<Page>
                                       FORM 20-F

[  ]     REGISTRATION STATEMENT PURSUANT TO SECTION 12(b) OR (g) OF THE
         SECURITIES EXCHANGE ACT OF 1934

                                       OR

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

For the fiscal year ended      DECEMBER 31, 2001
                         -------------------------------------------------------

                                       OR

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

For the transition period from _______________________ to_______________________

Commission file number       000-22113
                      ----------------------------------------------------------


                       EURO TECH HOLDINGS COMPANY LIMITED
--------------------------------------------------------------------------------
             (Exact name of Registrant as specified in its charter)

                       EURO TECH HOLDINGS COMPANY LIMITED
--------------------------------------------------------------------------------
                 (Translation of Registrant's name into English)

                             BRITISH VIRGIN ISLANDS
--------------------------------------------------------------------------------
                 (Jurisdiction of incorporation or organization)

          18/F GEE CHANG HONG CENTRE, 65 WONG CHUK HONG ROAD, HONG KONG
--------------------------------------------------------------------------------
                    (Address of principal executive offices)

Securities registered or to be registered pursuant to Section 12(b) of the Act.

                                                 Name of each exchange
         Title of each class                      on which registered
         -------------------                      -------------------


NOT APPLICABLE
------------------------------------      --------------------------------------

NOT APPLICABLE
------------------------------------      --------------------------------------

Securities registered or to be registered pursuant to Section 12(g) of the Act.

                          COMMON STOCK, $.01 PAR VALUE
--------------------------------------------------------------------------------
                                (Title of Class)

                    REDEEMABLE COMMON STOCK PURCHASE WARRANTS
--------------------------------------------------------------------------------
                                (Title of Class)

Securities for which there is a reporting obligation pursuant to Section 15(d)
of the Act.

--------------------------------------------------------------------------------
                                (Title of Class)


<Page>


         Indicate the number of issued and outstanding shares of each of the
issuer's classes of capital or common stock as of the close of the period
covered by the annual report.

                                  3,064,151 ORDINARY SHARES
                                  ----------------------------------------------

                                  WARRANTS TO PURCHASE 2,527,200 ORDINARY SHARES
                                  ----------------------------------------------

         Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.

                    Yes  |X|                        No  |_|


         Indicate by check mark which financial statement item the registrant
has elected to follow.

                    Item 17  |_|                    Item 18  |X|


(APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY PROCEEDINGS DURING THE PAST
FIVE YEARS)


         Indicate by check mark whether the registrant has filed all documents
and reports required to be filed by Sections 12, 13 or 15(d) of the Securities
Exchange Act of 1934 subsequent to the distribution of securities under a plan
confirmed by a court.

                    Yes  |_|                        No  |_|





<Page>

                                TABLE OF CONTENTS

<Table>
<S>             <C>                                                                                             <C>
INTRODUCTION....................................................................................................iii

GLOSSARY..........................................................................................................1

PART I............................................................................................................2

   ITEM 1.      IDENTITY OF DIRECTORS, SENIOR MANAGEMENT AND ADVISERS.............................................2
   ITEM 2.      OFFER STATISTICS AND EXPECTED TIMETABLE...........................................................2
   ITEM 3.      KEY INFORMATION...................................................................................2
     ITEM 3A.     SELECTED FINANCIAL DATA.........................................................................2
     ITEM 3B.     CAPITALIZATION AND INDEBTEDNESS.................................................................3
     ITEM 3C.     REASONS FOR THE OFFER AND USE OF PROCEEDS.......................................................3
     ITEM 3D.     RISK FACTORS....................................................................................3
   ITEM 4.      INFORMATION ON THE COMPANY.......................................................................13
     ITEM 4A.     HISTORY AND DEVELOPMENT OF THE COMPANY.........................................................13
     ITEM 4B.     BUSINESS OVERVIEW..............................................................................13
     ITEM 4C.     ORGANIZATIONAL STRUCTURE.......................................................................21
     ITEM 4D.     PROPERTY, PLANT AND EQUIPMENT..................................................................21
   ITEM 5.      OPERATING AND FINANCIAL REVIEW AND PROSPECTS.....................................................22
     ITEM 5A.     OPERATING RESULTS..............................................................................22
     ITEM 5B.     LIQUIDITY AND CAPITAL RESOURCES................................................................27
     ITEM 5C.     RESEARCH AND DEVELOPMENT, PATENTS AND LICENSES.................................................31
     ITEM 5D.     TREND INFORMATION..............................................................................31
     ITEM 5E.   SIGNIFICANT RELATED PARTY TRANSACTIONS...........................................................31
   ITEM 6.      DIRECTORS, SENIOR MANAGEMENT AND EMPLOYEES.......................................................31
     ITEM 6A.     DIRECTORS AND SENIOR MANAGEMENT................................................................31
     ITEM 6B.     COMPENSATION...................................................................................33
     ITEM 6C.     BOARD PRACTICES................................................................................40
     ITEM 6D.     EMPLOYEES......................................................................................40
     ITEM 6E.     SHARE OWNERSHIP................................................................................40
   ITEM 7.      MAJOR SHAREHOLDERS AND RELATED PARTY TRANSACTIONS................................................41
     ITEM 7A.     MAJOR SHAREHOLDERS.............................................................................41
     ITEM 7B.     RELATED PARTY TRANSACTIONS.....................................................................42
   ITEM 8.      FINANCIAL INFORMATION............................................................................42
     ITEM 8A.     CONSOLIDATED STATEMENTS AND OTHER FINANCIAL INFORMATION........................................42
     ITEM 8B.     SIGNIFICANT CHANGES............................................................................43
   ITEM 9.      THE OFFERING AND LISTING.........................................................................43
     ITEM 9A.     LISTING DETAILS AND 9.C PRINCIPAL TRADING MARKET...............................................43
     ITEM 9B.     PLAN OF DISTRIBUTION...........................................................................45
     ITEM 9C.     SELLING SHAREHOLDERS...........................................................................45
     ITEM 9D.     DILUTION.......................................................................................45
     ITEM 9E.     EXPENSES OF THE ISSUE..........................................................................45


                                       i
<Page>



   ITEM 10.     ADDITIONAL INFORMATION...........................................................................46
     ITEM 10A.    SHARE CAPITAL..................................................................................46
     ITEM 10B.    MEMORANDUM AND ARTICLES OF ASSOCIATION.........................................................49
     ITEM 10C.    MATERIAL AGREEMENTS............................................................................52
     ITEM 10D.    EXCHANGE CONTROLS..............................................................................52
     ITEM 10E.    TAXATION.......................................................................................53
     ITEM 10F.    DIVIDENDS AND PAYING AGENTS....................................................................53
     ITEM 10G.    STATEMENT BY EXPERTS...........................................................................53
     ITEM 10H.    DOCUMENTS ON DISPLAY...........................................................................53
     ITEM 10I.    SUBSIDIARY INFORMATION.........................................................................53
   ITEM 11.     QUANTITATIVE AND QUALIFICATION DISCLOSURES
                ABOUT MARKET RISK................................................................................54
   ITEM 12.     DESCRIPTION OF SECURITIES OTHER THAN EQUITY SECUIRITIES..........................................54

PART II..........................................................................................................55

   ITEM 13.     DEFAULTS, DIVIDENDS, ARREARAGES AND DELINQUENCIES................................................55
   ITEM 14.     MATERIAL MODIFICATION TO THE RIGHTS OF
                SECURITY HOLDERS AND USE OF PROCEEDS.............................................................55
   ITEM 15.     [RESERVED].......................................................................................55
   ITEM 16.     [RESERVED].......................................................................................55

PART III.........................................................................................................56

   ITEM 17.     FINANCIAL STATEMENTS.............................................................................56
   ITEM 18.     FINANCIAL STATEMENTS.............................................................................56
   ITEM 19.     EXHIBITS.........................................................................................57

SIGNATURES.......................................................................................................58
</Table>




                                       ii
<Page>

                                  INTRODUCTION

         In this Form 20-F, reference to "us", "we", the "Company" and
"EuroTech" are to EuroTech Holding Company Limited and its subsidiaries unless
otherwise expressly stated or the context otherwise requires

         FORWARD LOOKING STATEMENTS. This annual report contains forward looking
statements. Additional written or oral forward looking statements may be made by
the Company from time to time in filings with the Securities and Exchange
Commission (the "Commission") or otherwise. Such forward looking statements are
within the meaning of that term in Section 21E of the Exchange Act of 1934. Such
statements may include, but not be limited to, projections of revenues, income,
or loss, capital expenditures, plans for future operations, financing needs or
plans, and plans relating to products or services of the Company, as well as
assumptions relating to the foregoing. The words "believe," "expect,"
"anticipate," "estimate," "project," and similar expressions identify forward
looking statements, which speak only as of the date the statement was made.
Forward looking statements are inherently subject to risks and uncertainties,
some of which cannot be predicted or quantified. Future events and actual
results could differ materially from those set forth in, contemplated by, or
underlying the forward looking statements. Statements in this Annual Report,
including those contained in the sections entitled Part I, Item 3D. "Risk
Factors" and Item 5. "Operation and Financial Review and Prospects" and the
notes to the Company's Financial Statements, describe factors, among others,
that could contribute to or cause such differences.




                                      iii
<Page>

                                    GLOSSARY

         The following glossary of terms may be helpful in understanding the
terminology used in this Annual Report.

Ambient Air:                        Atmospheric air (outdoor as opposed to
                                    indoor air).

Colorimeter:                        An analytical instrument that measures
                                    substance concentration by color intensity
                                    when the substance reacts to a chemical
                                    reagent.

Flow Injection Analyzer:            An analytical instrument with a special
                                    sampling system that uses a continuous
                                    stream of reagent(s) into which fluid
                                    samples are injected.

pH Controller:                      A process instrument that measures and
                                    controls the acidity or alkalinity of a
                                    fluid.

Reagent:                            A chemical substance used to cause a
                                    chemical reaction and detect another
                                    substance.

Mass Spectrometer:                  An analytical instrument that separates and
                                    identifies chemical constituents according
                                    to their mass-to-charge ratios and is used
                                    to identify organic compounds.

Multi-Channel Digital Recorder:     A device that measures and records more than
                                    one input of a digitized signal (signal in
                                    the form of pulses).

Multi-Channel and Analogue
Recorder:                           A device that measures and records more than
                                    one input of a signal in multi-voltage or
                                    milliampere (e.g. temperature in degrees
                                    Centigrade or degrees Fahrenheit).

Atomic Spectrometer:                An analytical instrument used to measure the
                                    presence of an element in a substance by
                                    testing a sample which is aspirated into a
                                    flame and atomized. The amount of light
                                    absorbed or emitted is measured. The amount
                                    of energy absorbed or emitted is
                                    proportional to the concentration of the
                                    element in the sample.

Process Analyzer:                   An analyzer that continuously samples,
                                    monitors and measures fluids or gases.

Process Turbidimeter:               An analytical instrument that continually
                                    measures the clarity of water based on light
                                    scattering or deflection.

Total Organic Carbon Analyzer:      An analytical instrument that measures
                                    organic contamination in water.


                                       1
<Page>

                                     PART I

ITEM 1.  IDENTITY OF DIRECTORS, SENIOR MANAGEMENT AND ADVISERS

         Not applicable.


ITEM 2.  OFFER STATISTICS AND EXPECTED TIMETABLE

         Not applicable.


ITEM 3.  KEY INFORMATION

ITEM 3A. SELECTED FINANCIAL DATA

                         SELECTED FINANCIAL INFORMATION
                     (Amounts expressed in thousands, except
              share and per share data and unless otherwise stated)

         The selected income statement data for years ended December 31, 1999,
2000 and 2001, and the selected balance sheet data as of December 31, 2000 and
2001 set forth below are derived from audited financial statements of the
Company and should be read in conjunction with, and are qualified in their
entirety by reference to such financial statements, including the notes thereto
and Item 5. "Operating and Financial Review and Prospects." The selected income
data for the years ended December 31, 1997 and 1998 and the selected balance
sheet data as of December 31, 1997, 1998 and 1999 set forth below are derived
from audited financial statements of the Company which are not included herein.

<Table>
<Caption>

                                                                   AS OF DECEMBER 31,

                                           --------------------------------------------------------------------
                                                 1997          1998         1999          2000         2001
                                                 ----          ----         ----          ----         ----
                                                 US$           US$          US$           US$          US$
<S>                                               <C>            <C>          <C>          <C>           <C>
BALANCE SHEET DATA:
Cash and cash equivalents                         2,539          3,045        3,691        3,963         3,551
Working capital(1)                                3,292          3,493        3,632        3,686         4,123
Total assets                                      8,084          8,559        9,637       10,092        11,379
Short-term debt(2)                                   75             68           85           94            90
Long-term bank loans                                329            260          178           92             0
Net assets                                        4,972          5,194        5,533        5,878         6,206
</Table>

---------------------
(1)  Current assets minus current liabilities.
(2)  Short-term debt includes short-term borrowings and current portion of
     long-term bank loans.



                                       2
<Page>

<Table>
<Caption>

                                              FOR THE YEAR ENDED DECEMBER 31,
                        --------------------------------------------------------------------------
                              1997           1998           1999           2000             2001
                              ----           ----           ----           ----             ----
                               US$           US$            US$             US$             US$
<S>                         <C>             <C>             <C>             <C>             <C>
INCOME STATEMENT DATA:

Net sales .........         12,510          12,757          13,107          15,010          19,685
Cost of goods sold          (9,399)         (9,662)         (9,896)        (11,467)        (15,396)
                        ----------      ----------      ----------      ----------      ----------

Gross profit ......          3,111           3,095           3,211           3,543           4,289

Selling and
Administrative
Expenses ..........         (2,812)         (2,924)         (2,946)         (3,301)         (3,734)
                        ----------      ----------      ----------      ----------      ----------
Operating income ..            299             171             265             242             555
Interest (expenses)
Income, net .......             18              86              85             113              66
Other income, net .            183              69              67              97             126
                        ----------      ----------      ----------      ----------      ----------
Income before taxes            500             326             417             452             747
Income taxes ......            (62)            (71)            (78)            (94)           (163)
                        ----------      ----------      ----------      ----------      ----------

Net income ........            438             255             339             358             584
                        ==========      ==========      ==========      ==========      ==========

Net income per
Ordinary Share
Basic..............           0.15            0.08            0.11            0.11            0.18
Diluted............           0.15            0.08            0.11            0.11            0.18
Weighted average
Number of
Ordinary Shares
Outstanding .......      2,945,280       3,226,366       3,226,366       3,226,366       3,226,366
</Table>

Currency exchange rates as of the date of this Report are:

               US$1 = HK $7.8
               US$1 = RMB 8.3

ITEM 3B.       CAPITALIZATION AND INDEBTEDNESS

         Not applicable.

ITEM 3C.       REASONS FOR THE OFFER AND USE OF PROCEEDS

         Not applicable.

ITEM 3D.       RISK FACTORS

         You should carefully consider all of the information set forth in this
annual report and the following risk factors. The risks below are not the only
ones we face. Additional risks not currently known by us or that we deem
immaterial may also impair our business operations. Our business,


                                       3
<Page>

financial condition or results of operations could be materially adversely
affected by any of these risks. This annual report also contains forward looking
statements that involve risks and uncertainties. Our results could materially
differ from those anticipated in these forward looking statements as a result of
certain factors, including the risks we face as described below and elsewhere.
See "Forward Looking Statements."

CERTAIN RISKS RELATING TO DOING BUSINESS IN HONG KONG AND PRC.

PRC SOVEREIGNTY OVER
HONG KONG STILL DEVELOPING          o       The Company's executive and
                                            principal offices are located in
                                            Hong Kong, a Special Administrative
                                            Region of China (an "SAR"; Hong Kong
                                            is sometimes herein referred to as
                                            the "Hong Kong SAR").

                                    o       As provided in the Sino-British
                                            Joint Declaration on the Question of
                                            Hong Kong (the "Joint Declaration")
                                            and the Basic Law of the Hong Kong
                                            SAR of China (the "Basic Law"), the
                                            Hong Kong SAR is provided a high
                                            degree of autonomy except in foreign
                                            and defense affairs. Based on the
                                            current political conditions and the
                                            Company's understanding of the Basic
                                            Law, the Company does not believe
                                            that the transfer of sovereignty
                                            over Hong Kong has had an adverse
                                            impact on its financial and
                                            operating environment.

                                    o       The Company's results of operations
                                            and financial condition may be
                                            influenced by the political
                                            situation in Hong Kong and by the
                                            general state of the Hong Kong
                                            economy. See " - Economic
                                            Instability; Currency Exchange
                                            Rate."

                                    o       There can be no assurance that these
                                            past or any prospective future
                                            changes in political or other
                                            conditions will not result in a
                                            material adverse affect upon the
                                            Company.

ECONOMIC INSTABILITY;
CURRENCY EXCHANGE RATE              o       Most economies in the Far East are
                                            suffering from large debts,
                                            declining company earnings and
                                            economic growth, and significant
                                            currency devaluation. The region has
                                            also suffered from the effects of
                                            the resulting capital flight from
                                            financial institutions.

                                    o       On June 22, 1998, the Hong Kong
                                            Chief Executive announced an
                                            immediate freeze on new government
                                            land sales through April 22, 1999 in
                                            an attempt to stabilize property
                                            prices which have on average fallen
                                            approximately 43% from their 1997
                                            peak, and ease tightening credit.
                                            Financial institutions could face
                                            additional pressure from


                                       4
<Page>

                                            possible defaults on loans made for
                                            property. Issuer stock valuations
                                            also dropped sharply from a 1997
                                            high on the main Hong Kong stock
                                            index (the Hang Seng). On August 7,
                                            1997, the Hang Seng Index was
                                            16,673.27. On June 20, 2002, that
                                            index stood at 10,754.41. There can
                                            be no assurance that these problems
                                            will not continue to abate or worsen
                                            or that recovery will continue in
                                            the near future in which event the
                                            Company may likely be materially
                                            adversely affected.

ECONOMY MAY
BE UNSTABLE                         o       Unlike many other countries'
                                            economies, the People's Republic of
                                            China (the "PRC") government's
                                            economic philosophy is based upon a
                                            "planned" economy model as opposed
                                            to a "free enterprise" or
                                            "capitalist" model with moderate
                                            government regulation which is the
                                            typical model in most developed,
                                            Western nations. For more than forty
                                            years, the PRC economy has been, and
                                            presently continues to be, a
                                            socialist economy operating under
                                            government controls promulgated
                                            under various one-, five- and
                                            ten-year plans (collectively, "State
                                            Plans") adopted by central Chinese
                                            government authorities and
                                            implemented, to a large extent, by
                                            provincial and local authorities
                                            which may set production and
                                            development targets.

                                    o       Since approximately the early 1980s
                                            the Chinese government has
                                            implemented certain policies that
                                            emphasize decentralization of
                                            decision-making power and
                                            responsibility with respect to
                                            matters such as allocation of funds
                                            and the regionalization of economic
                                            development, reduce the role of
                                            government planning and permit some
                                            utilization of market forces in the
                                            development of its economy. Such
                                            economic reform measures or other
                                            policies, if continued, may be
                                            inconsistent, ineffectual, or
                                            discontinued at any time with or
                                            without notice, and the Company may
                                            not be able to benefit from any or
                                            all such reforms or policies.

                                    o       The success of the Company's
                                            activities in the PRC depends on the
                                            Company's continued ability to
                                            overcome circumstances specifically
                                            affecting the industrial sector,
                                            including the relatively poor
                                            infrastructure, road transportation
                                            and communications network and an
                                            uncertain legal and regulatory
                                            environment.


                                       5
<Page>

ECONOMIC REFORMS MAY
NOT CONTINUE OR IMPACT
POSITIVELY ON THE
COMPANY; CHANGING
BUSINESS ENVIRONMENT                o       During much of the past twenty
                                            years, the PRC has been reforming
                                            its economic and political systems
                                            in the direction of a more "free
                                            market" economy. Many of the reforms
                                            are unprecedented for the PRC and
                                            can be expected to be refined and
                                            readjusted. This refinement and
                                            readjustment process may not always
                                            have a positive effect on the
                                            Company.

                                    o       The Company's results at times may
                                            also be adversely affected by:

                                            o   changes in political, economic
                                                and social conditions in the
                                                PRC;
                                            o   by changes in government
                                                policies such as changes in laws
                                                and regulations (or their
                                                interpretation);
                                            o   the introduction of additional
                                                measures to control inflation;
                                            o   changes in the rate or method of
                                                taxation;
                                            o   imposition of additional
                                                restrictions on currency
                                                conversion remittances abroad;
                                            o   reduction in tariff protection
                                                and other import restrictions;
                                            o   a return to the more
                                                centrally-planned economy that
                                                existed prior.

UNEVEN ECONOMIC
GROWTH                              o       The PRC's economy has experienced
                                            significant growth in recent years,
                                            but that growth has been uneven
                                            among various geographic regions and
                                            economic sectors. Economic reforms
                                            and growth in the PRC have been more
                                            successful in certain provinces than
                                            in others, and the continuation or
                                            increase of such disparities could
                                            adversely affect political or social
                                            stability.

PRC INFLATION                       o       The PRC has recently experienced
                                            substantial rates of inflation,
                                            although inflation has declined in
                                            the most recent years. The PRC
                                            government's measures to restrain
                                            inflation have had a significant
                                            adverse impact on the Company in the
                                            past and more measures in this
                                            regard or other actions by the PRC
                                            government could materially and
                                            adversely affect the Company, its
                                            business and results of operations.
                                            See - "Adverse Impact upon Company
                                            of PRC's Credit Restrictions."


                                       6
<Page>

REGIONAL ECONOMIC
PROBLEMS                            o       Most economies in the Far East have
                                            suffered from large debts, declining
                                            company earnings and economic
                                            growth, and significant currency
                                            devaluation. The region has also
                                            suffered from the effects of the
                                            resulting capital flight on
                                            financial institutions. These
                                            problems may materially adversely
                                            affect political and economic
                                            conditions in Hong Kong and the PRC.
                                            There can be no assurance that such
                                            problems will abate or become worse,
                                            or continue for a protracted period,
                                            or that recovery will occur in the
                                            near future, if at all, in which
                                            event the Company may likely be
                                            materially adversely affected.

UNCERTAIN LEGAL SYSTEM
AND APPLICATION OF LAWS             o       The legislative trend in the PRC
                                            over the past decade has been to
                                            enhance the protection afforded to
                                            foreign investment and allow for
                                            more active control by foreign
                                            parties of foreign invested
                                            enterprises. There can be no
                                            assurance that this will continue.
                                            In addition, as the PRC economy,
                                            business and commercial framework
                                            and legal system all continue to
                                            develop, that development may
                                            adversely affect the Company's
                                            activities in the PRC or the ability
                                            of the Company to enter into
                                            Sino-foreign agreements.

PRC LEGAL SYSTEM
BUSINESS LAWS DEVELOPING            o       The PRC does not yet possess a
                                            comprehensive body of business law
                                            or a consolidated body of laws
                                            governing foreign investment
                                            enterprises. As a result, the
                                            enforcement, interpretation and
                                            implementation of existing laws,
                                            regulations or agreements may be
                                            sporadic, inconsistent and subject
                                            to considerable discretion. The
                                            PRC's judiciary has not had
                                            sufficient opportunity to gain
                                            experience in enforcing laws that
                                            exist, leading to a higher than
                                            usual degree of uncertainty as to
                                            the outcome of any litigation. As
                                            the legal system develops, entities
                                            such as the Company may be adversely
                                            affected by new laws, changes to
                                            existing laws (or interpretations
                                            thereof) and preemption of
                                            provincial or local laws by national
                                            laws. Even when adequate law exists
                                            in the PRC, it may not be possible
                                            to obtain speedy and equitable
                                            enforcement of the law.


                                       7
<Page>

GOVERNMENT CURRENCY
CONTROLS                            o       The PRC government imposes control
                                            over its foreign currency reserves
                                            in part through direct regulation of
                                            the conversion of its currency,
                                            Renminbi ("Rmb") into foreign
                                            exchange and through restrictions on
                                            foreign imports. The conversion of
                                            Rmb into Hong Kong and United States
                                            Dollars must be based on rates set
                                            by the People's Bank of China
                                            ("PBOC"), which rates are set daily
                                            based on the previous day's Chinese
                                            interbank foreign exchange market
                                            rate with reference to current
                                            exchange rates on the world
                                            financial markets.

                                    o       The official Rmb to U.S. dollar
                                            exchange rate declined from Rmb3.73
                                            to US$1.00 at the beginning of 1989
                                            to Rmb5.81 to US$1.00 at the end of
                                            1993. In 1993, there was significant
                                            volatility in the swap rate of Rmb
                                            to U.S. dollars, and there was a
                                            significant devaluation in the
                                            exchange rate on January 1, 1994, to
                                            Rmb 8.70 to U.S.$1.00, in connection
                                            with the abolition of the official
                                            exchange rate and implementation of
                                            the new managed floating rate
                                            foreign exchange system.

                                    o       Although the Rmb to U.S. dollar
                                            exchange rate has generally been
                                            stable since January 1, 1994 and the
                                            PRC government has stated its
                                            intention to intervene in the future
                                            to support the value of the Rmb,
                                            there can be no assurance that
                                            exchange rates will not again become
                                            volatile or that the Rmb will not
                                            devalue further against the U.S.
                                            dollar or Hong Kong dollar. Exchange
                                            rate fluctuations may adversely
                                            affect the Company because of
                                            foreign currency denominated
                                            liabilities, and may materially
                                            adversely affect the value,
                                            translated into U.S. dollars, of the
                                            Company's net fixed assets situated
                                            and to be situated in the PRC,
                                            earnings and dividends.

TURBULENT RELATIONS
WITH THE UNITED STATES              o       PRC's political relations with the
                                            United States temporarily
                                            deteriorated following the
                                            accidental bombing of the Chinese
                                            Embassy in Belgrade, Yugoslavia, in
                                            May 1999 and again following the
                                            collision of a U.S. EP-3
                                            reconnaissance aircraft and a
                                            Chinese fighter in international
                                            airspace in April 2001. Bilateral
                                            relations have gradually recovered
                                            from both incidents, though
                                            differences between the United
                                            States and PRC governments on some
                                            political issues continue
                                            occasionally to color the
                                            relationship.


                                       8
<Page>

CERTAIN RISKS RELATING TO COMPANY'S BUSINESS.


PAST INVESTMENTS                    o       The Company has from time to time
IN REAL ESTATE                              invested in real estate in Hong
                                            Kong. Although the Company has
                                            derived past profits from some of
                                            its investments in Hong Kong real
                                            estate, there can be no assurance
                                            that the Company will ever derive a
                                            profit from any future investments
                                            in Hong Kong realty. As a result of
                                            the recent transfer of sovereignty
                                            over Hong Kong from the United
                                            Kingdom to China, any investment in
                                            Hong Kong realty will be subject to
                                            the risks arising from that
                                            transfer, including but not limited
                                            to the possible appropriation of
                                            realty by the Chinese government. In
                                            addition, in Mid-1998 the Government
                                            of Hong Kong froze public land sales
                                            and dispositions of property through
                                            April 1999 in order to stabilize
                                            Hong Kong property values which had
                                            substantially declined from their
                                            peak in 1997. See Item 5. "Operating
                                            and Financial Review and Prospects."

DEPENDENCE
UPON MANAGEMENT                     o       The Company is dependent upon the
                                            services of its executive officers,
                                            in particular Mr. T.C. Leung, the
                                            Chairman of the Company's Board of
                                            Directors and its Chief Executive
                                            Officer. The business of the Company
                                            could be adversely effected by the
                                            loss of services of, or a material
                                            reduction in the amount of time
                                            devoted to the Company by its
                                            executive officers. Although the
                                            Company is the beneficiary of a "Key
                                            Person" life insurance policy in the
                                            amount of US$1,000,000 on the life
                                            of Mr. Leung, there can be no
                                            assurance that such coverage will be
                                            sufficient to compensate the Company
                                            for the loss of the services of Mr.
                                            Leung. See Item 6. "Directors,
                                            Senior Management and Employees."

ADVERSE IMPACT UPON
COMPANY OF PRC'S
CREDIT RESTRICTIONS                 o       The Company faces competition from
                                            other distributors of substantially
                                            similar products and manufacturers
                                            themselves, both foreign and
                                            Chinese. The Company faces its
                                            principal competition from foreign
                                            manufacturers and other distributors
                                            of their products situated in Hong
                                            Kong and the PRC. In 1994, the PRC
                                            tightened its credit nationwide and,
                                            as a result, the Company believes
                                            that purchasers of the


                                       9
<Page>

                                            products distributed by the Company
                                            sought reduced prices. The products
                                            distributed by the Company were
                                            foreign manufactured and higher
                                            priced than Chinese manufactured
                                            products. The Company reduced its
                                            sales prices and its profit margins
                                            to remain competitive.

COMPETITION WITH VENDORS            o       As the Company plans to assemble
                                            products of the kind that it
                                            presently distributes, the Company
                                            may directly compete with certain of
                                            its vendors. Any such direct
                                            competition may adversely affect its
                                            relationship with its vendors. See
                                            Item 4. "Information on the
                                            Company."

DEPENDENCE ON VENDORS;
LACK OF LONG
TERM AGREEMENTS                     o       The Company distributes supplies
                                            manufactured by a number of vendors,
                                            including Wallace & Tiernan Pacific
                                            Pty. Ltd. ("Wallace"), Hach Company,
                                            Inc. ("Hach"), Hioki E.E. Corp.
                                            ("Hioki") and ThermoQuest
                                            Corporation ("ThermoQuest"), which
                                            are the Company's largest suppliers.
                                            The Company has only a letter from
                                            Hioki appointing the Company as
                                            Hioki's sales representative in the
                                            PRC, Hong Kong and Macao, its
                                            agreements with each of Wallace and
                                            ThermoQuest are terminable on thirty
                                            days notice by either party prior to
                                            the renewal date and the agreement
                                            with Hach will expire in February
                                            2003. Although alternative
                                            sources of supply exist, there
                                            can be no assurance that the
                                            termination of the Company's
                                            relationship with any of the
                                            above or other vendors would not
                                            have a short-term adverse effect
                                            on the Company's operations due
                                            to the Company's dependence on
                                            these vendors.

CONTROL BY T.C. LEUNG POTEN-
TIAL CONFLICT OF INTERESTS          o       T.C. Leung, the Company's Chairman
                                            of the Board and Chief Executive
                                            Officer, as a practical matter, is
                                            able to nominate and cause the
                                            election of all the members of the
                                            Company's Board of Directors,
                                            control the appointment of its
                                            officers and the day-to-day affairs
                                            and management of the Company. As a
                                            consequence, Mr. Leung can have the
                                            Company managed in a manner that
                                            would be in his own interests and
                                            not in the interests of the other
                                            shareholders of the Company. See
                                            Item 7. "Major Shareholders and
                                            Related Party Transactions" and Item
                                            6. "Directors, Senior Management and
                                            Employees."


                                       10
<Page>

CERTAIN LEGAL CONSEQUENCES
OF INCORPORATION
IN THE BRITISH VIRGIN
ISLANDS; RIGHTS OF SHARE-
HOLDERS NOT AS EXTENSIVE
AS IN U.S. CORPORATIONS             o       Principles of British Virgin Islands
                                            ("BVI") corporate law relating to
                                            such matters as the validity of the
                                            Company procedures, the fiduciary
                                            duties of management and the rights
                                            of the Company's shareholders may
                                            differ from those that would apply
                                            if the Company were incorporated in
                                            a jurisdiction within the United
                                            States.

                                    o       The rights of shareholders under
                                            British Virgin Islands law are not
                                            as extensive as the rights of
                                            shareholders under legislation or
                                            judicial precedent in many United
                                            States jurisdictions. Under United
                                            States law, majority and controlling
                                            shareholders generally have certain
                                            "fiduciary" responsibilities to the
                                            minority shareholders. United States
                                            shareholder action must be taken in
                                            good faith and actions by
                                            controlling shareholders in a United
                                            States jurisdiction and executive
                                            compensation which are obviously
                                            unreasonable may be declared null
                                            and void.

                                    o       The BVI law protecting the interests
                                            of the minority shareholders is not
                                            as protective in all circumstances
                                            as the law protecting minority
                                            shareholders in United States
                                            jurisdictions. The shareholders of
                                            the Company may have more difficulty
                                            in protecting their interests in the
                                            face of actions by the Company's
                                            Board of Directors, and may have
                                            more limited rights, than they might
                                            have as shareholders of a company
                                            incorporated in many United States
                                            jurisdictions.

ANTI-TAKEOVER PROVISIONS            o       The Company has 5,000,000 shares of
                                            "blank check preferred stock"
                                            authorized. The "blank check
                                            preferred stock" is intended to
                                            strengthen the Company's ability to
                                            resist an unsolicited takeover bid
                                            and may be deemed to have an
                                            anti-takeover effect. The Board of
                                            Directors has the right to fix the
                                            rights, terms and preferences at the
                                            time of issue of "blank check
                                            preferred stock" without further
                                            action by our shareholders.


                                       11
<Page>

UNCERTAINTY OF
ENFORCING UNITED
STATES JUDGMENTS                    o       There is some uncertainty whether
                                            BVI courts would enforce judgments
                                            of the courts of the United States
                                            and of other foreign jurisdictions,
                                            or enforce actions brought in the
                                            BVI which are based upon the
                                            securities laws of the United
                                            States. A final monetary judgment
                                            obtained in the United States will
                                            be treated as a cause of action in
                                            itself by the BVI courts so that no
                                            retrial of the issues would be
                                            necessary, provided that material
                                            preconditions are met and the
                                            proceedings pursuant to which
                                            judgment was obtained were not
                                            contrary to the rules of natural
                                            justice.

                                    o       All of the Company's directors and
                                            executive officers reside outside of
                                            the United States, service of
                                            process upon the Company and such
                                            persons may be difficult to effect
                                            in the United States upon all such
                                            directors and officers.

                                    o       All of the Company's assets are and
                                            will be located outside of the
                                            United States, in Hong Kong and the
                                            PRC, and any judgment obtained in
                                            the United States may not be
                                            enforced in those jurisdictions.
                                            Hong Kong courts will not directly
                                            enforce against the Company or such
                                            persons judgments obtained in the
                                            United States. There is also
                                            substantial doubt as to the
                                            enforceability in the PRC of actions
                                            to enforce judgments of the United
                                            States' courts arising out of or
                                            based on the ownership of the
                                            securities offered hereby, including
                                            judgments arising out of or based on
                                            the civil liability provisions of
                                            United States federal or state
                                            securities laws or otherwise. See "-
                                            Certain Legal Consequences of
                                            Incorporation in the British Virgin
                                            Islands; Rights of Shareholders not
                                            as Extensive as in U.S.
                                            Corporations" and "- Uncertainty of
                                            Enforcing U.S. Judgments."


                                       12
<Page>

ITEM 4.        INFORMATION ON THE COMPANY

ITEM 4A.       HISTORY AND DEVELOPMENT OF THE COMPANY

         The Company was organized under the laws of the British Virgin Islands
on September 30, 1996 for the purposes of raising capital and for acquiring all
the outstanding capital stock of Euro Tech (Far East) Ltd., a Hong Kong
corporation ("Far East"). The Company successfully completed a public offering
("Public Offering") from which the Company received net proceeds of
approximately US$1,817,000, in March 1997. Pursuant to and concurrently with the
Public Offering, the Company acquired all the issued and outstanding capital
stock of Far East, and thereafter Far East became a wholly-owned subsidiary and
the primary operational tool of the Company. Far East was established in 1971
and has been in continuous operation since that time. See Item 5. "Operating and
Financial Review and Prospects." Far East engages in its core business of
distributing various equipment, instruments and supplies used in connection with
the treatment, analysis and testing of water and waste water.

         Prior to its incorporation, the businesses of the Company were engaged
in by Far East, which in 1997 was acquired by, and is now a wholly-owned
subsidiary of the Company. Far East was established in 1971, under the name of
Eurotherm (Far East) Ltd., as a subsidiary of a United Kingdom publicly traded
company, Eurotherm Ltd., to market and distribute its parent company's
industrial control equipment in Hong Kong and Southeast Asia, and expanded its
activities into the PRC in 1973. In the early 1980's, Far East began
distributing high-tech equipment manufactured in the United States, Europe and
Japan within the PRC, in addition to its distribution of its parent's products.
In 1988, the activities of the parent and Far East were separated into Eurotherm
International and Far East. In or around 1994, all the capital stock of Far East
was purchased by its management, principally T.C. Leung, the Company's Chairman
of the Board of Directors and Chief Executive Officer. Far East thereafter
changed its name from Eurotherm (Far East) Ltd. to its current name. See Item 7.
"Major Shareholders and Related Party Transactions."

         The Company used portions of the net proceeds of the Public Offering to
(a) establish an operation for the assembly of the type of products now
distributed by the Company, including certain water-related testing, monitoring
and treatment equipment (approximately US$200,000), (b) to expand its marketing
efforts by, among other things, opening additional regional sales offices in the
PRC (approximately US$200,000), (c) purchase equipment (approximately
US$135,000), (d) establish a subsidiary to develop and operate a B2B website
(approximately US$331,000), (e) repurchase securities from the underwriter of
the Company's Public Offering (approximately US$105,000), (f) pay expenses
incurred in seeking acquisition candidates and hiring an agent in the United
States (approximately US$170,000), (g) development costs of an Infrared
Photometric Oil Analyzer (approximately US$60,000), and (h) repurchase its
own Ordinary Shares in the open market (approximately US$237,000).

ITEM 4B.       BUSINESS OVERVIEW

         The Company is primarily a distributor of a wide range of advanced
water treatment equipment (including chlorination equipment), laboratory
instruments, analyzers, test kits and


                                       13
<Page>

related supplies. The Company acts as an exclusive and non-exclusive distributor
for well-known manufacturers of such equipment, primarily to commercial
customers and governmental agencies or instrumentalities in Hong Kong and the
PRC. The Company distributes products to more than 400 regular customers,
including the Hong Kong Environmental Protection Department, the Beijing
Hydrology station, China Light & Power Co., Ltd., Hong Kong Electric Co., Ltd.,
and the Kowloon-Canton Railway Corporation, China's National Environmental
Protection Agency, a joint venture between the China Great Wall Industry I/E
Corp. and Austria's Aqua Engineering to construct one of Beijing's water
treatment plants, and to subdistributors located in Hong Kong, the PRC and
Macao. These products are manufactured by a substantial number of major
American, European and Japanese corporations, including Wallace, Hach, Hioki and
ThermoQuest, which are the Company's largest suppliers, with purchases from them
accounting for approximately 7%, 23%, 12% and 7%, respectively, of the Company's
sales during the Company's fiscal year ended December 31, 2000 ("Fiscal 2000")
and 5%, 22%, 11% and 9%, respectively, during its fiscal year ended December 31,
2001 ("Fiscal 2001").

         The Company distributes products through its Hong Kong headquarters,
its regional sales offices located in Beijing, Shanghai, Guangzhou, Chongqing,
Xian and Shenyang, and through non-exclusive arrangements with independent
sub-distributors located in Hong Kong, the PRC and Macao.

         The Company believes that the continuing growth of industrial activity
in particular, and overall business activity in general, in the PRC over the
last five years has produced a strong and increasing demand for its products in
the PRC. The Company further believes that in the near future the need and
demand for the products it distributes will grow as a result of increased
regulations governing the environment and industrial pollution output, projected
growing demands of the PRC's population for clean water and a healthier and
safer environment, and the potential for the contamination or depletion of
existing clean fresh water sources.

         The Company believes that by assembling the products it distributes, it
may realize increased gross profit margins and greater revenues and net income
than if it remained only a distributor of such products. Similarly, the Company
believes that by expanding its regional sales efforts in the PRC, it may realize
higher revenues and net income.

         The Company is continually identifying manufacturing plants and
engineering companies which would make suitable acquisition targets. The Company
contemplates, but as to which no assurance can be made, that such entities, if
acquired, would assist in the assembly of its products and offer customer
turnkey projects and solutions.

         On January 31, 2002, the Company acquired a 30% equity interest in
Pact Asia Pacific Ltd. and Yixing Pact Environment Company Ltd. ("Pact") for
approximately US$288,000. Pact is a privately owned engineering firm situated
in Shanghai that specializes in the design, manufacture and operation of
water and waste water treatment plants in several industries situated in
China. The Company believes that Pact's business is complementary to the
Company's business as the Company continues to focus on sales and marketing
of products of others. The Company believes that by aligning itself with an
engineering firm, such as Pact, it may be able to gain a competitive
advantage by offering customers and potential customers not only hardware but
solutions to engineering problems as well. Also, the Company anticipates that
by

                                       14
<Page>

securing an equity stake in Pact, its ability to become a supplier to Pact is
enhanced. It took the Company approximately ten months to complete the
acquisition of an equity stake in Pact, during which it investigated Pact, its
finances, weighed tax consequences and obtained approval from governmental
authorities in China. The Company is now seeking to make a similar acquisition
of an engineering company specializing in air pollution control or other
complementary environmental protection fields. There can be no assurance that
the Company will locate any such additional acquisition candidate, successfully
complete such additional acquisition, Pact or any additional acquisition will
perform as anticipated, will not result in significant unexpected liabilities or
will ever contribute significant revenues or profits to the Company or that the
Company will not lose its entire investment in Pact or any other acquisition
candidates.

PRODUCTS, SERVICES AND CUSTOMERS

         Laboratory instruments, analyzers and test kits are used to analyze the
chemical content and ascertain the level of impurities or other contaminants in
water. The Company distributes analytical re-agents and chemicals to support
testing systems of laboratory and portable instruments, process analyzers and
portable test kits and assist in the analysis process. The Company offers a wide
variety of test kits to test water quality. The Company believes that these
portable test kits are easy to use and preadapted for rugged field use. These
test kits are used to monitor drinking water distribution systems.

         Laboratory and portable instruments generally consist of analytical
instruments including but not limited to the following: spectrophotometers,
colorimeters, turbidimeters, ion-selective electrodes, chemical oxygen demand
apparati, digestion apparati, and precision re-agent dispensing devices which
are used to test and monitor impurities and contaminants in water systems. See
"Glossary."

         The Company also distributes continuous-reading process analyzers,
process turbidimeters, pH controllers and analyzer accessories. These products
are generally used to monitor and control drinking water quality to ensure that
water treatment procedures comply with regulatory standards. See "Glossary."

         SCIENTIFIC INSTRUMENTS. The Company distributes analytical instruments,
environmental monitoring instruments and general purpose laboratory instruments.
Analytical instruments include, but are not limited to, mass spectrometers, flow
injector analyzers and atomic spectrometers. Environmental monitoring
instruments include both air and water quality monitoring instruments. Air
quality monitoring instruments are generally divided into those which monitor
ambient (i.e., atmospheric) air, and those which monitor pollution sources.
Additionally, the Company offers general purpose laboratory instruments
including a variety of water quality monitoring and analysis equipment, such as
continuous reading process analyzers, process turbidimeters, pH controllers, and
test kits for monitoring chemical content in water (i.e., chlorine, fluorides,
etc.). See "Glossary."


                                       15
<Page>

         Customers for the analytical instruments include government agencies,
academic and research institutions and major laboratories. The Company also
distributes products to beverage producers and restaurants, including water
quality test kits to more than twelve bottling plants of a well known United
States softdrink producer, which are located in the PRC; total organic carbon
analyzers to the People's Liberation Army (the PRC armed forces), water quality
monitoring instruments to well known United States fast food franchisor's
restaurants located in Hong Kong and the PRC, and to well known United States
and European beer producers bottling plants located in Wuhan, PRC. Each such
soda producer, restaurant and beer bottler accounts for less than one percent of
the Company's sales and the People's Liberation Army accounts for approximately
one percent of the Company's sales.

         Customers for air and water quality monitoring instruments also include
government agencies such as the Hong Kong Environmental Protection Department,
which uses a Company distributed water quality monitoring system to monitor the
water quality of Hong Kong's Victoria Harbor, more than ten water treatment
plants located in the PRC (including sites at Beijing, Tianjin, Guangzhou and
Wuhan), and the Beijing Environmental Monitoring Centre. The Company is also one
of two distributors supplying continuous water monitoring systems to Beijing's
Hydrology Station.

         The Company derived approximately 49.8%, 55.2% and 56.1% of its
sales from the sale of Scientific Instruments during Fiscal 1999, Fiscal 2000
and Fiscal 2001, respectively.

         PROCESS CONTROL AND ENGINEERING PRODUCTS. The Company provides process
control systems specifically designed for the industrial needs of clients
including sensors, temperature gauges, pressure gauges, flow meters, valves,
temperature and pressure transmitters and control devices, temperature and
pressure calibrators, moisture, power, energy and harmonic analyzers.
Chlorination disinfection systems are also distributed by Far East in
conjunction with water treatment, sewage discharge and swimming pool water
treatment. Customers for the foregoing distributed products include government
water supply agencies, water treatment facilities, power and electric companies,
petrochemical plants and instrument manufacturers. For example, the Company
distributes Chlorination disinfection systems to Hong Kong's new Chek Lap Kok
airport and its environs.

         The Company derived approximately 25.5%, 21.0% and 17.7% of its sales
from the sale of Process Control and Engineering Products during Fiscal 1999,
Fiscal 2000 and Fiscal 2001, respectively.

         OTHER PRODUCTS. The Company distributes general testing and
telecommunications testing equipment to industries, utilities, educational
institutions and telecommunications companies. The Company also distributes
multi-channel digital and analogue recorders and similar products. Customers for
telecommunications products include government departments and telephone
companies and utilities.

         The Company derived approximately 12.8%, 13.4% and 11.5% of its sales
from the sale of these Other Products during Fiscal 1999, Fiscal 2000 and
Fiscal 2001, respectively.

                                       16
<Page>

         SPECIAL PROJECTS AND TECHNICAL SUPPORT. In conjunction with the
distribution of computer hardware and software, the Company provides computer
programming hardware and software to government agencies, industrial plants and
beverage producers.

         The Company's technical support staff provides customers with
maintenance, installation assistance, and calibration services, and assists
sales personnel in giving technical advice to and performing product
demonstrations for customers.

         The Company derived approximately 11.9%, 10.4% and 14.7% of its sales
from Special Projects and Technical Support Operations during Fiscal 1999,
Fiscal 2000 and Fiscal 2001, respectively.

         CUSTOMERS. At the end of Fiscal 2001, the Company had more than 400
regular customers, including sub-distributors, located in Hong Kong, the PRC and
Macao. During Fiscal 2001, no single customer accounted for more than 5% of the
Company's sales, and the Company does not believe that any single customer or
sub-distributor is material to its operations.

PROTOTYPE INFRARED PHOTOMETRIC OIL ANALYZER

In May 2000, the Company signed an agreement with the Shanghai Institute Optics
Instrument to jointly develop an Infrared Photometric Oil Analyzer by infrared
absorption method. Potential prototypes of the analyzer have been completed.
Potential customers, who are evaluating the analyzer, have advised that the
prototypes have been received. This analyzer is intended to detect
concentrations of petroleum, animal and vegetable oils in surface water,
underground water, municipal and industrial wastewater. Potential customers are
environmental water monitoring stations, water purification and waste treatment
facilities, underground water and harbor water monitoring stations located in
China.

         Our perceived advantage of the analyzer is that the sample under that
test is measured by three different wavelengths simultaneously thus giving more
accurate readings against one fixed wavelength used by most of our potential
competitors' products.

         There can be no assurance that any such analyzer will: be fully
developed past the prototype stage; become a commercially viable product; and
not result in losses to the Company.


                                       17
<Page>

SOURCES OF SUPPLY

         The Company has exclusivity agreements covering specific geographic
areas with many of its suppliers for certain products. Such agreements do not
encompass all products distributed by the Company and all market areas served by
the Company. The Company's agreement with Finnigan for most products does not
include the PRC and similarly, the Company's agreement with Wallace is limited
to Hong Kong. The Company has written confirmation from Hach that the Company is
Hach's representative in the PRC, Hong Kong and Macao authorized to supply,
install and commission Hach's products and accessories. The Company also has
exclusive distribution agreements with Royce Instrument Corporation for certain
of that manufacturer's products in Hong Kong and the PRC.

         The Company distributes products manufactured by a number of vendors,
including Wallace, Hach, Hioki and Finnigan, which are the Company's primary
suppliers, with purchases from them accounting for approximately 7%, 23%, 12%
and 7%, respectively, of the Company's sales during Fiscal 2000 and 5%, 22%, 11%
and 9%, respectively, of the Company's sales during Fiscal 2001. The Company has
exclusivity agreements for specified geographic areas with many of its suppliers
for certain products, including Wallace and Finnigan. Those agreements do not
encompass all products distributed by the Company or all of the market areas
serviced by the Company. The Company's agreement with Finnigan for most products
does not include the PRC, while the Company's agreement with Wallace is limited
to Hong Kong. In addition, some of these agreements are memorialized not as
formal contracts but rather through other acknowledgements or correspondence
which may contain a vague, if any, description of the terms and conditions of
such agreement or arrangement, and therefore may be unenforceable. The Company
has written confirmation from Hach that the Company is Hach's representative in
the PRC, Hong Kong and Macao authorized to supply, install and commission Hach's
products and accessories. The Company has only a letter from Hioki appointing
the Company as Hioki's sales representative in the PRC, Hong Kong and Macao. The
Company's agreement with Wallace is terminable by either party on thirty days
notice prior to its annual renewal date. The Company's agreement with Finnigan
is terminable on ninety days notice by either party. The Company's agreement
with Hach expires in February 2003. Although alternative sources of supply
exist, there can be no assurance that the termination of the Company's
relationship with any of the above or other vendors would not have a short-term
adverse effect on operations.

EXPANSION

         The Company continues to seek: (1) potential acquisitions of
manufacturing plants and engineering companies for proposed product-assembly
operation, and (2) the development of the Infra and Photometic Oil Analyzer.
Also, the Company recently opened "pilot" shops in Shanghai and Beijing and
plans to open additional shops over the next 24 months. (See " - Sales and
Marketing.") In addition, although the Company has disposed of certain
subsidiaries in transactions with affiliates and disposed of certain realty held
for investment purposes, in an effort to streamline its structure and
concentrate on its core business, in the future the Company may establish
subsidiaries or divisions to distribute products that are unrelated to its
current core product lines, and it may make future investments in real estate.


                                       18
<Page>

REGULATORY ENVIRONMENT

         Concerns about and awareness of pollution problems and environmental
issues have grown at all levels of PRC government as the PRC has experienced
economic growth. Environmental protection laws and strict regulations have been
enacted and are buttressed by increased budget allocations for environmental
regulation, monitoring and enforcement. The PRC's primary environmental
protection agency is the State Environmental Protection Agency (SEPA), under
which there are Environment Protection Bureaus in each city and county.
According to the Company, under bureau management, there are two environment
monitoring systems: one system consists of over 2,200 monitoring stations to
collect and analyze the environmental data of each city and county; another
system consists of over 2,500 stations to monitor specific industrial districts
or factories which have been identified as major pollution sources due to their
non-compliance with environmental regulations. SEPA has recently identified
100,000 enterprises as new major pollution sources and the number of monitoring
stations for industrial firms is anticipated to increase to 400,000 in the next
five years, according to government estimates. The Company has supplied water
and air quality monitoring and analytic instruments to these monitoring stations
for several years. Despite this anticipated growth in monitoring stations, there
can be no assurance that the agencies will continue to use the Company's
products for these purposes, that other market competitors will not enter the
market with superior products, distribution systems or more competitive prices.
See " - Competition."

COMPETITION

         The Company faces competition from other distributors of substantially
similar products as well as the manufacturers of such products, and in both
foreign and Chinese markets. The Company faces its principal competition from
manufacturers and other distributors of its core products located in Hong Kong
and the PRC. Moreover, the Company has begun to implement plans to assemble
products of the kind that it presently distributes (see " - Product Assembly
Operations.") Should an assembly operation be developed to the stage where
products are presented to the market, the Company may be in direct competition
with certain of its vendors. There can be no assurance that the existence of
this direct competition will not impair the Company's ability or such
competitor's willingness to continue providing other products for continued
distribution by the Company, and that such a development would not materially
adversely affect the Company's core business.

         In 1994, the PRC tightened its credit nationwide and, as a result, the
Company believes that purchasers of the products distributed by the Company
sought reduced prices. The products distributed by the Company were
foreign-manufactured and higher-priced than products manufactured in the PRC. As
a result, the Company reduced its sales prices to remain competitive, with a
corresponding negative impact upon profit margins. During Fiscal 1999, Fiscal
2000 and Fiscal 2001, the Company's profit margins were approximately 24.5%,
23.6% and 21.8%, respectively. The Company believes that it competes with the
PRC manufacturers on the basis of quality and technology. The Company believes
it offers foreign-manufactured products which are of higher quality and use more
advanced technology than products manufactured in the PRC. The Company believes
that it competes with foreign manufacturers and other distributors of their
products on the basis of the Company's more extensive distribution network and
an established reputation.


                                       19
<Page>

B2B WEBSITE

         B2B website. In or about March 2000, the Company established
Chinah2o.com.Ltd., a Hong Kong corporation. Through Chinah2o.com.Ltd., the
Company launched a bilingual Business-to-Business ("B2B") internet platform in
August 2000. The website is located at (http://www.chinah2o.com). The B2B
website is directed at environmental businesses in China. The purpose of the B2B
website is to connect manufacturers, distributors and suppliers of environmental
protection equipment and related consultants and engineering firms in the West
with potential clients in China (i.e., water, wastewater treatment plants,
environmental protection bureaus, environmental monitoring stations, and related
industries). The website provides environmental news, directories of western
suppliers, potential clients in China, advertisement space and business
opportunities. The business and other activities generated by Chinah2o.com.Ltd.
have had a synergistic effect with those of the Company indirectly by feeding
market information, sales leads and tender information to the Company.

PRODUCT ASSEMBLY OPERATIONS

         The Company, through its PRC Corporation, Shanghai Euro Tech Limited,
plans to assemble certain products which the Company currently distributes,
including certain water-related testing, monitoring and treatment equipment. The
Company has obtained a one-year lease expiring in January 2003 to a
manufacturing plant and has commenced assembly operations for water and waste
water test instruments after receiving PRC government approvals in December
1999. It is contemplated that the Company will import components, assemble the
finished products and then distribute the products through its distribution
network. The Company believes that by establishing product assembly operations
in the PRC and expanding the number of its regional sales offices in the PRC, it
will not only increase revenues by expanding its customer base and increasing
distribution capabilities, but also net income since the Company believes it
will enjoy higher overall profit margins by assembling certain products which it
now distributes rather than by only purchasing the finished product from
vendors. It is planned that the Company's obligations pursuant to the Agreement
with the Shanghai Institute will be met through the Pudong Shanghai Assembly
Plant. The Infrared Photometric Oil Analyzer, together with the two types of
specialized reagents have been the best customer accepted products from this
plant. This plant also manufactures reagents for chemical oxygen demand and
chlorine and silica measurement.

SALES AND MARKETING

         The Company distributes products through its principal office located
in Hong Kong and its regional PRC offices located in Beijing, Shanghai,
Guangzhou, Chongqing, Xian and Shenyang. The Company has a marketing and sales
force of 44 people who are paid a salary plus commission based on sales. The
Company's offices also coordinate the sales efforts of approximately fifteen
other companies located in the PRC which act as sub-distributors. These
sub-distributors are paid a commission on sales they generated, and are engaged
on a non-exclusive basis to distribute the products of other distributors. Each
of the fifteen sub-distributors accounted for less than two percent of the
Company's sales during Fiscal 2000 and Fiscal 2001.


                                       20
<Page>

         In April of 2001, the Company opened a "pilot" shop in Shanghai to sell
inventoried water and other electronics testing equipment to potential
customers. This was followed by a second shop in Beijing in the last quarter of
2001 and third and fourth shops in Chongqing and Guangzhou in March and June of
2002, respectively. In view of China's accession to the WTO, and as a result of
favorable customer reaction to the shops in Shanghai and Beijing, Euro Tech is
planning to open four more shops over the next 24 months in the cities of Xian,
Dalian, Wuhan and Shenyang. The Company plans to continue financing each of the
shops with its own operational cash flow and not use outside financing. The
Company has found its four existing shops to be useful as demonstration
locations easily accessed by local customers who can pay in local currency while
the Company can make "off the shelf" sales and move its inventory more easily.
All of the foregoing are perceived by the Company to have had a positive impact
on its business reputation while reducing the Company's dependency on
sub-distributors who may not be loyal to the Company and distribute products of
its competitors. As foreign entities are not generally permitted to own these
facilities, the Company's four shops are actually owned by non-officer-director,
employees of the Company with the shops being financed by the Company through
non-fixed term loans bearing a nominal rate of interest. There can be no
assurances that; these shops will prove to be economically viable, the Company
will not sustain losses in connection with the founding costs of opening and
running the shops, hiring personnel and similar expenses; the shops will result
in any significant revenues or profits to the Company. Also, similar shops may
be established by its competitors and/or third parties.

ITEM 4C.       ORGANIZATIONAL STRUCTURE

         The Company presently wholly-owns Euro Tech (Far East) Limited ("Far
East") which, in turn, wholly owns the following corporations:

         o Euro Tech Trading (Shanghai) Limited - a People's Republic of China
           corporation
         o Euro Tech (China) Limited - a Hong Kong corporation
         o Chinah2o.com Limited - a Hong Kong corporation
         o Shanghai Euro Tech Limited - a People's Republic of China corporation

         The Company's wholly-owned subsidiary and primary operational arm is
Far East, which it acquired in March 1997. Far East has engaged in the
distribution of various industrial control equipment, which continues to be the
core business of the Company, since its inception in 1971.

ITEM 4D.       PROPERTY, PLANT AND EQUIPMENT

         The Company maintains an executive office at 18/F Gee Chang Hong
Centre, 65 Wong Chuk Hang Road, Hong Kong. The Company occupies approximately
12,800 square feet of office and warehouse storage space under a lease expiring
in May 2003 for monthly rental payments of approximately US$9,160. The warehouse
storage space is used to hold products for distribution to its customers via
common carriers.

         In August 1995, the Company purchased approximately 1,200 square foot
of space in a building in Hong Kong. The Company financed the purchase and as of
December 31, 2001, had an outstanding mortgage of approximately US$90,000 in
principal, bearing interest at the best lending


                                       21
<Page>

rate offered by the Company's bank plus 1.75%, which mortgage is repayable in
eighty-four monthly installments through approximately November 2002. This
property is now used as Chinah2o.com Ltd.'s office.

         The Company also maintains regional sales offices within the PRC in the
cities of Beijing, Shanghai, Guangzhou, Chongqing, Xian and Shenyang. The
Beijing and Shanghai sales offices are owned by the Company. The Beijing sales
office is situated on property purchased in November 1994. The Shanghai sales
office is situated on property purchased in August 1995. The Guangzhou sales
office is rented pursuant to a lease expiring in July 2002 for approximately
US$790 per month. The Chongqing sales office is rented pursuant to a lease
expiring in May 2003 for approximately US$630 per month. The Xian sales office
is rented pursuant to a lease expiring in March 2004 for approximately US$200
per month. The Shenyang office is rented pursuant to a lease expiring in March
2003 for approximately US$370 per month. Euro Tech Trading's Shanghai's office
is rented pursuant to a lease expiring in April 2003 for approximately US$250
per month.

         Euro Tech's Shanghai office is rented pursuant to a lease expiring in
January 2003 for approximately US$1,050 per month.

         The Company's registered office in the British Virgin Islands is
located at TrustNet Chambers, P.O. Box 3444, Road Town, Tortola, British Virgin
Islands and its telephone number is (809) 494-5296.

ITEM 5.        OPERATING AND FINANCIAL REVIEW AND PROSPECTS

ITEM 5A.       OPERATING RESULTS

BACKGROUND - POLITICAL AND ECONOMIC CONDITIONS IN HONG KONG AND THE PEOPLE'S
REPUBLIC OF CHINA

         The Company's operations are located almost entirely within, and
revenues are almost entirely generated from Hong Kong and the PRC. In Fiscal
2001, approximately 72% and 26% of the Company's sales were made to customers
located in the PRC and Hong Kong, respectively. During Fiscal 2000,
approximately 68% and 29% of the Company's sales were made to customers


                                       22
<Page>

located in the PRC and Hong Kong, respectively. During the Company's fiscal
year ended December 31, 1999 ("Fiscal 1999"), approximately 68% and 30% of
the Company's sales were made to customers located in the PRC and Hong Kong,
respectively. Sales to customers situated in Macao and elsewhere in Fiscal
1999, Fiscal 2000 and Fiscal 2001 were nominal. This makes the Company
particularly susceptible to changes in the political and economic climate of
either Hong Kong or the PRC.

         HONG KONG. Hong Kong has been one of the prime centers for commercial
activity and economic development recently in Southeast Asia. On July 1, 1997,
sovereignty over Hong Kong was transferred from the United Kingdom to the PRC.
As provided in the Sino-British Joint Declaration and the Basic Law, the Hong
Kong SAR is provided a high degree of autonomy except in foreign and defense
affairs. The Basic Law provides that the Hong Kong SAR is to have its own
legislature, legal and judicial system and full economic autonomy for 50 years
after the transfer of sovereignty. Based on the current political conditions and
the Company's understanding of the Basic Law, the Company does not believe that
the transfer of sovereignty over Hong Kong has had or will have an adverse
impact on its financial and operating environment. Although the Chinese
government has pledged to maintain the economic and political autonomy of Hong
Kong over its internal affairs, there is no assurance that such pledge will
continue to be honored if there are changes in the Chinese political or economic
climate. See Item 3D. "Key Information - Risk Factors."

         PRC. The PRC has been a socialist state since 1949. For more than forty
years, the PRC's economy has been, and presently continues to be, a socialist
economy operating under government controls promulgated under various one-,
five- and ten-year plans (collectively, "State Plans") adopted by central
Chinese government authorities and implemented, to a large extent, by provincial
and local authorities which may set production and development targets. However,
since approximately the early 1980s, the PRC's national government has
undertaken certain reforms to permit greater provincial and local economic
autonomy and private economic activities. Any change in political or economic
conditions may substantially adversely affect these reform initiatives and, in
turn, the Company. See Item 3D. "Key Information - Risk Factors."

RESULTS FROM OPERATIONS

         The following operating and financial review should be read in
conjunction with the Consolidated Financial Statements and notes thereto
appearing elsewhere in this Annual Report. All financial data referred to in
the following discussion has been prepared in accordance with United States
GAAP.

         The following table presents selected statement of operations data
expressed in thousand US$ and as a percentage of net sales for the Company's
Fiscal 1997, Fiscal 1998, Fiscal 1999, Fiscal 2000 and Fiscal 2001 years.

<Table>
<Caption>

                                                                        YEAR ENDED DECEMBER 31,
                                 ---------------------------------------------------------------------------------------------------
                                         1997                1998                1999               2000                 2001
                                         ----                ----                ----               ----                 ----
<S>                                <C>        <C>      <C>        <C>      <C>        <C>      <C>        <C>      <C>        <C>
Net Sales                          12,510     100.0%   12,757     100.0%   13,107     100.0%   15,010     100.0%   19,685     100.0%
Cost of goods sold                  9,399      75.1%    9,662      75.7%    9,896      75.5%   11,467      76.4%   15,396      78.2%
Gross Profit                        3,111      24.9%    3,095      24.3%    3,211      24.5%    3,453      23.6%    4,289      21.8%
Selling and administrative
  expenses                           2,812     22.5%    2,924      22.9%    2,946      22.5%    3,301      22.0%    3,734      19.0%
</Table>


                                       23
<Page>

<Table>
<Caption>

                                                                        YEAR ENDED DECEMBER 31,
                                  --------------------------------------------------------------------------------------------------
                                           1997               1998               1999                 2000                2001
                                           ----               ----               ----                 ----                ----
<S>                                   <C>       <C>       <C>       <C>       <C>       <C>       <C>       <C>       <C>       <C>
Income before income tax              500       4.0%      326       2.6%      417       3.2%      452       3.0%      747       3.8%
Income tax provision                   62       0.5%       71       0.6%       78       0.6%       94       0.6%      163       0.8%
Net income                            438       3.5%      255       2.0%      339       2.6%      358       2.4%      584       3.0%
                                    =====     =====     =====     =====     =====     =====     =====     =====     =====     =====
</Table>

RESULTS OF OPERATIONS

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

         NET SALES; GROSS PROFIT AND COST OF GOODS SOLD. Net sales increased by
approximately US$4,675,000 or 31.1% to approximately US$19,685,000 in Fiscal
2001 from approximately US$15,010,000 in the Company's year ended December 31,
2000 ("Fiscal 2000"). The increase was primarily due to the diversification and
strengthening of the Company's distribution network.

         Gross profits increased by approximately US$746,000 or 21.1% to
approximately US$4,289,000 for Fiscal 2001 as compared to approximately
US$3,543,000 for Fiscal 2000. This increase was attributable to the increase in
net sales in Fiscal 2001. During Fiscal 2001, the Company's cost of goods sold
was approximately US$15,396,000, or 78.2% of sales, in comparison to
approximately US$11,467,000, or 76.4% of net sales for Fiscal 2000. Cost of
goods sold expressed as a percentage of net sales increased by 1.8% in Fiscal
2001 as compared with Fiscal 2000. The gross profit margin decrease and the
percentage increase in cost of goods sold were attributed to the fact that the
Company had reduced the selling prices to compete with other companies during
Fiscal 2001 as a result of the Company placing tighter controls over its
expenses.

         SELLING AND ADMINISTRATIVE EXPENSES. Selling and administrative
expenses were approximately US$3,734,000 in Fiscal 2001, an increase of
approximately US$433,000 or 13.1% from approximately US$3,301,000 in Fiscal
2000. The increase was primarily due to the general increase in expenses related
to the increase in net sales. However, measured as a percentage of net sales,
selling and administrative actually declined by 3% from 22% in Fiscal 2000 to
19% in Fiscal 2001.

         INTEREST INCOME. Net interest income decreased by approximately
US$47,000 or 41.6% to approximately US$66,000 in Fiscal 2001 from approximately
US$113,000 for Fiscal 2000. Interest income decreased by approximately US$57,000
or 41.3% to approximately US$81,000 in Fiscal 2001 from approximately US$138,000
in Fiscal 2000. The decrease was primarily due to the general decrease in the
interest rate from bank deposits during the year. Interest expense decreased by
approximately US$10,000 or 40.0% to approximately US$15,000 in Fiscal 2001 from
approximately US$25,000 for Fiscal 2000. The decrease was a result of the
Company's reduced utilization of credit facilities under its banking
arrangements.

         OTHER INCOME. Other income increased by approximately US$29,000 or
29.9% to approximately US$126,000 in Fiscal 2001 from approximately US$97,000 in
Fiscal 2000. The


                                       24
<Page>

increase in other income was principally due to increase in exchange gains of
approximately US$24,000 and rental income of approximately US$8,000.

         PROVISION FOR PROFIT TAX. Provisions for taxes increased by
US$69,000 to approximately US$163,000 in Fiscal 2001 from approximately
US$94,000 in Fiscal 2000. The increase was due primarily to an increase in
operating profit. The increase in effective tax rate from 20.8% in Fiscal
2000 to 21.8% in Fiscal 2001 was due to the net operating loss of some
subsidiaries for which no benefit was realized.

         NET INCOME. Income from continuing operations increased by
approximately US$226,000 or 63.1% to approximately US$584,000 in Fiscal 2001
from approximately US$358,000 in Fiscal 2000. The increase in net income was
primarily due to the increase in net sales and the increase in the gross margin.

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

         NET SALES; GROSS PROFIT AND COST OF GOODS SOLD. Net sales increased by
approximately US$1,903,000 or 14.5% to approximately US$15,010,000 in Fiscal
2000 from approximately US$13,107,000 in the Company's year ended December 31,
1999 ("Fiscal 1999"). The increase was primarily due to improvement of the
economy in the PRC.

         Gross profits increased by approximately US$332,000 or 10.3% to
approximately US$3,543,000 for Fiscal 2000 as compared to approximately
US$3,211,000 for Fiscal 1999. This increase was attributable to the increase in
net sales in Fiscal 2000. During Fiscal 2000, the Company's cost of goods sold
was approximately US$11,467,000, or 76.4% of sales, in comparison to
approximately US$9,896,000 or 75.5% of net sales for Fiscal 1999. Cost of goods
sold expressed as a percentage of net sales increased by 0.9% in Fiscal 2000 as
compared with Fiscal 1999. The gross profit margin decreased and the percentage
increase in cost of goods sold were attributed to the fact that the Company had
less engineering assignments during Fiscal 2000.

         SELLING AND ADMINISTRATIVE EXPENSES. Selling and administrative
expenses were approximately US$3,301,000 in Fiscal 2000, an increase of
approximately US$355,000 or 12.1% from approximately US$2,946,000 in Fiscal
1999. The increase was primarily due to (i) the general increase in expenses
related to the increase in net sales, and (ii) additional expenses for the two
new subsidiary companies, i.e. Shanghai Euro Tech Limited and Chinah2o.com
Limited.

         INTEREST INCOME. Net interest income increased by approximately
US$28,000 or 32.9% to approximately US$113,000 in Fiscal 2000 from approximately
US$85,000 for Fiscal 1999. Interest income increased by approximately US$24,000
or 21.1% to approximately US$138,000 in Fiscal 2000 from approximately
US$114,000 in Fiscal 1999. The increase was primarily due to the general
increase in the interest rate from bank deposits and increase in bank deposits
during the year. Interest expense decreased by approximately US$4,000 or 13.8%
to approximately US$25,000 in Fiscal 2000 from approximately US$29,000 for
Fiscal 1999. The decrease was a result of the Company's reduced utilization of
credit facilities under its banking arrangements.


                                       25
<Page>

         OTHER INCOME. Other income increased by approximately US$30,000 or
44.8% to approximately US$97,000 in Fiscal 2000 from approximately US$67,000 in
Fiscal 1999. The increase in other income was principally due to increase in
exchange gains.

         PROVISION FOR PROFIT TAX. Provisions for taxes increased by US$16,000
to approximately US$94,000 in Fiscal 2000 from approximately US$78,000 in Fiscal
1999. The increase was due primarily to an increase in operating profit. The
increase in effective tax rate was due to the net operating loss of some
subsidiaries for which no benefit was realized.

         NET INCOME. Net income increased by approximately US$19,000 or 5.6% to
approximately US$358,000 in Fiscal 2000 from approximately US$339,000 in Fiscal
1999. The increase in net income was primarily due to the increase in net sales
and the increase in the gross margin. However, the increase in net income was
substantially offset by the operating loss of some newly set up subsidiaries.


                                       26
<Page>

ITEM 5B.       LIQUIDITY AND CAPITAL RESOURCES

         The Company has primarily used its cash to fund accounts receivable,
inventories, and capital expenditures including purchases of property, office
furniture and equipment, computers and calibration equipment. The Company has
historically met its cash requirements from cash flows from operations,
short-term borrowings under bank lines of credit, and long-term mortgage bank
loans. The Company expects, but as to which no assurance may be made, that its
present cash reserves, cash from operations and existing available bank credit
facilities would be sufficient to fund its capital expenditures. Working capital
at the end of Fiscal 2000 and Fiscal 2001 was approximately US$3,686,000 and
US$4,123,000, respectively.

         The Company generated net cash of US$928,000 and US$675,000 from
operating activities in Fiscal 1999 and Fiscal 2000, respectively, on net income
of US$339,000 and US$358,000 in Fiscal 1999 and Fiscal 2000, respectively. From
its net income in Fiscal 2001 of approximately US$584,000, the Company used
approximately US$60,000 in net cash in its operating activities. At the end of
Fiscal 1999, Fiscal 2000 and Fiscal 2001, the Company's accounts receivable were
approximately US$2,826,000, US$2,497,000 and US$2,717,000, respectively.

         The Company used approximately US$217,000, US$313,000 and US$0 for
investing activities in Fiscal 1999, Fiscal 2000 and Fiscal 2001, respectively.
Cash used in investing activities in Fiscal 2000 was mainly used to purchase
property, facilities and equipment.

         The Company used US$65,000, US$93,000 and US$317,000 in Fiscal 1999,
Fiscal 2000 and Fiscal 2001 for financing activities, respectively. The Company
had various banking facilities for overdraft, import and export credits and
foreign exchange contracts from which the Company can access up to approximately
US$3,761,000, and of which approximately US$2,952,000 remained unused as at
December 31, 2001. The aforementioned available credit facilities were obtained
on the conditions that, among other things, the Company mortgage its properties
as security for the credit facilities, not to create a charge or lien on its
other assets in favor of other parties without such bank's consent, and the
Company maintaining a certain level


                                       27
<Page>

of net worth. The Company also has a bank loan from the Hong Kong and Shanghai
Banking Corporation to finance the purchase of its properties with outstanding
indebtedness at December 31, 2001 of approximately US$90,000, which loan bears
interest at the best lending rate offered by the Company's bank plus 1.75% and
is repayable in monthly installments through December 2002.

         Cash decreased from approximately US$3,963,000 at the end of Fiscal
2000 to approximately US$3,551,000 at the end of Fiscal 2001. The principal
reasons for the decrease in cash were (i) cash used in operations; (ii) increase
in accounts receivable; (iii) increase in inventories and accounts payable
and decrease in bills payable; and (iv) purchase of treasury stock. The
Company plans to use cash on hand for, among other purposes, to acquire a
manufacturing plant and/or engineering company in Hong Kong and/or the PRC.

         The Company's net accounts receivable increased from approximately
US$2,497,000 at December 31, 2000 to approximately US$2,717,000 at December 31,
2001. The increase is attributed to the Company's net sales increase during
Fiscal 2001.

         The Company's inventory increased from approximately US$945,000 at the
end of Fiscal 2000 to approximately US$2,003,000 at the end of Fiscal 2001. The
higher inventory level at the end of Fiscal 2001 was principally due to (i)
increase in inventory necessary to stock our retail shops to meet our customer's
demands for "off-the-shelf" purchases; (ii) production inventory at our Pudong
assembly plant; and (iii) goods received near year end but not delivered to
customers for several reasons, including, but not limited to, multi-component
orders awaiting shipment and receipt of additional components, and orders
received without a corresponding letter of credit or other payment provisions
having been received by the Company.

         The Company's outstanding short-term bank borrowings consisted of
import and export bank loans. Short-term borrowings were US$0 at the end of both
Fiscal 2000 and Fiscal 2001. As of December 31, 2001, the Company had various
banking facilities from which total available credit was approximately
US$3,761,000, of which approximately US$2,952,000 remained unused as at such
date. The Company's long-term bank loans are secured by certain of the Company's
realty, and bear interest at 6.875% per annum. At December 31, 2001, the Company
had outstanding long-term bank loans in the amount of approximately US$90,000.

         The Company acquired a 30% equity interest in Pact for
approximately US$288,000.

         The Company's capital expenditures were approximately US$0 in Fiscal
2001, a decrease from expenditures of approximately US$313,000 in Fiscal 2000.
Capital expenditures in 2000 were incurred primarily in connection with the
purchase of office equipment, furniture and fixtures. A source of funds for
these capital expenditures included net proceeds from the Public Offering. The
Company continues to seek targets for acquisition, such as facilities for
assembly operations or engineering companies. If such acquisitions are indeed
made, the Company may expect to incur significantly larger capital expenditures,
for which the Company presently intends, but as to which no assurance can be
made, to use existing cash reserves, cash from operations and available bank
credit facilities to fund such capital expenditures.


                                       28
<Page>

<Table>
<Caption>
Contractual Obligations         Total           Less than 1     1-3 years      4-5 years       After 5
                                                   year                                         years
-------------------------------------------------------------------------------------------------------
<S>                         <C>                 <C>            <C>             <C>             <C>
Long-Term Debt              US$ 90,000          US$ 90,000          -              -               -

Operating Leases            US$201,000          US$136,000     US$65,000           -               -

Total Contractual Cash
   Obligations              US$291,000          US$226,000     US$65,000           -               -
</Table>


INFLATION

         The annual rate of inflation in the PRC has declined significantly in
recent years. In 1999, 2000 and 2001, the rate of inflation was approximately
-1.4%, 0.4% and .7%, respectively, in comparison to the preceding years,
respectively. The Company believes this declining inflation rate has had a
positive effect on its results from operations. The Company believes, although
no assurance can be given as to the correctness of the Company's belief, that
credit restrictions will be gradually lifted, and that as a result Far East will
be able to increase prices in the market for its products and thus realize
increased profit margins.

SHARE REPURCHASE PROGRAM

         In December 2000, the Company approved a program to repurchase up to
162,500 shares (as adjusted for the Company's August 2001 30% forward
stock-split effected in the form of a dividend) of its issued and outstanding
stock by December 31, 2001. Under this program, the Company has the ability
to purchase the stock in the open market or through negotiated or block
transactions from time to time based on market and business conditions until
the end of 2001. 162,215 of the Company's Ordinary Shares have been purchased
by the Company under this program.

CRITICAL ACCOUNTING POLICIES

         REVENUE RECOGNITION

         The Securities and Exchange Commission's Staff Accounting Bulletin
(SAB) No. 101 "Revenue Recognition" provides guidance on the application of
generally accepted accounting principles to selected revenue recognition issues.
SAB No. 101 requires that four basic criteria must be met before revenue can be
recognized: (1) persuasive evidence of an arrangement exists; (2) delivery has
occurred or services rendered; (3) the fee is fixed and determinable; and (4)
collectibility is reasonably assured. Based on the above criteria our revenue is
recognized when product has been shipped and title to the product has
transferred to the customer. Title of the product may transfer to the end
customer or distributor when shipped or when received by the customer based on a
specific agreement.

         INVENTORY VALUATION

         We write down our inventory for estimated obsolescence or unmarketable
inventory equal to the difference between the cost of inventory and the
estimated market value based upon assumptions about future demand and market
conditions. If actual future demand or market conditions are less favorable than
those projected by management, additional write-downs may be required.

         DEFERRED TAXES

         As part of the process of preparing our consolidated financial
statements, we are required to estimate our income taxes and tax bases of assets
and liabilities in each of the jurisdictions in which we operate. This process
involves us estimating our current tax exposure together with assessing


                                       29
<Page>

temporary differences resulting from differing treatment of items for tax and
accounting purposes. These differences result in deferred tax assets and
liabilities, which are included in our consolidated balance sheet. We must then
assess the likelihood that our deferred tax assets will be recovered from future
taxable income, and, to the extent we believe that recovery is more unlikely
than likely, we must establish a valuation allowance. To the extent we establish
a valuation allowance or increase this allowance in a period, we must include an
expense within the tax provision in the statement of operations.

         NEW STATEMENTS OF FINANCIAL ACCOUNTING STANDARDS

         In June 2001, the Financial Accounting Standards Board ("FASB") issued
SFAS No. 141: "Business Combinations" and SFAS No. 142 : "Goodwill and Other
Intangible Assets," effective for fiscal years beginning after December 15,
2001. SFAS No. 141 requires that the purchase method of accounting be used for
all business combinations completed after June 30, 2001. The adoption of SFAS
No. 141 did not have a material impact on the Company's financial statements.
SFAS No. 142 requires, among other provisions, companies to assess the possible
impairment of goodwill existing at the date of adoption and perform subsequent
impairment tests on an annual basis. Additionally, existing goodwill and
intangible assets must be reassessed and classified consistently in accordance
with the Statement's criteria. The Company is required to and will adopt SFAS
No. 142 on January 1, 2002. The adoption of SFAS No. 142 is not expected to have
a material impact on the Company's financial statements.

         In August 2001, FASB issued SFAS No. 143: "Accounting for Asset
Retirement Obligations". This Statement requires, among other provisions,
retirement obligations to be recognized when they are incurred and displayed as
liabilities, with a corresponding amount capitalized as part of the related long
lived asset. The capitalized element is required to be expensed using a
systematic and rational method over its useful life. The Company is required to
and will adopt SFAS No. 143 on January 1, 2002. The adoption of SFAS No. 143 is
not expected to have a material impact on the Company's financial statements.

         In October 2001, FASB issued SFAS No. 144: "Accounting for Impairment
or Disposal of Long-Lived Assets". The Statement supersedes SFAS No. 121,
"Accounting for Impairment of Long-Lived Assets and for Long-Lived Assets to be
Disposed of" and modifies APB Opinion No. 30, : "Reporting the Results of
Operations - Reporting the Effects of Disposal of a Segment of a Business, and
Extraordinary, Unusual and Infrequently Occurring Events". For long-lived assets
to be held and used, the Statement retains the requirements of SFAS No. 121,
whereby an impairment loss is recognized if the carrying value of the assets is
not recoverable from its undiscounted cash flows and an impairment loss is
measured as the difference between fair values and carrying values of the asset.
The new Statement requires long-lived assets to be disposed of other than by
sale be considered held and used until it is disposed of. The Statement also
broadens the scope of APB Opinion 30 provisions for the presentation of
discontinued operations separately from continuing operations to include a
component of an entity that either has been disposed of or is classified as held
for sale. In addition, discontinued operations are no longer measured on a net
realizable value basis, and expected future operating losses must be reflected
in the periods incurred, rather than at the measurement date as previously
required by APB Opinion No. 30. The Company is required to and will adopt SFAS
No. 144 on January 1,


                                       30
<Page>

2002. The adoption of SFAS No. 144 is not expected to have a material impact on
the Company's financial statements.

         In April 2002, FASB issued SFAS No. 145: "Rescission of FASB Statements
No. 4, 44, and 64, Amendment of FASB Statement No. 13, and Technical
Corrections". This statement made revisions to the accounting for gains and
losses from the extinguishment of debt, rescinded Statement No. 44, and required
certain lease modifications that have economic effects similar to sale-leaseback
transactions be accounted for in the same manner as sale-leaseback transactions.
This statement is required to be adopted by the Company beginning on January 1,
2003. The Company is in the process of evaluating the effect of the adoption of
this standard on the consolidated results of operations, financial position and
cash flows, if any.

ITEM 5C.       RESEARCH AND DEVELOPMENT, PATENTS AND LICENSES

         During Fiscal 1999, as is true for historical prior periods, the
Company (due to the nature of its business), did not expend any material funds
on company sponsored research and development activities. However, during Fiscal
2000 and Fiscal 2001, the Company expended approximately US$40,000 and
US$20,000, respectively, on the development of an Infrared Photometric Oil
Analyzer pursuant to its agreement with the Shanghai Institute Optics
Instrument. See Item 4B. "Business Overview." It is anticipated that an
additional US$50,000 in research and development costs will be expended on this
project, similar projects and potential research and development projects for
the development of on line water testing equipment during Fiscal 2002.

ITEM 5D.       TREND INFORMATION

         The Company believes that the expenses incurred in opening "pilot"
shops and product research and development may result in increases in revenue
but such increases are unlikely to allow for a recovery of the expenses for
approximately the next two years.

ITEM 5E.       SIGNIFICANT RELATED PARTY TRANSACTIONS

          During Fiscal 1999, Fiscal 2000 and Fiscal 2001, the Company made
purchases from Eurotherm of approximately US$850,000, US$845,000 and
US$2,114,000 respectively. The Company also received rental income from
Eurotherm during Fiscal 1999, Fiscal 2000 and Fiscal 2001 of approximately
US$36,000, US$34,000 and US$34,000, respectively. Additionally, during Fiscal
1999, Fiscal 2000 and Fiscal 2001, the Company paid management fees to
Eurotherm of approximately US$23,000, US$29,000 and US$27,000 respectively.
Mr. T.C. Leung, Chief Executive Officer and Chairman of the Board of
Directors of the Company, is also director of Eurotherm.

ITEM 6.        DIRECTORS, SENIOR MANAGEMENT AND EMPLOYEES

ITEM 6A.       DIRECTORS AND SENIOR MANAGEMENT

         Information concerning the Directors and Executive Officers of the
Company are as follows:

<Table>
<Caption>

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

<S>                                 <C>                       <C>
         T.C. Leung                 58                        Chairman of the Board of Directors
                                                              and Chief Executive Officer

         Jerry Wong                 43                        Director and Chief Financial Officer



                                       31
<Page>

<Caption>

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

<S>                                 <C>                       <C>
         Nancy Wong                 53                        Director

         C.P. Kwan                  43                        Director

         Alex Sham                  38                        Director

         Y.K. Liang                 72                        Director

         Ho Choi Chiu               70                        Director
</Table>

         Set forth below is a brief background of the executive officers and
directors based upon the information supplied by them to the Company:

         T.C. LEUNG has been Chief Executive Officer and Chairman of the Board
of Directors of both the Company and Far East since their inception. Before
establishing Far East, Mr. Leung was an engineer for English Electric in
England, from 1965 to 1968, and Lockheed Aircraft in Hong Kong, from 1968 to
1970. Mr. Leung also served as managing director of Eurotherm (Far East) Ltd.
between 1971 and 1992. Since 1988, Mr. Leung has also served as managing
director of Eurotherm Hong Kong. Mr. Leung received a Masters degree in Business
Administration from the University of East Asia, Macao in 1986 and is a
Chartered Engineer, a title bestowed upon a member of the Council of Engineering
Institutions in the United Kingdom.

         JERRY WONG has served as Director and Chief Financial Officer of Far
East since 1994 and has been with Far East since 1987. Mr. Wong has been the
Chief Financial Officer and a Director of the Company since its inception. From
1985 until 1987, Mr. Wong worked for MUA Agencies Ltd., a subsidiary of a Hong
Kong publicly listed company engaged in the insurance business, as deputy
manager of its secretarial, legal and accounting department. From 1981 until
1985, Mr. Wong served as a senior accountant in Price Waterhouse-Hong Kong. He
is a Fellow of the Association of Chartered Certified Accountants in the United
Kingdom and a Certified Public Accountant in Hong Kong.

         NANCY WONG has been a Director of the Company since its inception and a
Director of Far East, and its Personnel Manager, since 1994. Ms. Wong has been
with Far East since 1971. Ms. Wong is also Far East's Chief Representative in
China. During the last several years, Ms. Wong has played a pivotal role in Far
East's business expansion in China. Ms. Wong received a Bachelor of Science
degree in Business Administration from the University of East Asia, Macao in
1989.

         C.P. KWAN joined Far East in 1984 and has served as a Director and
Manager of its Process Equipment Department since 1991. Mr. Kwan has been a
Director of the Company since its inception. Before joining Far East, he was
employed by Haven Automation (H.K.) Ltd., a company involved in the water
treatment and process control business between 1981 and 1984.


                                       32
<Page>

         ALEX SHAM has been a Director of the Company since its inception. Mr.
Sham joined Far East in 1988 and has been its Sales Manager since 1993 and
became a Director of Far East in 1996. Mr. Sham received a Bachelor of Science
in Applied Chemistry from Hong Kong Baptist University in 1990. Prior to joining
Far East, Mr. Sham was employed by the Environmental Protection Department of
the Hong Kong Government from 1986 until 1988.

         Y.K. LIANG has been a director of the Company since February 1998. Mr.
Liang is a director of Wong Liang Consultants Ltd. ("Consultants") and a member
of the certified public accounting firm of Y.K. Liang & Co. ("LCO"). Mr. Liang
has been associated with both Consultants and LCO for more than the past five
years. Consultants is a general business consulting firm.

         HO CHOI CHIU has been a director of the Company since October 2000. Mr.
Chiu is a certified public accountant, is a senior partner in the accounting
firm of C.C. Ho & Company, a firm that he has been associated with for more than
the past five years.

         Directors of the Company serve until the next annual meeting of
shareholders of the Company and until their successors are elected and duly
qualified. Officers of the Company are elected annually by the Board of
Directors and serve at the discretion of the Board of Directors.

         None of the Company's directors, officers or beneficial owners of ten
percent or more of its Common Stock are required to file any reports pursuant to
Section 16(a) of the Securities Exchange Act of 1934, as amended (the "1934
Act").

         The Company had one meeting of its Board of Directors during Fiscal
2001.

         The Company has not had any directors resign or decline to stand for
re-election at any time during or since December 31, 1998. However, at the
Company's 2000 annual meeting, the Company's shareholders did not re-elect one
director, Adam L. Goldberg.

         There are no material legal proceedings involving any director, officer
or affiliate of the Company, owner of record or beneficially of more than five
percent of the Company's Common Stock or any associate of any of the foregoing.

ITEM 6B.       COMPENSATION

         The following table sets forth certain summary information with respect
to the compensation paid by the Company and Far East for services rendered in
all capacities to the Company and Far East during Fiscal 2001 and Fiscal 2000 to
the Chairman of the Board and Chief Executive Officer.


                                       33
<Page>

                                 SUMMARY COMPENSATION TABLE

<Table>
<Caption>

         NAME AND PRINCIPAL POSITION                         YEAR           SALARY US($)         BONUS US($)
         ---------------------------                         ----           ------------         -----------
<S>                                                          <C>            <C>                  <C>
         T.C. Leung, Chairman of the Board of                2001           100,000              61,000
             Directors and Chief Executive Officer           2000           100,000              44,000
</Table>

         COMPENSATION OF DIRECTORS. Directors of the Company do not receive
compensation for their services as directors; however, the Board of Directors
may authorize the payment of compensation to directors for their attendance at
regular and annual meetings of the Board and for attendance at meetings of
committees of the Board as is customary for similar companies. Directors will be
reimbursed for their reasonable out-of-pocket expenses incurred in connection
with their duties to the Company.

         PENSION PLAN. The Company has a defined contribution pension plan for
all of its employees. Under this plan, all employees are entitled to a pension
benefit equal to 50% to 100% of their individual fund account balances at their
dates of resignation or retirement which depends on their years of service. The
Company is required to make specific contributions at approximately 10% of the
basic salaries of the employees to an independent fund management company. The
Company has no future obligations for the pension payment or any post-retirement
benefits beyond the annual contributions made. The independent fund management
company is responsible for the ultimate pension liabilities to those resigned or
retired employees. During the years ended December 31, 2000 and 2001, the
Company made total pension contributions of approximately US$97,000 and
US$135,000, respectively, to this Plan.

         EMPLOYMENT AGREEMENT - T.C. LEUNG. T.C. Leung's services to the Company
and Far East were provided pursuant to a personal services agreement between the
Company, Far East and Shereman Enterprises Ltd., a management company (the
"Employment Agreement"). The Employment Agreement terminated in March 2002,
however, Mr. Leung continues to serve in those capacities while the Company
negotiates an extension of his Employment Agreement. Pursuant to this Employment
Agreement Mr. Leung serves as the Chairman of the Board of Directors and Chief
Executive Officer of Far East and the Company. The Employment Agreement requires
that Mr. Leung devote substantially all of his business time to the affairs of
the Company and Far East. The Employment Agreement provides for the payment of
US$100,000 and six percent of the Company's consolidated pre-tax income to the
management company in exchange for Mr. Leung's services during the first year of
the agreement's term with compensation past the first year to be renegotiated
annually. The Employment Agreement contains a confidentiality provision and a
covenant not to compete with the Company or Far East for a period of one year
following termination of the agreement under certain circumstances. Mr. Leung's
employment agreement requires the Company to provide his beneficiaries and him,
respectively, with twelve months salary in the event of his death or disability
and also contains provisions for payment of salary and benefits following a
change of control (as defined) of the Company, the failure to reappoint him to
his position, a salary reduction or the Company's failure to perform its
obligation under the employment agreement. In general, under such circumstances,
Mr. Leung would be entitled to a cash payment equivalent to his salary for the
remaining term of his Agreement, and continued life, health and disability
benefits for a period of one year.


                                       34
<Page>

         MANAGEMENT OPTION PLAN. The Company has authorized the issuance of
Options to purchase up to an aggregate of 2,184,000 Ordinary Shares (the
"Management Options") to its officers, directors and employees in such numbers
and to such persons as the Company's Chairman of the Board and Chief Executive
Officer may direct. The Management Options became exercisable on March 14, 1998
for a term of ten years.

         The exercise price and the number of Ordinary Shares purchasable upon
exercise of any Management Options are subject to adjustment upon the occurrence
of certain events, including stock dividends, reclassification, reorganizations,
consolidations, mergers, and certain issuances and redemptions of Ordinary
Shares and securities convertible into or exchangeable for Ordinary Shares
excluding certain issuances of shares. No adjustments in the exercise price will
be required to be made with respect to the Management Options until cumulative
adjustments amount to $.05.

         In the event of any capital reorganization, certain reclassifications
of the Ordinary Shares, any consolidation or merger involving the Company (other
than (i) a consolidation or merger which does not result in any reclassification
or change in the outstanding Ordinary Shares, or (ii) sale of the properties and
assets of the Company, as, or substantially as, an entirety to any other
corporation), Management Options will thereupon become exercisable only for the
number of shares of stock or other securities, assets, or cash to which a holder
of the number of Ordinary Shares of the Company purchasable (at the time of such
reorganization, reclassification, consolidation, merger, or sale) upon exercise
of such Management Options would have been entitled upon such reorganization,
reclassification, consolidation, merger, or sale.

         The table below shows, as to each of the executive officers and
directors of the Company and as to all executive officers and directors of the
Company as a group, the following information with respect to Management
Options: (i) the aggregate amounts of Ordinary Shares subject to Management
Options; and (ii) the per share exercise price for the Management Options
granted to these individuals.

         Each of the following persons also received options under the Company's
2000 Officers and Directors Plan.

<Table>
<Caption>

         NAME OF EXECUTIVE                     SHARES SUBJECT                           PER SHARE
         OFFICERS AND DIRECTORS                TO MANAGEMENT OPTIONS                    EXERCISE PRICE
         ----------------------                ---------------------                    --------------
                                                                                           (US$)

<S>                                                    <C>                                   <C>
         T.C. Leung                                    1,170,000                             3.5256
                                                         546,000                             2.5641

         Alex Sham                                        59,735                             3.5256
                                                          31,200                             2.5641

         Jerry Wong                                       51,935                             3.5256
                                                          23,400                             2.5641


                                       35
<Page>

<Caption>

         NAME OF EXECUTIVE                     SHARES SUBJECT                           PER SHARE
         OFFICERS AND DIRECTORS                TO MANAGEMENT OPTIONS                    EXERCISE PRICE
         ----------------------                ---------------------                    --------------
                                                                                           (US$)

<S>                                                    <C>                                   <C>
         Nancy Wong                                       44,200                             3.5256
                                                          11,700                             2.5641

         C.P. Kwan                                        35,100                             3.5256
                                                          11,700                             2.5641


         All Executive Officers and                    1,984,970                        2.5641 - 3.5256(1)
         Directors as a group
         (7 persons)
</Table>

----------
(1)  Price Range.

         Other officers and/or employees of the Company have been or will be
granted management options to purchase an aggregate of 199,030 Management
Options, all of which will be exercisable at US$3.5256 per share.

         As of May 31, 2002, no Management Options have been exercised. At May
31, 2002, none of the options were "in the money," although by their terms they
are exercisable.

         COMPANY OPTION PLANS. The 2000 Officers and Directors Plan provides for
the grant of options to acquire Ordinary Shares to the Company's executive
officers and directors and persons holding the same positions with the Company's
subsidiaries. The 2000 Employees Plan provides for the grant of options to
acquire Ordinary Shares to key employees of the Company and its subsidiaries.
The 2000 Officers and Directors Plan and 2000 Employees Plan are collectively
referred to as the "2000 Plans".

         189,800 and 379,600 shares are authorized for issuance under the 2000
Employees Plan and 2000 Officers and Directors Plan, respectively.

         The Board of Directors or a committee (the "Committee") appointed by
the Board of Directors administers the 2000 Plans. The Board of Directors or the
Committee has the authority to interpret the Plans, prescribe, amend and rescind
rules and regulations relating to it, determine the terms and provisions of
options granted under the Plans (which need not be identical), and make other
determinations as it deems necessary and advisable for the administration of the
Plans. The Board of Directors or the Committee also has the authority to
delegate decisions with respect to Options granted to key employees under the
2000 Employees Plan who are not elected officers or directors of the Company or
its subsidiaries and to delegate decisions with respect to key employees to the
Chief Executive Officer.


                                       36
<Page>

         Any decision by the Committee or the Chief Executive Officer to grant
an award under the 2000 Plans are subject to ratification by the Board of
Directors of the Company. The Board is also to ratify any decision that affects
the terms or conditions of options awarded to elected officers or directors of
the Company or its subsidiaries.

         In the event that the Ordinary Shares of the Company are subdivided or
consolidated as a result of a reorganization, stock split, payment of a stock
dividend, reverse stock split or other change in the Company's capitalization,
the Committee or the Board of Directors has the authority to make appropriate
adjustments in the Ordinary Shares available for issuance under the 2000 Plans,
the number of shares subject to options that may have been or may be awarded to
any participant in any 12 month period, the price, number of Ordinary Shares or
kind of securities subject to outstanding options, or the terms of such options
in order to prevent dilution or enlargement of rights under the options. In
addition, the Board may also change the kind of securities available for grant
under the 2000 Plans to reflect any such corporate changes.

         The Committee or the Chief Executive Officer has the discretion to
determine which employees constitute key employees to whom options will be
awarded under the 2000 Employees Plan.

         The Committee or Chief Executive Officer, as the case may be,
determines the number of Ordinary Shares subject to options to be granted.

         The purchase price per share of the Ordinary Shares to be paid upon the
exercise of the option must be at least 100% of the fair market value of an
Ordinary Shares on the date on which the option was granted.

         Under the 2000 Plans, if the Ordinary Shares are principally traded on
a national securities exchange or the Nasdaq Stock Market's National Market or
Small Cap Market at the time of grant, the Company is required to use, as fair
market value, the average of the closing prices of the Ordinary Shares for the
ten consecutive trading days immediately before the date of grant. If the
Ordinary Shares are traded on a national securities exchange or the Nasdaq Stock
Market's National Market or Small Cap Market, but no closing prices are reported
for such ten-day period, or if the Ordinary Shares are principally traded in the
over-the-counter market, the Company is required to use, as fair market value,
the average of the mean between the bid and asked prices reported for the
Company's Ordinary Shares at the close of trading during such ten-day period
before the date of grant. If the Ordinary Shares are traded neither on a
national securities exchange, the Nasdaq Stock Market's National Market, Small
Cap Market nor in the over-the-counter market or if bid and asked prices are
otherwise not available, the fair market value of the Ordinary Shares on the
date of grant will be determined in good faith by the Committee or the Board of
Directors, as the case may be.

         The Board of Directors or the Committee, as the case may be, or, to the
extent that such authority has been delegated to the Chief Executive Officer,
the Chief Executive Officer determines, at the time of grant, when each option
granted under the Plans will become exercisable. Notwithstanding the foregoing,
all options held by a key employee of the Company


                                       37
<Page>

or its subsidiaries become immediately exercisable, whether or not exercisable
at the time, upon the death or disability.

         No option is to be exercisable more than ten years from the date the
option is granted.

         PAYMENT OF EXERCISE PRICE FOR OPTIONS. Under the 2000 Plans, payment
for shares purchased upon exercise of an option may be made by any of the
following methods, subject to certain requirements: (1) in cash, paid by either
the optionholder or a broker to whom the optionee has tendered the option; (2)
in Ordinary Shares valued at the fair market value of such shares on the date of
exercise, provided that such shares were held by the optionholder for not less
than six months prior to the date of exercise of the option; (3) by any other
medium of payment that the Board, Committee or the Chief Executive Officer, as
applicable, has authorized at the time of grant (other than the withholding of
shares issuable upon the exercise of options); or (4) by any combination of the
preceding methods.

         TRANSFER OF OPTIONS. Under the 2000 Plans, an option may not be sold,
assigned or otherwise transferred except to:

         --       the spouse or lineal descendant of a plan participant;

         --       the trustee of a trust for the primary benefit of a plan
                  participant's spouse or lineal descendant;

         --       a partnership of which a plan participant and lineal
                  descendants are the only partners; or

         --       a charitable organization.

         These assignments are only permitted if the assigning optionee does not
receive any compensation in connection with the assignment and the assignment is
expressly approved by the Board or Committee, as the case may be.

         The Company indemnifies the members of any Committee and its delegates
and the Chief Executive Officer against (1) reasonable expenses incurred in
connection with the defense of any action, suit or proceeding to which they may
be a party by reason of any action taken or failure to act in connection with
the 2000 Plans, and (2) all amounts paid by them in settlement of or
satisfaction of a judgment entered in any such action, suit or proceeding,
except in cases where such a person is adjudged liable for gross negligence or
gross misconduct in the performance of his or her duties.

         The Board may terminate, suspend, or amend the 2000 Plans at any time
without the authorization of shareholders to the extent allowed by law or the
rules of any market on which the Company's shares are then listed or quoted.

         During Fiscal 2000 and in January 2002, the Company granted options to
certain of its officers and directors pursuant to its 2000 Officers and
Directors Plan. The table below shows, as


                                       38
<Page>

to each of the executive officers and directors of the Company and as to all
executive officers and directors of the Company as a group, the aggregate
amounts of Ordinary Shares subject to such options.

<Table>
<Caption>

                                             SHARES SUBJECT
                                             TO 2000 OFFICERS
NAMES OF EXECUTIVE                           AND DIRECTORS                      PER SHARE
OFFICERS AND DIRECTORS                       PLAN OPTIONS                       EXERCISE PRICE
----------------------                       --------------------               --------------
                                                                                    (US$)

<S>                                                 <C>                           <C>
T.C. Leung                                          143,000                       1.2154
                                                     98,000                       1.72

Alex Sham                                            15,600                       1.2154
                                                     45,000                       1.72

Jerry Wong                                           13,000                       1.2154
                                                     25,000                       1.72

Nancy Wong                                           10,400                       1.2154
                                                     11,000                       1.72

C.P. Kwan                                             7,800                       1.2154
                                                     10,800                       1.72

All executive officers and
Directors as a group                                379,600                       1.2154 -
                                                                                  1.72(1)
</Table>

----------
(1)  Price Range.

         The foregoing options will expire in August 2010.

         Pursuant to its 2000 Employees Plan, the Company has also granted
options to 37 of its non-officer/director employees to purchase an aggregate of
163,800 of its Ordinary Shares exercisable at a price of US$1.2154 per share for
a ten year term expiring in February 2011.

         At December 31, 2001, no options had been exercised. The Company
continues to account for stock-based compensation using the intrinsic value
method prescribed by Accounting Principles Board ("APB") Opinion No. 25, under
which no compensation cost for stock options is recognized for stock option
granted at or above fair market value. Had compensation expense


                                       39
<Page>

for the Company's options been determined based upon fair values at the grant
dates in accordance with SFAS No. 123, the Company's pro forma net income for
the year ended December 31, 2001 would be approximately US$325,000. The
Company's pro forma basic and diluted net income per common share would be
approximately US$0.09 for the year ended December 31, 2001.

         Weighted average fair value of 2000 Stock Options granted during the
year ended December 31, 2000 of US$1.43 is estimated on the date of grant using
the Black-Scholes option-pricing model. Fair values of 2000 Stock Options are
estimated on the date of grant using the following assumptions:

<Table>
<Caption>

                                                                       2000
                                                                       ----
<S>                                                                    <C>
         Risk-free interest rate                                       6.1%
         Expected dividend yield                                       0%
         Expected option life                                          7 years
         Expected stock price volatility                               127%
</Table>

ITEM 6C.       BOARD PRACTICES

         The term of each of the Company's seven directors expires at the
election and qualification of their successors at the next annual meeting of the
Company's shareholders, anticipated to be held in August of this year. All of
the Company's seven directors were elected at the Company's last annual meeting
of shareholders in August 2001.

         Mr. Leung, the Company's Chief Executive Officer and the Chairman of
its Board of Directors has an employment agreement with the Company, that
provides him with benefits upon the termination of his employment in certain
events. See Item 6B. "Compensation."

ITEM 6D.       EMPLOYEES

         The Company has approximately 92 full-time employees, including a
marketing and sales staff of 44, an administrative staff of 30 and a technical
support staff of 18.

         The Company's management consists of its officers and directors.

         The Company is not subject to any collective bargaining agreement and
believes that its relationship with its employees are good.

ITEM 6E.       SHARE OWNERSHIP

         With respect to the share ownership of the directors and senior
management of the Company, reference is made to Item 7. "Major Shareholders and
Related Party Transactions."


                                       40
<Page>

ITEM 7.        MAJOR SHAREHOLDERS AND RELATED PARTY TRANSACTIONS

ITEM 7A.       MAJOR SHAREHOLDERS

         The following table sets forth, as of June 11, 2002, certain
information concerning beneficial ownership of the Company's Ordinary Shares,
giving effect to the Company's repurchase of 162,215 of its Ordinary Shares,
with respect to (i) each person known to the Company to own 5% or more of the
outstanding Ordinary Shares, (ii) each director and executive officer of the
Company, and (iii) all officers and directors of the Company as a group:

<Table>
<Caption>

                                                                 AMOUNT AND               APPROXIMATE
                                                                 NATURE OF                PERCENTAGE
                                                                 BENEFICIAL               OF ORDINARY
                                                                 OWNERSHIP                SHARES OWNED
                                                                 ---------                ------------
<S>                                                              <C>                          <C>
T.C. Leung(1)(2)............................................     3,623,236                    72.2%

Pearl Venture Ltd.(1)(2)....................................     1,468,370                    47.9%

Alex Sham(3)................................................       173,375                     5.4%

Jerry Wong(3)...............................................       124,255                     3.9%

Nancy Wong(3)...............................................        99,140                     3.2%

C.P. Kwan(3)................................................       163,909                     5.2%

Y.K. Liang(3)...............................................             0                    ____

Ho Choi Chiu(3).............................................             0                    ____

Yeung Kai Tai(4)............................................       196,563                     6.4%

All Executive Officers
And Directors of the
Company as a group
(7 persons)(3)..............................................     4,183,915                    77.1%
</Table>

--------
(1)   The address for Mr. Leung is c/o Euro Tech (Far East) Ltd., 18/F Gee Chang
      Hong Centre, 65 Wong Chuk Hang Road, Hong Kong. The address for Pearl is
      Columbus Centre Building, Wichhams Cay, Road Town, Tortola, British Virgin
      Islands.
(2)   Includes shares of the Company's Common Stock owned of record by Pearl,
      which is a trust established for the benefit of Mr. Leung. Also includes
      those Company Ordinary Shares owned of record by Regent, of which Pearl is
      the majority shareholder.
(3)   Gives effect to the exercise of Management Options and 2000 Officers and
      Directors Plan Options owned of record by such persons. See Item 6B.
      "Compensation."
(4)   The address for Yeung Kai Tai is 37-37A Jordan Road, 4th Floor, Doubleset
      Commercial Centre, Kowloon, Hong Kong.


                                       41
<Page>

ITEM 7B.       RELATED PARTY TRANSACTIONS.

         All outstanding balances with related parties are unsecured,
non-interest bearing and are repayable in 2002. The related companies with
which the Company has engaged in transactions are Euro Electron (Far East)
Ltd. ("Euro Electron"), Eurotherm, Action Instruments (China) Ltd. ("Action")
and Armtison Limited ("Armtison"). During Fiscal 2001, the Company made sales
to Eurotherm of approximately US$30,000. During Fiscal 2001, the Company made
purchases from Action, Armtison and Eurotherm of approximately US$7,000,
US$68,000 and US$2,114,000, respectively. Additionally, during Fiscal 2001,
the Company paid approximately US$46,000 to Armtison for office space
rentals, and approximately US$27,000 in management fees to Eurotherm to
assist in the management of some of the Company's PRC offices. The payments
to Armtison and Eurotherm were based on actual office space usage and the
time cost of personnel used, respectively. T.C. Leung, the Company's Chairman
of the Board and Chief Executive Officer is also a director of Eurotherm. As
of December 31, 2001, approximately $120,000 of other current assets
represents advances to certain PRC employees of the Company. The advances are
used to finance the operations of certain retail shops established in the PRC
by the employees to sell the Company's products. The advances are unsecured,
bear interest at a nominal rate and have no fixed repayment terms.

ITEM 8.        FINANCIAL INFORMATION

ITEM 8A.       CONSOLIDATED STATEMENTS AND OTHER FINANCIAL INFORMATION

         Item 8A.1         See Item 18.

         Item 8A.2         See Item 18.

         Item 8A.3         See Report of Independent Accountant page F-1.

         Item 8A.4         We have complied with this requirement.

         Item 8A.5         Not applicable.

         Item 8A.6         Not applicable.

         Item 8A.7         Legal Proceedings.

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

         Item 8A.8         Dividend Policy.

                  The Company has not paid cash dividends to date. The payment
of cash dividends, if any, in the future is within the discretion of the Board
of Directors. The payment of cash dividends, if any, in the future will depend
upon the Company's earnings, capital


                                       42
<Page>

requirements and financial conditions and other relevant factors. The Company's
Board of Directors does not presently intend to declare any cash dividends in
the foreseeable future, but instead intends to retain all earnings, if any, for
use in the Company and Far East's business operations.

         The Company declared a 30% stock dividend on its Ordinary Shares with a
record date of August 27, 2001. The dividend resulted in each record holder of
the Company's Ordinary Shares on that date receiving three Ordinary Shares for
ten Ordinary Shares held at the opening of business on the day after August 27,
2001. The anti-dilution provisions of the Warrants resulted in the holders of
Warrants being entitled to purchase thirteen Ordinary Shares for each ten
Warrants held with proportional adjustments being made in the exercise and
redemption target prices of the Warrants.

ITEM 8B.       SIGNIFICANT CHANGES.

         There has not been any significant change since the date of the annual
financial statements included in this Report.

ITEM 9.        THE OFFERING AND LISTING.

ITEM 9A.       LISTING DETAILS AND 9.C PRINCIPAL TRADING MARKET.

         The Company has two classes of securities presently registered:
Ordinary Shares and Warrants. These securities are presently traded on the
NASDAQ SmallCap Market under the trading symbols "CLWT" and "CLWTW,"
respectively, and have so traded since the Company's Public Offering in March
1997.

         The following quotations have not been adjusted for a 20% stock
dividend issued in September 1999 and the 30% stock dividend issued in August
2001.

                                 ORDINARY SHARES

         The high and low bid price quotations for the Ordinary Shares in the
periods indicated are as follows:

<Table>
<Caption>

YEARS END DECEMBER 31,                                                 HIGH             LOW
---------------------------                                            -----------------------------------
                                                                           $              $
<S>                                                                      <C>            <C>
         1997 (from March)                                               9.125          4.00
         1998                                                            6.75           2.5
         1999                                                            3.625          0.25
         2000                                                           15.00           0.031250
         2001                                                            2.790          0.781
</Table>


                                       43
<Page>

<Table>
<Caption>

QUARTERS ENDED                                                         HIGH             LOW
---------------------------                                            -----------------------------------
                                                                           $              $
<S>                                                                      <C>            <C>
March 31, 2000                                                          15.00           1.03125
June 30, 2000                                                            4.6875         1.00
September 30, 2000                                                       2.375          0.25
December 31, 2000                                                        1.375          0.25
March 31, 2001                                                           2.00           0.78125
June 30, 2001                                                            2.450          1.688
September 30, 2001                                                       2.790          1.00
December 31, 2001                                                        2.320          1.130
March 31, 2002                                                           1.800          1.050

PERIOD
------------------------------------
From April 1, 2002 to June 11, 2002                                      2.450          1.688


THE FOLLOWING MONTHS                                                   HIGH             LOW
---------------------------                                            -----------------------------------
December 2001                                                            1.820          1.580
January 2002                                                             1.790          1.350
February 2002                                                            1.800          1.350
March 2002                                                               1.610          1.050
April 2002                                                               1.650          1.380
May 2002                                                                 1.580          1.100
</Table>

         The Ordinary Shares was held by approximately 49 holders of record as
of June 11, 2002. Based upon information received from broker-dealers, clearing
firms and others, the Company believes that it has approximately at least 400
beneficial shareholders of its Ordinary Shares.

                                    WARRANTS

         The high and low bid price quotations for the Warrants in the periods
indicated are as follows:

<Table>
<Caption>

YEARS END DECEMBER 31,                                                 HIGH             LOW
---------------------------                                            -----------------------------------
                                                                          $               $
<S>                                                                    <C>              <C>
         1997 (from March)                                             3.0625           0.50
         1998                                                          2.00             0.25
         1999                                                          0.812            0.0625
         2000                                                          3.71875          0.031250
         2001                                                          0.320            0.031
</Table>


                                       44
<Page>

<Table>
<Caption>

QUARTERS ENDED                                                                  HIGH             LOW
------------------------------------                                            -----------------------------------
                                                                                  $               $
<S>                                                                             <C>              <C>
March 31, 2000                                                                  3.75             0.125
June 30, 2000                                                                   1.00             0.03125
September 31, 2000                                                              0.59375          0.15625
December 31, 2000                                                               0.3125           0.03125
March 31, 2001                                                                  0.1875           0.03125
June 30, 2001                                                                   0.230            0.080
September 30, 2001                                                              0.320            0.100
December 31, 2001                                                               0.220            0.150
March 31, 2002                                                                  0.200            0.100

PERIOD
------------------------------------
From April 1, 2002 to June 11, 2001                                             0.140            0.100


THE FOLLOWING MONTHS                                                            HIGH             LOW
------------------------------------                                            -----------------------------------
                                                                                  $               $
December 2001                                                                   0.200            0.150
January 2002                                                                    0.200            0.150
February 2002                                                                   0.200            0.100
March 2002                                                                      0.140            0.120
April 2002                                                                      0.140            0.120
May 2002                                                                        0.140            0.100
</Table>


         The Warrants were held by approximately 35 holders of record as of June
11, 2002.

         For information concerning the possible effect on the rights of the
Company's Ordinary Shareholders of issuances of authorized Preferred Stock and
for a description of the terms and conditions of the Company's Warrants, see
Item 10. Additional Information.

ITEM 9B.       PLAN OF DISTRIBUTION

                  NOT APPLICABLE

ITEM 9C.       SELLING SHAREHOLDERS

                  Not Applicable.

ITEM 9D.       DILUTION

                  Not Applicable.

ITEM 9E.       EXPENSES OF THE ISSUE

                  Not Applicable.



                                       45
<Page>

ITEM 10.       ADDITIONAL INFORMATION

ITEM 10A.      SHARE CAPITAL

         AUTHORIZED CAPITAL. The authorized capital of the Company is US$250,000
comprised of 20,000,000 Ordinary Shares and 5,000,000 shares of Preferred Stock.
As of December 31, 2001 there were 3,064,151 Ordinary Shares and no shares of
Preferred Stock, issued and outstanding. All of the Company's shares of capital
stock have a par value of $.01 per share.

         Holders of the Company's Ordinary Shares are entitled to one vote for
each whole share on all matters to be voted upon by shareholders, including the
election of directors. Holders of Ordinary Shares do not have cumulative voting
rights in the election of directors. All shares of Ordinary Shares are equal to
each other with respect to liquidation and dividend rights. Holders of Ordinary
Shares are entitled to receive dividends if and when declared by the Company's
Board of Directors out of funds legally available under British Virgin Islands
law. In the event of the liquidation of the Company, all assets available for
distribution to the holders of Ordinary Shares are distributable among them
according to their respective share holdings. Holders of Ordinary Shares have no
preemptive rights to purchase any additional, unissued shares of Ordinary
Shares. All of the outstanding shares of Ordinary Shares of the Company are duly
authorized, validly issued, fully paid and non-assessable.

         Pursuant to the Company's Memorandum and Articles of Association and
pursuant to the laws of the British Virgin Islands, the Company's Memorandum and
Articles of Association may be amended by a resolution of the Board of Directors
without shareholder approval. This includes amendments to increase or reduce the
authorized capital stock of the Company or to increase or reduce the par value
of its shares. The ability of the Company to amend its Memorandum and Articles
of Association without shareholder approval could have the effect of delaying,
deterring or preventing a change in control of the Company without any further
action by the shareholders including but not limited to, a tender offer to
purchase the Common Stock at a premium over then current market prices.

         Under United States law, majority and controlling shareholders
generally have certain "fiduciary" responsibilities to the minority
shareholders. Shareholder action must be taken in good faith and actions by
controlling shareholders which are obviously unreasonable may be declared null
and void. The British Virgin Islands law protecting the interests of the
minority shareholders is not as protective in all circumstances as the law
protecting minority shareholders in United States jurisdictions. While British
Virgin Islands law does not permit a shareholder of a British Virgin Islands
company to sue its directors derivatively, I.E., in the name of and for the
benefit of the Company, and to sue the Company and its directors for his benefit
and the benefit of others similarly situated, the circumstances in which any
such action may be brought that may be available in respect of any such action
may result in the rights of shareholders of a British Virgin Island company
being more limited than those rights of shareholders in a United States company.

         The Board of Directors of the Company, without further shareholder
action, may issue shares of Preferred Stock in any number of series and may
establish as to each such series the


                                       46
<Page>

designation and number of shares to be issued and the relative rights and
preferences of the shares of each series, including provisions regarding voting
powers, redemption, dividend rights, rights upon liquidation and conversion
rights. The issuance of shares of Preferred Stock by the Board of Directors
could adversely affect the rights of holders of Ordinary Shares by, among other
matters, establishing preferential dividends, liquidation rights and voting
power. The Company has not issued any shares of Preferred Stock and has no
present intention to issue shares of Preferred Stock. The issuance thereof could
discourage or defeat efforts to acquire control of the Company through
acquisition of Ordinary Shares.

         WARRANTS. The Company has Warrants, to purchase an aggregate of
2,527,200 Ordinary Shares, issued in its initial public offering (the
"Warrants"). Each Warrant is issued pursuant to a Warrant Agreement between the
Company and American Stock Transfer & Trust Company, as warrant agent. The
following description is subject to the detailed provisions of and are qualified
in their entity by reference to a Warrant Agreement, which was included as an
exhibit to the Registration Statement for the Company's initial public offering.

         Exercise. Each holder of a Warrant may exercise such Warrant, in whole
or in part, by surrendering the certificate evidencing such Warrant, with the
form of election to purchase attached to such certificate properly completed and
executed, together with payment of the exercise price and any required transfer
taxes, to the Company. No Warrants may be exercised unless at the time of
exercise there is a current prospectus covering the Ordinary Shares of Common
Stock issuable upon the exercise of such Warrants under an effective
registration statement.

         The exercise price and any required transfer taxes are payable in cash
or by certified or official bank check payable to the Company. If fewer than all
of the Warrants evidenced by a warrant certificate are exercised, a new
certificate will be issued for the remaining number of Warrants. Certificates
evidencing the Warrants may be exchanged for new certificates of different
denominations by presenting the Warrant certificate at the offices of the
Company.

         The exercise price and any required transfer taxes are payable in cash
or by certified or official bank check payable to the Company. If fewer than all
of the Warrants evidenced by a warrant certificate are exercised, a new
certificate will be issued for the remaining number of Warrants. Certificates
evidencing the Warrants may be exchanged for new certificates of different
denominations by presenting the Warrant certificate at the offices of the
Company.

         Adjustments. The exercise price and the number of Ordinary Shares
purchasable upon exercise of any Warrants are subject to adjustment upon the
occurrence of certain events, including stock dividends, stock splits, reverse
stock splits, reclassification, reorganizations, consolidations, mergers, and
certain issuances and redemptions of Ordinary Shares and securities convertible
into or exchangeable for Ordinary Shares (below the lesser of the then exercise
price of the Warrants or the fair market value of the Company's Ordinary Shares)
excluding issuances of shares of the Company's Ordinary Shares prior to its
initial public offering, the acquisition of Far East, any issuances of the
Company's securities in connection with its initial public offering, Company
stock option plans or the Management Options. No adjustments in the exercise
price will be required to be made with respect to the Warrants until cumulative
adjustments amount to


                                       47
<Page>

$.05. In the event of any capital reorganization, certain reclassifications of
the Ordinary Shares, any consolidation or merger involving the Company (other
than (i) a consolidation or merger which does not result in any reclassification
or change in the outstanding Ordinary Shares, or (ii) the acquisition of Far
East or any other business), or sale of the properties and assets of the
Company, as, or substantially as, an entirety to any other corporation, Warrants
will thereupon become exercisable only for the number of shares of stock or
other securities, assets, or cash to which a holder of the number of Ordinary
Shares of the Company purchasable (at the time of such reorganization,
reclassification, consolidation, merger, or sale) upon exercise of such Warrants
would have been entitled upon such reorganization, reclassification,
consolidation, merger, or sale.

         Other Rights. In the event of an adjustment in the number of Ordinary
Shares issuable upon exercise of the Warrants, the Company will not be required
to issue fractional Ordinary Shares upon exercise of the Warrants. In lieu of
fractional Ordinary Shares, there will be paid to the holders of the Warrants,
at the time of such exercise, an amount in cash equal to the same fraction of
the current market price of an Ordinary Share.

         Warrant holders do not have voting or any other rights of shareholders
of the Company and are not entitled to dividends, if any.

         Redemption of Warrants. During any time the Warrants are exercisable,
if the average closing bid price of the Ordinary Shares for twenty (20)
consecutive trading days shall exceed certain prices, the Company may redeem the
Warrants by paying holders $.10 per Warrant, provided that notice of such
redemption is mailed not later than ten (10) days after the end of such period
and prescribes a redemption date at least thirty (30) days thereafter.
Warrantholders will be entitled to exercise Warrants at any time up to the
business day next preceding the redemption date. Additionally, the Warrants may
not be redeemed unless at the time of redemption there is a current prospectus
covering the Ordinary Shares issuable upon exercise of such Warrants under an
effective registration statement.

         Stock Dividends. The Company issued twenty (20%) and thirty (30%)
percent stock dividends to holders of its Ordinary Shares in September 1999 and
August 2001. Ordinary shareholders on the record dates received one share for
each five Ordinary Shares held and three shares for each ten Ordinary Shares
held, respectively. The issuance of the dividend shares caused certain
adjustments to be made to the exercise prices, numbers of shares and, where
redemption is applicable, the market price required to be maintained to
"trigger" the Company's right to redeem the warrants (the "Target Price").

         Exercise prices and target prices are set forth below. All Warrants
expire on March 14, 2003.

<Table>
<Caption>

                                                                                POST-DIVIDENDS
                                                                                --------------
<S>                                                                             <C>
         A.       Maximum Number of
                  Shares Exercisable For                                        2,527,200
         B.       Per Share Exercise Price                                      US$3.5256
         C.       Target Price                                                  US$5.4487
</Table>


                                       48
<Page>

ITEM 10B.      MEMORANDUM AND ARTICLES OF ASSOCIATION

         Set forth below is a summary of the material provisions of our
Memorandum and Articles of Association (the "Articles) and the British Virgin
Islands ("BVI") Companies Act relating to the shares. This description does not
purport to be complete and is qualified in its entirety by reference to BVI
statutory law and to the Articles.

         SHARE REGISTER AND VOTING RESTRICTIONS. The Company maintains a share
register at its registered office in the BVI. The Company's registered number is
200960. The objects of the Company are to engage in any act or activity that is
not prohibited under any law of the BVI. See Regulation 4(1) of the Articles.
Under the Articles, the Company is not required to treat the holder of a
registered share in the Company as a shareholder until that person's name has
been entered in the share register. The holders of Ordinary Shares have one vote
for each Ordinary Share held of record. The holders of Preferred Shares have
such voting powers, full or limited, or no voting powers and such restrictions
as may be stated and expressed in the resolution providing for the issuance of
the Preferred Shares.

         SHAREHOLDERS MEETING. The directors of the Company may convene meeting
on the shareholders of the Company at such times and in such manner and places
within or outside the BVI as the directors consider necessary or desirable. Upon
the written request of the shareholders holding ten (10%) percent or more of the
outstanding voting shares in the Company the directors must convene a meeting of
shareholders. The directors must give not less than seven days notice of
meetings of shareholders to those persons whose names on the date of the notice
is given appear as shareholders in the share register of the Company and are
entitled to vote at the meeting. The directors may fix the date notice is given
of a meeting of shareholders as the record date for determining those shares
that are entitled to vote at the meeting.

         The inadvertent failure of the directors to give notice of a meeting to
a shareholder, or the fact that a shareholder has not received notice, does not
invalidate the meeting. A shareholder may be represented at a meeting of
shareholders by a proxy who may speak and vote on behalf of the shareholder.

         A shareholder may participate at a meeting of shareholders by telephone
or other electronic means, as long as all shareholders participating in the
meeting are able to hear each other.

         A meeting of shareholders is duly constituted if, at the commencement
of the meeting, there are present in person or by proxy not less than fifty
(50%) percent of the votes of the shares or class series of shares entitled to
vote on resolutions of shareholders to be considered at the meeting.

         If a quorum is not present, the meeting, if convened upon the
requisition of shareholders, shall be dissolved; in any other case it shall
stand adjourned to the next business day at the same time and place or to such
other time and place as the directors may determine, and if at the adjourned
meeting there are present in person or by proxy not less than one third of the
votes of


                                       49
<Page>

the shares or each class or series of shares entitled to vote on the resolutions
to be considered by the meeting, those present shall constitute a quorum but
otherwise the meeting shall be dissolved.

         At every meeting of shareholders, the chairman of the board of
directors shall preside as chairman of the meeting.

         The chairman may, with the consent of the meeting, adjourn any meeting
from time to time, and from place to place, but no business shall be transacted
at any adjourned meeting other than the business left unfinished at the meeting
from which the adjournment took place.

         At any meeting of the shareholders the chairman shall be responsible
for deciding in such manner as he shall consider appropriate whether any
resolution has been carried or not ant the result of his decision shall be
announced to the meeting and recorded in the minutes thereof.

         An action that may be taken by the shareholders at a meeting may also
be taken by a resolution of shareholders consented to in writing or by written
electronic communication, without the need for any notice, but if not a
unanimous writing, a copy of such resolution shall be sent to all non-consenting
shareholders.

         NET PROFITS AND DIVIDENDS. Under BVI law, dividends may only be
declared and paid by an International Business Company (which the Company is
classified as under BVI law) out of surplus, such that after payment of
dividends such company must be able to satisfy its liabilities as they become
due in the ordinary course of business and the realizable value of the assets of
such company must not be less than the sum of its liabilities (other than
deferred taxes and capital). There are no other BVI restrictions regarding
dividends.

         PRE-EMPTIVE RIGHTS. The holders of Ordinary Shares and Preferred Shares
are not entitled to any pre-emptive or similar rights.

         BORROWING POWER. The directors may exercise all the powers of the
Company to borrow money and to mortgage or charge its undertakings and property
or any part thereof, to issue debentures, debenture stock and other securities
whenever money is borrowed or as security for any debt, liability or obligation
of the Company or of any third party.

         CONFLICT OF INTERESTS. No agreement or transaction between the Company
and one or more of its directors or any person in which any director has a
financial interest or to whom any director is related, including as a director
of that other person, is void and voidable for this reason only, or by reason
only that the director is present at the meeting of directors, or at the meeting
of the committee of directors that approves the agreement or transaction, or
that the vote or consent of the director is counted for that purpose, if the
material facts of the interest of each director in the agreement or transaction
and his interest in or relationship to any other party to the agreement or
transaction are disclosed in good faith, or are known by the other directors. A
director who has an interest in any particular business to be considered at a
meeting of directors or shareholders may be counted for purposes of determining
whether the meeting is duly constituted.


                                       50
<Page>

         REPURCHASE OF SHARES. The Company may purchase, redeem or otherwise
acquire and hold its own shares, but only out of surplus or in exchange for
newly issued shares of equal value. Subject to provisions to the contrary in:

         (a)      the designations, powers, preferences, rights, qualifications,
                  limitations and restrictions with which the shares were
                  issued; or

         (b)      the subscription agreement for the issue of the shares,

the Company may not purchase, redeem or otherwise acquire its own shares without
the consent of shareholders whose shares are to be purchased, redeemed or
otherwise acquired.

         Generally, no purchase, redemption or other acquisition of shares shall
be made unless the directors determine that immediately after purchase,
redemption or other acquisition the Company will be able to satisfy its
liabilities as they become due in the ordinary course of its business and the
realizable value of the assets of the Company will not be less than the sum of
its total liabilities, other than deferred taxes, as shown in the books of
account, and its capital and, in the absence of fraud, the decision of the
directors as to the realizable value of the assets of the Company is conclusive,
unless a question of law is involved.

         NOTICES. Any notice, information or written statement to be given by
the Company to shareholders may be served, in the case of shareholders holding
registered shares in any way by which it can reasonably be expected to reach
each shareholder or by mail addressed to each shareholder at the address shown
in the share register and in the case of shareholders holdings shares issued to
bearer, in the manner provided in the Memorandum of Association.

         PURPOSE, DURATION, LIQUIDATION, MERGER. The Company is empowered under
BVI law and its Memorandum of Association to engage in any act or activity that
is not prohibited under any law in the BVI. The Company shall continue until
wound-up and dissolved by a resolution of shareholders, or under the terms of
any insolvency or liquidation laws in force in the BVI. Under BVI law the
Company may merge with another company, including a parent company or
subsidiary, incorporated in the BVI, or in a jurisdiction outside of the BVI
where the laws of that jurisdiction permit the merger. A merger must be
authorized by the directors of the Company and approved by the shareholders.

         DISCLOSURE OF PRINCIPAL SHAREHOLDERS. Under the laws of the BVI the
identity of the shareholders of the Company is confidential and is not disclosed
in any public document.

         BOARD OF DIRECTORS. The business and affairs of the Company are managed
by the directors who may exercise all such powers of the Company as are not by
BVI law or by the Company's Articles required to be exercised by the
shareholders of the Company.


                                       51
<Page>

ITEM 10C.      MATERIAL AGREEMENTS

         Pursuant to the Company's distribution agreement with Hach, the Company
is Hach's sole representative in the PRC, Hong Kong and Macao and is authorized
to supply, install and commission Hach's products and accessories. The Company's
agreement with Hach expires in March 2003 unless renewed.

         T.C. Leung's services to the Company and Far East are provided pursuant
to the Employment Agreement between the Company, Far East and Shereman
Enterprises Ltd., a management company. The Employment Agreement, dated March
14, 1997, terminated in March 2002. Pursuant to the Employment Agreement Mr.
Leung serves as the Chairman of the Board of Directors and Chief Executive
Officer of Far East and the Company. The Employment Agreement requires that Mr.
Leung devote substantially all of his business time to the affairs of the
Company and Far East. The Employment Agreement provides for the payment of
US$100,000 and six percent of the Company's consolidated pre-tax income to the
management company in exchange for Mr. Leung's services during the first year of
the Employment Agreement's term with compensation past the first year to be
renegotiated annually. The Employment Agreement contains a confidentiality
provision and a covenant not to compete with the Company or Far East for a
period of one year following termination of the Employment Agreement under
certain circumstances. Mr. Leung and the Company are negotiating the terms of an
extension of his Employment Agreement.

         Pursuant to an equity interest transfer agreement between the Company
and Tamworth Industrial Ltd. ("Tamworth") and an equity interest and transfer
agreement among the Company, Tamworth and Pact Asia Pacific Limited, on January
31, 2002, the Company acquired a 30% equity interest in Pact for approximately
US$288,000, Pact, a privately owned engineering firm situated in Shanghai that
specializes in the design, manufacture an operation of water and waste water
treatment plants in several industries situated in China.

         There are no other material contracts other than those entered into in
the ordinary course of business.

ITEM 10D.      EXCHANGE CONTROLS

         There are no exchange control restrictions on payment of dividends on
the Company's Ordinary Shares or on the conduct of the Company's operations
either in Hong Kong, where the Company's principal executive offices are
located, or the British Virgin Islands, where the Company is incorporated. There
are no British Virgin Islands laws which impose foreign exchange controls on the
Company or that affect the payment of dividends, interest, or other payments to
non-resident holders of the Company's securities. British Virgin Islands laws
and the Company's Memorandum and Articles of Association impose no limitations
on the right of non-resident or foreign owners to hold the Company's securities
or vote the Company's Ordinary Shares. The PRC government has established a
unified exchange rate system and system of exchange controls to which the
Company is subject.


                                       52
<Page>

ITEM 10E.      TAXATION

         The Company is exempt from taxation in the British Virgin Islands.

         The Company's subsidiaries organized in Hong Kong, Far East, Limited
and Chinah20, pay the Hong Kong profits tax at a rate of 16% on their income for
financial reporting purposes, after adjustments for income and expense items
which are not assessable or deductible for profits tax purposes. Hong Kong
levies no capital gains or dividends tax.

         In accordance with the relevant income tax laws and regulations
applicable to foreign investment enterprises in the PRC, Euro Tech Trading
(Shanghai) Limited and Shanghai Euro Tech Limited, subsidiaries of the Company,
are exempt from PRC enterprise income tax of 15% for two years starting from
their first profit-making year, after offsetting losses brought forward, if any,
followed by a 50% reduction for the next three years thereafter.

         The Company's effective tax rates for Fiscal 1999, Fiscal 2000 and
Fiscal 2001 were 18.7%, 20.8% and 21.8%, respectively. A statutory tax rate of
16% was in effect during each of these three fiscal years. Principal adjustments
to this statutory tax rate were valuation allowances of 2.7%, 5.5% and 4.9%
during Fiscal 1999, Fiscal 2000 and Fiscal 2001, respectively.

         Income taxes represent Hong Kong's current profits tax. As the
Company's PRC subsidiaries were still in tax loss positions at the end of each
of the last three fiscal years, no PRC enterprise income tax was provided for.
The Company's PRC subsidiaries had accumulated tax losses available to offset
gains in future profits, if any, of US$34,648, US$67,815 and US$103,453 for
Fiscal 1999, Fiscal 2000 and Fiscal 2001, respectively.

ITEM 10F.      DIVIDENDS AND PAYING AGENTS

                  Not applicable.

ITEM 10G.      STATEMENT BY EXPERTS

                  Not applicable.

ITEM 10H.      DOCUMENTS ON DISPLAY

         The documents that are exhibits to or incorporated by reference in this
annual report can be read at the U.S. Securities and Exchange Commission's
public reference facilities at Room 1024, 450 Fifth Street, N.W., Washington, DC
20549 or on the Commission's website: WWW.SEC.GOV.

ITEM 10I.      SUBSIDIARY INFORMATION

                  Not applicable.


                                       53
<Page>

ITEM 11.       QUANTITATIVE AND QUALIFICATION DISCLOSURES ABOUT MARKET RISK

         The Company's primary risk exposures arise from changes in interest
rates and foreign currency exchanges rates.

         FOREIGN CURRENCY RISKS

         The Company is exposed to risk from changing foreign currency
exchanges rates. The Company's sales are denominated either in HK dollar or
Chinese Renminbu ("RMB"). The majority of the Company's expenses are
denominated in HK dollars, followed by RMB and U.s. dollars. The Company is
subject to a variety of risks associated with changes among the relative
value of the U.S. dollar, HK dollar and RMB. The Company does not currently
hedge its foreign exchange positions. Any material increase in the value of
the HK dollar and RMB relative to the U.S. dollar would increase the
Company's expenses and therefore would have a material adverse effect on the
Company's business, financial condition and results of operations. If
exchange rates on such currencies were to fluctuate 10%, the Company believes
that its results from operations and cash flows would not be adversely
affected.

         INFLATION

         Although the Company cannot accurately determine the precise effect
of inflation on its operations, it does not believe inflation has had a
material effect on sales or results of operations.

         The Company is currently not exposed to material future earnings or
cash flow exposures from changes in interest rates on debt obligations since
the Company's only debt is bank debt in the principal amount of $90,000 and
is repayable in full in November 2002. The Company does not currently
anticipate entering into interest rate swaps and/or similar instruments.

ITEM 12.       DESCRIPTION OF SECURITIES OTHER THAN EQUITY SECURITIES

                  Not applicable.



                                       54
<Page>

                                     PART II

ITEM 13.       DEFAULTS, DIVIDENDS, ARREARAGES AND DELINQUENCIES.

                  None.


ITEM 14.       MATERIAL MODIFICATION TO THE RIGHTS OF SECURITY HOLDERS AND USE
               OF PROCEEDS

         For a Discussion of the Use of Proceeds from the Company's Public
Offering, See Item 4A. History and Development of the Company.

ITEM 15.       [RESERVED]

ITEM 16.       [RESERVED]




                                       55
<Page>

                                    PART III

ITEM 17.       FINANCIAL STATEMENTS

                  Not applicable.


ITEM 18.       FINANCIAL STATEMENTS

         The following financial statements are filed as part of this annual
report on Form 20-F

Index to consolidated financial statements

Report of Independent certified public accountants                       F-1

Consolidated income statements                                           F-2

Consolidated balance sheets                                              F-3

Consolidated cash flow statements                                       F-4-5

Consolidated statement of changes in shareholders' equity                F-6

Notes to the consolidated financial statements                          F-7-21


                                       56

<Page>

ITEM 19.       EXHIBITS

Lists of Exhibits

EXHIBIT NO.       DESCRIPTION

1.1               Amended and Restated Memorandum and Articles of Association
                  (1)

1.2               Amendments to Exhibit 3.1 adopted by shareholders on August
                  15, 2000 (3)

4.1               Employment Agreement among Registrant, EuroTech (Far East)
                  Limited, Ltd. etc (for the services of T.C. Leung) (1)

4.2               Management Stock Option Plan (1)

4.3               Agreement with Shanghai Institute of Optics Instruments (2)

4.4               Agreement with Hach Company, Inc. (2)

4.5               2000 Officers and Directors Stock Option and Incentive Plan
                  (3)

4.6               2000 Employees' Stock Option and Incentive Plan (3)

4.7               Equity Interest Transfer Agreement between Tamworth Industrial
                  Ltd. ("Tamworth") and Registrant (4)

4.8               Equity Interest Transfer and Shareholders' Agreement among
                  Tamworth, Registrant and Pact Asia Pacific Limited (4)

4.9               Letters to the Securities and Exchange Commission pursuant to
                  Temporary Note 3T 60 Article 3 of Regulation S-X (5)

8.1               List of Subsidiaries (3)

----------
(1)      Incorporated by reference, previously filed as an Exhibit to
         Registration Statement, SEC File No. 333-16277 and is incorporated by
         reference herein.
(2)      Incorporated by reference, previously filed as an Exhibit to
         Registrant's Report on Form 20-F for its year ended December 31, 1999.
(3)      Incorporated by reference, previously filed as an Exhibit to
         Registrant's Report on Form 20-F for its year ended December 31, 2000.
(4)      Incorporated by reference, previously filed as an Exhibit to
         Registrant's Report on Form 6-K filed on February 11, 2002.
(5)      Filed herewith.




                                       57
<Page>

                                   SIGNATURES

         Pursuant to the requirements of Section 12 of the Securities Exchange
Act of 1934, the registrant certifies that it meets all of the requirements for
filing on Form 20-F and has duly caused this annual report to be signed on its
behalf by the undersigned, thereunto duly authorized.



                                         EURO TECH HOLDINGS COMPANY LIMITED
                                         ----------------------------------
                                                    (Registrant)


                                         /s/ T.C. Leung
                                         ---------------------------------------
                                         T.C. Leung,
                                         Chief Executive Officer and Chairman
                                         of the Board


Dated: June 28, 2002








                                       58
<PAGE>















               EURO TECH HOLDINGS COMPANY LIMITED AND SUBSIDIARIES
            ========================================================



                       AUDITED CONSOLIDATED BALANCE SHEETS

                        AS OF DECEMBER 31, 2000 AND 2001

                                       AND

                       CONSOLIDATED STATEMENTS OF INCOME,

                 CASH FLOWS AND CHANGES IN SHAREHOLDERS' EQUITY

              FOR THE YEARS ENDED DECEMBER 31, 1999, 2000 AND 2001

                         TOGETHER WITH AUDITORS' REPORT




<PAGE>





                    REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS



    TO THE SHAREHOLDERS AND DIRECTORS OF EURO TECH HOLDINGS COMPANY LIMITED


We have audited the accompanying consolidated balance sheets of Euro Tech
Holdings Company Limited (the "Company"), incorporated in the British Virgin
Islands, and subsidiaries (the "Group") as of December 31, 2000 and 2001, and
the related consolidated statements of income and comprehensive income, cash
flows and changes in shareholders' equity for the years ended December 31, 1999,
2000 and 2001. 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 generally accepted auditing standards
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, 2000 and 2001, and the results of its operations and
cash flows for the years ended December 31, 1999, 2000 and 2001 in conformity
with generally accepted accounting principles in the United States of America.



/s/ Arthur Andersen & Co

CERTIFIED PUBLIC ACCOUNTANTS

Hong Kong,
May 24, 2002.

                                      F-1

<PAGE>



                       EURO TECH HOLDINGS COMPANY LIMITED


           CONSOLIDATED STATEMENTS OF INCOME AND COMPREHENSIVE INCOME

              FOR THE YEARS ENDED DECEMBER 31, 1999, 2000 AND 2001

                 (Amounts in thousands of United States dollars
                      except for share and per share data)

<TABLE>
<CAPTION>


                                             Notes                 1999                2000               2001
                                          ----------         ----------          ----------         ----------
<S>                                         <C>              <C>                 <C>                <C>


Net sales                                   15 & 17              13,107              15,010             19,685
Cost of goods sold                             15                (9,896)            (11,467)           (15,396)
                                                             ----------          ----------         ----------

Gross profit                                                      3,211               3,543              4,289
Selling and administrative expenses            15                (2,946)             (3,301)            (3,734)
                                                             ----------          ----------         ----------

Operating income                                                    265                 242                555
Interest income                                15                    85                 113                 66
Other income, net                            3 & 15                  67                  97                126
                                                             ----------          ----------         ----------

Income before income taxes                                          417                 452                747
Income taxes                                   4                    (78)                (94)              (163)
                                                             ----------          ----------         ----------

Net income                                                          339                 358                584
                                                             ==========          ==========         ==========

Foreign currency translation adjustment                               -                   3                (35)
                                                             ----------          ----------         ----------

Comprehensive income                                                339                 361                549
                                                             ==========          ==========         ==========

Net income per common share
    -  Basic                                                 $     0.11          $     0.11         $     0.18
                                                             ==========          ==========         ==========
    -  Diluted                                               $     0.11          $     0.11         $     0.18
                                                             ==========          ==========         ==========

Weighted average number of common
    shares outstanding
    -  Basic                                                  3,226,366           3,226,366          3,226,366
                                                             ==========          ==========         ==========
    -  Diluted                                                3,226,366           3,226,366          3,226,366
                                                             ==========          ==========         ==========
</TABLE>


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


                                    F-2

<PAGE>



                       EURO TECH HOLDINGS COMPANY LIMITED


                           CONSOLIDATED BALANCE SHEETS

                        AS OF DECEMBER 31, 2000 AND 2001

                 (Amounts in thousands of United States dollars
                      except for share and per share data)


<TABLE>
<CAPTION>

                                                                Notes                  2000               2001
                                                             ----------          ----------         ----------
<S>                                                          <C>              <C>                 <C>
ASSETS

Current assets:
   Cash and cash equivalents                                                          3,963              3,551
   Accounts receivable, net                                        5                  2,497              2,717
   Bills receivable                                                                     194                669
   Prepayments and other current assets                           15                    209                330
   Inventories                                                     6                    945              2,003
   Value-added tax recoverable                                                            -                 26
                                                                                 ----------         ----------

         Total current assets                                                         7,808              9,296

Property, plant and equipment, net                               7 & 17               2,284              2,083
                                                                                 ----------         ----------

         Total assets                                                                10,092             11,379
                                                                                 ==========         ==========

LIABILITIES AND SHAREHOLDERS' EQUITY

Current liabilities:
   Long-term bank loan, current portion                           8                      94                 90
   Accounts payable                                                                   1,987              3,358
   Bills payable                                                                        857                137
   Due to related companies                                      15                     255                340
   Other payable and accrued expenses                             9                     881              1,150
   Taxation payable                                                                      48                 98
                                                                                 ----------         ----------

         Total current liabilities                                                    4,122              5,173
                                                                                 ----------         ----------

Long-term bank loan                                              8                       92                  -
                                                                                 ----------         ----------

Shareholders' equity:
   Common stock, par value $0.01 each, 20,000,000
     (2000 - 20,000,000) shares authorized;
     3,226,366 (2000 - 2,481,838) shares issued and
     outstanding                                                10                       25                 32
   Preferred stock, par value $0.01 each, 5,000,000
     (2000 - 5,000,000) shares authorized; nil (2000
     - nil) shares issued and outstanding                                               -                  -
   Additional paid-in capital                                                         2,050              2,043
   Warrants                                                     11                      172                172
   Treasury stock, at cost                                      12                      (16)              (237)
   Cumulative translation adjustments                                                     3                (32)
   Retained earnings                                                                  3,644              4,228
                                                                                 ----------         ----------

         Total shareholders' equity                                                   5,878              6,206
                                                                                 ----------         -----------

         Total liabilities and shareholders' equity                                  10,092             11,379
                                                                                 ==========         ==========

</TABLE>

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


                                    F-3

<PAGE>



                       EURO TECH HOLDINGS COMPANY LIMITED


                      CONSOLIDATED STATEMENTS OF CASH FLOWS

              FOR THE YEARS ENDED DECEMBER 31, 1999, 2000 AND 2001

                 (Amounts in thousands of United States dollars)


<TABLE>
<CAPTION>

                                                                   1999                2000               2001
                                                             ----------          ----------         ----------
<S>                                                          <C>                 <C>                <C>

CASH FLOWS FROM OPERATING ACTIVITIES:
Net income                                                          339                 358                584
Adjustments to reconcile net income to net cash
    provided by (used in) operating activities:
    Depreciation of property, plant and equipment                    99                 109                201
    Gain on disposal of property, plant and
       equipment                                                      -                  (1)                 -
(Increase) decrease in assets:
    Accounts receivable                                            (100)                329               (220)
    Bills receivable                                                (38)                (25)              (475)
    Prepayments and other current assets                            (93)                 94               (121)
    Inventories                                                     (83)               (376)            (1,058)
    Value-added tax recoverable                                       -                   -                (26)
Increase (decrease) in liabilities:
    Accounts payable                                                (73)               (577)             1,371
    Bills payable                                                   389                 423               (720)
    Due to related companies                                        200                  20                 85
    Other payable and accrued expenses                              283                 311                269
    Taxation payable                                                  5                  10                 50
                                                             ----------          ----------         ----------

    Net cash provided by (used in) operating
       activities                                                   928                 675                (60)
                                                             ----------          ----------         ----------

CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of property, plant and equipment                          (217)               (313)                 -
                                                             ----------          ----------         ----------


                                                                                                    (Continued)
</TABLE>

                                    F-4



<PAGE>



                       EURO TECH HOLDINGS COMPANY LIMITED


                 CONSOLIDATED STATEMENTS OF CASH FLOWS (Cont'd)

              FOR THE YEARS ENDED DECEMBER 31, 1999, 2000 AND 2001

                 (Amounts in thousands of United States dollars)



<TABLE>
<CAPTION>

                                                                   1999                2000               2001
                                                             ----------          ----------         ----------
<S>                                                          <C>                 <C>                <C>

CASH FLOWS FROM FINANCING ACTIVITIES:
Repayment of long-term bank loan                                    (65)                (77)               (96)
Purchase of treasury stock                                            -                 (16)              (221)
                                                             ----------          ----------         ----------

    Net cash used in financing activities                           (65)                (93)              (317)
                                                             ----------          ----------         ----------

Effect of exchange rate changes on cash and cash
    equivalents                                                       -                   3                (32)
                                                             ----------          ----------         ----------
Net (decrease) increase in cash and cash                            646                 269               (380)
   equivalents
Cash and cash equivalents, beginning of year                      3,045               3,691              3,963
                                                             ----------          ----------         ----------

Cash and cash equivalents, end of year                            3,691               3,963              3,551
                                                             ==========          ==========         ==========
Supplementary information
    Interest received                                               114                 138                 81
    Interest paid                                                    29                  25                 15
    Income taxes paid                                                82                  84                113
    Income taxes refund                                               8                   -                  -

</TABLE>




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


                                    F-5


<PAGE>



                       EURO TECH HOLDINGS COMPANY LIMITED


           CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY

              FOR THE YEARS ENDED DECEMBER 31, 1999, 2000 AND 2001

                 (Amounts in thousands of United States dollars)

<TABLE>
<CAPTION>


                                      Additional                           Cumulative
                             Common    paid-in                  Treasury   translation  Retained
                              stock    capital      Warrants     Stock     adjustment   earnings      Total
                          ----------- -----------  ----------  ----------  ----------  ----------  -----------
                                                                                                      $'000
<S>                        <C>         <C>         <C>          <C>            <C>       <C>        <C>

Balance as of January
   1, 1999                       21       2,054          172           -           -       2,947       5,194

Net income                        -           -            -           -           -         339         339
Stock split effected
   in the form of a
   dividend                       4          (4)           -           -           -           -           -
                          ----------- -----------  ----------  ----------  ----------  ----------  -----------

Balance as of December
   31, 1999                      25       2,050          172           -           -       3,286       5,533

Net income                        -           -            -           -           -         358         358
Purchase of treasury
   stock                          -           -            -         (16)          -           -         (16)
Foreign exchange
   translation
   adjustment                     -           -            -           -           3           -           3
                          ----------- -----------  ----------  ----------  ----------  ----------  -----------

Balance as of December
   31, 2000                      25       2,050          172         (16)          3       3,644       5,878

Net income                        -           -            -           -           -         584         584
Purchase of treasury
   stock                          -           -            -        (221)          -           -        (221)
Stock split effected
   in the form of a
   dividend                       7          (7)           -           -           -           -           -
Foreign exchange
   translation
   adjustment                     -           -            -           -         (35)          -         (35)
                          ----------- -----------  ----------  ----------  ----------  ----------  -----------


Balance as of December
   31, 2001                      32       2,043          172        (237)        (32)      4,228       6,206
                          =========== ===========  ==========  ==========  ==========  ==========  ===========

</TABLE>


















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


                                    F-6


<PAGE>



                       EURO TECH HOLDINGS COMPANY LIMITED


                 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

      (Amounts expressed in United States dollars unless otherwise stated)



1.       ORGANIZATION AND PRINCIPAL ACTIVITIES

Euro Tech Holdings Company Limited (the "Company") was incorporated in the
British Virgin Islands on September 30, 1996.

Euro Tech (Far East) Limited ("Far East") is the principal operating subsidiary
of the Company. It is principally engaged in the marketing and trading of water
and waste water related process control, analytical and testing instruments,
disinfection equipment, supplies and related automation systems in Hong Kong and
in the People's Republic of China (the "PRC").

Details of the Company's subsidiaries are summarized as follows:

<TABLE>
<CAPTION>

Name                                       Percentage of         Place of            Principal activities
                                         equity ownership      incorporation
--------------------------------------   ------------------  ------------------  -----------------------------
<S>                                      <C>                 <C>                 <C>

Euro Tech (Far East) Limited                   100%              Hong Kong       Marketing and trading of
                                                                                    water and waste water
                                                                                    related process control,
                                                                                    analytical and testing
                                                                                    instruments,
                                                                                    disinfection equipment,
                                                                                    supplies and related
                                                                                    automation systems

Euro Tech (China) Limited                      100%              Hong Kong       Inactive

ChinaH2O.com Limited                           100%              Hong Kong       Internet content provider
                                                                                    and provision of
                                                                                    marketing services for
                                                                                    environmental industry
                                                                                    to group companies

Euro Tech Trading (Shanghai) Limited           100%               The PRC        Marketing and trading of
                                                                                    water and waste water
                                                                                    related process control,
                                                                                    analytical and testing
                                                                                    instruments,
                                                                                    disinfection equipment,
                                                                                    supplies and related
                                                                                    automation systems

Shanghai Euro Tech Limited                     100%               The PRC        Manufacturing of analytical
                                                                                    and testing equipment

</TABLE>

                                    F-7


<PAGE>




2.       SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

a.       BASIS OF CONSOLIDATION

         The consolidated financial statements include the financial statements
         of the Company and its subsidiaries (the "Group"). All material
         intra-group balances and transactions have been eliminated on
         consolidation.

b.       SUBSIDIARIES

         A subsidiary is a company in which the Company holds, directly or
         indirectly, more than 50% of its outstanding voting share capital and
         over which it is able to exercise control.

c.       REVENUE RECOGNITION

         The Company adopted the Securities and Exchange Commission's Staff
         Accounting Bulletin ("SAB") No. 101: "Revenue Recognition". SAB No. 101
         requires that the four basic criteria must be met before revenue can be
         recognized: (1) persuasive evidence of an arrangement exists; (2)
         delivery has occurred or services rendered; (3) the fee is fixed and
         determinable; and (4) collectibility is reasonably assured. The
         Company's revenue arising from sale of goods is recognized upon
         delivery of goods and passage of title to customers. The Company grants
         discounts or allowances on merchandise and accounts for these discounts
         and allowances as a deduction from sales.

d.       TAXATION

         The Company accounts for income tax under the provision of Statement of
         Financial Accounting Standards ("SFAS") No. 109: "Accounting for Income
         Taxes", which requires recognition of deferred tax assets and
         liabilities for the expected future tax consequences of events that
         have been included in the financial statements or tax returns.

         Deferred income taxes are provided using the liability method. Under
         the liability method, deferred income taxes are recognized for the tax
         effects of temporary differences between the tax and financial
         statements bases of assets and liabilities and for credit and loss
         carryforwards. To the extent that a deferred tax asset will more likely
         than not go unrealised, a valuation allowance is recognised.

e.       CASH AND CASH EQUIVALENTS

         Cash and cash equivalents include cash on hand and demand deposits with
         banks.

f.       INVENTORIES

         Inventories are stated at the lower of cost, on the first-in, first-out
         method, or net realizable value. Costs include purchase and related
         costs incurred in bringing each product to its present location and
         condition. Net realizable value is calculated based on the estimated
         normal selling price, less further costs expected to be incurred to
         disposal. Provision is made for obsolete, slow moving or defective
         items, where appropriate.


                                    F-8

<PAGE>




2.       SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES  (Cont'd)


g.       PROPERTY, PLANT AND EQUIPMENT

         Property, plant and equipment are stated at cost less accumulated
         depreciation. Gains or losses on disposal are reflected in current
         operations. Major expenditures for betterments and renewals are
         capitalized. All ordinary repair and maintenance costs are expensed as
         incurred. Depreciation of property, plant and equipment is computed
         using the straight-line method over the assets' estimated useful lives
         as follows: office premises - 47 to 51 years, leasehold improvements -
         over terms of the leases, furniture, fixtures and office equipment - 3
         to 5 years, motor vehicles - 4 years, and testing equipment - 3 years.

         The Company accounts for the impairment of long-lived assets to be held
         and used by recognizing impairment loss on the assets when the sum of
         the projected undiscounted cash flows is less than the carrying amount
         of the assets. Measurement of the impairment loss is based on the fair
         value of the assets, as determined by the discounted cash flow method.
         Assets to be disposed of are reported at the lower of the carrying
         amount or fair value of such assets less costs to sell. In the opinion
         of the management, no indication of impairment existed as of December
         31, 2000 and 2001.

h.       OPERATING LEASES

         Leases where substantially all the risks and rewards of ownership of
         the leased assets remain with the lessors are accounted for as
         operating leases. Rental payments under operating leases are charged to
         expenses on the straight-line basis over the period of the relevant
         leases.

i.       FOREIGN CURRENCY TRANSLATION

         The Company maintains its books and records in United States dollars.
         Its subsidiaries maintain their books and records either in Hong Kong
         dollars or Chinese Renminbi ("functional currencies"). Foreign currency
         transactions during the year are translated into the respective
         functional currencies at the applicable rates of exchange at the dates
         of the transactions. Monetary assets and liabilities denominated in
         foreign currencies are translated into the respective functional
         currencies using the exchange rates prevailing at the balance sheet
         dates. Gain or losses from foreign currency transactions are recognized
         in the statements of income during the year in which they occur.
         Translation adjustments on subsidiaries' equity are included as
         cumulative translation adjustments.

j.       COMPREHENSIVE INCOME

         The Company has adopted Statement of Financial Accounting Standards
         (the "SFAS") No. 130: "Reporting Comprehensive Income," which requires
         the Company to report all changes in equity during a period, except for
         those resulting from investment by owners and distribution to owners,
         in the financial statements for the period in which they are
         recognized. The Company has presented comprehensive income, which
         encompasses net income and foreign currency translation adjustments, in
         the statements of income and comprehensive income.


                                    F-9

<PAGE>




2.       SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES  (Cont'd)


k.       EARNINGS PER COMMON SHARE

         Earnings per common share ("EPS") is computed in accordance with
         Statement of Financial Accounting Standards ("SFAS") No. 128 "Earnings
         Per Share", by dividing the net income by the weighted average number
         of shares of common stock outstanding during the period. Basic and
         diluted EPS are the same as the exercise prices of the redeemable
         common share purchase warrants and stock options were higher than the
         average market prices of the common stock for the years ended December
         31, 1999, 2000 and 2001.

l.       STOCK-BASED COMPENSATION

         The Company accounts for employee stock options in accordance with
         Accounting Principles Board ("APB") Opinion No. 25: "Accounting for
         Stock Issued to Employees". Compensation expense related to employee
         stock options is recorded only if the fair value of the underlying
         stock exceeds the exercise price on the date of grant. Also, the
         Company has adopted the disclosure-only requirement of SFAS No. 123:
         "Accounting of Stock-Based Compensation," which allows entities to
         continue to apply the provisions of APB Opinion No. 25 for transactions
         with employees and provide pro-forma net income and pro-forma earnings
         per share disclosures for employee stock grants as if the
         fair-value-based method of accounting as prescribed in SFAS No. 123 had
         been applied to these transactions.

m.       USE OF ESTIMATES

         The preparation of financial statements in conformity with accounting
         principles generally accepted in the United States of America requires
         management to make estimates and assumptions that affect certain
         reported amounts and disclosures. Accordingly, actual results could
         differ from those estimates.

n.       FINANCIAL INSTRUMENTS

         The carrying values of financial instruments, which consist of cash and
         cash equivalents, accounts receivable and accounts payable, bills
         receivable, bills payable and due to related companies approximate
         their fair values due to the short-term nature of these instruments.
         The carrying value of long-term bank loan approximates its fair value
         based upon rates available to the Company for borrowings with similar
         terms and maturities.

                                    F-10

<PAGE>




2.       SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES  (Cont'd)


o.       NEW STATEMENTS OF FINANCIAL ACCOUNTING STANDARDS

         In June 2001, the Financial Accounting Standards Board ("FASB") issued
         SFAS No. 141: "Business combinations" and SFAS No. 142 : "Goodwill and
         Other Intangible Assets," effective for fiscal years beginning after
         December 15, 2001. SFAS No. 141 requires that the purchase method of
         accounting be used for all business combinations completed after June
         30, 2001. The adoption of SFAS No. 141 did not have a material impact
         on the Company's financial statements. SFAS No. 142 requires, among
         other provisions, companies to assess the possible impairment of
         goodwill existing at the date of adoption and perform subsequent
         impairment tests on an annual basis. Additionally, existing goodwill
         and intangible assets must be reassessed and classified consistently in
         accordance with the Statement's criteria. The Company is required to
         and will adopt SFAS No. 142 on January 1, 2002. The adoption of SFAS
         No. 142 is not expected to have a material impact on the Company's
         financial statements.

         In August 2001, FASB issued SFAS No. 143: "Accounting for Asset
         Retirement Obligations". This Statement requires, among other
         provisions, retirement obligations to be recognized when they are
         incurred and displayed as liabilities, with a corresponding amount
         capitalized as part of the related long lived asset. The capitalized
         element is required to be expensed using a systematic and rational
         method over its useful life. The Company is required to and will adopt
         SFAS No. 143 on January 1, 2002. The adoption of SFAS No. 143 is not
         expected to have a material impact on the Company's financial
         statements.

         In October 2001, FASB issued SFAS No. 144: "Accounting for Impairment
         or Disposal of Long-Lived Assets". The Statement supersedes SFAS No.
         121, "Accounting for Impairment of Long-Lived Assets and for Long-Lived
         Assets to be Disposed of" and modifies APB Opinion No. 30, : "Reporting
         the Results of Operations - Reporting the Effects of Disposal of a
         Segment of a Business, and Extraordinary, Unusual and Infrequently
         Occurring Events". For long-lived assets to be held and used, the
         Statement retains the requirements of SFAS No. 121, whereby an
         impairment loss is recognized if the carrying value of the assets is
         not recoverable from its undiscounted cash flows and an impairment loss
         is measured as the difference between fair values and carrying values
         of the asset. The new Statement requires long-lived assets to be
         disposed of other than by sale be considered held and used until it is
         disposed of. The Statement also broadens the scope of APB Opinion 30
         provisions for the presentation of discontinued operations separately
         from continuing operations to include a component of an entity that
         either has been disposed of or is classified as held for sale. In
         addition, discontinued operations are no longer measured on a net
         realizable value basis, and expected future operating losses must be
         reflected in the periods incurred, rather than at the measurement date
         as previously required by APB Opinion No. 30. The Company is required
         to and will adopt SFAS No. 144 on January 1, 2002. The adoption of SFAS
         No. 144 is not expected to have a material impact on the Company's
         financial statements.

                                    F-11

<PAGE>




2.       SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES  (Cont'd)


o.       NEW STATEMENTS OF FINANCIAL ACCOUNTING STANDARDS  (Cont'd)


         In April 2002, FASB issued SFAS No. 145: "Rescission of FASB Statements
         No. 4, 44, and 64, Amendment of FASB Statement No. 13, and Technical
         Corrections". This statement made revisions to the accounting for gains
         and losses from the extinguishment of debt, rescinded Statement No. 44,
         and required certain lease modifications that have economic effects
         similar to sale-leaseback transactions be accounted for in the same
         manner as sale-leaseback transactions. This statement is required to be
         adopted by the Company beginning on January 1, 2003. The Company is in
         the process of evaluating the effect of the adoption of this standard
         on the consolidated results of operations, financial position and cash
         flows, if any.


3.       OTHER INCOME, NET

<TABLE>
<CAPTION>
                                                      1999                  2000                  2001
                                               -------------------   -------------------   -------------------
                                                     $'000                 $'000                 $'000
<S>                                            <C>                   <C>                   <C>

Gain on disposal of property, plant and
    equipment                                                  -                     1                     -
Exchange gain, net                                            23                    56                    80
Service fee income                                             -                     6                     -
Rental income                                                 44                    34                    46
                                               -------------------   -------------------   -------------------

                                                              67                    97                   126
                                               ===================   ===================   ===================

</TABLE>


4.       INCOME TAXES

The Company is exempt from taxation in the British Virgin Islands.

Far East, Euro Tech (China) Limited and ChinaH2O.com Limited provide for Hong
Kong profits tax at a rate of 16% on the basis of their income for financial
reporting purposes, adjusting for income and expense items which are not
assessable or deductible for profits tax purposes.

In accordance with the relevant income tax laws and regulations applicable to
foreign investment enterprises in the PRC, Euro Tech Trading (Shanghai) Limited
and Shanghai Euro Tech Limited, subsidiaries of the Company, are exempt from the
PRC enterprise income tax of 15% for two years starting from their first
profit-making year, after offsetting losses brought forward, if any, followed by
a 50% reduction for the next three years thereafter.


                                    F-12

<PAGE>




4.       INCOME TAXES  (Cont'd)
---------------------

The reconciliations of the Hong Kong statutory income tax rate to the effective
income tax rate as stated in the consolidated statements of income are as
follows:

<TABLE>
<CAPTION>

                                                      1999                  2000                  2001
                                               -------------------   -------------------   -------------------
                                                     $'000                 $'000                 $'000
<S>                                             <C>                   <C>                  <C>

Statutory tax rate                                       16.0%                 16.0%                 16.0%
Valuation allowances                                      2.7%                  5.5%                  4.9%
Others                                                    -                    (0.7%)                 0.9%
                                               -------------------   -------------------   -------------------

Effective tax rate                                       18.7%                 20.8%                 21.8%
                                               ===================   ===================   ===================

</TABLE>

Income taxes represent current Hong Kong profits tax. No PRC enterprise income
tax was provided for the years ended December 31, 1999, 2000 and 2001 as the PRC
subsidiaries were still in tax loss positions. The accumulated tax losses of the
PRC subsidiaries available to offset again future profit were $34,648, $67,815
and $103,453, respectively for the years ended December 31, 1999, 2000 and 2001.

The components of deferred tax assets are as follows:

<TABLE>
<CAPTION>

                                                                            2000                   2001
                                                                     -------------------    ------------------
                                                                           $'000                  $'000
<S>                                                                   <C>                  <C>

Deferred tax assets arising from PRC tax losses                                     25                     53

Less: Valuation allowances                                                         (25)                   (53)
                                                                     -------------------    ------------------

Net deferred tax assets                                                              -                      -
                                                                     ===================    ==================

</TABLE>


5.       ACCOUNTS RECEIVABLE

<TABLE>
<CAPTION>

                                                                            2000                   2001
                                                                     -------------------    ------------------
                                                                           $'000                  $'000
<S>                                                                   <C>                  <C>

Trade receivables                                                                 2,543                 2,756
Less: Allowance for doubtful debts                                                 (46)                  (39)
                                                                     -------------------    ------------------

                                                                                  2,497                 2,717
                                                                     ===================    ==================

</TABLE>

                                    F-13


<PAGE>




6.       INVENTORIES

<TABLE>
<CAPTION>

                                                                            2000                   2001
                                                                     -------------------    ------------------
                                                                           $'000                  $'000
<S>                                                                   <C>                  <C>

Raw materials                                                                        32                    18
Finished goods                                                                      913                 1,985
                                                                     -------------------    ------------------

                                                                                    945                 2,003
                                                                     ===================    ==================

</TABLE>


7.       PROPERTY, PLANT AND EQUIPMENT

<TABLE>
<CAPTION>

                                                                            2000                   2001
                                                                     -------------------    ------------------
                                                                           $'000                  $'000
<S>                                                                   <C>                  <C>

Office premises                                                                   2,271                 2,271
Leasehold improvements                                                               46                    46
Furniture, fixtures and office equipment                                            389                   388
Motor vehicles                                                                      126                   126
Testing equipment                                                                    51                    52
                                                                     -------------------    ------------------

                                                                                  2,883                 2,883

Less: Accumulated depreciation                                                    (599)                 (800)
                                                                     -------------------    ------------------

                                                                                  2,284                 2,083
                                                                     ===================    ==================

</TABLE>

As of December 31, 2000 and 2001, office premises with net book values of
$1,066,000 and $1,033,000, respectively, were pledged to secure certain banking
facilities of the Group (see Note 8).



                                    F-14

<PAGE>




8.       LONG-TERM BANK LOAN

Long-term bank loan is secured by certain of the Group's office premises, bears
interest at the best lending rate offered by the Group's bank plus 1.75% per
annum and matures at various dates before December 2002. Future maturities of
long-term bank loan are as follows:

<TABLE>
<CAPTION>

                                                                            2000                   2001
                                                                     -------------------    ------------------
                                                                           $'000                  $'000
<S>                                                                   <C>                  <C>

Within one year                                                                     94                     90
During the second year                                                              92                      -
                                                                     -------------------    ------------------

                                                                                   186                     90
                                                                     ===================    ==================

</TABLE>

As of December 31, 2001, the Group had various banking facilities available from
financial institutions amounting to approximately $3,761,000 (2000 -
$4,496,000), of which approximately $2,952,000 (2000 - $3,033,000) remained
unused.



9.       OTHER PAYABLE AND ACCRUED EXPENSES

Other payable and accrued expenses mainly represent deposits received from
customers and accurals for operating expenses.



10.      COMMON STOCK

In September 1999, the Company effected a two-for-ten stock split effected in
the form of a dividend, resulting in an increase of approximately 413,000 shares
of common stock of $0.01 each.

In August 2001, the Company effected a three-for-ten stock split effected in the
form of a dividend, resulting in an increase of approximately 745,000 shares of
common stock of $0.01 each.

The effects of the above two-for-ten and three-for-ten stock splits effected in
the form of a dividend have been reflected retroactively in the financial
statements and all earnings per share computations.


                                    F-15

<PAGE>




11.      WARRANTS

A total of 2,620,800 warrants were issued in 1997, which comprised 1,076,400
public warrants, 1,450,800 private warrants and 93,600 underwriting warrants
issued under the Company's warrants plan.

Each public and private warrant entitles the holder thereof to acquire one share
of the Company's common stock at the exercise price of $3.52 during the period
from March 14, 1998 to March 14, 2003. Each underwriter warrant entitles the
holder thereof to acquire one share of the Company's common stock at the
exercise price of $5.29 during the period from March 14, 1998 to March 14, 2002.
If the closing bid price of the Company's common stocks is above $5.4487 for
twenty consecutive days, the Company has the right to redeem the warrants at the
price of $0.10 each. For the year ended December 31, 1999, 2000 and 2001, no
warrants were exercised.



12.      TREASURY STOCK

The Company authorized a stock buyback program in December 2000 pursuant to
which up to 162,500 shares, not to exceed $281,250 in value, of the Company's
common stock could be purchased in the open market from time to time as market
and business conditions warrant. During the years ended December 31, 2000 and
2001, the Company repurchased a total of 17,355 and 144,860 shares of common
stock for a consideration of approximately $16,000 and $221,000, respectively.
There was no reissuance of treasury stock during the years ended December 31,
2000 and 2001.



13.      STOCK OPTIONS

A total of 2,184,000 shares of common stock have been reserved for issuance
under the Company's management options plan (the "Management Options"). The
Management Options provides for the grant of options to its officers,
directors and employees in such numbers and to such persons as the Company's
Chairman of the Board of Directors and Chief Executive Officer may direct. In
1997, the Company granted its officers, directors and employees options under
the Management Options, which allow them to purchase up to 2,073,240 shares
of common stock. The exercise price of the options granted is $2.56 per share
for 624,000 of such options and $3.53 per share for the remaining 1,449,240.
During the year ended December 31, 2000, 17,160 options with the exercise
price of $3.53 were cancelled. During the same year, the Company has further
granted 115,570 options under the Management Options with the exercise price
of $3.53 per share to its officers, directors and employees, which allow them
to purchase up to 115,570 shares of common stock. The options vested for a
period of one year and expired in March 2007. For the year ended December 31,
2001, no Management Options were granted or exercised.

During the year ended December 31, 2000, a total of 569,400 shares of common
stock have been reserved for issuance under the Company's 2000 Stock Option
Plan (the "2000 Stock Options"). The 2000 Stock Options provides for the
grant of options to its officers, directors and employees in such numbers and
to such persons as the Company's Chairman of the Board of Directors and Chief
Executive Officer may direct. During the year ended December 31, 2000, the
Company granted such options to its officers, directors and employees under
the 2000 Stock Options, which allow them to purchase up to 353,600 shares of
common stock. The exercise price of all options granted is $1.22 per share.
The options vest within a six-month to one-year period and will be expired in
August 2010. During the year ended December 31, 2001, no option under 2000
Stock Options were granted or exercised.

                                    F-16

<PAGE>




13.      STOCK OPTIONS  (Cont'd)

Changes in outstanding options under various plans mentioned above were as
follows:

<TABLE>
<CAPTION>

                                      1999                      2000                          2001
                           --------------------------  --------------------------   --------------------------
                                           Weighted                    Weighted                     Weighted
                                           average                     average                      average
                            Number of      exercise     Number of      exercise      Number of      exercise
                             options        price        options        price         options        price
                           ------------  ------------  ------------  ------------   ------------  ------------
                                              $                           $                            $
<S>                        <C>           <C>           <C>           <C>            <C>           <C>

Outstanding,  beginning      2,073,240          3.24
   of year                                                2,073,240         3.24       2,525,250         2.97
Granted                              -             -        469,170         1.79               -            -
Exercised                            -             -             -             -               -            -
Cancelled                            -             -        (17,160)      (3.53)               -            -
                           ------------  ------------  ------------  ------------   ------------  ------------

Outstanding, end of          2,073,240          3.24
   year                                                   2,525,250         2.97       2,525,250         2.97
                           ============  ============  ============  ============   ============  ============

Exercisable, end of          2,073,240          3.24
   year                                                   2,171,650         3.25       2,525,250         2.97
                           ============  ============  ============  ============   ============  ============

</TABLE>

As of December 31, 2001, the options outstanding and exercisable had exercise
price in the range of $1.22 to $3.53 and a weighted average unexpired life of
approximately 7.58 years

The Company accounts for stock-based compensation using the intrinsic value
method prescribed by APB Opinion No. 25, under which no compensation cost is
recognized as all stock options granted under the Management Options and the
2000 Stock Options have exercise prices at or above fair market value of the
underlying stock at the date of grant. Had compensation expense for the
Company's stock-based compensation plan been recognized based on fair value of
the options on the grant date in accordance with SFAS No. 123, the Company's pro
forma net income and earnings per common share would have been as follows:

<TABLE>
<CAPTION>


                                                          1999                 2000                 2001
                                                    ----------------     ----------------     ----------------
                                                         $'000                $'000                $'000
<S>                                                <C>                  <C>                   <C>

Pro forma net income                                            339                  102                  325
                                                    ================     ================     ================

Reported net income                                             339                  358                  584
                                                    ================     ================     ================

Pro forma earnings per common share
    -  Basic                                        $          0.11      $          0.03      $          0.09
    -  Diluted                                      $          0.11      $          0.03      $          0.09
                                                    ================     ================     ================

Reported earnings per common share
    -  Basic                                        $          0.11      $          0.11      $          0.18
    -  Diluted                                      $          0.11      $          0.11      $          0.18
                                                    ================     ================     ================

</TABLE>

Weighted average fair value of Management Options and 2000 Stock Options granted
during the year ended December 31, 2000 of $1.43 is estimated on the date of
grant using the Black-Scholes option-pricing model. Fair values of Management
Options and 2000 Stock Options are estimated on the date of grant using the
following assumptions:

<TABLE>
<CAPTION>
                                                            1999              2000                  2001
                                                    ----------------     ----------------     ----------------
<S>                                                 <C>                   <C>                  <C>

Risk-free interest rate                                           -           6.1%                          -
Expected dividend yield                                           -            0%                           -
Expected option life                                              -          7 years                        -
Expected stock price volatility                                   -           127%                          -

</TABLE>

                                   F-17

<PAGE>




13.      STOCK OPTIONS  (Cont'd)


The Black-Scholes option-pricing model requires the input of subjective
assumptions, including the expected volatility of stock price. Because changes
in subjective input assumptions can materially affect the fair value estimate,
in management's opinion, the existing model may not necessarily provide a
realiable measure of the fair value of the stock options.


14.      PENSION PLAN


Prior to December 1, 2000, the Group had a defined contribution pension plan for
all its Hong Kong employees. Under this plan, all employees were entitled to
pension benefits equal to their own contributions plus 50% to 100% of individual
fund account balances contributed by the Group, depending on their years of
service with the Group. The Group was required to make specific contributions at
approximately 10% of the basic salaries of the employees to an independent fund
management company. The Group had no future obligations for the pension payment
or any post-retirement benefits beyond the annual contributions made. The
independent fund management company was responsible for the ultimate pension
liabilities to those resigned or retired employees.

With the introduction of the Mandatory Provident Fund Scheme, a defined
contribution scheme managed by an independent trustee, by the Hong Kong
Government on December 1, 2000, each of the Group and its employees makes
monthly contributions to the scheme at 5% of the employee's cash income as
defined under the Mandatory Provident Fund legislation. Contributions of both
the Group and its employees are subject to a maximum of HK$1,000 per month and
thereafter contributions are voluntary and are not subject to any limitation.
The Group and its employees made their first contributions in December 2000.

As stipulated by the rules and regulations in the PRC, the Group contributes to
state-sponsored retirement plans for its employees in Mainland China. The Group
contributes approximately 7% (1999 and 2000 - 7%) of the basic salaries of its
employees, and has no further obligations for the actual payment of pension or
post-retirement benefits beyond the annual contributions. The state-sponsored
retirement plans are responsible for the entire pension obligations payable to
retired employees.

During the years ended December 31, 1999, 2000 and 2001, the aggregate
contributions of the Group to the aforementioned retirement benefit schemes were
approximately $124,000, $97,000 and $135,000, respectively.


                                   F-18


<PAGE>




15.      RELATED PARTY TRANSACTIONS

a.       The transactions with related parties are summarized as follows:
<TABLE>
<CAPTION>

                                                      1999                  2000                  2001
                                               -------------------   -------------------   -------------------
                                                     $'000                 $'000                 $'000
<S>                                            <C>                   <C>                   <C>

Sale of goods to Eurotherm Limited                            33                    26                    30

Purchase of goods from
    -  Armtison Limited                                       38                    72                    68
    -  Actions Instruments (China) Limited                     7                     8                     7
    -  Eurotherm Limited                                     850                   845                 2,114

Interest income on trade receivables earned
    from Armtison Limited                                     10                    10                    10

Interest income from advances to employees                     -                     -                     1

Rental income for office premises earned
    from Eurotherm Limited                                    36                    34                    34

Rental expense for office premises charged
    by Armtison Limited                                       46                    46                    46

Management fee charged by Eurotherm Limited                   23                    29                    27
                                               ===================   ===================   ===================

</TABLE>

b.       Details of amounts due to related companies are as follows:

<TABLE>
<CAPTION>

                                                                            2000                   2001
                                                                     -------------------    ------------------
                                                                           $'000                  $'000

<S>                                                                  <C>                    <C>
Armtison Limited                                                                    11                      7
Actions Instruments (China) Limited                                                  1                      2
Eurotherm Limited                                                                  243                    331
                                                                     -------------------    ------------------

                                                                                   255                    340
                                                                     ===================    ==================
</TABLE>


The amount due to related companies are trade in nature, unsecured, non-interest
bearing and are repayable in 2002.

c.        As of December 31, 2001, approximately $120,000 of other current
          assets represented advances to certain PRC employees of the Company.
          The advances are used to finance the operations of certain retail
          shops established in PRC by the employees to market the Company's
          products. The advances are unsecured, bear interest at a nominal rate
          and have no fixed repayment terms.

Armtison Limited and Actions Instruments (China) Limited are beneficially owned
by Mr. T. C. Leung, Chief Executive Officer and Chairman of the Board of
Directors. Mr. T. C. Leung is also a director of Eurotherm Limited.

                                   F-19


<PAGE>




16.      OPERATING LEASE COMMITMENTS


The Group has various operating lease agreements for office and industrial
premises. Rental expenses for the years ended December 31, 1999, 2000 and 2001
were approximately $206,000, $191,000 and $201,000, respectively. Future minimum
rental payments as of December 31, 2001 and 2002, under agreements classified as
operating leases with non-cancellable terms, are as follows:

<TABLE>
<CAPTION>
                                                                          2 0 0 0                2 0 0 1
                                                                     -------------------    ------------------
                                                                           $'000                  $'000
<S>                                                                   <C>                   <C>

2001                                                                                57                      -
2002                                                                                 -                    136
                                                                     -------------------    ------------------

Total minimum lease payments                                                        57                    136
                                                                     ===================    ==================


</TABLE>


17.      SEGMENT INFORMATION

a.       NET SALES

         Geographical analysis of net sales is as follows:

<TABLE>
<CAPTION>


                                                    1999                   2000                  2001
                                             -------------------   --------------------   -------------------
                                                   $'000                  $'000                 $'000
<S>                                          <C>                   <C>                    <C>


        Hong Kong                                        3,801                 4,503                  5,119
        The PRC                                          8,913                10,207                 14,173
        Others                                             393                   300                    393
                                             -------------------   --------------------   -------------------

                                                        13,107                15,010                 19,685
                                             ===================   ====================   ===================

</TABLE>


b.       LONG-LIVED ASSETS *

         Geographical analysis of long-lived assets is as follows:

<TABLE>
<CAPTION>

                                                                         2000               2001
                                                                   --------------------   -------------------
                                                                          $'000                 $'000
<S>                                                                 <C>                     <C>

        Hong Kong                                                              1,385                  1,230
        The PRC                                                                  899                    853
                                                                   --------------------   -------------------

                                                                               2,284                  2,083
                                                                   ====================   ===================

</TABLE>

         *  Long-lived assets represent property, plant and equipment, net.


                                   F-20

<PAGE>




17.      SEGMENT INFORMATION  (Cont'd)


c.       MAJOR SUPPLIERS

         Details of individual suppliers accounting for more than 5% of the
         Group's purchases are as follows:

<TABLE>
<CAPTION>


                                                    1999                   2000                  2001
                                             -------------------   --------------------   -------------------
                                                   $'000                  $'000                 $'000
<S>                                           <C>                   <C>                    <C>

        Wallace & Tiernan Pacific Pty.
            Ltd.                                            8%                   7%                      5%
        Hach Company Inc.                                  20%                  23%                     22%
        Hioki E.E. Corp.                                   11%                  12%                     11%
        ThermoQuest Corporation                             5%                   7%                      9%
                                             ===================   ====================   ===================

</TABLE>


         Some of the purchase agreements signed with the Group's suppliers are
         memorialized and are not as formal contracts but rather through other
         acknowledgements or correspondence which may contain a vague, if any,
         description of the terms and conditions of such agreements, and
         therefore may be unenforceable.



18.      SUBSEQUENT EVENTS

         a. During the year ended December 31, 2001, Far East entered into two
         agreements with Tamworth Industrial Ltd., an independent third party,
         to acquire 30% equity interests in Yixing Pact Environmental Technology
         Co., Ltd., a wholly foreign-owned enterprise incorporated in the PRC,
         and Pact Asia Pacific Limited, a company incorporated in the British
         Virgin Islands, for a total consideration of $288,000. The acquisitions
         were completed on January 30, 2002. These associated companies are
         principally engaged in design, manufacture and operation of water and
         waste water treatment machinery and equipment in China.

b.       In March 2002, the Company established another stock option plan, 2002
         Employees' Stock Option and Incentive Plan (the "2002 Stock Options"),
         which provides for the grant of options to its officers, directors and
         employees in such numbers and to such persons as the Company's Chairman
         of the Board of Directors and Chief Executive Officer may direct. A
         total of 140,000 shares of common stock of the Company have been
         reserved for issuance under the 2002 Stock Options at an exercise price
         not less than the fair market value of the common stock at the time
         such options are granted.

c.       In January 2002, the Company granted options to certain of its officers
         and directors pursuant to the 2000 Stock Options, which allow them to
         purchase up to 189,800 shares of common stock at a price of $1.72 per
         share. The options vest for a period of 6 month and are expiring in
         August 2010.


                                   F-21