the Yellow  River and Huaihe  River
Valley flood plain,  which has  approximately  6,000,000  hectare of  cultivated
land. Wheat, corn, rice, beans, and malt are the main crops grown. The estimated
demand for urea is more than  4,000,000  tons per year in Shandong  and Shandong
Industrial's prime market area makes up about


                                       2
<PAGE>


10% of the China market.  According to estimates  from the  Statistic  Bureau of
Shandong  Province,  the consumption of nitrogen-based  chemical  fertilizers in
China has  consistently  exceeded  production in recent years.  The shortage has
been met by  imports,  mainly from Japan and Russia.  This supply  shortage  has
allowed Shandong Industrial  production at near full capacity of 200,000 tons of
urea  in  1999  and  230,000  tons in  2000.  We  believe  this  gives  Shandong
Development a solid market for increased  sales.  Furthermore,  with  continuing
education and  promotion,  we believe the market is growing larger year by year.
As the biggest  seller and  manufacturer  of chemical  fertilizer in the region,
Shandong  Industrial  has  earned  an  outstanding  reputation  for its  quality
products,  pricing,  delivery and customer services.  Shandong  Development will
inherit this legacy and has a ready market for its planned 100,000 tons per year
increase in urea production.  Prices in 2000, set by the  international  market,
remained  relatively  stable  compared  to 1999 prices and were higher than 1998
prices.

We believe that our initial capital infusion will allow us the opportunity to:

     o    participate in Chinese development in agriculture industry and power;

     o    realize  above  average  returns  on  our  capital  infusion;

     o    take  advantage  of  an  established   enterprise   with  a  preferred
          competitive position;

     o    work with premium Chinese partners and excellent management;

     o    produce   environmentally   positive   products   such  as  urea   and
          thermoelectricity;

     o    benefit from immediate  growth potential of existing and new products;
          and

     o    enjoy the benefit of agreements and approvals already in place.

The Joint  Venture  Agreement.  The  Agreement  was drafted and entered  into in
accordance  with  the  Chinese-Foreign  Co-operative  Joint  Venture  Law of the
People's  Republic  of  China  ("PRC"),   as  well  as  China's   implementation
regulations and other relevant Chinese laws and  regulations.  In the Agreement,
we agreed with Shandong  Industrial to set up Shandong  Development in Shandong,
China to operate as our majority-owned subsidiary.  Shandong Development has the
status of a Chinese  legal  person and is subject  to the  jurisdiction  of, and
protected by the laws of the PRC. The Agreement  specifically  provides that all
activities of Shandong Development shall be governed by the relevant laws, rules
and regulations of the PRC.

Shandong  Development is a limited liability company.  Our liability to Shandong
Development is limited to the capital invested in Shandong Development. We shall
share profits, risks and losses of Shandong Development with Shandong Industrial
in proportion  to our  respective  contributions  to the  registered  capital of
Shandong Development.

The  business  scope of Shandong  Development  shall be to develop,  produce and
distribute chemical fertilizer,  power and steam and other related products. The
initial production scale of Shandong  Development is anticipated to be an annual
output of 230,000 tons of urea and 2X12 thousand KW thermal power.

The  total  amount  of  capital  contributed  to  Shandong  Development  will be
$29,928,916   ("Total   Contribution").   The  registered  capital  of  Shandong
Development is $25,600,000 ("Registered Capital").

We have agreed to contribute a total of  $13,000,000.00  towards the  Registered
Capital,  representing a 51% ownership interest. Within three months of Shandong
Development  obtaining its business  license (the "Business  License"),  we have
agreed  to  deliver  $6,500,000.00  to  Shandong   Development.   The  remaining
$6,500,000.00  will be delivered to Shandong  Development within eight months of
the  issuance of the  Business  License to Shandong  Development.  Within  three
months of the date that  Shandong  Development  obtains  the  Business  License,
Shandong Industrial will contribute  equipment,  facilities and materials valued
at  $12,600,000.00  for a 49% ownership  interest in Shandong  Development.  The
difference  between the Total  Contribution  and Registered  Capital of Shandong
Development shall be raised by assuming current  liabilities of $4,328,000.00 of
Shandong Industrial.

The Agreement provides that Shandong  Development shall lease the land, factory,
facilities  and the  remaining  equipment  within three months from the date the
Business License is issued.

Should one of the parties to the Agreement fail to make its  Registered  Capital
contribution in full within the time prescribed under the Agreement,  that party
shall  be  deemed  to have  breached  the  Agreement.  Upon the  request  of the
non-breaching  party,  the defaulting  party shall consent to the termination of
the Agreement without prejudice.  Notwithstanding  delays in making the required
contributions,  neither party to the Agreement has requested termination nor has
either party indicated that they intend to terminate the Agreement.


                                       3
<PAGE>


The Agreement provides that when more funds are raised by one party from time to
time by agreement  of each party,  and the other party cannot raise enough funds
to keep its original equity proportion,  such other party shall, upon the former
party's  request,  be obligated to transfer its comparable  equity  interests in
Shandong  Development  to the  former  party or the  former  party's  associated
companies, parent companies, or subsidiaries.

Specific Responsibilities of Shandong Industrial. Shandong Industrial has agreed
to:

     o    contribute the necessary equipment,  facilities and materials to allow
          Shandong Development to conduct its operations;

     o    be responsible for making application to the relevant  authorities for
          approval  of  the   Agreement   and  the   registration   of  Shandong
          Development;

     o    assist  Shandong  Development  in importing and obtaining  importation
          licenses for all raw materials,  machinery and equipment necessary for
          the operation of business;

     o    obtain effective insurance coverage and renew same in a timely manner;

     o    inform us of related Chinese laws, regulations,  notices and any other
          information affecting the operations of Shandong Development;

     o    provide  Shandong  Development  and us  available  information  on the
          Chinese  market   necessary  to  facilitate   Shandong   Development's
          operations;

     o    assist  Shandong  Development in purchasing and handling all necessary
          equipment and materials in China;

     o    assist Shandong  Development in obtaining all necessary  utilities and
          supplies,  including,  but not  limited  to,  water,  electricity  and
          communication capabilities;

     o    recommend to Shandong  Development  (without obligation on the part of
          Shandong   Development  to  employ)  persons   suitable  to  undertake
          managerial  and  technical  positions,  and render all  assistance  to
          Shandong Development in the recruitment of such and other personnel;

     o    assist  foreign  workers,  staff and their family members in obtaining
          all necessary entry visas, work permits and other travel documents;

     o    assist Shandong Development in solving legal, administrative and other
          problems  arising  from  time to time  with  respect  to the  business
          operations of Shandong Development;

     o    assist Shandong  Development in obtaining the preferential  status and
          treatment that it should be entitled to from the Chinese government;

     o    manage  Shandong  Development  according to the  management  agreement
          ("Management   Agreement")   contemplated  by  Shandong   Development,
          Shandong Industrial and us;

     o    assist  Shandong  Development  in  convening  meetings of the Board of
          Directors of Shandong  Development in China, such reasonable  expenses
          to be borne by Shandong Development; and

     o    use its best  efforts  to  assist  Shandong  Development  in any other
          matters   entrusted  to  it  or   reasonably   requested  by  Shandong
          Development.

Our Specific Responsibilities.  We have agreed to:

     o    contribute the cash contributions in United States Dollars;

     o    supervise the management and financial affairs of Shandong Development
          pursuant to the Management Agreement;

     o    recommend (without  obligation on the part of Shandong  Development to
          employ)  managerial and technical  personnel to Shandong  Development,
          and render all assistance to Shandong  Development in the  recruitment
          of such personnel;

     o    assist  Shandong  Development  in  convening  meetings of the Board of
          Directors  in the  United  States  of  America  whenever  the Board of
          Directors of Shandong  Development  shall decide to meet in the United
          States of America,  such  reasonable  expenses to be borne by Shandong
          Development; and


                                       4
<PAGE>


     o    use our best  efforts  to  assist  Shandong  Development  in any other
          matters   entrusted  to  us  or   reasonably   requested  by  Shandong
          Development.

The parties to the  Agreement  have also agreed that the Board of  Directors  of
Shandong  Development  shall be comprised  of 5 directors,  of which 3 directors
shall  be  appointed  by us and 2  directors  shall  be  appointed  by  Shandong
Industrial,  provided,  however,  that  the  ratio  representation  on  Shandong
Development's  Board of  Directors  shall  reflect  as near as  practicable  the
proportion of each party's  contributions to the Registered  Capital.  The ratio
representation on Shandong Development's Board of Directors shall be adjusted to
take effect  immediately  upon the date of change in  proportion  of  Registered
Capital  contributions.  The  Chairman  of the Board of  Directors  of  Shandong
Development shall be appointed by the party that maintains a majority proportion
of the Registered Capital of Shandong Development.

Distribution  of Profits.  The  Agreement  provides that the profits of Shandong
Development shall not be distributed  unless the losses of previous fiscal years
have  been paid in full.  Otherwise,  no less than 80% of  profits  of  Shandong
Development  shall  be  distributed  annually  to us  and  Shandong  Industrial.
Shandong  Industrial  shall  receive 49% of  distributed  profits,  and we shall
receive 51% of distributed profit.

For the fiscal  years  ended  1998,  1999 and 2000  Shandong  Industrial  earned
revenue of $38,500,000.00, $48,500.000.00 and $54,200,000.00 respectively.

Duration of the Joint  Venture.  The term of the  Agreement is thirty (30) years
from the date on which the Business License is issued.  The term may be extended
upon the agreement of all parties.

Product  Production.  Shandong  Industrial's Linyi facility consists of a Thermo
power and Steam Plant, a Chemical  Fertilizer Plant and office  facilities.  All
are relatively modern and well maintained.  They are contiguous on a single site
of about 200  hectares of land in Tan Cheng  County,  occupied  under a land use
right granted from the state. Linyi is located in southeastern Shandong Province
adjacent to the  Beijing-Shanghai  highway.  Shandong  Industrial  has excellent
communication and transportation services,  including high speed Internet, road,
rail and air transportation. Beijing is an hour by air to the north; Qingdao, on
the Pacific coast is five hours by road to the east.  Qingdao is a hub city with
an International airport, rail and port facilities.

For every different  technological stage during the manufacturing process, there
is a separate management level of accountability:  Quality Control,  Measurement
Control,  Equipment and Power Management,  Safety and  Environmental  Protection
Management, and Technology and Expenditure Reduction Control. These Professional
Management Offices are focus on the policy of "identify the reason,  correct the
mistake, and learn the lesson" and "combine treatment with prevention". In order
to maintain quality of their products, Shandong Industrial has:

     o    installed quality control detectors in the systems; and

     o    taken  precautionary  actions to prevent  down time and  rejects.  The
          plant has won awards for "Best Management",  "Expenditure  Reduction",
          "Environmental Protection",  "Clean Plant Model", and "Golden Products
          for Customers" from the county and state.

Shandong  Industrial  places a strong emphasis on quality  control.  The quality
control  department and production  management  department has  approximately 30
staff  members.  This  department  is  responsible  for the  quality  control of
incoming raw materials and the chemical fertilizer  products.  All raw materials
purchased by Shandong Industrial are subject to random inspections or testing in
accordance  with  quality  standards  set  by  Shandong   Industrial.   Shandong
Industrial  also  carries  out random  inspections  or  testing on its  finished
products in accordance  with standards that are set by Shandong  Industrial with
reference to national quality standards.

Shandong  Industrial's  current  equipment uses highly  developed  technology to
control  industrial  pollutants.  It has solved a problem with "amino nitrogen",
and chilled water is now recycled in closed  circuits.  There are no harmful gas
emissions in Shandong  Industrial's  factory,  and its slag from urea production
has been used in the thermoelectricity plant. Shandong Industrial has instituted
safety policies and procedures,  complete and effective  safety  standards,  and
clear-cut duties.  Full time safety inspectors  supervise all workshops everyday
and check  the fire  prevention  equipment  regularly.  The  plant has


                                       5
<PAGE>


complete  first-aid  facilities.  In its  clinic,  doctors,  and nurses can give
health care service and inspections for each employee and family,  and regularly
provide prevention treatments

Power and Steam.  The  Thermoelectricity  Plant is tied into the regional  power
grid which buys all the energy  not needed by  Shandong  Industrial.  It has two
generating  sets of  15,000KW,  capable of  producing  200  million KWh of power
annually and heat generating  capacity of 1.2 million tons of steam.  Both power
units are  relatively  new; the latest was installed in 1997-1998.  The plant is
coal fired,  using regional sources.  We anticipate that a third power unit will
be added in 2001  increasing  capacity to 45,000KW and 375 million KWh per year.
The capital cost of the unit has been estimated at $7.2 Million.

New  Products.  The chemical  fertilizer  plant can also produce  20,000 tons of
carbinol per year which is widely used in  medicine,  pesticide  production  and
other products.  This  capability and other strategic  investments may result in
some new products  being  introduced  by Shandong  Industrial in or around 2004.
Projected new products include:

     o    a new ionic film caustic soda system for caustic  soda  production  of
          100,000  tons per year;

     o    development of a cyanic uric acid system  producing 10,000 tons annual
          output;

     o    the  production  of 100,000  tons of  compound  fertilizer;  and

     o    the increased production of chlorine cyanic uric acid.

After  expanding  Shandong  Industrial's  major existing  production  lines,  we
anticipate  that  Shandong  Development's  focus  will  include  developing  its
by-products from the major lines, by using Shandong Industrial's  superiority in
product markets,  the combination of steam and power, high added value, and high
technology. Such by-products include:

     o    progesterone glycoside and ginkgo products;

     o    lysine;

     o    chlorinated polypropylene;

     o    chlorinated polyvinyl chloride;

     o    Methane chloride;

     o    Furanidine; and

     o    Adipic acid.

New Chemical Products. Early planning has commenced to develop, produce and sell
significant  volumes  of  caustic  soda and  chlorine  and minor  quantities  of
methanol, hydrochloric acid, hydrogen and one kind of chlorinated polypropylene.

Resources.  We believe that one of the most attractive  aspects of acquiring the
well-established  business from Shandong  Industrial is the  elimination  of the
need to secure additional sources of resources.  Sufficient  quantities of coal,
power,  water,  buildings,  equipment  and  people are  already  in place,  with
increases readily available.

Urea's source  material is coal.  Coal is also the key input for steam and power
production.  The coal is mainly  supplied from the Shanxi Coal Mine, and refined
on site. Based on relevant studies, we believe that ample quantities of coal are
available.  The price appears to be stable.  Shandong Industrial  currently pays
$47.00 a ton.

Electricity  for  fertilizer  production  is purchased  from the Power  Bureau's
network,  which offers preferred  capacity at a subsidized price for agriculture
related  production  of 3.4 cents  per KWh.  All other  power  requirements  are
supplied by Shandong  Industrial's  thermoelectric  plant. The main resource for
power production is smoked coal, which is available locally for $25.00 a ton.

A local utility provides all the water needed by Shandong Industrial.  Once used
in the manufacturing process, the industrial water is recycled through specially
constructed cooling towers.

We believe  that all  necessary  buildings  and  equipment  are in place for the
continuation  of  the  business  carried  on by  Shandong  Industrial  and to be
continued by Shandong Development.


                                       6
<PAGE>


Shandong  Industrial  will provide  management,  production  and  administrative
staff.  As  part  of its  contract  to  provide  management  services,  Shandong
Industrial  retains  all  personnel  obligations,  including  those  related  to
housing,  welfare,  and  pensions.  Staffing  proposed  include  employees  with
university  level  qualifications  and  extensive  experience  in  the  relevant
industries. Most of Shandong Industrial's employees are from Tancheng County.

Technology.  In  order to  manage  the  facility  effectively  and  efficiently,
Shandong  Industrial  has  invested  in a  computer  support  system  which  has
integrated computer network technology,  and information management to provide a
high quality,  comprehensive  information  management  platform for forecasting,
decision-making, operation, production control, and general management. Based on
the factory's  current  management system and method, we believe that the system
can precisely  and  effectively  recognize  changes in the external and internal
circumstances  at  different  times and various  places,  implement  uniform and
optimal  management  information,  and  form a  decision  support  system,  thus
speeding up the decision-making processes and saving administration costs.

The facility  for power  production  is only 4-years old. The  thermoelectricity
plant, a regional  thermoelectricity station,  integrates heat generation,  heat
supply and  environmental  protection  using modern  processes  and  technology.
Shandong  Industrial  has two  sets  of  urea  equipment,  which  were  recently
improved.  Shandong  Industrial  was the first operator to combine two towers in
China.  With this new  combined  system  its annual  output has risen.  Shandong
Industrial  further  plans to increase the output of the system with  technology
from Japan or France.

For new product  development,  Shandong  Industrial  has  established  a Product
Research  Department.  It has  its  own  experienced  research  technicians  and
engineers  for  developing  new  products  and adding  extra  value to  existing
products  to meet  the  constantly  changing  demand  of the  markets.  Shandong
Industrial  has budgeted  annual  expenditures  for  technology  transformation,
technology  upgrade,  employee  development,  and feasibility studies to improve
production quality and quantities.

Our  Competition.   Shandong  Industrial  is  the  largest  chemical  fertilizer
manufacturer  in Southern  Shandong,  Northern  Jiangsu,  and the Northern Anhui
provinces.  Most of the  region's  agricultural  wholesalers  have  traded  with
Shandong   Industrial   for  many   decades  and  have   established   long-term
relationship.  The nearest  domestic  competitor is in Yucheng City at the outer
edge of Shandong Industrial's primary market area.

Shandong  Industrial's urea products meet the quality standards laid down by the
Shandong Provincial Bureau of Standard and have received many awards. We believe
that  price  and  quality  are the  most  attractive  factors  to  consumers  of
fertilizer  industry in China.  Based on our research,  we believe that Shandong
Industrial  has a  competitive  advantage  in both.  We  believe  that  Shandong
Development  can  maintain  Shandong   Industrial's   market  position,   remain
competitive  and grow  with  the  increasing  demand  in the  region  due to the
following factors:

     o    Shandong  Industrial's  brand name urea  product  has earned a quality
          image;

     o    cost of production is lower than the competitors because of production
          volumes;

     o    high integration of resources, for instance, raw material, by-products
          (steam), and co-product (power) avoids damage from power shortages;

     o    excellent customer service;

     o    proven sales and marketing strategies; and

     o    highly qualified executive managers.

In order to maintain  and  increase  the  competitive  advantage  that  Shandong
Industrial has established,  Shandong  Development must pre-empt  competitors by
expanding  present  operations  to improve cost  structures  and  profitability.
Shandong  Development  must also  capitalize  on its  capacity to develop  other
refined chemical products which use urea as raw materials, and chemical products
which use, for example, local ginkgo as raw material.

There are several  competitors  such as Chin-I  Chemical  Fertilizer,  Chin-Shun
Chemical Fertilizer,  and Bo-Yong Chemical Fertilizer.  However, we believe that
all of these  competitors  produce  lower  amounts  of  fertilizer  with  higher
production costs. Although most of these manufacturers are relatively small, and
struggling  to  survive,  some do have  expansion  plans which have not yet been
fully approved and funded.

Japan and Russia are the  principal  countries  that  export  urea to China.  We
believe that such importers lack a competitive  advantage in the Shandong region
because:


                                       7
<PAGE>


     o    long  distance  shipments  can damage  packaging and the products lose
          visual appeal, are hard to handle and give rise to questions regarding
          quality;

     o    transport costs add to the cost or price to customers;

     o    storage and delivery costs are added; and

     o    customer service is practically non-existent.

The National government controls the import of chemical  fertilizers into China,
through the  requirement  to obtain  import  licenses and the  imposition  of an
import tariff,  which is currently levied at 5%. Based on historical  experience
and the fact that the price of the  imported  urea is normally  higher than that
produced  within  China,  we believe that imports will have no material  adverse
effect on sales despite imported urea being generally of a higher quality.  Even
if the 5% levy on imported fertilizers is eliminated after China joins the World
Trade Organization,  imports should not adversely affect Shandong  Development's
competitive position.

Government Regulation.  Shandong Development's results may be adversely affected
by changes in the political  and social  conditions in China and by, among other
things,  changes in governmental  policies with respect to laws and regulations,
inflationary measures,  currency conversion and remittance abroad, and rates and
methods of taxation.  While the Chinese  government  is expected to continue its
economic reform policies, many of the reforms are new or experimental and may be
refined or changed.  It is also possible that a change in the Chinese leadership
could lead to changes in economic policy.

Employees.  As of March  30,  2001,  we do not  currently  have  any  employees.
Shandong Industrial currently has 2,300 employees.

Item 2.  Description of Property.

Property Held by Us. As of the dates  specified in the following  table, we held
the following property in the following amounts:

        Property                 December 31, 1999         December 31, 2000
    ----------------             -----------------         -----------------
          Cash                      $14,890.00                 $9,106.00

We do not presently  own any  interests in real estate.  We do not presently own
any inventory or equipment.

The Company's Facilities. We do not own any real or personal property.  However,
we do lease office space from Automation Plus located at Suite 1000, 355 Burrard
Street, Vancouver, British Columbia, Canada V6C 2G8, for $1,118.05 a month.

Independent  Management  Consultants  of BC, a company  controlled  by  Benjamin
Leboe, our Secretary, Treasurer and a member of our Board of Directors, provides
office services to the Company.  During the fiscal year ended December 31, 2000,
we paid Independent Management Consultants of BC $3,500.00 for such services.

Item 3.  Legal Proceedings.

We are not  aware of any  pending  litigation  nor do we it have any  reason  to
believe that any such litigation exists.

Item 4.  Submission of Matters to Vote of Security Holders

Not applicable.

                                     PART II

Item 5.  Market Price for Common Equity and Related Stockholder Matters.


                                       8
<PAGE>


Reports to Security Holders.  We are a reporting company with the Securities and
Exchange  Commission.  The public may read and copy any materials filed with the
SEC at the SEC's Public  Reference  Room at 450 Fifth  Street N.W.,  Washington,
D.C.  20549.  The public may also obtain  information  on the  operation  of the
Public Reference Room by calling the SEC at 1-800-SEC-0330. The SEC maintains an
Internet site that contains reports, proxy and information statements, and other
information regarding issuers that file electronically with the SEC. The address
of that site is http://www.sec.gov.

There  are no  outstanding  options  or  warrants  to  purchase,  or  securities
convertible into, shares of our common stock. There are no outstanding shares of
our  common  stock  that  could be sold  pursuant  to Rule 144  pursuant  to the
Securities  Act of 1933 or that we have agreed to register  under the Securities
Act  of  1933  for  sale  by  security  holders.   There  are  approximately  35
shareholders holding shares of our stock.

There have been no cash  dividends  declared on our common stock.  Dividends are
declared at the sole discretion of our Board of Directors.

Penny Stock Regulation.  Shares of our common stock are subject to rules adopted
by the Securities and Exchange Commission that regulate broker-dealer  practices
in connection with  transactions  in "penny stocks".  Penny stocks are generally
equity  securities  with a price  of less  than  $5.00  (other  than  securities
registered  on certain  national  securities  exchanges  or quoted on the Nasdaq
system,  provided  that  current  price and volume  information  with respect to
transactions  in those  securities  is provided by the exchange or system).  The
penny stock rules require a  broker-dealer,  prior to a  transaction  in a penny
stock not  otherwise  exempt  from  those  rules,  deliver a  standardized  risk
disclosure  document prepared by the Securities and Exchange  Commission,  which
contains the following:

     o    a description  of the nature and level of risk in the market for penny
          stocks in both public offerings and secondary trading;

     o    a description  of the broker's or dealer's  duties to the customer and
          of the rights and remedies  available to the customer  with respect to
          violation to such duties or other requirements of securities' laws;

     o    a brief, clear,  narrative  description of a dealer market,  including
          "bid" and "ask"  prices for penny stocks and the  significance  of the
          spread between the "bid" and "ask" price;

     o    a toll-free telephone number for inquiries on disciplinary actions;

     o    definitions of significant terms in the disclosure  document or in the
          conduct of trading in penny stocks; and

     o    such other information and is in such form (including language,  type,
          size and format),  as the  Securities  and Exchange  Commission  shall
          require by rule or regulation.

Prior to effecting any transaction in penny stock, the  broker-dealer  also must
provide the customer the following:

     o    the bid and offer quotations for the penny stock;

     o    the  compensation  of the  broker-dealer  and its  salesperson  in the
          transaction;

     o    the number of shares to which such bid and ask prices apply,  or other
          comparable  information  relating  to the depth and  liquidity  of the
          market for such stock;  and

     o    monthly  account  statements  showing  the market  value of each penny
          stock held in the customer's account.

In  addition,  the penny stock rules  require that prior to a  transaction  in a
penny stock not otherwise exempt from those rules, the broker-dealer must make a
special written  determination that the penny stock is a suitable investment for
the purchaser and receive the purchaser's written  acknowledgment of the receipt
of a risk disclosure  statement,  a written agreement to transactions  involving
penny stocks, and a signed and dated copy of a written suitably statement. These
disclosure  requirements may have the effect of reducing the trading activity in
the secondary  market for a stock that becomes subject to the penny stock rules.
Holders of shares of our common stock may have  difficulty  selling those shares
because our common stock will probably be subject to the penny stock rules.

Item 6. Management's  Discussion and Analysis of Financial  Condition or Plan of
Operation.

This  following  information  specifies  certain  forward-looking  statements of
management  of the  company.  Forward-looking  statements  are  statements  that
estimate  the  happening  of future  events  are not based on  historical  fact.
Forward-looking  statements  may be  identified  by the  use of  forward-looking
terminology,  such as "may", "shall",  "will",  "could",  "expect",  "estimate",
"anticipate",   "predict",  "probable",  "possible",  "should",  "continue",  or


                                       9
<PAGE>


similar  terms,  variations  of those terms or the negative of those terms.  The
forward-looking  statements  specified in the  following  information  have been
compiled by our  management on the basis of  assumptions  made by management and
considered  by  management  to be  reasonable.  Our  future  operating  results,
however, are impossible to predict and no representation,  guaranty, or warranty
is to be inferred from those forward-looking statements.

The assumptions used for purposes of the forward-looking statements specified in
the following  information  represent estimates of future events and are subject
to uncertainty as to possible changes in economic,  legislative,  industry,  and
other circumstances.  As a result, the identification and interpretation of data
and other information and their use in developing and selecting assumptions from
and among  reasonable  alternatives  require the  exercise of  judgment.  To the
extent that the assumed events do not occur, the outcome may vary  substantially
from anticipated or projected results, and, accordingly, no opinion is expressed
on the achievability of those  forward-looking  statements.  No assurance can be
given that any of the  assumptions  relating to the  forward-looking  statements
specified in the following information are accurate, and we assume no obligation
to update any such forward-looking statements.

Liquidity and Capital Resources.  At December 31, 1999, we had cash resources of
$14,890.00.  At December  31,  2000,  we had cash  resources  of  $9,106.00.  At
December 31, 1999, we had total current  assets of $14,890.00  and total current
liabilities  of  $265,475.00.  At December 31, 1999,  total current  liabilities
exceeded total current assets by $250,585.00. At December 31, 2000, we had total
current  assets of $9,106.00 and total current  liabilities of  $419,998.00.  At
December 31, 2000,  total current  liabilities  exceeded total current assets by
$410,892.00. The cash and equivalents constitute our present internal sources of
liquidity.  Because we are not generating any revenues, our only external source
of liquidity is the sale of our capital stock.

Results of Operations. We have not yet realized any revenue from operations. For
the year ended December 31, 2000, we experienced a net loss of $160,307.00.  For
the year ended December 31, 1999, we experienced a net loss of $260,335.00.  The
decrease  in the  loss  for  the  corresponding  periods  was  primarily  due to
decreased office expenses,  decreased  professional fees and decreased  investor
relations expenses.

Marketing.  Shandong  Industrial  currently  sells three main  products from its
Linyi facility: urea, power and steam. The power and steam is mostly consumed in
urea production with the remainder sold to Shandong  Industrial's chemical plant
and the regional Power Bureau.  The urea is sold to the agricultural  community,
primarily in eastern China.

The power  produced by Shandong  Industrial is used mainly for its chemical line
and urea  production,  and the excess has always been sold to the state  utility
grid where it is highly in  demand.  Shandong  Development  will  continue  this
practice  to use or sell all its power and earn some  income from steam sales to
Shandong Industrial's chemical plant.

About ten  full-time  staff  work on  increasing  the market  share of  Shandong
Industrial's  urea sales.  They also handle the  day-to-day  sales and  delivery
operation  with the sales  agents,  authorized  distributors,  and other channel
partners.  Independent contractors,  mainly using trucks and tractors, through a
well-developed  distribution  network,  handle  delivery.  They have articulated
sales  and  market  strategies,  target  markets  and key  product  and  service
objectives.  Prices, set by the international market have been relatively stable
and were marginally higher in 2000 compared to 1998 prices.

Our Plan of Operation  for the Next Twelve  Months.  We will require  additional
cash to implement our business  strategies,  including  cash for: (i) payment of
increased operating expenses;  and (ii) further implementation of those business
strategies.  Such additional  capital may be raised through additional public or
private  financings,  as well as borrowings and other  resources.  To the extent
that additional  capital is raised through the sale of equity or  equity-related
securities,  the  issuance of such  securities  could  result in dilution of our
stockholders.  There  can  be no  assurance  that  additional  funding  will  be
available on favorable  terms,  if at all. If adequate  funds are not  available
within  the  next 12  months,  we may be  required  to  curtail  its  operations
significantly  or to  obtain  funds  through  entering  into  arrangements  with
collaborative  partners or others that may require us to relinquish  rights that
we would not otherwise  relinquish.  No assurance can be given, however, that we
will have access to the capital markets in the future, or that financing will be
available on acceptable terms to satisfy our cash  requirements to implement our
business  strategies.  Our  inability  to access the  capital  markets or obtain
acceptable  financing  could have a material  adverse  effect on our  results of
operations and financial conditions.


                                       10
<PAGE>


Our forecast of the period of time through which our financial resources will be
adequate to support our operations is a forward-looking  statement that involves
risks and  uncertainties,  and actual results could vary as a result of a number
of factors.

We do not anticipate any significant research and development within the next 12
months,  nor do we  anticipate  that we will lease or purchase  any  significant
equipment within the next 12 months.  We do not anticipate a significant  change
in the number of our employees within the next 12 months.

We anticipate that we will begin to realize a positive  revenue stream beginning
in or about the first quarter of Shandong  Development's  operations as a result
of the profit sharing provided for under the Agreement. Specifically, we believe
that the historical financial data provided by Shandong Industrial  demonstrates
that we will  begin to  realize a positive  revenue  stream  very soon after the
terms and conditions of the Agreement are met.

Item 7.  Financial Statements

Copies of the financial  statements  specified in Regulation  228.310 (Item 310)
are filed with this Annual Report on Form 10-KSB.


                                       11
<PAGE>


Independent Auditors' Report on the Financial Statements

To the Shareholders of
Asian Alliance Ventures Inc.

We  have  audited  the  balance  sheets  of  Asian  Alliance  Ventures  Inc.  (a
Development  Stage  Company)  as at  December  31, 2000 and 1999 and the related
statements of operations, cash flows and stockholders' equity for the years then
ended and for the period from October 2, 1998  (inception) to 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 an audit to obtain reasonable assurance 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 financial position of Asian Alliance Ventures Inc. as
at December 31, 2000 and 1999 and the results of its  operations  and cash flows
for the years then ended and for the period from October 2, 1998  (inception) to
December 31, 2000 in accordance with accounting principles generally accepted in
the United States of America.

The accompanying  financial  statements have been prepared  assuming the Company
will  continue  as a going  concern.  As  discussed  in Note 1 to the  financial
statements, the Company has no established source of revenue and is dependent on
its  ability  to  raise  substantial   amounts  of  equity  funds.  This  raises
substantial  doubt  about  its  ability  to  continue  as a going  concern.  The
financial  statements do not include any adjustments  that might result from the
outcome of this uncertainty.

Kelowna, Canada
March 12, 2001                                             Chartered Accountants


200-1633 Ellis Street
Kelowna
British Columbia
V1Y 2A8
Tel:  (250) 712-6800
Fax: (250) 712-6850

<PAGE>


--------------------------------------------------------------------------------
Asian Alliance Ventures Inc.
(a Development Stage Company)
Balance Sheet
December 31                                                  2000           1999
--------------------------------------------------------------------------------

Assets
Current
   Cash                                                 $   9,106     $  14,890
                                                        =========     =========

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

Liabilities
Current
   Accounts payable                                     $  26,848     $   1,297
   Accrued liabilities                                      2,500         3,000
   Due to related parties (Note 3)                        170,650        41,178
   Loan payable (Note 4)                                  220,000       220,000
                                                        ---------      --------
                                                          419,998       265,475
                                                        ---------      --------

Stockholders' Equity
Capital stock (Note 5)                                     5,000          5,000
   Authorized:
       50,000,000 common shares of $0.001 par value
       10,000,000 preferred shares of $0.001 par value
   Issued:
       5,000,000 common shares
Additional paid-in capital                                 5,000          5,000
Deficit accumulated during the development stage        (420,892)      (260,585)
                                                        (410,892)      (250,585)
                                                       ---------      ---------
                                                       $   9,106      $  14,890
                                                       =========      =========

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


               See accompanying notes to the financial statements.

<PAGE>


<TABLE>
--------------------------------------------------------------------------------
Asian Alliance Ventures Inc.
(a Development Stage Company)
Statement of Operations
--------------------------------------------------------------------------------
<CAPTION>
                                                  For the
                                                period from        For the            For the
                                              October 2, 1998       year               year
                                              (inception) to        ended              ended
                                                December 31      December 31        December 31
                                                   2000             2000               1999
                                                   ----             ----               ----
<S>                                              <C>            <C>              <C>
Bank charges and exchange                        $  18,899      $       495      $    18,404
Investor relations                                 293,958           61,845          232,113
Office                                              34,078           31,523            2,555
Licenses and permits                                 4,645            4,560               85
Management fees                                     29,000           29,000
Professional fees                                   29,419           21,991            7,178
Travel                                              10,893           10,893
                                                 ---------      -----------      -----------
Total expenses                                     420,892          160,307          260,335
                                                 ---------      -----------      -----------

Net loss                                         $(420,892)     $  (160,307)     $  (260,335)
                                                 =========      ===========      ===========

Weighted average number
   of shares outstanding                                          5,000,000        4,057,377
                                                                ===========      ===========
Loss per share - basic and diluted                              $     (0.03)     $     (0.06)
                                                                ===========      ===========
</TABLE>


              See accompanying notes to the financial statements.

<PAGE>


<TABLE>
Asian Alliance Ventures Inc.
(a Development Stage Company)
Statement of Cash Flows
<CAPTION>
                                                     For the
                                                   period from          For the          For the
                                                 October 2, 1998         year             year
                                                 (inception) to          ended            ended
                                                   December 31        December 31      December 31
                                                      2000               2000             1999
                                                    ---------        ---------        ---------
<S>                                                 <C>              <C>              <C>
Cash flows derived from

   Operating Activities
       Net loss                                     $(420,892)        (160,307)       $(260,335)
       Changes in non-cash operating
       working capital
           Accounts payable                            26,848           25,551            1,297
           Accrued liabilities                          2,500             (500)           3,000
                                                    ---------        ---------        ---------
                                                     (391,544)        (135,256)        (256,038)
                                                    ---------        ---------        ---------
   Financing Activities
       Advances from related parties                  170,650          129,472           40,928
       Proceeds from loan payable                     220,000                           220,000
       Capital stock issued for cash                   10,000                            10,000
                                                    ---------        ---------        ---------
                                                      400,650          129,472          270,928
                                                    ---------        ---------        ---------
Net (decrease) increase in cash                         9,106           (5,784)          14,890

Cash, beginning of period                                               14,890
                                                    ---------        ---------        ---------
Cash, end of period                                 $   9,106        $   9,106        $  14,890
                                                    =========        =========        =========
</TABLE>


              See accompanying notes to the financial statements.

<PAGE>
<TABLE>


--------------------------------------------------------------------------------
Asian Alliance Ventures Inc.
(a Development Stage Company)
Statement of Stockholders' Equity
From inception to December 31, 2000
--------------------------------------------------------------------------------
<CAPTION>
                                           Common Shares           Additional
                                       --------------------          Paid-In
                                       Shares        Amount          Capital           Deficit           Total
                                       ------        ------          -------           -------           -----
<S>                                   <C>               <C>            <C>            <C>                <C>
Common stock
   issued for cash                    5,000,000         $5,000         $5,000                --          $  10,000

Net loss for the period
   from inception to
   December 31, 1999                                                                  $(260,585)         $(260,585)
                                      ---------         ------         ------         ---------          ---------

Balance,
   December 31, 1999                  5,000,000          5,000          5,000          (260,585)          (250,585)

Net loss
   for the year ended
   December 31, 2000                                                                   (160,307)          (160,307)
                                      ---------         ------         ------         ---------          ---------
Balance,
   December 31, 2000                  5,000,000         $5,000         $5,000         $(420,892)         $(410,892)
                                      =========         ======         ======         =========          =========
</TABLE>


              See accompanying notes to the financial statements.

<PAGE>


--------------------------------------------------------------------------------
Asian Alliance Ventures Inc.
(a Development Stage Company)
Notes to the Financial Statements
December 31, 2000
--------------------------------------------------------------------------------

1.   Operations and going concern

The Company was incorporated under the laws of the State of Nevada on October 2,
1998 to engage in international business.

The Company has not yet commenced its planned  principal  operations  and it has
not yet  earned any  revenue.  In  accordance  with SFAS #7 it is  considered  a
development stage company.

The  Company's  current  focus is to build a power and urea  business  in China.
Management  is  devoting  substantially  all the  resources  of the  Company  to
marketing and developing this project.

The accompanying  financial  statements have been prepared on the basis that the
Company will continue as a going concern which assumes the realization of assets
and  settlement  of  liabilities  in the normal  course of  business.  Since its
inception,  the Company has been  engaged in  organizational  and  pre-operating
activities.  Further, the Company has generated no revenues and incurred losses.
Continuation of the Company's  existence is dependent upon its ability to obtain
additional capital and sustain profitable operations. The uncertainty related to
these  conditions  raises  substantial  doubt  about the  Company's  ability  to
continue  as a going  concern.  The  accompanying  financial  statements  do not
include any adjustments that might result from the outcome of this uncertainty.

Management's  plans  include  completion  of an  offering  to  raise  additional
capital.

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

2.   Summary of significant accounting policies

These financial  statements are presented in U.S. dollars and in accordance with
accounting principles generally accepted in the United States of America.

Use of estimates

The preparation of financial  statements in conformity  with generally  accepted
accounting principles requires management to make estimates and assumptions that
affect  the  reported  amounts  of assets  and  liabilities  and  disclosure  of
contingent  assets and  liabilities at the date of the financial  statements and
the reported amounts of revenue and expenses during the reporting period. Actual
results could differ from those estimates.

Financial instruments

The Company has various  financial  instruments that include cash,  payables and
amounts due to related  parties.  The carrying  values of financial  instruments
approximate their fair value due to the relatively short period to maturity.

<PAGE>


--------------------------------------------------------------------------------
Asian Alliance Ventures Inc.
(a Development Stage Company)
Notes to the Financial Statements
December 31, 2000
--------------------------------------------------------------------------------

2.   Summary of significant accounting policies (Continued)

Income taxes

Deferred  income  taxes  result from  significant  carryforwards  and  temporary
differences  between  the tax basis of an asset or  liability  and its  reported
amount in the  financial  statements  that will result in taxable or  deductible
amounts in future periods.  Deferred tax assets or liabilities are determined by
applying presently enacted tax rates and laws. A valuation allowance is required
when it is more likely  than not that some  portion or all of the  deferred  tax
asset will not be realized.

Net Loss Per Share

The Company  reports  basic and diluted loss per share.  Basic loss per share is
computed by dividing  net loss by the  weighted  average  number of  outstanding
shares of common stock.  Diluted  earnings per share is computed by dividing net
loss by the  weighted  average  number  of  shares  adjusted  for the  potential
dilution  that could  occur if stock  options,  warrants  and other  convertible
securities were exercised or converted into common stock.

For the years ending  December 31, 2000 and 1999, the Company had no potentially
dilutive securities outstanding.

Newly Issued Accounting Standards

In June 1999,  SFAS No. 133,  Accounting for Derivative  Instruments and Hedging
Activities, was issued and as amended by SFAS No's. 137 and 138 is effective for
all fiscal  quarters of fiscal years  beginning after June 15, 2000. The Company
will adopt SFAS No. 133 effective  with the first quarter of 2001. The statement
establishes  accounting and reporting  standards for derivative  instruments and
for  hedging  activities.  SFAS No. 133 will  require the Company to measure all
derivatives at fair value and to recognize them in its balance sheet as an asset
or  liability,  depending  on the  Company's  rights  or  obligations  under the
derivative contract.  Implementation of this standard is not anticipated to have
a material effect on the Company's results of operations,  financial position or
cash flows.

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

3.   Related party transactions

The Company had the following  transactions,  recorded at their exchange amount,
with related parties:

a)   Incurred $29,000 (1999: Nil) for management  services provided by companies
     in which certain officers and/or shareholders have a controlling interest.

<PAGE>


--------------------------------------------------------------------------------
Asian Alliance Ventures Inc.
(a Development Stage Company)
Notes to the Financial Statements
December 31, 2000
--------------------------------------------------------------------------------

b)   Incurred  $16,935 (1999:  Nil) for  administrative  services  provided by a
     Company in which certain  officers and/or  shareholders  have a controlling
     interest.

At December  31, 2000 the  following  balances  with  shareholders  or companies
controlled by certain officers and/or shareholders were outstanding:

     Due to Access International Capital Corporation                   $70,928
     Due to D.N. Larsen                                                $29,922
     Due to Axon Management Inc.                                       $14,800
     Due to Tristar Inc.                                               $55,000

These  balances  have no fixed terms of repayment  and are expected to be repaid
when funds become available from equity financing.

The balances owing to Access International Capital Corporation,  D.N. Larsen and
Axon  Management  Inc. bear  interest at 9% per annum.  Interest has been waived
until 2001. The balance owing to Tristar Inc. does not bear interest.

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

4.   Loan payable

The Company has entered into a Joint Venture  Agreement  with Shandong  Hengtong
Chemical Industrial Company Ltd. of the Peoples Republic of China to acquire and
expand an established  chemical fertilizer (urea) and power generation facility.
The joint  venture  partner has  advanced the Company  $220,000  for  investment
marketing purposes. The loan is non-interest bearing and is repayable on demand.
The  Company  will  require  approximately  $16  Million  in order to fulfil its
obligations  under the joint venture  agreement which it expects to raise in the
North American equity market.

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

5.   Capital stock

Private placement

On March 6, 1999 the Company  completed  an  offering of its common  stock under
Regulation "D", Rule 504 for 5,000,000 common shares of stock at $.002 per share
totalling $10,000.

Stock options

The Company has not issued any stock options.

<PAGE>


--------------------------------------------------------------------------------
Asian Alliance Ventures Inc.
(a Development Stage Company)
Notes to the Financial Statements
December 31, 2000
--------------------------------------------------------------------------------

6.   Income taxes

The  potential  tax  benefits  of the  losses  carried  forward  are offset by a
valuation allowance of the same amount as there is substantial  uncertainty that
the losses carried forward will be utilized before their expiry.

<PAGE>


Item 8.  Changes in and Disagreements with Accountants.

There have been no changes in or  disagreements  with our accountants  since our
formation required to be disclosed pursuant to Item 304 of Regulation S-B except
for the following:

On or about April 16, 2000, our auditor, Barry L. Friedman, CPA, resigned as our
auditor.  Mr. Friedman's  report on our financial  statements did not contain an
adverse opinion or disclaimer of opinion and was not qualified or modified as to
uncertainty,  audit  scope or  accounting  principles.  The  decision  to change
accountants was recommended and approved by our entire Board of Directors. There
were no disagreements with our former accountant on any matter. Mr. Friedman,  a
sole  practitioner,  subsequently  passed  away  and a letter  pursuant  to Item
304(a)(3) of Regulation  S-K cannot be filed.  On or about July 20, 2000,  Grant
Thornton LLP, executed an engagement letter agreeing to act as our auditors.  In
or around February 2001, we filed a Form 8-K disclosing the change in auditors.

                                    PART III

Item 9.  Directors, Executive Officers, Promoters and Control Persons.

Executive Officers and Directors.  We are dependent on the efforts and abilities
of certain of our senior  management.  The  interruption  of the services of key
management could have a material  adverse effect on our operations,  profits and
future  development,  if suitable  replacements  are not promptly  obtained.  We
anticipate  that we will enter into  employment  agreements with each of our key
executives;  however,  no assurance can be given that each executive will remain
with us  during  or  after  the  term  of his or her  employment  agreement.  In
addition,  our success depends,  in part, upon our ability to attract and retain
other  talented  personnel.  Although  we believe  that our  relations  with our
personnel are good and that we will continue to be successful in attracting  and
retaining qualified personnel, there can be no assurance that we will be able to
continue to do so. Our  officers  and  directors  will hold  office  until their
resignation or removal.

Our directors and principal executive officers are as specified on the following
table:

<TABLE>
<CAPTION>
Name and Address                          Age             Position                    Term as Director
----------------                          ---             --------                    -----------------
<S>                                       <C>    <C>                              <C>
Robert Clarke                             56              Director                October 2, 1998 (inception)
915 Leyland Street                                                                to present.
West Vancouver, British Columbia,
Canada V7T 2L6

Benjamin Leboe                            55     Secretary, Treasurer and a       November 1999 to present.
16730 Carrs Landing Road                                  Director
Lake Country, British Columbia,
Canada V4R 1B2

John Fraser                               54      President and a Director        From  September  21, 2000 to
104 Elm Avenue                                                                    the present.
Toronto, Ontario,
Canada M4W 1P2

Charlie Rodriguez                         56              Director                From September  21, 2000 to
1662 West Petunia Place                                                           the present.
Tucson, Arizona 85737
</TABLE>


                                       12

<PAGE>


Robert  Clarke,  age 56, is a member of our Board of  Directors.  Mr. Clarke has
earned  a  Bachelor  of  Commerce  as  well  as a  Masters  Degree  in  Business
Administration.  During  portions  of  the  last 5  years  he  has  acted  as an
independent  business  consultant for various companies.  From January,  1997 to
December,  1997, Mr. Clarke was the  President,  Chief  Executive  Officer and a
Director of  Waverider  Communications  Inc.  which is listed on the OTCBB under
Symbol  "WAVC".  From  September  18, 1995 to October 17,  1996,  and again from
February 11, 1998, to October 11, 1999, Mr. Clarke was a Director of Global CT &
T  Telecommunications  Inc. a company  that trades under the symbol "GLC" on the
Vancouver  Stock  Exchange.  Mr.  Clarke was the  Secretary  of Pacific  Western
Capital Corporation (traded on Vancouver Stock Exchange) from August 15, 1995 to
October 17, 1996.

Benjamin Leboe, age 55, is our Secretary, Treasurer and a member of our Board of
Directors.  Mr. Leboe holds a Bachelor of Commerce  and Business  Administration
from the University of British Columbia. He is also a British Columbia Chartered
Accountant and Certified Management Consultant. From 1978 to 1981, Mr. Leboe was
a Partner in the accounting  firm of KPMG.  From in or around 1991 to June 1995,
he was the  Vice-President  and Chief Financial  Officer of VECW Industries Ltd.
Mr. Leboe was a Director and the President of CPT Pemberton Technologies Ltd., a
company that trades on Vancouver Stock Exchange under the symbol of "CPT",  from
March,  1995 to June,  1995.  He is also the owner and  manager  of  Independent
Management Consultants of British Columbia.

     John  Fraser,  age 54,  is our  President  and a  member  of our  Board  of
     Directors. In 1968, Mr. Fraser earned an Economics Degree from the Victoria
     University  of  Wellington  in New Zealand.  In 1970,  Mr.  Fraser earned a
     Business  Degree from the University of Pittsburgh.  From 1938 to 1969, Mr.
     Fraser was the assistant manager at Unkever Ltd. in New Zealand.  From 1973
     to 1976,  Mr. Fraser was the Senior  Consultant  for W.D.  Scott & Co. From
     1976 to 1980, Mr. Fraser was a principal in Stevenson  Kellogg as well as a
     principal in Thorne  Riddell.  From 1980 to 1983,  Mr.  Fraser was the Vice
     President of Sungate Resources.  From 1983 to 1998, Mr. Fraser was the Vice
     Chairman  of  KPMG,  Canada,  responsible  for  the  management  consulting
     division  of that  company.  He has  managed  both  development  stage  and
     established  businesses.  He has worked in Europe,  Africa,  North America,
     Australia  and New  Zealand.  From  1998 to  2000,  Mr.  Fraser  has been a
     principal in Fraser Leishman.

Charlie  Rodriguez,  age 56,  is a  member  of our  Board  of  Directors.  He is
responsible for all of the North American regulatory aspects of 7bridge Systems.
He has held several  senior  positions  with both public and private  companies;
including, acting as President, Director, Chief Financial Officer and Treasurer.
Mr.  Rodriguez has assisted in  acquisitions,  mergers,  and several private and
public placements. Mr. Rodriguez was based in London for two years, where he was
President of the public telecommunications company. Mr. Rodriguez has also acted
as Vice  President of Corporate  Affairs for another  public  telecommunications
company  where he was directly  involved  with the  company's  development  from
start-up through expansion.

Other than Mr. Clarke,  Mr. Fraser,  Mr. Leboe and Mr.  Rodriguez,  there are no
significant  employees expected by us to make a significant  contribution to our
business.   Our  directors   will  serve  until  the  next  annual   meeting  of
stockholders. Our executive officers are appointed by our Board of Directors and
serve at the discretion of the Board of Directors.

There  are no  orders,  judgments,  or  decrees  of any  governmental  agency or
administrator, or of any court of competent jurisdiction, revoking or suspending
for cause any license,  permit or other  authority  to engage in the  securities
business or in the sale of a particular  security or  temporarily or permanently
restraining Mr. Clarke,  Mr. Fraser, Mr. Leboe or Mr. Rodriguez from engaging in
or  continuing  any  conduct,  practice or  employment  in  connection  with the
purchase or sale of securities,  or convicting them of any felony or misdemeanor
involving a security, or any aspect of the securities business or of theft or of
any felony.


                                       13
<PAGE>


Section 16(a) Beneficial  Ownership Reporting  Compliance.  All of our officers,
directors,  and  principal  shareholders  have filed all reports  required to be
filed  by  those  persons  on,  respectively,  a Form 3  (Initial  Statement  of
Beneficial  Ownership  of  Securities),  a  Form  4  (Statement  of  Changes  of
Beneficial Ownership of Securities), or a Form 5 (Annual Statement of Beneficial
Ownership of Securities).

Item 10.  Executive Compensation

Any compensation received by our officers,  directors,  and management personnel
will be determined  from time to time by our Board of  Directors.  Our officers,
directors,  and management  personnel  will be reimbursed for any  out-of-pocket
expenses incurred on our behalf.

Compensation of Directors.  Our directors who are also our employees  receive no
extra compensation for their service on our Board of Directors.

Compensation  of Officers.  As of March 30, 2001,  our officers have received no
compensation for their services provided to us. However,  during the fiscal year
ended  December 31, 2000,  we paid  consulting  fees of  $15,000.00 to a company
controlled by John Fraser, our President and a member of our Board of Directors.
During that same period, we also paid $14,000.00 in consulting fees to a company
controlled by Charlie Rodriguez, a member of our Board of Directors.

Item 11. Security Ownership of Certain Beneficial Owners and Management.

The following  table sets forth  certain  information  regarding the  beneficial
ownership  of our common  stock as of March 30,  2001,  by each person or entity
known by us to be the beneficial owner of more than 5% of the outstanding shares
of common stock, each of our directors and named executive officers,  and all of
our directors and executive officers as a group.

<TABLE>
<CAPTION>
                                                      Amount and Nature of
Title of Class     Name of Beneficial Owner             Beneficial Owner         Percent of Class
--------------     ------------------------           --------------------       ----------------
<S>                <C>                                       <C>                      <C>
                   Robert Clarke
 Common Stock      915 Leyland Street                        225,000                   4.5%
                   West Vancouver, British
                   Columbia, Canada V7T 2L6

                   Benjamin Leboe
 Common Stock      16730 Carrs Landing Road                  320,620                   6.5%
                   Lake Country,  British Columbia,
                   Canada V4R 1B2

                   John Fraser
 Common Stock      104 Elm Avenue                            207,500                   4.1%
                   Toronto, Ontario
                   Canada M4W 1P2

                   Charlie Rodriguez
 Common Stock      1662 West Petunia Place                    20,380                   0.4%
                   Tucson, Arizona 85737
    Totals                                                   773,500                  15.5%
</TABLE>

Beneficial  ownership  is  determined  in  accordance  with  the  rules  of  the
Commission  and generally  includes  voting or investment  power with respect to
securities.  In accordance  with  Commission  rules,  shares of our common stock
which may be  acquired  upon  exercise of stock  options or  warrants  which are
currently  exercisable or which become exercisable within 60 days of the date of
the table are deemed  beneficially owned by the optionees.  Subject to community
property  laws,  where  applicable,  the persons or entities  named in the table
above have sole voting and  investment  power with  respect to all shares of our
common stock indicated as beneficially owned by them.


                                       14
<PAGE>


Changes in Control.  Our management is not aware of any  arrangements  which may
result in "changes in control" as that term is defined by the provisions of Item
403(c) of Regulation S-B.

Item 12.  Certain Relationships and Related Transactions.

Transactions with Promoters. There have been no transactions with promoters.

Related Party  Transactions.  During the fiscal year ended December 31, 2000, we
incurred  $29,000.00  for  management  services  provided by  companies in which
certain officers and/or shareholders have a controlling interest.

During the fiscal year ended  December  31,  2000,  we incurred  $16,935.00  for
administrative  services  provided by a company in which certain officers and/or
shareholders have a controlling interest.

At December 31, 2000,  the  following  balances with  shareholders  or companies
controlled by certain officers and/or shareholders were outstanding:

         Due to Access International Capital Corporation            $70,928.00
         Due to D.N. Larsen                                         $29,922.00
         Due to Axon Management, Inc.                               $14,800.00
         Due to Tristar, Inc.                                       $55,000.00

These  balances  have no fixed terms of repayment  and are expected to be repaid
when funds become available from equity financing.

The balances owing to Access International Capital Corporation,  D.N. Larsen and
Axon  Management,  Inc. bear interest at 9% per annum.  Interest ahs been waived
until 2001. The balance owing to Tristar, Inc. does not bear interest.

Our joint venture partner,  Shandong Hengtong Chemical  Industrial Company Ltd.,
has loaned us $220,000.00 for investment  marketing purposes.  The loan does not
earn any interest and is repayable upon demand.

With regard to any future related party  transaction,  we plan to fully disclose
any and all related party transactions, including, but not limited to:

     o    disclosing such transactions in prospectus' where required;

     o    disclose  in any and all  filings  with the  Securities  and  Exchange
          Commission, where required;

     o    obtain  uninterested  directors  consent;  and

     o    obtain shareholder consent where required.

Item 13.  Exhibits and Reports on Form 8-K

(a) Exhibit No.

3.1        Certificate of Incorporation*
           (Charter Document)

3.2        Bylaws*

* Included in Registration Statement on Form 10-SB filed on March 20, 2000.

(b) Reports on Form 8-K

Filed on February 22, 2001,  re:  Change in Auditor and  incorporated  herein by
this reference.


                                       15
<PAGE>


SIGNATURES

In  accordance  with  Section 13 or 15(d) of the Exchange  Act,  the  registrant
caused this report to be signed on its behalf by the undersigned, thereunto duly
authorized, on April 9, 2001.

                                    Asian Alliance Ventures, Inc.,
                                    a Nevada corporation

                                    By:     /s/ John Fraser
                                            ------------------------------------
                                            John Fraser
                                    Its:    President and a Director

In  accordance  with the Exchange  Act, this report has been signed below by the
following  persons on behalf of the  registrant and in the capacities and on the
dates indicated.

/s/ John Fraser                                 April 11, 2001
------------------------------------
John Fraser
President and a Director


/s/ Robert Clarke                               April 11, 2001
------------------------------------
Robert Clarke
Director


/s/ Benjamin Leboe                              April 11, 2001
------------------------------------
Benjamin Leboe
Secretary, Treasurer and a Director


/s/ Charlie Rodriguez                           April 11, 2001
------------------------------------
Charlie Rodriguez
Director


                                       16