<PAGE>

                     U.S. SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549

                                   FORM 10-K/A

[X]      ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
         EXCHANGE ACT OF 1934


For the fiscal year ended  December 31, 2002

                                       OR

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

For the transition period from                     to

Commission file number 0-31153


                               AP HENDERSON GROUP
                (Name of registrant as specified in its charter)


         Nevada                                              88-0355504
-----------------------------------------             --------------------------
         (STATE OR OTHER JURISDICTION OF                     (I.R.S. EMPLOYER
         INCORPORATION OR ORGANIZATION)                      IDENTIFICATION NO.)

         600 Wilshire Blvd., Suite 1252
         Los Angeles, California                             90017
-----------------------------------------             --------------------------
         (ADDRESS OF PRINCIPAL EXECUTIVE OFFICES)            (ZIP CODE)

          Issuer's telephone number, including area code (213) 538-1203

SECURITIES TO BE 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                                     N/A

SECURITIES TO BE REGISTERED UNDER SECTION 12(g) OF THE ACT:

                          Common Stock, $.001 par value
--------------------------------------------------------------------------------
                                (TITLE OF CLASS)

<PAGE>

Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Exchange Act of 1934 during the past
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 [ ]

Check if there is no disclosure of delinquent filers pursuant to Item 405 of
Regulation S-K contained in this form, 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. [ ]

Indicate by check mark whether the registrant is an accelerated filed (as
defined in Rule 12b-2 of the Act). Yes [ ] No [X]

The aggregate market value of the voting and non-voting stock held by
non-affiliates of the registrant as of May 21, 2003 was approximately
$18,984,981.

The number of shares of the registrant's common stock outstanding as of May 21,
2003 was 45,000,002.

                   DOCUMENTS INCORPORATED BY REFERENCE: NONE.

<PAGE>

PART I

ITEM 1.  BUSINESS.

         UNLESS OTHERWISE INDICATED, ALL REFERENCES TO OUR COMPANY INCLUDE OUR
WHOLLY-OWNED SUBSIDIARIES, AP HENDERSON VENTURES, A NEVADA CORPORATION, AND
JINGBO CHEMICAL (BO XING) CO., LTD., A CHINESE FOREIGN DIRECT INVESTMENT
ENTERPRISE.

         ALL OF OUR SALES AND EXPENSES ARE DENOMINATED IN RENMINBI ("RMB"), THE
NATIONAL CURRENCY OF THE PEOPLE'S REPUBLIC OF CHINA. SOLELY FOR THE CONVENIENCE
OF THE READER, CERTAIN FINANCIAL INFORMATION AS OF AND FOR THE YEAR ENDED
DECEMBER 31, 2002 HAS BEEN CONVERTED INTO UNITED STATES DOLLARS AT THE NOON
BUYING RATE IN NEW YORK CITY ON SUCH DATES AS CERTIFIED FOR CUSTOMS PURPOSES BY
THE FEDERAL RESERVE BANK OF NEW YORK OF (US$1.00 = RMB 8.2773 AS OF DECEMBER 31,
2002). NO REPRESENTATION IS MADE THAT THE RMB AMOUNTS COULD HAVE BEEN, OR COULD
BE, CONVERTED INTO UNITED STATES DOLLARS AT THAT RATE OR AT ANY OTHER CERTAIN
RATE AS OF THE RESPECTIVE DATES OR AT ANY OTHER DATE.

         ALL SHARE INFORMATION IN THIS REPORT HAS BEEN ADJUSTED TO GIVE EFFECT
TO A 1.875 FOR ONE SPLIT OF OUR COMMON STOCK EFFECTIVE AS OF FEBRUARY 11, 2003.

         THE STATEMENTS CONTAINED IN THIS REPORT THAT ARE NOT HISTORICAL ARE
"FORWARD-LOOKING STATEMENTS" WITHIN THE MEANING OF SECTION 27A OF THE SECURITIES
ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"), AND SECTION 21E OF THE
SECURITIES EXCHANGE ACT OF 1934, AS AMENDED (THE "EXCHANGE ACT"), INCLUDING
STATEMENTS, WITHOUT LIMITATION, REGARDING OUR EXPECTATIONS, BELIEFS, INTENTIONS
OR STRATEGIES REGARDING THE FUTURE. WE INTEND THAT SUCH FORWARD-LOOKING
STATEMENTS BE SUBJECT TO THE SAFE-HARBOR PROVIDED BY THE PRIVATE SECURITIES
LITIGATION REFORM ACT OF 1995. SUCH FORWARD-LOOKING STATEMENTS RELATE TO, AMONG
OTHER THINGS: (1) EXPECTED REVENUE AND EARNINGS GROWTH; (2) ESTIMATES REGARDING
THE SIZE OF TARGET MARKETS; AND (3) REGULATION OF OUR INDUSTRIES AND MARKETS BY
THE CHINESE GOVERNMENT. THESE STATEMENTS ARE QUALIFIED BY IMPORTANT FACTORS THAT
COULD CAUSE OUR ACTUAL RESULTS TO DIFFER MATERIALLY FROM THOSE REFLECTED BY THE
FORWARD-LOOKING STATEMENTS. SUCH FACTORS INCLUDE BUT ARE NOT LIMITED TO: (1) OUR
ABILITY TO PURCHASE CRUDE OIL FROM LOCAL SUPPLIERS IN SUFFICIENT QUANTITIES, (2)
OUR ABILITY TO OBTAIN GOVERNMENT APPROVAL TO IMPORT CRUDE OIL AS WE DESIRE, (3)
DISRUPTION OF OUR MARKETS AND INDUSTRIES BY CHINA'S ENTRY INTO THE WORLD TRADE
ORGANIZATION, (4) THE LONG-TERM IMPACT OF THE SARS OUTBREAK IN THE PRC, AND (5)
OTHER FACTORS DESCRIBED ELSEWHERE IN THIS ANNUAL REPORT.

         OVERVIEW

         AP Henderson Group, via our wholly-owned subsidiary, Jingbo Chemical
(Bo Xing) Company Ltd., is engaged in the business of owning and operating a
petrochemical refinery and agrochemical manufacturing company in the People's
Republic of China ("PRC"). We are one of the largest independent petroleum
refiners and suppliers of transportation fuels, fuel oil, liquefied petroleum
gas (LPG), oxidized asphalt and other petrochemical products in the Shandong
province of the PRC. Our agrochemical division is a major manufacturer and
supplier of insecticide, fungicide, herbicide and other agrochemical products in
the eastern and northeastern parts of China.

         We own and operate a combined petrochemical and agrochemical refinery.
Our refinery is located in Chen Hu Town, Bo Xing County, Shandong Province,
256505, People's Republic of China and occupies a total area of 335,000 square
meters. The facility has a combined crude oil primary distillation throughput
capacity of approximately 1,300,000 tons per year. Our refinery has a complex
configuration that enables us to process lower cost sour and heavy sour crude
oil, thus providing us with a cost advantage. We are an independent
petrochemical refinery operator, which means that we do not produce crude oil
nor do we conduct the retail sale or marketing of our refined products. We sell
our refined petrochemical products on a wholesale basis primarily in the
Shandong and neighboring provinces. We also manufacture and sell seven lines of
agrochemical products. Our agrochemical products are sold in 18 provinces of the
PRC, Asian Pacific regions and Africa. In the fiscal year ended December 31,
2002, we had total revenue of RMB882.2 million (US$106.6 million) with net
income of RMB54.7 million (US$6.6 million).

                                       1
<PAGE>

         BUSINESS DEVELOPMENT

         We were organized as a Nevada corporation on June 13, 1994 under the
name Magnolia Ventures, Inc. for the purpose of listing our securities on an
electronic stock exchange and then acquiring an interest in a suitable operating
business. We conducted no operations from the date of our organization until
January 2003, other than the pursuit and analysis of suitable business
acquisitions.

         On January 15, 2003, we were the subject of a reverse acquisition by AP
Henderson Ventures, a Nevada corporation ("AP Ventures"), pursuant to which we
acquired all of the outstanding capital shares of AP Ventures in exchange for a
controlling interest in our common shares. At the time of the reorganization, AP
Ventures was known as AP Henderson Group and wholly-owned by Richard Henry.
Pursuant to a share purchase agreement dated January 15, 2003 between Peggy
Melilli, Dennis Melilli, and Sherri Lynn Cooper, our former officers and
directors, on the one hand, and Mr. Henry, on the other hand, Mr. Henry
purchased an aggregate of 33,429,465 shares of our outstanding common stock. The
share purchase agreement also provided that the Melillis and Ms. Cooper would
resign as directors and officers and be replaced with Mr. Henry and Richard Lui.
Immediately after the close of the share purchase agreement, Mr. Henry entered
into a separate securities purchase agreement with us whereby he sold all of the
outstanding capital shares of AP Ventures to us in consideration of our issuance
of 5,625,000 shares of common stock to Mr. Henry. Following the close of these
transactions, AP Ventures changed its corporate name from AP Henderson Group to
AP Henderson Ventures and we changed our corporate name from Magnolia Ventures,
Inc. to AP Henderson Group.

         AP Ventures was organized on December 31, 2002 for the purpose of
acquiring all of the capital shares of Jingbo Chemical (Bo Xing) Co., Ltd.
("Jingbo"), a Chinese foreign direct investment enterprise wholly-owned by Mr.
Henry. On December 31, 2002, Mr. Henry transferred all of the capital shares of
Jingbo to AP Ventures in exchange for AP Ventures' issuance of a total of 10,000
common shares. AP Ventures conducted no operations or acquired any assets or
liabilities from the date of its organization to time of its acquisition of
Jingbo.

         Jingbo was formed by Mr. Henry in 2002 for the purpose of acquiring
certain operating assets and liabilities of Shandong Jingbo Petrochemical
Company Limited, Shandong Jingbo Agrochemical Company Limited and Shandong
Boxing Lu Nong Chemical Company Limited, which together had been engaged in the
business of owning and operating a petrochemical refinery and agrochemical
manufacturing company in the PRC. Jingbo acquired the operating assets and
liabilities of Shandong Jingbo Petrochemical Company Limited, Shandong Jingbo
Agrochemical Company Limited and Shandong Boxing Lu Nong Chemical Company
Limited on December 31, 2002, immediately prior to AP Ventures' acquisition of
the capital shares of Jingbo.

         From the dates of their inception to January 15, 2003, neither Jingbo
nor AP Ventures conducted any operations or engaged in any capital transactions
apart from Jingbo's acquisition of the assets and liabilities of Shandong Jingbo
Petrochemical Company Limited, Shandong Jingbo Agrochemical Company Limited and
Shandong Boxing Lu Nong Chemical Company Limited, and AP Ventures' subsequent
acquisition of the capital shares of Jingbo. As a result, the financial
statements filed as part of this report are the historical financial statements
of AP Ventures.

         Our executive offices are located at 600 Wilshire Blvd., Suite 1252,
Los Angeles, California 90017; telephone number (213) 538-1203.

         INDUSTRY SEGMENTS

         We are engaged in two business segments, namely the manufacturing and
sale of petrochemical and agrochemical products. See Note 23 to our consolidated
financial statements for the financial information concerning our segment
operations.

                                       2
<PAGE>

         PETROCHEMICAL DIVISION

         GENERAL. Our petrochemical division has over ten lines of products
including gasoline, diesel, liquefied petroleum gas (LPG), fuel oil, propylene,
solvent naphta, oxidized asphalt and other petrochemical products. In recent
years, we have made significant capital investments in facility expansions and
upgrades to improve product quality to meet evolving market demand and
environmental requirements in China. For the year ended December 31, 2002 and
through February 2003, our capital expenditures for our refining and marketing
segment was RMB 900 million (US$10.9 million). These capital expenditures were
incurred primarily in connection with upgrading our atmospheric vacuum
distillation units from the previous annual capacity of 300,000 tons to
1,300,000 tons. We also enhanced our processing technologies and methods. These
efforts have enabled us to process substantial volumes of both light sour and
heavy sour crude oil. On a company-wide basis, our heavy sour crude oil
processing capacity is approximately 21% of the current throughput. We also
completed the upgrade of the processing capabilities of each of our heavy oil
catalytic cracking units, heavy oil viscosity reduction units, solvent oil unit,
gas separation units, gasoline etherealization units and asphalt units.


         PETROCHEMICAL PRODUCTS. The principal refined products of our
petrochemical division include:

o        LIGHT DIESEL. Our principal refinery products are distillate fuels,
         including light diesel and domestic heating oil. Our light diesel is a
         distillate fuel oil used in compression-ignition engines. It has
         appropriate viscosity, good fluidity, good physical chemistry
         capability and appropriate cetane ratio at low temperature.

o        FUEL OIL. Our fuel oil is a refined petroleum product used as a fuel
         for home or industrial heating and utility boilers. The fuel oil is of
         high fuel quality, high combustion quality and good corrosion
         resistance.

o        UNLEADED GASOLINE. We refine unleaded gasolines with octane ratings of
         90 and 93. Our gasolines are used for spark ignition engines blended to
         meet the requirements of modern automotive engines. They have a high
         octane rating, good resistant to deflagrate capability and good
         stability.

o        LIQUEFIED PETROLEUM GAS (LPG). The LPG is propane, butane, or
         propane-butane mixtures derived from crude oil refining. It is
         predominantly used as a domestic and commercial heating fuel. It may be
         suitable for automotive applications.

o        PROPYLENE. The propylene is a very important base chemical for the
         chemical and plastic industries.

o        OXIDIZED ASPHALT. The oxidized asphalt is used as a bonding agent in
         road building, and in numerous industrial applications, including the
         manufacture of roofing.

o        SOLVENT NAPHTA. Solvent Naphta is used primarily as a paint solvent,
         cleaning fluid, and blendstock in gasoline production.

                                       3
<PAGE>

         The table below sets forth our annual production (tons) of diesel, fuel
oil, gasoline and liquefied petroleum gas (LPG) for the twelve months ended
December 31, 2000, 2001 and 2002.

<TABLE>
<CAPTION>
                                         Twelve Months Ended December 31,
                          ----------------------------------------------------------------
                               2000                   2001                     2002
                          ---------------         --------------          ----------------

            <S>               <C>                    <C>                      <C>
            Diesel            95,467                 97,182                   182,140
            Fuel Oil          80,663                 80,378                   117,547
            Gasoline          58,856                 65,702                   105,887
            LPG               10,230                 10,879                   16,259
</TABLE>

         OUTSOURCING OF CRUDE OIL. We purchase our crude oil primarily from The
China National Petroleum Corporation ("CNPC") and to a lesser degree The China
Petroleum and Chemical Corporation ("Sinopec"), who together are the dominant
producers and refiners of crude oil in the PRC. We receive an allocation of
crude oil from CNPC and Sinopec pursuant to the PRC government's annual crude
oil allocation plan. CNPC and Sinopec set their crude oil median prices each
month based on the average Singapore market FOB prices for crude oil of
different grades in the previous month plus an amount equal to the customs
duties payable on the import of crude oil. In addition, CNPC and Sinopec
negotiate a premium or discount to reflect transportation costs, the differences
in oil quality and market supply and demand. The State Development Planning
Commission will mediate if CNPC and Sinopec cannot agree on the amount of
premium or discount.

         At the present time, we are not able to import crude oil from sources
outside of the PRC. The import and export of crude oil and refined products is
subject to quota and licensing control by the government of the PRC. Currently,
only a small number of companies have licenses to import and export crude oil
and refined products. The PRC's Ministry of Foreign Trade and Economic
Cooperation is responsible for issuing import and export licenses for products
subject to quotas. We have applied to the Ministry of Foreign Trade and Economic
Cooperation for a license to import up to 1 million tons of crude oil per year.
If we obtain the license, of which there is no assurance, we expect it will be
for an initial term of 12 months and subject to annual renewal. In part as a
result of the PRC's entry into the WTO, we expect that the PRC government will
eventually lift its restrictions that prohibit the direct sale of crude oil and
natural gas by foreign companies in China.

         MARKETING AND DISTRIBUTION. We sell our refined products on an
unbranded basis to approximately 380 distributors and retailers through our own
product distribution system and an extensive third-party owned product
distribution system. We have not entered into any supply or production
agreements and all refined products are sold at prevailing market prices for
immediate delivery at our refinery. We do not transport our refined products.

         AGROCHEMICAL DIVISION

         GENERAL. Our agrochemical division manufactures and sells a diverse
line of products over three product lines, namely insecticides, fungicides and
herbicides. We manufacture these products in the forms of base ingredients
(technical) and concentrates, including suspension concentrates, wettable
powders and emulsifiable concentrates. We also specialize in the manufacturing
of other related environmentally safe products.

         The agrochemical division is equipped with a tebufenozide technical
unit with an annual production capacity of 200 tons, an emamectin benzoate
technical unit with an annual production capacity of 50 tons. We utilize leading
technology in producing suspension concentrates, which reaches an annual
production capacity of 10,000 tons. We have also independently developed the
methodology of processing of water dispersible granule, which enables us to
process insecticide, herbicide and fungicide products into various atomic sizes.
We also have an annual processing capacity of 10,000 tons of emulsifiable
concentrate, 2,000 tons of wettable powder concentrate and 500 tons of water
dispersible granule.

                                       4
<PAGE>

         AGRICULTURAL CHEMICAL PRODUCTS. The principal chemical products of the
agrochemical division include, insecticides, fungicides and herbicides. They are
sub-divided into base ingredients (Technical) and concentrates. The concentrates
include suspension concentrate, wettable powder and emulsifiable concentrate.
The table below set out a summary of our agricultural chemical product lines:

        Name                    Type                       Usage
        ----                    ----                       -----

Emamectin Benzoate            Insecticide       It provides good control of
                                                Lepidoptera such as cabbage
                                                worms, soybean worms, cotton
                                                bollworms, tobacco worms,
                                                cabbage armyworms, tobacco
                                                cutworms, apple leaf rollers. It
                                                is especially effective against
                                                beet armyworms and diamondback
                                                moths on vegetables, tea,
                                                tobacco, fruit trees and
                                                cottons.

Tebufenozide                  Insecticide       It is an ecdysone agonist that
                                                acts by binding to the receptor
                                                site of the insect molting
                                                hormone ecdysone. Tebufenozide
                                                is used to control most of the
                                                lepidopteron insects such as
                                                beet armyworms, cabbage
                                                armyworms, tortricid, pine cater
                                                pillar, and etc. It can be
                                                applied to cabbage, cauliflower,
                                                beet, soybean, cotton, tea,
                                                tobacco and fruit trees.

Quizalofop-p-ethyl            Herbicide         Quizalofop-p-ethyl is a highly
                                                efficient, low toxic, systemic
                                                and selective post-emergence
                                                herbicide. It is used to control
                                                annual grass weeds such as wild
                                                oats, barnyard grass, green
                                                bristlegrass, golden
                                                bristlegrass, common crab grass,
                                                hairy bristlegrass, goose grass,
                                                wire grass, equal aqlopecurus,
                                                Indian love grass and Chinese
                                                sprangleton. osegrass wiregrass,
                                                equal alopecurus, India
                                                lovergrass, Chinese sprangletop
                                                and perennial gramineous weeds.
                                                It can be applied to bermuda
                                                grass, lalang grass, common
                                                reed, potatoes, soybeans, sugar
                                                beets, peanuts, cotton, flax,
                                                vegetables and fruit trees.

Pyrimethanil                  Fungicide         Pyrimethanil is an
                                                anilinopyrimidine fungicides
                                                with low toxicity and high
                                                performance. It is used to
                                                control gray mould on vines,
                                                fruit (such as strawberries,
                                                apples and pears), vegetables
                                                (such as tomatoes and cucumbers)
                                                and ornamentals.

         THE PRC OIL AND GAS INDUSTRY (1)

         China's economic development over the last two decades has resulted in
steady growth in total energy and petroleum demand. Even though the Asian
financial crisis in 1997 has resulted in an overall slowdown in Asian economies,
China has been able to sustain robust growth compared with the rest of Asia. The
growth has been primarily fueled by government spending program in China. China
currently is the world's third largest oil consumer, behind the United States
and Japan. Consumption of petroleum products totaled 4.975 million barrels per
day ("bbl/d") in 2001, up from 4.796 million bbl/d in 2000. The total U.S.
demand for petroleum was 19.649 million barrels per day in 2001, down from
19.701 million bbl/d in 2000. The total Japan demand for petroleum was 5.421
million bbl/d in 2001, down from 5.528 million bbl/d in 2000. China is expected
to surpass Japan as the second largest world oil consumer within the next decade
and reach a consumption level of 10.5 million bbl/d by 2020, making it a major
player in the world oil market.

---------------------
(1) Information contained in this section has been extracted from the Energy
Information Administration/International Energy Annual 2001 and Energy
Information Administration/International Energy Outlook 2002.

                                       5
<PAGE>

         China's petroleum industry has undergone major changes in recent years.
In 1998, the Chinese government reorganized most state owned oil and gas assets
into two vertically integrated firms, the CNPC and Sinopec. Before the
restructuring, CNPC had been engaged mainly in oil and gas exploration and
production, while Sinopec had been engaged in refining and distribution of
petroleum products. In 1998, the Chinese government ordered an asset swap which
transferred some exploration and production assets to Sinopec and some refining
and distribution assets to CNPC. This created two regionally focused firms, The
primary market of CNPC are in the northern and western parts of China, while
Sinopec's primary market is in the southern part of China. Other major state
owned firms in China include the China National Offshore Oil Corporation
("CNOOC"), which handles offshore exploration and production and accounts for
more than 10% of China's domestic crude production, and China National Star
Petroleum, a new company which was created in 1997.

         The three largest Chinese oil and gas firms, CNPC, Sinopec and CNOOC,
all have successfully carried out initial public offerings of stock within the
last few years, bringing in billions of dollars in foreign capital. CNPC
separated out most of its high quality assets into a subsidiary called CNPC in
early 2000, and carried out its IPO of a minority interest on both the Hong Kong
and New York stock exchanges in April 2000. The IPO raised over $3 billion, with
BP p.l.c. being the largest purchaser at 20% of the shares offered. Sinopec
carried out its IPO in New York and Hong Kong in October 2000, raising about
$3.5 billion. Like the IPO of CNPC, only a minority stake of 15% was offered.
About $2 billion of this amount was purchased by three international oil giants,
ExxonMobil, BP, and Shell. After an earlier failed IPO attempt in September
1999, CNOOC eventually carried out its IPO of a 27.5% stake in February 2001.
Shell bought a large block of shares valued at around $200 million.

         Effective December 11, 2001, the PRC has become a member of the World
Trade Organization. Since joining the WTO, China has implemented major market
reforms including a reduction in tariffs for oil markets, permission for
non-state crude oil imports (8.28 million tons for 2002), and the establishment
of petroleum product import quota (22 million tons for 2002). Further
liberalizations are scheduled, including the elimination of petroleum product
import quota (2004) and the liberalization of retail (2005) and wholesale
markets (2007). As the Chinese petroleum market expands, competition among major
domestic companies such as CNPC and Sinopec, as well as with foreign companies,
including major oil companies, are expected to intensify.

REGULATION

         OVERVIEW. China's oil and gas industry is subject to extensive
regulation by the PRC government with respect to a number of aspects of
exploration, production, transmission and marketing of crude oil and natural gas
as well as production, transportation and marketing of refined products and
chemical products. The following central government authorities exercise control
over various aspects of China's oil and gas industry:

         o The State Economic and Trade Commission has the industry
administration and policy coordination authority over China's oil and gas
industry. It is also responsible for setting import and export quotas for crude
oil and refined products on the basis of overall supply and demand for crude oil
and refined products in China as well as the WTO requirements for China.

         o The Ministry of Land and Resources has the authority for granting,
examining and approving oil and gas exploration and production licenses, the
administration of registration and transfer of exploration and production
licenses.

         o The Ministry of Foreign Trade and Economic Cooperation has the
authority to examine and approve production sharing contracts and Sino-foreign
equity and cooperative joint venture contracts. It is also responsible for
issuing import and export licenses for crude oil and refined products to oil and
gas companies once they have obtained import or export quotas from the State
Economic and Trade Commission.

         o  The State Development Planning Commission:

                  o        determines mandatory minimum volumes and applicable
                           prices of natural gas to be supplied to certain
                           fertilizer producers;
                  o        publishes guidance prices for natural gas and retail
                           median guidance prices for certain refined products,
                           including gasoline and diesel;
                  o        approves investment and finance projects exceeding
                           certain capital expenditure amounts; and
                  o        approves Sino-foreign equity and cooperative projects
                           exceeding certain capital amounts.

                                       6
<PAGE>

         IMPORTATION OF CRUDE OIL. The import and export of crude oil and
refined products is subject to quota and licensing control in China. Currently,
only a small number of State authorized companies have licenses to import and
export crude oil and refined products. The State Economic and Trade Commission
sets import and export quotas for crude oil and refined products by taking into
account the supply and demand in China as well as the WTO requirements for
China. The Ministry of Foreign Trade and Economic Cooperation is responsible for
issuing import and export licenses for products subject to quotas. Upon
receiving quota allocation, refining companies or enterprises can import crude
oil through State-authorized import companies.

         We have applied to the PRC government for right to import up to 1
million tons of crude oil per year. If we obtain the license, of which there is
no assurance, we expect it will be for an initial term of 12 months and subject
to annual renewal. In part as a result of the PRC's entry into the WTO, we
expect that the PRC government will eventually lift its restrictions that
prohibit the direct sale of crude oil and natural gas by foreign companies in
China.

         ENVIRONMENTAL REGULATION. Together with all other chemical refineries
in the PRC, we are subject to numerous national, regional and local
environmental laws and regulations concerning our petrochemical and agrochemical
refinery operations. In particular, these laws and regulations:

         o require an environmental evaluation report to be submitted and
approved prior to the commencement refining and chemical projects;

         o restrict the type, quantities, and concentration of various
substances that can be released into the environment in connection with refinery
activities; and

         o impose criminal and civil liabilities for pollution resulting from
petrochemical and agrochemical operations.

         These laws and regulations may also restrict air emissions and
discharges to surface and subsurface water resulting from the operation of
natural gas processing plants, chemical plants, refineries, pipeline systems and
other facilities that we own. In addition, our operations may be subject to laws
and regulations relating to the generation, handling, storage, transportation,
disposal and treatment of waste materials.

         The State Environmental Protection Bureau sets national environmental
protection standards and local environmental protection bureaus may set stricter
local standards. The PRC national and local environmental laws and regulations
impose fees for the discharge of waste substances above prescribed levels,
require the payment of fines for serious violations and provide that the PRC
national and local governments may at their own discretion close or suspend any
facility which fails to comply with orders requiring it to cease or cure
operations causing environmental damage.

         We are not currently involved in any environmental claims and believes
that our environmental protection systems and facilities are adequate for us to
comply with applicable national and local environmental protection regulations.

         EXCHANGE CONTROL. The Renminbi currently is not a freely convertible
currency. We receive all of our revenues in Renminbi. Under the existing foreign
exchange regulations in China, we may undertake current account foreign exchange
transactions, including the payment of dividends, without prior approval from
the State Administration of Foreign Exchange by producing commercial documents
evidencing such transactions, provided that they are processed through Chinese
banks licensed to engage in foreign exchange transactions. The PRC government
has stated publicly that it intends to make the RMB freely convertible in the
future. However, uncertainty exists as to whether the PRC government may
restrict access to foreign currency for current account transactions if foreign
currency becomes scarce in the PRC. We are not aware of any other PRC laws,
decrees or regulations that restrict the export or import of capital or that
affect the remittance of dividends, interest or other payments to non-resident
holders.

                                       7
<PAGE>

COMPETITION

         The market for refined petrochemical products in the PRC is dominated
by CNPC and Sinopec. Together, CNPC and Sinopec account for approximately 90% of
the sales of all refined petrochemical products in the PRC. Our refinery and
chemical plant is located in the northeastern region of China where the dominant
market share for refined products and chemical products is held by CNPC. In
addition to CNPC and Sinopec, there are approximately 54 petrochemical refinery
operations in the PRC, among which we are one of the largest. We compete
directly with all Sinopec, CNPC and several of the smaller refineries on the
basis of price, quality and customer service. We expect that we will continue to
face competition from, among other competitors, CNPC and Sinopec in increasing
our refined products and chemical products sales throughout the PRC.

         We also face competition from imported refined products and chemical
products on the basis of price and quality. As a result of China's entry into
the WTO, we expect that competition from foreign producers of refined products
and chemical products may increase as tariff and non-tariff barriers for
imported refined products and chemical products will be reduced or eliminated
over time, including the opening over time of retail and wholesale markets in
China for refined products and chemical products to foreign competition. Our
ability to compete with foreign producers of refined products and chemical
products will depend on our ability to reduce our production costs and improve
the quality of our products.

PATENTS AND TRADEMARKS

         We have applied for 11 patents in the PRC for various proprietary
chemical formulas developed by our agrochemical division.

RESEARCH AND DEVELOPMENT

         We incurred research and development expenses of RMB 4,339,799
($US524,301) and RMB 4,192,000 (US$506,488) for the twelve months ended December
31, 2002 and 2001, respectively. Research and development expenses were incurred
primarily by our agrochemical division and related to development of new
agrochemical products.

EMPLOYEES

         As of the date of this report, we employ approximately 1,050 employees.

ITEM 2.  DESCRIPTION OF PROPERTIES.

         Our Chinese refinery operations and executive offices are located in
Chen Hu Town, Bo Xing County, Shandong Province, 256505, People's Republic of
China. The refinery and executive offices consist of 335,000 square meters, of
which 322,120 square meters consist of refinery plant and factories, and 12,880
square meters consist of multi-level office space. Under the current land
ownership system in the PRC, private ownership of real property is not allowed.
However, we have acquired from the PRC the exclusive rights to use, at no cost
to us, the land upon which our facilities are located for periods ranging from
41 to 50 years.

         Our executive offices in the United States are located in Los Angeles,
California and consist of approximately 500 square feet, which we lease on a
month to month basis.

ITEM 3.  LEGAL PROCEEDINGS.

         Neither our company nor our property are subject to any pending legal
proceedings, other than routine litigation incidental to our business

                                       8
<PAGE>

ITEM 4.  SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.

         There were no matters submitted to the security holders of the Company
during the fourth quarter of the fiscal year ended December 31, 2002.

PART II

ITEM 5.  MARKET FOR COMMON EQUITY AND RELATED SHAREHOLDER MATTERS.

         MARKET INFORMATION

         Our common stock trades on the OTC Bulletin Board under the symbol
APHG. The last sale price of our common stock on May 21, 2003 was $5.25.
However, we consider our common stock to be thinly traded and, accordingly,
reported sale prices may not be a true market-based valuation of our common
stock. We have applied to list our common stock on the American Stock Exchange.
We believe that our common stock will not commence active trading until such
time as we obtain a listing on the AMEX.

         HOLDERS

         As of May 21, 2003, there were 433 record holders of our common stock.

         DIVIDENDS

         We have not paid any cash dividends on our common stock since our
inception and do not contemplate paying dividends in the foreseeable future. It
is anticipated that earnings, if any, will be retained for the operation of our
business. All of our revenues are denominated in Renminbi. The Renminbi
currently is not a freely convertible currency. The PRC government has stated
publicly that it intends to make the RMB freely convertible in the future.
However, uncertainty exists as to whether the PRC government may restrict access
to foreign currency for purposes of conducting upstream dividends from our
Chinese operating subsidiary to our publicly held parent corporation. Any such
restrictions could limit our ability to declare or pay dividends on our common
stock.

         SALES OF UNREGISTERED SECURITIES

         During the fiscal year ended December 31, 2002, we conducted no sales
of unregistered shares of our securities.

         EQUITY COMPENSATION PLANS

         The following table sets forth certain information as of December 31,
2002 concerning our equity compensation plans:

<TABLE>
<CAPTION>
                                   Number of Common
                               Shares to Be Issued Upon          Weighted- Average             Number of Common
                                Exercise of Outstanding          Exercise Price of             Shares Remaining
      Plan Category                     Options                 Outstanding Options         Available for Issuance
--------------------------     --------------------------     -------------------------     ------------------------
<S>                                      <C>                            <C>                           <C>
Equity  compensation plan                None                           N/A                           N/A
approved by shareholders

Equity  compensation plan                None                           N/A                           N/A
not approved by shareholders

</TABLE>

                                       9
<PAGE>
<TABLE>
<CAPTION>

ITEM 6.  SELECTED FINANCIAL DATA.

                                                         SUMMARY STATEMENT OF OPERATIONS DATA:

                                                         (IN THOUSANDS, EXCEPT PER SHARE DATA)
                                                   (EXPRESSED IN RENMINBI, UNLESS OTHERWISE STATED)

                                                                  YEAR ENDED DECEMBER 31,
                                            --------------------------------------------------------------------------
                                               2000              2001                 2002                  2002
                                            -----------        ----------         -------------        ---------------

<S>                                            <C>               <C>                   <C>          <C>
Net revenue.....................  RMB          557,479  RMB      509,322     RMB       882,175      $    106,578
Operating expense...............               549,096           470,083               819,275            98,978
Income from operations..........                 8,383            39,239                62,900             7,600
Net income......................                 1,685            30,163                54,708             6,610
Basic and diluted net income
  per share.....................                   .04               .77                  1.39              0.17
Weighted average diluted
  shares outstanding............                39,375            39,375                39,375            39,375


                                                              SUMMARY BALANCE SHEET DATA:

                                                         (IN THOUSANDS, EXCEPT PER SHARE DATA)
                                                   (EXPRESSED IN RENMINBI, UNLESS OTHERWISE STATED)


                                                                    YEAR ENDED DECEMBER 31,
                                            --------------------------------------------------------------------------
                                               2000               2001                 2002                 2002
                                            -----------        ------------         ------------       ---------------

Working capital (deficiency)....  RMB           27,957  RMB      (109,022)     RMB    105,671       $     12,766
Total assets....................               117,924            335,060             510,582             61,685
Long-term debt (net of
  current portions).............                   -0-                -0-             145,350             17,560
Stockholders' equity............                85,300             32,939             116,521             14,077

</TABLE>

         All of our sales and expenses are denominated in Renminbi ("RMB"), the
national currency of the People's Republic of China. Solely for the convenience
of the reader, the financial information as of and for the year ended December
31, 2002 has been converted into United States dollars at the noon buying rate
in New York City on such dates as certified for customs purposes by the Federal
Reserve Bank of New York of (US$1.00 = RMB 8.2773 as of December 31, 2002). No
representation is made that the RMB amounts could have been, or could be,
converted into United States dollars at that rate or at any other certain rate
as of the respective dates or at any other date.

                                       10
<PAGE>

ITEM 7.  MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
         OF OPERATIONS.

         THE FOLLOWING DISCUSSION AND ANALYSIS SHOULD BE READ IN CONJUNCTION
WITH OUR CONSOLIDATED FINANCIAL STATEMENTS AND RELATED NOTES INCLUDED IN THIS
REPORT.

         BACKGROUND

         AP Henderson Group, via our wholly-owned subsidiary, Jingbo Chemical
(Bo Xing) Company Ltd., is engaged in the business of owning and operating a
petrochemical refinery and agrochemical manufacturing company in the People's
Republic of China ("PRC"). We are one of the largest independent petroleum
refiners and suppliers of transportation fuels, fuel oil, liquefied petroleum
gas (LPG), oxidized asphalt and other petrochemical products in the Shandong
province of the PRC. Our agrochemical division is a major manufacturer and
supplier of insecticide, fungicide, herbicide and other agrochemical products in
the eastern and northeastern parts of China.

         We own and operate a combined petrochemical and agrochemical refinery.
Our refinery is located in Chen Hu Town, Bo Xing County, Shandong Province,
256505, People's Republic of China and occupies a total area of 335,000 square
meters. The facility has a combined crude oil primary distillation throughput
capacity of approximately 1,300,000 tons per year. Our refinery has a complex
configuration that enables us to process lower cost sour and heavy sour crude
oil, thus providing us with a cost advantage. We are an independent
petrochemical refinery operator, which means that we do not produce crude oil
nor do we conduct the retail sale or marketing of our refined products. We sell
our refined petrochemical products on a wholesale basis primarily in the
Shandong and neighboring provinces. We also manufacture and sell seven lines of
agrochemical products. Our agrochemical products are sold in 18 provinces of the
People's Republic of China, Asian Pacific regions and Africa.

REORGANIZATION

         We were organized as a Nevada corporation on June 13, 1994 under the
name Magnolia Ventures, Inc. for the purpose of listing our securities on an
electronic stock exchange and then acquiring an interest in a suitable operating
business. We conducted no operations from the date of our organization until
January 2003, other than the pursuit and analysis of suitable business
acquisitions.

         On January 15, 2003, we were the subject of a reverse acquisition by AP
Henderson Ventures, a Nevada corporation ("AP Ventures"), pursuant to which we
acquired all of the outstanding capital shares of AP Ventures in exchange for a
controlling interest in our common shares. Following the close of the
transaction, we changed our corporate name from Magnolia Ventures, Inc. to AP
Henderson Group.

         AP Ventures was organized on December 31, 2002 for the purpose of
acquiring all of the capital shares of Jingbo Chemical (Bo Xing) Co., Ltd.
("Jingbo"), a Chinese foreign direct investment enterprise. On December 31,
2002, AP Ventures acquired all of the capital shares of Jingbo. Jingbo was
formed in 2002 for the purpose of acquiring certain operating assets and
liabilities of Shandong Jingbo Petrochemical Company Limited, Shandong Jingbo
Agrochemical Company Limited and Shandong Boxing Lu Nong Chemical Company
Limited, which together had been engaged in the business of owning and operating
a petrochemical refinery and agrochemical manufacturing company in the PRC.
Jingbo acquired the operating assets and liabilities of Shandong Jingbo
Petrochemical Company Limited, Shandong Jingbo Agrochemical Company Limited and
Shandong Boxing Lu Nong Chemical Company Limited on December 31, 2002,
immediately prior to AP Ventures' acquisition of the capital shares of Jingbo.

         From the dates of their inception to January 15, 2003, neither Jingbo
nor AP Ventures conducted any operations or engaged in any capital transactions
apart from Jingbo's acquisition of the assets and liabilities of Shandong Jingbo
Petrochemical Company Limited, Shandong Jingbo Agrochemical Company Limited and
Shandong Boxing Lu Nong Chemical Company Limited, and AP Ventures' subsequent
acquisition of the capital shares of Jingbo. Our acquisition of AP Ventures is
considered to be a capital transaction in substance, rather than a business
combination, inasmuch as the transaction is equivalent to the issuance of shares
by a private company (AP Ventures) for the net non-monetary assets of a
non-operational public company, accompanied by a recapitalization. The
accounting for our acquisition of AP Ventures is identical to that resulting
from a reverse acquisition, except goodwill and other intangible assets are not
recorded. Accordingly, our financial statements are the historical financial
statements of AP Ventures.

                                       11
<PAGE>

RESULTS OF CONSOLIDATED OPERATIONS

         FISCAL YEAR DECEMBER 31, 2002 COMPARED TO FISCAL YEAR DECEMBER 31, 2001

         REVENUES. Revenues in the fiscal year ended December 31, 2002 were
RMB882.2 million (US$106.6 million), an increase of RMB372.9 million (US$45.1
million), or 73.21%, from RMB509.3 million (US$61.5 million) in the fiscal year
ended December 31, 2001. The increase was due primarily to an expansion of our
petrochemical refinery facility in Shandong Province, PRC. In 2002, we increased
our petrochemical refinery operations from a distillation throughout capacity of
300,000 tons annually to a capacity of 1,300,000 tons annually. Revenues from
the sale of petrochemical products in the fiscal year ended December 31, 2002
were RMB830.5 million (US$100.3 million), an increase of RMB349 million (US$42.2
million), or 72.5%, from RMB481.5 million (US$58.2 million) in the fiscal year
ended December 31, 2001. Revenues from the sale of agrochemical products in the
fiscal year ended December 31, 2002 increased by RMB23.8 million (US$2.9
million), or 85.7%, to RMB51.6 million (US$6.2 million) in fiscal 2002 from
RMB27.8 million (US$3.4 million) in fiscal 2001. The increase in sale of
agrochemical products in 2002 was the result of increased research and
development, marketing and new product introductions that took place in 2000 and
2001.

         PURCHASES, SERVICES AND OTHER. Purchases, services and other expenses
represent our primary cost of goods in the refinery of our petrochemical
products and manufacture of our agrochemical products. Expenses for purchases,
services and other in the fiscal year ended December 31, 2002 were RMB716.3
million (US$86.5 million), an increase of RMB332.4 million (US$40.2 million), or
86.6%, from RMB383.9 million (US$46.4 million) in the fiscal year ended December
31, 2001. The increase was due to the overall increase in revenue. However,
purchases, services and other expenses as a percentage of revenue increased from
75.4% in the fiscal year ended December 31, 2001 to 81.2% in the fiscal year
ended December 31, 2002. The increase in purchases, services and other expenses
as a percentage of revenue was caused by increased expense in our petrochemical
division relating to procurement, installation and testing of new equipment an
facilities in 2002.

         EMPLOYEE COMPENSATION COSTS. Employee compensation costs in the fiscal
year ended December 31, 2002 were RMB20.6 million (US$2.5 million), a decrease
of RMB2.9 million (US$358 thousand), or 13%, from RMB23.5 million (US$2.8
million) in the fiscal year ended December 31, 2001. The decrease in employee
compensation costs was due to our institution of a cost cutting program in 2002,
including the reduction of executive management salaries and bonuses. Employee
compensation costs as a percentage of revenue decreased from 4.6% in the fiscal
year ended December 31, 2001 to 2.3% in the fiscal year ended December 31, 2002.

         DEPRECIATION AND AMORTIZATION. Depreciation and amortization in the
fiscal year ended December 31, 2002 was RMB15.5 million (US$1.9 million), a
decrease of RMB1 million (US$130 thousand), or 6.5%, from RMB 16.5 million
(US$2.0 million) in the fiscal year ended December 31, 2001. Depreciation and
amortization as a percentage of revenue decreased from 3.2% in the fiscal year
ended December 31, 2001 to 1.76% in the fiscal year ended December 31, 2002.

         SELLING, GENERAL AND ADMINISTRATIVE EXPENSES. Selling, general and
administrative expenses in the fiscal year ended December 31, 2002 were RMB17.3
million (US$2.1 million), an increase of RMB4.5 million (US$540 thousand), or
34.8%, from RMB12.8 million (US$1.6 million) in the fiscal year ended December
31, 2001. Selling, general and administrative expenses as a percentage of
revenue declined from 2.5% in fiscal 2001 to 1.9% during fiscal 2002.

         TAXES OTHER THAN INCOME TAXES. Taxes other than income taxes include a
value added tax charged by the PRC on the sale of our petrochemical and
agrochemical products at rates between 6% to 17% and a consumption tax charged
by the PRC on our sale of gasoline and diesel oil at fixed rates of RMB277.6
(US$33.54) per ton and RMB117.6 (US$14.21) per ton, respectively. Taxes other
than income taxes also include surcharges for urban construction and education
taxes levied at 5% and 3%, respectively, of all consumption and value added
taxes payable and a property tax levied at 1.2% of the cost of property
constructed. Taxes other than income taxes in the fiscal year ended December 31,
2002 were RMB49.6 million (US$6.0 million), an increase of RMB16.4 million
(US$1.98 million), or 49.1%, from RMB33.3 million (US$4 million) in the fiscal
year ended December 31, 2001. Taxes other than income taxes as a percentage of
revenue declined from 6.5% in fiscal 2001 to 5.6% in fiscal 2002.

                                       12
<PAGE>

         INCOME FROM OPERATIONS. Income from operations in the fiscal year ended
December 31, 2002 was RMB62.9 million (US$7.6 million), an increase of RMB23.7
million (US$2.9 million), or 60.3%, from RMB39.2 million (US$4.7 million) in the
fiscal year ended December 31, 2001. Income from operations expressed as a
percentage of revenue decreased from 7.7% in fiscal 2001 to 7.1% during fiscal
2002. Income from operations of our petrochemical segment in the fiscal 2002 was
RMB59.8 million (US$7.2 million), an increase of RMB24 million (US$2.9 million),
or 67%, from RMB35.8 million (US$4.3 million) in the fiscal 2001. Income from
operations of our petrochemical segment as a percentage of segment revenue
declined slightly from 7.4% in fiscal 2001 to 7.2% in fiscal 2002. Income from
operations of our agrochemical segment in the fiscal 2002 was RMB9.5 million
(US$1.1 million), an increase of RMB1.9 million (US$224 thousand), or 24.2%,
from RMB7.7 million (US$926 thousand) in the fiscal 2001. Income from operations
of our agrochemical segment as a percentage of segment revenue declined from
27.6% in fiscal 2001 to 18.4% in fiscal 2002.

         OTHER INCOME (EXPENSES). Other income (expenses) in the fiscal year
ended December 31, 2002 was RMB16.5 million (US$2.0 million), an increase of
RMB13.9 million (US$1.7 million), or 531%, from RMB2.6 million (US$316 thousand)
in the fiscal year ended December 31, 2001. The net increase includes a write
off of RMB14.5 million (US$1.8 million) in accrued expenses in fiscal 2002 and
an increase in interest expense in fiscal 2002 of approximating RMB4.4 million
(US$534 thousand) from fiscal 2001 as a result of significant increases in
short-term and long-term debts used to finance increased capital expenditures
and operational expansion.

         INCOME TAXES. We are subject to PRC income tax on an entity basis on
income arising in or derived from the tax jurisdiction in which the entity
operates. For the years ended December 31, 2001 and 2002, all of our income was
generated in the PRC through our indirect subsidiary, Jingbo, which was subject
to PRC income taxes at 33% (30% state income tax and 3% local income tax).
Income taxes in the fiscal year ended December 31, 2002 were RMB24.2 (US$2.9
million), an increase of RMB13.6 million (US$1.6 million), or 128%, from RMB10.6
million (US$1.2 million) in the fiscal year ended December 31, 2001. The
increase was due to our increased revenue and income in the fiscal year ended
December 31, 2002 over the prior year.

         NET INCOME. Net income in the fiscal year ended December 31, 2002 was
RMB54.7 million (US$6.6 million), an increase of RMB24.5 million (US$3.0
million), or 81%, from RMB30.2 million (US$3.65) in the fiscal year ended
December 31, 2001.

         FISCAL YEAR DECEMBER 31, 2001 COMPARED TO FISCAL YEAR DECEMBER 31, 2000

         REVENUES. Revenues in the fiscal year ended December 31, 2001 were
RMB509.3 million (US$61.5 million), a decrease of RMB48.2 million (US$5.8
million), or 8.6%, from RMB557.5 million (US$67.4 million) in the fiscal year
ended December 31, 2000. The decrease was due primarily to a temporary
disruption in our petrochemical operations in 2001 caused by our installation of
a heavy oil catalytic cracking unit. Prior to 2001, we were not equipped with
adequate heavy oil catalytic cracking equipment and we outsourced several steps
in the petrochemical refinery process, thus incurring higher production costs.
In 2001, we installed new heavy oil catalytic cracking equipment but the
installation process caused a temporary disruption in our refinery operations,
resulting in lower revenue in 2001 from the prior year. Revenues from the sale
of petrochemical products in the fiscal year ended December 31, 2001 were
RMB481.5 million (US$58.2 million), a decrease of RMB49 million (US$5.92
million), or 9.23%, from RMB530.5 million (US$64.1 million) in the fiscal year
ended December 31, 2000. Revenues from the sale of agrochemical products for the
fiscal year ended December 31, 2001 increased by RMB812 thousand (US$98
thousand), or 3.01%, to RMB27.8 million (US$3.4 million) in fiscal 2001 from
RMB27 million (US$3.3 million) in fiscal 2000.

         PURCHASES, SERVICES AND OTHER. Purchases, services and others represent
our primary cost of goods in the refinery of our petrochemical products and
manufacture of our agrochemical products. Expenses for purchases, services and
others in the fiscal year ended December 31, 2001 were RMB383.9 million (US$46.4
million), a decrease of RMB80.4 million (US$9.7 million), or 17.3%, from
RMB464.3 million (US$56.1 million) in the fiscal year ended December 31, 2000.
However, purchases, services and other expenses as a percentage of revenue
decreased from 83.3% in the fiscal year ended December 31, 2000 to 75.4% in the
fiscal year ended December 31, 2001 due to cost savings realized when we
completed the installation of our heavy oil catalytic cracking equipment in 2001
and we were able to terminate the outsourcing of the associated refinery
process.

         EMPLOYEE COMPENSATION COSTS. Employee compensation costs in the fiscal
year ended December 31, 2001 were RMB23.5 million (US$2.8 million), a increase
of RMB1.4 million (US$175 thousand), or 6.5%, from RMB22.1 million (US$2.7
million) in the fiscal year ended December 31, 2000. The increase in employee
compensation costs was due to significant increases in bonuses paid to senior
management in 2001 from the prior year. Employee compensation costs as a
percentage of revenue increased from 4.0% in the fiscal year ended December 31,
2000 to 4.6% in the fiscal year ended December 31, 2001 as a result of the
significantly higher bonuses in 2001.

                                       13
<PAGE>

         DEPRECIATION AND AMORTIZATION. Depreciation and amortization in the
fiscal year ended December 31, 2001 was RMB16.5 million (US$2.0 million), a
decrease of RMB2.1 million (US$254 thousand), or 11.3%, from RMB 18.6 million
(US$2.3 million) in the fiscal year ended December 31, 2000. Depreciation and
amortization as a percentage of revenue decreased from 3.3% in the fiscal year
ended December 31, 2001 to 3.24% in the fiscal year ended December 31, 2000.

         SELLING, GENERAL AND ADMINISTRATIVE EXPENSES. Selling, general and
administrative expenses in the fiscal year ended December 31, 2001 were RMB12.8
million (US$1.6 million), an increase of RMB1 million (US$123 thousand), or
8.62%, from RMB11.8 million (US$1.4) in the fiscal year ended December 31, 2000.
Selling, general and administrative expenses as a percentage of revenue
increased slightly from 2.12% in fiscal 2000 to 2.5% during fiscal 2001.

         IMPAIRMENT LOSS ON VALUATION OF ASSETS AND LIABILITIES. In the fiscal
year ended December 31, 2000, we incurred a charge of RMB1.3 (US$157 thousand)
in connection with the write off of certain assets.

         TAXES OTHER THAN INCOME TAXES. Taxes other than income taxes include a
value added tax charged by the PRC on the sale of our petrochemical and
agrochemical products at rates between 6% to 17% and a consumption tax charged
by the PRC on our sale of gasoline and diesel oil at fixed rates of RMB277.6
(US$33.54) per ton and RMB117.6 (US$14.21) per ton, respectively. Taxes other
than income taxes also include surcharges for urban construction and education
taxes levied at 5% and 3%, respectively, of all consumption and value added
taxes payable and a property tax levied at 1.2% of the cost of property
constructed. Taxes other than income taxes in the fiscal year ended December 31,
2001 were RMB33.3 million (US$4 million), an increase of RMB2.3 million (US$282
thousand), or 7.5%, from RMB30.9 million (US$3.74 million) in the fiscal year
ended December 31, 2000. Taxes other than income taxes as a percentage of
revenue increased from 5.5% in fiscal 2000 to 6.5% in fiscal 2001.

         INCOME FROM OPERATIONS. Income from operations in the fiscal year ended
December 31, 2001 was RMB39.2 million (US$4.7 million), an increase of RMB30.9
million (US$3.73 million), or 368%, from RMB8.3 million (US$1 million) in the
fiscal year ended December 31, 2000. Income from operations as a percentage of
revenue increased from 1.5% in fiscal 2000 to 7.7% during fiscal 2001 due to
cost savings realized when we completed the installation of our heavy oil
catalytic cracking equipment in 2001 and we were able to terminate the
outsourcing of the associated refinery process. Income from operations of our
petrochemical segment in the fiscal 2001 was RMB35.8 million (US$4.3 million),
an increase of RMB20.8 million (US$2.5 million), or 139%, from RMB14.9 million
(US$1.8 million) in the fiscal 2000. Income from operations of our petrochemical
segment as a percentage of segment revenue increased from 2.8% in fiscal 2000 to
7.4% in fiscal 2001 as a result of the aforementioned cost savings. Income from
operations of our agrochemical segment in the fiscal 2001 was RMB7.7 million
(US$926 thousand), an increase of RMB13 million (US$1.56 million), or 346%, from
a loss of RMB5.3 million (US$635 thousand) in the fiscal 2000.

         OTHER INCOME (EXPENSES). Total other income (expenses) in the fiscal
year ended December 31, 2001 was RMB2.6 million (US$316 thousand), an increase
of RMB1.5 million (US$179 thousand), or 130%, from RMB1.1 million (US$137
thousand) in the fiscal year ended December 31, 2000. Interest expense in fiscal
2001 was RMB4.8 million (US$582 thousand) and increase of RMB3.2 million (US$385
thousand), or 195%, from RMB1.6 million (US$197 thousand) in the fiscal year
ended December 31, 2000 as a result of significant increases in short-term and
long-term debts used to finance capital expenditures and operational expansion.
At the same time, other income net of interest income and interest expense in
the fiscal year ended December 31, 2001 was RMB5.7 million (US$683 thousand), an
increase of RMB4.3 million (US$524 thousand), or 330%, from RMB1.3 million
(US$159 thousand) in expense in the fiscal year ended December 31, 2000.

         INCOME TAXES. We are subject to PRC income taxes on an entity basis on
income arising in or derived from the tax jurisdiction in which the entity
operates. For the years ended December 31, 2000 and 2001, all of our income was
generated in the PRC through our indirect subsidiary, Jingbo, which was subject
to PRC income taxes at 33% (30% state income tax and 3% local income tax).
Income taxes in the fiscal year ended December 31, 2001 were RMB10.6 million
(US$1.2 million), a increase of RMB2.6 million (US$314 thousand), or 33%, from
RMB8.0 million (US$966 thousand) in the fiscal year ended December 31, 2000.
Income taxes for the year ended December 31, 2000 in relation to income before
income taxes was significantly more compared to fiscal 2001, primarily due to
the initial impact of accounting for deferred taxes. In 2000, we initially
recorded deferred taxes, which were not previously recorded.

         NET INCOME. Net income in the fiscal year ended December 31, 2001 was
RMB30.2 million (US$3.6 million), an increase of RMB28.5 million (US$3.4
million), or 1,690%, from RMB1.7 million (US$204 thousand) in the fiscal year
ended December 31, 2000.

                                       14
<PAGE>

LIQUIDITY AND CAPITAL RESOURCES

         Liquidity is a measure of an entity's ability to meet potential cash
requirements, including planned capital expenditures. We have historically met
our capital requirements through cash flows from operations and debt financing
with local financial institutions.

         Cash flows provided by operating activities were RMB5 million (US$610
thousand) in the fiscal year ended December 31, 2002, compared to RMB23.5
(US$2.84 million) used by operating activities in the fiscal year ended December
31, 2001.

         Cash flows used in investing activities were RMB96.2 million (US$11.6
million) in the fiscal year ended December 31, 2002, compared to RMB41.7 million
(US$5 million) used in investing activities in the fiscal year ended December
31, 2001.

         Cash flows provided by financing activities were RMB132.9 million
(US$16.1 million) in the fiscal year ended December 31, 2002, compared to
RMB29.7 million (US$3.6 million) provided by financing activities in the fiscal
year ended December 31, 2001.

         As of December 31, 2002, we had working capital of RMB105.7 million
(US$12.8 million). We believe that existing cash balances, cash generated by
operating activities, and funds available under our credit facility will be
sufficient to finance our present level of operating activities for at least the
next 12 months. Since February 2003, at which time we completed the upgrade of
our atmospheric vacuum distillation units to a capacity of 1,300,000 tons
annually, we have operated our petrochemical refinery at less than full capacity
due to a shortage of working capital necessary to acquire sufficient amounts of
crude oil. In order to increase our petrochemical refinery operations to full
capacity, we believe we will need approximately $20 million of additional
working capital for purchases of crude oil. We will endeavor to acquire the
desired additional working capital through bank loans or the sale of our
securities. However, we cannot assure you that additional financing will be
available on terms favorable to us, or at all.

CRITICAL ACCOUNTING POLICIES

         REVENUES. Sales are recognized when the revenue is realized or
realizable, and has been earned. In general, revenue is recognized as when risk
and title to the product transfers to the customer, which usually occurs at the
time shipment is made or as services are rendered.

         EXPENSES. Expenses are recognized during the period in which they are
incurred.

         INVENTORY. Inventory is stated at the lower of cost or market value.
The methods of determining cost are used consistently from year to year at each
entity level. These methods are first-in-first-out and weighted average cost.

FACTORS AFFECTING OPERATING RESULTS

         Our results of operations and the period-to-period comparability of our
financial results are affected by a number of external factors, including
changes in the prices of crude oil, refined products, and chemical products and
fluctuations in exchange rates and interest rates.

         INDUSTRIAL RISK. Like other crude oil refinery companies in the PRC,
our business activities are subject to regulation and control of the PRC
government in many aspects such as grant of production license, special tax to
be imposed relating to the industry and environmental and safety standard, which
may affect our business operations. We receive an allocation of crude oil from
state controlled oil producers in the PRC, The China National Petroleum
Corporation and The China Petroleum and Chemical Corporation, who together are
the dominant producers and refiners of crude oil in the PRC. The import and
export of crude oil and refined products is subject to quota and licensing
control by the government of the PRC At the present time, we are not able to
import crude oil from sources outside of the PRC. We have applied to the
Ministry of Foreign Trade and Economic Cooperation for a license to import up to
1 million tons of crude oil per year. If we obtain the license, of which there


                                       15
<PAGE>

is no assurance, we expect it will be for an initial term of 12 months and
subject to annual renewal. For the foregoing reasons, we may be subject to a
substantial restriction when implementing our business strategy, when developing
and expanding our business or when attempting to maximize our profitability. Any
future change in the PRC government's policy on crude oil and natural gas
industry may also affect our business operations.

         CRUDE OIL PRICES. Our results of operations are substantially
influenced by crude oil prices. Since 2001, the PRC government has published
benchmark prices for crude oil in China, which are adjusted on a monthly basis
to equal Singapore market FOB prices for similar grades of crude oil,
supplemented by an amount equal to the customs duty payable on the import of
crude oil. Our suppliers have set our crude oil median prices monthly based on
the Singapore market FOB prices for crude oil. Our actual realized crude oil
prices include a premium on, or discount from, the median prices which primarily
reflects transportation costs, differences in oil quality and market supply and
demand conditions.

         REFINED PRODUCT PRICES. The State Development Planning Commission sets
wholesale and retail prices for our major refined products (gasoline, diesel,
LPG, fuel oil and kerosene). Since June 2000, the State Development Planning
Commission has adjusted such retail median prices on a monthly basis to reflect
the FOB Singapore, Rotterdam and New York trading prices for gasoline and diesel
in the previous month, supplemented by transportation costs and taxes. We set
our retail prices within an 8% floating range of the published median gasoline
and diesel guidance prices. We determine the prices of other refined products
with reference to the published median guidance prices of gasoline and diesel.

         SARS. In March 2003, several countries, including China, experienced an
outbreak of a new and highly contagious form of atypical pneumonia now known as
"severe acute respiratory syndrome" or "SARS." The severity of the outbreak in
certain municipalities, such as Beijing, and provinces, such as Guangdong
Province, has affected general commercial activity. While the long-term impact
of the SARS outbreak is unclear at this time, the prolonged existence of SARS
could have a negative impact on the PRC economy and, in turn, have a material
adverse effect on our results of operations.

         CHINA ECONOMY AND POLITICAL SITUATION. The PRC government recently
underwent substantial reforms after the National People's Congress meeting in
March 2003. The PRC government has reiterated its policy of furthering reforms
in the socialist market economy. No assurance can be given that these changes
will not have an adverse effect on business conditions in China generally or on
our business in particular.

                                       16
<PAGE>

ITEM 7A.  QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.

         Market risk is the risk of loss to future earnings, to fair values or
to future cash flows that may result from changes in the price of a financial
instrument. The value of a financial instrument may change as a result of
changes in interest rates, exchange rates, commodity prices, equity prices and
other market changes. Market risk is attributed to all market sensitive
financial instruments, including long-term debt.

         We do not utilize derivative financial instruments or investments in
available-for-sale securities. All cash is held in both interest and
non-interest bearing account. However, we do not believe that our cash account
would have significant impact as a result of changes in interest rate since we
do not rely on earnings from our cash accounts for cash flow. Accordingly, our
exposure to market risk is through our bank debt which bears interest at
variable rates. As of December 31, 2002, our bank debt consisted of RMB 208.3
million (US$25.2 million) of indebtedness bearing interest at the prime rate
announced by the Central Bank of China from time to time. An increase in lending
rates of 1% would cause our interest expense to increase by US$25 thousand.

                                       17
<PAGE>
<TABLE>


ITEM 8.  FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.

                          INDEX TO FINANCIAL STATEMENTS
<CAPTION>

AP HENDERSON GROUP (FORMERLY KNOWN AS MAGNOLIA VENTURES, INC.)

<S>                                                                                                      <C>
Report of Independent Certified Public Accountant........................................................F-1
Report of Independent Certified Public Accountant........................................................F-2
Consolidated Balance Sheets at December 31, 2002 and 2001 ...............................................F-3
Consolidated Statements of Income for the years ended December 31, 2002, 2001 and 2000...................F-4
Consolidated Statements of Shareholders' Equity for the years ended December 31, 2002, 2001 and 2000.....F-5
Consolidated Statements of Cash Flows for the years ended December 31, 2002, 2001 and 2000...............F-6
Notes to Consolidated Financial Statements ..............................................................F-7

</TABLE>

                                       18
<PAGE>

                REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANT
                -------------------------------------------------


To the Shareholders and Board of Directors
AP HENDERSON GROUP
(Formerly Magnolia Ventures, Inc.)
Los Angeles, California

I have audited the accompanying consolidated balance sheets of AP Henderson
Group (Formerly Magnolia Ventures, Inc.), as of December 31, 2001 and 2002, and
the related consolidated statements of income, shareholders' equity and cash
flows for the years ended December 31, 2000, 2001 and 2002. These consolidated
financial statements are the responsibility of the Company's management. My
responsibility is to express an opinion on these consolidated financial
statements based on my audits. I did not audit the financial statements of
Jingbo Chemical (Bo Xing) Company Limited, a wholly-owned subsidiary, which
statements reflect total assets of RMB 355,060,000 and RMB 510,582,000 as of
December 31, 2001 and 2002, respectively, and total revenues of RMB 557,479,000,
RMB 509,322,000 and RMB 882,175,000 for the years ended December 31, 2000, 2001
and 2002, respectively. Those statements were audited by other auditors whose
report has been furnished to me, included in these consolidated financial
statements, and my opinion, insofar as it relates to the amounts included for
Jingbo Chemical (Bo Xing) Company Limited, is based solely on the report of the
other auditors.

I conducted my audits in accordance with auditing standards generally accepted
in the United States. Those standards require that I plan and perform the audit
to obtain reasonable assurance about whether the consolidated financial
statements are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the consolidated
financial statements. An audit also includes assessing the accounting principles
used and significant estimates made by management, as well as evaluating the
overall financial statements presentation. I believe that my audits provide a
reasonable basis for my opinion.

In my opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the financial position of AP Henderson Group
(Formerly Magnolia Ventures, Inc.) as of December 31, 2001 and 2002, and of the
results of their operations and cash flows for the years ended December 31,
2000, 2001 and 2002, in conformity with accounting principles generally accepted
in the United States.


/s/ Kyle Tingle, C.P.A.
-----------------------
Kyle Tingle, C.P.A.
Las Vegas, Nevada
April 3, 2003

                                      F-1
<PAGE>





               REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
               --------------------------------------------------




To the Shareholders and Board of Directors
JINGBO CHEMICAL (BO XING) COMPANY LIMITED
Los Angeles, California

We have audited the accompanying consolidated balance sheets of Jingbo Chemical
(Bo Xing) Company Limited, as of December 31, 2001 and 2002, and the related
consolidated statements of income, shareholders' equity and cash flows for the
years ended December 31, 2000, 2001 and 2002. These consolidated financial
statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these consolidated financial
statements based on our audits.

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

In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the financial position of Jingbo Chemical (Bo
Xing) Company Limited as of December 31, 2001 and 2002, and of the results of
its operations and cash flows for the years ended December 31, 2000, 2001 and
2002, in conformity with accounting principles generally accepted in the United
States.


/s/ L.L. Bradford & Company, LLC

L.L. Bradford & Company, LLC
Las Vegas, Nevada
April 3, 2003

                                      F-2
<PAGE>
<TABLE>
                                                   AP HENDERSON GROUP
                                           (FORMERLY MAGNOLIA VENTURES, INC.)
                                              CONSOLIDATED BALANCE SHEETS
                                            AS OF DECEMBER 31, 2001 AND 2002
<CAPTION>

                                                                2001            2002            2002
                                                              RMB'000          RMB'000         US$'000
                                                           ---------------  --------------  --------------
<S>                                                               <C>             <C>              <C>
ASSETS
Current assets
   Cash and cash equivalents                                       79,512         121,236          14,647
   Accounts receivable, net                                         1,581           6,215             751
   Due from related parties                                        30,797          30,822           3,724
   Inventories                                                     71,498         119,595          14,449
   Prepaid expenses and other current assets                       27,198          53,396           6,450
                                                           ---------------  --------------  --------------
     Total current assets                                         210,586         331,264          40,021

Property, plant and equipment, net                                112,941         171,837          20,760
Investment in an equity affiliate                                  21,100               -               -
Intangible and other assets, net                                    5,088           4,513             545
Deferred tax assets                                                 5,345           2,968             359
                                                           ---------------  --------------  --------------

     Total assets                                                 355,060         510,582          61,685
                                                           ===============  ==============  ==============

LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities
   Accounts payable and accrued liabilities                        62,075          74,096           8,952
   Short-term debts                                                61,850          88,500          10,692
   Due to related parties                                          34,333          41,071           4,962
   Dividends payable                                               18,154               -               -
   Income taxes payable                                             2,536           9,450           1,142
   Other taxes payable                                            140,660          12,476           1,507
                                                           ---------------  --------------  --------------
     Total current liabilities                                    319,608         225,593          27,255
                                                           ---------------  --------------  --------------

Long-term liabilities
   Due to related parties, long-term portion                            -          23,118           2,793
   Long-term debts                                                      -         145,350          17,560
                                                           ---------------  --------------  --------------

     Total liabilities                                            319,608         394,061          47,608

Minority interests                                                  2,513               -               -
                                                           ---------------  --------------  --------------
                                                                  322,121         394,061          47,608
                                                           ---------------  --------------  --------------

Shareholders' equity
   Preferred share - RMB 0.008 (US$ 0.001) par value, 25,000,000
     shares authorized, no shares issued and outstanding                -               -               -
   Common share - RMB 0.008 (US$ 0.001) par value, 200,000,000
     shares authorized, 39,375,000 shares issued and outstanding      326             326              39
   Additonal paid-in capital                                       46,725          76,098           9,194
   Retained earnings (accumulated deficit)                        (18,827)         36,190           4,372
   Statutory common funds                                           4,715           3,907             472
                                                           ---------------  --------------  --------------
     Total shareholders' equity                                    32,939         116,521          14,077
                                                           ---------------  --------------  --------------

     Total liabilities and shareholders' equity                   355,060         510,582          61,685
                                                           ===============  ==============  ==============

                              See accompanying notes to consolidated financial statements
</TABLE>

                                                          F-3
<PAGE>
<TABLE>

                                                   AP HENDERSON GROUP
                                           (FORMERLY MAGNOLIA VENTURES, INC.)
                                           CONSOLIDATED STATEMENTS OF INCOME
                                  FOR THE YEARS ENDED DECEMBER 31, 2000, 2001 AND 2002
<CAPTION>

                                                             2000            2001            2002            2002
                                                           RMB'000          RMB'000         RMB'000         US$'000
                                                        ---------------  --------------  --------------  --------------
<S>                                                         <C>             <C>             <C>             <C>
REVENUES
   Sales and other operating revenues                          557,479         509,322         882,175         106,578

OPERATING EXPENSES
   Purchases, services and other                               464,283         383,876         716,284          86,536
   Employee compensation costs                                  22,101          23,547          20,584           2,487
   Depreciation and amortization                                18,637          16,530          15,458           1,867
   Selling, general and administrative expenses                 11,821          12,840          17,310           2,091
   Impairment loss on valuation of assets and liabilities        1,296               -               -               -
   Taxes other than income taxes                                30,958          33,290          49,639           5,997
                                                        ---------------  --------------  --------------  --------------
     Total operating expenses                                  549,096         470,083         819,275          98,978
                                                        ---------------  --------------  --------------  --------------

       Income from operations                                    8,383          39,239          62,900           7,600

OTHER INCOME (EXPENSE)
   Interest income                                               1,453           1,781           2,906             351
   Interest expense                                             (1,632)         (4,821)         (9,238)         (1,116)
   Write-off of accrued expenses                                     -               -          14,554           1,758
   Other income (expense), net                                   1,314           5,654           8,270             999
                                                        ---------------  --------------  --------------  --------------
     Total other income (expense)                                1,135           2,614          16,492           1,992
                                                        ---------------  --------------  --------------  --------------
       Income before income taxes and minority interests         9,518          41,853          79,392           9,592
   Income taxes                                                  7,961          10,590          24,187           2,922
                                                        ---------------  --------------  --------------  --------------
       Income before minority interests                          1,557          31,263          55,205           6,670
   Income (loss) applicable to minority interests                  128          (1,100)           (497)            (60)
                                                        ---------------  --------------  --------------  --------------

       Net income                                                1,685          30,163          54,708           6,610
                                                        ===============  ==============  ==============  ==============

Earnings per share data:
    Basic and fully diluted earnings per share                    0.04            0.77            1.39            0.17
                                                        ===============  ==============  ==============  ==============
    Weighted average common shares outstanding              39,375,000      39,375,000      39,375,000      39,375,000
                                                        ===============  ==============  ==============  ==============

                               See accompanying notes to consolidated financial statements
</TABLE>

                                                          F-4
<PAGE>
<TABLE>

                                                        AP HENDERSON GROUP
                                                (FORMERLY MAGNOLIA VENTURES, INC.)
                                    CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY
                                       FOR THE YEARS ENDED DECEMBER 31, 2000, 2001 AND 2002
<CAPTION>

                                                                                   RETAINED
                                                COMMON SHARES                      EARNINGS     STATUTORY
                                          ------------------------    PAID-IN    (ACCUMULATED     COMMON
                                           NUMBER OF                  CAPITAL      DEFICIT)        FUNDS         TOTAL
                                            SHARES       AMOUNT       RMB'000       RMB'000       RMB'000       RMB'000
                                          -----------  -----------  -----------   -----------   -----------   -----------
<S>                                       <C>                 <C>       <C>          <C>              <C>        <C>
Balance at December 31, 1999              39,375,000          326       25,749       (20,585)           --         5,490
Net income for the year ended
  December 31, 2000                               --           --           --         1,685            --         1,685
Contributions                                     --           --       21,006            --            --        21,006
Transfer to reserves                              --           --           --          (262)          262            --
                                          -----------  -----------  -----------   -----------   -----------   -----------
Balance at December 31, 2000              39,375,000          326       46,755       (19,162)          262        28,181
Net income for the year ended
  December 31, 2001                               --           --           --        30,163            --        30,163
Purchase of shareholders interest
  in Company                                      --           --          (30)           --            --           (30)
Transfer to reserves                              --           --           --        (4,453)        4,453            --
Dividend                                          --           --           --       (25,375)           --       (25,375)
                                          -----------  -----------  -----------   -----------   -----------   -----------
Balance at December 31, 2001              39,375,000          326       46,725       (18,827)        4,715        32,939
Net income for the year ended
  December 31, 2002                               --           --           --        54,708            --        54,708
Combination of Shandong Jingbo
  Agrochemical Company Limited                    --           --       15,113        (3,122)           --        11,991
Contribution of Shandong Bo Xing
  Lunong Chemical Company Limited
  assets and liabilities                          --           --      (13,454)        3,431          (808)      (10,831)
Assumption of excess liabilities
  by shareholder resulting from
  distribution of  non-operational
  assets and liabilities                          --           --       27,714            --            --        27,714
                                          -----------  -----------  -----------   -----------   -----------   -----------
Balance at December 31, 2002              39,375,000          326       76,098        36,190         3,907       116,521
                                          ===========  ===========  ===========   ===========   ===========   ===========

Balance at December 31, 2002 in US$'000   39,375,000           39        9,194         4,372           472        14,077
                                          ===========  ===========  ===========   ===========   ===========   ===========

                                   See accompanying notes to consolidated financial statements
</TABLE>

                                                               F-5
<PAGE>
<TABLE>

                                                   AP HENDERSON GROUP
                                           (FORMERLY MAGNOLIA VENTURES, INC.)
                                         CONSOLIDATED STATEMENTS OF CASH FLOWS
                                  FOR THE YEARS ENDED DECEMBER 31, 2000, 2001 AND 2002
<CAPTION>

                                                                      2000        2001         2002         2002
                                                                    RMB'000      RMB'000      RMB'000      US$'000
                                                                   ---------    ---------    ---------    ---------
<S>                                                                 <C>          <C>         <C>           <C>
CASH FLOW FROM OPERATING ACTIVITIES
    Net income                                                        1,685       30,163       54,708        6,610
    Adjustments to reconcile net income to net
      cash provided by operating activities:
       Depreciation and amortization                                 18,637       16,530       15,458        1,867
       Impairment loss on valuation of assets and liabilities         1,296           --           --           --
       Disposal and write-off property, plant and equipment           1,999        2,959        2,363          286
       Loss (gain) on dilution of equity interest in subsidiary          16       (1,452)          --           --
    Changes in operating assets and liabilities:
       Change in accounts receivable                                  2,144         (292)      (4,634)        (560)
       Change in inventory                                           (9,534)      10,470      (48,097)      (5,811)
       Change in prepaid expenses and other current assets             (491)        (635)     (20,162)      (2,436)
       Change in due from/to related parties                         29,044      (23,583)         365           44
       Change in accounts payable and accrued liabilities           (37,031)     (18,751)      12,021        1,452
       Change in income tax liabilities                               2,038          369        6,914          835
       Change in other taxes payable                                 15,230       13,319      (15,719)      (1,898)
       Change in minority interests                                      --           --       (2,513)        (304)
       Changes in paid in capital                                        --           --        1,659          200
       Changes in accumulated deficit                                    --           --          309           37
       Change in deferred taxes                                      (2,519)      (5,559)       2,377          287
                                                                   ---------    ---------    ---------    ---------
         Net cash provided by operating activities                   22,514       23,538        5,049          609
                                                                   ---------    ---------    ---------    ---------

CASH FLOW FROM INVESTING ACTIVITIES
    Purchases of property, plant and equipment                      (26,559)     (42,168)     (96,125)     (11,613)
    Acquisition of intangible asset                                  (1,360)          --           --           --
    Acquisition of long term investment                                  --           --         (594)         (72)
    Proceeds from disposal of property, plant and equipment          16,035          466          432           52
    Proceeds from disposal of long-term investment                      480           --           --           --
                                                                   ---------    ---------    ---------    ---------
         Net cash used in investing activities                      (11,404)     (41,702)     (96,287)     (11,633)
                                                                   ---------    ---------    ---------    ---------

CASH FLOW FROM FINANCING ACTIVITIES
    Dividends paid                                                       --       (7,221)     (18,696)      (2,258)
    Cash related to distribution of non-operational assets and
       liabilities to shareholder                                        --           --      (49,000)      (5,920)
    Dividends paid to minority shareholders                              --         (266)          --           --
    Proceeds from short-term and long-term debt (5)                  42,550       80,550      395,090       47,732
    Payments on short-term and long-term debt (5)                   (32,500)     (47,550)    (193,624)     (23,392)
    Repayment of statutory funds to Shandong Bo Xing
       Lunong Chemical Limited Company                                   --           --         (808)         (98)
    Proceeds of contributions from minority shareholders              5,006        4,212           --           --
    Purchase of shareholder interest in Company                          --          (30)          --           --
                                                                   ---------    ---------    ---------    ---------
         Net cash provided by financing activities                   15,056       29,695      132,962       16,064
                                                                   ---------    ---------    ---------    ---------

Net change in cash and cash equivalents                              26,166       11,531       41,724        5,040
Cash and cash equivalents, beginning of year                         41,815       67,981       79,512        9,606
                                                                   ---------    ---------    ---------    ---------

Cash and cash equivalents, end of the year                           67,981       79,512      121,236       14,646
                                                                   =========    =========    =========    =========

Supplemental cash flow information:
    Interest paid                                                    12,000        2,601       11,364        1,373
                                                                   =========    =========    =========    =========
    Income taxes paid                                                 8,442       15,780       10,985        1,327
                                                                   =========    =========    =========    =========
Non-cash financing and investing activities:
    Distribution of non-operational assets and liabilities
       to shareholder                                                    --           --       82,117        9,921
                                                                   =========    =========    =========    =========

                              See accompanying notes to consolidated financial statements
</TABLE>

                                                          F-6
<PAGE>

                               AP HENDERSON GROUP
                       (FORMERLY MAGNOLIA VENTURES, INC.)
                 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
              FOR THE YEARS ENDED DECEMBER 31, 2000, 2001 AND 2002

                 (EXPRESSED IN RENMINBI UNLESS OTHERWISE STATED)


1.       BACKGROUND, ORGANIZATION AND NATURE OF BUSINESS

                  AP Henderson Group, formerly Magnolia Ventures, Inc., was
         incorporated on June 13, 1994 in the State of Nevada. On January 15,
         2003, Magnolia Ventures, Inc. consummated an agreement to acquire all
         of the outstanding capital stock of AP Henderson Ventures, a Nevada
         Corporation ("AP Ventures"), in exchange for 5,625,000 shares of
         Magnolia Ventures, Inc.'s ("Magnolia") common stock ("AP Ventures
         Transaction"). Prior to the AP Ventures Transaction, Magnolia was a
         non-operating public company with no operations or assets; and
         39,375,000 shares of common shares issued and outstanding; and AP
         Ventures was a privately held company in the business of owning and
         operating a petrochemical refinery and agricultural chemical
         manufacturing company in the People's Republic of China ("PRC"). The AP
         Ventures Transaction is considered to be a capital transaction in
         substance, rather than a business combination. Inasmuch, the AP
         Ventures Transaction is equivalent to the issuance of shares by a
         private company (AP Ventures) for the net non-monetary assets of a
         non-operational public company (Magnolia), accompanied by a
         recapitalization. The accounting for the AP Ventures Transaction is
         identical to that resulting from a reverse acquisition, except goodwill
         or other intangible assets are not recorded. Accordingly, these
         financial statements are the historical financial statements of AP
         Ventures. Subsequent to the AP Ventures Transaction, Magnolia changed
         its name to AP Henderson Group.

                  AP Ventures conducts its operations through its subsidiary
         Jingbo Chemical (Bo Xing) Company Limited ("Jingbo"), a foreign
         direct-owned company in the PRC. Jingbo's financial position and
         operations is a result of a transfer of operational assets and
         liabilities ("Transfer of Assets") from Shandong Jingbo Petrochemical
         Company Limited ("Petrochemical Company") and Shandong Jingbo
         Agrochemical Company Limited ("Agrochemical Company") in December 2002.
         Since the operational history of AP Henderson stems from that of
         Petrochemical Company and Agrochemical Company, the non-operational
         assets and liabilities that were not included in the Transfer of Assets
         are accounted for as distributions of assets and liabilities to the
         shareholders.

                  Petrochemical Company was engaged in the manufacturing and
         distribution of petrochemical products in the PRC.

                  Agrochemical Company was engaged in the manufacturing and
         distribution of agricultural insecticide and chemicals. On April 5,
         2002, Agrochemical Company returned all of its capital contributed by
         Petrochemical Company to them and ceased to be a subsidiary of
         Petrochemical Company ("de-consolidation"). Prior to April 5, 2002,
         Agrochemical Company was 57% owned by Petrochemical Company.

                  Shandong Bo Xing Lu Nong Chemical Company Limited ("Lu Nong
         Chemical Company") was principally engaged in the manufacture of
         agricultural insecticide primarily for Agrochemical Company. On April
         5, 2002, Lu Nong Chemical Company transferred its assets, liabilities
         and business to Agrochemical Company and ceased to operate as a
         separate limited liability company ("de-registration").

                                      F-7
<PAGE>

                               AP HENDERSON GROUP
                       (FORMERLY MAGNOLIA VENTURES, INC.)
                 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
              FOR THE YEARS ENDED DECEMBER 31, 2000, 2001 AND 2002

                 (EXPRESSED IN RENMINBI UNLESS OTHERWISE STATED)


1.       BACKGROUND, ORGANIZATION AND NATURE OF BUSINESS (CONTINUED)

                  AP Henderson Group, formerly Magnolia Ventures, Inc., together
         with its subsidiary shall herein be collectively referred to as the
         "Company".

                  On February 11, 2003, the Company effectuated a 1.875 for 1
         forward stock-split. Accordingly, the consolidated financial statements
         have been retroactively adjusted to reflect the forward stock-split
         from the date of the Company's inception.

         The Company is subject to, among others, the following operating risks:

         (a)      Country risk

                           Significantly all of the Company's operations are
                  conducted in the PRC, the Company is subject to special
                  considerations and significant risks not typically associated
                  with companies operating in the United States of America.
                  These risks include, among others, the political, economic and
                  legal environments and foreign currency exchange. The
                  Company's results may be adversely affected by changes in the
                  political and social conditions in the PRC, and by changes in
                  governmental policies with respect to laws and regulations,
                  anti-inflationary measures, currency conversion and remittance
                  abroad, and rates and methods of taxation, among other things.

                           In addition, all of the Company's revenue is
                  denominated in the PRC's currency of Renminbi ("RMB"), which
                  must be converted into other currencies before remittance out
                  of the PRC. Both the conversion of RMB into foreign currencies
                  and the remittance of foreign currencies abroad require
                  approval of the PRC government.

         (b)      Credit risk

                           The carrying amounts of accounts receivable included
                  in the balance sheets represent the Company's exposure to
                  credit risk in relation to its financial assets. No other
                  financial assets carry a significant exposure to credit risk.

                           The Company performs ongoing credit evaluations of
                  each customer's financial condition. It maintains allowances
                  for doubtful accounts and such allowances in the aggregate
                  have not exceeded management's estimations.

         (c)      Interest rate risk

                           The Company is exposed to the risk arising from
                  changing interest rates, which may affect the ability of
                  repayment of existing debts and viability of securing future
                  debt instruments within the PRC.

                                      F-8
<PAGE>

                               AP HENDERSON GROUP
                       (FORMERLY MAGNOLIA VENTURES, INC.)
                 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
              FOR THE YEARS ENDED DECEMBER 31, 2000, 2001 AND 2002

                 (EXPRESSED IN RENMINBI UNLESS OTHERWISE STATED)


2.       BASIS OF PRESENTATION

                  The consolidated financial statements have been prepared in
         accordance with accounting principles generally accepted in the United
         States ("US GAAP").

                  The consolidated financial statements are expressed in RMB's,
         the national currency of the PRC. Solely for the convenience of the
         reader, the December 31, 2002 consolidated financial statements have
         been converted into United States dollars at the noon buying rate in
         New York City on December 31, 2002 for cable transfers in RMB's as
         certified for customs purposes by the Federal Reserve Bank of New York
         of US$1.00 = RMB 8.2773. No representation is made that the RMB amounts
         could have been, or could be, converted into United States dollars at
         that rate or at any other certain rate on December 31, 2002, or at any
         other date and accordingly no currency conversion gain or loss are
         reflected as a result of this translation.

                  Certain prior year balances have been reclassified to conform
         to the current year presentation.

                  The preparation of the consolidated financial statements in
         conformity with US GAAP requires management to make estimates and
         assumptions that affect the reported amounts of assets, liabilities,
         revenues and expenses and the disclosure of contingent assets and
         liabilities. Actual results could differ from these estimates.

3.       SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

         (a)      Basis of consolidation

                           The consolidated financial statements include the
                  consolidated financial statements of the Company and its
                  subsidiary. The results of operations of its subsidiary are
                  included in the consolidated statements of income, and the
                  portion attributable to minority interests is excluded from
                  the consolidated income from operations and reported
                  separately as income applicable to minority interest on the
                  consolidated statements of income. All significant
                  intercompany balances and transactions have been eliminated.

         (b)      Definition of fiscal year

                           The Company's fiscal year end is December 31.

                                      F-9
<PAGE>

                               AP HENDERSON GROUP
                       (FORMERLY MAGNOLIA VENTURES, INC.)
                 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
              FOR THE YEARS ENDED DECEMBER 31, 2000, 2001 AND 2002

                 (EXPRESSED IN RENMINBI UNLESS OTHERWISE STATED)


3.       SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

         (c)      Investment in an equity affiliate

                        Investment in an affiliated entity in which the Company
                  has the ability to exercise significant influence, but not
                  control, and generally is an ownership interest of the
                  investee's voting capital between 20% and 50%, is accounted
                  for under the equity method of accounting. Accordingly, under
                  the equity method of accounting, the Company's share of the
                  investee's earnings or losses is included in the consolidated
                  statements of income.

         (d)      Foreign currency translation

                           The functional currency of the Company is Renminbi
                  ("RMB"). Transactions denominated in foreign currencies are
                  translated into RMB at the unified exchange rates quoted by
                  the People's Bank of China prevailing at the dates of the
                  transactions. Monetary assets and liabilities denominated in
                  foreign currencies are translated into RMB using the
                  applicable unified exchange rates prevailing at the balance
                  sheet dates.

                           The Company did not enter into any hedge contracts
                  during any of the periods presented. No foreign currency
                  exchange gains or losses were capitalized for any periods
                  presented.

         (e)      Fair value of financial instruments

                           The carrying amounts for the Company's cash and cash
                  equivalents, accounts receivable, due to/from related parties,
                  (short-term) accounts payable and accrued liabilities, income
                  taxes payable, other taxes payable, prepaid assets and
                  short-term debts approximate fair value due to the short-term
                  maturity of these instruments.

                           The Company had no derivative financial instruments
                  in any of the years presented.

         (f)      Property, plant and equipment

                           Property, plant and equipment are initially recorded
                  at cost less accumulated depreciation and amortization. Cost
                  represents the purchase price of the asset and other costs
                  incurred to bring the asset into existing use.

                           Depreciation and amortization to reduce the cost of
                  each asset to their residual values over their estimated
                  useful lives are calculated using the straight-line method.

                                      F-10
<PAGE>

                               AP HENDERSON GROUP
                       (FORMERLY MAGNOLIA VENTURES, INC.)
                 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
              FOR THE YEARS ENDED DECEMBER 31, 2000, 2001 AND 2002

                 (EXPRESSED IN RENMINBI UNLESS OTHERWISE STATED)


3.       SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

         (f)      Property, plant and equipment (continued)

                           The Company uses the following useful lives for
                  depreciation and amortization purposes:

<TABLE>
<CAPTION>

<S>                                                   <C>
                  Land use rights                     over the land use right period of 27-50 years
                  Buildings                                                             25-40 years
                  Plant, machinery and equipment                                         3-30 years
                  Motor vehicles                                                         5-15 years
</TABLE>

                           No depreciation is provided for construction in
                  progress until they are completed and put in use. Interest and
                  other costs on borrowings to finance the construction of
                  property, plant and equipment are capitalized during the
                  period of time that is required to complete and prepare the
                  property for its intended use.

                           The Company periodically evaluates whether events and
                  circumstances have occurred that may warrant revision of the
                  estimated useful life of fixed assets or whether the remaining
                  balance of fixed assets should be evaluated for possible
                  impairment. The Company uses an estimate of the related
                  undiscounted cash flows over the remaining life of the fixed
                  assets in measuring their recoverability.

                           Gains and losses on disposal of property, plant and
                  equipment are determined by reference to their net carrying
                  amounts at the date of disposal.

                           Costs for planned major maintenance activities,
                  primarily related to refinery turnarounds, are expensed as
                  incurred except for costs of components that result in
                  improvements and betterments which are capitalized as part of
                  property, plant and equipment and depreciated over their
                  useful lives, which is generally the period until the next
                  scheduled major maintenance.

                                      F-11
<PAGE>

                               AP HENDERSON GROUP
                       (FORMERLY MAGNOLIA VENTURES, INC.)
                 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
              FOR THE YEARS ENDED DECEMBER 31, 2000, 2001 AND 2002

                 (EXPRESSED IN RENMINBI UNLESS OTHERWISE STATED)


3.       SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

         (g)      Intangible assets

                           Acquisition costs on patents, trademarks, licenses
                  and other intangibles are capitalized and amortized using the
                  straight-line method over their useful lives, generally over 3
                  to 10 years. The Company does not capitalize internally
                  generated intangible assets. The carrying amount of each
                  intangible asset is reviewed annually and adjusted for
                  impairment where it is considered necessary. An impairment
                  loss is recognized whenever the carrying amount of an asset
                  exceeds its recoverable amount. Events and circumstances that
                  would trigger an impairment assessment include a significant
                  decrease in the market value of an asset, a significant change
                  in the manner or extent that an asset is used including a
                  decision to abandon acquired products, services or
                  technologies, a significant adverse change in operations or
                  business climate affecting the asset, and historical operating
                  or cash flow losses expected to continue for the foreseeable
                  future associated with the asset. An asset is considered
                  impaired when the undiscounted cash flows projected to be
                  generated from the asset over its remaining useful life is
                  less than the recorded amount of that asset. Impairment losses
                  are measured based on the difference between the asset's fair
                  value and carrying amount and are recorded as impairment
                  write-downs in the consolidated statements of operations in
                  the period that an indicator of impairment arises. Measurement
                  of fair value is based on estimated expected future cash
                  flows, including terminal value cash flows expected to result
                  from the disposition of the asset at the end of its useful
                  life, discounted at our weighted average cost of capital.
                  Weighted average cost of capital is based on historical risk
                  premiums required by investors for companies of our size,
                  industry and capital structure and includes risk factors
                  specific to us. In some instances, the measurement of fair
                  value includes a factor, if appropriate, for market
                  comparables, representing our estimate of the value that a
                  buyer is willing to pay for similar assets in terms of
                  products and services, customer base, risks and earnings
                  capabilities.

         (h)      Inventories

                           Inventories are stated at the lower of cost or market
                  value. The methods of determining cost are used consistently
                  from year to year at each entity level. These methods are
                  first-in-first-out and weighted average cost.

         (i)      Accounts receivable

                           Accounts receivable are carried at original invoiced
                  amounts less any allowance for doubtful accounts. Such
                  allowance provision for accounts receivable is established if
                  there is an uncertainty that the Company will be unable to
                  collect such amounts.

                                      F-12
<PAGE>
                               AP HENDERSON GROUP
                       (FORMERLY MAGNOLIA VENTURES, INC.)
                 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
              FOR THE YEARS ENDED DECEMBER 31, 2000, 2001 AND 2002

                 (EXPRESSED IN RENMINBI UNLESS OTHERWISE STATED)


3.       SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

         (j)      Cash and cash equivalents

                           Cash and cash equivalents include interest bearing
                  and non-interest bearing bank deposits, money market accounts,
                  short-term certificates of deposit with original maturities of
                  three months or less.

         (k)      Income taxes

                           The Company is subject to PRC income taxes on an
                  entity basis on income arising in or derived from the tax
                  jurisdiction in which the entity operates.

                           For the years ended December 31, 2000, 2001 and 2002,
                  all of the Company's income was generated in the PRC, which
                  was subject to PRC income taxes at 33% (30% state income tax
                  and 3% local income tax).

                           The Company accounts for its income taxes in
                  accordance with Statement of Financial Accounting Standards
                  ("SFAS") No. 109, which requires recognition of deferred tax
                  assets and liabilities for future tax consequences
                  attributable to differences between the financial statement
                  carrying amounts of existing assets and liabilities and their
                  respective tax bases and any tax credit carryforwards
                  available. Deferred tax assets and liabilities are measured
                  using enacted tax rates expected to apply to taxable income in
                  the years in which those temporary differences are expected to
                  be recovered or settled. The effect on deferred tax assets and
                  liabilities of a change in tax rates is recognized in income
                  in the period that includes the enactment date.

                           The Company also incurs various other taxes, which
                  are not income taxes. Taxes other than income taxes, which
                  arise from operating expenses, primarily comprised of
                  consumption tax, resource tax, urban construction tax,
                  education surcharges and business tax. These taxes are shown
                  on the consolidated statements of income as a separate line
                  item and any unpaid amounts are reflected on the consolidated
                  balance sheets as other taxes payable.

         (l)      Revenues

                           Sales are recognized when the revenue is realized or
                  realizable, and has been earned. In general, revenue is
                  recognized as when risk and title to the product transfers to
                  the customer, which usually occurs at the time shipment is
                  made or as services are rendered.

         (m)      Expenses

                           Expenses are recognized during the period in which
                  they are incurred.

                                      F-13
<PAGE>

                               AP HENDERSON GROUP
                       (FORMERLY MAGNOLIA VENTURES, INC.)
                 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
              FOR THE YEARS ENDED DECEMBER 31, 2000, 2001 AND 2002

                 (EXPRESSED IN RENMINBI UNLESS OTHERWISE STATED)


3.       SUMMARY OF SIGNIFICANG ACCOUNTING POLICIES (CONTINUED)

         (n)      Research and development expenses

                           Research and development expenditures are charged to
                  expenses as incurred. Research and development expenses were
                  RMB 180,000, RMB 4,192,000and RMB 4,339,799 for the years
                  ended December 31, 2000, 2001 and 2002, respectively.

         (o)      Retirement benefit plans

                           The Company contributes to various employee
                  retirement benefit plans organized by municipal and provincial
                  governments under which it is required to make monthly
                  contributions to these plans at rates prescribed by the
                  related municipal and provincial governments. The municipal
                  and provincial governments undertake to assume the retirement
                  benefit obligations of all existing and future retired
                  employees of the Company. Contributions to these plans are
                  charged to expense as incurred.

         (p)               Stock-based compensation - The Company applies
                  Accounting Principles Board ("APB") Opinion No. 25, Accounting
                  for Stock Issued to Employees, and Related Interpretations, in
                  accounting for stock options issued to employees. Under APB
                  No. 25, employee compensation cost is recognized when
                  estimated fair value of the underlying stock on date of the
                  grant exceeds exercise price of the stock option. For stock
                  options and warrants issued to non-employees, the Company
                  applies SFAS No. 123, Accounting for Stock-Based Compensation,
                  which requires the recognition of compensation cost based upon
                  the fair value of stock options at the grant date using the
                  Black-Scholes option pricing model.

         (q)      EARNINGS (LOSS) PER SHARE - Basic earnings (loss) per share
                  exclude any dilutive effects of options, warrants and
                  convertible securities. Basic earnings (loss) per share is
                  computed using the weighted-average number of outstanding
                  common shares during the applicable period. Diluted earnings
                  per share is computed using the weighted average number of
                  common and common stock equivalent shares outstanding during
                  the period. Common stock equivalent shares are excluded from
                  the computation if their effect is antidilutive.

         (r)      New accounting developments

                           SFAS No. 143 establishes accounting standards for the
                  recognition and measurement of an asset retirement obligation
                  and its associated asset retirement cost. It also provides
                  accounting guidance for legal obligations associated with the
                  retirement of tangible long-lived assets. SFAS No. 143 is
                  effective in fiscal years beginning after June 15, 2002, with
                  early adoption permitted. The Company expects that the
                  provisions of SFAS No. 143 will not have a material impact on
                  its results of operations and financial position upon
                  adoption. The Company plans to adopt SFAS No. 143 effective
                  January 1, 2003.

                                      F-14
<PAGE>

                               AP HENDERSON GROUP
                       (FORMERLY MAGNOLIA VENTURES, INC.)
                 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
              FOR THE YEARS ENDED DECEMBER 31, 2000, 2001 AND 2002

                 (EXPRESSED IN RENMINBI UNLESS OTHERWISE STATED)


3.       SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

         (r)      New accounting developments (continued)

                           SFAS No. 144 establishes a single accounting model
                  for the impairment or disposal of long-lived assets, including
                  discontinued operations. SFAS No. 144 superseded SFAS No. 121,
                  Accounting for the Impairment of Long-Lived Assets and for
                  Long-Lived Assets to Be Disposed Of, and APB Opinion No. 30,
                  Reporting the Results of Operations-- Reporting the Effects of
                  Disposal of a Segment of a Business, and Extraordinary,
                  Unusual and Infrequently Occurring Events and Transactions.
                  The provisions of SFAS No. 144 are effective in fiscal years
                  beginning after December 15, 2001, with early adoption
                  permitted, and in general are to be applied prospectively. The
                  Company has adopted SFAS No. 144 effective January 1, 2002 and
                  did not have a material impact on its results of operations
                  and financial position.

                           SFAS No. 148 provides alternative methods of
                  transition for an entity that voluntarily changes to the fair
                  value based method of accounting for stock-based employee
                  compensation. In addition, this Statement amends the
                  disclosure requirements of SFAS No. 123 and APB Opinion No.
                  28, "Interim Financial Reporting," to require prominent
                  disclosures in both annual and interim financial statements
                  about the method of accounting for stock-based employee
                  compensation and the effect of the method used on reported
                  results. SFAS No. 148 is effective for fiscal years ending
                  after December 15, 2002 and for interim periods beginning
                  after December 15, 2002. The adoption of the provisions of
                  SFAS No. 148 did not have a material impact on the Company's
                  results of operations, financial position or cash flows.

                           In November 2002, FIN No. 45, "Guarantor's Accounting
                  and Disclosure Requirements for Guarantees, Including Indirect
                  Guarantees of Indebtedness of Others an interpretation of SFAS
                  No. 5, 57, and 107 and rescission of FASB Interpretation No.
                  34," was issued. FIN 45 clarifies the requirements of SFAS No.
                  5, "Accounting for Contingencies," relating to a guarantor's
                  accounting for, and disclosure of, the issuance of certain
                  types of guarantees. The adoption of the provisions of FIN 45
                  did not have a material impact on the Company's results of
                  operations, financial position or cash flows.

                           On January 17, 2003, FIN 46, "Consolidation of
                  Variable Interest Entities, an interpretation of ARB 51," was
                  issued. The primary objectives of FIN 46 are to provide
                  guidance on the identification and consolidation of variable
                  interest entities, or VIE's, which are entities for which
                  control is achieved through means other than through voting
                  rights. The Company does not have any VIEs.

                                      F-15
<PAGE>

                               AP HENDERSON GROUP
                       (FORMERLY MAGNOLIA VENTURES, INC.)
                 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
              FOR THE YEARS ENDED DECEMBER 31, 2000, 2001 AND 2002

                 (EXPRESSED IN RENMINBI UNLESS OTHERWISE STATED)

<TABLE>
<CAPTION>

4.       EMPLOYEE COMPENSATION COSTS

                                                                               Year Ended December 31,
                                                               ---------------------------------------------------
                                                                      2000              2001              2002
                                                                     RMB'000           RMB'000           RMB'000
                                                               ----------------  ----------------  ----------------
                  <S>                                                   <C>               <C>               <C>
                  Wages and salaries                                    20,282            21,543            18,533
                  Social security costs                                  1,819             2,003             2,053
                                                               ----------------  ----------------  ----------------

                                                                        22,101            23,546            20,586
                                                               ================  ================  ================

                  Social security costs represent contributions to funds for
         staff welfare organized by the municipal and provincial governments
         including contributions to the retirement benefit plans (see Note 22).

         5.       INCOME TAXES

                                                                               Year Ended December 31,
                                                               ---------------------------------------------------
                                                                      2000              2001              2002
                                                                     RMB'000           RMB'000           RMB'000
                                                               ----------------  ----------------  ----------------
                  PRC current tax                                       10,480            16,149            21,810
                  Deferred tax (Note 13)                                (2,519)           (5,559)            2,377
                                                               ----------------  ----------------  ----------------

                                                                         7,961            10,590            24,187
                                                               ================  ================  ================

                  In accordance with the relevant PRC income tax rules and
         regulations, the enacted PRC income tax rate applicable to the Company
         is 33% for the years ended December 31, 2001 and 2002.

                  The tax on the Company's income before income taxes differs
         from the theoretical amount that would arise using the basic tax rate
         in the PRC applicable to the Company as follows:

                                                                               Year Ended December 31,
                                                               ---------------------------------------------------
                                                                      2000              2001              2002
                                                                     RMB'000           RMB'000           RMB'000

                  Income before income taxes                             9,518            41,853            79,392
                                                               ================  ================  ================

                  Tax calculated at a tax rate of 33%                    3,141            13,811            26,200
                  Impairment loss on valuation
                    (net of tax effects)                                   428                 -                 -
                  Non assessable and non deductible
                    items of income and expenses
                    (net of tax effects)                                 4,392            (3,221)           (2,013)
                                                               ----------------  ----------------  ----------------

                                                                         7,961            10,590            24,187
                                                               ================  ================  ================
</TABLE>

                                      F-16
<PAGE>

                               AP HENDERSON GROUP
                       (FORMERLY MAGNOLIA VENTURES, INC.)
                 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
              FOR THE YEARS ENDED DECEMBER 31, 2000, 2001 AND 2002

                 (EXPRESSED IN RENMINBI UNLESS OTHERWISE STATED)

<TABLE>
<CAPTION>

6.       CASH AND CASH EQUIVALENTS

                                                                           At December 31,
                                                              ------------------------------------------
                                                                         2001                    2002
                                                              ------------------      ------------------
                                                                      RMB'000                 RMB'000

                  <S>                                                  <C>                    <C>
                  Cash at bank and in hand                             79,262                 119,372
                  Certificates of deposit                                 250                   1,864
                                                              ------------------      ------------------
                                                                       79,512                 121,236
                                                              ==================      ==================

7.       ACCOUNTS RECEIVABLE

                                                                           At December 31,
                                                              ------------------------------------------
                                                                         2001                    2002
                                                              ------------------      ------------------
                                                                      RMB'000                 RMB'000

                  Accounts receivables                                  2,273                   6,719
                  Less: Allowance for doubtful accounts                  (692)                   (504)
                                                              ------------------      ------------------
                  Accounts receivable, net                              1,581                   6,215
                                                              ==================      ==================


                                                                       Year Ended December 31,
                                                              ------------------------------------------
                                                                         2001                    2002
                                                              ------------------      ------------------
                                                                      RMB'000                 RMB'000

                  Allowance for doubtful accounts:
                    Balance at beginning of year                          369                     692
                    Changes to allowance for
                        doubtful accounts                                 323                    (188)
                                                              ------------------      ------------------
                    Balance at end of year                                692                     504
                                                              ==================      ==================

8.       INVENTORIES

                                                                           At December 31,
                                                              ------------------------------------------
                                                                         2001                    2002
                                                              ------------------      ------------------
                                                                      RMB'000                 RMB'000

                  Inventories consist of the following:
                     Raw materials                                     22,093                  64,948
                     Work-in-progress                                   8,148                  13,365
                     Finished goods                                    41,257                  41,282
                                                              ------------------      ------------------
                                                                       71,498                 119,595
                                                              ==================      ==================
</TABLE>

                                      F-17
<PAGE>

                               AP HENDERSON GROUP
                       (FORMERLY MAGNOLIA VENTURES, INC.)
                 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
              FOR THE YEARS ENDED DECEMBER 31, 2000, 2001 AND 2002

                 (EXPRESSED IN RENMINBI UNLESS OTHERWISE STATED)


9.       PREPAID EXPENSES AND OTHER CURRENT ASSETS
<TABLE>
<CAPTION>
                                                                                         At December 31,
                                                                            ------------------------------------------
                                                                                       2001                    2002
                                                                            ------------------      ------------------
                                                                                    RMB'000                 RMB'000

                  <S>                                                               <C>                      <C>
                  Other receivables                                                   7,998                       1
                  Less: Allowance for doubtful accounts                              (4,618)                      -
                                                                            ------------------      ------------------
                                                                                      3,380                       1
                  Deposits for purchase of raw materials,
                   machinery and equipment                                           14,759                  47,734
                  Prepayment for construction work                                      734                     267
                  Prepaid expenses                                                    7,555                   1,079
                  Value added tax recoverable                                             -                   4,093
                  Others                                                                770                     222
                                                                            ------------------      ------------------
                                                                                     27,198                  53,396
                                                                            ==================      ==================
</TABLE>

10. PROPERTY, PLANT AND EQUIPMENT
<TABLE>
<CAPTION>
                                                                     Plant,
                                                                 machinery
                                            Land                      and           Motor   Construction
                                       use rights   Buildings     equipment       vehicle    in progress         Total
                                       ----------   ---------     ---------       -------    -----------         -----
                                          RMB'000     RMB'000       RMB'000       RMB'000        RMB'000       RMB'000
         <S>                               <C>          <C>          <C>             <C>          <C>          <C>
         Year ended December 31, 2001

         Cost or valuation
           At beginning of the year        6,930        41,106       82,957          5,180         4,488       140,661
           Additions                           -         7,833       11,740            727        21,868        42,168
           Transfers                           -             -          293              -          (293)            -
           Disposals and write-offs            -             -       (1,510)          (560)       (2,473)       (4,543)
                                      ----------- ------------  ------------  -------------  ------------   -----------

           At end of the year              6,930        48,939       93,480          5,347        23,590       178,286
                                      ----------- ------------  ------------  -------------  ------------   -----------

         Accumulated depreciation
           At beginning of the year          124         5,473       42,656          2,256             -        50,509
           Depreciation                       90         1,549       13,455            860             -        15,954
           Disposals and write-offs            -             -         (636)          (482)            -        (1,118)
                                      ----------- ------------  ------------  -------------  ------------   -----------

           At end of the year                214         7,022       55,475          2,634             -        65,345
                                      ----------- ------------  ------------  -------------  ------------   -----------

         Net book value
           At end of the year              6,716        41,917       38,005          2,713        23,590       112,941
                                      =========== ============= ============  =============  ============   ===========
</TABLE>

                                      F-18
<PAGE>

                               AP HENDERSON GROUP
                       (FORMERLY MAGNOLIA VENTURES, INC.)
                 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
              FOR THE YEARS ENDED DECEMBER 31, 2000, 2001 AND 2002

                 (EXPRESSED IN RENMINBI UNLESS OTHERWISE STATED)


10.      PROPERTY, PLANT AND EQUIPMENT (CONTINUED)
<TABLE>
<CAPTION>

                                                                     Plant,
                                                                 machinery
                                             Land                     and           Motor   Construction
                                       use rights   Buildings     equipment       vehicle    in progress         Total
                                       ----------   ---------     ---------       -------    -----------         -----
                                          RMB'000     RMB'000       RMB'000       RMB'000        RMB'000       RMB'000
         <S>                               <C>          <C>          <C>             <C>          <C>          <C>
         Year ended December 31, 2002

         Cost or valuation
           At beginning of the year        6,930        48,939       93,480          5,347        23,590       178,286
           Additions                         150        19,225       33,740          7,897        35,113        96,125
           Reclassification                    -        (2,525)           -              -         2,525             -
           Transfer                            -         2,436       32,930              -       (35,366)            -
           Disposals and write-offs            -          (190)        (221)        (1,317)         (958)       (2,686)
           Carved out to shareholders       (345)      (17,364)      (2,488)          (204)         (363)      (20,764)
                                      ----------- ------------  ------------  -------------  ------------   -----------

           At end of the year              6,735        50,521      157,441         11,723        24,541       250,961
                                      ----------- ------------  ------------  -------------  ------------   -----------

         Accumulated depreciation
           At beginning of the year          214         7,022       55,475          2,634             -        65,345
           Depreciation                       90         1,892       11,264          1,637             -        14,883
           Disposals and write-offs            -             -          (95)          (316)            -          (411)
           Reclassification                    -           394         (249)          (145)            -             -
           Transfer                            -           109          411              -             -           520
           Carved out to shareholders        (23)         (448)        (612)          (130)            -        (1,213)
                                      ----------- ------------  ------------  -------------  ------------   -----------

           At end of the year                281         8,969       66,194          3,680             -        79,124
                                      ----------- ------------  ------------  -------------  ------------   -----------

         Net book value
           At end of the year              6,454        41,552       91,247          8,043        24,541       171,837
                                      =========== ============= ============  =============  ============   ===========
</TABLE>

                  Land use rights and buildings are located in the PRC, where
         private ownership of land is not allowed. Rather, entities acquire the
         rights to use land for a designated term. As of December 31, 2002, the
         Company had rights to use five parcels of land for periods ranging from
         40 to 51 years up to 2041 to 2052.

                                      F-19
<PAGE>

                               AP HENDERSON GROUP
                       (FORMERLY MAGNOLIA VENTURES, INC.)
                 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
              FOR THE YEARS ENDED DECEMBER 31, 2000, 2001 AND 2002

                 (EXPRESSED IN RENMINBI UNLESS OTHERWISE STATED)


11.      INVESTMENT IN AN EQUITY AFFILIATE

                                                   At December 31,
                                      ------------------------------------------
                                                 2001                    2002
                                      ------------------      ------------------
                                              RMB'000                 RMB'000

         Unlisted shares, at cost              21,100                       -
                                      ==================      ==================

<TABLE>
<CAPTION>
                  Details of the equity affiliate are as follows:

                                                Country of                                Equity
                                               establishment           Registered        interest       Principal
                  Name of company              And operation            capital            held        activities
                  ---------------              -------------            -------            ----        ----------

                  <S>                          <C>                   <C>                   <C>         <C>
                  Shandong Jingbo              The People's          RMB 50,000,000        42.2%       Production
                   Thermoelectrical              Republic                                               and sale
                  Company  Limited               of China                                             of electrical
                                                                                                     and thermo power
</TABLE>

                  Shandong Jingbo Thermoelectrical Company Limited commenced
         operation during 2002. In December 2002, the Company distributed its
         equity interest in this affiliate to shareholder along with other
         non-operational assets and liabilities totaling RMB 27,714,000 as
         discussed in Note 1.

                                      F-20
<PAGE>

                               AP HENDERSON GROUP
                       (FORMERLY MAGNOLIA VENTURES, INC.)
                 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
              FOR THE YEARS ENDED DECEMBER 31, 2000, 2001 AND 2002

                 (EXPRESSED IN RENMINBI UNLESS OTHERWISE STATED)


12.      INTANGIBLE AND OTHER ASSETS

         Intangible and other assets consist of the following at December 31:
<TABLE>
<CAPTION>
                                                   2001                                      2002
                               -------------------------------------   ----------------------------------------
                                            Accumulated                              Accumulated
                                     Cost  Amortization          Net           Cost  Amortization           Net
                                     ----  ------------          ---           ----  ------------           ---
                                  RMB'000       RMB'000      RMB'000        RMB'000       RMB'000       RMB'000
         <S>                        <C>            <C>         <C>            <C>            <C>          <C>
         Trademark                  3,838          (572)       3,266          3,838          (998)        2,840
         Other intangibles          1,198          (144)       1,054          1,198          (277)          921
                               ----------- ------------- ------------  -------------  ------------   -----------
         Intangible assets          5,036          (716)       4,320          5,036        (1,275)        3,761
         Other assets                 800           (32)         768            800           (48)          752
                               ----------- ------------- ------------  -------------  ------------   -----------
                                    5,836          (748)       5,088          5,836        (1,323)        4,513
                               =========== ============= ============  =============  ============   ===========
</TABLE>

                  Amortization on intangible assets was RMB 576,000 and RMB
         575,000 for the years ended December 31, 2001 and 2002 respectively.

                  Other assets represented long-term prepaid advertising.

13.      DEFERRED INCOME TAX ASSETS AND LIABILITIES

                  Deferred income taxes are calculated on temporary difference
         under the liability method using a principal tax rate of 33%.

                  The movements in the deferred income tax assets and
         liabilities account are as follows:
<TABLE>
<CAPTION>
                                                              Year Ended December 31,
                                                             2001                 2002
                                                      -----------------    -----------------
                                                              RMB'000               RMB'000
                  <S>                                            <C>                 <C>
                  At beginning of year                            (214)               5,345
                  Income statement credit/(debit)                5,559               (2,377)
                                                      -----------------    -----------------

                  At end of year                                 5,345                2,968
                                                      =================    =================
</TABLE>

                                      F-21
<PAGE>

                               AP HENDERSON GROUP
                       (FORMERLY MAGNOLIA VENTURES, INC.)
                 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
              FOR THE YEARS ENDED DECEMBER 31, 2000, 2001 AND 2002

                 (EXPRESSED IN RENMINBI UNLESS OTHERWISE STATED)


14.      SHORT-TERM DEBTS
<TABLE>
<CAPTION>
                                                                   At December 31,
                                                              2001                  2002
                                                        ----------------     ----------------
                                                            RMB'000               RMB'000

<S>                                                               <C>                  <C>
         Bank loans                                               61,350               63,000
         Other borrowings from unrelated parties                     500               25,500
                                                        ----------------     ----------------

                                                                  61,850               88,500
                                                        ================     ================
</TABLE>

                  As of December 31, 2001, bank loans were secured by the
         Company's property, plant and equipment with net book value of RMB
         41,361,000, and bears interest at prevailing lending rates in the PRC
         ranging from 5.24% to 5.85% per annum for the year ended December 31,
         2001.

                  As of December 31, 2002, bank loans totaling RMB 58,000,000
         were unsecured and non-interest bearing. Bank loan of RMB 5,000,000 was
         unsecured and bears interest at 5.31% per annum for the year ended
         December 31, 2002.

                  All bank loans mature within one year.

                  Other borrowings from unrelated parties are unsecured and bear
         interest at bank rate in the PRC ranging from 5.24% to 5.85% and 5.24%
         to 5.85% per annum for the years ended December 31, 2001 and 2002
         respectively.


                                      F-22
<PAGE>

                               AP HENDERSON GROUP
                       (FORMERLY MAGNOLIA VENTURES, INC.)
                 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
              FOR THE YEARS ENDED DECEMBER 31, 2000, 2001 AND 2002

                 (EXPRESSED IN RENMINBI UNLESS OTHERWISE STATED)


15.      LONG-TERM DEBTS

                                                      At December 31,
                                                 2001                 2002
                                          ----------------     ----------------
                                               RMB'000               RMB'000

         Bank loans                                      -              145,350
                                          ----------------     ----------------

                                                         -              145,350
                                          ================     ================

                  Bank loans are secured by the Company's property, plant and
         equipment and bear interest at prevailing lending rates of the Central
         Bank of China for the year ended December 31, 2002. The bank loans are
         interest only loans with the principal amounts maturing in December
         2010.

                  At December 31, 2002, long-term debts would mature as follows:

                                                               RMB'000

                  2003                                               -
                  2004                                               -
                  2005                                               -
                  2006                                               -
                  2007                                               -
                  Thereafter                                   145,350
                                                           -----------

                                                               145,350
                                                           -----------

                                      F-23
<PAGE>

                               AP HENDERSON GROUP
                       (FORMERLY MAGNOLIA VENTURES, INC.)
                 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
              FOR THE YEARS ENDED DECEMBER 31, 2000, 2001 AND 2002

                 (EXPRESSED IN RENMINBI UNLESS OTHERWISE STATED)


16.      ACCOUNTS PAYABLE AND ACCRUED LIABILITIES
<TABLE>
<CAPTION>
                                                                                             At December 31,
                                                                                       2001                 2002
                                                                                 ----------------     ----------------
                                                                                     RMB'000               RMB'000
         <S>                                                                               <C>                  <C>
         Trade payables                                                                    20,683               47,567
         Salaries and welfare payable                                                       8,085                7,199
         Accrued expenses                                                                   1,783                  639
         Dividends payable by a subsidiary to minority shareholders                           956                    -
         Interest payable                                                                   3,040                    -
         Payables for construction-in-progress                                              5,293                4,283
         Deposits received from staff                                                       4,600                9,790
         Deposits from customers                                                            3,266                2,485
         Provisions                                                                         8,525                  362
         Others                                                                             5,844                1,771
                                                                                 ----------------     ----------------

                                                                                           62,075               74,096
                                                                                 ================     ================

17.   OTHER TAXES PAYABLE

                  Details of other taxes payable are as follow:
                                                                                             At December 31,
                                                                                       2001                 2002
                                                                                 ----------------     ----------------
                                                                                     RMB'000               RMB'000

                  Value-added tax                                                          46,774                    -
                  Consumption tax                                                          84,340                6,020
                  Surtaxes                                                                  6,212                4,481
                  Withholding tax                                                           3,334                1,975
                                                                                 ----------------     ----------------

                                                                                          140,660               12,476
                                                                                 ================    =================
</TABLE>

         (a)      Value-Added Tax ("VAT")

                  The Company is subject to VAT, which is levied at the general
                  rates of 6% to 17% on gross sales of the Company's products.
                  An input credit is available whereby VAT paid on the purchases
                  of semi-finished products or raw materials can be used to
                  offset the VAT on sales to determine the net VAT payable.

                  VAT payable at December 31, 2001 included brought-forward
                  balances of RMB 45,110,000 from previous years, as the PRC
                  authority has not requested payment of these outstanding
                  amounts.

                                      F-24
<PAGE>

                               AP HENDERSON GROUP
                       (FORMERLY MAGNOLIA VENTURES, INC.)
                 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
              FOR THE YEARS ENDED DECEMBER 31, 2000, 2001 AND 2002

                 (EXPRESSED IN RENMINBI UNLESS OTHERWISE STATED)


17.      OTHER TAXES PAYABLE (CONTINUED)

         (b)      Consumption Tax ("CT")

                  The Company is subject to CT at fixed rates of RMB 277.6 per
                  ton and RMB 117.6 per ton for domestic sales of gasoline and
                  diesel oil, respectively.

                  CT payable at December 31, 2001 included brought forward
                  balances of RMB 77,542,000 , from previous years, as the PRC
                  authority has not requested payment of these outstanding
                  amounts.

         (c)      Surtaxes

                  The Company is subject to the following surtaxes:

                  -        Urban Construction Tax levied at 5% of CT and net VAT
                           payable;
                  -        Education Surcharges levied at 3% of CT and net VAT
                           payable.
                  -        Property Tax levied at 1.2% of the cost of property
                           constructed.

         (d)      Withholding taxes

                  The Company is required to withhold personal income tax in
                  respect of dividends paid to individual equity holders and
                  business tax in respect of payments to contractors for
                  construction services.

                                      F-25
<PAGE>

                               AP HENDERSON GROUP
                       (FORMERLY MAGNOLIA VENTURES, INC.)
                 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
              FOR THE YEARS ENDED DECEMBER 31, 2000, 2001 AND 2002

                 (EXPRESSED IN RENMINBI UNLESS OTHERWISE STATED)


18.      SHAREHOLDERS' EQUITY

                  As discussed in Note 1, Agrochemical Company de-consolidated
         from Petrochemical Company on April 5, 2002. Consequently, Agrochemical
         Company's financial statements are combined with accompanying
         consolidated financial statements from April 6, 2002 through December
         31, 2002. As a result, Agrochemical Company's capital and accumulated
         deficit of RMB 15,115,000 and RMB (3,122,000), respectively, were
         combined as of April 6, 2002.

                  As discussed in Note 1, Lu Nong Chemical Company de-registered
         on April 5, 2002 and the assets and liabilities of Lu Nong Chemical
         Company were transferred to Agrochemical Company at the historical
         amounts on that same date. Lu Nong Chemical Company's shareholders
         equity was comprised of paid-in capital of RMB 13,454,000, accumulated
         deficit of RMB 3,431,000, and statutory common funds of RMB 808,000,
         which was accounted for as contributed capital.

19.   STATUTORY COMMON FUNDS
<TABLE>
<CAPTION>
                                                                    Statutory           Statutory
                                                                       common              common
                                                                 reserve fund        welfare fund            Total
                                                             -----------------   -----------------    -----------------
                                                                      RMB'000             RMB'000              RMB'000
         <S>                                                           <C>                  <C>                 <C>
         Balance at January 1, 2001                                       175                  87                  262
         Transfer from accumulated deficit
           to reserves                                                  2,600               1,301                3,901
         Transfer from accumulated deficit
           to reserves by a subsidiary                                    368                 184                  552
                                                             -----------------   -----------------    -----------------
         Balance at December 31, 2001                                   3,143               1,572                4,715
         Transfer from accumulated deficit
           to reserves                                                      -                   -                    -
         Lunong Chemical Company
           (de-registration)                                             (539)               (269)                (808)
                                                             -----------------   -----------------    -----------------

         Balance at December 31, 2002                                   2,604               1,303                3,907
                                                             =================   =================    =================
</TABLE>

         (a)      Pursuant to PRC regulations and the Company's Articles of
                  Organization, the Company is required to transfer 10% of its
                  net income, as determined under the PRC accounting
                  regulations, to a statutory common reserve fund until such
                  fund equals 50% of the Company's registered capital. The
                  transfer to this reserve must be made prior to any
                  distribution of dividends to the Company's shareholders.

                                      F-26
<PAGE>

                               AP HENDERSON GROUP
                       (FORMERLY MAGNOLIA VENTURES, INC.)
                 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
              FOR THE YEARS ENDED DECEMBER 31, 2000, 2001 AND 2002

                 (EXPRESSED IN RENMINBI UNLESS OTHERWISE STATED)


19.      STATUTORY COMMON FUNDS (CONTINUED)

                  The statutory common reserve fund shall only be used to makeup
                  for previous years' losses, to expand the Company's production
                  operations, or to increase the capital of the Company.
                  Additionally, the Company may convert its statutory common
                  reserve fund into capital and issue bonus capital to existing
                  shareholders in proportion to their original shareholdings,
                  provided approval by a resolution of shareholders' general
                  meeting and the balance of the reserve fund after such issue
                  is not less than 25% of the registered capital.

         (b)      Pursuant to the PRC regulations and the Company's Articles of
                  Organization, the Company is required to transfer 5% to 10% of
                  its net income, as determined under the PRC accounting
                  regulations, to the statutory common welfare fund. This fund
                  can only be used to provide staff welfare facilities and other
                  collective benefits to the Company's employees in the form of
                  capital expenditure. This fund is non-distributable other than
                  in liquidation.

20.      COMMITMENTS

         (a)      Operating lease commitments

                           Under a lease agreement, the Company has committed to
                  pay determined rental to a PRC government for the period from
                  July 1996 to 2010. Future minimum lease payments as of
                  December 31, 2001 and 2002 under these arrangements are
                  analyzed as follows:
<TABLE>
<CAPTION>
                                                                            2001                 2002
                                                                     ----------------     ----------------
                                                                          RMB'000              RMB'000

                           <S>                                                    <C>                  <C>
                           - first year after 2001 and 2002                        67                   74
                           - second year after 2001 and 2002                       74                   81
                           - third year after 2001 and 2002                        81                   90
                           - fourth year after 2001 and 2002                       90                   98
                           - fifth year after 2001 and 2002                        98                  108
                           - thereafter                                           503                  395
                                                                     ----------------     ----------------

                                                                                  913                  846
                                                                     ================     ================
</TABLE>

                           Operating lease expenses approximated RMB 61,000 and
                  RMB 67,000 for the years ended December 31, 2001 and 2002,
                  respectively.

         (b)      Capital commitments

                           For the years ended December 31, 2001 and 2002, the
                  Company entered into various construction contracts. As of
                  December 31, 2001 and 2002, remaining commitments related to
                  these construction contracts approximated RMB 3,641,000 and
                  RMB 11,213,000, respectively.

                                      F-27
<PAGE>

                               AP HENDERSON GROUP
                       (FORMERLY MAGNOLIA VENTURES, INC.)
                 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
              FOR THE YEARS ENDED DECEMBER 31, 2000, 2001 AND 2002

                 (EXPRESSED IN RENMINBI UNLESS OTHERWISE STATED)


21.      RELATED PARTY TRANSACTIONS

                  Parties are considered to be related if they are subject to
         common control or common significant influence, common ownership,
         direct or indirect ownership between parties, or transactions with
         employees.

                  The Company's significant related party transactions affecting
         the results of operations are as follows:
<TABLE>
<CAPTION>
                                                                                     Year Ended December 31,
                                                                            ------------------------------------------
                                                                                   2001                    2002
                                                                            ------------------      ------------------
                                                                                 RMB'000                 RMB'000

                  <S>                                                                 <C>                     <C>
                  Purchase of material from Shandong Jingbo
                    Printing Limited                                                  1,030                   1,956
                                                                            ==================      ==================

                  Services received from Shandong Jingbo
                    Thermoelectrical Company Limited                                    158                       -
                                                                            ==================      ==================

                  Interest income and rental income earned from
                    short-term advances to Shandong Jingbo
                    Thermoelectrical Company Limited                                    192                   1,806
                                                                            ==================      ==================

                  Interest expenses paid to loans from
                    Shareholders                                                        367                       -
                                                                            ==================      ==================

                  Services received from Shandong Jingbo
                    Logistic Company Limited                                              -                   1,527
                                                                            ==================      ==================

                  Rental income received from Shandong Jingbo
                    Ke Lung Company Limited                                               -                     300
                                                                            ==================      ==================
</TABLE>

                                      F-28
<PAGE>

                               AP HENDERSON GROUP
                       (FORMERLY MAGNOLIA VENTURES, INC.)
                 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
              FOR THE YEARS ENDED DECEMBER 31, 2000, 2001 AND 2002

                 (EXPRESSED IN RENMINBI UNLESS OTHERWISE STATED)


21.      RELATED PARTY TRANSACTIONS (CONTINUED)

                  Due from/to related parties as of December 31, 2001 and 2002
         are as follow:
<TABLE>
<CAPTION>
                                                                                        At December 31,
                                                                            ------------------------------------------
                                                                                   2001                    2002
                                                                            ------------------      ------------------
                                                                                 RMB'000                 RMB'000
                  <S>                                                               <C>                     <C>
                  Due from related parties
                    Employee advances                                                 2,644                   1,027
                    Shandong Jingbo Thermoelectrical Company Limited                 28,153                  18,509
                    Shandong Jingbo Chemical Company Limited                              -                      31
                    Technology Development Centre                                         -                  11,220
                    Shangdong Jingbo Ke Lung Company Limited                              -                      35
                                                                            ------------------      ------------------
                    Total due from related parties                                   30,797                  30,822
                                                                            ==================      ==================

                  Due to related parties:
                    Loans from shareholders                                          12,312                       -
                    Loans from employees                                             22,021                  22,126
                    Current portion of staff borrowings                                   -                   6,348
                    Shangdong Jingbo Food Company Limited                                 -                   2,414
                    Shangdong Jingbo Logistic Company Limited                             -                  10,121
                    Shangdong Jingbo Printing Company Limited                             -                      62
                                                                            ------------------      ------------------
                    Total due to related parties                                     34,333                  41,071
                                                                            ==================      ==================

                  Due to related parties, long-term portion:
                    Long-term portion of staff borrowings                                 -                  23,118
                                                                            ------------------      ------------------
                    Total due to related parties, long term portion                       -                  23,118
                                                                            ==================      ==================
</TABLE>

                  Staff borrowings are unsecured and bear interest at bank rate
         in the PRC of 4.77% per annum for the year ended December 31, 2002.

                  At December 31, 2002, due to related parties, long-term
         portion, would mature as follows:

                                                                 RMB'000

                  2003                                             6,348
                  2004                                             6,348
                  2005                                             6,348
                  2006                                             4,074
                                                            ------------

                                                                  23,118
                                                            ============

                                      F-29
<PAGE>

                               AP HENDERSON GROUP
                       (FORMERLY MAGNOLIA VENTURES, INC.)
                 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
              FOR THE YEARS ENDED DECEMBER 31, 2000, 2001 AND 2002

                 (EXPRESSED IN RENMINBI UNLESS OTHERWISE STATED)


21.      RELATED PARTY TRANSACTIONS (CONTINUED)

                  Amounts due from related parties are interest free, unsecured
         and without predetermined repayment terms.

                  Amounts due to shareholders are interest free, unsecured and
         without predetermined repayment terms.

                  Amounts due to employees are unsecured, interest bearing at
         7.2% per annum and without predetermined repayment terms.

22.      RETIREMENT PLAN

                  As stipulated by the regulations of the PRC government, the
         Company operates a defined contribution retirement plan for their
         employees. The PRC government is responsible for the pension liability
         to these retired employees. The Company is required to make specified
         contributions to the state-sponsored retirement plan at 20% of the
         basic salary cost of their employees. Employees of the PRC companies
         are required to contribute 6% of their basic salary for the years ended
         December 31, 2001 and 2002, with the maximum amount of contribution of
         8%. For the years ended December 31, 2001 and 2002, contributions made
         by the Company approximated RMB 1,050,000 and RMB 1,139,000
         respectively.

23.      SEGMENT FINANCIAL INFORMATION

                  The Company is engaged in two business segments, namely,
         petrochemical and agrochemical.

         Description of products by segment
         ----------------------------------

                  The petrochemical segment is engaged in the manufacturing and
         sales of petrochemical products in the PRC.

                  The agrochemical segment is engaged in the manufacturing and
         sales of agricultural chemical products in the PRC.

                  All assets and operations of the Company are located in the
         PRC, which is considered as one geographic location in an economic
         environment with similar risks and returns.

         Measurement of segment income or loss and segment assets
         --------------------------------------------------------

                  The Company evaluates performance and allocates resources
         based on results from operations. The accounting policies of the
         reportable segments are the same as those described in the summary of
         significant accounting policies. Inter-segment sales and transfers
         between reportable segments are not material for any periods presented.

                                      F-30
<PAGE>
                               AP HENDERSON GROUP
                       (FORMERLY MAGNOLIA VENTURES, INC.)
                 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
              FOR THE YEARS ENDED DECEMBER 31, 2000, 2001 AND 2002

                 (EXPRESSED IN RENMINBI UNLESS OTHERWISE STATED)


23.      SEGMENT INFORMATION (CONTINUED)

         Factors management used to identify the Company's reportable segments
         ---------------------------------------------------------------------

                  The Company's reportable segments are business units that
         offer different products.

         Operating segment information
         -----------------------------
<TABLE>
<CAPTION>
                                                           Year ended December 31
                                                     2000            2001          2002
                                                   ---------      ---------      ---------
                                                    RMB'000        RMB'000        RMB'000
<S>                                                 <C>            <C>            <C>
Net sales:
   Petrochemical
      Net sales to unaffiliated customers           530,478        481,509        830,530
                                                   ---------      ---------      ---------

   Agrochemical
      Net sales to unaffiliated customers            27,001         27,813         51,645
                                                   ---------      ---------      ---------

Total consolidated net sales                        557,479        509,322        882,175
                                                   =========      =========      =========

Depreciation and amortization expenses:
   Petrochemical                                     16,930         14,461         11,789
   Agrochemical                                       1,707          2,070          3,667
                                                   ---------      ---------      ---------

Total consolidated depreciation
 and amortization expenses                           18,637         16,531         15,456
                                                   =========      =========      =========

Segment income/(loss):
   Petrochemical                                     14,967         35,775         59,811
   Agrochemical                                      (5,254)         7,666          9,518
                                                   ---------      ---------      ---------

Total segment income                                  9,713         43,441         69,329

Reconciling items:
   Corporate income/(expenses)                          (16)         1,452          1,841
   Write-off of accrued expenses                                        --         14,554
   Interest income                                    1,453          1,781          2,906
   Interest expenses                                 (1,632)        (4,821)        (9,238)
                                                   ---------      ---------      ---------

Total consolidated income before income taxes         9,518         41,853         79,392
                                                   =========      =========      =========
</TABLE>

                                      F-31
<PAGE>

                               AP HENDERSON GROUP
                       (FORMERLY MAGNOLIA VENTURES, INC.)
                 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
              FOR THE YEARS ENDED DECEMBER 31, 2000, 2001 AND 2002

                 (EXPRESSED IN RENMINBI UNLESS OTHERWISE STATED)


23.      SEGMENT INFORMATION (CONTINUED)

                                                         Year ended December 31
                                                           2001        2002
                                                         --------     --------
                                                         RMB'000      RMB'000
Segment assets:
   Petrochemical                                         288,422      429,527
   Agrochemical                                           66,638       81,055
                                                         --------     --------

Total consolidated assets                                355,060      510,582
                                                         ========     ========

Expenditure for additions to long-lived assets:
   Petrochemical                                          30,564       92,173
   Agrochemical                                           11,604        3,952
                                                         --------     --------

Total consolidated expenditure for
   additions to long-lived assets                         42,168       96,125
                                                         ========     ========

                  Long-lived assets of reportable segments and corporate assets
         consisted of property, plant and equipment located in the PRC.

         Major customers
         ---------------

                  Major customers of the Company with sales exceeding 10% of the
         total consolidated net sales are as follows.

                                                  Year ended December 31
                                               2000        2001       2002
                                               ----        ----       ----
                                              RMB'000     RMB'000    RMB'000

Shandong Haihua Holdings Company Limited         --       17.77%     0.75%
                                              ======      ======     =====

Shendian Electric Industrial Holdings
  Limited                                     11.35%         --        --
                                              ======      ======     =====

                                      F-32
<PAGE>

                               AP HENDERSON GROUP
                       (FORMERLY MAGNOLIA VENTURES, INC.)
                 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
              FOR THE YEARS ENDED DECEMBER 31, 2000, 2001 AND 2002

                 (EXPRESSED IN RENMINBI UNLESS OTHERWISE STATED)


24.      DISTRIBUTION NON-OPERATIONAL ASSETS AND LIABILITIES TO SHAREHOLDER

                  In December 2002, the Company transferred and assigned certain
         of its non-operational assets and liabilities to shareholder as a
         distribution. Details of the non-operational assets and liabilities
         transferred and assigned are as follows:

                                                                     RMB'000

         Assets
         ------

         Property, plant and equipment (net)                          19,551
         Investment in an equity affiliate                            21,100
         Other investments                                               594
         Cash                                                         49,000
         Other receivables                                             2,150
                                                                 ------------

                                                                      92,395

         Liabilities
         -----------

         Other taxes payable                                       (125,512)
                                                                 -----------

         Excess liabilities assumed by shareholder                  (33,117)
                                                                 ===========

25.      SUBSEQUENT EVENT

                  Presently, the Company's common shares trade on the OTC
         Bulletin Board. During January 2003, an application has been filed to
         list the common shares on the American Stock Exchange (AMEX). Such
         application is currently pending.

                                      F-33
<PAGE>

ITEM 9.  CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
         FINANCIAL DISCLOSURE.

         None.


PART III

ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS.

         Set forth below are our directors and officers, including key executive
officers of our wholly-owned operating subsidiary, Jingbo Chemical (Bo Xing)
Company Ltd.

<TABLE>
<CAPTION>
           NAME                   AGE                               POSITION
----------------------------    -------        -------------------------------------------------------
<S>                               <C>          <C>
Richard Henry                     48           Chairman of the Board, President, Chief Executive
                                                   Officer and Chief Financial Officer
Yun Sheng Ma                      39
                                               President of Jingbo Chemical
Qing Ling Shi                     36
                                               Vice President of Operations of Jingbo Chemical

Xing Lin Wang, Ph. D              38           Vice President of Agrochemical Division of Jingbo
                                                   Chemical

Li Jun Cao                        44           Vice President of Finance and Chief Financial Officer
                                                   of Jingbo Chemical

Richard Lui                       37           Director

Donald Sprague                    56           Director

George Brenner                    73           Director

Joseph Gatti                      74           Director

</TABLE>

         Mr. Henry has been the Chairman of the Board, President, Chief
Executive Officer and Chief Financial Officer of AP Henderson Group since
January 15, 2003. Mr. Henry is the founder of Jingbo Chemical (Bo Xing) Company
Ltd. and has served as a director of Jingbo Chemical since its founding in
September 2002. Mr. Henry has served as President of American Home Furniture
Industries, Inc., a manufacturer of home furniture, for the last ten years. Mr.
Henry also serves as Chairman of the Board of Holland House Furniture
Industries, Inc., a position he has held for three years, and President of Bally
Leather (China ) Industries, Inc., a position he has held for the last year.

         Mr. Ma has served as President of Jingbo Chemical since December 2002.
Mr. Ma previously served as Chief Executive Officer of Shandong Jingbo
Petrochemical Limited from January 2000 to December 2002, and Chief Executive
Officer of Shandong Bo Xing Lubricant Factory from April 1995 to December 1999.

         Mr. Shi has served as Vice President of Operations of Jingbo Chemical
since December 2002. From January 2000 to December 2002, Mr. Shi was Vice
President of Shandong Jingbo Petrochemical Limited. Mr. Shi served as Vice
President and Chief Engineer of Shandong Bo Xing County Lubricant Factory from
March 1995 to December 1999.

         Mr. Wang has served as Vice President of the Agrochemical Division of
Jingbo Chemical since December 2002. From April 2002 to December 2002, Mr. Wang
served as President of Shandong Jingbo Agrochemical Limited. Mr. Wang also
served as Vice President of Shenzen Rui De Feng Company from May 1998 to
February 2002.

                                       19
<PAGE>

         Mr. Cao has served as Vice President of Finance and Chief Financial
officer of Jingbo Chemical since December 2002. Mr. Cao previously served as
Vice President of Finance and Chief Financial Officer of Shandong Jingbo
Petrochemical Limited from December 2000 to December 2002. From January 1999 to
December 2000, Mr. Cao was Executive Assistant of Shandong Bo Xing County
Lubricant Factory.

         Mr. Lui has served as a director of AP Henderson Group since January
15, 2003. Mr. Lui has served as President of Morgan Capital International, Inc.,
a Los Angeles, California based financial and management consulting company,
since July 2002. From September 1997 to July 2002, Mr. Lui was the President of
Globalink Securities, Inc. a NASD member broker-dealer.

         Mr. Sprague has served as a director of AP Henderson Group since May
2003. Mr. Sprague has been a private investor since December 2002. From 1998 to
2002, Mr. Sprague was a catastrophe adjustor with the National Catastrophe
Adjustors Group.

         Mr. Brenner has served as a director of AP Henderson Group since May
2003. Mr. Brenner has also served as the President of George Brenner, CPA, A
Professional Corporation, a Los Angeles, California based public accounting firm
since 1992. Mr. Brenner is currently a director of the Securities Industry
Management Association, an organization of securities industry professionals.
Mr. Brenner is a certified public accountant licensed to practice by the State
of California.

         Mr. Gatti has served as a director of AP Henderson Group since May
2003. Mr. Gatti has also served as Managing Director of Corporate Finance for
Spencer Trask Securities, a New York based investment banking firm, since 1995.
Mr. Gatti is also a director of Bridge Technologies, Inc., a Garden Grove
manufacturer of power supplies and computer accessories.

         All directors serve for a one-year term and until their successors are
duly elected and qualified. All officers serve at the discretion of the Board of
Directors.

SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE

         Section 16(a) of the Exchange Act requires our officers, directors and
persons who beneficially own more than 10% of a registered class of our equity
securities to file reports of securities ownership and changes in such ownership
with the SEC. Officers, directors and greater than 10% beneficial owners are
also required by rules promulgated by the SEC to furnish us with copies of all
Section 16(a) forms they file.

         Based solely upon a review of the copies of such forms furnished to us,
or written representations that no Form 5 filings were required, we believe that
during the fiscal year ended December 31, 2002, each of our former officers and
directors, each of whom was also a ten percent (10%) shareholder, complied with
the Section 16(a) filing requirements applicable to our officers, directors and
greater than 10% beneficial owners.

                                       20
<PAGE>

ITEM 11. EXECUTIVE COMPENSATION.

         The following table sets forth the cash and non-cash compensation
earned during fiscal 2002, 2001 and 2000 by our chief executive officer and our
four other highest paid executive officers. In reviewing the table, please keep
in mind that:

         o        The executive officers identified below are officers of Jingbo
                  Chemical (Bo Xing) Company Ltd., which was acquired by us on
                  January 15, 2003, and the reported compensation was earned
                  while employed by Jingbo Chemical or its predecessors;

         o        All of our paid compensation was denominated in Renminbi
                  ("RMB"), the national currency of the Peoples' Republic of
                  China. Solely for the convenience of the reader, the
                  compensation information has been converted into United States
                  dollars at the noon buying rate in New York City as of the
                  last date of the specified year (US$1.00 = RMB 8.2773 as of
                  December 31, 2002, US$1.00 = RMB 8.2766 as of December 31,
                  2001 and US$1.00 = RMB 8.2774 as of December 31, 2000; and

         o        During 2000 through 2002, our officers and directors were
                  Peggy Melilli, Dennis Melilli, and Sherri Lynn Cooper, all of
                  whom resigned on January 15, 2203 and none of whom were paid
                  any compensation during 2000, 2001 or 2002.

<TABLE>
<CAPTION>

                                       ANNUAL COMPENSATION                LONG-TERM COMPENSATION
                            -------------------------------------------------------------------------
                                                                       RESTRICTED   COMMON SHARES
                                                           OTHER         STOCK       UNDERLYING
                                                           ANNUAL        AWARDS   OPTIONS GRANTED      ALL OTHER
    NAME AND POSITION        YEAR    SALARY     BONUS   COMPENSATION      ($)        (# SHARES)       COMPENSATION
--------------------------- ------- --------- -----------------------  ----------  ---------------   ---------------
<S>                          <C>    <C>        <C>           <C>          <C>            <C>               <C>
Richard Henry, President     2002     -0-        -0-         -0-          -0-            -0-               -0-
and Chief Executive          2001     -0-        -0-         -0-          -0-            -0-               -0-
Officer                      2000     -0-        -0-         -0-          -0-            -0-               -0-

Ma Yun Sheng, President      2002   $ 60,406   $33,827       -0-          -0-            -0-               -0-
of Jingbo Chemical Ltd.      2001   $483,249     -0-         -0-          -0-            -0-               -0-
                             2000   $386,599     -0-         -0-          -0-            -0-               -0-

Shi Qing Ling, Vice          2002   $ 24,162   $13,289       -0-          -0-            -0-               -0-
President of Operations      2001   $ 27,746      -0-        -0-          -0-            -0-               -0-
of Jingbo Chemical Ltd.      2000   $181,218      -0-        -0-          -0-            -0-               -0-

Wang Xing Lin, Ph. D,
Vice President of            2002   $ 30,203   $16,310       -0-          -0-            -0-               -0-
Agrochemical Division of     2001   $144,974     -0-         -0-          -0-            -0-               -0-
Jingbo Chemical Ltd.         2000   $120,812     -0-         -0-          -0-            -0-               -0-

Cao Li Jun, Vice
President of Finance and     2002   $ 12,081   $ 6,041       -0-          -0-            -0-               -0-
Chief Financial Officer      2001   $169,137     -0-         -0-          -0-            -0-               -0-
of Jingbo Chemical Ltd.      2000   $138,934     -0-         -0-          -0-            -0-               -0-

</TABLE>

                                       21
<PAGE>
<TABLE>
<CAPTION>

                      OPTION/SAR GRANTS IN 2002 FISCAL YEAR

                                                INDIVIDUAL GRANTS
-------------------------------------------------------------------------------------------------------------------
                                 NUMBER OF
                                 SECURITIES
                                 UNDERLYING         % OF TOTAL OPTIONS/SARS      EXERCISE OR
                                OPTIONS/SARS        GRANTED TO EMPLOYEES IN       BASE PRICE
          NAME                  GRANTED (#)               FISCAL YEAR               ($/SH)        EXPIRATION DATE
-------------------------   ---------------------   -------------------------   ---------------   -----------------
<S>                                   <C>             <C>                           <C>               <C>
                                      NONE




                              AGGREGATED OPTION/SAR EXERCISES IN 2002 FISCAL YEAR
                                         AND FY-END OPTION/SAR VALUES

                                                                                NUMBER OF             VALUE OF
                                                                                SECURITIES           UNEXERCISED
                                                                                UNDERLYING          IN-THE-MONEY
                                                                               UNEXERCISED         OPTIONS/SARS AT
                                                                             OPTIONS/SARS AT         FY-END ($)
                                                                                FY-END (#)

                                   SHARES ACQUIRED      VALUE REALIZED         EXERCISABLE/         EXERCISABLE/
           NAME                    ON EXERCISE (#)            ($)             UNEXERCISABLE         UNEXERCISABLE
-------------------------------   ------------------   ------------------    -----------------    ------------------
                                      NONE


</TABLE>


         COMPENSATION OF DIRECTORS. At the present time, directors receive no
compensation for serving as directors, however, we may in the future begin to
compensate our non-officer directors. All directors receive reimbursement for
out-of-pocket expenses in attending Board of Directors meetings. From time to
time, we may engage certain members of the Board of Directors to perform
services on our behalf and we will compensate such persons for the services
which they perform.

                                       22
<PAGE>

ITEM 12. 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 May 21, 2003 by:

         o        each person who is known by us to be the beneficial owner of
                  more than five percent (5%) of our issued and outstanding
                  shares of common stock;

         o        each of our directors and executive officers; and

         o        all directors and executive officers as a group.

         In reviewing the table, please keep in mind, that the percentage
amounts for each reported party are based on 45,000,002 common shares issued and
outstanding as of May 21, 2003. The address of each individual is 600 Wilshire
Blvd., Suite 1252, Angeles, California 90017.

<TABLE>
<CAPTION>

             NAME AND ADDRESS                                 NUMBER OF SHARES                     PERCENTAGE OWNED
--------------------------------------------     -------------------------------------------    --------------------
<S>                                                              <C>                                  <C>
Richard Henry                                                    39,054,465                           86.79%
Richard Lui                                                      1,432,125                             3.18%
Donald Sprague                                                    897,225                              1.99%
George Brenner                                                      -0-                                 --
Joseph Gatti                                                        -0-                                 --
All officers and directors as a group                            41,383,815                           91.96%
(five persons)

</TABLE>

ITEM 13.  CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.

         During the fiscal year 2003, our Chairman of the Board, Richard Henry,
advanced to us approximately US$350,000 for certain transactional costs and
expenses associated with the reorganization described in Part 1, Item 1
"Business - Business Development." The advances are non interest bearing and
payable on demand.

ITEM 14.  CONTROLS AND PROCEDURES.

         During the 90-day period prior to the filing date of this report,
management, including our Chief Executive Officer and Chief Financial
Officer, evaluated the effectiveness of the design and operation of our
disclosure controls and procedures. Based upon, and as of the date of that
evaluation, our Chief Executive Officer and Chief Financial Officer concluded
that the disclosure controls and procedures were effective, in all material
respects, to ensure that information required to be disclosed in the reports we
file and submit under the Exchange Act are recorded, processed, summarized and
reported as and when required.

         There have been no significant changes in our internal controls or in
other factors which could significantly affect internal controls subsequent to
the date our management carried out their evaluation. There were no significant
deficiencies or material weaknesses identified in the evaluation and therefore,
no corrective actions were taken.

                                       23
<PAGE>

ITEM 15. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K.

(a)      LIST OF DOCUMENTS FILED AS PART OF THIS REPORT:
         -----------------------------------------------

         (1)      FINANCIAL STATEMENTS:

                  See index to financial statements on page 18.

         (2)      FINANCIAL STATEMENT SCHEDULES:

                  All financial statement schedules have been omitted because
         the required information is included in our consolidated financial
         statements or the related notes, or is not applicable.

         (3)      EXHIBITS

                  The exhibits to this Annual Report on Form 10-K are listed in
the Exhibit Index contained on page E-1 of this report.

(b)      REPORTS ON FORM 8-K:
         --------------------

                  None.

(c)      EXHIBITS:
         --------

                  The response to this portion of Item 15 is included as a
separate section of this Annual Report on Form 10-K/A.

(d)      FINANCIAL STATEMENT SCHEDULES:
         ------------------------------

                  The response to this portion of Item 15 is included as a
separate section of this Annual Report on Form 10-K/A.


                                       24
<PAGE>

                                   SIGNATURES

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

                                         AP HENDERSON GROUP

Date:  May 27,  2003                     By:  /S/ RICHARD HENRY
                                            ------------------------------------
                                             Richard Henry, President and Chief
                                              Executive Officer

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

<TABLE>
<CAPTION>

Signature                                  Title                                       Date
---------                                  -----                                       ----

<S>                                        <C>                                         <C>
/S/ RICHARD HENRY                          Chairman of the Board, President, Chief     May 27, 2003
------------------------------------       Executive Officer and Chief Financial
Richard Henry                              Officer

/S/ RICHARD LUI                            Director                                    May 27, 2003
------------------------------------
Richard Lui

/S/ DONALD SPRAGUE                         Director                                    May 27, 2003
------------------------------------
Donald Sprague

/S/ GEORGE BRENNER                         Director                                    May 27, 2003
------------------------------------
George Brenner

/S/ JOSEPH GATTI                           Director                                    May 27, 2003
------------------------------------
Joseph Gatti

</TABLE>


                                       25
<PAGE>

                                 CERTIFICATIONS

I, Richard Henry, certify that:

1. I have reviewed this annual report on Form 10-K/A of AP Henderson Group
("registrant"):

2. Based on my knowledge, this annual report does not contain any untrue
statement of a material fact or omit to state a material fact necessary to make
the statements made, in light of the circumstances under which such statements
were made, not misleading with respect to the period covered by this annual
report;

3. Based on my knowledge, the financial statements, and other financial
information included in this annual report, fairly present in all material
respects the financial condition, results of operations and cash flows of the
registrant as of, and for, the periods presented in this annual report;

4. The registrant's other certifying officers and I are responsible for
establishing and maintaining disclosure controls and procedures (as defined in
Exchange Act Rules 13a-14 and 15d-14) for the registrant and have:

         a) designed such disclosure controls and procedures to ensure that
         material information relating to the registrant, including its
         consolidated subsidiaries, is made known to us by others within those
         entities, particularly during the period in which this annual report is
         being prepared;

         b) evaluated the effectiveness of the registrant's disclosure controls
         and procedures as of a date within 90 days prior to the filing date of
         this annual report (the "Evaluation Date"); and

         c) presented in this annual report our conclusions about the
         effectiveness of the disclosure controls and procedures based on our
         evaluation as of the Evaluation Date;

5. The registrant's other certifying officers and I have disclosed, based on our
most recent evaluation, to the registrant's auditors and the audit committee of
registrant's board of directors (or persons performing the equivalent
functions):

         a) all significant deficiencies in the design or operation of internal
         controls which could adversely affect the registrant's ability to
         record, process, summarize and report financial data and have
         identified for the registrant's auditors any material weaknesses in
         internal controls; and

         b) any fraud, whether or not material, that involves management or
         other employees who have a significant role in the registrant's
         internal controls; and

6. The registrant's other certifying officers and I have indicated in this
annual report whether or not there were significant changes in internal controls
or in other factors that could significantly affect internal controls subsequent
to the date of our most recent evaluation, including any corrective actions with
regard to significant deficiencies and material weaknesses.

Date: May 27, 2003

/S/ RICHARD HENRY
-----------------
Richard Henry
Chief Financial Officer

                                       26
<PAGE>

I, Richard Henry, certify that:

1. I have reviewed this annual report on Form 10-K/A of AP Henderson Group
("registrant"):

2. Based on my knowledge, this annual report does not contain any untrue
statement of a material fact or omit to state a material fact necessary to make
the statements made, in light of the circumstances under which such statements
were made, not misleading with respect to the period covered by this annual
report;

3. Based on my knowledge, the financial statements, and other financial
information included in this annual report, fairly present in all material
respects the financial condition, results of operations and cash flows of the
registrant as of, and for, the periods presented in this annual report;

4. The registrant's other certifying officers and I are responsible for
establishing and maintaining disclosure controls and procedures (as defined in
Exchange Act Rules 13a-14 and 15d-14) for the registrant and have:

         a) designed such disclosure controls and procedures to ensure that
         material information relating to the registrant, including its
         consolidated subsidiaries, is made known to us by others within those
         entities, particularly during the period in which this annual report is
         being prepared;

         b) evaluated the effectiveness of the registrant's disclosure controls
         and procedures as of a date within 90 days prior to the filing date of
         this annual report (the "Evaluation Date"); and

         c) presented in this annual report our conclusions about the
         effectiveness of the disclosure controls and procedures based on our
         evaluation as of the Evaluation Date;

5. The registrant's other certifying officers and I have disclosed, based on our
most recent evaluation, to the registrant's auditors and the audit committee of
registrant's board of directors (or persons performing the equivalent
functions):

         a) all significant deficiencies in the design or operation of internal
         controls which could adversely affect the registrant's ability to
         record, process, summarize and report financial data and have
         identified for the registrant's auditors any material weaknesses in
         internal controls; and

         b) any fraud, whether or not material, that involves management or
         other employees who have a significant role in the registrant's
         internal controls; and

6. The registrant's other certifying officers and I have indicated in this
annual report whether or not there were significant changes in internal controls
or in other factors that could significantly affect internal controls subsequent
to the date of our most recent evaluation, including any corrective actions with
regard to significant deficiencies and material weaknesses.

Date:  May 27, 2003

/S/ RICHARD HENRY
-----------------
Richard Henry
Chief Executive Officer


                                       27
<PAGE>
<TABLE>

                                                   AP HENDERSON GROUP

                                             Exhibit Index to Annual Report
                                             ------------------------------
                                                     on Form 10-K/A
                                                     --------------

                                       For the fiscal year ended December 31, 2002

ITEM
NO.                              DESCRIPTION                                        METHOD OF FILING
----------  -------------------------------------------------------  -----------------------------------------------

<C>         <C>                                                      <C>
2.1         Securities Purchase Agreement dated January 15, 2003     Incorporated by reference to Exhibit 2.1 to
            between Richard Henry and AP Henderson Group             AP Henderson Group's Current Report on Form
                                                                     8-K dated January 15, 2003 and filed with
                                                                     the Securities and Exchange Commission on
                                                                     January 30, 2003.

3.1         Amended and Restated Articles of Incorporation           Incorporated by reference to Exhibit 3.1 to
                                                                     AP Henderson Group's Annual Report on Form
                                                                     10-K filed with the Securities and Exchange
                                                                     Commission on April 15, 2003.

3.2         Amended and Restated Bylaws                              Filed herewith.

4.1         Specimen of Common Stock Certificate                     Incorporated by reference to Exhibit 4.1 to
                                                                     AP Henderson Group"s Annual Report on Form
                                                                     10-K filed with the Securities and Exchange
                                                                     Commission on April 15, 2003.

21.1        List of Subsidiaries                                     Incorporated by reference to Exhibit 2.1 to
                                                                     AP Henderson Group's Annual Report on Form
                                                                     10-K filed with the Securities and Exchange
                                                                     Commission on April 15, 2003.

99          Section 906 Certification                                Filed herewith.

</TABLE>

                                                           E-1