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Asia Fiber Holdings Ltd – ‘10KSB40’ for 12/31/00

On: Tuesday, 4/17/01, at 1:22pm ET · For: 12/31/00 · Accession #: 912057-1-509110 · File #: 1-08334

  As Of                Filer                Filing    For·On·As Docs:Size              Issuer               Agent

 4/17/01  Asia Fiber Holdings Ltd           10KSB40    12/31/00    2:106K                                   Merrill Corp/FA

Annual Report — Small Business — [x] Reg. S-B Item 405 — Form 10-KSB
Filing Table of Contents

Document/Exhibit                   Description                      Pages   Size 

 1: 10KSB40     Annual Report -- Small Business -- [x] Reg. S-B       47    203K 
                          Item 405                                               
 2: EX-21.1     Subsidiaries of the Registrant                         1      4K

10KSB40 — Annual Report — Small Business — [x] Reg. S-B Item 405
Document Table of Contents

Page	(sequential)	\|	(alphabetic)	Top
			Alternative Formats (Word, et al.) Asia Fiber Holdings Limited Certain Transactions Description of Business Directors and Executive Officers of the Registrant Executive Compensation Financial Statements and Supplementary Data Legal Proceedings Management's Discussion and Analysis of Results of Operations and Financial Condition Market for Common Equity and Related Stockholder Matters Properties Rmb Security Ownership of Certain Beneficial Owners and Management Submission of Matters to A Vote of Security Holders
1	1st Page - Filing Submission
"	Asia Fiber Holdings Limited
2	Item 1. Description of Business
11	Item 2. Properties
12	Item 3. Legal Proceedings
"	Item 4. Submission of Matters to A Vote of Security Holders
13	Item 5. Market for Common Equity and Related Stockholder Matters
14	Item 6. Management's Discussion and Analysis of Results of Operations and Financial Condition
18	Item 7. Financial Statements and Supplementary Data
19	Item 9. Directors and Executive Officers of the Registrant
20	Item 10. Executive Compensation
"	Item 11. Security Ownership of Certain Beneficial Owners and Management
22	Item 12. Certain Transactions
44	Rmb

10KSB40 1st Page of 47 TOC ↑Top Previous Next ↓Bottom Just 1st
 
--------------------------------------------------------------------------------
 UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549

 FORM 10-KSB

(MARK ONE)                                                                      
/X/ ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT
OF 1934                                                                         

FOR THE FISCAL YEAR ENDED DECEMBER 31, 2000                             

OR

/ / TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934 [NO FEE REQUIRED]                                           

For the transition period from _____________ to _____________ Commission file   
number 0-25963                                                                  

 ASIA FIBER HOLDINGS LIMITED

(Exact name of registrant as specified in its charter)

DELAWARE                          
(State of other jurisdiction of incorporation       (I.R.S. Employer  
                or organization)                    Identification Number)

RM 2005, 20/F, UNIVERSAL TRADE CENTRE       
3-5A, ARBUTHNOT ROAD                        
CENTRAL, HONG KONG                          
                (Address of principal executive offices)          (Zip Code)

Registrant's telephone number, including area code:  011-852-2810-6226          

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

Securities registered pursuant to Section 12(g) of the Act:  Common Stock, par  
                                                         value $0.01 per share

Indicate by checkmark whether the registrant (1) has filed all reports required 
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was     
required to file such report(s)), 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 in response to Item 405 of 
Regulation S-B is not contained in this form, and no disclosure will be         
contained, to the best of Registrant's knowledge, in definitive proxy or        
information statements incorporated by reference in Part III of this Form 10-KSB
or any amendment to this Form 10-KSB. /X/                                       

Revenues for the fiscal year ended December 31, 2000 were $65,093.              

The aggregate market value of the common equity held by non-affiliates of the   
registrant as of March 30, 2001 amounted to approximately $12.4 million.        

Registrant had 24,881,319 shares of common stock, $0.01 par value per share     
outstanding as of March 30, 2001.                                               

Documents Incorporated by Reference (to the extent indicated herein):  None.    

Transitional Small Business Disclosure Format:  Yes      No   X                 
                                    -----    -----

10KSB40 2nd Page of 47 TOC 1st Previous Next ↓Bottom Just 2nd
 PART I.

BUSINESS

ITEM 1.  DESCRIPTION OF BUSINESS                                                

OVERVIEW                                                                        

GENERAL                                                                         

        Asia Fiber Holdings Limited (the "Company") (HEREINAFTER, REFERENCE TO
THE "COMPANY" SHALL INCLUDE ITS SUBSIDIARIES UNLESS THE CONTEXT OTHERWISE       
REQUIRES), formerly known as Asia Resources Holdings Limited, is a Delaware     
corporation which acquired all of the capital stock of Far Beyond Investments   
Limited, a British Virgin Islands corporation ("Far Beyond") on January 24,     
2000. Far Beyond was incorporated in the British Virgin Islands on March 21,    
1995 and owns a 70% equity interest in Harbin Asibao Chemical Fiber Company     
Limited ("Asibao"), a Sino-foreign joint venture company that manufactures and  
sells polyester fiber products.                                                 

The following is the organization chart of the Company:       

                                                                [Download Table]
                                                                         
                         -----------------------                         
                         ASIA FIBER HOLDINGS                             
                         LIMITED                                         
                         -----------------------                         

                                       100%                              

                         -----------------------                         
                         FAR BEYOND               HEILONGJIANG           
                         INVESTMENTS LTD          LONGDI GROUP CO.       
                                                  LTD.                   
                         -----------------------                         

                                       70%               30%             

                         -----------------------                         
                         HARBIN ASIBAO                                   
                         CHEMICAL FIBER CO.                              
                         LIMITED                                         
                         -----------------------                         

                                       100%                              

-----------------------  -----------------------  -----------------------
POLYESTER                  POLYESTER              POLYESTER              
STAPLE FIBER               FILAMENT PLANT         FILAMENT PLANT         
PLANT                      NO. 1                  NO. 2                  
-----------------------  -----------------------  -----------------------

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10KSB40 3rd Page of 47 TOC 1st Previous Next ↓Bottom Just 3rd
FORMATION AND DEVELOPMENT                                                       

        On May 10, 1982, the Company, then known as Regal International, Inc.,
became a separately publicly held corporation as a result of a spin-off from    
Texas International Company. Shareholders of Texas International Company were   
issued one share of the Company's common stock for each two shares of Texas     
International's common stock. The Company changed its state of incorporation to 
Delaware in March 1982 through a merger with a wholly-owned subsidiary organized
for that purpose.                                                               

     On December 7, 1994, the New York Stock Exchange ("NYSE") suspended
trading of the Company's Common Stock pending delisting as the Company did not  
meet the NYSE's criteria for continued listing. The Company decided not to      
contest the delisting and the Common Stock was removed from listing and         
registration on the NYSE effective February 9, 1995. The Company's Common Stock 
began trading on the NASD Electronic Bulletin Board in August 1995.             

 On February 8, 1996, the Company acquired all of the issued and
outstanding shares of capital stock of Acewin Profits Limited, a British Virgin 
Islands Corporation ("Acewin") from China Strategic Holdings Limited, a Hong    
Kong company ("CSH"). Immediately following the acquisition of the capital stock
of Acewin, and as a condition thereto, the Company sold and transferred the     
operating assets and real property of the Company existing as of January 31,    
1996 to Regal (New) International Inc. ("New Regal"). A portion of the purchase 
price was paid by delivery of a promissory note dated February 13, 1996 executed
by Harlequin Investment Holdings Limited ("Harlequin") in favor of the Company  
for the sum of US $800,000 (the "Harlequin Promissory Note"); and (ii) a        
promissory note dated February 13, 1996 issued by New Regal in favor of the     
Company for the sum of US $900,000 (the "New Regal Promissory Note"). The       
Harlequin Promissory Note bore no interest and was due and payable in one       
installment on February 1, 2001. The New Regal Promissory Note bore interest at 
9% per year and was payable in sixty (60) equal installments of principal and   
interest. Harlequin was at the time of this transaction the beneficial owner of 
approximately 55% of the then currently outstanding shares of the Company's     
Common Stock. Subsequent to this transaction, Harlequin reduced its beneficial  
ownership of the Company to less than 1%.                                       

      Pursuant to a Deed of Variation dated July 27, 1998 by and among the
Company, New Regal and Harlequin, Harlequin agreed and undertook to assume all  
of the obligations and liabilities of New Regal under the New Regal Promissory  
Note in consideration of the Company's agreement to release New Regal from all  
obligations relating to the New Regal Promissory Note. All other terms of the   
New Regal Promissory Note remained the same.                                    

    During 1998, New Regal and the Company agreed on a revised payment
schedule relating to the Harlequin Promissory Note. Under the revised payment   
schedule, the payment of several monthly installments by New Regal in 1998 and  
1999 was suspended and the outstanding principal balance was revised to be      
settled in sixty (60) equal monthly installments commencing March 1999. The     
Harlequin Promissory Note continued to bear interest at 9% per year during the  
period of payment suspension in 1998 and 1999 and thereafter. Both the Harlequin
Promissory Note and the New Regal Promissory Note were assigned by the Company  
to CSH in January 2000 as indicated below.                                      

    On September 10, 1996 the Company acquired the entire issued share
capital of Westronix Limited, a wholly-owned subsidiary of CSH ("WL") at a      
consideration of US $30 million to be satisfied by a convertible promissory note
executed in favor of Horler by the Company (the "Second Horler Note"). The      
Second Horler Note was a US $30 million convertible note bearing interest at 9% 
per year after an initial 6-month interest-free period with all principal being 
due and payable on September 10, 1999. On April 14, 1998, Horler agreed to      
reduce the interest rate of the Second Horler Note from 9% to 5% per year for   
the year ended December 31, 1997. In addition, Horler agreed that after December
31,                                                                             

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10KSB40 4th Page of 47 TOC 1st Previous Next ↓Bottom Just 4th
1998, no principal repayment of the Second Horler Note would be demanded        
until the Company was financially capable of doing so. However, following       
January 1, 1998, the Second Horler Note continued to bear interest at 9% per    
year. The Second Horler Note was paid off in January 2000 as indicated below.   

   On September 11, 1996, the Company disposed of all the issued and
outstanding shares of capital stock of Acewin to BTR China Holdings B.V., a     
Netherlands company ("BTR"). At that time, the Company had the following        
subsidiaries:                                                                   

   WL--a holding company incorporated in the British Virgin Islands.

         China Construction Holdings Limited ("CCHL")--a company incorporated in
Hong Kong, formerly known as China Construction International Group Limited.    

      Hangzhou Zhongche Huantong Development Ltd. ("HZHD")--a Sino-foreign
joint venture company located in Hangzhou, Zhejiang Province, the PRC.          

         The Company held a 100% interest in WL. WL held a 100% interest in CCHL
which in turn held a 51% interest in HZHD. HZHD was established to develop the  
Hangzhou Toll Road.                                                             

       The Company filed an Amendment to its Certificate of Incorporation on
February 8, 1999 changing its name from "Regal International, Inc." to "Asia    
Resources Holdings Ltd." and increasing its capital stock to 1,100,000,000      
shares. On February 19, 1999, the Company effected a 1-for-138 reverse stock    
split of its Common Stock which resulted in approximately 597,132 shares of     
Common Stock outstanding.                                                       

       On January 24, 2000, pursuant to an Acquisition Agreement dated as of
September 10, 1999 (the "Far Beyond Acquisition Agreement") by and among the    
Company, Horler, Far Beyond and the shareholders of Far Beyond (the "FB         
Shareholders"), the FB Shareholders transferred all of the issued and           
outstanding shares of the capital stock of Far Beyond (the "Far Beyond Shares") 
to the Company in exchange for 8,757,951 shares of the Common Stock of the      
Company, representing approximately 88% of the outstanding shares of the Common 
Stock of the Company.                                                           

       Concurrently with and as a condition of the closing of the Far Beyond
Acquisition Agreement, pursuant to a Disposal Agreement (the "Disposal          
Agreement") between the Company and Horler, the Company transferred to Horler   
the entire share capital of WL in full and final satisfaction of the Second     
Horler Note. Also, concurrently with and as a condition of such closing,        
pursuant to an Assignment Agreement (the "Assignment Agreement") between the    
Company and CSH, the Company assigned to CSH, in settlement of all of the       
outstanding indebtedness the Company owed to CSH, the New Regal Promissory Note 
and the Harlequin Promissory Note. Pursuant to the Disposal Agreement and the   
Assignment Agreement (but prior to giving effect to the acquisition of the Far  
Beyond Shares) the Company disposed of all of its assets other than             
approximately $150,000 in cash or cash equivalents and all of its liabilities.  

       At the closing of the Far Beyond Acquisition Agreement, the executive
officers and directors of the Company resigned. Immediately following such      
resignations, the following persons became members of the Board of Directors of 
the Company: Lung Po Ching, Rui Min Zhao, Ming Xue Liu, Feng Jie Liu and Wai On 
Wan. Also immediately following such resignations, the Board of Directors of the
Company elected Lung Po Ching as Chairman of the Board, Rui Min Zhao as Vice    
Chairman of the Board and President, Ming Xue Liu as Vice President, Feng Jie   
Liu as Chief Financial Officer and Wai On Wan as the Secretary of the Company.  

    On February 28, 2001 the Company effectuated a 2.5:1 forward stock
split of its common stock for all shareholders of record on February 26, 2001.  

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         On March 14, 2000, the Company filed an Amendment to the Certificate of
Incorporation to decrease the authorized capital stock of the Company to        
40,000,000 shares (consisting of 30,000,000 shares of Common Stock and          
10,000,000 shares of Preferred Stock) and to change the name of the Company from
"Asia Resources Holdings Ltd." to "Asia Fiber Holdings Limited."                

BUSINESS                                                                        

     The Company's only significant asset is its 100% equity interest in
Far Beyond. Far Beyond owns a 70% equity interest in Asibao, the principal      
activity of which is the manufacture and sale of polyester fiber products.      
Asibao was established as a Sino-foreign joint venture company in the PRC       
between Heilongjaing Longdi Group Co. Limited ("Longdi"), a PRC state-owned     
enterprise ("Longdi") and Far Beyond on October 18, 1995 with a duration of     
thirty (30) years from the date of the business license. Far Beyond             
contributed cash in the amount of US $8.40 million in exchange for its          
seventy percent (70%) equity interest in Asibao and Longdi contributed its      
operating assets, having an aggregate fair market value of US $3.60 million     
in exchange for its 30% equity interest in Asibao. The registered capital of    
Asibao is approximately US $12 million.                                         

    Asibao also acquired from Londgi as of January 1, 1996 other fixed
assets , including production facilities, with an aggregate fair value of US    
$46.81 million pursuant to an agreement between Asibao and Londgi approved by   
the relevant governmental authorities of the PRC. Asibao has assumed            
substantially all of the business previously engaged in by Longdi, which        
business consists primarily of the production and distribution in China of      
polyester filament and polyester staple fiber. Polyester fiber is mainly used by
the textile industry for apparel, household, industrial and other fabrics.      
Before the formation of Asibao, Longdi produced polyester filament and polyester
staple fiber in standardized forms and as "differential" fiber with particular  
specifications.                                                                 

   Asibao's products are primarily distributed throughout China to a
diversified customer base. Currently, management of Asibao believes that        
demand in China for polyester filament and staple fiber exceeds the locally     
produced supply.                                                                

THE POLYESTER INDUSTRY                                                          

INTRODUCTION                                                                    

    Polyester is a synthetic polymer formed by the reaction between an
organic acid (usually PTA) and organic alcohol (usually MEG). Both PTA and MEG  
are petrochemical derivatives. The production of polyester involves two phases: 
(1) the polymerization phase which leads to the formation of a viscous paste    
known as polyester melt and (2) the processing phase in which polyester melt if 
formed into a range of end products. The production process can either be       
continuous from the initial reactants to the end products or it can be          
interrupted (the batch process) by allowing the polyester melt to solidify. This
intermediate product, known as polyester chip, reverts to polyester melt on     
reheating and can then be further processed.                                    

   At the end of the processing phase, polyester can take one of the
following forms: staple fiber, filament, resin or film. Polyester fiber (staple 
and filament) was estimated to account for approximately 70% of worldwide       
polyester production in 1998. It is the leading synthetic fiber in commercial   
production worldwide. Polyester fiber is either drawn into continuous strands   
known as filament or into bundles of strands which are then cut into short      
lengths to form staple fiber. Staple fibers more closely resembles the physical 
characteristics of naturally occurring fibers, such as cotton and wool. It is   
typically used in pure form or blended with cotton, wool, acrylic or viscose.   
Polyester fiber has the widest range of applications of any synthetic fiber.    

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                                                        [Enlarge/Download Table]
------------------------------------- ----------------------------------------------------------------------------------
                                                                                                                        
APPLICATIONS INCLUDE:                                                                                                   

Apparel                               Outerwear, lingerie, sweaters, socks, leisure-wear, workwear, medical staff wear  

Household                             carpet pile and backing, upholstery, household textiles, fiberfill                

Industrial                            Tire cord, other rubber reinforcements, geotextiles, composites, ropes and        
                                      cordage, coated fabrics, seat belts and filter media                              

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

GROWTH IN PRODUCTION                                                            

       The global polyester industry has experienced significant growth over
the last decade, primarily as a result of the substitution of polyester for     
other synthetic and natural materials, general economic growth (especially in   
certain parts of the developing world), technological advancements and new      
applications. World polyester production grew at an estimated compound annual   
rate of 11.4 % between 1993 and 1998.                                           

Processed polyester can take one of three principal forms: PET
packaging resin, fiber (either polyester staple fiber or polyester filament), or
film. The following table shows changes in world polyester production by end    
products from 1993 to 1998.                                                     

                                                                [Download Table]

                                     1993                 1998          1993-1998
                                                                         COMPOUND
                                            % OF                  % OF     ANNUAL
                               PRODUCTION  TOTAL     PRODUCTION  TOTAL     GROWTH
                            (IN THOUSANDS         (IN THOUSANDS                  
                                 OF TONS)              OF TONS)                  

                                                                                 
Polyester fiber:                                                                 
  - Polyester filament              5,247   37.8          9,095   38.1      11.6%
  - Polyester staple fiber          5,103   36.7          7,614   31.9       8.3%
PET packaging resin                 2,027   14.6          5,121   21.5      20.4%
Film                                  954    6.9          1,310    5.5       6.5%
Others                                565    4.0            731    3.0       5.3%
                                     ----   ----           ----   ----           
                                   13,896  100.0         23,871  100.0      11.4%
                                   ======  =====         ======  =====           

GEOGRAPHY OF PRODUCTION                                                         

         In the six-year period between 1993 and 1998, respectively, most of the
growth in world polyester fiber production has occurred in Asia (excluding      
Japan), where production has increased at an estimated compound annual growth   
rate of approximately 14.9%. The estimated compound annual growth in production 
in North America and Western Europe, where the polyester industry was originally
established, has generally been slower or negative in the same period. During   
the same period, the world's second largest producer of polyester fiber, had the
largest absolute increase in polyester fiber production of approximately        
2,215,000 tons. In the six-year period between 1993 and 1998, absolute world    
polyester production increased by 9,975,000                                     

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10KSB40 7th Page of 47 TOC 1st Previous Next ↓Bottom Just 7th
tons, at an estimated compound annual growth rate of 11.4 %. This gradual shift 
of production base of polyester fiber has been driven by demographic and cost   
considerations in general and by the relocation of the textile and apparel      
industries to Asia in particular. Asia is already the world's largest producing 
region for polyester fiber and the only one which is expected to increase its   
market share and production over the medium and longer term. In 1998, over 70%  
of production capacity of polyester fiber was located in Asia.                  

  The followings set forth the world polyester fiber production by
countries/regions:                                                              

                                                        [Enlarge/Download Table]

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

                            WORLD POLYESTER FIBER PRODUCTION BY COUNTRIES/REGIONS                              
---------------------------------------------------------------------------------------------------------------
                                            (IN THOUSANDS OF TONS)                                             

                                         1993                      1998                       1993-1998        
                                                                                           COMPOUND ANNUAL     
                                                                                               GROWTH          
                                  STAPLE                    STAPLE                       STAPLE                
                                   FIBER      FILAMENT       FIBER       FILAMENT         FIBER       FILAMENT 

                                                                                                               
North America                      1,190           667       1,368            845          2.8%           4.8% 
Central/South America                151           134         160            159          1.2%           3.5% 
Western Europe                       473           422         435            500         -1.7%           3.5% 
Eastern Europe                       293           170         251            171         -3.0%           0.1% 
Middle East/Africa                   160           180         219            302          6.5%          10.9% 
South/Southeast Asia                 712           754       1,666          1,653         18.5%          17.0% 
East Asia                          1,832         2,495       3,235          5,060         12.0%          15.2% 
Taiwan                               718         1,031         930          1,750          5.3%          11.2% 
South Korea                          489           664         675          1,300          6.7%          14.4% 
PRC                                  625           800       1,630          2,010         21.1%          20.2% 
Japan                                292           425         280            405         -0.8%          -1.0% 
                                    ----          ----        ----           ----                              

Total                              5,103         5,247       7,614          9,095          8.3%          11.6% 
                                   =====         =====       =====          =====                              
----------------------------- ----------- ------------- ----------- -------------- ------------- --------------

PRODUCT PRICES AND PRODUCERS' MARGIN                                            

      The price of polyester on the open market is dependent mainly on the
level of demand for particular products relative to production capacity and the 
price of raw materials. There is also some variation in the price of polyester  
as between the major regional markets of North America, Europe and the Far East.
This variation reflects the supply and demand balances within each region, the  
pressure on domestic suppliers from imports, and the prevalence of tariff       
barriers, both for polyester products and raw materials.                        

Since 1996, the prices of PTA and MEG offered by international
suppliers has been declining as a result of new production capacities, stagnant 
growth in demand for polyester products and a slump in crude oil prices.        
Affected by the Asian financial crisis that occurred in 1997, the prices of     
polyester fiber reached the cyclical bottom in mid-1998. Since then, the        
polyester industry has rebounded from the bottom with the recovery in economies 
taking place in Japan, Asia and Europe. These recoveries are positive for GDP   
sensitive commodity products such as polyester and textiles.                    

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POLYESTER INDUSTRY IN CHINA                                                     

       The five (5) major synthetic fibers produced in the PRC are polyester
fiber, acrylic fiber, polyvinyl alcohol fiber, polypropylene fiber and nylon.   
Polyester fiber is the most important synthetic fiber produced in the PRC       
representing approximately 80% of the total domestic consumption of synthetic   
fibers.                                                                         

    The textile and garments industry is a major sector in the Chinese
economy, accounting for approximately 9.3% of the gross value of industrial     
output in 1998 (Source: Statistical Yearbook of China 1999). China has one of   
the lowest per capita ratios of arable land in the world, with only 0.77        
hectares per capita, and as such it cannot produce all the natural fibers for   
the consumption by the textile industry. The synthetic fiber industry thus has a
key role in sustaining China's textile output. At present, the fiber consumption
in the PRC is approximately 6 kilograms per capita which is below the world's   
average of 7.7 kilograms per capita.                                            

        The polyester industry in the PRC began in the 1960's, which was later
than much of the developed world. Despite its late start, the PRC has since     
experienced a tremendous pace of development in the polyester industry. In 1998,
the PRC's total polyester production output of approximately 3.8 million tons   
placed it as the second largest producer of polyester in the world, after the   
United States.                                                                  

During the initial phase of development of the PRC's polyester
industry, reliance was placed on domestic technology for research and           
development and a large number of small scale plants were constructed using the 
batch production method. These plants were geographically dispersed, relying on 
outside suppliers of chips for their raw materials and producing a relatively   
narrow range of products. From the mid-1970's to the mid-1980's, the PRC        
concentrated instead on importing technology and equipment and the construction 
of a few large scale complexes. Over the years, there has been rapid expansion  
of production capacity, mainly focused around these large scale complexes. The  
import of relatively new technology, processes, equipment and management systems
has enabled the PRC's polyester industry to develop at a rapid pace. However,   
the problem remains that the industry is very fragmented with many small plants.

       China had a 21.8% world market share of polyester fiber production in
1998. It is estimated that the PRC's production of polyester filament and       
polyester staple fiber will be increased at an average compound annual growth   
rate of approximately 4.3% and 5.0%, respectively, over the period 1998 to 2004.

 POLYESTER PRODUCTION IN THE PRC
(IN THOUSANDS OF TONS)

                                                                [Download Table]

                                                           Compound
                                                             Annual
                         1998   1999   2000   2001   2004    Growth

                                                                   
Polyester filament      2,010  2,062  2,159  2,261  2,593      4.3%
Polyester staple fiber  1,630  1,713  1,818  1,930  2,181      5.0%

        It is expected that the polyester fiber sector will ultimately benefit
from China's entry into the World Trade Organization, on the back of higher     
exports of textile products as the present quota system is gradually phased out 
over the next five to six (6) years. The present tariff system on polyester     
fiber, will likely remain, albeit at slightly lower rates. It may take five (5) 
years before the average tariff of 17% falls to 9%. At the same time, a cyclical
upturn in the polyester sector plus higher export demand will likely keep       
product products prices and margins high. Furthermore, China has raised export  
tax rebates on textile products from 14% to 17%, which should encourage more    
exports. Together with the projected growth in population and the expected      
improvement in the living standards in the PRC, the demand for polyester fiber  
will certainly increase significantly.                                          

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POLYESTER CONSUMPTION IN THE PRC

(IN THOUSANDS OF TONS)

                                                                [Download Table]

                                                           Compound
                                                             Annual
                         1998   1999   2000   2001   2004    Growth

                                                                   
Polyester filament      2,616  2,606  2,704  2,800  3,128      3.0%
Polyester staple fiber  2,226  2,334  2,458  2,580  2,901      4.5%

PRODUCTS                                                                        

         Asibao currently produces two main products: polyester staple fiber and
polyester filament. Asibao sells its polyester staple fiber with approximately  
fifty (50) different specifications under the brand name of "Yin Chau". It sells
its polyester filament with approximately twenty-five (25) different            
specifications kinds under the brand names "Asibao," "Baiyu" and "Yinling."     
Asibao sells its products in over 180 factories in eighteen (18) different      
provinces, cities and autonomous regions in China and eighteen (18) of its      
products have been honored with the title of top quality product of the ministry
and the province in China.                                                      

       The polyester staple fiber produced by Asibao has the characteristics
of high tenacity, low elongation and high resistance of heat so that it is      
widely used in the textile industry. The three-dimensional crimped hollow fiber 
is one of the variations of staple fiber and was introduced in the 1980s. It is 
used mainly as an insulation and stuffing material for pillows, quilts,         
upholstery, ski-wear, and toys, as well as for processing suede-like woven      
products.                                                                       

RAW MATERIALS                                                                   

The principal raw material used by Asibao is polyester chip.  
Approximately 85% of Asibao's total cost of sales is attributable to raw        
materials. Raw materials are purchased from Longdi.                             

  Asibao is not committed to any supply agreements with suppliers.
Asibao chooses its suppliers based upon the price and quality of their raw      
materials.                                                                      

DISTRIBUTION OF PRODUCTS                                                        

         Approximately all of the Company's sales are made to domestic customers
located in Heilongjiang, Henan, Liaoning, Jilin, Shandong, Hebei, Tienjin,      
Shanxi, Zhejiang, Shaaxi, Jiangsu and approximately 11 other provinces or       
cities.                                                                         

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        From 1993 until the present, total export sales of the Company was 500
tons of its products. Demand in China for polyester staple fiber well exceeds   
domestic supply and the Company has consistently sold all of the polyester      
staple fiber that it has been able to produce.                                  

     In 1998, the average prices of polyester staple fiber and polyester
filament sold were approximately US $980 and US $1,278 per ton, respectively.   
The customers of the Company are mainly textile factories and wholesalers of    
polyester fiber. The Company's customer base is well established and            
approximately 75-80% of its sales represent repeat orders to existing customers.

MARKETING                                                                       

       Asibao conducts its marketing efforts through its sales and marketing
division, comprised of approximately fifty-three (53) employees working in      
Liaoning, Shandong, Beijing, Tienjin, Zhejiang and Heilongjiang. Approximately  
thirty-one (31) of such employees are market promotion staff and after-sales    
technicians and are responsible for conducting market research, sales planning, 
marketing strategy, order consultation with customers, sales coordination and   
control, and payment collection.                                                

PRICING                                                                         

       Until the end of 1992, a control price for polyester products sold by
Chinese producers in China was set for each calendar year by the Commodities    
Price Bureau in consultation with the Textile Ministry. Individual producers    
could apply to the Commodities Price Bureau for permission to sell specific     
products at higher prices, but not at lower prices.                             

     In 1993, the pricing system was reformed and the price of polyester
staple fiber was deregulated while the price for its primary raw material,      
polyester chip, was based on a pre-set reference control price around which     
producers could adjust up or down within a range of ten percent (10%) for       
standard products.                                                              

      However, in 1994, the pricing system was reformed once again and now
the producers themselves may determine the prices of polyester chip, as well as 
polyester staple fiber. In response to these changes, Asibao reviews pricing    
policy on a quarterly basis and adjusts prices according to such factors as     
changes in demand, international product prices, costs of raw materials and     
exchange rates. The sales prices for all orders are now determined by direct    
negotiations with the customers and slightly favorable terms are granted to     
regular customers.                                                              

COMPETITION                                                                     

    In the domestic market, Asibao's main competitors are mainly large
manufacturers located close to the coastal regions. Such competitors include    
Yizheng Chemical Fiber Company Limited, Tianjin Petrochemical Company, Liaoyaong
Petrochemical Fiber Company, Shanghai Petrochemical Polyester Factory and       
Guangdong Zinhui Chemical Fiber Factory, among others.                          

 Asibao competes with domestic producers on the basis of product
quality, wide variety of product specifications, delivery performance and       
after-sales services. Far Beyond believes that Asibao has a pricing advantage   
over its competitors due to a number of factors including, economies of sale,   
its ability to purchase cheaper raw materials through various channels and its  
use of the raw materials in its production of not only the polyester staple     
fiber, but also the polyester filament.                                         

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      Longdi owns a polyester chip plant that commenced operations in 1996
with a production capacity of 80,000 tons of polyester chip per annum. On       
January 10, 1996, Longdi and Asibao entered into a purchase agreement pursuant  
to which Longdi agreed to guarantee the supply of polyester chip to Asibao at a 
5% to 10% discount to the prevailing market prices offered to other purchasers  
of polyester chip with a right of first refusal to Asibao.                      

 Far Beyond believes that product price is the major competitive
advantage that Asibao has over importers of similar products. The import prices 
of staple fibers and filament are generally about 20% higher than those of      
Asibao. Presently, the domestic market in China is protected by tariffs on      
imported chip and staple fiber. Even if China becomes a signatory of GATT and   
import tariffs decrease, Far Beyond anticipates that the PRC government will    
likely promulgate appropriate regulations to protect local manufacturers against
overseas dumping.                                                               

RESEARCH AND DEVELOPMENT                                                        

      The research and development division for both Asibao and Longdi are
centralized within the organizational structure of Longdi and is known as the   
research institute. The research institute originated in 1983 and provides      
technical expertise for the improvement of the production facilities. The       
research institute also provides advanced technical training for employees.     
Asibao shares the costs incurred for the services provided by that division.    

MANAGEMENT AND EMPLOYEES                                                        

        Asibao employs approximately 1,100 employees. The number of employees,
categorized by function, is approximately as follows:                           

                                                                [Download Table]

Function                                Number of Employees
--------                                -------------------

                                                           
Production, Engineers and Technicians           1,055      

Sales and Marketing                                15      

Accounting, General and Administration             42      

ITEM 2.  PROPERTIES                                                             

         As of December 31, 2000, the Company had no office or facility for U.S.
operations. The head office and production facilities of the Company are located
in Harbin City, the capital of the Heilongjiang province (the "Facilities"). The
Facilities are leased by Longdi to the Company pursuant to a 15-year lease,     
commencing January 1, 1996 at a rate of US $121,000 per year. The rental rate is
adjustable, based on further mutual negotiation, every three years. The         
factories and office buildings cover a total area of approximately 317,000      
square meters, comprising 244,000 square meters for production plants and 73,000
square meters for warehouses and offices.                                       

       The Company's production facilities at present consist of a polyester
staple fiber plant and polyester filament plant nos. 1 and 2. All plant and     
machinery at these factories are owned by the Company. Long term land use rights
for the land on which these facilities are situated are held by Longdi. Other   
supporting facilities, including a power plant and a thermo-electricity plant,  
are provided by Longdi at agreed rates.                                         

      All land in the PRC is owned by the government. According to the PRC
law, land may be leased (under land use rights) for certain periods of time to  
businesses. While Chinese law expressly protects the                            

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status and rights of Sino-foreign joint venture enterprises, including their    
right to use land during the term of their respective joint venture contracts,  
the state reserves the right, in extreme and exceptional circumstances, to      
terminate the joint venture and provide compensation therefor. In such an event,
a joint venture's right to use land would terminate and all facilities would    
revert to the state in exchange for just compensation. Although management sees 
little risk in not having title to the land use rights, no assurances can be    
given that such land use rights may not be terminated by the government.        

ITEM 3.  LEGAL PROCEEDINGS                                                      

The Company is not a party to any material legal proceedings. 

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

None                                                          

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 PART II

ITEM 5.  MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS               

      The Company's Common Stock was listed on the New York Stock Exchange
("NYSE") under the symbol RGL until December 7, 1994, at which time the NYSE    
suspended its trading due to the Company's failure to meet the continued        
listing requirements. On February 5, 1995, the Common Stock of the Company      
was removed from registration and listing on the NYSE. The Company's Common     
Stock began trading on the NASD OTC Electronic Bulletin Board in August 1995.   
The Company's current symbol is AFBR. The following information sets forth      
the high and low prices in dollars per shares for the Common Stock of the       
Company during the periods indicated. Such prices reflect prices between        
dealers in securities and do not include any retail markup, markdown or         
commission and may not necessarily represent actual transactions. The           
information set forth below was provided by Dow Jones Interactive Quotes and    
Market Data.                                                                    

                                                                [Download Table]

                                                  High  Low 

                                                            
1998                                                        
      First Quarter (through March 31, 1998)      2.16  2.16
      Second Quarter (through June 30, 1998)      2.16  2.16
      Third Quarter (through September 30, 1998)  2.77  1.38
      Fourth Quarter (through December 31, 1998)  2.77  2.16

1999                                                        
      First Quarter (through March 31, 1999)      4.75   .25
      Second Quarter (through June 30, 1999)      4.50   .25
      Third Quarter (through September 30, 1999)  4.50  1.25
      Fourth Quarter (through December 31, 1999)   .60   .75

2000                                                        
      First Quarter (through March 31, 2000)      2.30   .80
      Second Quarter (through June 30, 2000)      1.08   .45
      Third Quarter (through September 30, 2000)   .80   .43
      Fourth Quarter (through December 31, 2000)   .72   .19


  On March 30, 2001, the closing bid price for the Common Stock as
reported by the OTC Electronic Bulletin Board was $2.20.                        

  On March 30, 2001 there were approximately 7,147 stockholders of
record for the Common Stock of the Company. As of such date, 24,881,319         
shares of Common Stock were outstanding.                                        

    No dividends have been declared or paid on the common stock of the
Company since the Company's incorporation. It is the current policy of the Board
of Directors to retain earnings, if any, to provide funds for the Company's     
operations. The payment of dividends is at the discretion of the Board of       
Directors, and dividends may be paid only out of current earnings and profits or
retained earnings.                                                              

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ITEM 6. MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND       
FINANCIAL CONDITION                                                             

MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF
OPERATIONS AND FINANCIAL CONDITION

The following discussion should be read in conjunction with the       
Consolidated Financial Statements of the Company and its subsidiaries and       
related Notes thereto, and other financial information included elsewhere       
herein. The financial statements of the Company are prepared in conformity with 
generally accepted accounting principles of the United States ("US GAAP").      

RESULTS OF OPERATIONS                                                           

   The following table shows the selected consolidated income statement data
of the Company and its subsidiaries for the three fiscal years ended December   
31, 1998, 1999 and 2000. The data should be read in conjunction with, and       
qualified in their entirety by reference to, the Consolidated Financial         
Statements of the Company and related Notes thereto and other financial         
information included elsewhere therein:                                         

                                                        [Enlarge/Download Table]


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

                                                       1998           1999           2000          2000 
(In thousands)                                        (RMB)          (RMB)          (RMB)        (US $) 
--------------------------------------------------------------------------------------------------------

                                                                                                        
Sales                                               460,448        452,218        538,493        65,093 

Cost of sales                                      (375,559)      (364,174)      (475,816)      (57,516)
                                              --------------  ------------- -------------- -------------

Gross profit                                         84,889         88,044         62,677         7,577 

Gross profit margin                                    18.4%          19.5%          11.6%         11.6%

Other income                                              -            913              -             - 

Selling and administrative expenses                 (19,271)       (29,863)       (19,598)       23,093 

Financial income/(expenses), net                    (10,694)        (4,978)         8,300         1,003 

Transaction costs                                         -              -        (18,511)       (2,238)
                                              --------------  ------------- -------------- -------------

Income before income taxes                           54,924         54,116         32,868         3,973 

Income taxes                                         (4,568)          (268)        (4,377)         (529)
                                              --------------  ------------- -------------- -------------

Income before minority interests                     50,356         53,848         28,491         3,444 

Minority interests                                  (16,502)       (17,301)       (15,951)       (1,928)
                                              --------------  ------------- -------------- -------------

Net income                                           33,854         36,547         12,540         1,506 
                                              ==============  ============= ============== =============


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YEAR ENDED DECEMBER 31, 2000 COMPARED TO YEAR ENDED DECEMBER 31, 1999           

SALES AND GROSS PROFIT MARGIN                                                   

 Total sales for the year ended December 31, 2000, increased by RMB 86.3
million (US $10.4 million) or 19.1% to RMB 538.5 million (US $65.1 million),    
compared to RMB 452.2 million (US $54.7 million) for the corresponding period in
1999. The total sales volume for the year ended December 31, 2000 increased by  
2.7% compared to that of the corresponding period in 1999. The selling prices of
polyester products for the year ended December 31, 2000 increased by 2% to 10%  
compared to that of the corresponding period in 1999. As a series of            
anti-smuggling campaign and expansionary fiscal policies were launched by the   
PRC government in 1999, the over-supply of polyester products in the domestic   
market was considerably reduced. This has resulted in a marginal increase in    
both the selling prices and sales volume of polyester fibers product. Moreover, 
the cost of petroleum, being the major raw material of all polyester products,  
increased during the year, which has resulted in the increase in selling prices 
of polyester fiber products. The increase in sales were also attributable to the
increase in sales of polyester chips and sub-standard polyester products to     
outsiders and related companies at cost.                                        

     The decrease in gross profit margin from 19.5% in 1999 to 11.6% in 2000 was
mainly due to the increase in the cost of polyester chips by 28.5% which        
outweigh the marginal increase in selling prices of polyester fiber products.   

OTHER INCOME                                                                    

     Other income for the year ended December 31, 1999 represented cash dividend
income received from the investment in the Heilongjiang Longdi Limited Liability
Company.                                                                        

SELLING AND ADMINISTRATIVE EXPENSES                                             

    Selling and administrative expenses decreased by RMB 10.3 million (US $1.2
million) or 34.4% to RMB 19.6 million (US $2.4 million) in 2000 from RMB 29.9   
million (US $3.6 million) in 1999. The following events attributed to the       
overall decrease in selling and administrative expenses:                        

  (a)  Asibao made provision of RMB 12.1 million (US $1.5 million) in 1999
  (2000: nil) on certain trade receivables recovery of which was
considered by management to be doubtful.                    

     (b)  There was a decrease in administrative expenses by RMB 2.4 million (US
       $290,000). Asibao incurred professional and consultancy fee for tax
        filing in the PRC and settled claims for damages due to sub-standard
          quality of product sold of approximately RMB 1.1 million (US $133,000)
          in 1999 (2000: nil). There was an overall decrease in salaries, office
     expenses, travelling and entertainment expenses as a tighter cost
control system was applied in 2000.                         

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  (c)  There was an increase in commission expenses by RMB 1.5 million (US
       $181,000) as more salesperson met the sales budget during the year.

  (d)  There was an increase in transportation expenses by RMB 1.3 million
 (US $157,000) as there was no discount offered by PRC railway
     authorities during the year while there was a charge reduction of
25-30% in 1999.                                             

FINANCIAL INCOME/(EXPENSES), NET                                                

Net financial income/(expenses) decreased from net expenses of RMB 5.0
million (US $602,000) in 1999 to net income of RMB 8.3 million (US $1.0 million)
in 2000. The decrease were due to the decrease in average bank borrowing rate   
from 7.6% in 1999 to 6.4% in 2000 and the increase in interest income on the    
amount due from Longdi from RMB 8.4 million (US $1.0 million) in 1999 to RMB    
19.6 million (US $2.4 million) in 2000.                                         

INCOME TAXES                                                                    

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

    Asibao is governed by the Income Tax Laws of the PRC. Being a Sino-foreign
joint venture established in the Harbin Economic Development Zone and being     
awarded the status of "advanced technology enterprise", Asibao is exempted from 
income taxes for a period of two years commencing from its first profitable year
and is entitled to a preferential income tax rate of 15% for the remaining years
of the Joint Venture with a 50% reduction for 3 consecutive years commencing    
from its third profitable year. 1998 was the third profitable year and the      
income taxes were provided accordingly. Asibao's net income originated in the   
PRC.                                                                            

  Under the current British Virgin Islands' Law (the "BVI"), dividends and
capital gains arising from the Company's investments in the BVI are not subject 
to income taxes.                                                                

During 1999, Asibao was successful in a claim to the local tax bureau 
for an additional tax-free holiday for 1998, its third profitable year.         
Accordingly, the preferential income tax rate of 15% for the remaining years    
of the Joint Venture with a 50% reduction for 3 consecutive years commenced     
from 1999, its fourth profitable year, under certain tax regulations for the    
advanced technology enterprises issued by the local government. Accordingly,    
the income taxes provided in 1998 were reversed in 1999.                        

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2000 was the fifth profitable year and the income taxes were provided 
accordingly.                                                                    

YEAR ENDED DECEMBER 31, 1999 COMPARED TO YEAR ENDED DECEMBER 31, 1998           

SALES AND GROSS PROFIT MARGIN                                                   

Total sales for the year ended December 31, 1999, decreased by RMB 8.2
million (US $992,000) or 1.8% to RMB 452.2 million (US $54.7 million), compared 
to RMB 460.4 million (US $55.7 million) for the corresponding period in 1998.   
The total sales volume for the year ended December 31, 1999 decreased by 3.4%   
compared to that of the corresponding period in 1998. As a series of            
anti-smuggling campaign and expansionary fiscal policies were launched by the   
PRC government during the year, the over-supply of polyester products in the    
domestic market was considerably reduced. This has resulted in a marginal       
increase in both the selling prices and sales volume of polyester fibers        
product, with the exception of the staple fibers. Marginal decreases in selling 
prices and sales volume of staple fibers were mainly due to the decreasing price
of cotton during 1999, and the demand and selling price of staple fibers were   
vulnerable to the selling price of cotton. As the sales of staple fibers        
accounted for 57% of total sales in 1999, the decreasing sales of staple fibers 
more than offset the increasing sales of other polyester fiber products and     
accounted for the overall decrease in sales.                                    

     The increase in gross profit margin from 18.4% in 1998 to 19.5% in 1999 was
mainly due to the slightly increase in selling prices of polyester fiber        
products (except for staple fiber).                                             

OTHER INCOME                                                                    

     Other income for the year ended December 31, 1999 represented cash dividend
income received from the investment in the Heilongjiang Longdi Limited Liability
Company.                                                                        

SELLING AND ADMINISTRATIVE EXPENSES                                             

    Selling and administrative expenses increased by RMB 10.6 million (US $1.3
million) or 55.0% to RMB 29.9 million (US $3.6 million) in 1999 from RMB 19.3   
million (US $2.3 million) in 1998. The following events occurred in 1999 that   
attributed to the overall increase in selling and administrative expenses:      

  (e)  Asibao made provision of RMB 12.1 million (US $1.5 million) in 1999
  (1998: nil) on certain trade receivables recovery of which was
considered by management to be doubtful.                    

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     (f)  Asibao incurred professional and consultancy fee for tax filing in the
     PRC and settled claims for damages due to sub-standard quality of
      product sold of approximately RMB 1.1 million (US $133,000) (1998:
nil).                                                       

     (g)  There was a decrease in transportation expenses by RMB 2.6 million (US
     $314,000) as a result of a 25-30% charge reduction by PRC railway
authorities during 1999.                                    

FINANCIAL EXPENSES, NET                                                         

    Net financial expenses decreased by RMB 5.7 million (US $691,000) or 53.5%
to RMB 5.0 million (US $602,000) in 1999 from RMB 10.7 million (US $1.3 million)
in 1998. The decrease was primarily due to the decrease in average bank         
borrowing rate from 8.7% in 1998 to 7.6% in 1999 and the increase in interest   
income on the amount due from Longdi.                                           

INCOME TAXES                                                                    

Please refer to the above discussion.                                 

ITEM 7.  FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA                            

Filed herewith are the following financial statements:        

    Consolidated Financial Statements for the Years ended December 31,
2000, 1999 and 1998.                                                            

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PART III

ITEM 9.  DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT                     

DIRECTORS AND EXECUTIVE OFFICERS                                                

   The following table and text sets forth the names and ages of all
directors and executive officers of the Company and the key management personnel
as of December 31, 2000. The Board of Directors of the Company is comprised of  
only one class. All of the directors will serve until the next annual meeting of
stockholders and until their successors are elected and qualified, or until     
their earlier death, retirement, resignation or removal. Executive officers     
serve at the discretion of the Board of Directors, and are appointed to serve   
until the first Board of Directors meeting following the annual meeting of      
stockholders. Also provided is a brief description of the business experience of
each director and executive officer and the key management personnel during the 
past five years and an indication of directorships held by each director in     
other companies subject to the reporting requirements under the Federal         
securities laws.                                                                

                                                                [Download Table]

            NAME  AGE                   POSITION               
            ----  ---                   --------               

                                                               
Lung Po Ching      54  Chairman of the Board                   

Rui Min Zhao       52  Vice Chairman of the Board and President

Ming Xue Liu       53  Vice President and Director             

Feng Jie Liu       53  Chief Financial Officer and Director    

Wai On Wan         27  Secretary and Director                  

      MR. LUNG PO CHING, has been the Chairman of the Board of the Company
since January 24, 2000. Mr. Ching has been involved for more than 20 years in   
the management of production and technology of industrial enterprises in the    
PRC. Mr. Ching graduated from the Harbin Military and Engineering Institute in  
1968 and holds the title of Senior Engineer. Mr. Ching is also the president of 
two US corporations, one of which is listed on the NASDAQ Stock Exchange and the
other is included on the OTC Bulletin Board operated by the NASD.               

         MR. RUI MIN ZHAO, has been the Vice Chairman of the Board and President
of the Company since January 24, 2000. Mr. Zhao is also the General Manager of  
Asibao. Mr. Zhao has many years of experience in the management of chemical     
fiber and textile enterprises. He has won several titles and awards such as the 
"National Medal of Outstanding Entrepreneur", the "National Model Worker of     
Textile Industry" and the "May First Labor Medal". Mr. Zhao graduated from the  
department of mechanical engineering of Harbin Industrial University in 1975.   

     MR. MING XUE LIU, has been the Vice President and a Director of the
Company since January 24, 2000. Mr. Liu has been involved in the production and 
technological improvement of synthetic fiber manufacturing since 1975. Mr. Liu  
has extensive experiences in working with and for foreign as well as in foreign 
companies. He graduated from Heilongjiang University in 1975 with a             
concentration in macro-molecular.                                               

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       MR. FENG JIA LIU, has been the Chief Financial Officer and a Director
of the Company since January 24, 2000. Mr. Liu has over 30 years of financial   
management experiences. Mr. Liu graduated from Forestry Institute in            
Heilongjiang Province in 1967 with a concentration in financial management.     

      MR. WAI ON WAN, has been the Secretary and a Director of the Company
since January 24, 2000. Mr. Wan has been involved in corporate strategy and     
business development for high-tech industry. He was the Founder and Co-CEO of   
Iconcept.net Ltd., a company which focuses on providing web solution services to
local companies. Mr. Wan graduated from Rutgers University, New Jersey in 1996  
with a concentration in Finance.                                                

ITEM 10.  EXECUTIVE COMPENSATION                                                

COMPENSATION AGREEMENTS                                                         

 No executive officer received compensation during 1998 or 1999.

      There are currently no long-term employment or consulting agreements
between the Company and the executive officers or directors of the Company.     

BOARD OF DIRECTORS                                                              

       During the year ended December 31, 2000, two meetings of the Board of
Directors were held. Additionally, certain corporate actions were also conducted
by unanimous written consent of the Board of Directors. Directors are reimbursed
for travel and other expenses relating to meetings of the Board of Directors and
its committees. Richard N. Gray received $10,000 in 1998 for serving as a       
director of the Company.                                                        

STOCK OPTION PLAN                                                               

   No stock options or stock appreciation rights were granted to any
directors or officers of the Company during 1999 or 2000.                       

ITEM 11.  SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT        

         The following table sets forth certain information as of March 13, 2000
with respect to (i) the beneficial ownership of the Common Stock of the Company 
by each beneficial owner of more than 5% of the outstanding shares of Common    
Stock of the Company, each director, each executive officer and all executive   
officers and directors of the Company as a group, (ii) the number of shares of  
Common Stock owned by each such person and group and (iii) the percent of the   
Company's Common Stock so owned.                                                

        As used in this section, the term beneficial ownership with respect to
a security is defined by Rule 13d-3 under the Exchange Act as consisting of sole
or shared voting power (including the power to vote or direct the vote) and/or  
sole or shared investment power (including the power to dispose of or direct the
disposition of) with respect to the security through any contract, arrangement, 
understanding, relationship or otherwise, subject to community property laws    
where applicable. Each person has sole voting and investment power with respect 
to the shares of Common Stock, except as otherwise indicated. Beneficial        
ownership consists of a direct interest in the shares of Common Stock, except as
otherwise indicated.                                                            

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                                                        [Enlarge/Download Table]

---------------------------------------------- ------------------------------ -------------------------------
                                                                                      Percentage of          
                                                    Number of Shares of             Outstanding Common       
              Name and Address                         Common Stock                 Stock Beneficially       
             of Beneficial Owner                    Beneficially Owned                    Owned              
---------------------------------------------- ------------------------------ -------------------------------

                                                                                                             
Hearty Holdings Limited                                6,069,261                         40.66%              
Rm. 2005 Universal Trade Centre                                                                              
3-5A Arbuthnot Road                                                                                          
Central, Hong Kong                                                                                           

Megastone Development Limited                          2,601,111                         17.42%              
20/F Asia Pacific Finance Tower                                                                              
Citibank Plaza, 3 Garden Road                                                                                
Central, Hong Kong                                                                                           

Liu Ming Xue (1)                                       3,034,631                         20.33%              
Rm. 2005 Universal Trade Centre                                                                              
3-5A Arbuthnot Road                                                                                          
Central, Hong Kong                                                                                           

Cao Yu Shan (1)                                        3,034,631                         20.33%              
Rm. 2005 Universal Trade Centre                                                                              
3-5A Arbuthnot Road                                                                                          
Central, Hong Kong                                                                                           

Well Gain Investments Limited                          1,050,954                           7.0%              
Room 2103-2104                                                                                               
21/F Treasure Centre                                                                                         
42 Hung To Road                                                                                              
Kwun Tong, Hong Kong                                                                                         

Zhu Yi Xin (2)                                         1,050,954                           7.0%              
Rm. 2005 Universal Trade Centre                                                                              
3-5A Arbuthnot Road                                                                                          
Central, Hong Kong                                                                                           

NJI No. 2 Investment Fund                              2,988,651                          20.0%              
6 Battery Road, No. 42-01                                                                                    
Singapore 049909                                                                                             

(1)  Messieurs Liu and Cao each own 50% of the share capital of Hearty Holdings 
Limited.                                                              

(2)  Mr. Zhu owns all of the share capital of Well Gain Investments Limited.    

CHANGES IN CONTROL                                                              

  The Company is unaware of any contract or other arrangement, the
operation of which may at a subsequent date result in a change in control of the
Company.                                                                        

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ITEM 12.  CERTAIN TRANSACTIONS                                                  

      Pursuant to a supplementary shareholders' agreement (the "Guaranteed
Distribution Agreement") dated May 18, 1998 between CCHL and the Chinese joint  
venture partner of HZHD (the "Chinese Partner"), the Chinese Partner agreed to  
pay CCHL a fixed annual income of RMB 15,300,000 (the "Guaranteed Distribution")
from January 1, 1998 through the expiration of the joint venture period of HZHD.
Any surplus income generated from the Hangzhou Toll Road in excess of the amount
of the Guaranteed Distribution would belong to the Chinese Partner and any      
shortfall would be made up by the Chinese Partner. In addition, as part of the  
Guaranteed Distribution Agreement, an amount of RMB 178,500,000 would be paid to
CCHL upon the expiration of the joint venture period of HZHD and the assets of  
the joint venture would be surrendered to the Chinese Partner at no further     
consideration. This Guaranteed Distribution Agreement was subject to approvals  
by the authorities which originally approved the set up of the joint venture. To
date, the approvals have not been obtained despite efforts by the management of 
the joint venture and the Company.                                              

      On April 14, 1998, Horler, a wholly-owned subsidiary of CSH, a major
shareholder of the Company, agreed to reduce the interest rate of the Second    
Horler Note from 9% to 5% per year for the year ended December 31, 1997. In     
addition, Horler agreed that after December 31, 1998, no principal repayment of 
the Second Horler Note would be demanded until the Company was financially      
capable of doing so. However, following January 1, 1998, the Second Horler Note 
continued to bear interest at 9% per year.                                      

      On July 27, 1998 the Company, Harlequin and New Regal entered into a
Deed of Variation pursuant to which Harlequin agreed and undertook to assume all
of the obligations and liabilities of New Regal under the New Regal Promissory  
Note in consideration of the Company's agreement to release New Regal from all  
obligations relating to the New Promissory Note. All other terms of the New     
Regal Promissory Note remained the same. At that time, Richard N. Gray was a    
director of the Company. Mr. Gray was also a director of GHL (Senior ) Pension  
Fund, of which Harlequin was a wholly-owned subsidiary.                         

    During 1998, New Regal and the Company agreed on a revised payment
schedule relating to the Harlequin Promissory Note. Under the revised payment   
schedule, the payment of several monthly installments by New Regal in 1998 and  
1999 was suspended and the outstanding principal balance was revised to be      
settled in sixty (60) equal monthly installments commencing March 1999. The     
Harlequin Promissory Note continued to bear interest at nine percent (9%) per   
year during the period of payment suspension in 1998 and 1999 and thereafter.   

     The Company paid to CSH management fees of US $155,000 per year for
1997 and 1998 and US $38,000 during the three months ended March 31, 1999 for   
the office space and administrative support it shared with CSH.                 

   HZHD guaranteed bank borrowing of a company related to CSH in the
amount of RMB 56 million and RMB 93 million as of December 31, 1997 and 1998,   
respectively.                                                                   

         CSH committed to provide continuing financial support to the Company to
the extent of CSH's interest in the Company for the period ending on December   
31, 1999.                                                                       

       On January 24, 2000, pursuant to the Far Beyond Acquisition Agreement
by and among the Company, Horler, Far Beyond and the FB Shareholders transferred
all of the issued and outstanding shares of the capital stock of Far Beyond to  
the Company in exchange for 8,757,951 shares of the                             

22

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Common Stock of the Company, representing approximately 88% of the outstanding  
shares of the Common Stock of the Company.                                      

       Concurrently with and as a condition of the closing of the Far Beyond
Acquisition Agreement, pursuant to the Disposal Agreement between the Company   
and Horler, the Company transferred to Horler the entire share capital of WL in 
full and final satisfaction of the Second Horler Note. Also, concurrently with  
and as a condition of such closing, pursuant to the Assignment Agreement between
the Company and CSH, the Company assigned to CSH, in settlement of the          
outstanding indebtedness the Company owed to CSH, the New Regal Promissory Note 
and the Harlequin Promissory Note.                                              

23

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 PART IV

                                                        [Enlarge/Download Table]
                                                                                               
(a)(1)          Financial Statement                                                            

        (2)     Exhibits                                                                       

Exhibit Number  Title                                                                          
--------------  -----                                                                          

      2.1(1)    Acquisition Agreement                                                          

      2.2(2)    Disposal Agreement                                                             

      2.3(3)    Assignment Agreement                                                           

      3.1(4)    Certificate of Incorporation as filed with the Delaware Secretary of State with
                amendments.                                                                    

      3.2(4)    Bylaws                                                                         

      21.1*     Subsidiaries of the Company                                                    

      (1)   Incorporated herein by reference to Exhibit C of the Proxy Statement
of the Company filed on November 2, 1999.               

      (2)   Incorporated herein by reference to Exhibit A of the Proxy Statement
of the Company filed on November 2, 1999.               

      (3)   Incorporated herein by reference to Exhibit B of the Proxy Statement
of the Company filed on November 2, 1999.               

(4)   Incorporated herein by reference to Form 10-KSB filed on      
April 14, 2000.                                         

*Filed herein                                                       

(b)                        Reports on Form 8-K.                                 

                     There were no reports on Form 8-K filed by Asia
                  Resources during the fourth quarter of 2000.

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SIGNATURES

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

                         ASIA FIBER HOLDINGS LIMITED

                       By:      /s/ Rui Min Zhao
                                                --------------------------------
                            Rui Min Zhao
                         President

Dated: April 17, 2001                                                           

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

                                                                [Download Table]
                                                                        
By:  Rui Min Zhao                                  Dated: April 17, 2001
     -----------------------------------                                
     Rui Min Zhao                                                       
     President and Vice Chairman of the Board                           

By:  /s/ Feng Jie Liu                              Dated: April 17, 2001
     -----------------------------------                                
     Feng Jie Liu                                                       
     Chief Financial Officer and Director                               
     (principal financial and accounting officer)                       

By:  /s/ Lung Po Ching                             Dated: April 17, 2001
     -----------------------------------                                
     Lung Po Ching                                                      
     Chairman of the Board                                              

By:  /s/ Ming Xue Liu                              Dated: April 17, 2001
     -----------------------------------                                
     Ming Xue Liu                                                       
     Vice President and Director                                        

By:  /s/ Wan Wai On                                Dated: April 17, 2001
     -----------------------------------                                
     Wan Wai On                                                         
     Secretary and Director                                             

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ASIA FIBER HOLDINGS LIMITED AND SUBSIDIARIES                                    

CONTENTS                                                                        

                                                                [Download Table]


                                                              Pages 
                                                              ----- 
                                                                    
Report of Independent Auditors                                 F-1  

Consolidated Balance Sheets                                    F-2  

Consolidated Statements of Income                              F-3  

Consolidated Statements of Changes in Shareholders' Equity     F-4  

Consolidated Statements of Cash Flows                          F-5  

Notes to Consolidated Financial Statements                  F6 - F21

10KSB40 27th Page of 47 TOC 1st Previous Next ↓Bottom Just 27th
REPORT OF INDEPENDENT AUDITORS                                                  

To the Board of Directors and Shareholders                                      
Asia Fiber Holdings Limited                                                     

We have audited the accompanying consolidated balance sheets of Asia Fiber      
Holdings Limited (the "Company") and its subsidiaries (collectively the "Group")
as of December 31, 1999 and 2000, and the related consolidated statements of    
income, cash flows and changes in shareholders' equity for each of the three    
years in the period ended December 31, 2000. These financial statements are the 
responsibility of the Company's management. Our responsibility is to express an 
opinion on these financial statements based on our audits.                      

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

In our opinion, the consolidated financial statements referred to above present 
fairly, in all material respects, the consolidated financial position of the    
Group as of December 31, 1999 and 2000, and the consolidated results of its     
operations and its cash flows for each of the three years in the period ended   
December 31, 2000, in conformity with accounting principles generally accepted  
in the United States of America.                                                

/s/ Ernst & Young                                                               

Hong Kong                                                                       
January 31, 2001, except for                                                    
note 1, as to which the date is                                                 
March 14, 2001                                                                  

F-1 

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ASIA FIBER HOLDINGS LIMITED AND SUBSIDIARIES                                    

CONSOLIDATED BALANCE SHEETS                                                     

AS OF DECEMBER 31, 1999 and 2000                                                

(Amounts in thousands except share and per share data)                          

                                                        [Enlarge/Download Table]


                                                      Notes     1999     2000     2000
                                                                 RMB      RMB      US$
                                                                                      

ASSETS                                                                                

CURRENT ASSETS                                                                        
Cash and cash equivalents                                      8,427   11,403    1,378
Trade receivables, less provision for doubtful debts                                  
    of RMB12,128 in 1999 and 2000                       6     56,868   58,071    7,020
Bills receivable                                               1,300    6,889      832
Other receivables and prepayments                                561      285       34
Inventories                                             7     26,789   28,367    3,429
Amount due from a minority joint venture partner       12    261,070  359,762   43,488
Amounts due from related companies                     12     29,161    5,184      627
                                                             -------  -------  -------

TOTAL CURRENT ASSETS                                         384,176  469,961   56,808

FIXED ASSETS                                            8    133,642  120,652   14,584

INVESTMENT                                              9     13,390   13,995    1,692

DEFERRED INCOME TAXES                                   5      2,042    1,842      223
                                                             -------  -------  -------

TOTAL ASSETS                                                 533,250  606,450   73,307
                                                             =======  =======  =======

LIABILITIES AND SHAREHOLDERS' EQUITY                                                  

CURRENT LIABILITIES                                                                   
Bank loans                                             10    177,880  181,600   21,959
Accounts payable                                               4,315      455       55
Deposits from customers                                       44,280   16,183    1,956
Accrued liabilities and other payables                        29,677   21,389    2,585
Amount due to a director                               12      5,734    6,503      786
Amounts due to related companies                       12     12,098   72,481    8,761
Income taxes payable                                             536      827      100
Dividend payable                                              19,961   33,717    4,076
                                                             -------  -------  -------

TOTAL CURRENT LIABILITIES                                    294,481  333,155   40,271

MINORITY INTERESTS                                            21,988   24,183    2,924
                                                             -------  -------  -------

TOTAL LIABILITIES AND MINORITY INTERESTS                     316,469  357,338   43,195
                                                             -------  -------  -------

COMMITMENTS AND CONTINGENCIES                          15                             

SHAREHOLDERS' EQUITY                                                                  
Preferred stock, par value of US$0.01 each;                                           
    Authorized:                                                                       
        10,000,000 (1999: 10,000,000) shares                                          
Common stock, par value of US$0.01 each                                               
    Authorized:                                                                       
        75,000,000 (1999: 2,750,000) shares                                           
    Issued and fully paid:                                                            
        24,881,319 (1999: 21,895,655) shares           11      1,811    2,057      244
Additional paid-in capital                             11     68,742   69,738    8,480
Reserves                                               14     15,845   19,451    2,351
Retained earnings                                            130,002  157,447   19,032
Accumulated other comprehensive income                           381      419       50
                                                             -------  -------  -------

TOTAL SHAREHOLDERS' EQUITY                                   216,781  249,112   30,112
                                                             -------  -------  -------

TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY                   533,250  606,450   73,307
                                                             =======  =======  =======

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

F-2 

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ASIA FIBER HOLDINGS LIMITED AND SUBSIDIARIES                                    

CONSOLIDATED STATEMENTS OF INCOME                                               

FOR THE YEARS ENDED DECEMBER 31, 1998, 1999 and 2000                            

(Amounts in thousands except share and per share data)                          

                                                        [Enlarge/Download Table]


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

SALES, including finished goods sold                                                                            
    to related parties of RMB10,361,                                                                            
    RMB17,912 and RMB64,017 in 1998,                                                                            
    1999 and 2000, respectively                            460,448        452,218        538,493         65,093 

COST OF SALES, including raw materials                                                                          
     purchased from related parties of                                                                          
     RMB275,041, RMB247,156 and RMB379,979;                                                                     
     finished goods purchased from                                                                              
     related parties of RMB nil, RMB18,344                                                                      
     and RMB14,308; utility charges paid                                                                        
     to related parties of RMB23,941,                                                                           
     RMB26,409 and RMB27,431; rental expenses                                                                   
     for leasing of plant and machinery from                                                                    
     related parties of RMB1,004,                                                                               
     RMB1,004 and RMB1,004                                                                                      
     in 1998, 1999 and 2000, respectively                 (375,559)      (364,174)      (475,816)       (57,516)
                                                         ---------      ---------      ---------      --------- 

GROSS PROFIT                                                84,889         88,044         62,677          7,577 

OTHER INCOME, NET, including dividend income                                                                    
     of RMB nil, RMB1,030 and RMB nil                                                                           
     from an associate company of the                                                                           
     Company's minority shareholders in                                                                         
     1998, 1999 and 2000, respectively                           -            913              -              - 

SELLING AND ADMINISTRATIVE EXPENSES                        (19,271)       (17,735)       (19,598)        (2,369)

PROVISION FOR DOUBTFUL DEBTS                                     -        (12,128)             -              - 

FINANCIAL INCOME/(EXPENSES), NET,                                                                               
     including interest income from related                                                                     
     party of RMB5,242, RMB8,360 and                                                                            
     RMB19,583 in 1998, 1999 and 2000,                                                                          
     respectively                                4         (10,694)        (4,978)         8,300          1,003 
                                                         ---------      ---------      ---------      --------- 

INCOME BEFORE INCOME TAXES                                  54,924         54,116         51,379          6,211 

INCOME TAXES                                     5          (4,568)          (268)        (4,377)          (529)
                                                         ---------      ---------      ---------      --------- 

INCOME BEFORE MINORITY INTERESTS                            50,356         53,848         47,002          5,682 

MINORITY INTERESTS                                         (16,502)       (17,301)       (15,951)        (1,928)
                                                         ---------      ---------      ---------      --------- 

NET INCOME                                                  33,854         36,547         31,051          3,754 
                                                         =========      =========      =========      ========= 

EARNINGS PER SHARE                                                                                              
     Basic and Diluted                         3(k)           1.55           1.67           1.26           0.15 
                                                         =========      =========      =========      ========= 

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

F-3 

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ASIA FIBER HOLDINGS LIMITED AND SUBSIDIARIES                                    

CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY                      

FOR THE YEARS ENDED DECEMBER 31, 1998, 1999 and 2000                            

(Amounts in thousands except share and per share data)                          

                                                        [Enlarge/Download Table]


                                                                                         Accumulated         
                                                      Additional                               other         
                                               Share     paid-in            Retained   comprehensive         
                                      Notes  capital     capital  Reserves  earnings          income    Total
                                                 RMB         RMB       RMB       RMB             RMB      RMB
                                                                                                             
Balance at January 1, 1998                     1,811      64,771     7,866    67,580             356  142,384

Net income and comprehensive income                -           -         -    33,854               -   33,854

Transfer to/(from) reserves            14          -           -     3,771    (3,771)              -        -
                                              ------      ------    ------    ------          ------   ------

Balance at December 31, 1998                   1,811      64,771    11,637    97,663             356  176,238

Gain on sales of fixed assets to the                                                                         
    Company's minority shareholder                                                                           
    attributable to the Group                      -       3,971         -         -               -    3,971

Net income                                         -           -         -    36,547               -   36,547

Currency translation adjustments                   -           -         -         -              25       25
                                                                                                       ------
Comprehensive income                                                                                   36,572
                                                                                                       ------

Transfer to/(from) reserves            14          -           -     4,208    (4,208)              -        -
                                              ------      ------    ------    ------          ------   ------

Balance at December 31, 1999                   1,811      68,742    15,845   130,002             381  216,781

Shares of common stock owned by                                                                              
    the original shareholders of ARHL at                                                                     
    the date of Reverse Acquisition              846         996         -         -               -    1,242

Net income                                         -           -         -    31,051               -   31,051

Currency translation adjustments                   -           -         -         -              38       38
                                                                                                       ------
Comprehensive income                                                                                      310
                                                                                                       ------

Transfer to/(from) reserves            14          -           -     3,606    (3,606)              -        -
                                              ------      ------    ------    ------          ------   ------

Balance at December 31, 2000                   2,057      69,738    19,451   138,936             419  249,112
                                              ======      ======    ======    ======          ======  =======

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

F-4 

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ASIA FIBER HOLDINGS LIMITED AND SUBSIDIARIES                                    

CONSOLIDATED STATEMENTS OF CASH FLOWS                                           

AS OF DECEMBER 31, 1998, 1999 and 2000                                          

(Amounts in thousands except share and per share data)                          

                                                        [Enlarge/Download Table]

                                                           Year ended     Year ended     Year ended     Year ended 
                                                         December 31,   December 31,   December 31,   December 31, 
                                                                 1998           1999           2000           2000 
                                                                  RMB            RMB            RMB            US$ 
                                                                                                                   
CASH FLOWS FROM OPERATING ACTIVITIES                                                                               
    Net income                                                 33,854         36,547         31,051          3,754 
Adjustments to reconcile net income to net                                                                         
    cash provided by operating activities:                                                                         
        Depreciation                                           17,581         17,209         13,567          1,640 
        Minority interests                                     16,502         17,301         15,951          1,928 
Decrease/(increase) in assets:                                                                                     
    Trade receivables                                         (15,560)        18,317         (1,203)          (145)
    Bills receivable                                            4,080          4,099         (5,589)          (676)
    Other receivables and prepayments                             379            170            276             34 
    Inventories                                                13,835         11,822         (1,578)          (191)
    Amount due from related companies                            (332)           332         23,977          2,898 
    Deferred income taxes                                         200            200            200             24 
Increase/(decrease) in liabilities:                                                                                
    Accounts payable                                           (1,569)         2,419         (3,860)          (467)
    Deposits from customers                                   (11,996)        32,220        (28,097)        (3,396)
    Accrued liabilities and other payables                     10,857            356         (8,288)        (1,002)
    Amount due to a director                                      506          4,566            769             93 
    Amount due to related companies                            (7,718)        (1,641)        46,902          5,673 
    Income taxes payable                                        2,468         (1,932)           291             35 
                                                            ---------      ---------      ---------      --------- 
Net cash provided by operating activities                      63,087        141,985         84,369         10,202 
                                                            ---------      ---------      ---------      --------- 
CASH FLOWS USED IN INVESTING ACTIVITIES                                                                            
    Purchases of fixed assets                                    (561)        (1,017)          (577)           (70)
    Proceeds on sales of fixed assets to related party              -         47,218              -              - 
    Advances to a minority joint venture partner              (19,416)      (166,557)       (98,692)       (11,934)
    Increase in investment                                     (3,900)        (9,490)          (605)           (73)
    Amounts due from related companies                           (283)       (17,954)             -              - 
    Advances to related companies                                (186)        10,282         13,481          1,630 
                                                            ---------      ---------      ---------      --------- 
Net cash used in investing activities                         (24,346)      (137,518)       (86,393)       (10,447)
                                                            ---------      ---------      ---------      --------- 
CASH FLOWS PROVIDED BY/(USED IN)                                                                                   
    FINANCING ACTIVITIES                                                                                           
        New issue shares for Reverse Acquisition                    -              -          1,242            150 
        Proceeds from bank borrowings                         138,800        177,880        181,600         21,952 
        Repayments of bank borrowings                        (139,200)      (179,400)      (177,880)       (21,502)
        Dividend paid to minority joint venture partner       (39,757)             -              -              - 
                                                            ---------      ---------      ---------      --------- 
Net cash provided by/(used in) financing activities           (40,157)        (1,520)         4,962            600 
                                                            ---------      ---------      ---------      --------- 

Exchange differences on cash and cash equivalents                   -             24             38              4 
                                                            ---------      ---------      ---------      --------- 

Net increase/(decrease) in cash and cash equivalents           (1,416)         2,971          2,976            359 

Cash and cash equivalents, at beginning of year                 6,872          5,456          8,427          1,019 
                                                            ---------      ---------      ---------      --------- 

Cash and cash equivalents, at end of year                       5,456          8,427         11,403          1,378 
                                                            =========      =========      =========      ========= 

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

F-5 

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ASIA FIBER HOLDINGS LIMITED AND SUBSIDIARIES                                    

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS                                      

(Amounts in thousands except share and per share data)                          

1.   ORGANIZATION AND PRINCIPAL ACTIVITIES                                      

Asia Fiber Holdings Limited (the "Company") was formerly known as Asia
    Resources Holdings Limited ("ARHL") which was incorporated in the State of
   Delaware, the United States of America and the shares of which are listed
    for trading on the United States Over-the-counter Bulletin Board. On March
14, 2000, ARHL changed its name to Asia Fiber Holdings Limited.       

Far Beyond Investments Limited ("FB") was incorporated in the British 
Virgin Islands on March 21, 1995 with limited liability. Its principal
activity is to conduct activities through its subsidiary and its      
 principal investment is a 70% equity interest in Harbin Asibao Chemical
Fiber Co., Limited ("Asibao" or the "Joint Venture") and the principal
activity of Asibao is the manufacture and sale of synthetic fiber     
products.                                                             

Asibao was established as a Sino-foreign joint venture company in the 
  People's Republic of China (the "PRC") between Heilongjiang Longdi Group
   Co., Limited ("HLG") (30%) and FB (70%) on October 18, 1995 with a tenure
of 30 years from the date of the business licence. The tenure can be  
     extended by agreement between the joint venture partners with the necessary
   approval from the relevant government agencies. The registered capital of
Asibao is US$12 million, contributed by HLG as to US$3.60 million     
(approximately RMB29.88 million) and by FB as to US$8.40 million      
(approximately RMB69.72 million).                                     

On January 24, 2000, pursuant to an acquisition agreement dated       
September 10, 1999, FB merged with ARHL and became a wholly-owned     
subsidiary of ARHL. The transaction was executed as a reverse         
acquisition ("Reverse Acquisition") whereby all of the issued and     
outstanding shares of common stock of FB were exchanged for 88% of the
aggregate issued and outstanding common stock of ARHL. For accounting 
  purposes, this transaction has been treated as the issuance of the stock
by FB for the net monetary assets of ARHL, accompanied by a           
 recapitalization, with no goodwill or other intangible assets recorded.
For financial reporting purposes, FB is considered the acquiror and   
therefore, the historical operating results of ARHL are not presented.

On March 1, 2001, the Board of directors declared a 2.5 for 1 forward 
stock split of its common shares. The financial statements have been  
restated to give effect to the retroactive recognition to the stock   
 split in prior periods by reclassifying from additional paid-in capital
  to common stock, the par value of the additional shares arising from the
split. In addition, all references in the financials statements to    
number of shares and per share amounts have been restated.            

On March 14, 2001, the authorized capital stock of the Company was    
 decreased from 2,760,000,000 shares (consisting of 2,750,000,000 shares
 of Common Stock and 10,000,000 shares of Preferred Stock) to 85,000,000
shares (consisting of 75,000,000 shares of Common Stock and 10,000,000
shares of Preferred Stock).                                           

F-6 

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ASIA FIBER HOLDINGS LIMITED AND SUBSIDIARIES                                    

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS                                      

(Amounts in thousands except share and per share data)                          

2.   BASIS OF PRESENTATION                                                      

The consolidated financial statements are prepared in accordance with 
  accounting principles generally accepted in the United States of America
("US GAAP"). This basis of accounting differs from that used in the   
  statutory financial statements of the Joint Venture in the PRC which are
    prepared in accordance with the accounting principles and the relevant PRC
financial regulations.                                                

    The principal adjustment made to the statutory financial statements of the
    Joint Venture to conform with US GAAP is the reclassification of the staff
bonus and welfare reserve appropriation from reserves to a charge to  
income.                                                               

3.   PRINCIPAL ACCOUNTING POLICIES                                              

(a)  BASIS OF CONSOLIDATION                                           
     The consolidated financial statements include the accounts of the
        Company and its subsidiaries. The results of the subsidiary acquired
   during the year are consolidated from its acquisition date. All
        material intercompany balances and transactions have been eliminated
on consolidation.                                           

(b)  CASH AND CASH EQUIVALENTS                                        
         The Group considers cash and cash equivalents to include cash on hand
    and deposits with banks with original terms of maturity of three
months or less at the date of acquisition.                  

    At December 31, 2000, cash and cash equivalents included foreign
     currency deposits equivalent to RMB1,727 (US$208) (1999: RMB4,521
(US$547)).                                                  

(c)  INVENTORIES                                                      
        Inventories are stated at the lower of cost or market value. Cost is
          determined on the weighted average cost basis and, in the case of work
         in progress and finished goods, comprised of direct materials, direct
labour and an appropriate portion of overhead.              

      Market value is based on estimated selling prices less any further
costs expected to be incurred for completion and disposal.  

(d)  FIXED ASSETS AND DEPRECIATION                                    
  Fixed assets are stated at cost less accumulated depreciation.

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

Plant, machinery and equipment         8 - 15 years         
Motor vehicles                         10 years             

(e)  INVESTMENT                                                       
          The unlisted equity investment, not being a subsidiary or company over
         which the Group is in a position to exercise significant influence or
         to control the financing and operating decisions, is accounted for by
the cost method.                                            

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ASIA FIBER HOLDINGS LIMITED AND SUBSIDIARIES                                    

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS                                      

(Amounts in thousands except share and per share data)                          

3.   PRINCIPAL ACCOUNTING POLICIES (continued)                                  

(f)  REVENUE RECOGNITION                                              
        Sales represent the invoiced value of goods sold, net of returns and
          allowances. Revenue is recognised upon delivery of goods to customers.

(g)  FOREIGN CURRENCY TRANSACTIONS                                    
      The functional currency of substantially all the operations of the
    Group is Renminbi ("RMB"), the national currency of the PRC. The
          financial statements of operations with functional currency other than
     RMB have been translated into RMB using the respective applicable
         rates of exchange quoted by the People's Bank of China (the "Exchange
        Rates") prevailing at the dates of the transactions. Monetary assets
      and liabilities in US$ and other foreign currencies are translated
       using the applicable Exchange Rates at the respective balance sheet
         dates. The resulting exchange gains or losses are reported separately
as a component of shareholders' equity.                     

       The financial records of Asibao are maintained in RMB. In preparing
          these financial statements, foreign currency transactions and monetary
          assets and liabilities of Asibao denominated in foreign currencies are
     translated into RMB using the applicable Exchange Rates. Monetary
assets and liabilities denominated in foreign currencies are
          translated into RMB at the applicable Exchange Rates at the respective
   balance sheet dates. The resulting exchange gains or losses are
credited or charged to the statements of income.            

       Translation of amounts from RMB into US$ for the convenience of the
     reader has been made at the Exchange Rate on December 31, 2000 of
   US$1.00 = RMB8.27 and, accordingly, differs from the underlying
    foreign currency amounts. No representation is made that the RMB
         amounts could have been, or could be, converted into US$ at that rate
on December 31, 2000 or at any other date.                  

      The market risks associated with changes in exchange rates and the
          restriction over the convertibility of RMB into foreign currencies are
discussed in note 17 to the financial statements.           

(h)  INCOME TAXES                                                     
         Income taxes are determined under the liability method as required by
       Financial Accounting Standards Board Statement No. 109, "Accounting
for Income Taxes".                                          

(i)  COMPREHENSIVE INCOME                                             
         The Group adopted Statement of Financial Accounting Standards No. 130
  "Comprehensive Income" ("SFAS 130") in 1998, which established
        standards for reporting and display of comprehensive income/loss and
  its components. SFAS 130 requires foreign currency translation
  adjustments to be included in other comprehensive income/loss.
      Accumulated other comprehensive income/loss, which consists of the
     foreign currency translation adjustments only, is reported in the
         consolidated statements of shareholders' equity. The adoption of SFAS
        130 did not have a material effect on the Group's financial position
or results of operations.                                   

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ASIA FIBER HOLDINGS LIMITED AND SUBSIDIARIES                                    

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS                                      

(Amounts in thousands except share and per share data)                          

3.   PRINCIPAL ACCOUNTING POLICIES (continued)                                  

(j)  RETIREMENT BENEFITS                                              
         The Group has a defined contribution retirement plan for the staff of
          Asibao. As stipulated by the regulations of the PRC Government, Asibao
      is required to make an annual contribution to an insurance company
         equivalent to 15% of its annual basic salaries paid to its PRC staff.
       All staff of Asibao are covered under the plan and upon retirement,
        the retired staff are entitled to a monthly pension payment borne by
       the above-mentioned insurance company under the plan. Asibao is not
        responsible for any payments beyond the contributions to the plan as
noted above.                                                

          The contributions to the retirement plan for the employees are charged
       to the statement of income as services are provided. The amounts of
       contribution paid by Asibao, which were charged to the consolidated
       statements of income, were RMB1,965 for the year ended December 31,
2000 (1999: RMB2,022 and 1998: RMB2,019).                   

(k)  EARNINGS PER SHARE                                               
          The calculation of earnings per share is based on the weighted average
      number of ordinary shares of 21,895,655, 21,895,655 and 24,685,538
          outstanding during each of the years ended December 31, 1998, 1999 and
2000, respectively.                                         

The weighted average number of shares outstanding have been 
       adjusted for the 2.5 for 1 forward stock split of common shares and
        as if the shares issued to the original shareholders of FB under the
 Reverse Acquisition had been completed as at January 1, 1998.

(l)  USE OF ESTIMATES                                                 
      The preparation of financial statements in conformity with US GAAP
         requires management to make estimates and assumptions that affect the
        amounts reported in the financial statements and accompanying notes.
Actual results could differ from those estimates.           

(m)  DIVIDENDS PAYABLE                                                
       Dividends payable represent dividends declared by Asibao payable to
HLG, but unpaid at year end.                                

(n)  COMPARATIVE AMOUNTS                                              
          Certain comparative amounts have been reclassified to conform with the
current year's presentation.                                

4.   FINANCIAL EXPENSES, NET                                                    

                                                                [Download Table]


                               Year ended     Year ended     Year ended 
                             December 31,   December 31,   December 31, 
                                     1998           1999           2000 
                                      RMB            RMB            RMB 
                                                                        
Interest expenses                 (16,129)       (13,495)       (11,452)
Interest income                     5,434          8,515         19,752 
Foreign exchange gains, net             1              2              - 
                                 --------       --------       -------- 

                                  (10,694)        (4,978)         8,300 
                                 ========       ========       ======== 

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ASIA FIBER HOLDINGS LIMITED AND SUBSIDIARIES                                    

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS                                      

(Amounts in thousands except share and per share data)                          

5.   INCOME TAXES                                                               

   Pre-tax profit from continuing operations for the years ended December 31
was taxed in the following jurisdictions:                             

                                                                [Download Table]


                   Year ended    Year ended    Year ended
                 December 31,  December 31,  December 31,
                         1998          1999          2000
                     RMB           RMB           RMB     
                                                         
PRC                54,941        54,576        54,187    
Other countries       (17)         (460)      (21,319)   
                   ------        ------        ------    

                   54,924        54,116        32,868    
                   ======        ======        ======    

The component of the provision for income taxes are as follows:       

                                                                [Download Table]


                                             Year ended    Year ended    Year ended
                                           December 31,  December 31,  December 31,
                                                   1998          1999          2000
                                                    RMB           RMB           RMB
                                                                                   
Current PRC income taxes, the amount in                                            
    1999 including tax credit of RMB4,368                                          
    received in 1999 but related to 1998          4,368            68         4,177
Deferred income taxes                               200           200           200
                                                 ------        ------        ------

                                                  4,568           268         4,377
                                                 ======        ======        ======

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

    Asibao is governed by the Income Tax Laws of the PRC. Being a Sino-foreign
     joint venture established in the Harbin Economic Development Zone and being
    awarded the status of "advanced technology enterprise", Asibao is exempted
from income taxes for a period of two years commencing from its first 
  profitable year and is entitled to a preferential income tax rate of 15%
 for the remaining years of the Joint Venture with a 50% reduction for 3
     consecutive years commencing from its third profitable year. The year ended
   December 31, 1998 was the third profitable year and the income taxes were
provided accordingly. Asibao's net income originated in the PRC.      

   During 1999, Asibao was successful in a claim to the local tax bureau for
  an additional tax-free holiday for the year ended December 31, 1998, the
   Company's third profitable year. Accordingly, the preferential income tax
rate of 15% for the remaining years of the Joint Venture with a 50%   
     reduction for 3 consecutive years commenced for the year ended December 31,
   1999, the Company's fourth profitable year, under certain tax regulations
    for the advanced technology enterprises issued by the local government. As
     a result, the Company was given an income tax credit relating to 1998 to be
applied against income taxes for the year ended December 31, 1999.    

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ASIA FIBER HOLDINGS LIMITED AND SUBSIDIARIES                                    

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS                                      

(Amounts in thousands except share and per share data)                          

5.   INCOME TAXES (continued)                                                   

The year ended December 31, 2000 was the fifth profitable year and the
income taxes were provided accordingly.                               

 A reconciliation between the actual income tax expense and income taxes
computed by applying the statutory PRC tax rate applicable to foreign 
    investment enterprises operating in the Harbin Development Zone in the PRC
to the income before income taxes is as follows:                      

                                                        [Enlarge/Download Table]


                                              Year ended     Year ended     Year ended 
                                            December 31,   December 31,   December 31, 
                                                    1998           1999           2000 
                                                     RMB            RMB            RMB 
                                                                                       
Statutory PRC income tax rate                         15%            15%            15%

Provision computed at statutory rate               8,239          8,117          7,707 
Impact of tax holiday/benefit of Asibao                                                
    (RMB0.16 (1999: RMB0.37 and                                                        
    1998: RMB0.18) per share based on                                                  
    24,685,538 (1999: 21,895,655 and 1998:                                             
    21,895,655) ordinary shares)                  (4,040)        (8,120)        (3,951)
Item which gives rise to no tax benefit:                                               
    Net increase in valuation allowance               --             --            344 
    Non-deductible expenses                          177            198            213 
Others                                               192             73             64 
                                                   -----          -----          ----- 

Provision for income taxes                         4,568            268          4,377 
                                                   =====          =====          ===== 

    The impact of tax holiday/benefit for the year ended December 31, 1998 and
     2000 represented the 50% reduction of income taxes granted by the local tax
bureau in the PRC to Asibao.                                          

In addition to the 50% reduction of income taxes for the year ended   
     December 31, 1999, the impact of tax holiday/benefit for that year included
a tax credit received in 1999 for the year ended December 31, 1998 for
  which Asibao was successful in claiming from the local tax bureau during
1999.                                                                 

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ASIA FIBER HOLDINGS LIMITED AND SUBSIDIARIES                                    

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS                                      

(Amounts in thousands except share and per share data)                          

5.   INCOME TAXES (continued)                                                   

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

                                                        [Enlarge/Download Table]

                                                                   Year ended       Year ended
                                                                 December 31,     December 31,
                                                                         1999             2000
                                                                 ---------------  ------------
                                                                      RMB              RMB    
                                                                                              
Deferred tax asset:                                                                           
  Temporary differences on revaluation of fixed assets                                        
     between Asibao's PRC financial statements for tax purposes                               
     and its US GAAP financial statements                           2,042            1,842    
  Net operating loss carryforwards                                     --              344    
  Less: Valuation allowance for deferred tax asset                     --             (344)   
                                                                   -------           ------   

                                                                    2,042            1,842    
                                                                   ======           ======    

  Undistributed earnings of the Company's foreign subsidiaries amounted to
approximately RMB157,447 at December 31, 2000. Because those earnings 
  are considered to be permanently invested, no provision for U.S. federal
and state income taxes on those earnings has been provided. Upon      
   distribution of those earnings in the form of dividends or otherwise, the
    Company would be subject to U.S. income taxes. Determination of the amount
of unrecognized deferred U.S. income tax liability is not practicable 
   because of the complexities associated with its hypothetical calculation.

At December 31, 2000, the Company had net operating loss carryforwards
  ("NOLs") of approximately RMB2,292 million for U.S. income tax purposes.

6.   TRADE RECEIVABLES                                                          

                                                                [Download Table]

                                       1999      2000 
                                        RMB       RMB 
                                                      
Trade receivables                    68,996    70,199 
Less: Provision for doubtful debts  (12,128)  (12,128)
                                    -------   ------- 

                                     56,868    58,071 
                                    =======   ======= 

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ASIA FIBER HOLDINGS LIMITED AND SUBSIDIARIES                                    

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS                                      

(Amounts in thousands except share and per share data)                          

6.   TRADE RECEIVABLES (continued)                                              

                                                                [Download Table]


                                             Year ended    Year ended    Year ended
                                           December 31,  December 31,  December 31,
                                                   1998          1999          2000
                                                    RMB           RMB           RMB
                                                                                   
Movement of provision for doubtful debts:                                          
   Balance at beginning of year                       -             -        12,128
   Provision for the year                             -        12,128             -
                                                 ------        ------        ------

Balance at end of year                                -        12,128        12,128
                                                 ======        ======        ======

7.   INVENTORIES                                                                

                                                                [Download Table]

                                   1999     2000 
                                    RMB      RMB 
                                                 
Raw materials                    21,453    3,926 
Work in progress                  2,480    6,695 
Finished goods                    4,763   18,139 
                                 ------   ------ 
                                 28,696   28,760 

Less: Provision for inventories  (1,907)    (393)
                                 ------   ------ 

                                 26,789   28,367 
                                 ======   ====== 

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ASIA FIBER HOLDINGS LIMITED AND SUBSIDIARIES                                    

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS                                      

(Amounts in thousands except share and per share data)                          

8.   FIXED ASSETS                                                               

                                                                [Download Table]


                                       1999      2000 
                                        RMB       RMB 
                                                      
Cost:                                                 
    Plant, machinery and equipment  188,226   188,803 
    Motor vehicles                    1,418     1,418 
                                    -------   ------- 
                                    189,644   190,221 

Accumulated depreciation            (56,002)  (69,569)
                                    -------   ------- 

Net book value                      133,642   120,652 
                                    =======   ======= 

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ASIA FIBER HOLDINGS LIMITED AND SUBSIDIARIES                                    

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS                                      

(Amounts in thousands except share and per share data)                          

9.  COMMON STOCK AND ADDITIONAL PAID-IN CAPITAL                                 

As of January 24, 2000, 597,133 shares of common stock of par value of
US$0.01 each were outstanding to the then existing shareholders of the
Company.                                                              

    As of the same date, 8,757,951 shares of common stock of par value US$0.01
   each were allotted to the then shareholders of FB pursuant to the Reverse
 Acquisition set out in note 1 to the consolidated financial statements.

     As of the same date, 597,133 shares of common stock of par value of US$0.01
    each were allotted to the financial advisor as the return for the services
rendered for the Reverse Acquisition. Such shares of common stock are 
stated at market value as at the date of issuance.                    

On March 1, 2001, the Company announced a 2.5 for 1 stock split of its
shares of common stock.                                               

10.  RELATED PARTY BALANCES AND TRANSACTIONS                                    

   The Group's amounts due from/to related companies owned and/or controlled
by HLG comprise:                                                      

                                                                [Download Table]

                                                      1999     2000
                                                       RMB      RMB
                                                                   
Due from related companies:                                        
    Heilongjiang North Chemical Fiber Company                      
        ("North Chemical")                          10,503        -
    Heilongjiang Longdi Economic Trading Co. Ltd.   18,058    4,268
    Harbin Hua Jia Construction Materials Co. Ltd.     600      600
    Heilongjiang Longdi Weaving Factory                  -      316
                                                   -------  -------

                                                    29,161    5,184
                                                   =======  =======

Due from a minority joint venture partner - HLG    261,070  359,762
                                                   =======  =======

Due to related companies:                                          
    Heilongjiang Dragon Rising Chemical Fiber                      
        Company ("Dragon Rising")                    8,488   35,017
    Heilongjiang Dragon Flying Chemical Fiber                      
        Company ("Dragon Flying")                    1,816   23,983
    North Chemical                                       -   13,481
    Heilongjiang Longdi Staff's Family Members                     
        Factory ("Factory")                          1,794        -
                                                   -------  -------

                                                    12,098   72,481
                                                   =======  =======

Except for the balance with HLG which bears interest at the prevailing
  3-month bank loans interest rate in the PRC, the balances with the above
related companies and a director are unsecured and interest-free. The 
average interest rate charged by HLG for current year is 5.36% (1999: 
6.12%).                                                               

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ASIA FIBER HOLDINGS LIMITED AND SUBSIDIARIES                                    

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS                                      

(Amounts in thousands except share and per share data)                          

11.  RELATED PARTY BALANCES AND TRANSACTIONS (continued)                        

A significant portion of transactions undertaken by the Group has been
     effected with HLG and companies owned and/or controlled by HLG, as follows:

(a)  PURCHASES OF POLYESTER CHIPS                                     

          Pursuant to a purchase agreement dated January 10, 1996 between Longdi
         and Asibao, Longdi agreed to guarantee the supply of polyester chips,
    to Asibao at a 5% - 10% discount to the prevailing market prices
        offered to other purchasers of polyester chips with a first right of
          refusal to Asibao. The discount was agreed based on mutual negotiation
     and after taking into account the savings in transportation costs
 (excluding packaging costs) and wastage on transportation. In
     addition, an additional 3% discount was also granted by Longdi to
       allow for savings of packaging materials as a result of the reduced
         distance of transportation. The polyester chips purchased from Longdi
        or its subsidiary, Harbin Long Xing Chemical Fiber Co. Ltd., through
  HLG in 2000 amounted to RMB341,899 (1999: RMB239,053 and 1998:
RMB260,247).                                                

(b)  LEASE OF FACTORIES AND OFFICE BUILDINGS                          

          Pursuant to the supplementary Restructuring Agreement, as amended, HLG
   agreed to lease to Asibao the factories and office buildings in
          Harbin, the PRC commencing on January 1, 1996. The rental agreement is
      for a period of 15 years at an annual rental of RMB1,004, which is
       adjustable, based on further mutual negotiation, every three years.

   (c)  Other transactions with related companies are summarized as follows:

                                                        [Enlarge/Download Table]

                                              Year ended     Year ended     Year ended 
                                            December 31,   December 31,   December 31, 
                                                    1998           1999           2000 
                                                     RMB            RMB            RMB 
                                                                                       
Sales of finished goods to HLG                     7,146         15,245         54,705 
Sales of finished goods to Dragon Rising           2,889          2,667          1,959 
Sales of finished goods to North  Chemical             -              -          4,473 
Sales of finished goods to Factory                   326              -              - 
Sales of finished goods to Heiongjiang                                                 
    Longdi Packaging Co. Ltd.                          -              -          2,880 
Sales of fixed assets to HLG                           -         47,218              - 
Interest income charged to HLG                     5,242          8,360         19,583 
Purchase of raw materials from HLG               (14,794)        (6,522)       (37,813)
Purchase of raw materials                                                              
    from Dragon Rising                                 -         (1,581)          (267)
Purchase of finished goods                                                             
   from Dragon Flying                                  -         (2,877)        (5,380)
Purchase of finished goods from HLG                    -        (15,467)        (8,928)
Utilities charged by HLG                         (23,941)       (26,409)       (27,431)
                                                 =======        =======        ======= 

(d)  Amount due to a director represents amount paid by a director on 
     behalf of the Group and the unpaid director's salary. This amount
has no stated repayment term and is interest-free.          

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ASIA FIBER HOLDINGS LIMITED AND SUBSIDIARIES                                    

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS                                      

(Amounts in thousands except share and per share data)                          

12.  SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION                           

                                                                [Download Table]


                                  Year ended    Year ended    Year ended
                                December 31,  December 31,  December 31,
                                        1998          1999          2000
                                         RMB           RMB           RMB
                                                                        
Cash paid during the year for:                                          
    Interest expenses                 16,129        13,495        11,452
                                      ======        ======        ======

    Income taxes paid                  1,900         2,000         3,886
                                      ======        ======        ======

13.  RESERVES AND DISTRIBUTION OF PROFITS                                       

The Company's ability to pay dividends is primarily dependent on the  
    Company receiving distributions from its subsidiary, Asibao. In accordance
with the relevant PRC regulations and the articles of association of  
Asibao, appropriations of the net income as reflected in its statutory
financial statements will be allocated to each of the general reserve,
enterprise expansion reserve and staff bonus and welfare reserve,     
 respectively, as determined by the resolution of the board of directors
annually.                                                             

The appropriations to general reserve and enterprise expansion reserve
    attributable to the Company totalling RMB19,451 were reflected as reserves
     in the consolidated balance sheet as at December 31, 2000 (1999: 15,845 and
1998: RMB11,637).                                                     

The staff bonus and welfare reserve are set aside for the provision of
   bonus and welfare benefits to the employees of Asibao. In accordance with
 US GAAP, the amounts designated for payments of staff bonus and welfare
  benefits to employees have been charged to income before arriving at the
    net consolidated income. The staff bonus and welfare benefits to employees
  charged to the statement of income amounted to RMB515 for the year ended
December 31, 2000 (1999: RMB601 and 1998: RMB539).                    

  As described in note 2 to the consolidated financial statements, the net
  income as reported in the US GAAP financial statements differs from that
reported in the statutory financial statements. In accordance with the
relevant laws and regulations in the PRC, the profits available for   
   distribution are based on the statutory financial statements. At December
     31, 2000, the Group's share of the distributable profits of Asibao amounted
to RMB175,584 (1999: RMB143,486).                                     

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ASIA FIBER HOLDINGS LIMITED AND SUBSIDIARIES                                    

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS                                      

(Amounts in thousands except share and per share data)                          

14.  COMMITMENTS AND CONTINGENCIES                                              

As at December 31, 2000, the Group had the following commitments:     

  (i)  The future minimum payments under the operating leases with HLG for
        factories and office buildings located in the PRC for a period of 15
years commencing on January 1, 1996 are as follows:         

                                                                [Download Table]

                                              RMB
                                                 
Payable in:                                      
    2001                                    1,004
    2002                                    1,004
    2003                                    1,004
    2004                                    1,004
    2005                                    1,004
    Thereafter                              5,020
                                           ------

Total minimum lease payments               10,040
                                           ======

         Rental expense under the operating leases for the year ended December
      31, 2000 amounted to RMB1,004 (1999: RMB1,004 and 1998: RMB1,004).

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ASIA FIBER HOLDINGS LIMITED AND SUBSIDIARIES                                    

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS                                      

(Amounts in thousands except share and per share data)                          

15.  FOREIGN CURRENCY EXCHANGE                                                  

RMB is not freely convertible into foreign currencies.                

   Effective from January 1, 1994, a single rate of exchange is quoted daily
     by the People's Bank of China (the "Exchange Rate"). However, this does not
 imply convertibility of RMB into United States dollars ("US$") or other
foreign currencies. All foreign exchange transactions continue to take
    place either through the Bank of China or other institutions authorized to
buy and sell foreign currencies at the exchange rates quoted by the   
   People's Bank of China. Approval of foreign currency payments by the Bank
  of China or other institutions requires submitting a payment application
form together with suppliers' invoices, shipping documents and signed 
contracts.                                                            

    The Exchange Rates at December 31, 1998, 1999 and 2000 were US$1: RMB8.28,
US$1: RMB8.27 and US$1: RMB8.27, respectively.                        

16.  FAIR VALUE OF FINANCIAL INSTRUMENTS                                        

The carrying amounts of the Group's cash and cash equivalents, trade  
   receivables, bills receivable and accounts payable approximate their fair
value because of their short maturity period.                         

     The carrying amounts of the balances with a minority joint venture partner,
     directors and related companies are reasonable estimates of the fair values
due to the short maturity of these assets and liabilities.            

It was not practicable to estimate the fair values of the Group's cost
   method investment in non-traded investments because of the lack of quoted
   market prices and the inability to estimate fair values without incurring
 excessive costs. The carrying amounts of RMB13,995 at December 31, 2000
 represent the Group's best estimates of current economic values of this
investment.                                                           

   The carrying amounts of the bank loans approximate their fair value based
on the borrowing rates currently available for bank loans with similar
terms and average maturity.                                           

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ASIA FIBER HOLDINGS LIMITED AND SUBSIDIARIES                                    

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS                                      

(Amounts in thousands except share and per share data)                          

17.  CONCENTRATION OF CREDIT RISKS                                              

The financial instruments which potentially subject the Group to a    
significant concentration of credit risk consist are principally the  
following:                                                            

(i)  Cash deposits                                                    

          The Group places its cash deposits with various PRC State-owned banks.

(ii) Trade receivables                                                

        The Group manufactures and sells synthetic fiber products to garment
        manufacturers in the PRC. Concentration of credit risks with respect
       to trade receivables is limited due to the large number of entities
comprising the Group's customer base.                       

         Management considers that the Group's current customers are generally
     creditworthy and credit is extended based on an evaluation of the
        customers' financial conditions and, therefore, generally collateral
is not required.                                            

        As of December 31, 2000, trade receivables totalled RMB58,071 (1999:
RMB56,868) and are generally due within 60 days.            

(iii) Bills receivable                                                  

         As of December 31, 2000, bills receivable amounted to RMB6,889 (1999:
         RMB1,300) and their collectability was guaranteed by banks. The bills
   receivable have normal terms of maturity of four to six months.

(iv) Due from related companies                                       

       The balances due from related companies include the advances to and
trade receivables from related companies.                   

     The Group does not require collateral and all of the balances are
unsecured.                                                  

(v)  Due from a minority joint venture partner                        

      The balance due from a minority joint venture partner includes the
       advances to HLG less the amounts payable to HLG for purchase of raw
materials and utilities.                                    

     The Group does not require collateral and all of the balances are
unsecured.                                                  

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ASIA FIBER HOLDINGS LIMITED AND SUBSIDIARIES                                    

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS                                      

(Amounts in thousands except share and per share data)                          

18.  CURRENT VULNERABILITY DUE TO CERTAIN CONCENTRATIONS                        

  The Group's operating assets and primary source of income and cash flows
are located in the PRC, and may be adversely affected by significant  
   political, economic and social uncertainties in the PRC. Although the PRC
government has been pursuing economic reform policies for the past 22 
   years, no assurance can be given that the PRC government will continue to
pursue such policies or that such policies may not be significantly   
altered, especially in the event of a change in leadership, social or 
political disruption or unforeseen circumstances affecting the PRC's  
    political, economic and social conditions. There is also no guarantee that
the PRC government's pursuit of economic reforms will be consistent or
effective.                                                            

The Group is dependent on HLG and its subsidiaries for providing      
substantially all of the supply of polyester chips and some auxiliary 
 materials. While Asibao has entered into an agreement with Longdi which
    requires Long Xing, an associated company of HLG, to prioritize allocation
     of polyester chips in favor of Asibao, there can be no assurances that this
    agreement will result in continued allocations of satisfactory supplies of
polyester chips.                                                      

   Currently, a large proportion of the Group's revenue comes from the sales
     of synthetic fiber products manufactured in the PRC, which is vulnerable to
an increase in the level of competition or a change in the supply and 
demand relationship in the synthetic fiber industry in the PRC.       

19.  SEGMENT FINANCIAL INFORMATION                                              

The Group is engaged in the manufacture and sale of synthetic fiber   
   products. Its assets, operations and customer base are principally within
the PRC.                                                              

20.  SUMMARIZED QUARTERLY DATA (UNAUDITED)                                      

The following financial information reflects all normal recurring     
  adjustments that are, in the opinion of management, necessary for a fair
statement of the results of the interim periods. Summarized quarterly 
data for fiscal 2000 and 1999 is as follows (Amounts in thousands,    
except per share data):                                               

                                                                [Download Table]

                                1st quarter  2nd quarter  3rd quarter  4th quarter
                                        RMB          RMB          RMB          RMB

                                                                                  
2000                                                                              
Revenue                           104,676      154,132      156,664      123,021  
Gross profit/(loss)(1)             23,342       20,234       (7,003)      26,014  
Operating income/(loss)(1)         (1,240)      17,087       (8,660)      25,681  
Net income/(loss)(1)               (7,758)      10,768       (5,831)      15,361  
Basic and diluted net earnings                                                    
   /(loss) per common share(3)      (0.34)        0.43        (0.23)        0.62  

1999                                                                              
Revenue                           104,278       64,577      139,543      143,820  
Gross profit                       19,172        7,142       22,311       39,419  
Operating income/(loss)(2)          9,232       (1,209)      15,985       30,108  
Net income/(loss)(2)                6,367         (945)      11,154       19,971  
Basic and diluted net earnings                                                    
   /(loss) per common share(3)       0.29        (0.04)        0.51         0.91  

(1)  The operating loss and net loss for the first quarter was restated due     
   to inclusion of transaction costs in relation to the reverse acquisition.

The gross loss, operating loss and net loss in the third quarter was  
mainly attributable to an increase in purchase price of raw materials 
which was in turn resulted from the increase in oil price.            

(2)  The operating income and net income was comparatively lower in the first   
two quarters due to the effect of temporary suspension of a production
plant of polyester filaments from August 1998 to the third quarter of 
1999.                                                                 

(3)  Earning/(loss) per common share are computed independently for each        
quarter based on the respective average shares outstanding with       
  adjustment stated in note 1 to the financial statements.  Therefore, the
sum of the quarterly net earnings/(loss) per common share amounts may 
not equal to the annual amounts reported.                             

F-21

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Dates Referenced Herein and Documents Incorporated by Reference

		Referenced-On Page
This ‘10KSB40’ Filing	Date	First	Last	Other Filings

Filed on:	4/17/01	25
	3/30/01	1	13
	3/14/01	27	32
	3/1/01	32	41
	2/28/01	4
	2/26/01	4
	2/1/01	3
	1/31/01	27
For Period End:	12/31/00	1	46	10KSB/A, NT 10-K
	9/30/00	13		10QSB
	6/30/00	13		10QSB
	4/14/00	24		10KSB
	3/31/00	13		10QSB, NT 10-K, NT 10-Q
	3/14/00	5	32
	3/13/00	20
	1/24/00	2	41	3, 8-K
	12/31/99	13	45	10KSB, NT 10-K
	11/2/99	24		DEF 14A
	9/30/99	13		10QSB, NT 10-Q
	9/10/99	3	32
	6/30/99	13		10QSB, NT 10-Q
	3/31/99	13	22	10QSB, NT 10-Q
	2/19/99	4
	2/8/99	4
	12/31/98	13	45	10KSB, 10KSB/A, NT 10-K
	9/30/98	13		10QSB
	7/27/98	3	22
	6/30/98	13		10QSB, NT 10-Q
	5/18/98	22		10QSB
	4/14/98	3	22
	3/31/98	13		10QSB, 10QSB/A, NT 10-K, NT 10-Q
	1/1/98	4	35
	12/31/97	3	22	10KSB, 10KSB/A, NT 10-K
	9/11/96	4		5, 8-K
	9/10/96	3		8-K
	2/13/96	3
	2/8/96	3
	1/31/96	3
	1/10/96	11	42
	1/1/96	5	44
	10/18/95	5	32
	3/21/95	2	32
	2/9/95	3
	2/5/95	13
	12/7/94	3	13
	1/1/94	45
				List all Filings

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Filing Submission 0000912057-01-509110 – Alternative Formats (Word / Rich Text, HTML, Plain Text, et al.)

Asia Fiber Holdings Ltd – ‘10KSB40’ for 12/31/00

On: Tuesday, 4/17/01, at 1:22pm ET · For: 12/31/00 · Accession #: 912057-1-509110 · File #: 1-08334

Annual Report — Small Business — [x] Reg. S-B Item 405 — Form 10-KSBFiling Table of Contents

10KSB40 — Annual Report — Small Business — [x] Reg. S-B Item 405Document Table of Contents

Dates Referenced Herein and Documents Incorporated by Reference

Annual Report — Small Business — [x] Reg. S-B Item 405 — Form 10-KSB
Filing Table of Contents

10KSB40 — Annual Report — Small Business — [x] Reg. S-B Item 405
Document Table of Contents