EURO TECH HOLDINGS CO LTD
F-1/A, 1997-03-11
MISC DURABLE GOODS
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<PAGE>   1
 
   
     AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON MARCH 11, 1997
    
 
                                                      REGISTRATION NO. 333-16277
================================================================================
 
                       SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549
 
                            ------------------------
   
                                AMENDMENT NO. 4
    
 
                                       TO
 
                                    FORM F-1
                             REGISTRATION STATEMENT
                                     UNDER
                           THE SECURITIES ACT OF 1933
                            ------------------------
 
                       EURO TECH HOLDINGS COMPANY LIMITED
             (EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER
               AND TRANSLATION OF REGISTRANT'S NAME INTO ENGLISH)
 
<TABLE>
<S>                       <C>                       <C>
  BRITISH VIRGIN ISLANDS             5090                       NA
     (STATE OR OTHER          (PRIMARY STANDARD          (I.R.S. EMPLOYER
        JURISDICTION              INDUSTRIAL           IDENTIFICATION NO.)
   OF INCORPORATION OR       CLASSIFICATION CODE
      ORGANIZATION)                NUMBER)
</TABLE>
 
                           18F Gee Chang Hong Centre
 
                       65 Wong Chuk Hang Road, Hong Kong
                               011-852-2814-0311
  (ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE, OF
                   REGISTRANT'S PRINCIPAL EXECUTIVE OFFICES)
 
                            ------------------------
 
                             C T CORPORATION SYSTEM
                                 1633 Broadway
                            New York, New York 10019
                                 (212) 664-1666
 (NAME, ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE,
                             OF AGENT FOR SERVICE)
 
                            ------------------------
 
                                   COPIES TO:
 
<TABLE>
<S>                                 <C>
         ROBERT PEREZ, ESQ.                          JAY M. KAPLOWITZ, ESQ.
       GUSRAE, KAPLAN & BRUNO         GERSTEN, SAVAGE, KAPLOWITZ, FREDERICKS & CURTIN, LLP
          120 Wall Street                             101 East 52nd Street
      New York, New York 10005                      New York, New York 10022
       Tel No. (212) 269-1400                        Tel No. (212) 752-9700
       Fax No. (212) 809-5449                        Fax No. (212) 752-9713
</TABLE>
 
        Approximate date of commencement of proposed sale to the public:
AS SOON AS PRACTICABLE AFTER THE EFFECTIVE DATE OF THIS REGISTRATION STATEMENT.
 
     If any securities being registered on this Form are to be offered on a
delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, check the following box.  [X]
 
     If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following box
and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering.  [ ]
 
     If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering.  [ ]
 
     If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box.  [ ]
 
                            ------------------------
<PAGE>   2
 
                        CALCULATION OF REGISTRATION FEE
- --------------------------------------------------------------------------------
 
<TABLE>
<S>                                   <C>            <C>            <C>            <C>
- --------------------------------------------------------------------------------
                                                        PROPOSED       PROPOSED
                                                         MAXIMUM        MAXIMUM
                                          AMOUNT        OFFERING       AGGREGATE      AMOUNT OF
        TITLE OF EACH CLASS OF            TO BE           PRICE        OFFERING     REGISTRATION
     SECURITIES TO BE REGISTERED        REGISTERED     PER UNIT(1)     PRICE(1)          FEE
- --------------------------------------------------------------------------------------------------
Common Stock, $.01 par value..........   690,000(2)      $ 5.00       $3,450,000      $1,045.46
- --------------------------------------------------------------------------------------------------
Redeemable Common Stock Purchase
  Warrants............................   690,000(3)      $  .15        $ 103,500      $   31.36
- --------------------------------------------------------------------------------------------------
Common Stock, $.01 par value(4).......    690,000        $ 5.50       $3,795,000      $1,150.00
- --------------------------------------------------------------------------------------------------
Underwriter's Stock Warrants(5).......     60,000        $   --       $        5      $      --
- --------------------------------------------------------------------------------------------------
Common Stock, $.01 par value(6).......     60,000        $ 8.25        $ 495,000      $ 150.00
- --------------------------------------------------------------------------------------------------
Underwriter's Warrants(7).............     60,000        $   --       $        5      $      --
- --------------------------------------------------------------------------------------------------
Common Stock Purchase Warrants(8).....     60,000        $.2475       $   14,850      $    4.50
- --------------------------------------------------------------------------------------------------
Common Stock, $.01 par value(9).......     60,000        $ 6.00        $ 360,000      $ 109.09
- --------------------------------------------------------------------------------------------------
Redeemable Common Stock Purchase
  Warrants to be sold by Selling
  Securityholders.....................    930,000      $  .15(10)      $ 139,500      $   42.27
- --------------------------------------------------------------------------------------------------
Common Stock, $.01 par value to be
  sold by Selling Securityholders.....    930,000      $ 5.50(10)     $5,115,000      $1,550.00
- --------------------------------------------------------------------------------------------------
       TOTAL..........................                                              $4,082.68(12)
                                                                                     ==========
==================================================================================================
</TABLE>
 
- ---------------
 (1) Except as set forth in Note (10), estimated solely for purposes of
     calculating the registration fee.
 
 (2) Includes 90,000 shares of Common Stock subject to the underwriter's
     overallotment option and assumes the overallotment option is exercised in
     full.
 
 (3) Includes 90,000 Redeemable Common Stock Purchase Warrants subject to the
     underwriter's overallotment option and assumes the overallotment option is
     exercised in full.
 
 (4) Issuable upon exercise of the Redeemable Common Stock Purchase Warrants
     referred to in the prior note.
 
 (5) To be issued to the Underwriter, entitling the Underwriter to purchase up
     to 60,000 shares of Common Stock.
 
 (6) Issuable upon the exercise of the Underwriter's Stock Warrants.
 
 (7) To be issued to the Underwriter, entitling the Underwriter to purchase up
     to 60,000 Common Stock Purchase Warrants.
 
 (8) Issuable upon the exercise of the Underwriter's Warrants.
 (9) Issuable upon the exercise of the Common Stock Purchase Warrants identified
     in the prior note.
 
(10) Price is based upon actual sale price paid or to be paid by Selling
     Securityholders to Registrant.
 
(11) Issuable upon the exercise of the Redeemable Common Stock Purchase Warrants
     which are to be sold by the Selling Securityholders.
 
(12) $4,734.24 previously paid with initial filing on November 18, 1996.
 
     PURSUANT TO RULE 416, THERE ARE ALSO BEING REGISTERED SUCH ADDITIONAL BUT
INDETERMINATE NUMBER OF SHARES AS MAY BECOME ISSUABLE PURSUANT TO ANTI-DILUTION
PROVISIONS OF THE REDEEMABLE COMMON STOCK PURCHASE WARRANTS AND THE
UNDERWRITER'S STOCK WARRANTS AND UNDERWRITER'S WARRANTS.
 
     THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF
THE SECURITIES ACT OF 1933 OR UNTIL THIS REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(A),
MAY DETERMINE.
 
================================================================================
<PAGE>   3
 
                       EURO TECH HOLDINGS COMPANY LIMITED
                             CROSS REFERENCE SHEET
                   PURSUANT TO ITEM 501(B) OF REGULATION S-K
 
<TABLE>
<CAPTION>
                      ITEM OF FORM F-1                             LOCATION IN PROSPECTUS
- -------------------------------------------------------------  ------------------------------
<S>                                                            <C>
 1.  Forepart of the Registration Statement and Outside Front
     Cover Page of Prospectus................................  Front Cover Page of
                                                               Registration Statement; Cross
                                                               Reference Sheet; Outside Front
                                                               Cover Page of Prospectus
 2.  Inside Front and Outside Back Cover Pages of
     Prospectus..............................................  Inside Front Cover Page of
                                                               Prospectus; Additional
                                                               Information; Outside Back
                                                               Cover Page of Prospectus
 3.  Summary Information, Risk Factors and Ratio of Earnings
     to Fixed Charges........................................  Prospectus Summary; Risk
                                                               Factors
 4.  Use of Proceeds.........................................  Prospectus Summary; Use of
                                                               Proceeds
 5.  Determination of Offering Price.........................  Outside Front Cover Page of
                                                               Prospectus; Underwriting
 6.  Dilution................................................  Dilution; Risk Factors
 7.  Selling Securityholders.................................  Concurrent Registration for
                                                               Selling Securityholders
 8.  Plan of Distribution....................................  Outside Front Cover Page of
                                                               Prospectus; Underwriting
 9.  Description of Securities to be Registered..............  Outside Front Cover Page of
                                                               Prospectus; Prospectus
                                                               Summary; Description of
                                                               Securities
10.  Interests of Named Experts and Counsel..................  Legal Matters; Experts
11.  Information with Respect to the Registrant..............  Outside Front Cover Page of
                                                               Prospectus; Prospectus
                                                               Summary; Risk Factors;
                                                               Capitalization; Unaudited Pro
                                                               Forma Condensed Consolidated
                                                               Financial Statements; Selected
                                                               Financial Information;
                                                               Management's Discussion and
                                                               Analysis of Financial
                                                               Condition and Results of
                                                               Operations; Business;
                                                               Management; Certain
                                                               Transactions; Principal
                                                               Shareholders; Description of
                                                               Securities; Dividend Policy;
                                                               Shares Eligible for Future
                                                               Sale; Appendix -- The People's
                                                               Republic of China; Financial
                                                               Statements
12.  Disclosure of Commission Position on Indemnification for
     Securities Act Liabilities..............................                *
</TABLE>
 
- ---------------
 
* Item is inapplicable, or the answer thereto is in the negative, and is
  omitted.
<PAGE>   4
 
                                EXPLANATORY NOTE
 
     This Registration Statement contains two forms of prospectus: one to be
used in connection with an offering by the Company of shares of Common Stock and
Redeemable Common Stock Purchase Warrants (the "Prospectus") and one to be used
in connection with the sale of Redeemable Common Stock Purchase Warrants and
shares of the Company's Common Stock underlying such Warrants by certain selling
securityholders (the "Selling Securityholder Prospectus"). The Prospectus and
the Selling Securityholder Prospectus will be identical in all respects except
for the alternate pages for the Selling Securityholder Prospectus included
herein which are labeled "Alternate Page(s) for Selling Securityholder
Prospectus."
<PAGE>   5
 
   
                  SUBJECT TO COMPLETION, DATED MARCH 11, 1997
    
                       EURO TECH HOLDINGS COMPANY LIMITED
                       600,000 SHARES OF COMMON STOCK AND
               600,000 REDEEMABLE COMMON STOCK PURCHASE WARRANTS
 
     Euro Tech Holdings Company Limited, a British Virgin Island company (the
"Company") hereby offers 600,000 shares of common stock, $.01 par value (the
"Common Stock" or "Common Share(s)") of the Company and 600,000 Redeemable
Common Stock Purchase Warrants (the "Public Warrants"). The Common Stock and the
Public Warrants offered hereby (sometimes hereinafter collectively referred to
as the "Securities") will be separately tradeable immediately upon issuance and
may be purchased separately. Investors will not be required to purchase shares
of Common Stock and Public Warrants together or in any particular ratio. Each
Public Warrant entitles the holder to purchase one share of Common Stock at an
exercise price of $5.50 (the "Exercise Price"), subject to adjustment,
commencing one year after the date of this Prospectus (the "Effective Date")
until the close of business on the sixth year after the Effective Date, provided
however that prior to the second year after the Effective Date, the Public
Warrants will be exercisable only if May Davis Group, Inc. (the "Underwriter")
has consented in writing to all of the Public Warrants being exercisable.
 
     The Public Warrants are redeemable, in whole or in part, by the Company at
a price of $.10 per Public Warrant, at any time that they are exercisable, and
prior to their expiration, provided that (i) prior written notice of not less
than thirty days is given to the Warrantholders, (ii) the average closing bid
price of the Company's Common Stock for the twenty consecutive trading days
immediately prior to the date on which the notice of redemption is given, shall
have exceeded $8.50 per share, and (iii) Warrantholders shall have exercise
rights until the close of business the day preceding the date fixed for
redemption if the Public Warrants are then exercisable.
 
   
     Prior to this offering (the "Offering" or the "Public Offering"), there has
been no public market for the Company's Common Stock and Public Warrants, and
there can be no assurance that such a public market will develop or be sustained
after the completion of the Offering. The Offering price of the Common Stock and
the exercise price and other terms of the Public Warrants were established by
negotiations between the Company and the Underwriter and do not bear any direct
relationship to the Company's assets, book value, results of operations or any
other criteria of value. The Company has applied for the listing of the Common
Stock and Public Warrants on the NASDAQ Small Cap Market ("NASDAQ") under the
symbols "CLWTF" and "CLWWF", respectively. The closing of the Public Offering is
subject to the simultaneous acquisition by the Company of Euro Tech (Far East)
Ltd..
    
 
   
     Simultaneously, with the Public Offering, certain selling securityholders
(the "Selling Securityholders") are offering for resale 930,000 Warrants
purchased by such Selling Securityholders as private investors in a recent
private placement of said securities (the "Private Warrants") and 930,000 shares
of the Company's Common Stock underlying the Private Warrants. To permit such
resale, the Company has included said Private Warrants and the shares of the
Company's Common Stock underlying said Private Warrants in the Registration
Statement of which this Prospectus forms a part and are to be offered by the
Selling Securityholders by a separate prospectus also included therein. The
Underwriter has no agreements or understandings with any of the Selling
Securityholders with respect to the release of the securities prior to 12 months
from the date of this prospectus. The Selling Securityholders have entered into
an unconditional twelve month lock-up agreement pursuant to which they cannot
sell the Private Warrants or the shares of Common Stock underlying said
warrants. The NASD has rendered an opinion only with regard to the underwriting
terms and arrangements in connection with the primary offering by the Company of
600,000 shares of Common Stock and 600,000 Public Warrants. Therefore no NASD
member may participate in the offering of the 930,000 Private Warrants or the
930,000 shares of Common Stock issuable on the exercise of the Private Warrants
to be made by the Selling Securityholders without submitting the terms and
arrangements to the NASD for review and approval. See "Underwriting." The resale
of the securities of the Selling Securityholders are subject to Prospectus
delivery and other requirements of the Security Act of 1933 as amended. Sales of
such securities or the potential of such sales at any time may have an adverse
effect on the market prices of the securities offered hereby. See "Concurrent
Registration of Securities." The terms of the Private Warrants are identical to
the Public Warrants, and the Private Warrants and the Public Warrants are
hereinafter collectively referred to as the "Warrants."
    
 
      THE SECURITIES OFFERED HEREBY INVOLVE A HIGH DEGREE OF RISK AND IMMEDIATE
AND SUBSTANTIAL DILUTION. SEE "RISK FACTORS," COMMENCING ON PAGE 9 AND
"DILUTION."
  THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
 EXCHANGE COMMISSION (THE "COMMISSION") OR ANY STATE SECURITIES COMMISSION NOR
 HAS THE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE ACCURACY
OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL
                                    OFFENSE.
- --------------------------------------------------------------------------------
 
<TABLE>
<S>                                        <C>                  <C>                  <C>
- --------------------------------------------------------------------------------
                                                                    UNDERWRITING
                                                 PRICE TO           DISCOUNTS AND         PROCEEDS TO
                                                  PUBLIC           COMMISSIONS(1)         COMPANY(2)
- ----------------------------------------------------------------------------------------------------------
Per Share..................................         $5.00               $.50                 $4.50
- ----------------------------------------------------------------------------------------------------------
Per Warrant................................         $.15                $.015                $.135
- ----------------------------------------------------------------------------------------------------------
Total(3)...................................     $3,090,000.00        $309,000.00         $2,781,000.00
==========================================================================================================
</TABLE>
 
                                                   (footnotes on following page)
                  -------------------------------------------
                             MAY DAVIS GROUP, INC.
                  -------------------------------------------
 
             The date of this Prospectus is                , 1997.
 
     INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A
     REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE
     SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR
     MAY OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT
     BECOMES EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR
     THE SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE
     SECURITIES IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE
     UNLAWFUL PRIOR TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS
     OF ANY SUCH STATE.
<PAGE>   6
 
(footnotes from previous page)
 
    (1) Does not include additional compensation to the Underwriter consisting
of (i) a non-accountable expense allowance equal to 3% of the aggregate purchase
price of the Securities, or $92,700 ($106,605 if the Underwriter's overallotment
option is exercised in full); (ii) warrants to purchase 60,000 shares of Common
Stock at $8.25 per share and/or 60,000 Common Stock Purchase Warrants at $.2475
per Warrant; and (iii) a three year consulting agreement providing for fees
totalling $108,000, which is payable to the Underwriter in full on the closing
of this Offering. For additional information concerning further agreements
between the Company and the Underwriter, including an agreement to indemnify the
Underwriter against certain civil liabilities, including liabilities under the
Securities Act of 1933. See "Underwriting."
    (2) After deducting Underwriting discounts and commissions, but before the
payment of the Underwriter's non-accountable expense allowance in the amount of
$92,700 ($106,605 if the Underwriter's overallotment option is exercised in
full) and other expenses of the Offering payable by the Company (estimated at
$449,550).
    (3) The Company has granted the Underwriter an option to purchase up to
90,000 additional shares of Common Stock and 90,000 additional Warrants, upon
the same terms and conditions set forth above, solely to cover overallotments,
if any (the "Overallotment Option"). If the Overallotment Option is exercised in
full, the total Price to Public, Underwriting Discounts and Commissions and
Proceeds to Company will be increased to $3,553,500, $355,350 and $3,198,150,
respectively.
    The Common Stock and Warrants are being offered on a "firm commitment"
basis, subject to prior sale, when, as, and if delivered to and accepted by the
Underwriter, and subject to certain other conditions and legal matters. The
Underwriter reserves the right to withdraw, cancel or modify the Offering and to
reject orders in whole or in part. It is expected that delivery of the
certificates representing the shares of Common Stock and Warrants will be made
at the offices of the Underwriter, in New York City, on or about              ,
1997.
 
     Upon consummation of this Offering, the Company will be subject to the
informational requirements of the Securities Exchange Act of 1934, as amended
(the "Exchange Act"), and, in accordance therewith, will file periodic reports
and other information with the Commission. However, as a "foreign private
issuer," the Company will be exempt from the rules under the Exchange Act
prescribing certain disclosure and procedural requirements for proxy
solicitations and the Company's officers, directors and principal shareholders
will be exempt from the reporting and "short-swing" profit recovery provisions
contained in Section 16 of the Exchange Act and the rules thereunder, with
respect to their purchases and sales of shares of Common Stock and Warrants. In
addition, the Company will not be required under the Exchange Act to file
periodic reports and financial statements with the Commission as frequently or
as promptly as United States companies whose securities are registered under the
Exchange Act. However, the Company intends to furnish its shareholders with
annual reports containing financial statements which will be examined and
reported on, with an opinion expressed by an independent public accounting firm
prepared in accordance with generally accepted accounting principles in the
United States ("U.S. GAAP").
 
     The Company prepares its consolidated financial statements in accordance
with U.S. GAAP. The Company publishes its financial statements in United States
dollars as the Company is incorporated in the British Virgin Islands, where the
currency is the United States dollar, and upon completion of this Offering the
functional currency of the Company's only operating subsidiary is in Hong Kong
Dollars. All dollar amounts ("$") set forth in this Prospectus are in United
States dollars, the references to HK$ refer to Hong Kong Dollars and RMB to
Chinese Renminbi Yuan.
 
IN CONNECTION WITH THIS OFFERING, THE UNDERWRITER MAY OVERALLOT OR EFFECT
TRANSACTIONS WHICH STABILIZE OR MAINTAIN THE MARKET PRICE OF THE COMMON STOCK
AND THE WARRANTS AT LEVELS ABOVE THOSE WHICH MIGHT OTHERWISE PREVAIL IN THE OPEN
MARKET. SUCH STABILIZING, IF COMMENCED, MAY BE DISCONTINUED AT ANY TIME.
 
                            ------------------------
 
     The Company intends to distribute to its shareholders annual reports
containing financial statements audited and reported upon by its independent
public accountants after the close of each fiscal year, and will make such other
periodic reports as the Company may determine to be appropriate or as may be
required by law. The Company's fiscal year ends December 31st of each year.
 
                                        2
<PAGE>   7
 
                                    GLOSSARY
 
     The following glossary of terms may be helpful in understanding the
terminology used in this Prospectus:
 
<TABLE>
<S>                             <C>
Ambient air:                    Atmospheric air (outdoor as opposed to indoor air).
Cardiac catheterization:        An invasive clinical treatment of patients suffering from
                                cardiac disease by means of insertion of a special catheter
                                through the blood vessels and into the chamber of the heart.
                                Generally used for widening narrow blood vessels and
                                correcting abnormal heartbeats.
Colorimeter:                    An analytical instrument that measures substance
                                concentration by color intensity when the substance reacts
                                to a chemical reagent.
Defibrillator:                  A medical device used for life-resuscitation following
                                cardiac arrest, by releasing energy in an attempt to restore
                                a normal heart beat.
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           A device that measures and records more than one input of a
recorder:                       digitized signal (signal in the form of pulses).
Multi-channel and analogue      A device that measures and records more than one input of a
recorder:                       signal in millivoltage or milliamphere (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 continuously measures the
                                clarity of water based on light scattering or deflection.
</TABLE>
 
                                        3
<PAGE>   8
 
                               PROSPECTUS SUMMARY
 
     The following summary is qualified in its entirety by the more detailed
information, including financial statements and notes thereto appearing
elsewhere in this Prospectus. Each prospective investor is urged to read this
Prospectus in its entirety. Except as otherwise indicated herein, the
information contained in this Prospectus gives no effect to the exercise of (i)
the Overallotment Option, (ii) the Underwriter's Warrants, (iii) Warrants
offered hereby or issued to private investors, or (iv) options granted under the
Company's stock option plan and other options which may be granted by the
Company.
 
                                  THE COMPANY
 
     Euro Tech Holdings Company Limited, a British Virgin Islands company, will
acquire upon the closing of this Offering all of the issued and outstanding
capital stock of Euro Tech (Far East) Ltd. ("Far East"), a Hong Kong corporation
(the "Acquisition") and Far East will become a wholly owned subsidiary of the
Company. Unless the context otherwise requires, or it is otherwise stated, all
references to the "Company" include Far East, giving effect to the Acquisition.
See "Management's Discussion and Analysis of Financial Condition and Results of
Operations" and "Certain Transactions."
 
     The Company is a distributor, in Hong Kong and the People's Republic of
China (the "PRC" or "China"), of process control, analytical and testing
instruments, disinfection equipment, supplies and related automation systems
used in the treatment, analysis and testing of water and waste water. The
Company distributes products to approximately 400 regular customers including
sub-distributors located in Hong Kong, the PRC and Macau 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. Far East was established in 1971 as a subsidiary of a United
Kingdom publicly traded company to market and distribute its parent'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 the distribution of
high technology equipment manufactured in the United States, Europe and Japan
into the PRC, in addition to its distribution activities on behalf of its
parent. In 1988, the activities of the parent and Far East were separated into
Far East and another entity. During Far East's fiscal years ended October 31,
1991 ("Fiscal 1991"), October 31, 1992 ("Fiscal 1992") and December 31, 1993
("Fiscal 1993"), Far East experienced a gradual increase in sales revenues.
During its fiscal years ended December 31, 1994 ("Fiscal 1994") and 1995
("Fiscal 1995"), Far East's sales revenues remained substantially unchanged. The
Company believes that Far East's lack of sales growth during Fiscal 1994 and
Fiscal 1995 resulted from the PRC's economic austerity measures undertaken to
dampen the rate of inflation in the PRC. As a result of these measures, cost
became an overriding issue with many of Far East's PRC customers and, in
response, Far East reduced its sales prices and, therefore, its profit margins
to remain competitive with PRC manufacturers even though the products
distributed by Far East were believed by it to be of better quality. During the
six month period ended June 30, 1996 ("Six Months 1996"), Far East also began
streamlining its operations and focusing its efforts on its current product
lines by disposing of three of its subsidiaries, which had not been successful.
See "Management's Discussion and Analysis of Financial Condition and Results of
Operations," "Business," "Principal Shareholders" and "Certain Transactions."
 
     The Company believes that because of the increased expansion of industry
and general business growth in the PRC during the last five years there is a
strong and increasing demand for the products distributed by it in the PRC. The
Company further believes that in years to come the need for the products
distributed by it will grow as a result of governmental regulations of
environmental pollution and based upon demands of the PRC's population for a
healthy and safer environment including cleaner water.
 
     The Company distributes products manufactured by a substantial number of
American, European and Japanese corporations, including Wallace & Tiernan,
Pacific Pty. Ltd. ("Wallace"), Hach Company ("Hach"), Hioki E.E. Corporation
("Hioki") and Finnigan Corporation ("Finnigan"), which are the Company's largest
suppliers, with purchases from them accounting for approximately 11%, 7%, 7% and
4%,
 
                                        4
<PAGE>   9
 
respectively, of the Company's sales during its fiscal year ended December 31,
1995 ("Fiscal 1995") and 9%, 10%, 10% and 23%, respectively, of the Company's
sales during the first six months of the Company's fiscal year ended December
31, 1996 ("Six Months 1996"). Products distributed by the Company include,
advanced water treatment and testing equipment (including chlorination
equipment) laboratory instruments, test kits and related supplies such as
spectrometers, colorimeters, chemical reagent dispensers, analyzers,
turbidimeters and pH controllers. The Company also distributes general testing
and telecommunications testing equipment, cardiac catheterization systems,
defribrillators, indoor pay telephones, and digital and analogue recorders. See
"Business."
 
     The Company distributes products through its headquarters located in Hong
Kong and its regional sales offices located in Beijing, Shanghai and Guangzhou
and through non-exclusive arrangements with independent sub-distributors. During
Fiscal 1995 and Six Months 1996, no single customer accounted for more than 5%
of the Company's sales and each of its nine sub-distributors accounted for less
than 2% of the Company's sales during Fiscal 1995 and Six Months 1996. See
"Business."
 
     The Company intends to use a substantial portion of the net proceeds of the
Public Offering to establish an operation to assemble products of the kind now
distributed by the Company, initially certain water related testing, monitoring
and treatment equipment, and if successful in assembling such products, to
expand its product assembly operations to other products of the kind now
distributed by the Company, pursuant to an agreement to be entered into with a
PRC based entity, such as the Shanghai Thermometric Instrument Plant ("STIP"),
and to expand its marketing efforts by, among other things, opening additional
regional sales offices in the PRC. The Company believes that by assembling
products that it distributes, gross profits margins, revenues and net income
will increase. Similarly, the Company believes that by expanding its regional
sales efforts in the PRC, revenues and net income will be enhanced. See "Use of
Proceeds."
 
     The Company has recently reached a preliminary agreement with STIP pursuant
to which STIP will provide space and technical expertise necessary to enable the
Company to assemble in the PRC such products. It is presently contemplated that
the Company will import components, assemble the components into finished
product and then distribute the products through the Company's distribution
network. There can be no assurance that the Company will successfully complete
an agreement with STIP or any other similar entity or that the Company's
expansion efforts will be successful. See "Business."
 
     During the Company's Fiscal 1995 and Six Months 1996, the Company had sales
of approximately $13,667,000 and $6,973,000, respectively, and net income of
approximately $79,000 and $232,000, respectively. There can be no assurance that
the recent levels of the Company's revenues or net income will continue to be
achieved in the future. See "Management's Discussion and Analysis of Financial
Condition and Results of Operations" and the financial statements of the Company
and Far East and the notes thereto.
 
     The Company maintains an executive office at 18/F Gee Chang Hong Centre, 65
Wong Chuk Hang Road, Hong Kong, and its telephone number at that address is
011-852-2814-0311.
 
     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.
 
                                        5
<PAGE>   10
 
                                  RISK FACTORS
 
     Certain risk factors should be considered in evaluating the Company, its
business and its proposed product assembly operations and expansion plans. Such
factors include, among others, the risks associated with having its principal
offices and operations located in Hong Kong, where the transfer of sovereignty
is to occur shortly, risks associated with doing business in China, the possible
need for additional financing, the risks inherent in establishing new business
operations and expanding marketing efforts, competition with Chinese
manufactured products, competing with its own vendors, dependence upon vendors
and the lack of long term agreements with vendors and substantial dilution. For
a discussion of these and certain other factors, see "Risk Factors."
 
                                  THE OFFERING
 
SECURITIES OFFERED(1)......  600,000 shares of Common Stock and 600,000 Public
                             Warrants. Each Warrant entitles the holder to
                             purchase one share of Common Stock at a price of
                             $5.50 during a five year period commencing one year
                             after the date of this Prospectus, provided,
                             however, that prior to the second year after the
                             date of this Prospectus, the Warrants will be
                             exercisable only if the Underwriter has consented
                             in writing to all of the Warrants being
                             exercisable. The exercise price and the number of
                             shares issuable upon exercise of the Warrants are
                             subject to adjustment in certain circumstances. See
                             "Description of Securities."
 
COMMON STOCK OUTSTANDING
  BEFORE OFFERING(1).......  1,450,000 Shares.
 
COMMON STOCK OUTSTANDING
  AFTER OFFERING(1)(2).....  2,050,000 Shares.
 
WARRANTS OUTSTANDING BEFORE
  OFFERING.................  930,000 Warrants.
 
WARRANTS OUTSTANDING AFTER
  OFFERING.................  1,530,000 Warrants.
 
WARRANT EXPIRATION DATE....  March   , 2003 (six years after the Effective
                             Date).
 
WARRANT REDEMPTION.........  Redeemable by the Company, in whole or in part at a
                             price of $.10 per Warrant, at any time that they
                             are exercisable upon not less than 30 days prior
                             written notice to the holders of such Warrants,
                             provided that the average closing bid price of the
                             Company's Common Stock for the twenty consecutive
                             trading days immediately prior to the date on which
                             the notice of redemption is given, shall have
                             exceeded $8.50 per share.
 
USE OF PROCEEDS............  Expenses of establishing assembly operations in the
                             PRC (including start-up costs, leasehold
                             improvements and equipment), expansion of regional
                             sales offices, capital expenditures for office
                             equipment and working capital. See "Use of
                             Proceeds."
                                                   (footnotes on following page)
 
                                        6
<PAGE>   11
 
PROPOSED NASDAQ SMALL CAP
  SYMBOLS:(3)
 
   
     COMMON STOCK..........  CLWTF
    
 
   
     WARRANTS..............  CLWWF
    
- ---------------
 
(footnotes from previous page)
 
(1) Includes 1,400,000 shares of the Company's Common Stock to be issued in
    connection with the Acquisition. See "Certain Transactions."
(2) Does not include (i) 90,000 shares of Common Stock and 90,000 Warrants,
    subject to the Underwriter's Overallotment Option; (ii) 1,530,000 shares of
    Common Stock issuable upon the exercise of the outstanding Warrants; (iii)
    120,000 shares of Common Stock issuable upon the exercise of the
    Underwriter's Warrants including the shares of Common Stock underlying the
    Warrants included within the Underwriter's Warrants; (iv) 1,400,000 shares
    of Common Stock reserved for options to be granted on or prior to the
    Effective Date to members of the Company's management and employees of Far
    East (the "Management Options"); (v) 150,000 shares of Common Stock reserved
    for issuance pursuant to the Company's incentive stock option plan; or (vi)
    100,000 shares of Common Stock reserved for options to be granted to a
    consultant to Far East on or prior to the Effective Date. See "Management,"
    "Certain Transactions," "Underwriting" and "Description of Securities."
(3) The proposed trading symbols do not imply that a liquid and active market
    will be developed or sustained for the securities upon completion of this
    Offering. See "Risk Factors -- Possible Suspension of the Company's
    Securities from NASDAQ Even if Listing is Obtained."
 
                                        7
<PAGE>   12
 
                             SUMMARY FINANCIAL DATA
                    (AMOUNTS EXPRESSED IN THOUSANDS, EXCEPT
             SHARE AND PER SHARE DATA AND UNLESS OTHERWISE STATED)
 
     The following table presents summary financial data of Euro Tech (Far East)
Limited. For a description of the Financial Statements from which the following
financial data have been derived, see the introduction to "Selected Financial
Information." The summary financial data set forth below should be read in
conjunction with "Management's Discussion and Analysis of Financial Condition
and Results of Operations" and the financial statements and notes thereto
included elsewhere in this Prospectus.
 
<TABLE>
<CAPTION>
                                       AS OF                                                       AS OF JUNE 30, 1996
                                  OCTOBER 31,(1)           AS OF DECEMBER 31,           -----------------------------------------
                                  ---------------   ---------------------------------                AS          PRO       PRO
                                   1991     1992     1993     1994     1995     1995    ACTUAL   ADJUSTED(5)   FORMA(6)  FORMA(6)
                                  ------   ------   ------   ------   ------   ------   ------   -----------   -------   --------
                                   HK$      HK$      HK$      HK$      HK$     US$(2)    HK$         HK$         HK$      US$(2)
                                                                                                       (UNAUDITED)
<S>                               <C>      <C>      <C>      <C>      <C>      <C>      <C>      <C>           <C>       <C>
BALANCE SHEET DATA:
Cash and cash equivalents........  1,340    4,934    3,735    3,408    4,626     597     3,008       4,018     20,512      2,650
Working capital(3)...............  6,152    8,855    9,261    7,253    4,896     631     6,115       7,125     23,619      3,052
Total assets..................... 25,845   33,615   45,838   52,492   59,740   7,717    57,303      58,313     74,807      9,665
Short-term debt(4)...............  1,086    3,629    6,235    7,791    6,434     831     6,232       6,232      6,232        805
Long-term bank loans.............     --       --    2,538    3,330    7,006     905     6,471       6,471      6,471        836
Stockholders' equity.............  8,955   11,308   17,140   17,607   17,721   2,289    20,983      21,993     38,487      4,973
</TABLE>
 
<TABLE>
<CAPTION>
                   FOR THE          FOR THE TWO
                 YEAR ENDED        MONTHS ENDED                                                             FOR THE SIX
               OCTOBER 31,(1)     DECEMBER 31,(1)         FOR THE YEAR ENDED DECEMBER 31,              MONTHS ENDED JUNE 30,
              -----------------   ---------------   -------------------------------------------   -------------------------------
               1991      1992          1992          1993       1994        1995        1995       1995       1996        1996
              -------   -------   ---------------   -------   ---------   ---------   ---------   -------   ---------   ---------
                HK$       HK$           HK$           HK$        HK$         HK$       US$(2)       HK$        HK$       US$(2)
                                                                                                            (UNAUDITED)
<S>           <C>       <C>       <C>               <C>       <C>         <C>         <C>         <C>       <C>         <C>
INCOME
 STATEMENT
 DATA:
Sales........  68,263    83,813        15,257       105,374     103,512     105,782      13,667    51,959      53,969       6,973
              --------  --------     --------      --------    --------    --------     -------   -------    --------   ---------
Cost of goods
 sold........ (50,686)  (62,833)       (8,746)      (79,384)    (80,953)    (82,300)    (10,633)  (40,623)    (41,776)     (5,397)
Selling and
administrative
 expenses.... (15,607)  (19,683)       (5,438)      (19,302)    (20,199)    (21,464)     (2,773)  (10,614)     (9,861)     (1,273)
Interest
 expenses,
 net.........    (249)     (135)          (21)         (221)       (492)       (877)       (113)     (420)       (631)        (82)
Gain on
 disposal of
 a real
 estate
 property....      --        --            --            --       2,300          --          --        --          --          --
Other income,
 net.........     535     2,739           147           675         590       1,186         153       118         488          63
              --------  --------     --------      --------    --------    --------   ---------  --------    --------   ---------
Total costs
 and
 expenses.... (66,007)  (79,912)      (14,058)      (98,232)    (98,754)   (103,455)    (13,366)  (51,539)    (51,780)     (6,689)
              --------  --------      --------      --------    --------   --------    --------   -------    --------   ---------
Income from
 continuing
 operations
 before
 profits
 tax.........   2,256     3,901         1,199         7,142       4,758       2,327         301       420       2,189         284
Provision for
 profits tax
 current.....    (373)     (827)         (201)       (1,106)       (425)        (68)         (9)      (77)       (406)        (52)
              --------  --------   ----------      --------   ---------   ---------   ---------    ------   ---------   ---------
Income from
 continuing
operations...   1,883     3,074           993         6,036       4,333       2,259         292       343       1,783         232
Discontinued
 operations
 Income
 (loss) of
 subsidiary
 companies
 sold in
 1996........     169       947             3            12      (1,466)     (1,645)       (213)     (369)         --          --
              --------  --------    ---------      --------   ---------   ---------   ---------  --------
Net income
 (loss)......   2,052     4,021           992         6,048       2,867         614          79       (26)      1,783         232
            ========= =========     =========     =========   =========   =========   =========   ========= =========   =========
Pro forma
 income from
 continuing
 operations
 per common
 share.......                                                                  1.56        0.20                  1.23        0.16
Pro forma
 loss from
 discontinued
 operations
 per common
 share.......                                                                 (1.14)      (0.15)                   --          --
Pro forma net
 income per
 common
 share.......                                                                  0.42        0.05                  1.23        0.16
Pro forma
 weighted
 average
 number of
 common share
 outstanding...                                                           1,450,000   1,450,000             1,450,000   1,450,000
</TABLE>
 
- ---------------
(1) In 1993, Euro Tech (Far East) Limited changed its financial year end from
    October 31 to December 31.
 
(2) Translation solely for convenience of the readers at the prevailing exchange
    rate of HK$7.74 = US$1 on June 30, 1996.
 
(3) Current assets minus current liabilities.
 
(4) Short-term debt include short-term borrowings and current portion of
    long-term bank loans.
 
(5) Reflects the issuance of 1,000,000 Warrants to certain private investors for
    net proceeds of US$130,500 before the Public Offering.
 
(6) Reflects the issuance of 1,000,000 Warrants to certain private investors for
    net proceeds of US$130,500 before the Public Offering and the issuance of
    600,000 Common Shares and 600,000 Warrants and the receipt of the estimated
    net proceeds of the Public Offering.
 
                                        8
<PAGE>   13
 
                                  RISK FACTORS
 
     This Prospectus, including the documents incorporated by reference herein,
contains forward-looking statements within the meaning of Section 27A of the
Securities Act. Also, documents subsequently filed by the Company with the
Commission will contain forward-looking statements. Actual results could differ
materially from those projected in the forward-looking statements as a result of
the risk factors set forth below and the matters set forth or incorporated in
the Prospectus generally. The Company cautions the reader, however, that this
list of factors may not be exhaustive, particularly with respect to future
filings. Before making a decision to purchase any of the securities described in
this Prospectus, prospective investors should carefully consider the following
risk factors in connection with an investment in the Company, certain of which
are not typically associated with investing in equity securities of companies
from the United States. For more information concerning the PRC and certain
related matters discussed below, see "Appendix -- The People's Republic of
China."
 
     HONG KONG; TRANSFER OF SOVEREIGNTY.  The Company's executive and principal
offices are located in Hong Kong. As a result, 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. On July 1, 1997,
sovereignty over Hong Kong will be transferred from the United Kingdom to China,
and Hong Kong will become a Special Administrative Region of China (an "SAR").
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 will have a high degree of autonomy except in
foreign and defense affairs. Under the Basic Law, the Hong Kong SAR is to have
its own legislature, legal and judicial system and full economic autonomy for 50
years. On December 21, 1996, a Committee of four hundred people, chosen by the
government of China from Hong Kong's business and political communities, met in
the Chinese city of Shenzhen and selected sixty members for Hong Kong's new
legislature. Ten days prior to that, the same committee selected Hong Kong's
first Chinese chief executive. 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 will have an adverse impact on its
financial and operating environment. There can be no assurance, however, that
changes in political or other conditions will not result in such an adverse
impact.
 
     RISKS RELATING TO CHINA; UNCERTAIN ECONOMY; INTERNAL POLITICS; UNCERTAIN
LEGAL SYSTEM AND APPLICATION OF LAWS; NO ASSURANCE OF GOVERNMENT APPROVALS;
GOVERNMENT CONTROL OF CURRENCY AND EXCHANGE RATE RISKS; AND RECENT TURBULENT
RELATIONS WITH UNITED STATES.  A substantial portion of the Company's revenues
are derived from activities located in China. Additionally, the Company has
reached a preliminary agreement to produce water related testing, monitoring and
treatment equipment in China. As a consequence, the Company's results of
operations and financial condition may be influenced by the economic, political,
legal and social conditions in China. See "Appendix - The People's Republic of
China."
 
     Economic, Internal Political and Other Risks.  The economy in China differs
from the economics of many other countries in such respects as structure,
government involvement, level of development, growth rate, capital reinvestment,
allocation of resources, rate of inflation and balance of payments position. For
almost forty years, the economy of China has been planned economy subject to
one-, five- and ten-year plans ("State Plans") adopted by central Chinese
government authorities and implemented, to a large extent, by provincial and
local authorities, which set out production and development targets. Although
the majority of productive assets in China are still government owned, in the
past several years the Chinese government has implemented economic reform
measures that emphasize decentralization, the utilization of market forces in
the development of its economy and the encouragement of private economic
activity. Such economic reform measures may be inconsistent or ineffectual and
the Company may not be able to capitalize on all such reforms. Further, there
can be no assurance that the government of China will continue to pursue such
policies, that such policies will be successful if pursued, that such policies
will not be significantly altered from time to time or that business operations
in China would not become subject to the risk of nationalization, which could
result in the total loss of investments made and markets developed in that
country. In addition, the success of the Company's activities in China depend on
the Company's continued ability to overcome
 
                                        9
<PAGE>   14
 
circumstances specifically affecting the industrial sector, including the
relatively poor infrastructure, road transportation and communications network
and an uncertain legal and regulatory environment.
 
     During the nearly past two decades, the Chinese government under its
current leadership has been reforming, and is expected to continue to reform,
China's economic and political systems. Many of the reforms are unprecedented
and are expected to be refined over time. Other political, economic and social
factors can also lead to further readjustment of the reform measures. This
refinement and readjustment process may not always have a positive effect on the
Company in China. The Company's results at times may also be adversely affected
by changes in China's political, economic and social conditions and by changes
in policies of China's government such as changes in laws and regulations (or
the interpretation thereof), the introduction of additional measures to control
inflation, changes in the rate or method of taxation and imposition of
additional restrictions on currency conversion and remittances abroad and
reduction in tariff protection and other import restrictions. Although
historically there have been periods of political instability, such as during
the "Cultural Revolution", and certain of the reform measures have from time to
time been readjusted, because of the broad support for the reform process and
because the economic system in China has already undergone extensive changes as
a result of the success of such reforms, the Company believes that the basic
principles underlying the reforms will continue to provide an acceptable
framework for China's political and economic systems.
 
     Although China's economy has experienced significant growth in recent
years, that growth has been uneven among various geographic regions and economic
sectors. Also, China recently has been experiencing substantial rates of
inflation. For example, according to public reports, consumer prices reportedly
were 10.1% greater in 1995 than in 1994. The Chinese government has implemented
various measures from time to time to control inflation and to regulate economic
expansion with a view to preventing overheating of the economy including credit
restrictions and reduction in growth of the money supply. The Chinese
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 Chinese government could materially and adversely affect the
Company, its business and results of operations. See "-- Competition; Adverse
Impact upon Company of PRC's Credit Restrictions."
 
     Uncertain Legal System and Application of Laws.  The legislative trend in
China 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, however, that
legislation directed towards promoting foreign investment and experimentation
will continue. In addition, as the Chinese business legal system continues to
develop, changes to existing laws, the creation of new laws and the preemption
of local regulations by national laws may adversely affect the Company's
activities in China or the ability of the Company to enter into a Sino-foreign
agreements. For example, China's State Economic and Trade Commission is
reportedly considering regulations that may restrict the ability of foreigners
to enter certain industries. Although since January 1, 1994, the Chinese
government has introduced new laws and regulations to modernize its systems,
China does not yet possess a comprehensive body of business law. As a result,
the enforcement, interpretation and implementation of existing laws, regulations
or agreements may be sporadic and inconsistent. China's judiciary is relatively
inexperienced in enforcing laws that exist, leading to a higher than usual
degree of uncertainty as to the outcome of any litigation. Even when adequate
law exists in China, it may not be possible to obtain speedy and equitable
enforcement of the law.
 
     No Assurance of Government Approvals.  Consummation by the Company of any
agreement with a Chinese entity will be subject to certain Chinese government
approvals. The approval process typically requires submission of applications,
asset appraisals and feasibility studies to municipal, provincial and/or central
government agencies and the Company estimates that obtaining necessary approvals
may take at least 3 to 5 months after execution of final documentation for any
such agreement. Although the Company has not been denied any such approvals in
the past, there can be no assurance that the Company will be able to obtain such
approvals or that it will find a suitable entity to enter into an agreement
with.
 
     Government Control of Currency and Exchange Rate Risks.  The present
practice of the Company when entering into contracts for deliveries in China is
to have the contract sums denominated and payable in Hong Kong dollars, U.S.
dollars or the pound sterling. In some instances, the Company may allow clients
to
 
                                       10
<PAGE>   15
 
pay certain low value contracts in Renminbi ("Rmb"), the currency of China, as
the Company needs to pay some of its costs in Rmb such as its day to day
overhead expenses for its offices situated in China. With this method, the
currency risks have been reduced to a minimum and the Company does not consider
any hedging activities for the purpose of minimizing its exposure to currency
fluctuation risk to be necessary.
 
     The Chinese government imposes control over its foreign currency reserves
in part through direct regulation of the conversion of Renminbi into foreign
exchange and through restrictions on foreign imports. Effective January 1, 1994,
pursuant to the Notice of the People's Bank of China ("PBOC") Concerning Further
Reform of the Foreign Currency Control System, the conversion of Renminbi into
Hong Kong and United States Dollars must be based on rates set by the 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.
 
     During the last five years, the value of the Rmb generally has experienced
a gradual but significant devaluation against most major currencies. For
example, 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 Rmb8.70 to US$1.00, in connection with the abolition of the official exchange
rate and implementation of the new managed floating rate foreign exchange
system. Although the Rmb to U.S. dollar exchange rate has been stable since
January 1, 1994 and the Chinese 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 China,
earnings and dividends.
 
     Recent Turbulent Relations with the United States.  The United States has
considered revocation of China's Most Favored Nation ("MFN") trade status, which
provides China with the trading privileges available generally to trading
partners of the United States, and the United States and China have recently
been involved in controversy over the protection in China of intellectual
property rights that threatened a trade war between the countries. President
Clinton has extended China's MFN status until June 1997. However, there can be
no assurance that the United States will not revoke or refuse to extend China's
MFN status in the future.
 
     POSSIBLE NEED FOR ADDITIONAL FINANCING.  The Company intends to use
approximately 39% of the net proceeds of the Public Offering to expand its
business operations by assembling products of the kind that it distributes.
Although it is anticipated that STIP will provide the facilities and the
technical expertise to assemble the products, the Company will be required to
pay for leasehold improvements and the equipment to assemble the products. The
Company will also be required to employ mid-level management to oversee the
assembly of products. The Company's estimated costs for leasehold improvements
and equipment may prove to be inaccurate or the costs may increase as a result
of conditions in the PRC or other factors. Additionally, although it believes
that there are mid-level managerial personnel available to the Company at a
salary rate acceptable to the Company, future events may alter this
circumstance. There is no assurance the Company's estimates will prove to be
accurate or that unforeseen expenses will not occur. In the event the Company's
cost estimates prove to be inaccurate and additional expenditures are required,
the Company may not be able to implement its strategy to assemble products
and/or may be required to reallocate net proceeds from other allocations to this
purpose. See "-- Establishment of a New Business," "Use of Proceeds,"
"Management's Discussion and Analysis of Financial Condition and Results of
Operations" and "Business."
 
     ESTABLISHMENT OF A NEW BUSINESS.  The Company has not previously engaged in
the assembly of products and, as such, the Company's planned product assembly
operations should be viewed by investors as a new business venture that will be
subject to all the risks inherent in establishment of any new business
enterprise including, but not limited to, the possible need for additional
financing, complications and delays in the initiation of assembly operations,
incurring initial losses in the start-up of operations, the uncertainty of
market acceptance of the products to be assembled by the Company and competition
from manufacturers of
 
                                       11
<PAGE>   16
 
finished products which the Company plans to assemble as well as their
distributors. Accordingly, there can be no assurance that the Company's proposed
product assembly operations will be successful. In the event the Company is not
successful in establishing its planned product assembly operations, any proceeds
remaining from the funds allocated for such purposes may be reallocated to
expanding the lines of products that the Company distributes. See "-- Possible
Need For Additional Financing," "Use of Proceeds," "Management's Discussion and
Analysis of Financial Condition and Results of Operations" and "Business."
 
     LOSSES POSSIBLE IN ATTEMPTING TO PENETRATE NEW MARKETS; POSSIBLE FAILURE TO
PENETRATE NEW MARKETS.  The Company intends to establish three additional
regional sales offices in the PRC with a portion of the net proceeds of the
Public Offering. The opening of additional offices will require the hiring and
training of personnel, paying their salaries and related benefits, and the
payment of leasehold, equipment and other expenses until the offices are
sustained by their own revenues, of which there can be no assurance. Therefore,
losses may be possible for these additional regional sales offices until they
are established and have generated significant revenues. In addition to the
foregoing, future events, including problems, delays, expenses and complications
frequently encountered by companies seeking to penetrate new markets, as well as
changes in governmental policies, economic or other conditions may occur that
could also cause the Company to be unsuccessful in these expansion efforts and
the proceeds allocated to that purpose may be expended without the Company
deriving any financial benefit. See "Use of Proceeds," "Management's Discussion
and Analysis of Financial Condition and Results of Operations" and "Business."
 
     RECENTLY DISPOSED OF UNSUCCESSFUL SUBSIDIARIES; RISKS OF INVESTING IN HONG
KONG REALTY.  The Company recently disposed of several unsuccessful subsidiaries
which had sustained losses. One of such subsidiaries had been established to
distribute telecommunications products but encountered intense competition from
the manufacturers of telecommunications products who engaged in direct
distribution to end users. Such subsidiary failed to develop the expertise
necessary to distribute telecommunications products. Another subsidiary,
established to distribute industrial computers, lost its principal vendor when
the vendor sold this product line. Additionally, the Company has from time to
time invested in real estate in Hong Kong. In the future, the Company may
establish subsidiaries or divisions to distribute products that are unrelated to
its current product lines and it may make future investments in Hong Kong real
estate. In the event that the Company establishes such subsidiaries or divisions
in the future, there can be no assurance that they will not sustain losses.
Although the Company has derived profits from its investment in Hong Kong real
estate, there can be no assurance that the Company will derive a profit from any
future investments that it may make in Hong Kong realty. As a result of the
impending transfer of sovereignty over Hong Kong from the United Kingdom to
China, any investment in Hong Kong realty will be subject to the risks relating
to that transfer, including but not limited to the appropriation of realty by
the Chinese government. See "-- Hong Kong; Transfer of Sovereignty,"
"Management's Discussion and Analysis of Financial Condition and Results of
Operations" and "Business."
 
     DEPENDENCE UPON MANAGEMENT.  The Company will be 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 intends to apply for and be the
beneficiary of a "Key Person" life insurance policy in the amount of $1,000,000
on the life of Mr. Leung, there can be no assurance that the Company will
successfully obtain this insurance coverage, that it will maintain the policy in
effect or that the coverage to be applied for, if obtained, will be sufficient
to compensate the Company for the loss of the services of Mr. Leung. See
"Management."
 
     COMPETITION; ADVERSE IMPACT UPON COMPANY OF PRC'S CREDIT RESTRICTIONS.  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 products distributed by the Company sought reduced prices. The
products distributed by the Company were foreign manufactured and higher priced
than Chinese manufactured products. As a result, the Company reduced its sales
prices and, therefore, its profit margins to remain competitive. The Company
believes that it competes with PRC manufacturers on the
 
                                       12
<PAGE>   17
 
basis of quality and technology, with the Company offering products of foreign
manufacturers which are of higher quality and use more advanced technology. The
Company believes that it competes with the foreign manufacturers and the
distributors of their products on the basis of the Company's more extensive
distribution network and an established reputation. However, the Company
recently disposed of one of its subsidiaries as a result of direct competition
from a manufacturer which established its own distribution network in the PRC to
distribute the type of products distributed by the subsidiary. There can be no
assurance that the Company will be able to compete effectively with its
competitors. See "Management's Discussion and Analysis of Financial Condition
and Results of Operations" and "Business."
 
     COMPETITION WITH VENDORS.  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
relationships with its vendors. See "Business."
 
     DEPENDENCE ON VENDORS; LACK OF LONG TERM AGREEMENTS.  The Company
distributes supplies manufactured by a number of vendors, including Wallace,
Hach, Hioki and Finnigan, which are the Company's largest suppliers, with
purchases from them accounting for approximately 11%, 7%, 7% and 4%,
respectively, of the Company's sales during Fiscal 1995 and 9%, 10%, 10%, and
23%, respectively, of the Company's sales during Six Months 1996. The Company
has only a letter from Hioki appointing the Company as Hioki's sales
representative in the PRC, Hong Kong and Macau, its agreement with Wallace is
terminable by either party on thirty days notice prior to its annual renewal
date, its agreement with Finnigan is terminable on ninety days notice by either
party and the agreement with Hach expires in March 1997, unless a renewal is
obtained. 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. See
"Business."
 
     BROAD DISCRETION IN APPLICATION OF PROCEEDS.  Approximately 24% of the
estimated net proceeds received by the Company from this Offering have been
allocated to working capital and the Company will have broad discretion as to
the application of such funds. See "Use of Proceeds."
 
     CONTROL BY T.C. LEUNG; POTENTIAL CONFLICT OF INTERESTS.  After the
successful completion of this Offering, T.C. Leung, the Company's Chairman of
the Board and Chief Executive Officer will beneficially own approximately 68% of
the Company's issued and outstanding shares of Common Stock which as a practical
matter will enable him 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 could, as a practical matter, 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 "Principal Shareholders."
 
     CERTAIN LEGAL CONSEQUENCES OF INCORPORATION IN THE BRITISH VIRGIN ISLANDS;
RIGHTS OF SHAREHOLDERS NOT AS EXTENSIVE AS IN UNITED STATES CORPORATIONS;
UNCERTAINTY OF ENFORCING UNITED STATES JUDGMENTS.  The Company's corporate
affairs are governed by its Memorandum of Association, Articles of Association
and the corporate law of the British Virgin Islands. Principles of law relating
to such matters as the validity of 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. 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. Shareholder action must be taken in good faith and
action 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
 
                                       13
<PAGE>   18
 
those rights of shareholders in a United States company. Thus, 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 than they might have as
shareholders of a company incorporated in many United States jurisdictions. In
addition, there is uncertainty whether the courts of BVI would enforce judgments
of the courts of the United States and of other foreign jurisdictions. There is
also uncertainty whether the courts of the BVI would enforce actions brought in
the BVI which are based upon the securities laws of the United States. See
"Description of Securities."
 
     UNCERTAINTY OF ENFORCING UNITED STATES JUDGMENTS IN HONG KONG AND THE
PRC.  As all of the Company's officers and directors reside outside of the
United States, service of process upon the Company and such persons may be
difficult to effect in the United States. Furthermore, 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 United States
Corporations; Uncertainty of Enforcing United States Judgments" and "Enforcement
of Civil Liabilities."
 
     LACK OF INDEPENDENT DIRECTORS.  All current members of the Company's Board
of Directors are employed by Far East and, as such, there are no current members
of the Company's Board of Directors who are not affiliated or associated with
Far East and who are independent of the Company and/or Far East. All decisions
affecting the day-to-day operations of the Company and Far East will be made by
a Board of Directors, the members of which are not independent of the Company
and Far East. See "Management."
 
     OUTSTANDING LOAN TO AFFILIATED PARTY.  At June 30, 1996, Regent Earning,
Ltd. ("Regent") was indebted to the Company in the approximate sum of
HK$3,800,000. Regent owns approximately two-thirds of the outstanding equity
securities of Far East and upon completion of this Offering will own
approximately 48% of the Company's issued and outstanding shares of Common
Stock. Regent's majority shareholder is Pearl Venture, Ltd. which is a trust
established for the benefit of T.C. Leung, Chairman of the Company's Board of
Directors and its Chief Executive Officer. See "Management's Discussion and
Analysis of Financial Condition and Results of Operations," "Principal
Shareholders" and "Certain Transactions."
 
     FORWARD LOOKING STATEMENTS.  This Prospectus 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 Commission or otherwise. Such
forward looking statements are within the meaning of that term in Section 27A of
the Securities Act of 1933, as amended, (the "Securities Act"), and Section 21E
of the Exchange Act. 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 Prospectus, including those contained in the sections entitled "Risk
Factors," "Use of Proceeds," "Management's Discussion and Analysis of Financial
Condition and Results of Operations," "Business" and in the notes to the
Company's Financial Statements, describe factors, among others, that could
contribute to or cause such differences.
 
     DILUTION.  As a result of the sale of the Securities offered in this
Offering and the consummation of the Acquisition, there will be immediate and
substantial dilution to public investors in that the pro forma net tangible book
value per share of the Company's Common Stock after this Offering and
consummation of the Acquisition will be approximately $2.36 per share, or
approximately $2.64 (53%) less than the $5.00 offering price per share. See
"Dilution."
 
                                       14
<PAGE>   19
 
     NO ASSURANCE OF PUBLIC MARKET; DETERMINATION OF OFFERING PRICE.  Prior to
this Offering, there has been no market for any of the Company's securities. The
initial public offering price of the Securities and the exercise price and other
terms of the Warrants have been arbitrarily determined by negotiations between
the Company and the Underwriter and such prices and terms are not necessarily
related to the Company's asset value, net worth or other established criteria of
value. In addition, there can be no assurance that a trading market will develop
after this Offering for any of the Company's Securities or that, if developed,
it will be sustained. See "Underwriting."
 
   
     SHARES ELIGIBLE FOR FUTURE SALE.  In general, under Rule 144, a person
which has satisfied a two-year (one-year effective on or about April 29, 1997)
holding period may, under certain circumstances, sell within any three-month
period a number of shares of common stock that does not exceed the greater of 1%
of the then outstanding shares of common stock or the average weekly trading
volume in such shares during the four calendar weeks prior to such sale. Rule
144 also permits, under certain circumstances, the sale of shares without any
quantity or other limitation by a person which is not an affiliate of an issuer
and which has satisfied a three-year holding period. The holders of all shares
of the Company's Common Stock have agreed not to sell shares of the Company's
Common Stock owned by them on the date hereof for a period of twenty-four months
from the date of this Prospectus without the prior written consent of the
Underwriter.
    
 
   
     The Company has 1,450,000 shares of Common Stock outstanding that are
"restricted securities," as that term is defined under Rule 144 promulgated
under the Securities Act. The Company also has outstanding Warrants to purchase
930,000 shares of Common Stock which Warrants and shares of Common Stock
underlying the Warrants are being registered under the Registration Statement of
which this Prospectus forms a part for resale by said persons. Investors should
be aware that sales of the Company's securities may have a depressive effect on
the price of the Company's securities in any market which may develop for such
securities. See "-- Effect of Options, Warrants and Registration Rights,"
"-- Impact of Concurrent Offering," "Shares Eligible for Future Sale" and
"Concurrent Registration of Securities."
    
 
     EFFECT OF OPTIONS, WARRANTS AND REGISTRATION RIGHTS.  For the respective
terms of the Underwriter's Warrants, Warrants sold as part of this Offering and
the Private Warrants registered hereby and any options that may be granted by
the Company under the Company's stock option plan or other options issued or
which may be issued by the Company, the holders thereof are given an opportunity
to profit from a rise in the market price of the Common Stock, with a resulting
dilution in the interests of the other stockholders. Further, the terms on which
the Company may obtain additional financing during the exercise periods of said
warrants and options may be adversely effected by the existence of such
warrants, options and plan. The holders of options or warrants to purchase
Common Stock may exercise such options or warrants at a time when the Company
might be able to obtain additional capital through offerings of securities on
terms more favorable than those provided by such options or warrants. In
addition, the holders of the Underwriter's Warrants and the Private Warrants
have demand and "piggyback" registration rights with respect to their
securities. Exercise of such registration rights may involve substantial expense
to the Company. See "Management," "Certain Transactions," "Description of
Securities," "Underwriting" and "Concurrent Registration of Securities."
 
     NO CASH DIVIDENDS.  The Company has not paid any dividends to date. The
Company's Board of Directors does not presently intend to declare any dividends
in the foreseeable future, but instead intends to retain all earnings, if any,
for use in the Company's business operations. See "Description of Securities."
 
     LACK OF EXPERIENCE OF THE UNDERWRITER.  The Underwriter was organized in
August 1993, was registered as a broker in June 1995, and became a member firm
of the National Association of Securities Dealers, Inc. (the "NASD") in June
1995. The Underwriter is principally engaged in retail brokerage and market
making activities and various corporate finance projects. The Underwriter has
acted as a placement agent in private offerings and has participated as a member
of the underwriting syndicate or as a selected dealer in one public offering and
it has acted solely one time as the lead manager in only one public offering of
securities. While certain of the officers of the Underwriter have significant
experience in corporate finance and the underwriting of securities, no assurance
can be given that the Underwriter's lack of experience as a lead managing
underwriter of public offerings will not adversely affect this Offering and the
subsequent development of a liquid public trading market in the Company's
securities. See "Underwriting."
 
                                       15
<PAGE>   20
 
     POTENTIAL ADVERSE EFFECT OF REDEMPTION OF WARRANTS.  At any time during
their exercise period, the Warrants may be redeemed by the Company at a
redemption price of $.10 per Warrant upon 30 days prior written notice if the
average closing bid price of the Common Stock for 20 consecutive trading days
ending within 10 days of the notice exceeds $8.50. Redemption of the Warrants
could force the holders to exercise the Warrants and pay the exercise price at a
time when it may be disadvantageous for the holders to do so, to sell the
Warrants at the current market price for the Warrants when they might otherwise
wish to hold the Warrants, or to accept the redemption price, which may be
substantially less than the market value of the Warrants at the time of
redemption. See "Description of Securities."
 
     CURRENT PROSPECTUS AND BLUE SKY REGISTRATION REQUIRED TO EXERCISE
WARRANTS.  Holders of the Warrants will have the right to exercise the Warrants
for the purchase of shares of Common Stock only if a current prospectus relating
to such shares is then in effect and only if the shares are qualified for sale
under the securities laws of the states in which the Warrantholders reside.
Although the Company intends to maintain such a current prospectus and to seek
to qualify the shares of Common Stock underlying the Warrants for sale in those
states where the Common Stock and Warrants are to be offered, there is no
assurance that it will be able to do so. The Warrants may be deprived of any
value if the current prospectus encompassing the shares underlying the Warrants
is not kept effective or if such underlying shares are not or cannot be
registered in the states in which Warrantholders reside. See "Description of
Securities."
 
     POSSIBLE SUSPENSION OF COMPANY'S SECURITIES FROM NASDAQ EVEN IF LISTING
OBTAINED.  The Company has applied for the listing of the Securities offered
hereby on the NASDAQ SmallCap System. However, there can be no assurance that
the Company's application will be granted or that, if granted, the Company will
meet the criteria for continued quotation of its securities on the NASDAQ
SmallCap System. Current minimum continued quotation criteria on the NASDAQ
SmallCap System include, among other things, $2,000,000 in total assets,
$1,000,000 in capital and surplus, $200,000 in aggregate market value, and a
minimum bid price of $1.00 per share of Common Stock. If an issuer does not meet
the $1.00 minimum bid requirement, it may, however, remain on the NASDAQ
SmallCap System if it has $2,000,000 of capital and surplus and $1,000,000 in
aggregate market value. NASDAQ has proposed changes to its continued quotation
criteria for its SmallCap System, which would make it more difficult to maintain
the listing of the Company's Securities, including, among other things,
$2,000,000 in net tangible assets, an aggregate market value of $1,000,000,
500,000 shares being freely tradeable, two independent directors and an audit
committee of an issuer's board of directors with the majority of the committee
members being independent directors. If the Company becomes unable to meet the
continued quotation criteria of the NASDAQ SmallCap System and is suspended
therefrom, trading, if any, in the Company's securities would thereafter be
conducted in the over-the-counter market in the so-called "pink sheets" or if
then available, the OTC Bulletin Board. In such event, an investor would likely
find it more difficult to dispose of, or to obtain accurate quotations as to the
value of, the Company's securities.
 
     RISKS OF LOW-PRICED SECURITIES.  If the Securities were to be suspended or
delisted from the NASDAQ SmallCap System, the Securities would be subject to
rules under the Exchange Act, which impose additional sales practice
requirements on broker-dealers who sell such securities to persons other than
established clients and "accredited investors" (for example, individuals with a
net worth in excess of $1,000,000 or an annual income exceeding $200,000, or
$300,000 together with their spouses). For transactions covered by such rules, a
broker-dealer must make a special suitability determination of the purchaser and
have received the purchaser's written consent to the transaction prior to the
sale. Consequently, such rules may affect the ability of broker-dealers to sell
the Company's Securities and the ability of purchasers in this Offering to sell
any of the Company's Securities acquired in this Offering in any secondary
market that may develop for such Securities.
 
     The Commission has enacted rules that define a "penny stock" to be any
equity security that has a price (as therein defined) of less than $5.00 per
share or an exercise price of less than $5.00 per share, subject to certain
exceptions, including securities listed on the NASDAQ SmallCap System or on
designated exchanges, For any transaction involving a penny stock, unless
exempt, the rules require the delivery, prior to any transaction in a penny
stock, of a disclosure statement prepared by the Commission relating to the
penny stock market. Disclosure also has to be made about the risks of investing
in penny stocks in both public offerings and
 
                                       16
<PAGE>   21
 
in secondary trading, and about commissions payable to both the broker-dealer
and the registered representative, current quotations for the securities and the
rights and remedies available to an investor in cases of fraud in penny stock
transactions. Finally, monthly statements must be sent disclosing recent price
information for the penny stocks held in the account and information on the
limited market in penny stocks. In the event the Company's securities are no
longer listed on the NASDAQ SmallCap System or are not otherwise exempt from the
provisions of the Commission's "penny stock" rules, such rules may also affect
the ability of broker-dealers to sell the Company's Securities and the ability
of purchasers in this Offering to sell any of the Securities acquired hereby in
any secondary market that may develop.
 
     IMPACT OF CONCURRENT OFFERING.  Concurrently with this Offering, the
Company is registering, on behalf of the Selling Securityholders, Warrants to
purchase 930,000 shares of Common Stock and 930,000 shares of Common Stock
underlying said Warrants to permit the holders of the Warrants to publicly
resell said Warrants and the shares of the Company's Common Stock underlying
said Warrants. All of the Selling Securityholders acquired their Warrants in a
private placement of the Warrants which was completed by the Company in November
1996. As a practical matter, the concurrent offering is dependent on the
successful completion of this Offering. In the event this Offering is not
successfully completed, there can be no expectation that any market for the
Company's securities will develop and, as a consequence, in such an event it
would be most unlikely that the concurrent offering would go forward. The
Selling Securityholders have agreed not to sell any of the Company's securities
owned by them for a period of two years from the closing of this Offering
without the prior written consent of the Underwriter. The Company and the
Underwriter have agreed that they will not permit the foregoing securityholders
to sell, assign, pledge or otherwise dispose of any of the foregoing Warrants
for a period of one year from the Effective Date. Sales of substantial amounts
of the Company's securities by the Selling Securityholders or even the potential
for such sales, could have an adverse affect on the market price of the
Securities and could impair the Company's ability to raise capital through the
sale of its securities. See "Certain Transactions" and "Concurrent Registration
of Securities."
 
                                       17
<PAGE>   22
 
                                    DILUTION
 
     The net tangible book value of the Company as of June 30, 1996 was
approximately HK$20,983,000 (US$2,711,000) or HK$14.47 (US$1.87) per Common
Share. Net tangible book value per Common Share is determined by dividing the
net tangible book value of the Company (total tangible assets less total
liabilities) by the number of outstanding Common Shares at that date, assuming
the share exchange between the Company and Far East as described in the "Certain
Transactions" section had taken place prior to June 30, 1996 and that 100% of
the outstanding shares of Far East had been transferred to the Company. After
giving effect to the sale by the Company of the 600,000 Common Shares and
600,000 Warrants offered hereby (after deduction of estimated underwriting
discounts and commissions, and offering expenses), the Company's net tangible
book value at June 30, 1996 would have been approximately HK$37,475,000
(US$4,842,000) or HK$18.28 (US$2.36) per Common Share. This represents an
immediate increase in net tangible book value to existing shareholders of
HK$3.81 (US$0.49) per Common Share and an immediate dilution to new investors of
HK$20.42 (US$2.64) per Common Share. The following table illustrates the per
Common Share dilution:
 
<TABLE>
<S>                                                                        <C>        <C>
Assumed initial public offering price per Common Share...................             US$ 5.00
  Net tangible book value per Common Share as of June 30, 1996...........  US$ 1.87
  Increase in net tangible book value per Common Share attributable to
     new investors.......................................................      0.49
                                                                           --------
  Net tangible book value per Common Share after this Offering...........                 2.36
                                                                                      --------
     Dilution per Common Share to new investors..........................             US$ 2.64
                                                                                      ========
</TABLE>
 
     The following table sets forth on a pro forma basis as of June 30, 1996,
assuming the above mentioned share exchange had taken place prior to such date,
the difference between the number of Common Shares purchased from the Company,
the total consideration paid, and the average price per Common Share paid by the
existing shareholders and by the new investors (at an assumed initial public
offering price of US$5.00 per Common Share before deduction of estimated
underwriting discounts and commissions, and other expenses):
 
<TABLE>
<CAPTION>
                              SHARES PURCHASED         TOTAL CONSIDERATION
                            --------------------     -----------------------     AVERAGE PRICE
                             NUMBER       PERCENT       AMOUNT        PERCENT   PER COMMON SHARE
                            ---------     ------     ------------     ------    ----------------
<S>                         <C>           <C>        <C>              <C>       <C>
Existing shareholders.....  1,450,000       70.7%    US$2,711,000       47.5%       US$ 1.87
New investors.............    600,000       29.3%       3,000,000       52.5%           5.00
                            ---------     ------     ------------     ------    ----------------
  Total...................  2,050,000      100.0%    US$5,711,000      100.0%       US$ 2.79
                             ========     ======     ============     ======    =================
</TABLE>
 
     The information presented above, with respect to existing shareholders,
assumes no exercise of the Underwriter's Overallotment Option. In addition,
1,530,000 Common Shares have been reserved for issuance upon exercise of the
Warrants and 120,000 Common Shares have been reserved for issuance upon exercise
of the Underwriter's Warrants including the shares of Common Stock underlying
the Warrants included within the Underwriter's Warrants, 1,400,000 Common Shares
have been reserved for future issuance pursuant to the Management Options,
150,000 Common Shares have been reserved for future issuance upon exercise of
options granted pursuant to the Company's incentive stock option plan and
100,000 Common Shares reserved for future issuance to a consultant to Far East.
See "Management's Discussion and Analysis of Financial Condition and Results of
Operations," "Management," "Certain Transactions," "Underwriting" and
"Description of Securities."
 
                                       18
<PAGE>   23
 
                                USE OF PROCEEDS
 
     The net proceeds to the Company from the sale of 600,000 shares of Common
Stock and 600,000 Warrants offered hereby are estimated to be approximately
$2,130,750 ($2,533,995 if the Underwriter's Overallotment Option is exercised in
full) after deducting underwriting commissions and discounts and other expenses
of this Offering. The Company expects to use the net proceeds over the next
twelve months approximately as follows:
 
<TABLE>
<CAPTION>
                                                                  APPROXIMATE      APPROXIMATE
                                                                 DOLLAR AMOUNT    PERCENTAGE OF
                 APPLICATION OF NET PROCEEDS                    OF NET PROCEEDS   NET PROCEEDS
- --------------------------------------------------------------  ---------------   -------------
<S>                                                             <C>               <C>
Product Assembly Operations(1)................................    $   825,000           39%
Expand the Number of Sales Offices(2).........................    $   300,000           14%
Office Equipment Purchases(3).................................    $   350,000           16%
Establish an Office in the United States(4)...................    $   150,000            7%
Working Capital...............................................    $   505,750           24%
                                                                   ----------          ---
  Total.......................................................    $ 2,130,750          100%
</TABLE>
 
- ---------------
 
(1) Represents the approximate amount that may be used to fund the initial
    start-up costs, approximately $150,000, and the establishment of production
    facilities (including leasehold improvements and equipment and inventory
    purchases, lease payments and employee salaries), approximately $675,000,
    for the Company's proposed product assembly operations. See "Business."
 
(2) Represents the approximate amount that may be used to expand the number of
    the Company's regional sales offices in the PRC which is subject to change
    from time to time. The Company estimates that the foregoing allocation will
    be sufficient to enable it to establish approximately three new regional
    sales offices and will be used for leasehold improvements and office
    equipment. See "Business."
 
(3) To be used to purchase and update the Company's principal offices, including
    purchases of computer hardware and software and general office equipment.
 
(4) To purchase equipment and leasehold improvements, pay security deposits,
    first year's lease payments and initial salaries for an office to be
    established in the United States.
 
     Although the Company has not specifically allocated the funds allocated to
working capital and the Company will have broad discretion as to the application
of such funds, such funds will be used in the Company's current and/or planned
operations with the primary purposes of this Offering being to raise capital for
the specific purposes described herein. The establishment of product assembly
operations may result in negative cash flow for a period of time. In such an
event, the net proceeds allocated to working capital would be used to support
product assembly operations until they result in positive cash flow or the
Company decides that such operations will not result in an economic benefit.
 
     The Company currently estimates that the net proceeds of this Offering will
be sufficient to fund its planned operations, including the funding of its
obligations under the proposed agreement with STIP, and expansion efforts for
approximately twelve months from the date of this Prospectus. The net proceeds
may be sufficient for a greater or lesser period of time depending on the extent
of the Company's expansion efforts and the rapidity of the completion of the
negotiations for the Company's proposed agreement with STIP. In addition, the
Company may require additional financing prior to or following such period if it
is unable to complete the negotiation for the proposed agreement with STIP and
another suitable facility is obtained requiring the Company to expend greater
sums of money for initial start-up costs and/or production facilities or if a
final agreement is reached with STIP but the estimated initial start-up costs
and establishment of production facilities is greater than estimated. The
Company has no commitments or arrangements for any such additional financing and
there can be no assurance that the Company will be able to obtain additional
financing on terms acceptable to the Company or at all. In the event additional
financing is unavailable to the Company, the Company may be materially adversely
affected.
 
     The foregoing represents the Company's best estimate of its allocation of
the net proceeds of this Offering. Future events, as well as changes in
economic, regulatory or competitive conditions or the Company's business and the
results of its activities may make shifts in the allocation of funds within the
described categories or to other purposes necessary or desirable. In the event
the Company is unable to fund its proposed product assembly operations with the
net proceeds allocated above or suffers losses, the Company
 
                                       19
<PAGE>   24
 
may draw upon the net proceeds of this Offering allocated to expand the number
of sales offices, purchase equipment and/or working capital. In the event the
Company is not successful in establishing its planned product assembly
operations, any net proceeds remaining from the funds allocated for such purpose
may be reallocated to expanding the lines of products that the Company
distributes. The Company estimates that the net proceeds of this Offering
allocated to expand the number of its sales offices will be sufficient to
establish approximately three new sales offices at an average cost of
approximately $100,000 for each new sales office. In the event the per sales
office costs are greater than estimated, the Company may establish fewer sales
offices or draw upon the net proceeds of this Offering allocated to working
capital. In the event the per sales office costs are less than estimated, a
portion of the net proceeds of this Offering allocated for such purposes will be
reallocated to working capital.
 
     Prior to expenditure, proceeds will be invested principally in high grade,
short-term, interest-bearing investments. Any proceeds received upon exercise of
the Overallotment Option or any of the Warrants will be used for working capital
purposes. There can be no assurance that the Overallotment Option or any of the
Warrants will be exercised.
 
                                       20
<PAGE>   25
 
                                 CAPITALIZATION
 
   
     The following table sets forth the pro forma consolidated capitalization of
the Company at June 30, 1996, (i) on an actual basis assuming the share exchange
between the Company and Far East as described in the "Certain Transactions"
section had taken place prior to June 30, 1996 and that 100% of the outstanding
shares of Far East had been transferred to the Company; and (ii) on a pro forma
basis giving effect to the issuance of 50,000 Common Shares to United States
counsel for the Company, 930,000 Warrants to certain private investors (after
deduction of 70,000 Warrants repurchased by the Company) before the Public
Offering and the issuance of 600,000 Common Shares and 600,000 Warrants and the
receipt of the estimated net proceeds of the Public Offering. This table should
be read in conjunction with the financial statements of Far East and the notes
thereto included elsewhere in this Prospectus.
    
 
   
<TABLE>
<CAPTION>
                                                                  JUNE 30, 1996
                                                         -------------------------------
                                                         ACTUAL    PRO FORMA   PRO FORMA
                                                         -------   ---------   ---------
                                                         HK$000     HK$ 000     US$ 000
    <S>                                                  <C>       <C>         <C>
    Short-term borrowings..............................   5,171       5,171         668
    Current portion of long-term bank loans............   1,061       1,061         137
    Payable to a director..............................      38          38           5
                                                         -------   ---------   ---------
    Total current portion of debt......................   6,270       6,270         810
                                                         -------   ---------   ---------
    Long-term bank loans, net of current portion.......   6,471       6,471         836
                                                         -------   ---------   ---------
    Shareholders' equity:
         Share capital.................................     108         112          15
         Additional paid-in capital....................      --      16,494       2,131
         Capital surplus...............................  20,875      20,875       2,697
         Warrants......................................      --         929         120
                                                         -------   ---------   ---------
         Total shareholders' equity....................  20,983      38,410       4,963
                                                         -------   ---------   ---------
              Total capitalization.....................  33,724      51,151       6,609
                                                         ========  =========   =========
</TABLE>
    
 
                                       21
<PAGE>   26
 
                         SELECTED FINANCIAL INFORMATION
                    (AMOUNTS EXPRESSED IN THOUSANDS, EXCEPT
             SHARE AND PER SHARE DATA AND UNLESS OTHERWISE STATED)
 
     The selected income statement data for the six months ended June 30, 1996,
and the selected balance sheet data as of June 30, 1996 set forth below are
derived from unaudited financial statements of Euro Tech (Far East) Limited
which are included elsewhere in this Prospectus and should be read in
conjunction with, and are qualified in their entirety by reference to such
financial statements. The selected income statement data for the years ended
December 31, 1993, 1994 and 1995 and the selected balance sheet data as of
December 31, 1994 and 1995 set forth below are derived from audited financial
statements of Euro Tech (Far East) Limited which are included elsewhere in this
Prospectus and should be read in conjunction with, and are qualified in their
entirety by reference to such financial statements, including the notes thereto.
The selected income statement data for the years ended October 31, 1991 and 1992
and the selected balance sheet data as of October 31, 1991 and 1992, and
December 31, 1993 set forth below are derived from audited financial statements
of Euro Tech (Far East) Limited which are not included herein. All of the above
financial statements have been prepared and presented in accordance with
accounting principles generally accepted in the United States of America.
 
     The consolidated financial data set forth below have been presented as if
(i) the Company, which was incorporated on September 30, 1996, had been in
existence for all periods presented; and (ii) 100% of the share capital of Euro
Tech (Far East) Limited had been transferred to the Company at the beginning of
the periods presented.
 
<TABLE>
<CAPTION>
                                       AS OF                                                        AS OF JUNE 30, 1996
                                  OCTOBER 31,(1)              AS OF DECEMBER,             ---------------------------------------
                                  ---------------    ---------------------------------                AS         PRO       PRO
                                   1991     1992      1993     1994     1995     1995     ACTUAL  ADJUSTED(5)  FORMA(6)  FORMA(6)
                                  ------   ------    ------   ------   ------   ------    ------  -----------  --------  --------
                                   HK$      HK$       HK$      HK$      HK$     US$(2)     HK$        HK$        HK$      US$(2)
                                                                                                        (UNAUDITED)
<S>                               <C>      <C>       <C>      <C>      <C>      <C>       <C>     <C>          <C>       <C>
BALANCE SHEET DATA:
  Cash and cash equivalents.....   1,340    4,934     3,735    3,408    4,626     597     3,008       4,018     20,512     2,650
  Working capital(3)............   6,152    8,855     9,261    7,253    4,896     631     6,115       7,125     23,619     3,052
  Total assets..................  25,845   33,615    45,838   52,492   59,740   7,717     57,303     58,313     74,807     9,665
  Short-term debt(4)............   1,086    3,629     6,235    7,791    6,434     831     6,232       6,232      6,232       805
  Long-term bank loans..........      --       --     2,538    3,330    7,006     905     6,471       6,471      6,471       836
  Stockholders' equity..........   8,955   11,308    17,140   17,607   17,721   2,289     20,983     21,993     38,487     4,973
</TABLE>
 
                                       22
<PAGE>   27
 
<TABLE>
<CAPTION>
             FOR THE            FOR THE TWO
           YEAR ENDED          MONTHS ENDED                                                            FOR THE SIX MONTHS
         OCTOBER 31,(1)       DECEMBER 31,(1)          FOR THE YEAR ENDED DECEMBER 31,                   ENDED JUNE 30,
      ---------------------   ---------------   ---------------------------------------------   ---------------------------------
        1991        1992           1992           1993        1994        1995        1995        1995        1996        1996
      ---------   ---------   ---------------   ---------   ---------   ---------   ---------   ---------   ---------   ---------
         HK$         HK$            HK$            HK$         HK$         HK$       US$(2)        HK$         HK$       US$(2)
                                                                                                           (UNAUDITED)
<S>   <C>         <C>         <C>               <C>         <C>         <C>         <C>         <C>         <C>         <C>
INCOME
STATEMENT
  DATA:
Sales...    68,263    83,813        15,257        105,374     103,512     105,782      13,667      51,959      53,969       6,973
      ---------   ---------   ---------------   ---------   ---------   ---------   ---------   ---------   ---------   ---------
Cost
  of
  goods
sold...   (50,686)   (62,833)       (8,746)       (79,384)    (80,953)    (82,300)    (10,633)    (40,623)    (41,776)     (5,397)
Selling
  and
  administrative
  expenses...   (15,607)   (19,683)       (5,438)   (19,302)   (20,199)   (21,464)     (2,773)    (10,614)     (9,861)     (1,273)
Interest
expenses,
  net..      (249)      (135)          (21)          (221)       (492)       (877)       (113)       (420)       (631)        (82)
Gain
  on
  disposal
  of a
real
estate
property..        --        --           --            --       2,300          --          --          --          --          --
Other
income,
 net...       535     2,739            147            675         590       1,186         153         118         488          63
      ---------   ---------   ---------------   ---------   ---------   ---------   ---------   ---------   ---------   ---------
    Total
    costs
      and
      expenses...   (66,007)   (79,912)      (14,058)   (98,232)   (98,754)  (103,455)   (13,366)   (51,539)   (51,780)    (6,689)
      ---------   ---------   ---------------   ---------   ---------   ---------   ---------   ---------   ---------   ---------
Income
  from
  continuing
  operations
  before
  profits
  tax...     2,256     3,901         1,199          7,142       4,758       2,327         301         420       2,189         284
Provision
  for
  profits
 tax
  -- current...      (373)      (827)         (210)    (1,106)      (425)       (68)        (9)       (77)       (406)        (52)
      ---------   ---------   ---------------   ---------   ---------   ---------   ---------   ---------   ---------   ---------
Income
  from
  continuing
  operations...     1,883     3,074          993     6,036      4,333       2,259         292         343       1,783         232
Discontinued
  operations
  Income
  (loss)
  of
  subsidiary
  companies
  sold in
  1996...       169       947            3             12      (1,466)     (1,645)       (213)       (369)         --          --
      ---------   ---------   ---------------   ---------   ---------   ---------   ---------   ---------   ---------   ---------
Net
income
(loss)...     2,052     4,021          992          6,048       2,867         614          79         (26)      1,783         232
       ========    ========   ===============    ========    ========    ========    ========    ========    ========    ========
Pro
forma
income
from
continuing
  operations
  per
  common
share...                                                                     1.56        0.20                    1.23        0.16
Pro
forma
 loss
 from
  discontinued
  operations
  per
  common
share...                                                                    (1.14)      (0.15)                     --          --
Pro
forma
  net
  income
 per
 common
 share...                                                                    0.42        0.05                    1.23        0.16
Pro
forma
weighted
  average
  number
  of
  common
  share
  outstanding...                                                        1,450,000   1,450,000               1,450,000   1,450,000
</TABLE>
 
- ---------------
(1) In 1993, Euro Tech (Far East) Limited changed its financial year end from
    October 31 to December 31.
 
(2) Translation solely for convenience of the readers at the prevailing exchange
    rate of HK$7.74 = US$1 on June 30, 1996.
 
(3) Current assets minus current liabilities.
 
(4) Short-term debt includes short-term borrowings and current portion of
    long-term bank loans.
 
(5) Reflects the issuance of 1,000,000 Warrants to certain private investors for
    net proceeds of US$130,500 before the Public Offering. See "Management's
    Discussion and Analysis of Financial Condition and Results of Operations,"
    "Certain Transactions" and the financial statements of the Company and Far
    East and the notes thereto.
 
(6) Reflects the issuance of 1,000,000 Warrants to certain private investors for
    net proceeds of US$130,500 before the Public Offering and the issuance of
    600,000 Common Shares and 600,000 Warrants and the receipt of the estimated
    net proceeds of the Public Offering. See "Management's Discussion and
    Analysis of Financial Condition and Results of Operations," "Certain
    Transactions" and the financial statements of the Company and Far East and
    the notes thereto.
 
                                       23
<PAGE>   28
 
                      MANAGEMENT'S DISCUSSION AND ANALYSIS
                OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
 
     The following discussion and analysis should be read in conjunction with
the Financial Statements and notes thereto appearing elsewhere in this
Prospectus.
 
INTRODUCTION
 
     The Company was organized under the laws of the British Virgin Islands on
September 30, 1996 to raise capital and acquire Far East. Upon the closing of
the Public Offering, Far East will become 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'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 the distribution of high-tech equipment
manufactured in the United States, Europe and Japan into the PRC, in addition to
its distribution activities on behalf of its parent. In 1988, the activities of
the parent and Far East were separated into Eurotherm International and Far
East. By in or about 1994, all the capital stock of Far East was purchased by
its management, principally Mr. T.C. Leung, the Company's Chairman of the Board
of Directors and Chief Executive Officer and Far East changed its name from
Eurotherm (Far East) Ltd. to its current name. See "Principal Shareholders" and
"Certain Transactions."
 
     During Fiscal 1995 approximately 59% and 40% of the Company's sales were
made to customers located in the PRC and Hong Kong, respectively. For Six Months
1996 approximately 66% and 34% of the Company's sales were made to customers
located in the PRC and Hong Kong, respectively. Sales to customers situated in
Macau and elsewhere were nominal.
 
     The Company has funded itself since inception by initial borrowings from
Far East and selling 1,000,000 Warrants in a private placement of such
securities pursuant to which the Company derived aggregate gross proceeds of
$150,000. In March 1997, the Company repurchased 70,000 Private Warrants at
their purchase price or an aggregate amount of $10,500. See "Certain
Transactions," "Description of Securities" and "Concurrent Registration of
Securities."
 
FAR EAST
 
GENERALLY
 
     During Fiscal 1991, Fiscal 1992, and Fiscal 1993, Far East experienced a
gradual increase in sales revenues. During Fiscal 1994 and Fiscal 1995, Far
East's sales revenues remained substantially unchanged. Management of the
Company believes that Far East's lack of sales growth during Fiscal 1994 and
Fiscal 1995 resulted from the PRC's economic austerity measures undertaken to
dampen the rate of inflation in the PRC, which was approximately 27% in 1994 in
comparison to 1993. These economic austerity measures included the tightening of
credit, when coupled with a devaluation of the RMB in 1993 and the imposition of
a value tax imposed by the PRC on imports into the PRC, caused products
manufactured in the PRC to become more competitive with the United States,
European and Japanese manufactured products distributed by Far East even though
the products distributed by Far East were of better quality. Cost became an
overriding issue with many of PRC's customers and, in response, Far East reduced
its sales prices and, therefore, its profit margins to remain competitive with
PRC manufacturers. During Six Months 1996, Far East also began streamlining its
operations and focusing its efforts on its current product lines by disposing of
three of its subsidiaries, Euro Electron (Far East) Ltd. ("Euro Electron"),
Action Instruments (China) Ltd. ("Action") and Armtison Ltd. ("Armtison"). Euro
Electron had been established to distribute telecommunication products. However,
manufacturers of these products distribute their products directly to end users,
without intermediary distributors such as Far East. Technical expertise in this
product line was also found to be a necessity. As a result, Euro Electron's
activities never developed. Action distributed industrial computers. During
Fiscal 1994, Action lost its principal source of this product line when Action's
principal supplier sold its industrial
 
                                       24
<PAGE>   29
 
computer production line to another supplier. Additionally, another major
manufacturer of industrial computers established its own distribution office in
Hong Kong to distribute its products in Hong Kong and the PRC. Armtison was
principally a holding company for Euro Electron and Action.
 
     The rate of inflation in the PRC has declined. In 1995, the rate of
inflation was approximately 10% in comparison to 1994. 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 allowing Far East to
increase its sales prices and profit margins. The Company's management also
believes that by Far East entering into an agreement with an entity situated in
the PRC to assemble certain products of the kind currently distributed by Far
East, Far East will also be able to increase its profit margins.
 
BASIS OF PRESENTATION
 
     All financial data referred to in the following discussion has been
prepared in accordance with U.S. GAAP.
 
RESULTS OF OPERATION OF FAR EAST
 
     The following table presents selected statement of operations data
expressed as a percentage of net sales for Far East's Fiscal 1993, Fiscal 1994
and Fiscal 1995 and the Six Months ended June 30, 1995 and 1996.
 
<TABLE>
<CAPTION>
                                              SIX MONTHS ENDED
                                                   JUNE 30            YEAR ENDED DECEMBER 31,
                                              -----------------     ----------------------------
                                               1995       1996       1993       1994       1995
                                              ------     ------     ------     ------     ------
<S>                                           <C>        <C>        <C>        <C>        <C>
Net Sales...................................  100.0%     100.0%     100.0%     100.0%     100.0%
Cost of goods sold..........................   78.2%      77.4%      75.3%      78.2%      77.8%
Gross profit................................   21.8%      22.6%      24.7%      21.8%      22.2%
Selling and administrative expenses.........   20.4%      18.3%      18.3%      19.5%      20.3%
Operating income............................     .8%       4.1%       6.8%       4.6%       2.2%
Income tax provision........................     .1%        .8%       1.0%        .4%        .1%
Net income..................................    (.1%)      3.3%       5.7%       2.8%        .6%
</TABLE>
 
RESULTS OF OPERATIONS
 
SIX MONTHS ENDED JUNE 30, 1996 COMPARED TO SIX MONTHS ENDED JUNE 30, 1995
 
     Sales; Gross Profit and Cost of Goods Sold.  Sales increased by
approximately HK$2,010,000 or 3.9% to approximately HK$53,969,000 in the Six
Months 1996 from approximately HK$51,959,000 in the Six Months 1995. The Company
believes that this increase in sales is primarily due to the PRC government
relaxing economic austerity measures in early 1996. Gross profit increased by
approximately HK$857,000 or 7.6% to approximately HK$12,193,000 for the Six
Months 1996 compared to approximately HK$11,336,000 for the Six Months 1995
which was attributable to the increase in sales (including those products with
high gross profit margins) and the increase in gross profit margins from 21.8%
for the Six Months 1995 to 22.6% for the Six Months 1996. For the Six Months
1996, Far East's cost of goods sold were approximately HK$41,776,000 or 77.4% of
sales representing a decrease of approximately HK$1,153,000 from the comparable
period in the prior year or approximately HK$40,623,000 or 78.2% of sales. The
decrease in cost of goods sold is primarily due to increases in demand for
products with higher gross profit margins.
 
     Selling and Administrative Expenses.  Selling and administrative expenses
were approximately HK$9,861,000 for the Six Months 1996 a decrease of
approximately HK$753,000 or 7.1% from approximately HK$10,614,000 for the Six
Months 1995. This decrease is primarily due to improved operating efficiencies
resulting in the reduction of operating expenses in Far East's PRC sales
offices, lower advertising costs incurred in promotion and exhibitions and other
selling expenses, and decrease in rental expenses for Far East's sales offices
as Far East moved to self-owned properties in Shanghai and Beijing.
 
                                       25
<PAGE>   30
 
     Interest Expense.  Net interest expense increased by approximately
HK$211,000 or 50.2% to approximately HK$631,000 for the Six Months 1996 from
approximately HK$420,000 for the Six Months 1995. The increase is principally
the result of mortgage loan interest payments of approximately HK$217,000 due
upon Far East's long term bank borrowings incurred in September and October 1995
used to finance the purchase of premises situated in Shanghai and Hong Kong,
respectively.
 
     Other Income.  The main components of other income are rental income,
income from provision of engineering service, gain (loss) on disposal of fixed
assets, and exchange gain (loss). Other income increased by approximately
HK$370,000 from approximately HK$118,000 for the Six Months 1995 to
approximately HK$488,000 for the Six Months 1996 and results from greater income
generated from providing engineering service to other companies and exchange
rate differences arising from settlement of sales and purchase transactions.
 
     Income from Continuing Operations.  Income from continuing operations
increased by approximately HK$1,440,000 or 419.8% to approximately HK$1,783,000
for the Six Months 1996 compared to approximately HK$343,000 for the Six Months
1995. In addition to a small increase in sales and gross profit margin
percentages, the principal factor contributing to the increase in net income was
a significant reduction in sales and administrative expenses. The decrease in
sales and administrative expenses was principally a reduction in selling
expenses, (business travel, advertising and exhibition costs) as Far East's
efforts in prior years have created what the Company believes to be a solid
network of distributors, a recognized name, an established reputation and a
stable PRC sales force.
 
     Discontinued Operations.  Far East's shareholders decided to separate the
main operating company (Far East) from its subsidiaries in early 1996 to focus
on its current product lines and shed immaterial activities. Far East disposed
of the following subsidiaries; Euro-Electron, Action and Armtison. See
"-- Generally." Far East's investment in the foregoing three subsidiaries was
transferred back to Far East's shareholders directly at a price equal to book
value (HK$10,000). As a result, there is no income (loss) of those subsidiaries
reported for the Six Months 1996.
 
FISCAL YEAR ENDED DECEMBER 31, 1995 COMPARED TO FISCAL YEAR ENDED DECEMBER 31,
1994
 
     Sales; Gross Profit and Cost of Goods Sold.  Sales increased by
approximately HK$2,270,000 or 2.2% to approximately HK$105,782,000 in Fiscal
1995 from approximately HK$103,512,000 in Fiscal 1994. Far East was able to
achieve a growth in sales even under the PRC's economic austerity measures
primarily as a result of Far East's established sales and distribution networks.
Gross profit increased by approximately HK$923,000 or 4.1% to approximately
HK$23,482,000 for Fiscal 1995 compared to approximately HK$22,559,000 for Fiscal
1994 which increase is attributable to increased sales and a gross profit margin
increase from 21.8% in Fiscal 1994 to 22.2% in Fiscal 1995. During Fiscal 1995,
Far East's cost of goods sold were HK$82,300,000 or 77.8% of sales remaining
relatively constant when compared to Fiscal 1994, when cost of goods sold were
approximately HK$80,953,000 or 78.2% of sales as Far East faced intense
competition in the PRC market place resulting from the economic austerity
measures adopted in early 1994.
 
     Selling and Administrative Expenses.  Selling and administrative expenses
were approximately HK$21,464,000 in Fiscal 1995, an increase of approximately
HK$1,265,000 or 6.3% from approximately HK$20,199,000 in Fiscal 1994. This
increase is primarily due to the increase in the selling and administrative
expenses of Far East's PRC sales offices, especially Far East being obligated to
pay taxes for its sales offices in the PRC commencing in 1995.
 
     Interest Expense.  Net interest expense increased by approximately
HK$385,000 or 78.3% to approximately HK$877,000 in Fiscal 1995 from
approximately HK$492,000 for Fiscal 1994. This interest expense increase is the
result of increased levels of borrowing, particularly Far East entering into a
mortgage loan for the purchase of its Beijing's office in November 1994 with
mortgage loan interest expense increasing by approximately HK$202,000. Increased
interest for other short term bank borrowings (i.e. bank overdraft and
import/export loans) is principally due to the gradual increase in interest
rates from the Hong Kong prime of 6.5% in January 1994 up to the highest rate of
9.0% during 1995.
 
     Other Income.  Other income increased by approximately HK$596,000 or 101%
to approximately HK$1,186,000 in Fiscal 1995 from approximately HK$590,000 in
Fiscal 1994. The increase in other income
 
                                       26
<PAGE>   31
 
results from greater income generated from providing engineering services to
other companies and exchange rate differences arising from settlement of sales
and purchase transactions.
 
     Provision for Profit Tax.  Provisions for taxes declined by approximately
HK$357,000 to approximately HK$68,000 in Fiscal 1995 from approximately
HK$425,000 in Fiscal 1994. This decline was due primarily to an adjustment of
profits tax on prior years of approximately HK$345,000 made in Fiscal 1995
resulting from a tax review by Hong Kong's Commissioner of Inland Revenue.
 
     Income from Continuing Operations.  Income from continuing operations was
approximately HK$2,259,000 in Fiscal 1995, an increase of approximately
HK$226,000 or 11% from approximately HK$2,033,000 (total income of approximately
HK$4,333,000 less non-recurring profit of approximately HK$2,300,000 from sales
of property) in Fiscal 1994. The increase in operating profit was primarily due
to the increase in sales and gross margin percentages and Far East's
self-imposed budgetary restraints on selling and administrative expenses, which
only increased by 6.3% in comparison to the then double digit PRC inflation
rate.
 
     Discontinued Operations -- Losses of subsidiary companies.  Losses of Far
East subsidiaries increased by approximately HK$179,000 to approximately
HK$1,645,000 for Fiscal 1995, from approximately HK$1,466,000 in Fiscal 1994.
During Fiscal 1995 one of Action's major suppliers established its own office in
Hong Kong to directly distribute its products. As a result of a reduction in
products resulting from the loss of another supplier and this direct
manufacturer competition, Action sustained a loss. Another Far East subsidiary,
Euro Electron, was unable to secure major orders from the telecommunication
market and also sustained a loss for Fiscal 1995.
 
FISCAL YEAR ENDED DECEMBER 31, 1994 COMPARED TO FISCAL YEAR ENDED DECEMBER 31,
1993
 
     Sales; Gross Profit and Cost of Goods Sold.  Sales decreased by
approximately HK$1,862,000 or 1.8% to approximately HK$103,512,000 in Fiscal
1994 from approximately HK$105,374,000 in Fiscal 1993. This decrease was
primarily the result of exceptionally high sales in Fiscal 1993 flowing from the
inclusion in Fiscal 1993 sales of approximately HK$19,600,000 of equipment to
the largest steel complex in the PRC. Excluding this exceptional order, the net
sales for Fiscal 1993 were approximately HK$85,774,000 and Fiscal 1994 sales had
an increase of approximately HK$17,738,000, or 20.7%. In 1994, the PRC
government implemented economic austerity measures to curb its high inflation
rates. However, Far East was able to increase its sales during Fiscal 1994 even
when confronted by the PRC's economic austerity measures as a result of prior
years efforts in exploring PRC markets, including but not limited to prior
appointments of distributors and the establishment of its Guangzhou sales office
in Fiscal 1993. Gross profit decreased by approximately HK$3,431,000 or 13.2% to
approximately HK$22,559,000 for Fiscal 1994 in comparison to approximately
HK$25,990,000 in Fiscal 1993, which decrease was attributable to the inclusion
of the exceptional order mentioned above in Fiscal 1993 sales and a 2.9%
decrease in gross profit margins from 24.7% for Fiscal 1993 to 21.8% for Fiscal
1994. For Fiscal 1994, Far East's cost of goods sold were approximately
HK$80,953,000 or 78.2% of sales in comparison to HK$79,384,000 or 75.3% of sales
for Fiscal 1993. Cost of goods sold expressed as a percentage of sales increased
by 2.9% in Fiscal 1994 as compared with Fiscal 1993. The gross profit margin
reduction and the percentage increase in costs of goods sold were principally
the result of intensified competition in the PRC market resulting from the
economic austerity measures adopted by the PRC government in early 1994, the
imposition of a value added tax on goods imported in the PRC and the devaluation
of RMB in early 1994 significantly reduced the purchasing power of Far East's
PRC customers. As a result, they sought discounts on the products distributed by
Far East.
 
     Selling and Administrative Expenses.  Selling and administrative expenses
were approximately HK$20,199,000 in Fiscal 1994, representing an increase of
approximately HK$897,000 or 4.7% from approximately HK$19,302,000 in Fiscal
1993. This increase was primarily due to general increases in expenses as a
result of the high inflation rate in the PRC which Far East was able to offset
by self-imposed budgetary restraints on selling expenses (sales commissions,
business travel, advertising, exhibitions, entertainment etc.)
 
     Interest Expense.  Net interest expense increased by approximately
HK$271,000 or 123% to approximately HK$492,000 for Fiscal 1994 from
approximately HK$221,000 for Fiscal 1993. The increase in interest
 
                                       27
<PAGE>   32
 
expense was due to an increased level of borrowings, resulting from the purchase
of investment property in September 1993 (with mortgage interest increasing by
HK$170,000) and payment of dividends of approximately HK$3,500,000 in Fiscal
1994 to Far East's shareholders.
 
     Other Income.  Other income declined by approximately HK$85,000 or 12.6% to
approximately HK$590,000 in Fiscal 1994 from approximately HK$675,000 in Fiscal
1993. This decrease in other income was due primarily to a decrease in income
generated from providing engineering services to other companies in Fiscal 1994.
 
     Gain on Disposal of a Real Estate Property.  The gain of approximately HK
$2,300,000 resulted from the disposition of the premises which were previously
leased out.
 
     Income from Continuing Operations.  Income from continuing operations was
approximately HK$4,333,000 in Fiscal 1994, a decrease of approximately
HK$1,703,000 or 28.2% from approximately HK$6,036,000 in Fiscal 1993. This
decrease in operating profit was primarily due to the economic austerity
measures adopted by the PRC government in early 1994 and the exceptional sale in
Fiscal 1993 resulting from the inclusion of the above mentioned exceptional
order in the approximate amount of HK$19,600,000.
 
     Discontinued Operations -- Income (Loss) of subsidiary companies.  In
Fiscal 1993, the operations of Far East's subsidiaries derived a profit of
approximately HK$12,000 but their operations resulted in a loss of approximately
HK$(1,466,000) in Fiscal 1994. This loss was primarily due to one of the major
suppliers of Action disposing of its industrial computer product line in Fiscal
1994. The industrial computer product line had been one of Action's major
product lines in prior years. Euro Electron was established in the later part of
Fiscal 1993. During Fiscal 1994, Euro Electron was in its development stage,
incurring expenses for planned operations, seeking product sources and
formulating its marketing efforts while deriving no revenues.
 
LIQUIDITY AND CAPITAL RESOURCES
 
     Far East's primary uses of cash have been to fund accounts receivable,
inventories, capital expenditures related to the additions to property and
equipment, and to pay dividends to its shareholders. Far East has historically
met its cash requirements from cash flow from operations, short-term borrowings
under bank lines of credit, and long-term mortgage bank loans. Working capital
at the end of Fiscal 1995 and Six Months 1996 was approximately HK$4,896,000 and
approximately HK$6,115,000, respectively.
 
     Inventory decreased from approximately HK$5,106,000 at the end of Fiscal
1995 to approximately HK$3,258,000 at the end of Six Months 1996. Far East seeks
to maintain a low level of inventory comprised mostly of low tech products to
fill regular customer's orders and parts and accessories for warranty purposes,
with Far East principally ordering products upon receiving a customer's order.
The higher inventory level at the end of Fiscal 1995 was principally due to
goods received near year end but not delivered to customers for several reasons,
including but not limited to, a multicomponent order awaiting shipment of a
component while another had arrived and a customer's letter of credit or payment
not having been received.
 
     During Fiscal 1995 and Six Months 1996, Far East experienced cash flow from
operations of approximately HK$7,611,000 and (HK$319,000), respectively. Cash
from operations in Fiscal 1995 having been positively impacted by shipments made
in late Fiscal 1994 with payment being received in Fiscal 1995. At the end of
Fiscal 1995, Far East's accounts receivable stood at approximately HK$22,040,000
while at the end of Six Months 1996, Far East's accounts receivable were
approximately HK$18,978,000. At the end of Six Months 1996, Far East had
advanced approximately HK$3,800,000 to Regent (of which approximately
HK$2,200,000 was repaid subsequent to the end of Six Months 1996). Also accounts
receivable declined by approximately HK$3,062,000 from approximately
HK$22,040,000 at the end of Fiscal 1995 to approximately HK$18,978,000 at the
end of Six Months 1996, which was partially offset by an increase in receivables
from related companies of approximately HK$1,115,000 from approximately
HK$275,000 at the end of Fiscal 1995 to approximately HK$1,390,000 at the end of
Six Months 1996.
 
     For Fiscal 1995 and Six Months 1996, Far East had income from continuing
operations of approximately HK$2,259,000 and HK$1,783,000 respectively. This
income rate increase followed from Far East's self-
 
                                       28
<PAGE>   33
 
imposed budgetary restraints, the loosening of the PRC's economic austerity
measures and a reduced rate of inflation in the PRC.
 
     Cash used in investing activities were mainly used to purchase properties
in the PRC and Hong Kong.
 
     Far East has various banking facilities for overdraft, import and export
credits and foreign exchange contracts amounting to approximately HK$40,900,000
from various banks. More specifically, at June 30, 1996 Far East had borrowed
the following short term bank overdraft facilities to finance its operating
activities: (a) approximately HK$1,692,455 from Standard Chartered Bank; and (b)
approximately HK$1,780,937 from Banque Nationale de Paris. Both such facilities
bearing interest at Hong Kong's prime rate. At June 30,1996, unused portions of
the foregoing overdraft facilities were approximately HK$307,545 and HK$219,063
from the Standard Chartered Bank and Banque Nationale de Paris, respectively.
Far East also had the following outstanding import loans to finance the purchase
of goods from suppliers: (a) approximately 108,836 Deutsche Marks and 34,977
Singapore Dollars from Standard Chartered Bank, bearing interest at Hong Kong's
prime rate plus one-half percent and repayable within 90 days; and (b)
approximately US$136,762 from Banque Nationale de Paris, bearing interest at
Hong Kong's prime rate plus one percent and repayable within 120 days.
Approximately HK$24,500,000 of the credit facilities that are available were
obtained on the conditions that, among other things, Far East mortgage its
properties as security for the credit facilities, Far East not to create a
charge or lien on its other assets in favor of other parties without the bank's
consent, and Far East maintaining a certain level of net worth. Far East also
has various bank loans to finance the purchase of its properties with
outstanding indebtedness at June 30, 1996 of approximately HK$7,500,000. More
specifically, at June 30, 1996 Far East had the following bank loans used to
finance the purchase of properties: (a) the Hong Kong and Shanghai Banking
Corporation, bearing interest at the United States prime rate plus two and
one-half percent, repayable at the approximate rate of US$2,800 per month with
approximately HK$1,104,000 in principal remaining to be paid at the end of Six
Months 1996; (b) the Bank of East Asia Ltd., bearing 13% interest per year,
repayable at the approximate rate of HK$11,945 per month with approximately
HK$768,000 in principal remaining to be paid at the end of Six Months 1996; (c)
Standard Chartered Bank, bearing interest at Hong Kong's prime rate plus one and
a quarter percent, repayable at the approximate rate of HK$31,500 per month plus
interest with approximately HK$1,972,000 in principal remaining to be paid at
the end of Six Months 1996 (repaid in December 1996 upon the sale of the
property the purchase of which this bank loan was used to finance); and (d) the
Hong Kong and Shanghai Banking Corporation, bearing interest at Hong Kong's
prime rate plus one and three quarters percent repayable at the approximate rate
of HK$65,598 per month with approximately HK$3,688,000 in principal remaining to
be paid at the end of Six Months 1996. As of June 30, 1996, properties with net
book value of approximately HK$20,200,000 were pledged to secure certain banking
facilities of Far East.
 
     Cash declined from approximately HK$4,626,000 at the end of Fiscal 1995 to
approximately HK$3,008,000 at the end of Six Months 1996 principally as a result
of Far East electing to use cash on hand to repay short-term borrowings (i.e.
bank overdraft and import/export loans) and make advances to Regent to finance a
significant government project that had been undertaken by Regent's subsidiary,
Action, and is nearing completion. Regent is charged interest at the rate of 18%
per year for this advance. At June 30, 1996, Regent had an outstanding balance
of approximately HK$3,800,000 due to Far East. Regent owns approximately
two-thirds of the outstanding equity securities of Far East and upon completion
of this Offering will own approximately 48% of the Company's issued and
outstanding shares of Common Stock. Regent's majority shareholder is Pearl
Venture Ltd. which is a trust established for the benefit of T.C. Leung,
Chairman of the Company's Board of Directors and its Chief Executive Officer.
See "Principal Shareholders" and "Certain Transactions."
 
     The Company plans to use the net proceeds of this Offering to establish
product assembly operations and additional sales offices in the PRC and purchase
office equipment including computer hardware and software. The balance of the
proceeds of this Offering will be used for general working capital purposes.
 
     The Company believes that the net proceeds of this Offering, together with
available trade credit, bank credit and internally generated funds, will be
sufficient to satisfy its anticipated working capital needs for at least the
twelve month period following the completion of this Offering.
 
                                       29
<PAGE>   34
 
                                    BUSINESS
 
INTRODUCTION
 
     The Company is a distributor, in Hong Kong and China, of process control,
analytical and testing instruments, disinfection equipment, supplies and related
automation systems used in the treatment, analysis and testing of water and
waste water. The Company distributes products to approximately 400 regular
customers including sub-distributors located in Hong Kong, the PRC and Macau
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.
 
     The Company believes that because of the increased expansion of industry
and general business growth in the PRC during the last five years there is a
strong and increasing demand for the products distributed by it in the PRC. The
Company further believes that in years to come the need for the products
distributed by it will grow as a result of governmental regulations of
environmental pollution and based upon demands of the PRC's population for a
healthy and safer environment including cleaner water.
 
     The Company distributes products manufactured by a substantial number of
major American, European and Japanese corporations, including Wallace, Hach,
Hioki and Finnigan which are the Company's largest suppliers, with purchases
from them accounting for approximately 11%, 7%, 7% and 4%, respectively, of the
Company's sales during Fiscal 1995 and 9%, 10%, 10% and 23%, respectively, of
the Company's sales during Six Months 1996.
 
     The Company distributes products through its headquarters located in Hong
Kong and its regional sales offices located in Beijing, Shanghai and Guangzhou
and through non-exclusive arrangements with independent sub-distributors.
 
     The Company intends to use a substantial portion of the net proceeds of the
Public Offering to establish an operation to assemble products of the kind now
distributed by the Company, initially certain water related testing, monitoring
and treatment equipment, and if successful in assembling such products, to
expand its product assembly operations to other products of the kind now
distributed by the Company, pursuant to an agreement to be entered into with a
PRC based entity, such as STIP and to expand its marketing efforts by, among
other things, opening additional regional sales offices in the PRC. The Company
believes that by assembling products that it distributes, gross profits margins,
revenues and net income will increase. Similarly, the Company believes that by
expanding its regional sales efforts in the PRC, revenues and net income will be
enhanced.
 
     The Company has recently reached a preliminary agreement with STIP pursuant
to which STIP will provide space and technical expertise necessary to enable the
Company to assemble in the PRC such products. It is presently contemplated that
the Company will import components, assemble the components into finished
product and then distribute the products through the Company's distribution
network.
 
     In the event, the Company is unable to complete a definitive agreement with
STIP, it will continue to seek other PRC based entities to assemble products.
 
     During the Company's Fiscal 1995 and Six Months 1996, the Company had sales
of approximately $13,667,000 and $6,973,000, respectively, and net income of
approximately $79,000 and $232,000, respectively.
 
BACKGROUND
 
     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's industrial control equipment in Hong
Kong and Southeast Asia and expanded its activities into China in 1973. In the
early 1980's, Far East began the distribution of high-tech equipment
manufactured in the United States, Europe and Japan into China, in addition to
its distribution activities on behalf of its parent. In 1988, the activities of
the parent and Far East were separated into Eurotherm International and Far
East. By 1994, all of
 
                                       30
<PAGE>   35
 
the capital stock of Far East had been purchased by its management and Far East
changed its name from Eurotherm (Far East) Ltd. to its current name. See
"Certain Transactions."
 
BUSINESS
 
GENERAL
 
     The Company is a distributor in China of a wide range of advanced water
treatment equipment (including chlorination equipment), laboratory instruments,
analyzers, test kits and supplies and acts as an exclusive and non-exclusive
distributor for well known manufacturers of such equipment.
 
     The Company has exclusivity agreements with many of its suppliers for
certain products for specific geographic areas. Such agreements do not encompass
all products distributed by the Company and all market areas services 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 sole representative in the PRC, Hong Kong and Macau authorized to supply,
install and commission Hach's products and accessories. See "-- Sources of
Supply." The Company also has exclusive distribution agreements with Euroglas,
B.V. for certain of that manufacturer's products in Hong Kong and the PRC and
Thermo Environmental Instruments, Inc. for certain of that manufacturer's
products in Hong Kong.
 
     Laboratory instruments, analyzers and test kits are used to analyze the
chemical content and other properties of water and, in conjunction with these
products, the Company distributes analytical re-agents and chemicals to support
testing systems of laboratory and portable instruments, process analyzers and
portable test kits.
 
     Laboratory and portable instruments consist of analytical instruments
including but not limited to the following: spectrophometers, colorimeters,
turbidimeters, ion selective electrodes, chemical oxygen demand apparatus,
digestion apparatus, and precision re-agent dispensing devices which are used to
test and monitor impurities in water systems. See "Glossary."
 
     The Company also distributes continuous-reading process analyzers, process
turbidimeters, pH controllers and analyzer accessories. These products are used
to monitor and control drinking water quality to ensure that water treatment
procedures comply with regulatory standards. See "Glossary."
 
     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.
 
PRODUCTS, SERVICES AND CUSTOMERS
 
     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 divided into two categories, one monitors
ambient air, and the second monitors pollution sources. Additionally, a variety
of water quality monitoring and analysis equipment are offered including
continuous reading process analyzers, process turbidimeters, pH controllers,
test kits for monitoring chemical content in water (i.e. chlorine, fluorides,
etc.). See "Glossary."
 
     Customers for the analytical instruments include government departments,
institutions and major laboratories. The Company also distributes products to
beverage producers and restaurants supplying; water quality test kits to
approximately twelve bottling plants, of a well known United States softdrink
producer, located in the PRC; field use water quality test kits to the People's
Liberation Army, water quality monitoring instruments to a well known United
States fast food franchisor's restaurants located in Hong Kong and China, and to
a well known United States beer producer's bottling plants located in the PRC's
city of Wuhan. Each of
 
                                       31
<PAGE>   36
 
said soda producer, restaurants and beer producer account 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, approximately ten water treatment
plants located in the PRC (including 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 27.1% and 41.7% of its sales from the
sale of Scientific Instruments during Fiscal 1995 and Six Months 1996,
respectively. The increased percentage of the Company's sales of Scientific
Instruments during Six Months 1996 in comparison to its overall sales during
Fiscal 1995, is the result of the Company focusing greater emphasis on these
products and reducing its emphasis on the sales of Other Products.
 
     PROCESS CONTROL AND ENGINEERING PRODUCTS.  The Company provides controls
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 harmonics 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 are government water supply bureaus, water
treatment projects, 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 39.4% and 34.3% of its sales from the
sale of Process Control and Engineering Products during Fiscal 1995 and Six
Months 1996, respectively.
 
     OTHER PRODUCTS.  The Company distributes general testing and
telecommunications testing equipment to industries, utilities, educational
institutions and telecommunications companies, and bio-medical instruments such
as cardiac catheterization systems and defibrillators to hospitals. See
"Glossary."
 
     The Company distributes indoor pay telephones, multi-channel digital and
analogue recorders and similar products. Customers for telecommunications
products include government departments, and telephone companies and customers
for bio-medical instruments are hospitals such as Queen Mary Hospital in Hong
Kong and the Logistic Bureau of China People's Liberation Army Hospital in
China. See "Glossary."
 
     The Company derived approximately 26.7% and 17.3% of its sales from the
sale of these Other Products during Fiscal 1995 and Six Months 1996,
respectively. The decreased percentage of the Company's sales of Other Products
during Six Months 1996 in comparison to its overall sales during Fiscal 1995, is
the result of the Company focusing greater emphasis on the sales of Scientific
Instruments and reducing its emphasis on the sales of Other Products.
 
     SPECIAL PROJECTS AND TECHNICAL SUPPORT.  In conjunction with the
distribution of computer hardware and software. The Company provides computer
programming to government agencies, industrial plants and beverage producers.
 
     The Company's technical support staff provides customers with maintenance
and installation assistance and assist sales personnel in giving technical
advice to and performing product demonstrations for customers.
 
     The Company derived approximately 6.8% and 6.7% of its sales from Special
Projects and Technical Support Operations during Fiscal 1995 and Six Months
1996, respectively.
 
     CUSTOMERS.  At the end of Fiscal 1995 and Six Months 1996, the Company had
approximately 400 regular customers, including sub-distributors, located in Hong
Kong, PRC and Macau. During Fiscal 1995 and Six Months 1996, 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.
 
                                       32
<PAGE>   37
 
     OTHER ACTIVITIES.  The Company in the past has established subsidiaries to
distribute products not directly related to its principal product lines
discussed above. During Six Months 1996, the Company streamlined its operations
and focused its efforts on its current product lines by disposing of three of
its subsidiaries, Euro Electron, Action and Armtison. Euro Electron had been
established to distribute telecommunication products. However, manufacturers of
these products distribute their products directly to end users, without
intermediary distributors, and technical expertise in this product line was also
found to be a necessity. As a result, Euro Electron's activities never past a
start-up stage. Action distributed industrial computers. During Fiscal 1994,
Action lost its principal source of this product line when Action's principal
supplier sold its industrial computer production line to another supplier.
Additionally, another major manufacturer of industrial computers established its
own distribution office in Hong Kong to distribute its products in Hong Kong and
the PRC. Armtison was principally a holding company for Euro Electron and
Action. Additionally, the Company has from time to time invested in real estate
and currently holds realty in Hong Kong which it intends to sell. In the future,
the Company may establish subsidiaries or divisions to distribute products that
are unrelated to its current product lines and it may make future investments in
real estate.
 
EXPANSION
 
     Management also intends to pursue expansion of the Company's operations by
adding new regional sales offices in the PRC with the proceeds of the Public
Offering and by internal growth.
 
     The Company has allocated approximately $300,000 from the net proceeds of
the Public Offering to establish three new additional regional sales offices in
the PRC which are intended to be located in the PRC's cities of Chongqing, Xian
and Shenyang which are intended to be opened within twelve months following the
completion of the Public Offering. The Company presently anticipates that the
additional regional sales offices will be leased from third parties not
affiliated with the Company.
 
REGULATORY ENVIRONMENT
 
     Environmental concerns have become increasingly important, at all levels of
PRC government paralleling PRC's economic growth. Environmental protection laws
and strict regulations have been enacted buttressed by increased budget
allocations for environmental purposes. PRC's system of environmental protection
is led by the National Environmental Protection Agency (NEPA) and consists of
Environment Protection Bureaus in each city and county. Under bureau management,
there are two environment monitoring systems: one system consists of over 2,000
monitoring stations to collect and analyze the environmental data of each city
and county; another system consists of over 1,000 stations to monitor specific
industrial districts or factories which have been identified as major pollution
sources for their noncompliance with environmental regulations. NEPA has
recently identified 3,000 enterprises as new major pollution sources. The number
of monitoring stations for industrial firms is anticipated to increase to 9,000
in the next five years, according to the governmental plans. The Company has
supplied water and air quality monitoring and analytic instruments to these
monitoring stations for several years.
 
COMPETITION
 
     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 products distributed by the Company sought reduced prices. The
products distributed by the Company were foreign manufactured and higher priced
than Chinese manufactured products. As a result, the Company reduced its sales
prices and, therefore, profits margins to remain competitive. During Fiscal
1993, Fiscal 1994, Fiscal 1995 and Six Months 1996, the Company's profit margins
were approximately 24.7%, 21.8%, 22.2% and 22.6%, respectively. The Company
believes that it competes with the PRC manufacturers on the basis of quality and
technology, with the Company offering products of foreign manufacturers which
are of higher quality and use more advanced technology. The Company believes
that it competes with the foreign manufacturers and the
 
                                       33
<PAGE>   38
 
distributors of their products on the basis of the Company's more extensive
distribution network and an established reputation. The Company recently
disposed of one of its subsidiaries as a result of direct competition from a
manufacturer which established its own distribution network in the PRC to
distribute the type of products distributed by the subsidiary.
 
     As the Company plans to assemble products of the kind that it presently
distributes, the Company may directly compete with certain of its vendors.
 
PROPOSED PRODUCT ASSEMBLY OPERATIONS
 
     The Company has recently reached a preliminary agreement with STIP pursuant
to which STIP will provide space and technical expertise to enable the Company
to assemble in the PRC certain products of the kind that the Company currently
distributes, including certain of the water related testing, monitoring and
treatment equipment. It is contemplated that the Company will import components,
assemble the components into finished product and then distribute the products
through the Company's 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
will increase net income by assembling certain of the products that it
distributes rather than purchasing the finished product from suppliers which the
Company believes will result in higher profit margins on such products. STIP has
a twenty year history of manufacturing temperature sensor and measuring
instruments and controllers, has over 150 employees and has a 16,000 square
meter facility of which the Company intends to lease a portion of.
 
     It is anticipated that STIP will provide the Company with leased space for
the Company to assemble, warehouse and distribute its products from and provide
the Company with technical and non-technical employees. It is anticipated that
the Company's sole obligation to STIP will be to make lease payments for the
portion of the facility it uses and pay the salaries of the STIP employees it
uses.
 
     The preliminary agreement with STIP is subject to negotiation of a
definitive agreement, of which no assurance can be given, and the Company
securing adequate financing. Any such financing will be used for, among other
purposes, leasehold improvements to conform the existing facility to the
Company's specifications, equipment purchases, lease payments, purchases of
inventory and salaries. As the Company has not previously engaged in product
assembly operations, it requires the assistance of STIP or a similar entity to
engage in such operations. See "Use of Proceeds."
 
SOURCES OF SUPPLY
 
     The Company distributes products manufactured by a number of vendors,
including Wallace, Hach, Hioki and Finnigan which are the Company's largest
suppliers, with purchases from them accounting for approximately 11%, 7%, 7% and
4%, respectively, of the Company's sales during Fiscal 1995 and 9%, 10%, 10%,
and 23%, respectively, of the Company's sales during Six Months 1996. The
Company has exclusivity agreements with many of its suppliers for certain
products for specified geographic areas, including the two of the four
previously mentioned suppliers (Wallace and Finnigan). Those agreements do not
encompass all products distributed by the Company and all of the market areas
serviced 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 sole representative in the PRC, Hong Kong and Macau 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 Macau. 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 March 1997,
unless renewed. 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.
 
                                       34
<PAGE>   39
 
SALES AND MARKETING
 
     The Company distributes products through its principal office located in
Hong Kong and its regional PRC offices located in Beijing, Shanghai and
Guangzhou by using its 26 person marketing and sales force which are paid a
salary plus a sales commission. The Company's offices also coordinate the sales
efforts of approximately nine other companies as sub-distributors located in the
PRC which are paid a commission on sales effected by them. The Company's
sub-distributors are engaged on a non-exclusive basis, distributing the products
of other distributors, with each of the nine sub-distributors accounting for
less than two percent of the Company's sales during Fiscal 1995 and Six Months
1996.
 
FACILITIES
 
     The Company maintains an executive office at 18/F Gee Chang Hong Centre, 65
Wong Chuk Hang Road, Hong Kong occupying approximately 12,800 square feet of
office and warehouse storage space under a lease expiring in October 1997
requiring monthly rental payments of approximately $16,200. The warehouse
storage space is used to hold products for distribution to its customers via
common carriers.
 
     In August 1995, the Company purchased a building, 1502 AT Tower, 180
Electric Road, North Point, Hong Kong, having approximately 1,200 square feet,
by a bank mortgage in the principal sum of approximately HK$3,688,000 at June
30, 1996, bearing interest at Hong Kong's prime rate plus 1.75%, repayable in
eighty four monthly installments commencing in November 1995. The Company
intends to relocate part of its executive and headquarters office to this newly
purchased site.
 
     The Company also maintains regional sales offices within the PRC in the
cities of Beijing, Shanghai and Guangzhou. The Beijing and Shanghai sales
offices are owned by the Company. The Company's Beijing sales office is situated
on premises purchased in November 1994, with an outstanding principal amount due
upon a bank mortgage of approximately HK$1,104,000 at June 30, 1996, bearing
interest at the United States prime rate plus 2.5% repayable in eighty four
monthly installments which commenced in December 1994. The Company's Shanghai
sales office is situated on premises purchased in August 1995, with an
outstanding principal amount due upon a bank mortgage of approximately
HK$768,000 at June 30, 1996 bearing interest at thirteen percent, subject to
fluctuation, repayable in one hundred twenty monthly installments which
commenced in October 1995. The Guangzhou sales office is a leased facility
pursuant to a lease expiring in April 1997 requiring monthly rental payments of
approximately $1,870.
 
     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.
 
EMPLOYEES
 
     The Company has approximately 52 full-time employees, including 26
marketing and sales persons, 16 administrative persons and 10 technical support
persons.
 
     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.
 
LEGAL PROCEEDINGS
 
     The Company is not a party to any material legal proceedings.
 
                                       35
<PAGE>   40
 
                                   MANAGEMENT
 
     The directors and executive officers of Euro Tech Holdings Company Limited
are as follows:
 
<TABLE>
<CAPTION>
                NAME                  AGE                           POSITIONS
- ------------------------------------  ---   ---------------------------------------------------------
<S>                                   <C>   <C>
T.C. Leung..........................   53   Chairman of the Board of Directors and Chief Executive
                                            Officer
Jerry Wong..........................   37   Director and Chief Financial Officer
Nancy Wong..........................   47   Director
C.P. Kwan...........................   37   Director
Alex Sham...........................   33   Director
</TABLE>
 
     Set forth below is a brief background of the executive officers and
directors based upon information supplied by them:
 
     T.C. Leung has been Chief Executive Officer and Chairman of the Board of
Directors of Far East and the Company since their inception. Before establishing
Far East, Mr. Leung was an engineer for English Electric in England, from 1965
to 1968, and Lockheed Aircraft, from 1968 to 1970 in Hong Kong. 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 Master's degree in Business Administration from the
University of East Asia, Macau in 1986 and is a Chartered Engineer, i.e. 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 having joined Far East in 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 Chartered Association of Certified Accountants in the United Kingdom and a
Certified Public Accountant in Hong Kong.
 
     Nancy Wong joined Far East in 1971 becoming a Director and its Personnel
Manager in 1994. Ms. Wong is also Far East's Chief Representative in China. Ms.
Wong has been a Director of the Company since its inception. 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's degree in Business
Administration from the University of East Asia, Macau 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.
 
     Alex 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 has been a Director of the
Company since its inception. Mr. Sham received a degree 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.
 
     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 will be elected annually by the Board of
Directors and serve at the discretion of the Board of Directors.
 
EXECUTIVE COMPENSATION
 
     The following table sets forth certain summary information with respect to
the compensation paid by Far East for services rendered in all capacities to Far
East during Fiscal 1995 and Fiscal 1994 by Far East's
 
                                       36
<PAGE>   41
 
Chairman of the Board and Chief Executive Officer. Neither the Company nor Far
East having any executive officer whose total annual salary and bonus exceeded
$100,000 for either of said fiscal years:
 
                           SUMMARY COMPENSATION TABLE
 
<TABLE>
<CAPTION>
                                                FISCAL YEAR
                        NAME AND                   ENDED
                   PRINCIPAL POSITION            DECEMBER       SALARY($)     BONUS($)
          ------------------------------------  -----------     ---------     --------
          <S>                                   <C>             <C>           <C>
          T.C Leung, Chairman of the Board of
          Directors and Chief Executive
          Officer.............................      1995          15,584       15,605
                                                    1994          15,584       41,162
</TABLE>
 
EMPLOYMENT AGREEMENT
 
     The Company and Far East have entered into a five year personal services
agreement, with Shereman Enterprises Ltd., a management company, pursuant to
which Mr. Leung will continue to serve as the Chairman of the Board of Directors
and Chief Executive Officer of Far East and the Company. The agreement requires
that Mr. Leung devote substantially all of his business time to the affairs of
the Company and Far East. The agreement provides for the payment of $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 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.
 
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 special 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.
 
STOCK OPTION PLAN
 
     In November 1996, the Board of Directors adopted the Company's 1996 Stock
Option Plan (the "1996 Stock Option Plan"). The 1996 Stock Option Plan provides
for the grant of options to employees, officers, directors and consultants of
the Company. The total number of shares of Common Stock for which options may be
granted under the 1996 Stock Option Plan is 150,000 shares.
 
     The 1996 Stock Option Plan is to be administered by the Board of Directors
or a committee of the Board of Directors which will determine the terms of
options granted, including the exercise price, the number of shares subject to
the option and the terms and conditions of exercise.
 
     The exercise price of all stock options granted under the 1996 Stock Option
Plan must be at least $5.50. The term of each option granted pursuant to the
1996 Stock Option Plan may be established by the Board of Directors or a
committee of the Board of Directors, in its sole discretion; provided, however,
that the maximum term of each such Option granted pursuant to the 1996 Stock
Option Plan is six years. Options shall become exercisable at such times and in
such installments as the Board of Directors or a committee of the Board of
Directors shall provide in the terms of each individual option, provided,
however, that as to 50,000 and 100,000 Options, by their terms automatically
terminate unless the Company achieves net income levels of not less than
$990,000 and $1,800,000, respectively, during the Company's fiscal years to end
December 31, 1997 and 1998.
 
MANAGEMENT OPTIONS
 
     The Company has authorized the issuance of options to purchase up to an
aggregate of 1,400,000 shares of Common Stock (the "Management Options") to its
officers, directors and employees in such numbers and
 
                                       37
<PAGE>   42
 
to such persons as the Company's Chairman of the Board and Chief Executive
Officer may direct. Any such Management Options will not be exercisable until
one year after the Effective Date and may have a term of up to ten years. The
exercise price of the Management Options will be $4.00 per share for 400,000 of
such options and $5.50 per share for the remaining 1,000,000 options.
 
     The exercise price and the number of shares of Common Stock 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 Common Stock and securities convertible into or exchangeable for Common Stock
excluding certain issuances of shares of the Company's Common Stock. 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 Common Stock,
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 shares of Common Stock 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, 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 shares of Common
Stock 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 to be
granted: (i) the aggregate amounts of shares of Common Stock subject to
Management Options to be granted prior to the Effective Date; and (ii) the per
share exercise price for the Management Options to be granted for these
individuals. No other options to these individuals have been issued or will be
issued and outstanding on the Effective Date.
 
<TABLE>
<CAPTION>
                                                                SHARES SUBJECT     PER SHARE
            NAMES OF EXECUTIVE OFFICERS AND DIRECTORS             TO OPTIONS     EXERCISE PRICE
    ----------------------------------------------------------  --------------   --------------
    <S>                                                         <C>              <C>
    T.C. Leung................................................       750,000              $5.50
                                                                     350,000              $4.00
 
    Alex Sham.................................................        30,000              $5.50
                                                                      20,000              $4.00
 
    Jerry Wong................................................        25,000              $5.50
                                                                      15,000              $4.00
 
    Nancy Wong................................................        22,500              $5.50
                                                                       7,500              $4.00
 
    C.P. Kwan.................................................        22,500              $5.50
                                                                       7,500              $4.00
 
    All Executive Officers and Directors
      as a Group (5 persons)..................................     1,250,000      $4.00 - $5.50(1)
</TABLE>
 
- ---------------
(1) Price Range.
 
     Other officers and/or employees of the Company have been or will be granted
Management Options, prior to the Effective Date, to purchase an aggregate of
150,000 Management Options, all of which will be exercisable at $5.50 per share.
 
CONSULTANT'S OPTIONS
 
     On or prior to the Effective Date, the Company will grant options to
purchase up to 100,000 shares of its Common Stock to Sidford International Ltd.
("Sidford"), a consultant to Far East. Said options will be
 
                                       38
<PAGE>   43
 
exercisable at $5.50 per share and contain the same terms and conditions as the
Warrants. See "Certain Transactions."
 
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 services. 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, 1993, 1994 and 1995, and
for Six Months 1995 and 1996, the Company made total pension contributions of
approximately HK$587,000, HK$621,000, HK$864,000, HK$455,000 (Unaudited) and
HK$261,000 (Unaudited) respectively.
 
                                       39
<PAGE>   44
 
                             PRINCIPAL SHAREHOLDERS
 
     The following table set forth, as of the date of this Prospectus, after
giving effect to the Acquisition as if it had occurred on that date, certain
information concerning beneficial ownership of shares of Common Stock with
respect to (i) each person known to the Company to own 5% or more of the
outstanding shares of Common Stock, (ii) each executive officer and director of
the Company, and (iii) all officers and directors of the Company as a group:
 
<TABLE>
<CAPTION>
                                                                     APPROXIMATE
                                                                      PERCENTAGE
                                                                      OF COMMON        APPROXIMATE
                                                        AMOUNT AND   STOCK OWNED      PERCENTAGE OF
                                                        NATURE OF       BEFORE      COMMON STOCK OWNED
                                                        BENEFICIAL      PUBLIC         AFTER PUBLIC
                                                        OWNERSHIP      OFFERING        OFFERING(4)
                                                        ----------   ------------   ------------------
<S>                                                     <C>          <C>            <C>
T.C Leung (1)(2)......................................  1,400,000         97%               68%
Jerry Wong (1)(3).....................................          0           *                 *
Nancy Wong (1)(3).....................................          0           *                 *
C.P. Kwan (1)(3)......................................          0           *                 *
Alex Sham (1)(3)......................................          0           *                 *
Pearl Venture Ltd. (1)(2).............................  1,400,000         97%               68%
Regent Earning Ltd. (1)...............................  1,027,600         71%               50%
All Executive Officers and Directors of the Company as
  a group (5 persons) (2)(3)..........................  1,400,000         97%               68%
</TABLE>
 
- ---------------
 *  Denotes less than 1%.
 
(1) The address for each of Ms. Wong and Messrs. Leung, Wong, Kwan and Sham 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 Venture Ltd. ("Pearl") is Columbus
    Centre Building, Wichhams Cay, Road Town, Tortola, British Virgin Islands.
    The address for Regent Earning Ltd. ("Regent") is Chong Kin Commercial
    Building, 596 Nathan Road, Room 902, Mong Kok, Kowloon, Hong Kong.
 
(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 shares of the Company's Common Stock owned of record by Regent of
    which Pearl is the majority shareholder. See "Certain Transactions."
 
(3) Does not include such person's proportionate interest in shares of the
    Company's Common Stock held of record by Regent and/or Broadskill
    Investments, Inc. ("Broadskill"). See "Certain Transactions."
 
(4) Does not include options granted or which may be granted under the Company's
    1996 Stock Option Plan, the Management Options and the Consultant's Options.
    See "Management" and "Certain Transactions."
 
                                       40
<PAGE>   45
 
                              CERTAIN TRANSACTIONS
 
     The Company was incorporated under the laws of the British Virgin Islands
on September 30, 1996 and shortly thereafter sold 50,000 shares of its Common
Stock to Gusrae, Kaplan & Bruno, Esqs. and 100,000 shares of its Common Stock to
Sidford for aggregate cash consideration of $1,500 or $.01 per share. Gusrae,
Kaplan & Bruno is United States counsel to the Company and was granted the right
to purchase said shares in partial consideration of its services rendered to the
Company in connection with this Offering. Sidford has been and is a business
consultant to Far East which initially was paid HK$5,000 and granted the option
to purchase the foregoing 100,000 shares. In January 1997, Far East amended its
agreement with Sidford to provide cash compensation to Sidford of $5,000 per
month for twenty months. At that same time, the Company repurchased the 100,000
shares previously sold to Sidford for the sum of $1,000 and agreed to grant to
Sidford options to purchase up to 100,000 shares of the Company's Common Stock,
such options being exercisable at $5.50 per share. See "Management."
 
     The Company's activities to date have been limited to organizational
activities, seeking and securing financing including a private offering of its
securities and this Offering and negotiating the terms and conditions of its
acquisition of Far East. Far East was established in 1971 and has been in
continuous operation since that time. See "Management's Discussion and Analysis
of Financial Condition and Results of Operations."
 
     Pearl is a British Virgin Islands company which is a trust for the benefit
of T.C. Leung, the Company's Chairman of the Board and Chief Executive Officer.
Regent is a Hong Kong corporation.
 
     Simultaneously with the closing of this Offering, the Company will
consummate the Acquisition by exchanging 1,400,000 shares of the Company's
Common Stock for the 1,000,000 issued and outstanding shares of the Common Stock
of Far East at a ratio of 1.4 (one and four-tenths) shares of the Company's
Common Stock for each issued and outstanding share of Far East's Common Stock.
All discussions in this Prospectus relating to the number of issued and
outstanding shares of Common Stock give effect to the Acquisition.
 
     Pearl was one of the founding shareholders of Far East and during the years
1992 through 1994, Pearl and Regent accumulated 100% of the issued and
outstanding common stock of Far East (1,000,000 shares) for an aggregate
consideration of approximately HK$11,130,000, with Pearl and Regent being the
record owners of 266,000 and 734,000 shares of Far East's Common Stock,
respectively. Broadskill is a Hong Kong corporation which owns an approximate
44% equity interest in Regent which if converted into shares of the Company's
Common Stock would represent approximately 29% of the Company's Common Stock. No
executive officer or director of the Company is an officer or director of Pearl,
Regent or Broadskill. In addition to its direct record ownership of 372,400
shares of the Company's Common Stock, Pearl is also the beneficial owner of
approximately 527,069 shares of the Company's Common Stock through its equity
interest in Regent. Mr. Kwan, and each of Messrs. Wong, Sham and Ms. Wong,
Executive Officers and Directors of the Company and Far East have equity
interests in Regent and/or Broadskill which if converted into shares of the
Company's Common Stock would represent approximately 5%, less than 1%, less than
1% and less than 1% of the Company's Common Stock, respectively. See
"Management" and "Principal Shareholders."
 
     During Fiscal 1996, the Company transferred its equity interests in three
former subsidiaries, Armtison Limited (a wholly owned subsidiary), Action
Instruments (China) Ltd., (a 51% owned subsidiary) and Euro Electron (Far East)
Ltd. (a 80% owned subsidiary) to Regent and Pearl at book value (HK$10,000)
invested in these three subsidiaries.
 
     On November 11, 1996 the Company completed the sale of an aggregate of
1,000,000 Warrants (the "Private Warrants") to private investors for aggregate
gross proceeds of $150,000, or a price of $.15 per Warrant. The Underwriter
acted as the Company's placement agent in connection with the foregoing private
placement of the Company's Private Warrants and received an aggregate of $19,500
in commissions and non-accountable expenses. The terms and conditions of the
Private Warrants are identical to the Warrants offered hereby. In March 1997,
the Company repurchased 70,000 Private Warrants at their purchase price or an
aggregate amount of $10,500. See "Description of Securities" and "Concurrent
Registration of Securities."
 
                                       41
<PAGE>   46
 
     At the end of Six Months 1996, Far East had advanced approximately
HK$3,800,000 to Regent to finance a significant government project that had been
undertaken by Regent's subsidiary and is nearing completion. Regent is charged
eighteen percent interest per year on this advance. Regent has repaid
approximately HK$2,200,000 to Far East subsequent to June 30, 1996.
 
     Mr. Leung may be deemed to be a "promoter" of the Company as such term is
defined by the rules promulgated by the Commission under the Securities Act. As
so defined a promoter is any person who (i) acting alone or in conjunction with
others, took the initiative in founding and organizing an issuer's business or
enterprise, or (ii) in connection with founding and organizing the business or
enterprise of an issuer, receives in consideration for services and/or property,
ten percent or more or either any class of the issuer's securities or the
proceeds therefrom. Mr. Leung formulated the concepts of a public offering to
raise capital for the Company and Far East and establishing a company in the
British Virgin Islands for that purpose. Additionally, upon completion of this
Offering and the Acquisition, Mr. Leung will beneficially own approximately 68%
of the Company's issued and outstanding shares of Common Stock. See "Principal
Shareholders."
 
     All future transactions between the Company and its executive officers and
directors will be on terms no less favorable than could be obtained from
independent third parties and will be approved by a majority of the Company's
directors disinterested in such transactions.
 
     In addition, no loans or advances will be made in the future to the
Company's officers, directors or 5% shareholders, or their affiliates, unless
such loans are for bona fide business purposes.
 
                                       42
<PAGE>   47
 
                           DESCRIPTION OF SECURITIES
 
COMMON STOCK
 
     The authorized capital of the Company is $200,000 comprised of 20,000,000
shares of Common Stock, $.01 par value per share, of which 2,050,000 shares will
be outstanding upon completion of the Public Offering (2,140,000 shares if the
Underwriter's Overallotment Option is exercised in full).
 
     Holders of Common Stock 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 Common Stock do not have cumulative voting rights in the
election of directors. All shares of Common Stock are equal to each other with
respect to liquidation and dividend rights. Holders of Common Stock 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 Common Stock are distributable among them according to their
respective share holdings. Holders of Common Stock have no preemptive rights to
purchase any additional, unissued shares of Common Stock. All of the outstanding
shares of Common Stock of the Company are, and the shares of Common Stock
offered hereby will be when issued against the consideration set forth in this
Prospectus, duly authorized, validly issued, fully paid and nonassessable.
 
     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.
 
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 the Warrant Agreement, which is included as an exhibit to
the Registration Statement of which this Prospectus is a part.
 
     Each Warrant entitles the holder to purchase one share of Common Stock at a
price of $5.50, for a period of five years commencing one year after the
Effective Date, provided however, that prior to the second year after the
Effective Date, the Warrants will be exercisable only if the Underwriter has
consented in writing to all of the Warrants being exercisable.
 
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
 
                                       43
<PAGE>   48
 
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 shares of Common
Stock issuable upon the exercise of such Warrants under an effective
registration statement. The Company will endeavor to maintain an effective
registration statement, including such current prospectus, so long as any of the
exercisable Warrants remain outstanding. While it is the Company's intention to
comply with this intention, there can be no assurance that it will be able to do
so.
 
     The exercise price and any required transfer taxes will be 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 shares of Common Stock 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 Common Stock and securities convertible into or
exchangeable for Common Stock (below the lesser of the then exercise price of
the Warrants or the fair market value of the Company's Common Stock) excluding
issuances of shares of the Company's Common Stock prior to the commencement of
the Public Offering, the acquisition of Far East, any issuances of the Company's
securities in connection with the Public Offering and 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
$.05. In the event of any capital reorganization, certain reclassifications of
the Common Stock, 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 shares of Common Stock 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 shares of
Common Stock 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 shares of Common Stock
issuable upon exercise of the Warrants, the Company will not be required to
issue fractional shares of Common Stock upon exercise of the Warrants. In lieu
of fractional shares of Common Stock, 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 a share of Common Stock of the Company.
 
     Warrantholders do not have voting or any other rights of stockholders 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 Common Stock for 20 consecutive trading days shall exceed $8.50 the
Company may redeem the Warrants by paying holders $.10 per Warrant, provided
that notice of such redemption is mailed not later than 10 days after the end of
such period and prescribes a redemption date at least 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 shares of Common Stock issuable upon exercise of such Warrants
under an effective registration statement.
 
                                       44
<PAGE>   49
 
PRIVATE PLACEMENT WARRANTS
 
     Upon the completion of the Public Offering, the Private Warrants, which
were issued in typewritten format, will be automatically exchangeable for
Warrants in printed form. In the event the majority holders of the Private
Warrants and the shares of the Company's Common Stock underlying said Warrants
have not been sold in connection with the Public Offering, the Company has
agreed to use its best effort to file an additional registration statement for
such securities to permit their public resale. See "Concurrent Registration of
Securities."
 
TRANSFER AGENT AND WARRANT AGENT
 
     The Company has appointed American Stock Transfer & Trust Company as
transfer agent and registrar for the Common Stock and as Warrant Agent for the
Warrants.
 
     The Company's Warrant Agreement with the Warrant Agent contains provisions
permitting the Company and the Warrant Agent, without the consent of the
Warrantholders, to supplement or amend the Warrant Agreement in order to cure
any ambiguity or defect, or to make any other provisions in regard to matters or
questions arising thereunder that the Company and the Warrant Agent may deem
necessary or desirable and that does not adversely affect the interests of the
Warrantholders.
 
DIVIDEND POLICY
 
     The Company has not paid dividends to date. The payment of dividends, if
any, in the future is within the discretion of the Board of Directors. The
payment of dividends, if any, in the future will depend upon the Company's
earnings, capital requirements and financial conditions and other relevant
factors. The Company's Board of Directors does not presently intend to declare
any 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.
 
EXCHANGE CONTROLS AND OTHER LIMITATIONS AFFECTING SHAREHOLDERS
 
     There are no exchange control restrictions on payment of dividends on the
Company's Common Stock 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. Other jurisdictions
in which the Company conducts operations may have various exchange controls.
There are no material British Virgin Islands laws which impose foreign exchange
controls on the Company or that affect the payment of dividends, interest, or
other payments to nonresident holders of the Company's securities. British
Virgin Islands law and the Company's Memorandum and Articles of Association
impose no limitations on the right of nonresident or foreign owners to hold the
Company's securities or vote the Company's Common Stock.
 
                        SHARES ELIGIBLE FOR FUTURE SALE
 
     Upon consummation of the Public Offering, the Company will have 2,050,000
shares of Common Stock and 1,530,000 Warrants outstanding (2,140,000 shares and
1,620,000 Warrants, respectively, if the Underwriter's Overallotment Option is
exercised in full). All of the shares of Common Stock sold in the Public
Offering will be freely tradeable without restriction or further registration
under the Securities Act, except for any shares purchased by an "affiliate" of
the Company which will be subject to certain limitations of Rule 144 adopted
under the Securities Act.
 
   
     All outstanding shares of Common Stock and 930,000 Warrants are restricted
securities and will be subject to the resale limitations provided for in Rule
144. Under Rule 144, as currently in effect, subject to the satisfaction of
certain other conditions, a person, including an affiliate of a company, who has
owned restricted securities beneficially for at least two years (one year
effective on or about April 29, 1997), is entitled to sell, within any three
month period, a number of the securities that does not exceed the greater of 1%
of the total number of outstanding securities of the same class or, if the
security is quoted on an exchange, the average weekly trading volume during the
four calendar weeks preceding the sale. A nonaffiliate who has not been an
affiliate of the Company for at least the three months immediately preceding the
sale and who has beneficially
    
 
                                       45
<PAGE>   50
 
owned the Company's securities for at least three years is entitled to sell such
shares under Rule 144 without regard to any of the limitations described above.
In meeting the two/one and three year holding periods described above, a holder
who has purchased shares can include the holding periods of a prior owner who
was not an affiliate of the Company.
 
     All of the Company's securityholders, on the date hereof, have agreed not
to publicly sell, for a period of twenty-four months from the date of this
Prospectus, any securities of the Company owned by them without the prior
written consent of the Underwriter. Additionally, the Company and the
Underwriter have agreed that they will not permit the Private Warrantholders to
sell, assign, pledge or otherwise dispose of any of their Private Warrants for a
period of one year from the Effective Date.
 
     Prior to the Public Offering, there has been no market for any securities
of the Company. The effect, if any, of public sales of the restricted shares of
Common Stock or the availability of such shares for future sale at prevailing
market prices cannot be predicted. Nevertheless, the possibility that
substantial amounts of restricted shares may be resold in the public market may
adversely affect prevailing market prices for the Common Stock and the Warrants,
if any such market should develop.
 
                                       46
<PAGE>   51
 
                                  UNDERWRITING
 
     Subject to the terms and conditions contained in the underwriting agreement
between the Company and the Underwriter (a copy of which agreement is filed as
an exhibit to the Registration Statement of which this Prospectus forms a part),
the Company has agreed to sell to the Underwriter 600,000 shares of Common Stock
and 600,000 Warrants. All 600,000 shares and 600,000 Warrants offered must be
purchased by the Underwriter if any are purchased. The shares and Warrants are
being offered by the Underwriter subject to prior sale, when, as and if
delivered to and accepted by the Underwriter and subject to approval of certain
legal matters by counsel and to certain other conditions.
 
   
     The Underwriter has advised the Company that it proposes to offer the
shares of Common Stock and the Warrants to the public at the offering prices set
forth on the cover page of this Prospectus and that the Underwriter may allow to
certain dealers who are members in good standing with the NASD concessions, not
in excess of $.15 per share of Common Stock. After the initial public offering,
the public offering price and concessions may be changed by the Underwriter.
    
 
     While certain of the officers of the Underwriter have significant
experience in corporate finance and the underwriting of securities, the
Underwriter has previously underwritten only one public offering. No assurance
can be given that the Underwriter's limited public offering experience will not
affect the Company's Offering of the Common Stock and Warrants and subsequent
development of a trading market, if any.
 
     The Company has granted the Underwriter an option, exercisable for 45 days
from the date of this Prospectus, to purchase up to 90,000 shares and 90,000
Warrants from it, at the public offering price less the underwriting discounts
set forth on the cover page of this Prospectus. The Underwriters may exercise
this option solely to cover overallotments in the sale of the shares of Common
Stock and Warrants offered hereby.
 
     The Company has agreed to pay the Underwriter a non-accountable expense
allowance of 3% of the gross proceeds of the shares of Common Stock and Warrants
sold in this Offering.
 
     The underwriting agreement provides for reciprocal indemnification between
the Company and the Underwriter against certain civil liabilities, including
liabilities under the Securities Act.
 
     The Company has agreed to sell to the Underwriter or its designees, at a
price of $10, the Underwriter's Warrants, which entitle the Underwriter to
purchase up to 60,000 shares of Common Stock of the Company and 60,000 Warrants
to purchase up to an additional 60,000 shares of Common Stock of the Company,
respectively. The Underwriter's Warrants will be exercisable at a price of $8.25
per share and $.2475 per Warrant, respectively, for a period of four years
commencing one year from the date of this Prospectus, and they will not be
transferable except to the Underwriter and selected dealers and officers and
partners thereof. Any profit realized upon any resale of the Underwriter's
Warrants or upon any sale of the shares of Common Stock or Warrants underlying
same may be deemed to be additional underwriter's compensation. The Company has
registered (or file a post-effective amendment with respect to any registration
statement registering), for a period of five years from the effective date of
this Offering, the Underwriter's Warrants and the underlying securities under
the Securities Act at its expense on one occasion, and at the expense of the
holders thereof on another occasion, upon the request of a majority of the
holders thereof. The Company has also agreed to certain "piggy-back"
registration rights for the holders of the Underwriter's Warrants and the
underlying securities. Such piggy-back registration rights will expire seven
years from the Effective Date.
 
     The Company has agreed that for a period of not less than three years, the
Underwriter will have the right to designate a person to be a non-voting advisor
to the Company's Board of Directors who will receive the same compensation as a
member of the Board of Directors and who will be indemnified by the Company
against any claims arising out of his participation at meetings of the Board of
Directors. Alternatively, the Underwriter has the right, during such three year
period, to designate one person to be elected to the Company's Board of
Directors. The Company has agreed to use its best effort to obtain the election
of the Underwriter's designee and, if so elected, such person shall be entitled
to receive the same compensation, expense reimbursement and other benefits as
any other non-employee Director of the Company, if any. The
 
                                       47
<PAGE>   52
 
identity of such person has not been determined as of the date hereof, and it is
not expected that such right will be exercised in the immediate future.
 
     The Underwriter has informed the Company that it does not expect sales to
be made to discretionary accounts to exceed 1% of the shares of Common Stock and
Warrants offered hereby.
 
     The Offering is subject to the agreement by all present stockholders of the
Company that they will not sell any shares of Common Stock to the public for a
period of twenty-four months.
 
     The Company has agreed to enter into an agreement with the Underwriter
retaining it as a financial consultant for a period of three years from the date
hereof, pursuant to which it will receive fees aggregating $108,000 which fees
will be payable in full at closing.
 
     The Underwriting Agreement also provides that the Company, its current or
future subsidiaries, if any, and its principal stockholders, or their respective
affiliates, will for a period of three years from the Effective Date provide the
Underwriter with a right of first refusal with respect to any public or private
offering of securities to raise capital. The Underwriter must agree to undertake
any such financing on the same or better terms as any other financing proposal.
 
   
     The National Association of Securities Dealers, Inc. (the "NASD") has
advised the Underwriter that it is not issuing any opinion at this time that it
has no objection to any underwriting compensation to be received or any other
terms and arrangements of an offering by the Underwriter or any NASD member in
connection with a sale by the Selling Securityholders. Therefore, no NASD member
would be permitted to participate in a public offering of the Selling
Securityholder Warrants or the shares underlying such Warrants without filing
and receiving an opinion from the NASD that it has no objection to the
compensation to be received and any other terms and arrangements of an offering.
(Member firms of the NASD are referred to Notice To Members 88-101 for
guidance.) As a result, the Selling Securityholders may be subject to delays or
limitations which will affect the liquidity of their securities.
    
 
     The Underwriter has given a representation to the NASD that in the event
the Underwriter enters into any arrangement or intends to sell any of such
Warrants or shares underlying such Warrants to be offered by Selling
Securityholders in an offering of securities, that the Underwriter will make a
filing with the NASD, disclosing in detail the proposed terms and arrangements
of any contemplated offer, sale, or purchase of Selling Securityholder
securities in a timely manner so as to permit the NASD ample time to review and
render an opinion as to the reasonableness of the terms and arrangements of the
offering, prior to commencement of the distribution, including any additional
disclosure the NASD may deem necessary. There are no assurances that the NASD
will issue an opinion that it has no objections to the underwriting compensation
to be received or to any other terms and arrangement of an offering. Therefore,
absent such an opinion, no NASD member, including the Underwriter, would be
permitted to participate in a public offering of the Selling Securityholder
Warrants or the shares underlying such Warrants.
 
                     CONCURRENT REGISTRATION OF SECURITIES
 
     Concurrently with this Offering, 930,000 Warrants and 930,000 shares of the
Company's Common Stock underlying said Warrants have been registered under the
Securities Act for immediate resale. None of the holders of such securities or
their affiliates has ever held any position or office with the Company or had
any other material relationship with the Company. The holders of such securities
have agreed not to sell any of the registerable securities for a period of
twenty-four months from the Effective Date without the prior written consent of
the Underwriter. Additionally, the Company and the Underwriter have agreed that
they will not permit the foregoing securityholders to sell, assign, pledge or
otherwise dispose of any of the foregoing Warrants for a period of one year from
the Effective Date.
 
                                 LEGAL MATTERS
 
     The validity of the Securities being offered hereby and certain legal
matters in connection with this Offering with respect to British Virgin Islands
law will be passed upon for the Company by Smith-Hughes,
 
                                       48
<PAGE>   53
 
Raworth & McKenzie, British Virgin Islands counsel to the Company. Certain legal
matters in connection with this Offering with respect to United States law will
be passed upon for the Company by Gusrae, Kaplan & Bruno, New York, New York, as
United States counsel to the Company. Gusrae, Kaplan & Bruno owns 50,000 shares
of the Company's Common Stock. Hastings & Co. has advised the Company on certain
legal matters in connection with this Offering with respect to the laws of Hong
Kong. Jingtian Associates has advised the Company on certain legal matters with
respect to the laws of the PRC. Certain legal matters in connection with this
Offering will be passed upon for the Representative by Gersten, Savage,
Kaplowitz, Fredericks & Curtin LLP, New York, New York.
 
                                    EXPERTS
 
     The Financial Statements of the Company, included in this Prospectus have
been audited by Arthur, Andersen & Co., Hong Kong, independent public
accountants, as indicated in their reports with respect thereto, and are
included herein in reliance upon the authority of said firm as expert in giving
said reports.
 
                        ENFORCEMENT OF CIVIL LIABILITIES
 
     The Company is a British Virgin Islands holding corporation. The Company
has appointed CT Corporation System, 1633 Broadway, New York, New York 10019 as
its agent upon whom process may be served in any action brought against it under
the securities laws of the United States. However, it may be difficult for
investors to enforce outside the United States judgements against the Company
obtained in the United States in any such actions, including actions predicated
upon the civil liability provisions of the United States federal securities
laws. In addition, all of the Company's officers and directors reside outside
the United States and all of the assets of these persons and of the Company are
or may be located outside of the United States. As a result, it may be difficult
for investors to effect service of process within the United States upon such
persons. Additionally, Hong Kong courts will not directly enforce against the
Company or such persons judgments obtained in United States courts. There is
substantial doubt as to the enforceability against the Company or any of its
officers and directors located outside the United States in original actions for
enforcement of judgements of United States courts.
 
     The Company has been advised by Hastings & Co., its Hong Kong counsel, and
Smith-Hughes, Raworth & McKenzie, its British Virgin Islands counsel, that no
treaty exists between Hong Kong or the British Virgin Islands and the United
States providing for the reciprocal enforcement of foreign judgements. However,
the courts of Hong Kong and the British Virgin Islands are generally prepared to
accept a foreign judgment as evidence of a debt due. An action may then be
commenced in Hong Kong or the British Virgin Islands for recovery of this debt.
A Hong Kong or British Virgin Islands court will only accept a foreign judgement
as evidence of a debt due if: (i) the judgement is for a liquidated amount in a
civil matter; (ii) the judgment is final and conclusive and has not been stayed
or satisfied in full; (iii) the judgment is not directly or indirectly for the
payment of foreign taxes, penalties, fines or changes of a like nature (in this
regard, a Hong Kong or British Virgin Islands court is unlikely to accept a
judgement for an amount obtained by doubling, trebling or otherwise multiplying
a sum assessed as compensation for the loss or damage sustained by the person in
whose favor the judgement was given); (iv) the judgment was not obtained by
actual or constructive fraud or duress; (v) the foreign court has taken
jurisdiction on grounds that are recognized by the common law rules as to
conflict of laws in Hong Kong or the British Virgin Islands; (vi) the
proceedings in which the judgment was obtained were not contrary to natural
justice (i.e., the concept of fair adjudication); (vii) the proceedings in which
the judgment was obtained, the judgment itself and the enforcement of the
judgment are not contrary to the public policy of Hong Kong or the British
Virgin Islands; (viii) the person against whom the judgment is given is subject
to the jurisdiction of the Hong Kong or the British Virgin Islands court; and
(ix) the judgment is not on a claim for contribution in respect of damages
awarded by a judgement which does not satisfy the foregoing. Enforcement of a
foreign judgment which has been registered in a Hong Kong court or a judgment
obtained in Hong Kong can be enforced by one or more of the following manners:
(i) a Hong Kong court's bailiffs being sent to seize valuable chattels from the
judgment debtor's premises and thereafter auction the same in satisfaction of
the judgment debt; (ii) by a charge being registered against any real property
belonging
 
                                       49
<PAGE>   54
 
to the judgment debtor which charge must necessarily be redeemed upon sale or
upon the judgment creditor exercising a right of sale attached thereto; (iii)
oral examination of the judgment debtor or its director(s), to reveal in open
court, assets belonging to him/her or the Company; (iv) by debtors of the
judgment debtor being required to pay over debts due to the judgment debtor; and
(v) bankruptcy or "winding-up" proceedings. Enforcement of a foreign judgement
in Hong Kong or the British Virgin Islands may also be limited or affected by
applicable bankruptcy, insolvency, liquidation, arrangement, moratorium or
similar laws relating to or affecting creditors' rights generally and will be
subject to a statutory limitation of time within which proceedings may be
brought.
 
     A substantial portion of the Company's assets will be situated in the PRC.
As the PRC does not have treaties providing for the reciprocal recognition and
enforcement of judgments of courts within the United States, actions brought by
regulatory authorities, such as the Commission, and other actions, which result
in foreign court judgments, could (assuming such actions are not required by PRC
law to be arbitrated) only be enforced in the PRC if such judgments or rulings
do not violate the basic principles of the law of the PRC or the sovereignty,
security and public interest of the society of the PRC, as determined by a
people's court of the PRC which has jurisdiction for recognition and enforcement
of judgments. The Company has been advised by its PRC counsel, Jingtian
Associates, that there is substantial doubt as to the enforceability in the PRC
of any actions to enforce judgments of 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.
 
                             ADDITIONAL INFORMATION
 
     The Company has filed with the Commission a Registration Statement on Form
F-1 (the "Registration Statement") under the Securities Act with respect to the
shares of Common Stock and Warrants offered hereby. This Prospectus, which
constitutes a part of the Registration Statement, does not contain all of the
information set forth in the Registration Statement, certain items of which are
contained in the exhibits and schedules thereto as permitted by the rules and
regulations of the Commission. Statements made in this Prospectus as to the
contents of any contract, agreement or other document referred to herein are not
necessarily complete. With respect to each such contract, agreement or other
document filed as an exhibit to the Registration Statement, reference is made to
the exhibit for a more complete description of the matter involved, and each
such statement shall be deemed qualified in its entirety by such reference. The
Registration Statement, including the exhibits and schedules thereto, may be
inspected without charge at the principal office of the Commission, 450 Fifth
Street, N.W., Washington, D.C. 20549 or at the Regional Offices of the
Commission located at Northwestern Atrium Center, 500 West Madison Street, Suite
1400, Chicago, Illinois 60661 and 7 World Trade Center, Suite 1300, New York,
New York 10048. Copies of such material may be obtained by mail from the Public
Reference Section of the Commission at 450 Fifth Street, N.W., Washington, D.C.
20549 at prescribed rates. The Commission maintains a website that contains
reports, proxies and information statements and other information regarding
issuers that file electronically with the Commission. The Commission's website
is located at http://www.sec.gov.
 
                                       50
<PAGE>   55
 
                         INDEX TO FINANCIAL INFORMATION
 
<TABLE>
<CAPTION>
                                                                                  PAGE
                                                                                  -----
      <S>                                                                         <C>
      FINANCIAL STATEMENTS OF
        EURO TECH (FAR EAST) LIMITED
           Report of Independent Public Accountants...........................    F-2
           Statements of Income for the years ended December 31, 1993, 1994
            and 1995 (Audited), and for the six months ended June 30, 1995 and
            1996 (Unaudited)..................................................    F-3
           Balance Sheets as of December 31, 1994 and 1995 (Audited), and June
            30, 1996 (Unaudited)..............................................    F-4
           Statements of Cash Flows for the years ended December 31, 1993,
            1994 and 1995 (Audited), and for the six months ended June 30,
            1995 and 1996 (Unaudited).........................................    F-5
           Statements of Changes in Equity for the years ended December 31,
            1993, 1994 and 1995 (Audited), and for the six months ended June
            30, 1996 (Unaudited)..............................................    F-7
           Notes to the Financial Statements..................................    F-8
 
      BALANCE SHEET OF
        EURO TECH HOLDINGS COMPANY LIMITED
           Report of Independent Public Accountants...........................    F-21
           Balance Sheet as of October 31, 1996...............................    F-22
           Notes to the Balance Sheet.........................................    F-23
</TABLE>
 
                                       F-1
<PAGE>   56
 
                    REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
 
To:  Euro Tech (Far East) Limited
 
     We have audited the accompanying balance sheets of Euro Tech (Far East)
Limited (the "Company"), incorporated in Hong Kong, as of December 31, 1994 and
1995, and the related statements of income, cash flows and changes in
shareholders' equity for the years ended December 31, 1993, 1994 and 1995,
expressed in Hong Kong dollars. 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 audit.
 
     We conducted our audit 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 audit provides a
reasonable basis for our opinion.
 
     In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of the Company as of December
31, 1994 and 1995, and the results of its operations and cash flows for the
years ended December 31, 1993, 1994 and 1995 in conformity with generally
accepted accounting principles in the United States of America.
 
                                          /s/ ARTHUR ANDERSEN & CO.
                                          Certified Public Accountants
                                          Hong Kong
 
Hong Kong,
November 13, 1996.
 
                                       F-2
<PAGE>   57
 
                          EURO TECH (FAR EAST) LIMITED
 
                              STATEMENTS OF INCOME
        FOR THE YEARS ENDED DECEMBER 31, 1993, 1994 AND 1995 (AUDITED),
        AND FOR THE SIX MONTHS ENDED JUNE 30, 1995 AND 1996 (UNAUDITED)
 
             (AMOUNTS IN THOUSANDS EXCEPT SHARE AND PER SHARE DATA)
 
<TABLE>
<CAPTION>
                                         FOR THE YEAR ENDED DECEMBER 31,                  FOR THE SIX MONTHS ENDED JUNE 30,
                                --------------------------------------------------    -----------------------------------------
                                               1994         1995          1995           1995           1996           1996
                                             ---------    ---------    -----------    -----------    -----------    -----------
                                                HK$          HK$           US$            HK$            HK$            US$
                                  1993       (AUDITED)    (AUDITED)    (NOTE 2 J.)    (UNAUDITED)    (UNAUDITED)    (NOTE 2 J.)
                                ---------
                                   HK$
                                (AUDITED)
<S>                             <C>          <C>          <C>          <C>            <C>            <C>            <C>
Sales..........................   105,374      103,512      105,782        13,667         51,959         53,969          6,973
                                ---------    ---------    ---------     ---------      ---------      ---------      ---------
Cost of goods sold.............   (79,384)     (80,953)     (82,300)      (10,633)       (40,623)       (41,776)        (5,397)
Selling and administrative
  expenses.....................   (19,302)     (20,199)     (21,464)       (2,773)       (10,614)        (9,861)        (1,273)
Interest expenses, net.........      (221)        (492)        (877)         (113)          (420)          (631)           (82)
Gain on disposal of a real
  estate property..............        --        2,300           --            --             --             --             --
Other income, net..............       675          590        1,186           153            118            488             63
                                ---------    ---------    ---------     ---------      ---------      ---------      ---------
Total costs and expenses.......   (98,232)     (98,754)    (103,455)      (13,366)       (51,539)       (51,780)        (6,689)
                                ---------    ---------    ---------     ---------      ---------      ---------      ---------
Income from continuing
  operations before profits
  tax..........................     7,142        4,758        2,327           301            420          2,189            284
Provision for profits tax
  -- current...................    (1,106)        (425)         (68)           (9)           (77)          (406)           (52)
                                ---------    ---------    ---------     ---------      ---------      ---------      ---------
Income from continuing
  operations...................     6,036        4,333        2,259           292            343          1,783            232
Discontinued operations
  Income (loss) of subsidiary
    companies sold in 1996.....        12       (1,466)      (1,645)         (213)          (369)            --             --
                                ---------    ---------    ---------     ---------      ---------      ---------      ---------
Net income (loss)..............     6,048        2,867          614            79            (26)         1,783            232
                                =========    =========    =========     =========      =========      =========      =========
Pro forma income from
  continuing operations per
  common share.................                                1.56          0.20                          1.23           0.16
                                                          =========     =========                     =========      =========
Pro forma loss from
  discontinued operations per
  common share.................                               (1.14)        (0.15)                           --             --
                                                          =========     =========                     =========      =========
Pro forma net income per common
  share........................                                0.42          0.05                          1.23           0.16
                                                          =========     =========                     =========      =========
Pro forma weighted average
  number of common shares
  outstanding..................                           1,450,000     1,450,000                     1,450,000      1,450,000
                                                          =========     =========                     =========      =========
</TABLE>
 
   The accompanying notes are an integral part of these financial statements.
 
                                       F-3
<PAGE>   58
 
                          EURO TECH (FAR EAST) LIMITED
 
                                 BALANCE SHEETS
                  AS OF DECEMBER 31, 1994 AND 1995 (AUDITED),
                         AND JUNE 30, 1996 (UNAUDITED)
 
                             (AMOUNTS IN THOUSANDS)
 
<TABLE>
<CAPTION>
                                                           DECEMBER 31,                     JUNE 30,
                                                 ---------------------------------  ------------------------
                                                              1995        1995         1996         1996
                                                            ---------  -----------  -----------  -----------
                                                               HK$         US$          HK$          US$
                                                   1994     (AUDITED)  (NOTE 2 J.)  (UNAUDITED)  (NOTE 2 J.)
                                                 ---------
                                                    HK$
                                                 (AUDITED)
<S>                                              <C>        <C>        <C>          <C>          <C>
ASSETS
Current assets:
  Cash and cash equivalents.....................    3,408      4,626        597         3,008         389
  Accounts receivable, net......................   26,649     22,040      2,847        18,978       2,452
  Bills receivable..............................       --      2,963        383         2,700         349
  Receivable from subsidiary companies..........       39      1,564        202            --          --
  Receivable from related companies.............      226        275         36         1,390         180
  Receivable from shareholders..................       --         --         --         5,258         679
  Inventories, net..............................    6,354      5,106        660         3,258         421
  Prepayments and other current assets..........    1,782      1,366        175         1,372         177
                                                   ------     ------      -----        ------       -----
          Total current assets..................   38,458     37,940      4,900        35,964       4,647
Property, plant and equipment, net..............    8,073     15,974      2,064        15,580       2,013
Investment property, net........................    5,961      5,826        753         5,759         744
                                                   ------     ------      -----        ------       -----
          Total assets..........................   52,492     59,740      7,717        57,303       7,404
                                                   ======     ======      =====        ======       =====
LIABILITIES
Current liabilities:
  Short-term borrowings.........................    7,276      5,426        701         5,171         668
  Long-term bank loans, current portion.........      515      1,008        130         1,061         137
  Accounts payable..............................   16,992     19,411      2,508        18,216       2,354
  Payable to subsidiary companies...............       54         --         --            --          --
  Payable to a director.........................       --         25          3            38           5
  Accrued expenses and other liabilities........    5,599      6,837        883         4,966         642
  Taxation payable..............................      769        337         44           397          51
                                                   ------     ------      -----        ------       -----
          Total current liabilities.............   31,205     33,044      4,269        29,849       3,857
Long-term bank loans............................    3,330      7,006        905         6,471         836
Net liabilities of discontinued operations......      324      1,969        254            --          --
Other non-current liabilities...................       26         --         --            --          --
                                                   ------     ------      -----        ------       -----
          Total liabilities.....................   34,885     42,019      5,428        36,320       4,693
                                                   ------     ------      -----        ------       -----
SHAREHOLDERS' EQUITY
  Share capital.................................    1,000      1,000        129         1,000         129
  Retained earnings.............................   16,607     16,721      2,160        19,983       2,582
                                                   ------     ------      -----        ------       -----
          Total shareholders' equity............   17,607     17,721      2,289        20,983       2,711
                                                   ------     ------      -----        ------       -----
          Total liabilities and shareholders'
            equity..............................   52,492     59,740      7,717        57,303       7,404
                                                   ======     ======      =====        ======       =====
</TABLE>
 
   The accompanying notes are an integral part of these financial statements.
 
                                       F-4
<PAGE>   59
 
                          EURO TECH (FAR EAST) LIMITED
 
                            STATEMENTS OF CASH FLOWS
                              FOR THE YEARS ENDED
                DECEMBER 31, 1993, 1994 AND 1995 (AUDITED), AND
          FOR THE SIX MONTHS ENDED JUNE 30, 1995 AND 1996 (UNAUDITED)
 
                             (AMOUNTS IN THOUSANDS)
 
<TABLE>
<CAPTION>
                                                FOR THE YEAR ENDED DECEMBER 31,              FOR THE SIX MONTHS ENDED JUNE 30,
                                        -----------------------------------------------   ---------------------------------------
                                          1993        1994        1995         1995          1995          1996          1996
                                        ---------   ---------   ---------   -----------   -----------   -----------   -----------
                                           HK$         HK$         HK$          US$           HK$           HK$           US$
                                        (AUDITED)   (AUDITED)   (AUDITED)   (NOTE 2 J.)   (UNAUDITED)   (UNAUDITED)   (NOTE 2 J.)
<S>                                     <C>         <C>         <C>         <C>           <C>           <C>           <C>
Cash flows from continuing operating
  activities:
Income from continuing operations.....     6,036       4,333       2,259          292           343         1,783          232
Adjustments to reconcile income to net
  cash provided by (used in) operating
  activities:
  Depreciation of property, plant and
    equipment.........................       367         325         334           43           142           467           60
  Gain on disposals of property, plant
    and equipment.....................       (35)     (2,335)        (49)          (6)          (49)           (1)          --
  Depreciation of investment
    property..........................        33         135         135           17            67            67            9
(Increase) decrease in assets:
  Accounts receivable.................    (8,499)     (2,869)      4,609          595         3,415         3,062          395
  Bills receivable....................        --          --      (2,963)        (383)           --           263           34
  Receivable from subsidiary
    companies.........................        --         (39)     (1,525)        (197)         (478)        1,564          202
  Receivable from related companies...        --        (226)        (49)          (6)         (125)       (1,115)        (144)
  Receivable from a director..........        26          --          --           --            --            --           --
  Receivable from shareholders........        --          --          --           --            --        (5,258)        (679)
  Inventories.........................      (293)       (311)      1,248          161        (1,247)        1,848          239
  Prepayments and other current
    assets............................     1,199          15         416           54          (500)           (6)          (2)
Increase (decrease) in liabilities:
  Accounts payable....................    (2,610)      6,554       2,419          313         4,080        (1,195)        (154)
  Payable to subsidiary companies.....        58         (64)        (54)          (7)          (54)           --           --
  Payable to associated companies.....         5          (5)         --           --            --            --           --
  Payable to related companies........     1,067      (1,067)         --           --            --            --           --
  Payable to a director...............        --          --          25            3            13            13            2
  Accrued expenses and other
    liabilities.......................     3,305        (760)      1,238          160            30        (1,871)        (241)
  Taxation payable....................      (168)     (1,103)       (432)         (56)           76            60            7
                                          ------      ------      ------       ------        ------        ------         ----
    Net cash provided by (used in)
      continuing operating
      activities......................       491       2,583       7,611          983         5,713          (319)         (40)
                                          ------      ------      ------       ------        ------        ------         ----
Cash flows from investing activities:
Additions to property, plant and
  equipment...........................    (2,318)     (6,055)     (8,240)      (1,065)           (5)          (73)          (9)
Proceeds from disposals of property,
  plant and equipment.................        35       4,338          54            7            54             1
Additions to investment property......    (6,129)         --          --           --            --            --           --
Proceeds from disposals of subsidiary
  companies...........................        --          --          --           --            --            10            1
                                          ------      ------      ------       ------        ------        ------         ----
    Net cash (used in) provided by
      investing activities............    (8,412)     (1,717)     (8,186)      (1,058)           49           (62)          (8)
                                          ------      ------      ------       ------        ------        ------         ----
</TABLE>
 
   The accompanying notes are an integral part of these financial statements.
 
                                       F-5
<PAGE>   60
 
                          EURO TECH (FAR EAST) LIMITED
 
                       STATEMENTS OF CASH FLOWS (CONT'D)
                              FOR THE YEARS ENDED
                DECEMBER 31, 1993, 1994 AND 1995 (AUDITED), AND
          FOR THE SIX MONTHS ENDED JUNE 30, 1995 AND 1996 (UNAUDITED)
 
                             (AMOUNTS IN THOUSANDS)
 
<TABLE>
<CAPTION>
                                                                                             FOR THE SIX MONTHS ENDED JUNE 30,
                                                FOR THE YEAR ENDED DECEMBER 31,           ---------------------------------------
                                        -----------------------------------------------
                                                      1994        1995         1995          1995          1996          1996
                                                    ---------   ---------   -----------   -----------   -----------   -----------
                                                       HK$         HK$          US$           HK$           HK$           US$
                                          1993      (AUDITED)   (AUDITED)   (NOTE 2 J.)   (UNAUDITED)   (UNAUDITED)   (NOTE 2 J.)
                                        ---------
                                           HK$
                                        (AUDITED)
<S>                                     <C>         <C>         <C>         <C>           <C>           <C>           <C>
Cash flows from financing activities:
Net proceeds from (repayment of)
  short-term borrowings...............     3,325       1,419      (1,850)       (239)        (3,765)         (255)         (33)
Proceeds from long-term bank loans....     2,916       1,307       4,679         605             --            --           --
Repayment of long-term bank loans.....        --        (378)       (510)        (66)          (253)         (482)         (62)
Proceeds from other non-current
  liabilities.........................        67          --          --          --             --            --           --
Repayment of other non-current
  liabilities.........................        --         (41)        (26)         (3)           (26)           --           --
Dividends paid........................    (1,200)     (3,500)       (500)        (65)          (500)         (500)         (65)
                                          ------      ------      ------        ----         ------        ------         ----
    Net cash provided by (used in)
      financing activities............     5,108      (1,193)      1,793         232         (4,544)       (1,237)        (160)
                                          ------      ------      ------        ----         ------        ------         ----
Net (decrease) increase in cash and
  cash equivalents....................    (2,813)       (327)      1,218         157          1,218        (1,618)        (208)
Cash and cash equivalents, beginning
  of year.............................     6,548       3,735       3,408         440          3,408         4,626          597
                                          ------      ------      ------        ----         ------        ------         ----
Cash and cash equivalents, end of
  year................................     3,735       3,408       4,626         597          4,626         3,008          389
                                          ======      ======      ======        ====         ======        ======         ====
Supplemental Information
Interest received.....................        75          60         149          20             78            37            4
Interest paid.........................       296         552       1,026         133            498           668           86
Profits tax paid......................     1,274       1,528         500          65             --           346           45
Non-cash transaction
    -transfer of net liabilities of
    subsidiaries to the Company's
    shareholders......................        --          --          --          --             --         1,969          254
</TABLE>
 
   The accompanying notes are an integral part of these financial statements.
 
                                       F-6
<PAGE>   61
 
                          EURO TECH (FAR EAST) LIMITED
 
                        STATEMENTS OF CHANGES IN EQUITY
                              FOR THE YEARS ENDED
                DECEMBER 31, 1993, 1994 AND 1995 (AUDITED), AND
               FOR THE SIX MONTHS ENDED JUNE 30, 1996 (UNAUDITED)
 
                             (AMOUNTS IN THOUSANDS)
 
<TABLE>
<CAPTION>
                                                        SHARE     RETAINED
                                                        CAPITAL   EARNINGS     TOTAL
                                                        -----     --------     ------        TOTAL
                                                         HK$        HK$         HK$       -----------
                                                                                              US$
                                                                                          (NOTE 2 J.)
<S>                                                     <C>       <C>          <C>        <C>
Balance as of January 1, 1993.........................  1,000      12,392      13,392        1,730
Net income............................................     --       6,048       6,048          781
Dividends.............................................     --      (1,200)     (1,200)        (154)
                                                        -----      ------      ------        -----
Balance as of December 31, 1993.......................  1,000      17,240      18,240        2,357
Net income............................................     --       2,867       2,867          370
Dividends.............................................     --      (3,500)     (3,500)        (452)
                                                        -----      ------      ------        -----
Balance as of December 31, 1994.......................  1,000      16,607      17,607        2,275
Net income............................................     --         614         614           79
Dividends.............................................     --        (500)       (500)         (65)
                                                        -----      ------      ------        -----
Balance as of December 31, 1995.......................  1,000      16,721      17,721        2,289
Net income (Unaudited)................................     --       1,783       1,783          232
Net liabilities of subsidiary companies transferred to
  the Company's shareholders (Unaudited)..............     --       1,979       1,979          255
Dividends (Unaudited).................................     --        (500)       (500)         (65)
                                                        -----      ------      ------        -----
Balance as of June 30, 1996 (Unaudited)...............  1,000      19,983      20,983        2,711
                                                        =====      ======      ======        =====
</TABLE>
 
   The accompanying notes are an integral part of these financial statements.
 
                                       F-7
<PAGE>   62
 
                          EURO TECH (FAR EAST) LIMITED
 
                       NOTES TO THE FINANCIAL STATEMENTS
        (AMOUNTS EXPRESSED IN HONG KONG DOLLARS UNLESS OTHERWISE STATED)
        (DATA WITH RESPECT TO JUNE 30, 1996 AND FOR THE SIX MONTHS ENDED
                     JUNE 30, 1995 AND 1996 ARE UNAUDITED)
 
1.  ORGANIZATION AND PRINCIPAL ACTIVITIES
 
     Euro Tech (Far East) Limited (the "Company") was incorporated in Hong Kong
on June 15, 1971 and is owned by Regent Earning Limited (73.4%), a company
incorporated in Hong Kong, and Pearl Venture Limited (26.6%), a company
incorporated in the British Virgin Islands.
 
     The Company 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 system in Hong Kong and
in the People's Republic of China (the "PRC").
 
2.  SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
 
  a. Sales
 
     Sales represent the invoiced value of goods supplied to customers. Sales
are recognized upon delivery of goods and passage of title to customers.
 
  b. Taxation
 
     The Company provides for Hong Kong profits tax on the basis of its income
for financial reporting purposes, adjusted for income and expense items which
are not assessable or deductible for profits tax purposes.
 
     The Company provides deferred profits tax using the liability method. Under
the liability method, deferred profits tax is recognized for all significant
temporary differences between the tax and financial statement bases of assets
and liabilities. The tax consequences of those differences are classified as an
asset or a liability.
 
  c. Cash and Cash Equivalents
 
     Cash and cash equivalents include cash on hand and demand deposits with
banks, and liquid investments with an original maturity of three months or less.
 
  d. Inventories
 
     Inventories are stated at the lower of cost, on a specific identification
basis, 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>   63
 
                          EURO TECH (FAR EAST) LIMITED
 
                NOTES TO THE FINANCIAL STATEMENTS -- (CONTINUED)
 
2.  SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
  e. Property, Plant and Equipment
 
     Property, plant and equipment are stated at cost less accumulated
depreciation. Depreciation of property, plant and equipment is computed using
the straight-line method over the assets' estimated useful lives. The estimated
useful lives are as follows:
 
<TABLE>
        <S>                                                        <C>
        Land...................................................    Terms of the leases
        Buildings..............................................    15 - 51 years
        Leasehold improvements.................................    Terms of the leases
        Furniture, fixtures and office equipment...............    5 years
        Motor vehicles.........................................    5 years
        Testing equipment......................................    3 years
</TABLE>
 
  f. Investment Property
 
     Investment property represents land and building held for their investment
potential. Investment property is stated at cost less accumulated depreciation.
Depreciation of investment property is computed using the straight-line method
over its estimated useful live. The estimated useful lives are as follows:
 
<TABLE>
        <S>                                                        <C>
        Land...................................................    Terms of the leases
        Building...............................................    40 years
</TABLE>
 
  g. Operating Leases
 
     Leases where substantially all the risks and rewards of ownership of the
leased assets remain with the leasing company are accounted for as operating
leases. Rental payments under operating leases are charged to expense on the
straight-line basis over the period of the relevant leases.
 
  h. Foreign Currency Translation
 
     The Company mainly conducts its operations in Hong Kong and the PRC, and
maintains its books and records in Hong Kong dollars. The functional currency
for the Company's operations is Hong Kong dollars. Foreign currency transactions
during the year are translated into Hong Kong dollars at the exchange rates
prevailing at the time of the transactions. Monetary assets and liabilities
denominated in foreign currencies are translated using the exchange rates
prevailing at the balance sheet date. Exchange differences are included in the
accompanying statements of income.
 
  i. Net Income per Common Share
 
     Net income per common share is computed by dividing net income (loss) for
each year or period by 1,450,000, the weighted average number of common shares
outstanding during the year or period, as the case may be, on the basis that the
share exchange with Euro Tech Holdings Company Limited had been consummated and
that 50,000 common shares of Euro Tech Holdings Company Limited had been issued
to Gusrae, Kaplan & Bruno, Esqs. prior to January 1, 1997 (see Note 17).
 
  j. Translation into United States Dollars
 
     The financial statements expressed in Hong Kong dollars as of December 31,
1995 and June 30, 1996, and for the year ended December 31, 1995 and for the six
months ended June 30, 1996 were translated into United States dollars, solely
for the convenience of the reader, at the prevailing exchange rate of
$7.74 = US$1 on June 30, 1996.
 
                                       F-9
<PAGE>   64
 
                          EURO TECH (FAR EAST) LIMITED
 
                NOTES TO THE FINANCIAL STATEMENTS -- (CONTINUED)
 
2.  SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
  k. Use of Estimates
 
     The preparation of financial statements in conformity with accounting
principles generally accepted in the United States of America ("US GAAP")
requires management to make estimates and assumptions that affect certain
reported amounts and disclosures. Accordingly, actual results could differ from
those estimates.
 
3.  OTHER INCOME
 
     Other income comprised:
 
<TABLE>
<CAPTION>
                                      FOR THE YEAR ENDED DECEMBER 31,              FOR THE SIX MONTHS ENDED JUNE 30,
                              -----------------------------------------------   ---------------------------------------
                                1993        1994        1995         1995          1995          1996          1996
                              ---------   ---------   ---------   -----------   -----------   -----------   -----------
                                HK$'000     HK$'000     HK$'000       US$'000       HK$'000       HK$'000       US$'000
                              (AUDITED)   (AUDITED)   (AUDITED)   (NOTE 2 J.)   (UNAUDITED)   (UNAUDITED)   (NOTE 2 J.)
<S>                           <C>         <C>         <C>         <C>           <C>           <C>           <C>
Gain on disposal of fixed
  assets.....................      35          --          49           6             49             2            0
Rental income................     448         444         372          48            186            16            2
Exchange gain (loss).........     115          (2)        360          47           (211)          295           38
Service fee income...........      77         148         405          52             94           175           23
                              ---------   ---------   ---------       ---          -----         -----          ---
                                  675         590       1,186         153            118           488           63
                              =========   =========   =========   ==========    ===========   ===========   ==========
</TABLE>
 
4.  PROVISION FOR PROFITS TAX
 
     Hong Kong profits tax was provided at the rate of 16.5% on the estimated
assessable income which was earned in or derived from Hong Kong.
 
     The reconciliations of profits tax amounts based on the statutory profits
tax rate in Hong Kong to the profits tax amounts as stated in the statements of
income are as follows:
 
<TABLE>
<CAPTION>
                                      FOR THE YEAR ENDED DECEMBER 31,              FOR THE SIX MONTHS ENDED JUNE 30,
                              -----------------------------------------------   ---------------------------------------
                                1993        1994        1995         1995          1995          1996          1996
                              ---------   ---------   ---------   -----------   -----------   -----------   -----------
                                HK$'000     HK$'000     HK$'000       US$'000       HK$'000       HK$'000       US$'000
                              (AUDITED)   (AUDITED)   (AUDITED)   (NOTE 2 J.)   (UNAUDITED)   (UNAUDITED)   (NOTE 2 J.)
<S>                           <C>         <C>         <C>         <C>           <C>           <C>           <C>
Tax based on pre-tax
  accounting income at
  statutory rate (16.5%).....   1,178         785         384          50            69            361           46
Tax effect of permanent
  differences................    (148)       (486)        (28)         (4)          (83)            --          (63)
Tax effect of US GAAP
  adjustments................       6          25          50           6            20             45            6
Adjustments of profits tax of
  prior years resulting from
  Inland Revenue Department
  review.....................      --          --        (345)        (44)           --             --           --
Other........................      70         101           7           1            71             --           63
                                -----        ----        ----         ---           ---           ----          ---
Provision for profits tax....   1,106         425          68           9            77            406           52
                                =====        ====        ====         ===           ===           ====          ===
</TABLE>
 
     As of December 31, 1994 and 1995, and June 30, 1996, the Company had no
significant deferred tax assets or liabilities.
 
                                      F-10
<PAGE>   65
 
                          EURO TECH (FAR EAST) LIMITED
 
                NOTES TO THE FINANCIAL STATEMENTS -- (CONTINUED)
 
5.  ACCOUNTS RECEIVABLE
 
     Accounts receivable comprised:
 
<TABLE>
<CAPTION>
                                                 DECEMBER 31,                          JUNE 30,
                                     -------------------------------------    --------------------------
                                       1994         1995          1995           1996           1996
                                     ---------    ---------    -----------    -----------    -----------
                                       HK$'000      HK$'000        US$'000        HK$'000        US$'000
                                     (AUDITED)    (AUDITED)    (NOTE 2 J.)    (UNAUDITED)    (NOTE 2 J.)
    <S>                              <C>          <C>          <C>            <C>            <C>
    Trade and other receivables.....   26,649       22,153        2,862          19,134         2,472
    Less: Allowance for doubtful
      debts.........................       --         (113)         (15)           (156)          (20)
                                       ------       ------        -----          ------         -----
    Accounts receivable, net........   26,649       22,040        2,847          18,978         2,452
                                       ======       ======        =====          ======         =====
</TABLE>
 
6.  INVENTORIES
 
     Inventories comprised:
 
<TABLE>
<CAPTION>
                                                 DECEMBER 31,                          JUNE 30,
                                     -------------------------------------    --------------------------
                                       1994         1995          1995           1996           1996
                                     ---------    ---------    -----------    -----------    -----------
                                       HK$'000      HK$'000        US$'000        HK$'000        US$'000
                                     (AUDITED)    (AUDITED)    (NOTE 2 J.)    (UNAUDITED)    (NOTE 2 J.)
    <S>                              <C>          <C>          <C>            <C>            <C>
    Trading equipment...............    7,064        5,885          761           4,221           545
    Less: Provision for inventory
      obsolescence..................     (710)        (779)        (101)           (963)         (124)
                                        -----        -----         ----           -----          ----
    Inventories, net................    6,354        5,106          660           3,258           421
                                        =====        =====         ====           =====          ====
</TABLE>
 
7.  PROPERTY, PLANT AND EQUIPMENT
 
     Property, plant and equipment comprised:
 
<TABLE>
<CAPTION>
                                                 DECEMBER 31,                          JUNE 30,
                                     -------------------------------------    --------------------------
                                       1994         1995          1995           1996           1996
                                     ---------    ---------    -----------    -----------    -----------
                                       HK$'000      HK$'000        US$'000        HK$'000        US$'000
                                     (AUDITED)    (AUDITED)    (NOTE 2 J.)    (UNAUDITED)    (NOTE 2 J.)
    <S>                              <C>          <C>          <C>            <C>            <C>
    Land and buildings..............    7,812       16,019        2,070          16,019         2,070
    Leasehold improvements..........      190          190           25             190            25
    Furniture, fixtures and office
      equipment.....................    1,259        1,293          167           1,358           175
    Motor vehicles..................    1,021        1,021          132             866           112
    Testing equipment...............    1,251        1,204          155           1,212           156
                                       ------       ------        -----          ------         -----
                                       11,533       19,727        2,549          19,645         2,538
    Less: Accumulated
      depreciation..................   (3,460)      (3,753)        (485)         (4,065)         (525)
                                       ------       ------        -----          ------         -----
    Net book value..................    8,073       15,974        2,064          15,580         2,013
                                       ======       ======        =====          ======         =====
</TABLE>
 
     As of December 31, 1995 and June 30, 1996, all land and buildings with net
book values of $14,650,000 and $14,405,000 (Unaudited) respectively were pledged
to secure certain banking facilities of the Company (see Note 10).
 
                                      F-11
<PAGE>   66
 
                          EURO TECH (FAR EAST) LIMITED
 
                NOTES TO THE FINANCIAL STATEMENTS -- (CONTINUED)
 
8.  INVESTMENT PROPERTY
 
     Investment property comprised:
 
<TABLE>
<CAPTION>
                                                  DECEMBER 31,                          JUNE 30,
                                      -------------------------------------    --------------------------
                                        1994         1995          1995           1996           1996
                                      ---------    ---------    -----------    -----------    -----------
                                        HK$'000      HK$'000        US$'000        HK$'000        US$'000
                                      (AUDITED)    (AUDITED)    (NOTE 2 J.)    (UNAUDITED)    (NOTE 2 J.)
    <S>                               <C>          <C>          <C>            <C>            <C>
    Cost.............................   6,129        6,129          792           6,129           792
    Less: Accumulated depreciation...    (168)        (303)         (39)           (370)          (48)
                                        -----        -----          ---           -----           ---
    Net book value...................   5,961        5,826          753           5,759           744
                                        =====        =====          ===           =====           ===
</TABLE>
 
     The investment property was originally purchased for rental purpose.
Subsequent to June 30, 1996, the investment property was sold to a third party
for a consideration of $6,838,000 (Unaudited). As of December 31, 1995 and June
30, 1996, the investment property was pledged to secure certain banking
facilities of the Company (see Note 10).
 
9.  SHORT-TERM BORROWINGS
 
     Short-term borrowings represented import and export bank loans, bearing
interest at 6.75%-9.00% per annum as of December 31, 1995 and June 30, 1996.
 
     Unused credit lines for short-term borrowings amounted to approximately
$27,861,000 as of December 31, 1995 and $32,063,000 (Unaudited) as of June 30,
1996.
 
                                      F-12
<PAGE>   67
 
                          EURO TECH (FAR EAST) LIMITED
 
                NOTES TO THE FINANCIAL STATEMENTS -- (CONTINUED)
 
9.  SHORT-TERM BORROWINGS (CONTINUED)
     Other information pertaining to the short-term borrowings is as follows:
 
<TABLE>
<CAPTION>
                                                         MAXIMUM       AVERAGE       WEIGHTED        WEIGHTED
                                                         AMOUNT        AMOUNT         AVERAGE         AVERAGE
                                                       OUTSTANDING   OUTSTANDING   INTEREST RATE   INTEREST RATE
                                                       DURING THE    DURING THE     AT THE END      DURING THE
                                             BALANCE     PERIOD        PERIOD      OF THE PERIOD      PERIOD
                                             -------   -----------   -----------   -------------   -------------
<S>                                          <C>       <C>           <C>           <C>             <C>
AMOUNTS IN THOUSANDS
OF HONG KONG DOLLARS
- -------------------------------------------
December 31, 1994 (Audited)
Denominated
  Non HK$..................................  $ 4,095     $ 6,845       $ 4,350         8.00%           8.00%
  HK$......................................    3,181       4,261         2,847         8.50%           7.21%
                                              ------
                                             $ 7,276
                                              ------
December 31, 1995 (Audited)
Denominated
  Non HK$..................................  $ 3,367     $ 6,113       $ 4,428         8.00%           8.00%
  HK$......................................    2,059       3,910         3,141         9.00%           8.96%
                                              ------
                                             $ 5,426
                                              ------
June 30, 1996 (Unaudited)
Denominated
  Non HK$..................................  $ 1,698     $ 5,676       $ 4,191         6.75%           7.04%
  HK$......................................    3,473       3,869         2,098         8.50%           8.67%
                                              ------
                                             $ 5,171
                                              ------
AMOUNTS IN THOUSANDS OF
UNITED STATES DOLLARS (NOTE 2 J.)
- -------------------------------------------
December 31, 1995 (Audited)
Denominated
  Non HK$..................................  $   435     $   790       $   572         8.00%           8.00%
  HK$......................................      266         505           406         9.00%           8.96%
                                              ------
                                             $   701
                                              ------
June 30, 1996 (Unaudited)
Denominated
  Non HK$..................................  $   219     $   733       $   541         6.75%           7.04%
  HK$......................................      449         500           271         8.50%           8.67%
                                              ------
                                             $   668
                                              ------
</TABLE>
 
                                      F-13
<PAGE>   68
 
                          EURO TECH (FAR EAST) LIMITED
 
                NOTES TO THE FINANCIAL STATEMENTS -- (CONTINUED)
 
10.  LONG-TERM BANK LOANS
 
     Long-term bank loans comprised:
 
<TABLE>
<CAPTION>
                                                     DECEMBER 31,                         JUNE 30,
                                        --------------------------------------   --------------------------
                                                        1995          1995          1996           1996
                                                     ----------   ------------   -----------   ------------
                                                      HK$'000       US$'000        HK$'000       US$'000
                                           1994      (AUDITED)    (NOTE 2 J.)    (UNAUDITED)   (NOTE 2 J.)
                                        ----------
                                         HK$'000
                                        (AUDITED)
    <S>                                 <C>          <C>          <C>            <C>           <C>
    DENOMINATED IN HONG KONG DOLLARS
    Mortgage bank loan on land and
      building -- repayable in 84
      equal monthly installments
      starting from November 30, 1995,
      interest at 10.75% in 1995 and
      10.25% in 1996..................        --        3,889           503          3,688          476
    Mortgage bank loan on land and
      building -- repayable in 94
      monthly installments starting
      from December 7, 1993, interest
      at Hong Kong prime rate plus
      1.25% in 1994, 1995 and 1996....     2,538        2,160           279          1,972          255
    Mortgage bank loan on land and
      building -- repayable in 118
      equal monthly installments
      starting from October 18, 1995,
      interest at 13% in 1995 and
      12.5% in 1996...................        --          790           102            768           99
                                           -----       ------         -----         ------         ----
    Sub-total.........................     2,538        6,839           884          6,428          830
 
    DENOMINATED IN UNITED STATES
      DOLLARS
    Mortgage bank loan on land and
      building -- repayable in 84
      equal monthly installments
      starting from December 4, 1994,
      interest at U.S. prime rate plus
      2.5% in 1994, 1995 and 1996.....     1,307        1,175           151          1,104          143
                                           -----       ------         -----         ------         ----
    Sub-total.........................     3,845        8,014         1,035          7,532          973
    Portion due within one year.......      (515)      (1,008)         (130)        (1,061)        (137)
                                           -----       ------         -----         ------         ----
                                           3,330        7,006           905          6,471          836
                                           =====       ======         =====         ======         ====
</TABLE>
 
     Future maturities of long-term bank loans were as follows:
 
<TABLE>
<CAPTION>
                                              DECEMBER 31,                            JUNE 30,
                                 ---------------------------------------     ---------------------------
                                   1994          1995           1995            1996            1996
                                 ---------     ---------     -----------     -----------     -----------
                                  HK$'000       HK$'000        US$'000         HK$'000         US$'000
                                 (AUDITED)     (AUDITED)     (NOTE 2 J.)     (UNAUDITED)     (NOTE 2 J.)
    <S>                          <C>           <C>           <C>             <C>             <C>
    Within one year............      515         1,008            130           1,061            137
    During the second year.....      528         1,044            135           1,090            141
    During the third year......      545         1,127            146           1,167            151
    During the fourth year.....      570         1,200            155           1,249            161
    During the fifth year......      579         1,296            167           1,343            174
    Over five years but not
      exceeding nine years.....    1,108         2,339            302           1,622            209
                                   -----         -----          -----           -----           ----
                                   3,845         8,014          1,035           7,532            973
                                   =====         =====          =====           =====           ====
</TABLE>
 
                                      F-14
<PAGE>   69
 
                          EURO TECH (FAR EAST) LIMITED
 
                NOTES TO THE FINANCIAL STATEMENTS -- (CONTINUED)
 
11.  ACCRUED EXPENSES AND OTHER LIABILITIES
 
     Accrued expenses and other liabilities comprised:
 
<TABLE>
<CAPTION>
                                              DECEMBER 31,                            JUNE 30,
                                 ---------------------------------------     ---------------------------
                                   1994          1995           1995            1996            1996
                                 ---------     ---------     -----------     -----------     -----------
                                  HK$'000       HK$'000        US$'000         HK$'000         US$'000
                                 (AUDITED)     (AUDITED)     (NOTE 2 J.)     (UNAUDITED)     (NOTE 2 J.)
    <S>                          <C>           <C>           <C>             <C>             <C>
    Commission payable to sales
      agents...................    3,092         3,805           491            3,327            430
    Accrued expenses...........      631           755            98              438             57
    Deposits from customers....      917         1,036           134              604             78
    Other payables.............      959         1,241           160              597             77
                                   -----         -----           ---            -----            ---
    Total......................    5,599         6,837           883            4,966            642
                                   =====         =====           ===            =====            ===
</TABLE>
 
12.  NET LIABILITIES OF DISCONTINUED OPERATIONS
 
     In preparation for its initial public offering, the Company underwent a
restructuring and in 1996 transferred its investments in certain subsidiary
companies to its shareholders in exchange for cash equal to the par value of the
shares transferred. These subsidiary companies had incurred losses in recent
years and at the dates of transfer their liabilities exceeded their assets. The
shareholders agreed to assume these net liabilities and accordingly the
transfers were reflected as increases in the Company's shareholders' equity. The
operations of these subsidiary companies have been accounted for as discontinued
operations in the accompanying financial statements.
 
     Movements in the net liabilities of these subsidiary companies were as
follows:
 
<TABLE>
<CAPTION>
                                      FOR THE YEAR ENDED DECEMBER 31,                     FOR THE SIX MONTHS ENDED JUNE 30,
                           -----------------------------------------------------     -------------------------------------------
                             1993          1994          1995           1995            1995            1996            1996
                           ---------     ---------     ---------     -----------     -----------     -----------     -----------
                            HK$'000       HK$'000       HK$'000        US$'000         HK$'000         HK$'000         US$'000
                           (AUDITED)     (AUDITED)     (AUDITED)     (NOTE 2 J.)     (UNAUDITED)     (UNAUDITED)     (NOTE 2 J.)
    <S>                    <C>           <C>           <C>           <C>             <C>             <C>             <C>
    Balance, beginning of
      period.............    1,130          1,142          (324)          (41)           (324)          (1,969)          (254)
    Income (loss) from
      equity
      investment.........       12         (1,466)       (1,645)         (213)           (369)              --             --
    Transfer of interest
      in subsidiary
      companies to the
      Company's
      shareholders.......       --             --            --            --              --            1,969            254
                              ----          -----          ----          ----          ------             ----
    Balance, end of
      period.............    1,142           (324)       (1,969)         (254)           (693)              --             --
                              ====          =====          ====          ====          ======             ====
</TABLE>
 
     For the years ended December 31, 1993, 1994 and 1995, and for the six
months ended June 30, 1996, the subsidiary companies had no income tax expenses
or benefits.
 
     Other information pertaining to the subsidiary companies is as follows:
 
<TABLE>
<CAPTION>
                                FOR THE YEAR ENDED DECEMBER 31,                     FOR THE SIX MONTHS ENDED JUNE 30,
                     -----------------------------------------------------     -------------------------------------------
                                     1994          1995           1995                            1996            1996
                                   ---------     ---------     -----------        1995         -----------     -----------
                                    HK$'000       HK$'000        US$'000       -----------       HK$'000         US$'000
                                   (AUDITED)     (AUDITED)     (NOTE 2 J.)       HK$'000       (UNAUDITED)     (NOTE 2 J.)
                       1993                                                    (UNAUDITED)
                     ---------
                      HK$'000
                     (AUDITED)
    <S>              <C>           <C>           <C>           <C>             <C>             <C>             <C>
    Sales........       569          6,987         8,860          1,145           4,781              --              --
</TABLE>
 
                                      F-15
<PAGE>   70
 
                          EURO TECH (FAR EAST) LIMITED
 
                NOTES TO THE FINANCIAL STATEMENTS -- (CONTINUED)
 
12.  NET LIABILITIES OF DISCONTINUED OPERATIONS (CONTINUED)
     Details of the subsidiary companies were as follows:
 
<TABLE>
<CAPTION>
                               PERCENTAGE
          NAME OF           OF INTEREST HELD
        SUBSIDIARY       -----------------------      COUNTRY OF
         COMPANIES       DIRECTLY     INDIRECTLY     INCORPORATION          PRINCIPAL ACTIVITIES
    -------------------                              -------------     ------------------------------
    <S>                  <C>          <C>            <C>               <C>
    Armtison Limited...     100%          --             Hong Kong     Marketing and trading of
                                                                       electronic equipment
    Euro Tech (China)
      Limited..........     100%          --             Hong Kong     Inactive
    Action Instruments
      (China) Limited
      ("Action").......      --           51%            Hong Kong     Marketing and trading of
                                                                       electronic equipment
    Euro Electron (Far
      East) Limited....      --           80%            Hong Kong     Marketing and trading of
                                                                       telecommunication equipment
</TABLE>
 
13.  RELATED PARTY TRANSACTIONS
 
     The transactions with related parties are summarized as follows:
 
<TABLE>
<CAPTION>
                                         FOR THE YEAR ENDED DECEMBER 31,              FOR THE SIX MONTHS ENDED JUNE 30,
                                 -----------------------------------------------   ---------------------------------------
                                               1994        1995         1995                        1996          1996
                                             ---------   ---------   -----------      1995       -----------   -----------
                                              HK$'000     HK$'000      US$'000     -----------     HK$'000       US$'000
                                             (AUDITED)   (AUDITED)   (NOTE 2 J.)     HK$'000     (UNAUDITED)   (NOTE 2 J.)
                                   1993                                            (UNAUDITED)
                                 ---------
                                  HK$'000
                                 (AUDITED)
    <S>                          <C>         <C>         <C>         <C>           <C>           <C>           <C>
    Sales to subsidiary
     companies.................        5          13          59           8             59           --            --
    Sales to related
      companies................      367         383       1,088         141            530          945           122
    Purchases from subsidiary
      companies................    1,278         942       2,443         316          2,044           --            --
    Purchase from related
      companies................    7,516       1,562         764          99            250          265            34
    Service income received
      from subsidiary
      companies................       58          50         213          28             14           --            --
    Service income received
      from related companies...       --          --          --          --             --          128            17
    Management fees paid to a
      subsidiary company.......      448         384          --          --             --           --            --
    Interest income received
      from a subsidiary
      company..................       --          --         166          21             --           --            --
    Interest income received
      from a related company...       --          --          --          --             --          258            33
    Transfer of investment in
      subsidiary companies to
      the Company's
      shareholders.............       --          --          --          --             --           10             1
</TABLE>
 
     The outstanding balances due from subsidiary companies and shareholders
included a loan to Action of $500,000 as of December 31, 1995 and a loan to
Regent Earning Limited of approximately $3,868,000 (Unaudited) as of June 30,
1996, which were unsecured, bore interest at 18% per annum and are payable in
early 1997.
 
     All other outstanding balances with related companies, shareholders and a
director were unsecured, non-interest bearing and are payable in early 1997.
 
                                      F-16
<PAGE>   71
 
                          EURO TECH (FAR EAST) LIMITED
 
                NOTES TO THE FINANCIAL STATEMENTS -- (CONTINUED)
 
14.  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
equals to 50% to 100% of their individual fund account balances at their dates
of resignation or retirement which depends on their years of services with the
Company. 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, 1993,
1994 and 1995, and for the six months ended June 30, 1995 and 1996, the Company
made total pension contributions of approximately $587,000, $621,000, $864,000,
$455,000 (Unaudited) and $261,000 (Unaudited) respectively.
 
15.  COMMITMENTS
 
  a. Lease commitments
 
     The Company leases office and industrial premises under various lease
agreements extending to October 1997. Rental expenses for the years ended
December 31, 1993, 1994 and 1995 and for the six months ended June 30, 1995 and
1996 were approximately $1,116,000, $1,013,000, $1,020,000, $504,000 (Unaudited)
and $557,000 (Unaudited) respectively.
 
     Future minimum rental payments as of December 31, 1995 and June 30, 1996,
under agreements classified as operating leases with noncancelable terms in
excess of one year, were as follows:
 
<TABLE>
<CAPTION>
                                                       DECEMBER 31,                 JUNE 30,
                                                  -----------------------   -------------------------
                                                                 1995          1996          1996
                                                              -----------   -----------   -----------
                                                                US$'000       HK$'000       US$'000
                                                    1995      (NOTE 2 J.)   (UNAUDITED)   (NOTE 2 J.)
                                                  ---------
                                                   HK$'000
                                                  (AUDITED)
    <S>                                           <C>         <C>           <C>           <C>
    Payable during the following period:
      Within one year.........................      1,666         215          1,638          212
      Over one year but not exceeding two
         years................................      1,305         169            500           65
                                                    -----         ---          -----          ---
                                                    2,971         384          2,138          277
                                                    =====         ===          =====          ===
</TABLE>
 
  b. Capital commitments
 
     As of December 31, 1995 and June 30, 1996, the Company had outstanding
contractual commitments for purchase of land and buildings in the PRC of both
approximately $1,701,000.
 
16.  SEGMENT INFORMATION
 
     a. The Company is engaged in the marketing and trading of electronic
equipment and has no other major business operations.
 
                                      F-17
<PAGE>   72
 
                          EURO TECH (FAR EAST) LIMITED
 
                NOTES TO THE FINANCIAL STATEMENTS -- (CONTINUED)
 
16.  SEGMENT INFORMATION (CONTINUED)
     b. Analysis of sales
 
<TABLE>
<CAPTION>
                             FOR THE YEAR ENDED DECEMBER 31,                  FOR THE SIX MONTHS ENDED JUNE 30,
                    --------------------------------------------------    -----------------------------------------
                      1993         1994         1995          1995           1995           1996           1996
                    ---------    ---------    ---------    -----------    -----------    -----------    -----------
                      HK$'000      HK$'000      HK$'000        US$'000        HK$'000        HK$'000        US$'000
                    (AUDITED)    (AUDITED)    (AUDITED)    (NOTE 2 J.)    (UNAUDITED)    (UNAUDITED)    (NOTE 2 J.)
<S>                 <C>          <C>          <C>          <C>            <C>            <C>            <C>
China..............   71,571       61,216       62,566         8,083         32,218         35,330         4,565
Hong Kong..........   30,429       40,824       41,605         5,375         19,131         18,268         2,360
Macau..............    3,194        1,193          753            97            576            253            33
Others.............      180          279          858           112             34            118            15
                     -------      -------      -------        ------         ------         ------         -----
                     105,374      103,512      105,782        13,667         51,959         53,969         6,973
                     =======      =======      =======        ======         ======         ======         =====
</TABLE>
 
     c. Major customers
 
     A substantial portion of the Company's sales was made to a large number of
customers on credit and generally no collateral was required. There was no
individual customer accounting for more than 10% of the Company's sales for the
years ended December 31, 1993, 1994 and 1995 and for the six months ended June
30, 1995 and 1996.
 
17.  CONTEMPLATED TRANSACTIONS
 
     Subsequent to December 31, 1995, the following events are being planned:
 
     a. Upon completion of the initial public offering as described in note b
below, the shareholders of the Company will exchange all of the issued and
outstanding ordinary shares of the Company for 1,400,000 common shares of Euro
Tech Holdings Company Limited in a transaction accounted for as a reorganization
of companies under common control in a manner similar to a pooling of interests.
Upon the consummation of the share exchange transaction, the Company will become
a wholly owned subsidiary of Euro Tech Holdings Company Limited.
 
   
     Euro Tech Holdings Company Limited is owned by Sidford International
Limited (66.7%) and Gusrae, Kaplan & Bruno, Esqs (33.3%). Sidford International
Limited is a business consultant of the Company and Gusrae, Kaplan & Bruno,
Esqs. is the United States counsel of Euro Tech Holdings Company Limited. Euro
Tech Holdings Company Limited was incorporated in the British Virgin Islands on
September 30, 1996 and shortly thereafter issued 100,000 and 50,000 common
shares at par value of US$0.01 per share to Sidford International Limited and
Gusrae, Kaplan & Bruno, Esqs., respectively, for a total consideration of
US$1,500. Euro Tech Holdings Company Limited will repurchase the 100,000 common
shares from Sidford International Limited at a cost of US$1,000 and Euro Tech
Holdings Company Limited will become wholly owned by Gusrae, Kaplan & Bruno,
Esqs. before the initial public offering as described in (b) below. The shares
issued to Gusrae, Kaplan & Bruno, Esqs. will be recorded at fair market value at
the completion of the initial public offering. In addition, Euro Tech Holdings
Company Limited issued 1,000,000 redeemable common share purchase warrants to
certain private investors for net proceeds of US$130,500 (equivalent to
HK$1,010,070) and will repurchase 70,000 redeemable common share purchase
warrants from certain private investors at a cost of US$10,500 (equivalent to
HK$81,270).
    
 
                                      F-18
<PAGE>   73
 
                          EURO TECH (FAR EAST) LIMITED
 
                NOTES TO THE FINANCIAL STATEMENTS -- (CONTINUED)
 
17.  CONTEMPLATED TRANSACTIONS (CONTINUED)
     Assuming the above share exchange transaction occurred as of December 31,
1995, or June 30, 1996, as the case may be, consolidated shareholders' equity of
Euro Tech Holdings Company Limited and subsidiary would have been as follows:
 
   
<TABLE>
<CAPTION>
                                                       DECEMBER 31, 1995          JUNE 30, 1996
                                                     ----------------------   ----------------------
                                                     HK$'000     US$'000      HK$'000     US$'000
                                                               (NOTE 2 J.)              (NOTE 2 J.)
    <S>                                              <C>       <C>            <C>       <C>
    Share capital
      -- 1,450,000 common shares outstanding.......     112           15         112           15
    Capital surplus................................  17,613        2,275      20,875        2,697
    Warrants.......................................     929          120         929          120
                                                     ------        -----      ------        -----
                                                     18,654        2,410      21,916        2,832
                                                     ======        =====      ======        =====
</TABLE>
    
 
     b. Euro Tech Holdings Company Limited is planning for an initial public
offering of 600,000 common shares and 600,000 redeemable common share purchase
warrants. The net proceeds from this offering, after underwriters' discounts and
commission, and other estimated expenses, are expected to be US$2,130,750 based
on an assumed initial public offering of US$5 per share and US$0.15 per warrant.
 
     The following unaudited pro forma consolidated statements of income of Euro
Tech Holdings Company Limited for the year ended December 31, 1995 and for the
six months ended June 30, 1996, have been prepared to give effect to the
transactions as described in Note a. above as if such transactions had occurred
on January 1, 1995.
 
     The pro forma consolidated statements of income are unaudited and have been
prepared using the historical financial statements of the Company, and are
qualified entirely by reference to, and should be read in conjunction with, such
historical financial statements. The pro forma consolidated statements of income
are provided for informational and comparative purposes only. The pro forma
adjustments are based on available financial information and certain estimates
and assumptions. The pro forma consolidated statements of income do not purport
to be indicative of the results of operations of Euro Tech Holdings Company
Limited that would have occurred had such transactions in fact happened on
January 1, 1995, or during the periods presented or during any future periods.
 
                                      F-19
<PAGE>   74
 
                          EURO TECH (FAR EAST) LIMITED
 
                NOTES TO THE FINANCIAL STATEMENTS -- (CONTINUED)
 
17.  CONTEMPLATED TRANSACTIONS (CONTINUED)
     i. Unaudited pro forma consolidated statement of income of Euro Tech
Holdings Company Limited for the year ended December 31, 1995:
 
<TABLE>
<CAPTION>
                                                           PRO FORMA
                                                          ADJUSTMENTS      PRO FORMA
                                               ACTUAL     -----------      ---------   PRO FORMA
                                              ---------     HK$'000         HK$'000    ---------
                                               HK$'000                                  US$'000
                                                                                        (NOTE 2
                                                                                       J.)
    <S>                                       <C>         <C>              <C>         <C>
    Sales...................................    105,782                      105,782      13,667
                                              ---------                    ---------   ---------
    Cost of goods sold......................    (82,300)                     (82,300)    (10,633)
    Selling and administrative expenses.....    (21,464)         (641)(1)    (22,105)     (2,856)
    Interest expenses, net..................       (877)                        (877)       (113)
    Other income, net.......................      1,186                        1,186         153
                                              ---------                    ---------   ---------
    Total costs and expenses................   (103,455)                    (104,096)    (13,449)
                                              ---------                    ---------   ---------
    Income from continuing operations before
      profits tax...........................      2,327                        1,686         218
    Provision for profits tax...............        (68)                         (68)         (9)
                                              ---------                    ---------   ---------
    Income from continuing operations.......      2,259                        1,618         209
                                              =========                    =========   =========
    Income from continuing operations per
      common share..........................     0.0016                       0.0011      0.0001
                                              =========                    =========   =========
    Weighted average number of common shares
      outstanding...........................  1,450,000                    1,450,000   1,450,000
                                              =========                    =========   =========
</TABLE>
 
     ii. Unaudited pro forma consolidated statement of income of Euro Tech
Holdings Company Limited for the six months ended June 30, 1996:
 
<TABLE>
<CAPTION>
                                                           PRO FORMA
                                                          ADJUSTMENTS      PRO FORMA
                                               ACTUAL     -----------      ---------   PRO FORMA
                                              ---------     HK$'000         HK$'000    ---------
                                               HK$'000                                  US$'000
                                                                                        (NOTE 2
                                                                                       J.)
    <S>                                       <C>         <C>              <C>         <C>
    Sales...................................     53,969                       53,969       6,973
                                              ---------                    ---------   ---------
    Cost of goods sold......................    (41,776)                     (41,776)     (5,397)
    Selling and administrative expenses.....     (9,861)         (439)(1)    (10,300)     (1,330)
    Interest expenses, net..................       (631)                        (631)        (82)
    Other income, net.......................        488                          488          63
                                              ---------                    ---------   ---------
    Total costs and expenses................    (51,780)                     (52,219)     (6,746)
                                              ---------                    ---------   ---------
    Income before profits tax...............      2,189                        1,750         227
    Provision for profits tax...............       (406)                        (406)        (52)
                                              ---------                    ---------   ---------
    Net income..............................      1,783                        1,344         175
                                              =========                    =========   =========
    Net income per common share.............     0.0012                       0.0009      0.0001
                                              =========                    =========   =========
    Weighted average number of common shares
      outstanding...........................  1,450,000                    1,450,000   1,450,000
                                              =========                    =========   =========
</TABLE>
 
- ---------------
 
Note to unaudited pro forma consolidated statements of income:
 
(1) Upon consummation of the initial public offering, the Chairman will be
    compensated based on a new employment contract. Had this contract been
    effective as of January 1, 1995, selling and administrative expenses would
    have been higher as indicated.
 
                                      F-20
<PAGE>   75
 
                    REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
 
To:  Euro Tech Holdings Company Limited
 
     We have audited the accompanying balance sheet of Euro Tech Holdings
Company Limited (the "Company"), incorporated in the British Virgin Islands, as
of October 31, 1996, expressed in United States dollars. This balance sheet is
the responsibility of the Company's management. Our responsibility is to express
an opinion on this balance sheet based on our audit.
 
     We conducted our audit 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 balance
sheet is free of material misstatement. An audit includes examining, on a test
basis, evidence supporting the amounts and disclosures in the balance sheet. An
audit also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall balance sheet
presentation. We believe that our audit provides a reasonable basis for our
opinion.
 
     In our opinion, the balance sheet referred to above present fairly, in all
material respects, the financial position of the Company as of October 31, 1996
in conformity with generally accepted accounting principles in the United States
of America.
 
                                          /s/ ARTHUR ANDERSEN & CO.
                                          Certified Public Accountants
                                          Hong Kong
 
Hong Kong,
November 13, 1996.
 
                                      F-21
<PAGE>   76
 
                       EURO TECH HOLDINGS COMPANY LIMITED
 
                                 BALANCE SHEET
 
                             AS OF OCTOBER 31, 1996
 
<TABLE>
<CAPTION>
                                                                                       US$
                                                                                     -------
<S>                                                                                  <C>
ASSETS
Current asset:
  Cash.............................................................................   168.01
                                                                                     -------
Organization costs.................................................................  8,257.00
                                                                                     -------
          Total assets.............................................................  8,425.01
                                                                                     =======
LIABILITIES
Current liabilities:
  Accruals and other payables......................................................  8,425.00
                                                                                     -------
SHAREHOLDERS' EQUITY
  Share capital....................................................................     0.01
                                                                                     -------
          Total liabilities and shareholders' equity...............................  8,425.01
                                                                                     =======
</TABLE>
 
    The accompanying notes are an integral part of this financial statement.
 
                                      F-22
<PAGE>   77
 
                       EURO TECH HOLDINGS COMPANY LIMITED
 
                           NOTES TO THE BALANCE SHEET
 
                  (AMOUNTS EXPRESSED IN UNITED STATES DOLLARS)
 
1.  ORGANIZATION
 
   
     Euro Tech Holdings Company Limited (the "Company") was incorporated in the
British Virgin Islands on September 30, 1996 and is owned by Sidford
International Limited (66.7%) and Gusrae, Kaplan & Bruno, Esqs (33.3%). Sidford
International Limited is a business consultant of Euro Tech (Far East) Limited
("Far East"), a company incorporated in Hong Kong, and Gusrae, Kaplan & Bruno,
Esqs is the United States counsel of the Company. In November 1996, the Company
issued 100,000 and 50,000 common shares at par value of US$0.01 per share to
Sidford International Limited and Gusrae, Kaplan & Bruno, Esqs., respectively,
for a total consideration of $1,500. Euro Tech Holdings Company Limited will
repurchase the 100,000 common shares from Sidford International Limited at a
cost of US$1,000 and Euro Tech Holdings Company Limited will become wholly owned
by Gusrae, Kaplan & Bruno, Esqs. before the initial public offering described in
Note 2 below. The shares issued to Gusrae, Kaplan & Bruno, Esqs. will be
recorded at fair market value at the completion of the initial public offering.
In addition, the Company issued 1,000,000 redeemable common share purchase
warrants to certain private investors for aggregate gross proceeds of $150,000.
Each warrant entitles the holder to purchase one common share exercisable at
$5.50 per share (subject to adjustment) for a period of five years commencing
one year after the date of the Prospectus. The Company will repurchase 70,000
redeemable common share purchase warrants from certain private investors at a
cost of $10,500.
    
 
2.  INITIAL PUBLIC OFFERING
 
     The Company is planning for an initial public offering (the "Offering") of
600,000 common shares, par value $0.01 per share, of the Company and 600,000
redeemable common share purchase warrants. Upon completion of the Offering, the
Company will acquire all of the issued and outstanding ordinary shares of Far
East by issuance of 1,027,600 and 372,400 common shares of the Company to Regent
Earning Limited, a company incorporated in Hong Kong, and Pearl Venture Limited,
a company incorporated in the British Virgin Islands, respectively. Regent
Earning Limited and Pearl Venture Limited in the aggregate hold 100% of the
outstanding shares of Far East. This transaction will be accounted for as a
reorganization of companies under common control in a manner similar to a
pooling of interests. Far East 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. Upon the consummation of the
above transaction, Far East will become a wholly owned subsidiary of the
Company.
 
3.  SIGNIFICANT ACCOUNTING POLICY
 
    ORGANIZATION COSTS
 
     Organization costs represent costs incurred in the establishment of the
Company and are amortized using the straight-line method over a period of five
years.
 
4.  STOCK OPTION PLAN
 
     During the period, the Company established a stock option plan which
provides for the grant of options to employees, officers, directors and
consultants. The stock option plan is to be administered by the Board of
Directors or a committee of the Board of Directors which will determine the
terms of options granted, including the exercise price, the number of shares
subject to the option and the terms and conditions of exercise. The total number
of shares of common stock for which options may be granted under the stock
option plan is 150,000 shares and the exercise price of all stock options
granted under the stock option plan must be at least US$5.50. The term of each
option granted pursuant to the stock option plan may be
 
                                      F-23
<PAGE>   78
 
established by the Board of Directors or a committee of the Board of Directors,
in its sole discretion; provided, however, that the maximum term of each such
option granted pursuant to the stock option plan is six years. Options shall
become exercisable at such times and in such installments as the Board of
Directors or a committee of the Board of Directors shall provide in the terms of
each individual option, provided, however, that as to 50,000 and 100,000
options, by their terms automatically terminate unless the Company achieves net
income levels of not less than US$990,000 and US$1,800,000, respectively, during
the Company's fiscal years ending December 31, 1997 and 1998.
 
     The Company has also authorized the issuance of options to purchase up to
an aggregate of 1,400,000 shares of common stock (the "Management" Options") to
its officers and directors in such numbers and to such persons as the Company's
Chairman of the Board and Chief Executive Officer may direct. Any such
Management Options will not be exercisable until one year after the initial
public offering and may have a term of up to ten years. The exercise price of
the Management Options will be US$4.00 per share for 400,000 of such options and
US$5.50 per share for the remaining 1,000,000 options.
 
     As of October 31, 1996, no option had been granted by the Board of
Directors.
 
                                      F-24
<PAGE>   79
 
                                    APPENDIX
 
                         THE PEOPLE'S REPUBLIC OF CHINA
 
AREA AND POPULATION
 
     The PRC is the third largest country in the world in terms of land area. It
has a territory of approximately 9.6 million square kilometers (3.71 million
square miles).
 
     The PRC is also the most populous country in the world with a population at
the end of 1995 of over 1.2 billion, representing about one-fifth of the world's
population. The population is unevenly distributed, being very dense in the
east, with over 75% of PRC's population living in the eastern half of the
country.
 
     The PRC is becoming increasingly urbanized. In 1949, the PRC urban
population accounted for only 11% of the total population with the remaining 89%
living in rural areas. At the end of 1995, about 29% of the population (that is,
approximately 398 million people), lived in the cities and 71% (approximately
852 million people) lived in rural areas.
 
POLITICAL OVERVIEW
 
     The structure of the PRC political system is organized on the basis of the
PRC Constitution, which was first adopted in 1954, with a New Constitution
adopted in 1982 and amended in 1988 and 1993. The structure consists of the
National People's Congress ("NPC"), which is the highest organ and law-making
body under the PRC Constitution, and the State Council, which is the highest
executive organ of the laws and decisions made by the NPC.
 
     All state organs derive official authority from the PRC Constitutions and
other laws. The principal powers of the NPC include amending and enacting the
PRC Constitution, promulgating and reviewing China's national laws and other
regulations, appointing and removing the Premier and other members of the State
Council, the Chairman of the Central Military Commission, the President of the
Supreme People's Court, the Procurator General of the Supreme People's
Procurate, and the President and Vice-President of the PRC and approving
national, social and economic plans. The NPC represents the highest level of
state power and is composed of approximately 2,900 indirectly elected
delegates/deputies. The NPC meets annually with the Standing Committee of the
NPC exercising state power when the NPC is not in session.
 
     While the NPC is the highest policy and law-making body, the State Council
is the highest executive organ of the state. The Premier of the State Council is
appointed by the NPC. The State Council is responsible for the supervision and
co-ordination of all ministries and commissions at the state level, as well as,
all administrative agencies at the local level. It prepares and supervises the
implementation of the state budget.
 
     The Chinese Communist Party ("CCP") has been the governing party since
1949.
 
     PRC's Constitution provides that the PRC may be divided into administrative
subdivisions which currently consist of 23 provinces (which includes Taiwan),
three municipalities (Beijing, Shanghai and Tianjin), five autonomous regions
and 2,171 counties. At the local level, administrative entities derive their
authority from, and are accountable to, the People's Congresses at the
provincial and municipal levels.
 
ECONOMIC OVERVIEW
 
ECONOMIC STRUCTURE
 
     The PRC's economy is currently comprised of the following major sectors:
state-owned enterprises, collectively-owned enterprises, individually-owned
enterprises, companies limited by shares, including companies limited by shares
that are subject to varying degrees of state ownership, and enterprises owned at
least 25% by foreign individuals or foreign companies ("foreign-invested
enterprises"). Although the proportion of industrial output attributable to
state-owned enterprises has been decreasing, state-owned enterprises still play
a leading role in the economy. In 1993, state-owned enterprises accounted for
approximately 30.9% of the
 
                                       A-1
<PAGE>   80
 
PRC's total national gross industrial output value while companies limited by
shares, cooperative enterprises and foreign-invested enterprises together
accounted for approximately 13.1% of such output value.
 
     The fastest growing sectors of the PRC's economy have been companies
limited by shares, cooperative enterprises and foreign-invested enterprises.
From 1989 to 1993, the percentage contribution of total national gross
industrial output value of companies limited by shares, cooperative enterprises
and foreign-invested enterprises increased from 5.7% of the PRC's total national
gross industrial output value in 1991 to 13.1% in 1995. In addition, township
and village enterprises ("TVEs"), constituting small-scale collective
enterprises, developed primarily in townships and rural areas after the 1978
reforms, have been a vibrant segment of the economy. The percentage contribution
of TVEs to the total national gross industrial output value represented at least
34.2% of the PRC's total gross industrial output value in 1995. In 1995, total
national industrial gross output value was approximately Rmb9,852 billion, an
increase of approximately 21.5% over 1994.
 
     The PRC Government relies predominantly on state-owned enterprises for its
revenues. These enterprises dominate major industrial sectors such as energy and
raw materials, heavy industries, transport and communications. Because of their
inefficiency and the large drain on the state budget from subsidies to them,
there have been demands for stateowned enterprises to be placed under greater
financial discipline. One of the goals of recent management and other reforms is
to reduce state subsidies to loss-making state-owned enterprises so that they
will assume greater responsibility for their own profits and losses.
 
     One of the important recent reforms has been the conversion of selected
state-owned enterprises into limited liability shareholding companies, and the
issue of shares to public and private investors (including employees).
 
     Collectively-owned enterprises are mostly located in rural areas and
concentrated in industries with lower demands for capital and technology or with
greater consumer orientation. Collectively-owned enterprises are not subject to
strict control, but are only under the guidance of the State Plan. This allows
them more operational flexibility than state-owned enterprises, but entitles
them to fewer state subsidies.
 
     Individually-owned enterprises are typically family-run small businesses.
Individually-owned and other enterprises generally engage in service industries
or retail businesses and are not covered by the State Plan.
 
ECONOMIC PLANS AND DEVELOPMENT
 
     The development of the PRC's economy has been characterized by the
adoption, since 1953, of Five Year Plans. Implementation of the plans is carried
out under the supervision of the State Planning Commission, which reports
directly to the State Council. The eighth Five Year Plan for national, economic
and social development for 1991-1995, along with a ten-year program which
extends to 2000, was adopted on March 28, 1991, by the Standing Committee of the
NPC.
 
     One common objective for both of these plans is for the PRC to quadruple
its gross national output from RMB710 billion in 1980 to RMB2,800 billion by the
end of this century. This objective requires the country's output to grow at a
compound annual rate of growth of about 6% in the 1990s. From 1980 to 1990, the
PRC had an average annual GNP growth rate of approximately 9%, which
substantially exceeded both of the annual targeted rates of 4.0% and 7.5% of the
sixth Five Year Plan (1981-1985) and the seventh Five Year Plan (1986-1990),
respectively.
 
     The plans also call for the establishment of an economic structure
consistent with a socialist planned economy based on public ownership and market
regulation. In addition, emphasis is placed on the further opening of the PRC to
the outside world by expanding economic and technological exchanges with other
countries. The plans also seek to relieve supply bottle-necks which have arisen
from rapid growth during the 1980s and to allocate resources to the priority
areas of agriculture, energy, transportation, telecommunications and basic
materials industries.
 
     The PRC's target of 9% annual GNP growth rate in the current eighth Five
Year Plan is somewhat higher than the average 7.78% per annum achieved in the
previous Five Year Plan from 1986 to 1990.
 
                                       A-2
<PAGE>   81
 
ECONOMIC REFORMS
 
     In 1978, the PRC began implementing an economic reform program in an effort
to revitalize the economy and improve the standard of living. Since that time,
the PRC Government's economic policies have allowed for an increasing degree of
liberalization from a centrally-planned economy to a more market-oriented
economy. At the fourteenth Party Congress held in October 1992, the Congress
called for a "socialist market economy" in which full rein should be given to
market forces with the government limiting its role to setting and implementing
broad macro-economic policies. This was later endorsed by the eighth session of
the NPC amending the Constitution. As part of the economic reforms, managers of
enterprises have been granted more decision-making powers and responsibilities
in relation to matters such as production, marketing, use of funds, and
employment and disciplining of staff.
 
     On November 14, 1993, the Central Committee of the CPC affirmed its
commitment to pursue the implementation of economic reforms through the adoption
of the "Decision of the CPC Central Committee on Issues Concerning the
Establishment of a Socialist Market Economy" (the "Decision on Economic
Structure"). Those reforms include (1) reducing the PRC government's
administrative control over the economy in favor of management of the economy
using macro-economic monetary and fiscal tools; (2) introducing further
competition in the labor market; (3) promoting further corporatization of
State-owned enterprises and reducing the involvement of the PRC government in
the management of such enterprises; (4) continuing to permit the prices of more
goods and services to be determined by market forces; (5) actively and steadily
expanding financing activities in the form of stocks and bonds; (6) developing
an auction system in which the public can bid for commercial land use rights;
(7) comprehensively revising the taxation system; (8) separating the
policy-lending activities from the commercial-lending activities of the PRC's
major banks in order to develop such banks into commercial banks; and (9)
permitting deposit and loan interest rates to float freely within a range.
 
     The implementation of economic reforms by the PRC government since 1978 has
also been marked by a number of other specific reform measures, such as rural,
enterprise, price, fiscal, and foreign trade and foreign investment reforms.
Effective January 1, 1994, the PRC government introduced a new unitary and
controlled floating exchange rate system to gradually replace the dual-rate
foreign exchange system.
 
     Under the new regime of the income tax laws, income tax at the rate of 33%
is imposed upon virtually all domestic enterprises and foreign-invested status
enterprises, other than those enjoying preferential treatment granted to
enterprises located in designated areas or engaged in specified industries, thus
equalizing the tax treatment of domestic and foreign-invested status
enterprises.
 
     A new Value-Added Tax ("VAT") was introduced to replace a number of
previously existing taxes. The VAT regulations subject all goods produced or
processed in the PRC, other than real property and goods produced or processed
for export, to VAT at each stage or sale in the process of manufacture,
processing and distribution, through the sale to the ultimate consumer of the
goods. The basic VAT rate is 17% of the sale price of the item, although certain
goods are assessed VAT at a preferential 13% rate. The seller of the goods adds
VAT at the applicable rate to the sale price of the item, separately invoiced
(except in the case of retail sales) and collects the applicable amount of VAT
through the sale of the item.
 
     Other newly introduced taxes include consumption tax, land value-added tax
and resources tax.
 
                                       A-3
<PAGE>   82
 
     The following table sets forth selected data regarding the PRC's economy
for 1991 through 1995.
 
<TABLE>
<CAPTION>
                                               1991        1992        1993        1994        1995
                                              -------     -------     -------     -------     -------
<S>                                           <C>         <C>         <C>         <C>         <C>
GNP (in billions of Rmb)....................  2,166.6     2,665.1     3,447.7     4,491.8     5,765.0
Per Capita GNP (in Rmb).....................  1,833.0     2,288.0     2,926.0     3,679.0     4,757.0
GDP (in billions of Rmb)....................  2,161.8     2,663.5     3,451.4     4,500.6     5,773.3
Exports (in billions of $)..................     71.8        84.9        91.7       121.0       148.8
Imports (in billions of $)..................     63.8        80.6       104.0       115.7       132.1
Current Account Balance (in billions of $)
  (year end)................................     13.3         6.4       (11.9)        7.7         2.0
Official International Reserves (in billions
  of $) (year end)..........................     23.3        21.2        23.0        53.5        76.0
Total Industrial Gross Output Value (in
  billions of Rmb)..........................  2,824.8     3,706.6     5,269.2     7,690.2     9,852.0
Total Agricultural Gross Output Value (in
  billions of Rmb)..........................    815.7       908.5     1,099.6     1,575.0     2,032.8
Inflation Rate..............................      2.9%        5.4%       13.2%       21.7%       14.8%
</TABLE>
 
- ---------------
Sources: China Statistical Yearbook: 1995, 1996 Statistical Survey. State
         Statistical Bureau of China; the PBOC.
 
     The following table sets forth data regarding percentage changes in certain
key PRC economic indicators for 1991 through 1995:
 
                             ECONOMIC GROWTH RATES
 
<TABLE>
<CAPTION>
                                                          1991     1992     1993     1994     1995
                                                          ----     ----     ----     ----     ----
                                                                   (PERCENTAGE INCREASE)
<S>                                                       <C>      <C>      <C>      <C>      <C>
GNP.....................................................   9.5%    14.0%    13.3%    11.6%    10.2%
Per Capita GNP..........................................   7.8%    12.8%    12.2%    10.2%     8.2%
GDP.....................................................   9.3%    14.2%    13.8%    11.8%    10.2%
Total Industrial Gross Output Value.....................  14.8%    27.5%    28.0%    26.0%    21.5%
Total Agricultural Gross Output Value...................   3.7%     6.4%     7.8%     8.6%    10.5%
</TABLE>
 
- ---------------
Sources:China Statistical Yearbook: 1995, 1996 Statistical Survey. State
        Statistical Bureau of China.
 
     The last decade of economic reform has resulted in a great change in the
PRC's industrial pattern. In the first three decades after 1949, the PRC placed
great emphasis on heavy industry rather than light industry and as a result the
growth rate of heavy industry consistently out-performed that of light industry.
In recent years growth in the industrial output has become relatively balanced
between light industry and heavy industry.
 
     The PRC's economic reform has not been without problems. Overheating of the
economy, inflation and stagnation in its basic infrastructure development
prompted the government to implement policies to curb inflation from time to
time during the 1980s. An austerity policy in 1988, in particular, led to two
years of stagnant markets and an economic downswing. Starting in early 1992,
boosted by Deng Xiaoping's calls for faster economic development during his
visit to southern China, the pace of the PRC's economic reform has accelerated.
 
     At present, the PRC is in another period of very fast economic development.
However, economic problems are being encountered mainly due to over-investment
in fixed assets, rapid growth in the monetary supply, serious bottle-neck
problems in transport infrastructure, excessive increases in the prices of some
consumer goods and the costs of production. Commencing in the second half of
1993, the PRC implemented macro-economic and fiscal policies in an effort to
control its overheated economy. The plan included raising interest rates,
calling in speculative loans, cutting government expenditure and suspending some
price reform measures. The challenge facing the PRC's economic planners is to
ensure that the economy continues to grow, but that this growth takes place in a
stable and non-inflationary environment.
 
                                       A-4
<PAGE>   83
 
FOREIGN TRADE
 
     The PRC's foreign trade has grown rapidly since 1978 in both quantity and
range. Prior to 1978, foreign trade was highly centralized and all imports and
exports were controlled by the then Ministry of Foreign Trade through a series
of specialized foreign trade corporations. In 1978, the PRC government began to
decentralize foreign trade. Several central government agencies and regional
authorities established their own trading corporations. In 1982, the Ministry of
Foreign Economic Relations and Trade ("MOFERT") was formed following a merger of
the various bodies formerly responsible for monitoring foreign trade and
investment, including the Ministry of Foreign Trade. In 1992, MOFERT was
succeeded by the Ministry of Foreign Trade and Economic Cooperation. On May 12,
1994, the PRC promulgated a new foreign trade law (the "Foreign Trade Law")
which, together with implementing and other regulations to be further
promulgated thereunder, is designed to further develop the PRC's foreign trade
and provide a foundation for the free import and export of goods and
technologies to and from the PRC. Because the Foreign Trade Law only became
effective on July 1 and relevant implementing and other regulations have yet to
be promulgated, it is impossible to fully judge the extent to which the Foreign
Trade Law will succeed in accomplishing its purposes.
 
     The PRC's foreign trade has grown since 1978. The growth has included
greater absolute volumes and an expanded range of traded products. The PRC's
trading partners include more than 227 countries and regions throughout the
world. For the five-year period ended December 31, 1995, the PRC's annual
exports averaged 19.1% of its annual GNP.
 
     This following table sets forth information pertaining to the PRC's foreign
trade for 1991 through 1995:
 
                                 FOREIGN TRADE
 
<TABLE>
<CAPTION>
                                                 1991      1992      1993      1994      1995
                                                 -----     -----     -----     -----     -----
                                                  (IN BILLIONS OF $, EXCEPT FOR PERCENTAGES)
    <S>                                          <C>       <C>       <C>       <C>       <C>
    Exports....................................   71.8      84.9      91.7     121.0     148.8
    Imports....................................   63.8      80.6     104.0     115.7     132.1
    Balance of Trade...........................    8.1       4.4     (12.2)      5.3      16.7
    Exports as % of Imports....................  112.6%    105.4%     88.2%    104.6%    112.6%
    Exports as % of GNP........................   17.7%     17.5%     15.3%     23.2%     21.6%
</TABLE>
 
- ---------------
Sources: Figures are based on customs statistics.
 
Sources: China Statistical Yearbook: 1995, 1996 Statistical Survey. State
         Statistical Bureau of China.
 
     In 1995, the PRC's foreign trade surplus was $16.7 billion. Exports reached
$148.8 billion, an increase of 22% over 1994, and imports reach $132.1 billion,
an increase of 14.2% over 1994. Total trade for 1995 was approximately $280.9
billion, an increase of 18.7% over 1994.
 
     The PRC currently enjoys Most Favored Nation ("MFN") trading status with
the United States which is subject to renewal on an annual basis. The PRC's MFN
status means that the PRC maintains those trading privileges enjoyed by all
normal trading partners of the United States. The PRC has retained MFN
privileges since 1980.
 
     On May 28, 1993, President Clinton signed an executive order which renewed
the PRC's MFN status for another year but set forth certain conditions that had
to be met for the status to be renewed for 1994. Under the order, the Secretary
of State was to make a recommendation to the President to extend or not to
extend MFN status to the PRC for the 12-month period beginning July 3, 1994. The
Secretary of State was to recommend against extension unless he determined that
extension would substantially promote the freedom of emigration objective of the
U.S. Trade Act of 1974 and that the PRC was complying with the 1992 bilateral
agreement between the U.S. and the PRC concerning prison labor. In addition, in
making this recommendation, the Secretary of State was to determine whether the
PRC had made overall significant progress with respect to certain human rights
matters. On June 2, 1994, President Clinton made a determination that the PRC's
MFN status be renewed for another year without such conditions. In making such
determination, the President also announced that the U.S. would no longer link
the annual extension of MFN status for the PRC
 
                                       A-5
<PAGE>   84
 
to non-trade conditions such as those set forth in the May 28, 1993 executive
order. Freedom of emigration requirements, however, remain a condition for
renewal of MFN status, unless such requirements are waived by the President.
Recision of the PRC's MFN status would subject PRC exports to the U.S. to higher
tariff. On July 1, 1994, Senate Majority Leader George Mitchell, in response to
the President's decision to renew the PRC's MFN status, introduced a bill that
would sanction goods that are produced, manufactured or exported by the People's
Liberation Army or the PRC's defense industrial trading companies or
nonqualified goods that are produced, manufactured or exported by State-owned
enterprises. Passage of the Mitchell bill or other recision of MFN status would
subject certain PRC exports to the U.S. to higher tariffs.
 
FOREIGN INVESTMENT
 
     In 1979, the PRC promulgated the first equity joint venture law, and
thereafter a number of related laws, administrative rules and regulations, which
provide a framework within which foreign investment activities are conducted and
regulated. Foreign investments in that PRC may take a number of forms, including
equity joint ventures, cooperative joint ventures and wholly foreign-owned
enterprises.
 
     Equity joint ventures are "limited liability companies" incorporated and
registered in the PRC. They are "Chinese enterprise legal persons" which have
the right to own, use and dispose of property. In contrast with equity joint
ventures, cooperative joint ventures are not necessarily separate legal persons,
although many cooperative joint ventures have such status. If a cooperative
joint venture is not a separate enterprise legal person, each Chinese and
foreign party is responsible for paying its own taxes on profits derived from
the venture and bears its own liability for risks and losses. A wholly
foreign-owned enterprise is owned completely by one or more foreign investors
and does not involve any Chinese joint venture parties. A wholly foreign-owned
enterprise must be an enterprise which either utilizes advanced technology or
which exports 50% or more of its products. Wholly foreign-owned enterprises are
restricted or prohibited from engaging in certain specified industries, such as
media, domestic commerce, foreign trade and telecommunications.
 
                    FOREIGN DIRECT INVESTMENT IN THE PRC(1)
 
<TABLE>
<CAPTION>
                                             1991        1992        1993         1994        1995
                                           --------    --------    ---------    --------    ---------
                                                               (IN MILLIONS OF $)
<S>                                        <C>         <C>         <C>          <C>         <C>
Actual Investment(2)
  Equity Joint Ventures(3)...............   2,299.0     6,114.6     15,347.8    17,932.5     19,078.0
  Wholly Foreign-Owned Enterprise........   1,134.7     2,520.3      6,505.6     8,035.6     10,371.0
  Cooperative Joint Ventures(3)..........     763.6     2,122.5      5,237.6     7,120.2      7,536.0
  Others.................................     108.7       250.0        424.0       678.2        590.0
                                           --------    --------     --------    --------     --------
          Total..........................   4,366.0    11,007.4     27,515.0    33,761.5     37,521.0
                                           ========    ========     ========    ========     ========
Contracted Investments(4)................  11,977.0    58,124.0    111,435.7    82,679.8    103,210.0
</TABLE>
 
- ---------------
(1) Excludes investments in "B" shares, "H" and "N" shares issued by Chinese
    enterprises.
 
(2) Reflects amounts disbursed during the relevant period.
 
(3) Represents amounts contributed by foreign investors.
 
(4) Reflects amounts committed during the relevant period.
 
Sources: China Foreign Economic Relations and Trade Yearbooks, 1991-1995,
         MOFTEC; 1996 Statistical Survey, State Statistical Bureau of China.
 
     According to the State Planning Commission, aggregate direct foreign
investment disbursed in 1993, including equity joint ventures, cooperative joint
ventures and wholly foreign-owned enterprises, was approximately $20 billion,
representing an increase in excess of 85% from 1992.
 
     Foreign investment in the PRC may also take the form of "B" shares, "H"
shares and "N" shares, which are shares offered exclusively to foreign investors
for purchase and sale using foreign exchange. "B" Shares were first listed and
traded on the Shanghai and Shenzhen Stock Exchanges in 1992. In October 1992, it
was announced that nine State-owned enterprises had been selected to list their
"H" shares on the Hong Kong Stock Exchange ("HKSE"). As of end of March 1994,
"H" shares of seven of these enterprises had been
 
                                       A-6
<PAGE>   85
 
listed on the HKSE. Also, in early 1994, it was announced that twenty-two
State-owned enterprises would be allowed to list their shares on foreign stock
exchanges, including the New York Stock Exchange ("NYSE") and the HKSE.
 
LEGAL SYSTEM
 
     China's legal system is based on written statutes. Decided cases generally
do not constituted binding precedents, although such cases are sometimes
referred to for guidance. Although China is still in the process of developing a
comprehensive system of laws, a significant number of laws and regulations
dealing with general economic matters, foreign investment, protection of
intellectual property, taxation, technology transfer and trade have been
promulgated since the start of China's economic reform program in 1978. In 1982,
China adopted a new Constitution which, among other things, authorizes foreign
investment and guarantees the "lawful rights and interests" of foreign investors
in China and was amended in 1988 and 1993 to provide for a "socialist market
economy."
 
     National laws in China are promulgated by the NPC or its Standing
Committee. The State Council formulates and promulgates administrative
regulations, orders and directives in accordance with the Constitution and
existing laws. The ministries and commissions under the State Council are vested
with the power to issue orders, directives and regulations within the scope of
their respective authorities. The local People's Congress and the local
government are authorized to issue local decrees and administrative regulations
to their own jurisdiction. These administrative regulations, orders and
directives as well as local decrees and administrative regulations cannot be in
conflict with the Constitution and existing laws.
 
     The principal statute governing the judicial system is The Law of the
People's Republic of China Concerning the Organization of the Judicial System,
which took effect in July 1979 and which was amended in September 1983. The
principal statute governing civil relations, including business transactions is
the General Principles of the Civil Code (the "Civil Code"), enacted in April
1986. The Civil Code can be divided into seven broad categories: general
principles, civil law, contract property, civil liability, remedies and special
provisions governing foreign economic relations. The main statute governing
civil procedure is The Law of the People's Republic of China on Civil Procedure
(the "Civil Procedure Law") which took effect in April 1991.
 
     All foreign individuals, enterprises and other entities have the same
rights and obligations as Chinese individuals, enterprises and other entities in
instituting or defending proceedings in Chinese courts. However, if the rights
and obligations of Chinese individuals, enterprises or other entities to
institute or defend legal proceedings are subject to restrictions in particular
foreign jurisdictions, then reciprocal restrictions may be imposed by Chinese
courts on the rights and obligations of individuals, enterprises and other
entities of such jurisdictions to institute or defend legal proceedings in
China.
 
     All civil cases are decided by Chinese courts on the basis of a majority
vote of the judges sitting on a case and are subject to a two-tier procedure
whereby cases are heard by a court of first instance and are then subject to
review by appellate courts. Courts are divided into four levels; the Supreme
People's Court, the Higher People's Court, the Intermediate People's Court and
the Elementary People's Court, with each level usually containing a criminal
division, a civil division, an economic division, an administrative division, an
intellectual property rights division and an enforcement division. The Supreme
People's Court is the highest judicial organ in China and is responsible for
supervising all other Courts.
 
     If a Chinese court is asked to recognize or enforce a judgment or ruling
given by a foreign court, such judgment or ruling will be recognized and
enforced only where there exists an applicable international treaty or other
arrangement or basis for reciprocal enforcement of judgments between China and
the country of the foreign court and where such enforcement would not violate
the public security, state sovereignty or basic principles of the law of China ,
or contradict the "public interest." Foreign arbitral awards may be enforced in
China pursuant to international treaties to which China is party, including the
Convention on the Recognition and Enforcement of Foreign Arbitral Awards (the
"New York Convention"), to which China acceded in 1987. As of January 1, 1992,
86 countries were members of the New York Convention, including the United
States and Hong Kong (to which Great Britain extended application of the
Convention pursuant to its own
 
                                       A-7
<PAGE>   86
 
accession). Applications for enforcement in China are handled in accordance with
the Civil Procedure Law, which provides that an application for enforcement
shall be submitted to the Intermediate People's Court of the place where the
party subject to enforcement is domiciled or where such party's property is
located.
 
     The Arbitration Law of PRC was promulgated by the Standing Committee of the
NPC on August 31, 1994 and came into effect on September 1, 1995. It is
applicable to, among other matters, trade disputes involving foreign parties
where the parties have entered into a written agreement to refer the matter to
arbitration before an arbitration committee constituted in accordance with the
Arbitration Law. Under the Arbitration Law, China Chamber of International
Commerce is authorized to formulate foreign-related arbitration rules in
accordance with the Arbitration Law and the PRC Civil Procedure Law. Where the
parties have by an agreement provided arbitration as a method for dispute
resolution, the parties are not permitted to institute legal proceeding in a
People's Court. The China International Economic and Trade Arbitration
Commission ("CIETAC"), established in Beijing under the auspices of the China
Council for the Promotion of International Trade (China Chamber of International
Commerce) is one of two domestic arbitration organizations in China charged with
arbitrating foreign-related disputes. CIETAC's arbitration rules provide that
CIETAC has jurisdiction over any dispute arising from "international economic
and trade transactions" with respect to which an arbitration agreement selecting
CIETAC arbitration is in effect. The second Chinese arbitration organization
exclusively arbitrates foreign-related maritime disputes. The CIETAC rules
provide that an award rendered by a CIETAC tribunal shall be final and binding
on the parties. The Civil Procedure Law also provides that a Chinese court may
only refuse to enforce a CIETAC final award in the event of certain procedural
errors relating to the jurisdiction of CIETAC over a given dispute or the
failure by an arbitration tribunal to abide by CIETAC rules, or in the event
that it determines that doing so would be against the "public interest." A
consistent record of enforcement in China of foreign arbitral awards has yet to
develop.
 
EXCHANGE CONTROL
 
     On December 28, 1993, the People's Bank of China, authorized by the State
Council of the PRC, announced that the dual exchange rate system for Renminbi
against foreign currencies would be replaced by a unified exchange rate system,
with effect from January 1, 1994.
 
     The People's Bank of China, with authority from the State Council, on
December 28, 1993 issued the Notice on the Further Reform of the Foreign
Exchange Control Structure with effect from January 1, 1994. The Notice unifies
the official Renminbi exchange rate and the market rate for Renminbi established
at the foreign exchange swap centers throughout the PRC. Under the Notice, all
foreign exchange income of PRC enterprises must be sold to designated banks
authorized to deal in foreign exchange. However, enterprises with foreign equity
interests and enterprises allowed to have foreign exchange bank accounts are
allowed to retain their foreign exchange earnings.
 
     In furtherance of the currency reforms, the China Foreign Exchange Trading
Center ("CFETC") was formally established and came into operation in April 1994.
CFETC has set up a computerized network with sub-centers in several major
cities, thereby forming an inter-bank market in which designated foreign
exchange banks can trade and settle their foreign currencies. The establishment
of CFETC was originally intended to coincide with the elimination of the swap
centers. However, the swap centers have been retained as an interim measure.
 
     Since the unification of the exchange rate system pursuant to the PBOC
Notice, numerous regulations, rules and notices have been issued. In particular,
the Regulations of the People's Republic of China for the Control of Foreign
Exchange (the "Forex Regulations") were promulgated by the State Council on
January 29, 1996 and came into effect on April 1, 1996. The Forex Regulations
are designed to be the foundation of foreign exchange control in the PRC and to
provide for greater convertibility of the Renminbi.
 
                                       A-8
<PAGE>   87
 
     Under the Forex Regulations, foreign exchange revenue from current account
items (that is, transaction items which occur regularly within the context of
international receipts and payment, including revenue and expenditure from
trade) must be sold to designated foreign exchange banks in accordance with the
Regulations for Administration of the Settlement, Sale and Payment of Foreign
Exchange promulgated by the PBOC on June 20, 1996 or, upon approval, deposited
into foreign exchange accounts at designated foreign exchange accounts at
designated foreign exchange banks. Foreign exchange may be purchased for payment
of current account items from designated foreign exchange banks on the strength
of valid vouchers and commercial documents in accordance with the Settlement
Regulations.
 
     Foreign exchange revenue from capital account items (that is, items of
increase or decrease in assets or liabilities due to inflow or outflow of
capital within the context of international receipts and payments, including
direct investment and all forms of loans) must be deposited into foreign
exchange accounts opened with designated foreign exchange banks. The sale of
foreign exchange revenue from capital account items is subject to the approval
of the foreign exchange control authorities.
 
     Upon termination of foreign investment enterprises and provided that
liquidation has been carried out and taxes have been paid in accordance with the
relevant State Counsel regulations, the Renminbi funds belonging to the foreign
investors may be remitted or carried out of the PRC in foreign exchange
purchased from designated foreign exchange banks. The foreign exchange belonging
to the PRC investors shall be sold to the designated foreign exchange banks.
 
     The Forex Regulations also reinforce the implementation of a foreign debt
registration system by the state. Loans taken out by foreign investment
enterprises are required to be reported to the SAEC. Foreign exchange guarantees
may only be issued by financial institutions and enterprises which conform to
conditions specified by the state and shall be subject to registration with and
approval of the SAEC.
 
     Foreign investment enterprises continue to be able to access foreign
exchange through the swap centers. Pursuant to Settlement Regulations, foreign
investment enterprises can also access foreign exchange through designated
foreign exchange banks.
 
     The following table sets forth (a) the Official Exchange Rate and the
exchange rate at the Shanghai Swap Center for 1991 through 1994 and (b) the
PPBOC Rate (as reflected by the Noon Buying Rate) and the exchange rate at the
Shanghai Swap Center in 1995 and the first quarter of 1996:
 
                                 EXCHANGE RATES
 
<TABLE>
<CAPTION>
                         OFFICIAL EXCHANGE RATE/PROC RATE(1)              SHANGHAI SWAP CENTER RATE
                       ---------------------------------------     ---------------------------------------
                       PERIOD                                      PERIOD
       PERIOD           END     AVERAGE(2)    HIGH       LOW        END     AVERAGE(2)    HIGH       LOW
- ---------------------  ------   ----------   ------     ------     ------   ----------   ------     ------
                            (EXPRESSED IN RMB PER $1.00)                (EXPRESSED IN RMB PER $1.00)
<S>                    <C>      <C>          <C>        <C>        <C>      <C>          <C>        <C>
1991.................  5.4478     5.3343     5.4478     5.2352     5.8980     5.8534     5.9290     5.7490
1992.................  5.7662     5.5214     5.9007     5.4124     7.7060     6.7497     7.7700     5.8970
1993.................  5.8145     5.7769     5.8245     5.7076     8.7000     8.7207     10.9230    7.7180
1994.................  8.4662     8.6303     8.7409     8.4662     8.4461     8.5790     8.7080     8.4459
1995.................  8.3374     8.3685     8.4584     8.3203     8.3174     8.3494     8.4448     8.2764
1st quarter, 1996....  8.3538     8.3429     8.3538     8.3338     8.3339     8.3229     8.3365     8.3079
</TABLE>
 
- ---------------
(1) For periods prior to 1994, the Official Exchange Rate; for subsequent
    periods, the PBOC Rate.
 
(2) Determined by averaging the rates on the last business day of each month
    during the relevant period.
 
Sources:Official Exchange Rates are as reported at the Noon Buying Rates.
        Shanghai Swap Center Rates have been obtained from the Shanghai Swap
        Center.
 
                                       A-9
<PAGE>   88
 
     For the five-year period ended December 31, 1991, there was a consistent
devaluation of the Renminbi against the United States Dollar. In February 1993,
the SAEC imposed limits on foreign currency exchange rates available at swap
centers. Under such limitations, the Renminbi/United States Dollar exchange rate
was officially capped at approximately Rmb8.40 to $1.00. These limitations,
together with continue devaluations of the Renminbi and increasing demand for
foreign currency in early 1993, gave rise to the development of unofficial
foreign currency markets which are not subject to such restrictions. As a
result, there were periodic shortages of foreign currency at swap centers in
1993. On June 1, 1993, the ceilings on swap center rates were removed, and these
rates promptly were adjusted to reflect prevailing market rates. On June 1,
1993, the Renminbi/United States Dollar exchange rate at the Shanghai swap
center was Rmb10.170 to $1.00. Thereafter, the Renminbi/United States Dollar
exchange rate declined at the Shanghai swap center to approximately Rmb8.7 to
$1.00 at December 31, 1993.
 
                                      A-10
<PAGE>   89
 
======================================================
 
  NO DEALER, SALESPERSON OR OTHER PERSON HAS BEEN AUTHORIZED IN CONNECTION WITH
THIS OFFERING TO GIVE ANY INFORMATION OR TO MAKE ANY REPRESENTATIONS OTHER THAN
THOSE CONTAINED IN THIS PROSPECTUS. THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER
OR A SOLICITATION IN ANY JURISDICTION TO ANY PERSON TO WHOM IT IS UNLAWFUL TO
MAKE SUCH AN OFFER OR SOLICITATION. NEITHER THE DELIVERY OF THIS PROSPECTUS NOR
ANY SALE MADE HEREUNDER SHALL, UNDER ANY CIRCUMSTANCES, CREATE AN IMPLICATION
THAT THERE HAS BEEN NO CHANGE IN THE CIRCUMSTANCES OF THE COMPANY OR THE FACTS
HEREIN SET FORTH SINCE THE DATE HEREOF.
 
                               TABLE OF CONTENTS
 
   
<TABLE>
<CAPTION>
                                         PAGE
                                       ------
<S>                                    <C>
Prospectus Summary.....................      4
Risk Factors...........................      9
Dilution...............................     18
Use of Proceeds........................     19
Capitalization.........................     21
Selected Financial Information.........     22
Management's Discussion and Analysis of
  Financial Condition and Results of
  Operations...........................     24
Business...............................     30
Management.............................     36
Principal Shareholders.................     40
Certain Transactions...................     41
Description of Securities..............     43
Shares Eligible for Future Sale........     45
Underwriting...........................     47
Concurrent Registration of
  Securities...........................     48
Legal Matters..........................     48
Experts................................     49
Enforcement of Civil Liabilities.......     49
Additional Information.................     50
Index to Financial Statements..........    F-1
Appendix -- The People's Republic of
  China................................    A-1
</TABLE>
    
 
   
UNTIL APRIL   , 1997 (25 DAYS AFTER THE DATE OF THE PROSPECTUS), ALL DEALERS
EFFECTING TRANSACTIONS IN THE REGISTERED SECURITIES, WHETHER OR NOT
PARTICIPATING IN THIS DISTRIBUTION, MAY BE REQUIRED TO DELIVER A PROSPECTUS.
THIS IS IN ADDITION TO THE OBLIGATION OF DEALERS TO DELIVER A PROSPECTUS WHEN
ACTING AS UNDERWRITERS AND WITH RESPECT TO THEIR UNSOLD ALLOTMENTS OR
SUBSCRIPTIONS.
    
 
======================================================
======================================================
                                   EURO TECH
                            HOLDINGS COMPANY LIMITED
 
                               600,000 SHARES OF
                                COMMON STOCK AND
                               600,000 REDEEMABLE
                         COMMON STOCK PURCHASE WARRANTS
 
                              --------------------
 
                                   PROSPECTUS
                              --------------------
 
                             MAY DAVIS GROUP, INC.
                                            , 1997
 
             ======================================================
<PAGE>   90
 
     INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A
     REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE
     SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR
     MAY OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT
     BECOMES EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR
     THE SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE
     BE ANY SALE OF THESE SECURITIES IN ANY STATE IN WHICH SUCH OFFER,
     SOLICITATION OR SALE WOULD BE UNLAWFUL PRIOR TO REGISTRATION OR
     QUALIFICATION UNDER THE SECURITIES LAWS OF ANY SUCH STATE.
 
            [ALTERNATE PAGE FOR SELLING SECURITYHOLDERS' PROSPECTUS]
 
   
                  SUBJECT TO COMPLETION, DATED MARCH 11, 1997
    
 
                       EURO TECH HOLDINGS COMPANY LIMITED
 
   
               930,000 REDEEMABLE COMMON STOCK PURCHASE WARRANTS
    
 
   
                       AND 930,000 SHARES OF COMMON STOCK
    
 
     This Prospectus relates to the resale by certain selling securityholders
(the "Selling Securityholders") of 930,000 Shares of common stock, par value
$.01 per share (the "Common Stock") and 930,000 common stock purchase warrants
(the "Warrants") of Euro Tech Holdings Company Limited, a British Virgin Islands
Company (the "Company"). None of the proceeds from the sale of the Common Stock
and Warrants by the Selling Securityholders will be received by the Company. The
Company will bear all expenses (other than selling commissions and fees and
expenses of counsel or other advisors to the Selling Securityholders) in
connection with the registration and sale of the Common Stock and Warrants being
offered by the Selling Securityholders. The Common Stock and the Warrants are
sometimes collectively referred to as the "Securities."
 
     The Common Stock and Warrants will be offered by the Selling
Securityholders in transactions in the over-the-counter market, in negotiated
transactions or a combination of such methods of sale, at fixed prices which may
be changed, at market prices prevailing at the time of sale, at prices related
to such prevailing market prices, or at negotiated prices. The Selling
Securityholders may effect such transactions by selling the Common Stock and
Warrants to or through broker/dealers, and such broker/dealers may receive
compensation in the form of discounts, concessions or commissions from the
Selling Securityholders and/or the purchasers of the Common Stock and Warrants
for whom such broker/dealers may act as agent or to whom they sell as principal,
or both. The Selling Securityholders may be deemed to be "underwriters" as
defined in the Securities Act of 1933, as amended (the "Securities Act"). If any
broker/dealers are used by the Selling Securityholders, any commission paid to
broker/dealers and, if broker/dealers purchase any Common Stock or Warrants as
principals, any profits received by such broker/dealers on the resales of the
Securities may be deemed to be underwriting discounts or commissions under the
Securities Act. In addition, any profits realized by the Selling Securityholders
may be deemed to be underwriter commissions. All costs, expenses and fees in
connection with the registration of the Common Stock and Warrants offered by
Selling Securityholders will be borne by the Company. Brokerage commissions, if
any, attributable to the sale of the Common Stock and Warrants will be borne by
the Selling Securityholders. See "Selling Securityholders" and "Plan of
Distribution."
 
   
     The Company has applied for listing of the Common Stock and Warrants on the
NASDAQ SmallCap Market ("NASDAQ") under the symbols "CLWTF" and "CLWWF",
respectively.
    
 
     Concurrently with the commencement of this offering, the Company offered by
separate Prospectus 600,000 shares of Common Stock and 600,000 Warrants (the
"Public Securities"). The Company's offering (the "Public Offering") is being
made through May Davis Group, Inc. (the "Underwriter"). The Warrants offered by
the Selling Securityholders are identical to the Warrants offered in the Public
Offering. The Public Offering is subject to the simultaneous acquisition by the
Company of Euro Tech (Far East) Ltd. It is anticipated that the offering by the
Selling Securityholders will not be commenced by any of the Selling
Securityholders unless the Public Offering is successfully completed, as unless
it is so completed there will be no expectation of a market developing for any
of the Company's securities.
                            ------------------------
                  THE SECURITIES OFFERED HEREBY INVOLVE A HIGH
             DEGREE OF RISK AND IMMEDIATE AND SUBSTANTIAL DILUTION.
            SEE "RISK FACTORS," COMMENCING ON PAGE 9 AND "DILUTION."
                            ------------------------
  THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
 EXCHANGE COMMISSION (THE "COMMISSION") OR ANY STATE SECURITIES COMMISSION NOR
 HAS THE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE ACCURACY
OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL
                                    OFFENSE.
 
               THE DATE OF THIS PROSPECTUS IS             , 1997
<PAGE>   91
 
            [ALTERNATE PAGE FOR SELLING SECURITYHOLDERS' PROSPECTUS]
 
     Upon consummation of the Public Offering, the Company will be subject to
the informational requirements of the Securities Exchange Act of 1934, as
amended (the "Exchange Act"), and, in accordance therewith, will file periodic
reports and other information with the Commission. However, as a "foreign
private issuer," the Company will be exempt from the rules under the Exchange
Act prescribing certain disclosure and procedural requirements for proxy
solicitations and the Company's officers, directors and principal shareholders
will be exempt from the reporting and "short-swing" profit recovery provisions
contained in Section 16 of the Exchange Act and the rules thereunder, with
respect to their purchases and sales of shares of Common Stock and Warrants. In
addition, the Company will not be required under the Exchange Act to file
periodic reports and financial statements with the Commission as frequently or
as promptly as United States companies whose securities are registered under the
Exchange Act. However, the Company intends to furnish its shareholders with
annual reports containing financial statements which will be examined and
reported on, with an opinion expressed by an independent public accounting firm
prepared in accordance with generally accepted accounting principles in the
United States ("U.S. GAAP").
 
     The Company prepares its consolidated financial statements in accordance
with U.S. GAAP. The Company publishes its financial statements in United States
dollars as the Company is incorporated in the British Virgin Islands, where the
currency is the United States dollar, and upon completion of the Public Offering
the functional currency of the Company's only operating subsidiary is in Hong
Kong Dollars. All dollar amounts ("$") set forth in this Prospectus are in
United States dollars, the references to HK$ refer to Hong Kong Dollars and RMB
to Chinese Renminbi Yuan.
 
     The Company intends to distribute to its shareholders annual reports
containing financial statements audited and reported upon by its independent
public accountants after the close of each fiscal year, and will make such other
periodic reports as the Company may determine to be appropriate or as may be
required by law. The Company's fiscal year ends December 31st of each year.
<PAGE>   92
 
            [ALTERNATE PAGE FOR SELLING SECURITYHOLDERS' PROSPECTUS]
 
respectively, of the Company's sales during its fiscal year ended December 31,
1995 ("Fiscal 1995") and 9%, 10%, 10% and 23%, respectively, of the Company's
sales during the first six months of the Company's fiscal year ended December
31, 1996 ("Six Months 1996"). Products distributed by the Company include,
advanced water treatment and testing equipment (including chlorination
equipment) laboratory instruments, test kits and related supplies such as
spectrometers, colorimeters, chemical reagent dispensers, analyzers,
turbidimeters and pH controllers. The Company also distributes general testing
and telecommunications testing equipment, cardiac catheterization systems,
defribrillators, indoor pay telephones, and digital and analogue recorders. See
"Business."
 
     The Company distributes products through its headquarters located in Hong
Kong and its regional sales offices located in Beijing, Shanghai and Guangzhou
and through non-exclusive arrangements with independent sub-distributors. During
Fiscal 1995 and Six Months 1996, no single customer accounted for more than 5%
of the Company's sales and each of its nine sub-distributors accounted for less
than 2% of the Company's sales during Fiscal 1995 and Six Months 1996. See
"Business."
 
     The Company intends to use a substantial portion of the net proceeds of the
Public Offering to establish an operation to assemble products of the kind now
distributed by the Company, initially certain water related testing, monitoring
and treatment equipment, and if successful in assembling such products, to
expand its product assembly operations to other products of the kind now
distributed by the Company, pursuant to an agreement to be entered into with a
PRC based entity, such as the Shanghai Thermometric Instrument Plant ("STIP"),
and to expand its marketing efforts by, among other things, opening additional
regional sales offices in the PRC. The Company believes that by assembling
products that it distributes, gross profits margins, revenues and net income
will increase. Similarly, the Company believes that by expanding its regional
sales efforts in the PRC, revenues and net income will be enhanced. See "Use of
Proceeds."
 
     The Company has recently reached a preliminary agreement with STIP pursuant
to which STIP will provide space and technical expertise necessary to enable the
Company to assemble in the PRC such products. It is presently contemplated that
the Company will import components, assemble the components into finished
product and then distribute the products through the Company's distribution
network. There can be no assurance that the Company will successfully complete
an agreement with STIP or any other similar entity or that the Company's
expansion efforts will be successful. See "Business."
 
     During the Company's Fiscal 1995 and Six Months 1996, the Company had sales
of approximately $13,667,000 and $6,973,000, respectively, and net income of
approximately $79,000 and $232,000, respectively. There can be no assurance that
the recent levels of the Company's revenues or net income will continue to be
achieved in the future. See "Management's Discussion and Analysis of Financial
Condition and Results of Operations and the financial statements of the Company
and Far East and the notes thereto.
 
     The Company maintains an executive office at 18/F Gee Chang Hong Centre, 65
Wong Chuk Hang Road, Hong Kong, and its telephone number at that address is
011-852-2814-0311.
 
     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.
 
                                        5
<PAGE>   93
 
            [ALTERNATE PAGE FOR SELLING SECURITYHOLDERS' PROSPECTUS]
 
                                  RISK FACTORS
 
     Certain risk factors should be considered in evaluating the Company, its
business and its proposed product assembly operations and expansion plans. Such
factors include, among others, the risks associated with having its principal
offices and operations located in Hong Kong, where the transfer of sovereignty
is to occur shortly, risks associated with doing business in China, the possible
need for additional financing, the risks inherent in establishing new business
operations and expanding marketing efforts, competition with Chinese
manufactured products, competing with its own vendors, dependence upon vendors
and the lack of long term agreements with vendors and substantial dilution. For
a discussion of these and certain other factors, see "Risk Factors."
 
                                  THE OFFERING
 
SECURITIES OFFERED(1)......  930,000 shares of Common Stock and 930,000
                             Warrants. See "Description of Securities."
 
COMMON STOCK OUTSTANDING
  BEFORE PUBLIC
  OFFERING(1)..............  1,450,000 shares.
 
COMMON STOCK OUTSTANDING
  AFTER PUBLIC
  OFFERING(1)(2)...........  2,050,000 shares.
 
WARRANTS TO BE ISSUED IN
THE PUBLIC OFFERING........  600,000 Warrants.
 
EXERCISE TERMS.............  Each Warrant entitles the holder thereof to
                             purchase one share of Common Stock for $5.50,
                             during the five year period commencing one year
                             after the date of this Prospectus, provided,
                             however, that prior to the second year after the
                             date of this Prospectus, the Warrants will be
                             exercisable only if the Underwriter has consented
                             in writing to all of the Warrants being
                             exercisable. The exercise price and the number of
                             shares issuable upon exercise of the Warrants are
                             subject to adjustment in certain circumstances. See
                             "Description of Securities."
 
WARRANT EXPIRATION DATE....  March   , 2003 (six years after the Effective
                             Date).
 
WARRANT REDEMPTION.........  Redeemable by the Company, in whole or in part, at
                             a price of $.10 per Warrant, at any time that the
                             Warrants are exercisable upon not less than 30 days
                             prior written notice to the holders of such
                             Warrants, provided that the closing bid price of
                             the Company's Common Stock for the twenty
                             consecutive trading days immediately prior to the
                             date on which the notice of redemption is given,
                             shall have exceeded $8.50 per share.
 
USE OF PROCEEDS............  The Company will receive none of the proceeds from
                             this offering. See "Use of Proceeds."
 
                                                   (footnotes on following page)
 
                                        6
<PAGE>   94
 
            [ALTERNATE PAGE FOR SELLING SECURITYHOLDERS' PROSPECTUS]
 
PROPOSED NASDAQ SMALL CAP
  SYMBOLS:(3)
 
     COMMON STOCK.....CLWTF
 
   
     WARRANTS.........CLWWF
    
- ------------------
(footnotes from previous page)
 
(1) Includes 1,400,000 shares of the Company's Common Stock to be issued in
    connection with the Acquisition. See "Certain Transaction."
 
(2) Does not include (i) 90,000 shares of Common Stock and 90,000 Warrants,
    subject to the Underwriter's Overallotment Option; (ii) 1,530,000 shares of
    Common Stock issuable upon the exercise of the outstanding Warrants; (iii)
    120,000 shares of Common Stock issuable upon the exercise of the
    Underwriter's Warrants including the shares of Common Stock underlying the
    Warrants included within the Underwriter's Warrants; (iv) 1,400,000 shares
    of Common Stock reserved for options to be granted on or prior to the
    Effective Date to members of the Company's management and employees of Far
    East (the "Management Options"); (v) 150,000 shares of Common Stock reserved
    for issuance pursuant to the Company's incentive stock option plan; or (vi)
    100,000 shares of Common Stock reserved for options to be granted to a
    consultant to Far East on or prior to the effective date. See "Concurrent
    Public Offering of Securities," "Management" "Certain Transactions," and
    "Description of Securities."
 
(3) The proposed trading symbols do not imply that a liquid and active market
    will be developed or sustained for the Securities upon completion of the
    Public Offering. See "Risk Factors -- Possible Suspension of the Company's
    Securities from NASDAQ Even if Listing is Obtained.
 
                                        7
<PAGE>   95
 
            [ALTERNATE PAGE FOR SELLING SECURITYHOLDERS' PROSPECTUS]
 
   
basis of quality and technology, with the Company offering products of foreign
manufacturers which are of higher quality and use more advanced technology. The
Company believes that it competes with the foreign manufacturers and the
distributors of their products on the basis of the Company's more extensive
distribution network and an established reputation. However, the Company
recently disposed of one of its subsidiaries as a result of direct competition
from a manufacturer which established its own distribution network in the PRC to
distribute the type of products distributed by the subsidiary. There can be no
assurance that the Company will be able to compete effectively with its
competitors. See "Management's Discussion and Analysis of Financial Condition
and Results of Operations" and "Business."
    
 
     COMPETITION WITH VENDORS.  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
relationships with its vendors. See "Business."
 
     DEPENDENCE ON VENDORS; LACK OF LONG TERM AGREEMENTS.  The Company
distributes supplies manufactured by a number of vendors, including Wallace,
Hach, Hioki and Finnigan, which are the Company's largest suppliers, with
purchases from them accounting for approximately 11%, 7%, 7% and 4%,
respectively, of the Company's sales during Fiscal 1995 and 9%, 10%, 10%, and
23%, respectively, of the Company's sales during Six Months 1996. The Company
has only a letter from Hioki appointing the Company as Hioki's sales
representative in the PRC, Hong Kong and Macau, its agreement with Wallace is
terminable by either party on thirty days notice prior to its annual renewal
date, its agreement with Finnigan is terminable on ninety days notice by either
party and the agreement with Hach expires in March 1997, unless a renewal is
obtained. 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. See
"Business."
 
     BROAD DISCRETION IN APPLICATION OF PROCEEDS.  Approximately 24% of the net
proceeds received by the Company from the Public Offering have been allocated to
working capital and the Company will have broad discretion as to the application
of such funds. See "Use of Proceeds."
 
     CONTROL BY T.C. LEUNG; POTENTIAL CONFLICTS OF INTEREST.  After the
successful completion of the Public Offering, T.C. Leung, the Company's Chairman
of the Board and Chief Executive Officer will beneficially own approximately 68%
of the Company's issued and outstanding shares of Common Stock which as a
practical matter will enable him 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. See
"Principal Stockholders." As a consequence, Mr. Leung could, as a practical
matter, have the Company managed in a manner that would be in his own best
interests and not the interest of the other shareholders of the Company.
 
     CERTAIN LEGAL CONSEQUENCES OF INCORPORATION IN THE BRITISH VIRGIN ISLANDS;
RIGHTS OF SHAREHOLDERS NOT AS EXTENSIVE AS IN UNITED STATES CORPORATIONS;
UNCERTAINTY OF ENFORCING UNITED STATES JUDGMENTS.  The Company's corporate
affairs are governed by its Memorandum of Association, Articles of Association
and the corporate law of the British Virgin Islands. Principles of law relating
to such matters as the validity of 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. 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. Shareholder action must be taken in good faith and
action 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
 
                                       13
<PAGE>   96
 
            [ALTERNATE PAGE FOR SELLING SECURITYHOLDERS' PROSPECTUS]
 
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. Thus, 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 than they
might have as shareholders of a company incorporated in many United States
jurisdictions. In addition, there is uncertainty whether the courts of BVI would
enforce judgments of the courts of the United States and of other foreign
jurisdictions. There is also uncertainty whether the courts of the BVI would
enforce actions brought in the BVI which are based upon the securities laws of
the United States. See "Description of Securities."
 
     UNCERTAINTY OF ENFORCING UNITED STATES JUDGMENTS IN HONG KONG AND THE
PRC.  As all of the Company's officers and directors reside outside of the
United States, service of process upon the Company and such persons may be
difficult to effect in the United States. Furthermore, all of the Company 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 United States
Corporations; Uncertainty of Enforcing United States Judgments" and "Enforcement
of Civil Liabilities."
 
     LACK OF INDEPENDENT DIRECTORS.  All current members of the Company's Board
of Directors are employed by Far East and, as such, there are no current members
of the Company's Board of Directors who are not affiliated or associated with
Far East and who are independent of the Company and/or Far East. All decisions
affecting the day-to-day operations of the Company and Far East will be made by
a Board of Directors, the members of which are not independent of the Company
and Far East. See "Management."
 
     OUTSTANDING LOAN TO AFFILIATED PARTY.  At June 30, 1996, Regent Earning,
Ltd. ("Regent") was indebted to the Company in the approximate sum of
HK$3,800,000. Regent owns approximately two-thirds of the outstanding equity
securities of Far East and upon completion of the Public Offering will own
approximately 48% of the Company's issued and outstanding shares of Common
Stock. Regent's majority shareholder is Pearl Venture, Ltd. which is a trust
established for the benefit of T.C. Leung, Chairman of the Company's Board of
Directors and its Chief Executive Officer. See "Management's Discussion and
Analysis of Financial Condition and Results of Operations," "Principal
Shareholders" and "Certain Transactions."
 
     FORWARD LOOKING STATEMENTS.  This Prospectus 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 Commission or otherwise. Such
forward looking statements are within the meaning of that term in Section 27A of
the Securities Act of 1933, as amended, (the "Securities Act"), and Section 21E
of the Exchange Act. 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 Prospectus, including those contained in the sections entitled "Risk
Factors," "Use of Proceeds," "Management's Discussion and Analysis of Financial
Condition and Results of Operations," "Business" and in the notes to the
Company's Financial Statements, describe factors, among others, that could
contribute to or cause such differences.
 
                                       14
<PAGE>   97
 
            [ALTERNATE PAGE FOR SELLING SECURITYHOLDERS' PROSPECTUS]
 
     DILUTION.  As a result of the sale of the Securities offered in the Public
Offering and the consummation of the Acquisition, there will be immediate and
substantial dilution to public investors in that the pro forma net tangible book
value per share of the Company's Common Stock after the Public Offering and
consummation of the Acquisition will be approximately $2.36 per share, or
approximately $2.64 (53%) less than the $5.00 Public Offering price per share.
See "Dilution."
 
     NO ASSURANCE OF PUBLIC MARKET; DETERMINATION OF OFFERING PRICE.  Prior to
the Public Offering, there has been no market for any of the Company's
securities. The initial public offering price of the Securities and the exercise
price and other terms of the Warrants have been arbitrarily determined by
negotiations between the Company and the Underwriter and such prices and terms
are not necessarily related to the Company's asset value, net worth or other
established criteria of value. In addition, there can be no assurance that a
trading market will develop after the Public Offering for any of the Company's
Securities or that, if developed, it will be sustained. See "Underwriting."
 
   
     SHARES ELIGIBLE FOR FUTURE SALE.  In general, under Rule 144, a person
which has satisfied a two-year (one-year effective on or about April 29, 1997)
holding period may, under certain circumstances, sell within any three-month
period a number of shares of common stock that does not exceed the greater of 1%
of the then outstanding shares of common stock or the average weekly trading
volume in such shares during the four calendar weeks prior to such sale. Rule
144 also permits, under certain circumstances, the sale of shares without any
quantity or other limitation by a person which is not an affiliate of an issuer
and which has satisfied a three-year holding period. The holders of all shares
of the Company's Common Stock, have agreed not to sell shares of the Company's
Common Stock owned by them on the date hereof for a period of twenty-four months
from the date of this Prospectus without the prior written consent of the
Underwriter.
    
 
     The Company has 1,450,000 shares of Common Stock outstanding that are
"restricted securities," as that term is defined under Rule 144 promulgated
under the Securities Act. The Company also has outstanding Warrants to purchase
930,000 shares of Common Stock which Warrants and shares of Common Stock
underlying the Warrants are being registered under the Registration Statement of
which this Prospectus forms a part for resale by said persons. Investors should
be aware that sales of the Company's securities may have a depressive effect on
the price of the Company's securities in any market which may develop for such
securities. See "-- Effect of Options, Warrants and Registration Rights,"
"Shares Eligible for Future Sale" and "Concurrent Registration of Securities."
 
   
     EFFECT OF OPTIONS, WARRANTS AND REGISTRATION RIGHTS.    For the respective
terms of the Underwriter's Warrants, Warrants sold as part of this Offering and
the Public Offering and registered hereby and any options that may be granted by
the Company under the Company's stock option plan or other options which may be
issued by the Company, the holders thereof are given an opportunity to profit
from a rise in the market price of the Common Stock, with a resulting dilution
in the interests of the other stockholders. Further, the terms on which the
Company may obtain additional financing during the exercise periods of said
warrants and options may be adversely effected by the existence of such
warrants, options and plan. The holders of options or warrants to purchase
Common Stock may exercise such options or warrants at a time when the Company
might be able to obtain additional capital through offerings of securities on
terms more favorable than those provided by such options or warrants. In
addition, the holders of the Underwriter's Warrants and the Private Warrants
have demand and "piggyback" registration rights with respect to their
securities. Exercise of such registration rights may involve substantial expense
to the Company. See "Management," "Certain Transactions," "Description of
Securities," "Underwriting" and "Concurrent Public Offering of Securities."
    
 
     NO CASH DIVIDENDS.  The Company has not paid any dividends to date. The
Company's Board of Directors does not presently intend to declare any dividends
in the foreseeable future, but instead intends to retain all earnings, if any,
for use in the Company's business operations. See "Description of Securities."
 
     LACK OF EXPERIENCE OF THE UNDERWRITER.  The Underwriter was organized in
August 1993, was registered as a broker in June 1995, and became a member firm
of the National Association of Securities Dealers, Inc. in June 1995. The
Underwriter is principally engaged in retail brokerage and market making
activities and
 
                                       15
<PAGE>   98
 
            [ALTERNATE PAGE FOR SELLING SECURITYHOLDERS' PROSPECTUS]
 
various corporate finance projects. The Underwriter has acted as a placement
agent in private offerings and has participated as a member of the underwriting
syndicate or as a selected dealer in one public offering and it has acted solely
one time as the lead manager in only one public offering of securities. While
certain of the officers of the Underwriter have significant experience in
corporate finance and the underwriting of securities, no assurance can be given
that the Underwriter's lack of experience as a lead managing underwriter of
public offerings will not adversely affect the Public Offering and the
subsequent development of a liquid public trading market in the Company's
securities.
 
     POTENTIAL ADVERSE EFFECT OF REDEMPTION OF WARRANTS.  At any time during
their exercise period, the Warrants may be redeemed by the Company at a
redemption price of $.10 per Warrant upon 30 days prior written notice if the
average closing bid price of the Common Stock for 20 consecutive trading days
ending within 10 days of the notice exceeds $8.50. Redemption of the Warrants
could force the holders to exercise the Warrants and pay the exercise price at a
time when it may be disadvantageous for the holders to do so, to sell the
Warrants at the current market price for the Warrants when they might otherwise
wish to hold the Warrants, or to accept the redemption price, which may be
substantially less than the market value of the Warrants at the time of
redemption. See "Description of Securities."
 
     CURRENT PROSPECTUS AND BLUE SKY REGISTRATION REQUIRED TO EXERCISE
WARRANTS.  Holders of the Warrants will have the right to exercise the Warrants
for the purchase of shares of Common Stock only if a current prospectus relating
to such shares is then in effect and only if the shares are qualified for sale
under the securities laws of the states in which the Warrantholders reside.
Although the Company intends to maintain such a current prospectus and to seek
to qualify the shares of Common Stock underlying the Warrants for sale in those
states where the Common Stock and Warrants are to be offered, there is no
assurance that it will be able to do so. The Warrants may be deprived of any
value if the current prospectus encompassing the shares underlying the Warrants
is not kept effective or if such underlying shares are not or cannot be
registered in the states in which Warrantholders reside. See "Description of
Securities."
 
     POSSIBLE SUSPENSION OF COMPANY'S SECURITIES FROM NASDAQ EVEN IF LISTING
OBTAINED.  In connection with the Public Offering, the Company has applied for
the listing of the Securities offered hereby on the NASDAQ SmallCap System.
However, there can be no assurance that the Company's application will be
granted or that, if granted, the Company will meet the criteria for continued
quotation of its securities on the NASDAQ SmallCap System. Current minimum
continued quotation criteria on the NASDAQ SmallCap System, which would make it
more difficult to maintain the listing of the Company's Securities, include,
among other things, $2,000,000 in total assets, $1,000,000 in capital and
surplus, $200,000 in aggregate market value, and a minimum bid price of $1.00
per share of Common Stock. If an issuer does not meet the $1.00 minimum bid
requirement, it may, however, remain on the NASDAQ SmallCap System if it has
$2,000,000 of capital and surplus and $1,000,000 in aggregate market value.
NASDAQ has proposed changes to its continued quotation criteria for its SmallCap
System including, among other things, $2,000,000 in net tangible assets, an
aggregate market value of $1,000,000, 500,000 shares being freely tradeable, two
independent directors and an audit committee of an issuer's board of directors
with the majority of the committee members being independent directors. If the
Company becomes unable to meet the continued quotation criteria of the NASDAQ
SmallCap System and is suspended therefrom, trading, if any, in the Company's
securities would thereafter be conducted in the over-the-counter market in the
so-called "pink sheets" if then available, the OTC Bulletin Board. In such
event, an investor would likely find it more difficult to dispose of, or to
obtain accurate quotations as to the value of, the Company's securities.
 
     RISKS OF LOW-PRICED SECURITIES.  If the Securities were to be suspended or
delisted from the NASDAQ System, the Securities would be subject to rules under
the Exchange Act, which impose additional sales practice requirements on
broker-dealers who sell such securities to persons other than established
clients and "accredited investors" (for example, individuals with a net worth in
excess of $1,000,000 or an annual income exceeding $200,000, or $300,000
together with their spouses). For transactions covered by such rules, a
broker-dealer must make a special suitability determination of the purchaser and
have received the purchaser's written consent to the transaction prior to the
sale. Consequently, such rules may affect the ability
 
                                       16
<PAGE>   99
 
            [ALTERNATE PAGE FOR SELLING SECURITYHOLDERS' PROSPECTUS]
 
of broker-dealers to sell the Company's Securities and the ability of purchasers
in this Offering to sell any of the Company's Securities acquired in this
Offering in any secondary market that may develop for such Securities.
 
     The Commission has enacted rules that define a "penny stock" to be any
equity security that has a price (as therein defined) of less than $5.00 per
share or an exercise price of less than $5.00 per share, subject to certain
exceptions, including securities listed on the NASDAQ SmallCap System or on
designated exchanges, for any transaction involving a penny stock, unless
exempt, the rules require the delivery, prior to any transaction in a penny
stock, of a disclosure statement prepared by the Commission relating to the
penny stock market. Disclosure also has to be made about the risks of investing
in penny stocks in both public offerings and in secondary trading, and about
commissions payable to both the broker-dealer and the registered representative,
current quotations for the securities and the rights and remedies available to
an investor in cases of fraud in penny stock transactions. Finally, monthly
statements must be sent disclosing recent price information for the penny stocks
held in the account and information on the limited market in penny stocks. In
the event the Company's securities are no longer listed on the NASDAQ SmallCap
System or are not otherwise exempt from the provisions of the Commission's
"penny stock" rules, such rules may also affect the ability of broker-dealers to
sell the Company's Securities and the ability of purchasers in this Offering to
sell any of the Securities acquired hereby in any secondary market that may
develop.
 
                                       17
<PAGE>   100
 
            [ALTERNATE PAGE FOR SELLING SECURITYHOLDERS' PROSPECTUS]
 
                                    DILUTION
 
     The net tangible book value of the Company as of June 30, 1996 was
approximately HK$20,983,000 (US$2,711,000) or HK$14.47 (US$1.87) per Common
Share. Net tangible book value per Common Share is determined by dividing the
net tangible book value of the Company (total tangible assets less total
liabilities) by the number of outstanding Common Shares at that date, assuming
the share exchange between the Company and Far East as described in the "Certain
Transactions" section had taken place prior to June 30, 1996 and that 100% of
the outstanding shares of Far East had been transferred to the Company. After
giving effect to the sale by the Company of the 600,000 Common Shares and
600,000 Warrants offered hereby (after deduction of estimated underwriting
discounts and commissions, and offering expenses), the Company's net tangible
book value at June 30, 1996 would have been approximately HK$37,475,000
(US$4,842,000) or HK$18.28 (US$2.36) per Common Share. This represents an
immediate increase in net tangible book value to existing shareholders of
HK$3.81 (US$0.49) per Common Share and an immediate dilution to new investors of
HK$20.42 (US$2.64) per Common Share. The following table illustrates the per
Common Share dilution:
 
<TABLE>
<S>                                                                      <C>          <C>
Assumed initial public offering price per Common Share.................               US$ 5.00
  Net tangible book value per Common Share as of June 30, 1996.........  US$ 1.87
  Increase in net tangible book value per Common Share attributable to
     new investors.....................................................      0.49
                                                                         --------
  Net tangible book value per Common Share after the Public Offering...                   2.36
                                                                                      --------
  Dilution per Common Share to new investors...........................               US$ 2.64
                                                                                      ========
</TABLE>
 
     The following table sets forth on a pro forma basis as of June 30, 1996,
assuming the above mentioned share exchange had taken place prior to such date,
the difference between the number of Common Shares purchased from the Company,
the total consideration paid, and the average price per Common Share paid by the
existing shareholders and by the new investors (at an assumed initial public
offering price of US$5.00 per Common Share before deduction of estimated
underwriting discounts and commissions, and other expenses):
 
<TABLE>
<CAPTION>
                              SHARES PURCHASED        TOTAL CONSIDERATION
                             -------------------     ----------------------      AVERAGE PRICE
                              NUMBER      PERCENT       AMOUNT       PERCENT    PER COMMON SHARE
                             ---------    ------     ------------    ------     ----------------
<S>                          <C>          <C>        <C>             <C>        <C>
Existing shareholders......  1,450,000      70.7%    US$2,711,000      47.5%        US$ 1.87
New investors..............    600,000      29.3%       3,000,000      52.5%            5.00
                             ---------    ------     ------------    ------     ----------------
     Total.................  2,050,000     100.0%    US$5,711,000     100.0%        US$ 2.79
                              ========    ======     ============    ======     =================
</TABLE>
 
     The information presented above, with respect to existing shareholders,
assumes no exercise of the Underwriter's Overallotment Option. In addition,
1,530,000 Common Shares have been reserved for issuance upon exercise of the
Warrants and 120,000 Common Shares have been reserved for issuance upon exercise
of the Underwriter's Warrants including the shares of Common Stock underlying
the Warrants included within the Underwriter's Warrants, 1,400,000 Common Shares
have been reserved for future issuance pursuant to the Management Options,
150,000 Common Shares have been reserved for future issuance upon exercise of
options granted pursuant to the Company's incentive stock option plan and
100,000 Common Shares reserved for future issuance to a consultant to Far East.
See "Management's Discussion and Analysis of Financial Condition and Results of
Operations," "Management," "Certain Transactions" and "Description of
Securities."
 
                    CONCURRENT PUBLIC OFFERING OF SECURITIES
 
     Concurrently with this Offering, the Company is offering 600,000 shares of
its Common Stock and 600,000 in the Public Offering through the Underwriter.
 
                                       18
<PAGE>   101
 
            [ALTERNATE PAGE FOR SELLING SECURITYHOLDERS' PROSPECTUS]
 
                                USE OF PROCEEDS
 
     The Company will not received any proceeds from this Offering, but it will
receive proceeds upon the exercise of the Warrants. The net proceeds to the
Company from the sale of 600,000 shares of Common Stock and 600,000 Warrants
offered in the Public Offering are estimated to be approximately $2,130,750
(approximately $2,533,995 if the Underwriter's Overallotment Option is exercised
in full) after deducting underwriting commissions and discounts and other
expenses of the Public Offering. The Company expects to use the net proceeds of
the Public Offering over the next twelve months approximately as follows:
 
<TABLE>
<CAPTION>
                                                                    APPROXIMATE    APPROXIMATE
                                                                      DOLLAR       PERCENTAGE
                                                                      AMOUNT           OF
                                                                      OF NET           NET
                   APPLICATION OF NET PROCEEDS                       PROCEEDS       PROCEEDS
- ------------------------------------------------------------------  ----------     -----------
<S>                                                                 <C>            <C>
Product Assembly Operations(1)....................................  $  825,000          39%
Expand the Number of Sales Offices(2).............................  $  300,000          14%
Office Equipment Purchases(3).....................................  $  350,000          16%
Establish an Office in the United States(4).......................  $  150,000           7%
Working Capital...................................................  $  505,750          24%
                                                                    ----------         ----
          Total...................................................  $2,130,750         100%
</TABLE>
 
- ---------------
 
(1) Represents the approximate amount that may be used to fund the initial
    start-up costs, approximately $150,000, and the establishment of production
    facilities (including leasehold improvements, equipment and inventory
    purchases, lease payments and employee salaries), approximately $675,000,
    for the Company's proposed product assembly operations. See "Business."
 
(2) Represents the approximate amount that may be used to expand the number of
    the Company's regional sales offices in the PRC which is subject to change
    from time to time. The Company estimates that the foregoing allocation will
    be sufficient to enable it to establish approximately three new regional
    sales offices and will be used for leasehold improvements and office
    equipment. See "Business."
 
(3) To be used to purchase and update the Company's principal offices, including
    purchases of computer hardware and software and general office equipment.
 
(4) To purchase equipment and leasehold improvements, pay security deposits,
    first year's lease payments and initial salaries for an office to be
    established in the United States.
 
     Although the Company has not specifically allocated the funds allocated to
working capital and the Company will have broad discretion as to the application
of such funds, such funds will be used in the Company's current and/or planned
operations with the primary purposes of the Public Offering being to raise
capital for the specific purposes described herein. The establishment of product
assembly operations may result in negative cash flow for a period of time. In
such an event, the net proceeds allocated to working capital would be used to
support product assembly operations until they result in positive cash flow or
the Company decides that such operations will not result in an economic benefit.
 
     The Company currently estimates that the net proceeds of the Public
Offering will be sufficient to fund its planned operations, including the
funding of its obligations under the proposed agreement with STIP, and expansion
efforts for approximately twelve months from the date of this Prospectus. The
net proceeds may be sufficient for a greater or lesser period of time depending
on the extent of the Company's expansion efforts and the rapidity of the
completion of the negotiations for the Company's proposed agreement with STIP.
In addition, the Company may require additional financing prior to or following
such period if it is unable to complete the negotiation for the proposed
agreement with STIP and another suitable facility is obtained requiring the
Company to expend greater sums of money for initial start-up costs and/or
production facilities or if a final agreement is reached with STIP but the
estimated initial start-up costs and establishment of production facilities is
greater than estimated. The Company has no commitments or arrangements for any
such additional financing and there can be no assurance that the Company will be
able to obtain additional financing on terms acceptable to the Company or at
all. In the event additional financing is unavailable to the Company, the
Company may be materially adversely affected.
 
     The foregoing represents the Company's best estimate of its allocation of
the net proceeds of the Public Offering. Future events, as well as changes in
economic, regulatory or competitive conditions or the
 
                                       19
<PAGE>   102
 
            [ALTERNATE PAGE FOR SELLING SECURITYHOLDERS' PROSPECTUS]
 
Company's business and the results of the its activities may make shifts in the
allocation of funds within the described categories or to other purposes
necessary or desirable. In the event the Company is unable to fund its proposed
product assembly operations with the net proceeds allocated above or suffers
losses, the Company may draw upon the net proceeds of the Public Offering
allocated to expand the number of its sales offices, purchase equipment and/or
working capital. In the event the Company is not successful in establishing its
planned product assembly operations, any net proceeds remaining from the funds
allocated for such purpose may be reallotted to expanding the lines of products
that the Company distributes. The Company estimates that the net proceeds of the
Public Offering allocated to expand the number of its sales offices will be
sufficient to establish approximately three new sales office at an average cost
of approximately $100,000 for each new sales office. In the event the per sales
office costs are greater than estimated, the Company may establish fewer sales
offices or draw upon the net proceeds of the Public Offering allocated to
working capital. In the event the per sales office costs are less than
estimated, a portion of the net proceeds of the Public Offering allocated for
such purposes will be reallocated to working capital.
 
     Prior to expenditure, proceeds will be invested principally in high grade,
short-term, interest-bearing investments. Any proceeds received upon exercise of
the Overallotment Option or any of the Warrants will be used for working capital
purposes. There can be no assurance that the Overallotment Option or any of the
Warrants will be exercised.
 
                                       20
<PAGE>   103
 
            [ALTERNATE PAGE FOR SELLING SECURITYHOLDERS' PROSPECTUS]
 
expense was due to an increased level of borrowings, resulting from the purchase
of investment property in September 1993 (with mortgage interest increasing by
HK$170,000) and payment of dividends of approximately HK$3,500,000 in Fiscal
1994 to Far East's shareholders.
 
     Other Income.  Other income declined by approximately HK$85,000 or 12.6% to
approximately HK$590,000 in Fiscal 1994 from approximately HK$675,000 in Fiscal
1993. This decrease in other income was due primarily to a decrease in income
generated from providing engineering services to other companies in Fiscal 1994.
 
     Gain on Disposal of a Real Estate Property.  The gain of approximately HK
$2,300,000 resulted from the disposition of the premises which were previously
leased out.
 
     Income from Continuing Operations.  Income from continuing operations was
approximately HK$4,333,000 in Fiscal 1994, a decrease of approximately
HK$1,703,000 or 28.2% from approximately HK$6,036,000 in Fiscal 1993. This
decrease in operating profit was primarily due to the economic austerity
measures adopted by the PRC government in early 1994 and the exceptional sale in
Fiscal 1993 resulting from the inclusion of the above mentioned exceptional
order in the approximate amount of HK$19,600,000.
 
     Discontinued Operations - Income (Loss) of subsidiary companies. In Fiscal
1993, the operations of Far East's subsidiaries derived a profit of
approximately HK$12,000 but their operations resulted in a loss of approximately
(HK$1,466,000) in Fiscal 1994. This loss was primarily due to one of the major
suppliers of Action disposing of its industrial computer product line in Fiscal
1994. The industrial computer product line had been one of Action's major
product lines in prior years. Euro Electron was established in the later part of
Fiscal 1993. During Fiscal 1994, Euro Electron was in its development stage,
incurring expenses for planned operations, seeking product sources and
formulating its marketing efforts while deriving no revenues.
 
LIQUIDITY AND CAPITAL RESOURCES
 
     Far East's primary uses of cash have been to fund accounts receivable,
inventories, capital expenditures related to the additions to property and
equipment, and to pay dividends to its shareholders. Far East has historically
met its cash requirements from cash flow from operations, short-term borrowings
under bank lines of credit, and long-term mortgage bank loans. Working capital
at the end of Fiscal 1995 and Six Months 1996 was approximately HK$4,896,000 and
approximately HK$6,115,000, respectively.
 
     Inventory decreased from approximately HK$5,106,000 at the end of Fiscal
1995 to approximately HK$3,258,000 at the end of Six Months 1996. Far East seeks
to maintain a low level of inventory comprised mostly of low tech products to
fill regular customer's orders and parts and accessories for warranty purposes,
with Far East principally ordering products upon receiving a customer's order.
The higher inventory level at the end of Fiscal 1995 was principally due to
goods received near year end but not delivered to customers for several reasons,
including but not limited to, a multicomponent order awaiting shipment of a
component while another had arrived and a customer's letter of credit or payment
not having been received.
 
     During Fiscal 1995 and Six Months 1996, Far East experienced cash flow from
operations of approximately HK$7,611,000 and (HK$319,000), respectively. Cash
from operations in Fiscal 1995 having been positively impacted by shipments made
in late Fiscal 1994 with payment being received in Fiscal 1995. At the end of
Fiscal 1995, Far East's accounts receivable stood at approximately HK$22,040,000
while at the end of Six Months 1996, Far East's accounts receivable were
approximately HK$18,978,000. At the end of Six Months 1996, Far East had
advanced approximately HK$3,800,000 to Regent (of which approximately
HK$2,200,000 was repaid subsequent to the end of Six Months 1996). Also accounts
receivable declined by approximately HK$3,062,000 from approximately
HK$22,040,000 at the end of Fiscal 1995 to approximately HK$18,978,000 at the
end of Six Months 1996, which was partially offset by an increase in receivables
from related companies of approximately HK$1,115,000 from approximately
HK$275,000 at the end of Fiscal 1995 to approximately HK$1,390,000 at the end of
Six Months 1996.
 
     For Fiscal 1995 and Six Months 1996, Far East had income from continuing
operations of approximately HK$2,259,000 and HK$1,783,000 respectively. This
income rate increase followed from Far East's self-imposed budgetary restraints,
the loosening of the PRC's economic austerity measures and a reduced rate of
inflation in the PRC.
 
                                       28
<PAGE>   104
 
            [ALTERNATE PAGE FOR SELLING SECURITYHOLDERS' PROSPECTUS]
 
     Cash used in investing activities were mainly used to purchase properties
in the PRC and Hong Kong.
 
     Far East has various banking facilities for overdraft, import and export
credits and foreign exchange contracts amounting to approximately HK$40,900,000
from various banks. More specifically, at June 30, 1996 Far East had borrowed
the following short term bank overdraft facilities to finance its operating
activities: (a) approximately HK$1,692,455 from Standard Chartered Bank; and (b)
approximately HK$1,780,937 from Banque Nationale de Paris. Both such facilities
bearing interest at Hong Kong's prime rate. At June 30, 1996, unused portions of
the foregoing overdraft facilities were approximately HK$307,545 and HK$219,063
from the Standard Chartered Bank and Banque Nationale de Paris, respectively.
Far East also had the following outstanding import loans to finance the purchase
of goods from suppliers: (a) approximately 108,836 Deutsche Marks and 34,977
Singapore Dollars from Standard Chartered Bank, bearing interest at Hong Kong's
prime rate plus one-half percent and repayable within 90 days; and (b)
approximately US$136,762 from Banque Nationale de Paris, bearing interest at
Hong Kong's prime rate plus one percent and repayable within 120 days.
Approximately HK$24,500,000 of the credit facilities that are available were
obtained on the conditions that, among other things, Far East mortgage its
properties as security for the credit facilities, Far East not to create a
charge or lien on its other assets in favor of other parties without the bank's
consent, and Far East maintaining a certain level of net worth. Far East also
has various bank loans to finance the purchase of its properties with
outstanding indebtedness at June 30, 1996 of approximately HK$7,500,000. More
specifically, at June 30, 1996 Far East had the following bank loans used to
finance the purchase of properties: (a) The Hong Kong and Shanghai Banking
Corporation, bearing interest at the United States prime rate plus two and
one-half percent, repayable at the approximate rate of US $2,800 per month with
approximately HK$1,104,000 in principal remaining to be paid at the end of Six
Months 1996; (b) the Bank of East Asia Ltd., bearing 13% interest per year,
repayable at the approximate rate of HK$11,945 per month with approximately
HK$768,000 in principal remaining to be paid at the end of Six Months 1996; (c)
Standard Chartered Bank, bearing interest at Hong Kong's prime rate plus one and
a quarter percent, repayable at the approximate rate of HK$31,500 per month plus
interest with approximately HK$1,972,000 in principal remaining to be paid at
the end of Six Months 1996 (repaid in December 1996 upon the sale of the
property the purchase of which this bank loan was used to finance); and (d) the
Hong Kong and Shanghai Banking Corporation, bearing interest at Hong Kong's
prime rate plus one and three quarters percent repayable at the approximate rate
of HK$65,598 per month with approximately HK$3,688,000 in principal remaining to
be paid at the end of Six Months 1996. As of June 30, 1996, properties with net
book value of approximately HK$20,200,000 were pledged to secure certain banking
facilities of Far East.
 
     Cash declined from approximately HK$4,626,000 at the end of Fiscal 1995 to
approximately HK$3,008,000 at the end of Six Months 1996 principally as a result
of Far East electing to use cash on hand to repay short-term borrowings (i.e.
bank overdraft and import/export loans) and make advances to Regent to finance a
significant government project that had been undertaken by Regent's subsidiary,
Action, and is nearing completion. Regent is charged interest at the rate of 18%
per year for this advance. At June 30, 1996, Regent had an outstanding balance
of approximately HK$3,800,000 due to Far East. Regent owns approximately
two-thirds of the outstanding equity securities of Far East and upon completion
of the Public Offering will own approximately 48% of the Company's issued and
outstanding shares of Common Stock. Regent's majority shareholder is Pearl
Venture Ltd. which is a trust established for the benefit of T.C. Leung,
Chairman of the Company's Board of Directors and its Chief Executive Officer.
See "Principal Shareholders" and "Certain Transactions."
 
     The Company plans to use the net proceeds of the Public Offering to
establish product assembly operations in the PRC and additional sales offices in
the PRC and purchase office equipment including computer hardware and software.
The balance of the proceeds of the Public Offering will be used for general
working capital purposes.
 
     The Company believes that the net proceeds of the Public Offering, together
with available trade credit, bank credit and internally generated funds, will be
sufficient to satisfy its anticipated working capital needs for at least the
twelve month period following the completion of the Public Offering.
 
                                       29
<PAGE>   105
 
            [ALTERNATE PAGE FOR SELLING SECURITYHOLDERS' PROSPECTUS]
 
                             PRINCIPAL SHAREHOLDERS
 
     The following table set forth, as of the date of this Prospectus, after
giving effect to the Acquisition as if it had occurred on that date, certain
information concerning beneficial ownership of shares of Common Stock with
respect to (i) each person known to the Company to own 5% or more of the
outstanding shares of Common Stock, (ii) each executive officer and director of
the Company, and (iii) all officers and directors of the Company as a group:
 
<TABLE>
<CAPTION>
                                                                                     APPROXIMATE
                                                  AMOUNT         APPROXIMATE        PERCENTAGE OF
                                                    AND         PERCENTAGE OF       COMMON STOCK
                                                 NATURE OF      COMMON STOCK         OWNED AFTER
                                                 BENEFICIAL     OWNED BEFORE           PUBLIC
                                                 OWNERSHIP     PUBLIC OFFERING       OFFERING(4)
                                                 ---------     ---------------     ---------------
<S>                                              <C>           <C>                 <C>
T.C Leung (1)(2)..............................   1,400,000            97%                 68%
Jerry Wong (1)(3).............................          0               *                   *
Nancy Wong (1)(3).............................          0               *                   *
C.P. Kwan (1)(3)..............................          0               *                   *
Alex Sham (1)(3)..............................          0               *                   *
Pearl Venture Ltd. (1)(2).....................   1,400,000            97%                 68%
Regent Earning Ltd. (1).......................   1,027,600            71%                 50%
All Executive Officers and Directors of the
  Company as a group (5 persons) (2)(3).......   1,400,000            97%                 68%
</TABLE>
 
- ---------------
 
* Denotes less than 1%.
 
(1) The address for each of Ms. Wong and Messrs. Leung, Wong, Kwan and Sham 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 Venture Ltd. ("Pearl") is Columbus
    Centre Building, Wichhams Cay, Road Town, Tortola, British Virgin Islands.
    The address for Regent Earning Ltd. ("Regent") is Chong Kin Commercial
    Building, 596 Nathan Road, Room 902, Mong Kok, Kowloon, Hong Kong.
 
(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 shares of the Company's Common Stock owned of record by Regent, of
    which Pearl is the majority shareholder. See "Certain Transactions."
 
(3) Does not include such person's proportionate beneficial interest in shares
    of the Company's Common Stock held of record by Regent and/or Broadskill
    Investments, Inc. ("Broadskill"). See "Certain Transactions."
 
(4) Does not include options granted or which may be granted under the Company's
    1996 Stock Option Plan, the Management Options and the Consultant's Options.
    See "Management" and "Certain Transactions."
 
                                       40
<PAGE>   106
 
            [ALTERNATE PAGE FOR SELLING SECURITYHOLDERS' PROSPECTUS]
 
                              CERTAIN TRANSACTIONS
 
     The Company was incorporated under the laws of the British Virgin Islands
on September 30, 1996 and shortly thereafter sold 50,000 shares of its Common
Stock to Gusrae, Kaplan & Bruno, and 100,000 shares of its Common Stock to
Sidford for an aggregate cash consideration of $1,500 or $.01 per share. Gusrae,
Kaplan & Bruno is United States counsel to the Company and was granted the right
to purchase said shares in partial consideration of its services rendered in
connection with the Public Offering and this Offering. Sidford has been and is a
business consultant to Far East which was initially paid HK$5,000 and granted
the option to purchase the foregoing 100,000 shares. In January 1997, Far East
amended its Agreement with Sidford to provide cash compensation to Sidford of
$5,000 per month for twenty months. At that same time, the Company repurchased
the 100,000 shares previously sold to Sidford for the sum of $1,000 and agreed
to grant to Sidford options to purchase up to 100,000 shares of the Company's
Common Stock, such option being exercisable at $5.50 per share. See
"Management".
 
     The Company's activities to date have been limited to organizational
activities, seeking and securing financing including a private offering of its
securities and the Public Offering and negotiating the terms and conditions of
its acquisition of Far East. Far East was established in 1971 and has been in
continuous operation since that time. See "Management's Discussion and Analysis
of Financial Condition and Results of Operations."
 
     Pearl is a British Virgin Islands company which is a trust for the benefit
of T.C. Leung, the Company's Chairman of the Board and Chief Executive Officer.
Regent is a Hong Kong corporation.
 
     Simultaneously with the closing of the Public Offering, the Company will
consummate the Acquisition by exchanging 1,400,000 shares of its Common Stock
for the 1,000,000 issued and outstanding shares of the Common Stock of Far East
at a ratio of 1.4 (one and four-tenths) shares of the Company's Common Stock for
each issued and outstanding share of Far East's Common Stock. All discussions in
this Prospectus relating to the number of issued and outstanding shares of
Common Stock give effect to the Acquisition.
 
     Pearl was one of the founding shareholders of Far East and during the years
1992 through 1994, Pearl and Regent accumulated 100% of the issued and
outstanding common stock of Far East (1,000,000 shares) for an aggregate
consideration of approximately HK$11,130,000, with Pearl and Regent being the
record owners of 266,000 and 734,000 shares of Far East's Common Stock,
respectively. Broadskill is a Hong Kong corporation which owns an approximate
44% equity interest in Regent which if converted into shares of the Company's
Common Stock would represent approximately 29% of the Company's Common Stock. No
executive officer or director of the Company is an officer or director of Pearl,
Regent or Broadskill. In addition to its direct record ownership of 372,400
shares of the Company's Common Stock, Pearl is also the beneficial owner of
approximately 527,069 shares of the Company's Common Stock through its equity
interest in Regent. Mr. Kwan, and each of Messrs. Wong and Sham and Ms. Wong,
Executive Officers and Directors of the Company and Far East have equity
interests in Regent and/or Broadskill which if were converted into shares of the
Company's Common Stock would represent approximately 5%, less than 1%, less than
1% and less than 1% of the Company's Common Stock, respectively. See
"Management" and "Principal Shareholders."
 
     During Fiscal 1996, the Company transferred its equity interests in three
former subsidiaries, Armtison Limited (a wholly owned subsidiary), Action
Instruments (China) Ltd., (a 51% owned subsidiary) and Euro Electron (Far East)
Ltd. (a 80% owned subsidiary) to Regent and Pearl at book value (HK$10,000)
invested in these three subsidiaries.
 
     On November 11, 1996 the Company completed the sale of an aggregate of
1,000,000 Warrants (the "Private Warrants") to private investors for aggregate
gross proceeds of $150,000, or a price of $.15 per Warrant. The Underwriter
acted as the Company's placement agent in connection with the foregoing private
placement of the Company's Private Warrants and received an aggregate of $19,500
in commissions and non-accountable expenses. Said Private Warrants and the
shares of the Company's Common Stock underlying said Warrants are being offered
hereby. In March 1997, the Company repurchased 70,000 Private Warrants at
 
                                       41
<PAGE>   107
 
            [ALTERNATE PAGE FOR SELLING SECURITYHOLDERS' PROSPECTUS]
 
their purchase price or an aggregate amount of $10,500. See "Concurrent Public
Offering of Securities," "Description of Securities" and "Plan of Distribution."
 
     At the end of Six Months 1996, Far East had advanced approximately
HK$3,800,000 to Regent to finance a significant government project that had been
undertaken by Regent's subsidiary and is nearing completion. Regent is charged
eighteen percent interest per year on this advance. Regent has repaid
approximately HK$2,200,000 subsequent to June 30, 1996.
 
     Mr. Leung may be deemed to be a "promoter" of the Company as such term is
defined by the rules promulgated by the Commission under the Securities Act. As
so defined a promoter is any person who (i) acting alone or in conjunction with
others, took the initiative in founding and organizing an issuer's business or
enterprise, or (ii) in connection with founding and organizing the business or
enterprise of an issuer, receives in consideration for services and/or property,
ten percent or more or either any class of the issuer's securities or the
proceeds therefrom. Mr. Leung formulated the concepts of a public offering to
raise capital for the Company and Far East and establishing a company in the
British Virgin Islands for that purpose. Additionally, upon completion of the
Public Offering and the Acquisition, Mr. Leung will beneficially own
approximately 65% of the Company's issued and outstanding shares of Common
Stock. See "Principal Shareholders."
 
     All future transactions between the Company and its executive officers and
directors will be on teams no less favorable than could be obtained from
independent third parties and will be approved by a majority of the Company's
directors disinterest in such transactions.
 
                                       42
<PAGE>   108
 
            [ALTERNATE PAGE FOR SELLING SECURITYHOLDERS' PROSPECTUS]
 
                            SELLING SECURITYHOLDERS
 
     The Registration Statement of which this Prospectus forms a part covers the
offering of 930,000 Warrants and 930,000 shares of Common Stock underlying said
Warrants owned by the Selling Securityholders. The resale of such securities by
the Selling Securityholders is subject to prospectus delivery and other
requirements of the Securities Act.
 
     The Company's securities are being offered by the following Selling
Securityholders in the amounts set forth below.
 
<TABLE>
<CAPTION>
                                             (1)                    (2)                 (3)
                                       NUMBER OF SHARES       NUMBER OF SHARES       NUMBER OF
                                       OF COMMON STOCK        OF COMMON STOCK         WARRANTS
                                         BENEFICIALLY            REGISTERED          REGISTERED
       SELLING SECURITYHOLDER             OWNED (*)              HEREIN (*)            HEREIN
- -------------------------------------  ----------------       ----------------       ----------
<S>                                    <C>                    <C>                    <C>
Celestial Dreams Corp., NV...........       100,000                100,000             100,000
Richgrove, NV........................       100,000                100,000             100,000
Waveland Corp., NV...................       100,000                100,000             100,000
Eaglehurst, NV.......................       100,000                100,000             100,000
Signal Hill, NV......................        92,000                 92,000              92,000
Totado International, NV.............        70,000                 70,000              70,000
Imagine Holdings Corp................        50,000                 50,000              50,000
Lillian Goldman......................        50,000                 50,000              50,000
Jennifer L. King.....................        50,000                 50,000              50,000
Maureen Hilson.......................        50,000                 50,000              50,000
Ningling Jing........................        30,000                 30,000              30,000
Pamela Gailliard.....................        25,000                 25,000              25,000
Edward Boginsky......................        25,000                 25,000              25,000
K. Percy.............................        25,000                 25,000              25,000
Lovella Fiedtkou.....................        10,000                 10,000              10,000
Dr. David Mehler.....................        10,000                 10,000              10,000
David H. Meyrowitz...................        10,000                 10,000              10,000
Gale L. Sayers Proby.................        10,000                 10,000              10,000
Charles A. Conner, Jr................        10,000                 10,000              10,000
Jane Troyer..........................         5,000                  5,000               5,000
Jon A. Maresca and
C. Elizabeth Maresca.................         5,000                  5,000               5,000
John Andrew Roe......................         3,000                  3,000               3,000
</TABLE>
 
- ---------------
 
(*) The Number of Shares of Common Stock Beneficially Owned and the Number of
    Shares of Common Stock Registered Herein as set forth above includes shares
    of Common Stock issuable on the exercise of the Warrants.
 
     After the completion of the sale by the respective Selling Securityholders
of the number of shares of Common Stock and Warrants set forth opposite their
names in Columns (2) and (3) above, none of the Selling Securityholders will own
any of such shares of Common Stock or Warrants.
 
     The foregoing persons and entities have agreed not to sell, for a period of
twenty four months from the date of this Prospectus, an aggregate of 930,000
Warrants and 930,000 shares of Common Stock underlying said Warrants without the
prior written consent of the Underwriter. Additionally, the Company and the
Underwriter have agreed that they will not permit the Private Warrantholders to
sell, assign, pledge or otherwise dispose of any of the foregoing Warrants for a
period of one year from the Effective Date of the Public Offering.
 
                                       47
<PAGE>   109
 
            [ALTERNATE PAGE FOR SELLING SECURITYHOLDERS' PROSPECTUS]
 
                              PLAN OF DISTRIBUTION
 
     The Warrants and/or the shares of the Company's Common Stock underlying
such Warrants may be resold from time to time directly by the Selling
Securityholders. Alternatively, the Selling Securityholders may from time to
time offer such securities through underwriters, dealers or agents. The
distribution of securities by the Selling Securityholders may be effected in one
or more transactions that may take place on the over-the-counter market,
including ordinary broker's transactions, privately-negotiated transactions or
through sales to one or more broker-dealers for resale of such shares as
principals, at market prices prevailing at the time of sale. Commissions may be
paid by the Selling Securityholders in connection with such sales. The Selling
Securityholders and intermediaries through whom such securities are sold may be
deemed "underwriters" within the meaning of the Securities Act with respect to
the securities offered, and any profits realized or commissions received may be
deemed underwriting compensation. The Company will derive proceeds from
exercises of the Warrants but will not derive any proceeds from the sale of the
Company's securities by the Selling Securityholders. There can be no assurance
that any of the Warrants will be exercised.
 
     The National Association of Securities Dealers, Inc. (the "NASD") has
advised the Underwriter that it is not issuing any opinion at this time that it
has no objection to any underwriting compensation to be received or any other
terms and arrangements of an offering by the Underwriter or any NASD member in
connection with a sale by the Selling Securityholders. Therefore, no NASD member
would be permitted to participate in a public offering of the Selling
Securityholder Warrants or the shares underlying such Warrants without filing
and receiving an opinion from the NASD that it has no objection to the
compensation to be received and any other terms and arrangements of an offering.
As a result, the Selling Securityholders may be subject to delays or limitations
which will affect the liquidity of their securities.
 
     The Underwriter has given a representation to the NASD that in the event
the Underwriter enters into any arrangement or intends to sell any of such
Warrants or shares underlying such Warrants to be offered by Selling
Securityholders in an offering of securities, that the Underwriter will make a
filing with the NASD, disclosing in detail the proposed terms and arrangements
of any contemplated offer, sale, or purchase of Selling Securityholder
securities in a timely manner so as to permit the NASD ample time to review and
render an opinion as to the reasonableness of the terms and arrangements of the
offering, prior to commencement of the distribution, including any additional
disclosure the NASD may deem necessary. There are no assurances that the NASD
will issue an opinion that it has no objections to the underwriting compensation
to be received or to any other terms and arrangement of an offering. Therefore,
absent such an opinion, no NASD member, including the Underwriter, would be
permitted to participate in a public offering of the Selling Securityholder
Warrants or the shares underlying such Warrants.
 
     At a time an offer of securities is made by or on behalf of a Selling
Securityholder, it is the Company's intent that a prospectus be distributed
setting forth, based upon information provided by the Selling Securityholder,
the number of securities being offered and the terms of the offering, including
the name or names of any underwriters, dealers or agents, if any, the purchase
price paid by any underwriter for securities purchased from the Selling
Securityholder and any discounts, commissions or concessions allowed or re-
allowed or paid to dealers, and the proposed selling price to the public.
 
     Sales of securities by the Selling Securityholders could have an adverse
effect on the market prices of the securities offered pursuant to the Public
Offering.
 
                                 LEGAL MATTERS
 
     The validity of the Securities being offered hereby and certain legal
matters in connection with this Offering with respect to British Virgin Islands
law will be passed upon for the Company by Smith-Hughes, Raworth & McKenzie,
British Virgin Islands counsel to the Company. Certain legal matters in
connection with this Offering with respect to United States law will be passed
upon for the Company by Gusrae, Kaplan
 
                                       48
<PAGE>   110
 
            [ALTERNATE PAGE FOR SELLING SECURITYHOLDERS' PROSPECTUS]
 
& Bruno, New York, New York, as United States counsel to the Company. Gusrae,
Kaplan & Bruno owns 50,000 shares of the Company's Common Stock. Hastings & Co.
has advised the Company on certain legal matters in connection with this
Offering with respect to the laws of Hong Kong. Jingtian Associates has advised
the Company on certain legal matters with respect to the laws of the PRC.
 
                                    EXPERTS
 
     The Financial Statements of the Company included in this Prospectus have
been audited by Arthur, Andersen & Co., Hong Kong, independent public
accountants, as indicated in their reports with respect thereto, and are
included herein in reliance upon the authority of said firm as expert in giving
said reports.
 
                        ENFORCEMENT OF CIVIL LIABILITIES
 
     The Company is a British Virgin Islands holding corporation. The Company
has appointed CT Corporation System, 1633 Broadway, New York, New York 10019 as
its agent upon whom process may be served in any action brought against it under
the securities laws of the United States. However, it may be difficult for
investors to enforce outside the United States judgements against the Company
obtained in the United States in any such actions, including actions predicated
upon the civil liability provisions of the United States federal securities
laws. In addition, all of the Company's officers and directors reside outside
the United States and all of the assets of these persons and of the Company are
or may be located outside of the United States. As a result, it may be difficult
for investors to effect service of process within the United States upon such
persons. Additionally, Hong Kong courts will not directly enforce against the
Company or such persons judgments obtained in United States courts. There is
substantial doubt as to the enforceability against the Company or any of its
officers and directors located outside the United States in original actions for
enforcement of judgements of United States courts.
 
     The Company has been advised by Hastings & Co., its Hong Kong counsel, and
Smith-Hughes, Raworth & McKenzie, its British Virgin Islands counsel, that no
treaty exists between Hong Kong or the British Virgin Islands and the United
States providing for the reciprocal enforcement of foreign judgements. However,
the courts of Hong Kong and the British Virgin Islands are generally prepared to
accept a foreign judgment as evidence of a debt due. An action may then be
commenced in Hong Kong or the British Virgin Islands for recovery of this debt.
A Hong Kong or British Virgin Islands court will only accept a foreign judgement
as evidence of a debt due if: (i) the judgement is for a liquidated amount in a
civil matter; (ii) the judgment is final and conclusive and has not been stayed
or satisfied in full; (iii) the judgment is not directly or indirectly for the
payment of foreign taxes, penalties, fines or changes of a like nature (in this
regard, a Hong Kong or British Virgin Islands court is unlikely to accept a
judgement for an amount obtained by doubling, trebling or otherwise multiplying
a sum assessed as compensation for the loss or damage sustained by the person in
whose favor the judgement was given); (iv) the judgment was not obtained by
actual or constructive fraud or duress; (v) the foreign court has taken
jurisdiction on grounds that are recognized by the common law rules as to
conflict of laws in Hong Kong or the British Virgin Islands; (vi) the
proceedings in which the judgment was obtained were not contrary to natural
justice (i.e., the concept of fair adjudication); (vii) the proceedings in which
the judgment was obtained, the judgment itself and the enforcement of the
judgment are not contrary to the public policy of Hong Kong or the British
Virgin Islands; (viii) the person against whom the judgment is given is subject
to the jurisdiction of the Hong Kong or the British Virgin Islands court; and
(ix) the judgment is not on a claim for contribution in respect of damages
awarded by a judgement which does not satisfy the foregoing. Enforcement of a
foreign judgment which has been registered in a Hong Kong court or a judgment
obtained in Hong Kong can be enforced by one or more of the following manners:
(i) a Hong Kong court's bailiffs being sent to seize valuable chattels from the
judgment debtor's premises and thereafter auction the same in satisfaction of
the judgment debt; (ii) by a charge being registered against any real property
belonging to the judgment debtor which charge must necessarily be redeemed upon
sale or upon the judgment creditor exercising a right of sale attached thereto;
(iii) oral examination of the judgment debtor or its director(s) to
 
                                       49
<PAGE>   111
 
            [ALTERNATE PAGE FOR SELLING SECURITYHOLDERS' PROSPECTUS]
 
reveal in open court assets belonging to him/her or the Company; (iv) by debtors
of the judgment debtor being required to pay over debts due to the judgment
debtor; and (v) bankruptcy or "winding up" proceedings. Enforcement of a foreign
judgement in Hong Kong or the British Virgin Islands may also be limited or
affected by applicable bankruptcy, insolvency, liquidation, arrangement,
moratorium or similar laws relating to or affecting creditors' rights generally
and will be subject to a statutory limitation of time within which proceedings
may be brought.
 
     A substantial portion of the Company's assets will be situated in the PRC.
As the PRC does not have treaties providing for the reciprocal recognition and
enforcement of judgments of courts within the United States, actions brought by
regulatory authorities, such as the Commission, and other actions, which result
in foreign court judgments, could (assuming such actions are not required by PRC
law to be arbitrated) only be enforced in the PRC if such judgments or rulings
do not violate the basic principles of the law of the PRC or the sovereignty,
security and public interest of the society of the PRC, as determined by a
people's court of the PRC which has jurisdiction for recognition and enforcement
of judgments. The Company has been advised by its PRC counsel, Jingtian
Associates, that there is substantial doubt as to the enforceability in the PRC
of any actions to enforce judgments of 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.
 
                             ADDITIONAL INFORMATION
 
     The Company has filed with the Commission a Registration Statement on Form
F-1 (the "Registration Statement") under the Securities Act with respect to the
shares of Common Stock and Warrants offered hereby. This Prospectus, which
constitutes a part of the Registration Statement, does not contain all of the
information set forth in the Registration Statement, certain items of which are
contained in the exhibits and schedules thereto as permitted by the rules and
regulations of the Commission. Statements made in this Prospectus as to the
contents of any contract, agreement or other document referred to herein are not
necessarily complete. With respect to each such contract, agreement or other
document filed as an exhibit to the Registration Statement, reference is made to
the exhibit for a more complete description of the matter involved, and each
such statement shall be deemed qualified in its entirety by such reference. The
Registration Statement, including the exhibits and schedules thereto, may be
inspected without charge at the principal office of the Commission, 450 Fifth
Street, N.W., Washington, D.C. 20549 or at the Regional Offices of the
Commission located at Northwestern Atrium Center, 500 West Madison Street, Suite
1400, Chicago, Illinois 60661 and 7 World Trade Center, Suite 1300, New York,
New York 10048. Copies of such material may be obtained by mail from the Public
Reference Section of the Commission at 450 Fifth Street, N.W., Washington, D.C.
20549 at prescribed rates. The Commission maintains a website that contains
reports, proxies and information statements and other information regarding
issuers that file electronically with the Commission. The Commission's website
is located at http://www.sec.gov.
 
                                       50
<PAGE>   112
 
            [ALTERNATE PAGE FOR SELLING SECURITYHOLDERS' PROSPECTUS]
 
======================================================
 
  NO DEALER, SALESPERSON OR OTHER PERSON HAS BEEN AUTHORIZED IN CONNECTION WITH
THIS OFFERING TO GIVE ANY INFORMATION OR TO MAKE ANY REPRESENTATIONS OTHER THAN
THOSE CONTAINED IN THIS PROSPECTUS. THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER
OR A SOLICITATION IN ANY JURISDICTION TO ANY PERSON TO WHOM IT IS UNLAWFUL TO
MAKE SUCH AN OFFER OR SOLICITATION. NEITHER THE DELIVERY OF THIS PROSPECTUS NOR
ANY SALE MADE HEREUNDER SHALL, UNDER ANY CIRCUMSTANCES, CREATE AN IMPLICATION
THAT THERE HAS BEEN NO CHANGE IN THE CIRCUMSTANCES OF THE COMPANY OR THE FACTS
HEREIN SET FORTH SINCE THE DATE HEREOF.
 
                               TABLE OF CONTENTS
 
   
<TABLE>
<CAPTION>
                                        PAGE
                                       -----
<S>                                    <C>
Prospectus Summary.....................     4
Risk Factors...........................     9
Dilution...............................    18
Concurrent Public Offering of
  Securities...........................    18
Use of Proceeds........................    19
Capitalization.........................    21
Selected Financial Information.........    22
Management's Discussion and Analysis of
  Financial Condition and Results of
  Operations...........................    24
Business...............................    30
Management.............................    36
Principal Shareholders.................    40
Certain Transactions...................    41
Description of Securities..............    43
Shares Eligible for Future Sale........    45
Selling Securityholders................    47
Plan of Distribution...................    48
Legal Matters..........................    48
Experts................................    49
Enforcement of Civil Liabilities.......    49
Additional Information.................    50
Index to Financial Statements..........   F-1
Appendix -- The People's Republic of
  China................................   A-1
</TABLE>
    
 
   
UNTIL APRIL   , 1997 (25 DAYS AFTER THE DATE OF THE PROSPECTUS), ALL DEALERS
EFFECTING TRANSACTIONS IN THE REGISTERED SECURITIES, WHETHER OR NOT
PARTICIPATING IN THIS DISTRIBUTION, MAY BE REQUIRED TO DELIVER A PROSPECTUS.
THIS IS IN ADDITION TO THE OBLIGATION OF DEALERS TO DELIVER A PROSPECTUS WHEN
ACTING AS UNDERWRITERS AND WITH RESPECT TO THEIR UNSOLD ALLOTMENTS OR
SUBSCRIPTIONS.
    
 
======================================================
======================================================
                                   EURO TECH
                            HOLDINGS COMPANY LIMITED
 
                               930,000 REDEEMABLE
                         COMMON STOCK PURCHASE WARRANTS
                             AND 930,000 SHARES OF
                                  COMMON STOCK
 
                              --------------------
 
                                   PROSPECTUS
                              --------------------
                                            , 1997
 
             ======================================================
<PAGE>   113
 
                                    PART II
 
                     INFORMATION NOT REQUIRED IN PROSPECTUS
 
ITEM 13. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION
 
     The estimated expenses of this offering, all of which are to be paid by the
Registrant, in connection with the issuance and distribution of the Securities
being registered, are as follows:
 
<TABLE>
<S>                                                                               <C>
SEC Registration Fee............................................................  $  4,734.24
NASD Filing Fee.................................................................     1,872.93
NASDAQ Listing and Filing Fees..................................................    15,000.00*
Printing and Engraving Expenses.................................................    50,000.00*
Accounting Fees and Expenses....................................................   100,000.00*
Legal Fees and Expenses.........................................................   212,000.00*
Blue Sky Fees and Expenses......................................................    50,000.00*
Transfer and Warrant Agent Fees and Expenses....................................    10,000.00*
Consulting Agreement with Underwriter...........................................   108,000.00
Underwriter's non-accountable expense allowance (assuming no exercise of the
  overallotment option).........................................................    92,700.00
Miscellaneous Expenses..........................................................     5,942.83*
Total...........................................................................  $650,250.00*
                                                                                  ===========
</TABLE>
 
- ---------------
 
* Estimated.
 
ITEM 14. INDEMNIFICATION OF DIRECTORS AND OFFICERS
 
     Section 57 of the British Virgin Islands International Business Companies
Ordinance provides as follows:
 
     (1) Subject to subsection (2) and any limitations in its memorandum or
articles, a company incorporated under this Ordinance may indemnify against all
expenses, including legal fees, and against all judgments, fines and amounts
paid in settlement and reasonably incurred in connection with legal,
administrative or investigative proceedings any person who:
 
          (a) is or was a party or is threatened to be made a party to any
     threatened, pending or completed proceedings, whether civil, criminal,
     administrative or investigative, by reason of the fact that the person is
     or was a director, an officer or a liquidator of the company; or
 
          (b) is or was, at the request of the company, serving as a director,
     officer or liquidator of, or in any other capacity is or was acting for,
     another company or a partnership, joint venture, trust or other enterprise.
 
     (2) Subsection (1) only applies to a person referred to in that subsection
if the person acted honestly and in good faith with a view to the best interests
of the company and, in the case of criminal proceedings, the person has no
reasonable cause to believe that his conduct was unlawful.
 
     (3) The decision of the directors as to whether the person acted honestly
and in good faith and with a view to the best interests of the company and as to
whether the person had no reasonable cause to believe that his conduct was
unlawful is in the absence of fraud, sufficient for the purposes of this
section, unless a question of law is involved.
 
     (4) The termination of any proceedings by any judgment, order, settlement,
conviction or the entering of a nolle prosequi does not, by itself, create a
presumption that the person did not act honestly and in good faith and with a
view to the best interests of the company or that the person had reasonable
cause to believe that his conduct was unlawful.
 
                                      II-1
<PAGE>   114
 
     (5) If the person referred to in subsection (1) has been successful in
defense of any proceedings referred to in subsection (1), the person is entitled
to be indemnified against all expenses, including legal fees, and against all
judgements, fines and amounts paid in settlement and reasonably incurred by the
person in connection with the proceedings.
 
     In addition, Section 58 of the British Virgin Islands International
Business Ordinance provides as follows:
 
        A company incorporated under this Ordinance may purchase and maintain
        insurance in relation to any person who is or was a director, an officer
        or a liquidator of the company, or who at the request of the company is
        or was serving as a director, an officer or a liquidator of, or in any
        other capacity is or was acting for, another company or a partnership,
        joint venture, trust or other enterprise, against any liability asserted
        against the person and incurred by the person in that capacity, whether
        or not the company has or would have had the power to indemnify the
        person against the liability under subsection (1) of section 57.
 
ITEM 15. RECENT SALES OF UNREGISTERED SECURITIES
 
     The Registrant has sold the following securities within the past three
years:
 
                                       A
 
     In November 1996, the Registrant sold an aggregate of 150,000 shares of its
Common Stock to the entities identified as follows, at a price of $.01 per
share, Gusrae, Kaplan & Bruno (50,000 shares); Sidford International Ltd.
(100,000 shares); and
 
                                       B
 
     In November 1996, the Registrant sold, to the persons and entities
identified below, the securities of the Registrant for the consideration
indicated opposite their names:
 
<TABLE>
<CAPTION>
         PERSON/ENTITY                           NUMBER OF SECURITIES                   CONSIDERATION
- -------------------------------  -----------------------------------------------------  ----------
<S>                              <C>                                                    <C>
Signal Hill, N.V...............  Ninety Two Hundredths of a Unit (s)of the Company's    $13,800.00
                                 Securities*
Celestial Dreams Corp., N.V....  One Unit of the Company's Securities*                  $15,000.00
Richgrove, N.V.................  One Unit of the Company's Securities*                  $15,000.00
Waveland Corp, N.V.............  One Unit of the Company's Securities*                  $15,000.00
Eaglehurst, N.V................  One Unit of the Company's Securities*                  $15,000.00
Totado International, N.V......  7/10ths of a Unit of the Company's Securities*         $10,500.00
Lillian Goldman................  One Half of a Unit of the Company's Securities*        $ 7,500.00
Jennifer L. King...............  One Half of a Unit of the Company's Securities*        $ 7,500.00
Maureen Hilson.................  One Half of a Unit of the Company's Securities*        $ 7,500.00
Imagine Holdings Corp..........  One Half of a Unit of the Company's Securities*        $ 7,500.00
Ningling Jing..................  3/10ths of a Unit of the Company's Securities*         $ 4,500.00
Edward Boginsky................  One Quarter of a Unit of the Company's Securities*     $ 3,750.00
K. Percy.......................  One Quarter of a Unit of the Company's Securities*     $ 3,750.00
Pamela Gailliard...............  One Quarter of a Unit of the Company's Securities*     $ 3,750.00
Robert B. Sauter...............  One Tenth of a Unit of the Company's Securities*       $ 1,500.00
Louella Fiedtkou...............  One Tenth of a Unit of the Company's Securities*       $ 1,500.00
Philip Settles.................  One Tenth of a Unit of the Company's Securities*       $ 1,500.00
Dr. David Mehler...............  One Tenth of a Unit of the Company's Securities*       $ 1,500.00
David H. Meyrowitz.............  One Tenth of a Unit of the Company's Securities*       $ 1,500.00
Farid K. Farida................  One Tenth of a Unit of the Company's Securities*       $ 1,500.00
Edwin S. Osias.................  One Tenth of a Unit of the Company's Securities*       $ 1,500.00
</TABLE>
 
                                      II-2
<PAGE>   115
 
<TABLE>
<CAPTION>
         PERSON/ENTITY                           NUMBER OF SECURITIES                   CONSIDERATION
- -------------------------------  -----------------------------------------------------  ----------
<S>                              <C>                                                    <C>
Lon Rubackin...................  One Tenth of a Unit of the Company's Securities*       $ 1,500.00
Gale L. Sayer Proby............  One Tenth of a Unit of the Company's Securities*       $ 1,500.00
Charles A. Conner, Jr..........  One Tenth of a Unit of the Company's Securities*       $ 1,500.00
Georgia M. Rogers..............  One Twentieth of a Unit of the Company's Securities    $   750.00
Jon A. & C. Elizabeth            One Twentieth of a Unit of the Company's Securities*   $   750.00
  Maresca......................
Jane Troyer....................  One Twentieth of a Unit of the Company's Securities*   $   750.00
Clifford Feldstein.............  One Twentieth of a Unit of the Company's Securities*   $   750.00
Ulysses Fleming................  One Tenth of a Unit of the Company's Securities*       $ 1,500.00
John Andrew Roe................  Three One-hundredths of a Unit of the Company's        $   450.00
                                 Securities*
                                 TOTAL                                                  $150,000.00
</TABLE>
 
- ------------------
 
* Each Unit consisting of 100,000 Redeemable Common Stock Purchase Warrants.
 
     These transactions were exempt from registration under the Securities Act
of 1933, as amended (the "Act"), under Section 4(2) of that Act as not involving
a public offering, and as to those sales set forth under subsection B above,
reliance is placed upon Rule 506 of Regulation D and Section 4(6) of the Act. No
underwriter was engaged by the Registrant in connection with the issuances
described above in A. May Davis Group, Inc acted as placement agent for the
Registrant in connection with the issuances described in B above and received a
commission and non-accountable expense equal to 10% and 3% of the aggregate
amount of such securities. The recipients of all of the foregoing securities
represented that such securities were being acquired for investment and not with
a view to the distribution thereof. In addition, the certificates evidencing
such securities bear restrictive legends.
 
ITEM 16. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
 
(A) EXHIBITS
 
<TABLE>
   <C>      <S>
     1.1    Form of Underwriting Agreement (2)
     3.1    Registrant's Restated Memorandum and Articles of Association (1)
     4.1    Form of Underwriter's Warrant Certificate (2)
     4.2    Form of Financial Consulting Agreement to be entered into by and between the
            Registrant and the Underwriter (2)
     4.3    Form of Common Stock Certificate (2)
     4.4    Form of Redeemable Common Stock Purchase Warrants (2)
     4.5    Form of Warrant Agreement between Registrant and American Stock Transfer & Trust
            Company (2)
     5.1    Opinion of Smith Hughes, Raworth & McKenzie (2)
    10.1    Form of Stock Exchange Agreement (2)
    10.2    Preliminary Agreement between the Shanghai Thermometric Instrument Plant and Euro
            Tech (Far East) Ltd. (1)
    10.3    Lease For Euro Tech (Far East) Ltd.'s Hong Kong Office (1)
    10.4    Lease For Euro Tech (Far East) Ltd.'s Guangzhou Office (1)
    10.5    Purchase Agreement between Beijing China International Industry and Commerce Co.
            Ltd. and Euro Tech (Far East) Ltd. (Beijing sales office) (1)
    10.6    Purchase Agreement between Shanghai Xing Tai Real Estate Development Incorp. and
            Euro Tech (Far East) Ltd. (Shanghai sales office) (1)
    10.7    International Sales Representative and Distribution Agreement between Wallace &
            Tiernan and Euro Tech (Far East) Ltd. (1)
    10.8    Sales Representative Agreement between the Finnigan Corporation and Euro Tech (Far
            East) Ltd. (1)
</TABLE>
 
                                      II-3
<PAGE>   116
 
<TABLE>
   <C>      <S>
    10.9    Distributorship Agreement between Hach Company and Euro Tech (Far East) Limited
            (1)
   10.10    Hong Kong Bank Mortgage Commitment Letter with Euro Tech (Far East) Ltd.
            (regarding Beijing sales office) (1)
   10.11    The Bank of East Asia Limited Mortgage Commitment Letter with Euro Tech (Far East)
            Limited (regarding Shanghai sales office) (1)
   10.12    Hong Kong Bank Mortgage with Euro Tech (Far East) Limited (regarding new office)
            (1)
   10.13    Standard Chartered Bank Mortgage with Euro Tech (Far East) Limited (regarding
            investment property) (1)
   10.14    Form of Agreement among Registrant, Euro Tech (Far East) Limited and Shereman
            Enterprises Ltd. (for the services of T.C. Leung) (2)
   10.15    Registrant's Stock Option Plan (2)
   10.16    Consulting Agreement with Sidford International Ltd. (2)
    23.1    Consent of Smith Hughes, Raworth & McKenzie (included in Exhibit 5.1) (2)
    23.2    Consents of Arthur Anderson & Co., Hong Kong (3)
    23.3    Consent of Gusrae, Kaplan & Bruno (2)
    23.4    Consent of Hastings & Co. (2)
    23.5    Consent of Jingtian Associates (2)
    24.1    Power of Attorney included on Page II-6 of initial filing.
</TABLE>
 
- ---------------
 
(1) Previously filed with initial filing.
 
(2) Previously filed with Amendment No. 1 on January 31, 1997.
 
(3) Filed herewith.
 
(b) Financial Statement Schedule(s)
 
NONE REQUIRED.
 
ITEM 17.  UNDERTAKINGS
 
     The Registrant hereby undertakes:
 
     (1) To file, during any period in which offers or sales are being made, a
post-effective amendment to this registration statement;
 
          (i) To include any prospectus required by Section 10(a)(3) of the
     Securities Act of 1933;
 
          (ii) To reflect in the prospectus any facts or events arising after
     the effective date of the registration statement (or the most recent
     post-effective amendment thereof) which, individually or in the aggregate,
     represent a fundamental change in the information set forth in the
     registration statement;
 
          (iii) To include any material information with respect to the plan of
     distribution not previously disclosed in the registration statement or any
     material change to such information in the registration statement;
 
     (2) That, for the purpose of determining any liability under the Securities
Act of 1933, each such post-effective amendment shall be deemed to be a new
registration statement relating to the securities offered therein, and the
offering of such securities at that time shall be deemed to be the initial bona
fide offering thereof;
 
     (3) To remove from registration by means of a post-effective amendment any
of the securities being registered which remain unsold at the termination of the
offering;
 
     (4) To file a post-effective amendment to the registration statement to
include any financial statements required by Rule 3-19 of this chapter at the
start of any delayed offering or throughout a continuous offering. Financial
statements and information otherwise required by Section 10(a) (3) of the Act
need not be furnished, provided, that the registrant includes in the prospectus,
by means of a post-effective amendment,
 
                                      II-4
<PAGE>   117
 
financial statements required pursuant to this paragraph (a) (4) and other
information necessary to ensure that all other information in the prospectus is
at least as current as the date of those financial statements.
 
     (5) Insofar as indemnification for liabilities arising under the Securities
Act of 1933 (the "Act") may be permitted to directors, officers and controlling
persons of the registrant pursuant to the foregoing provisions, or otherwise,
the registrant has been advised that in the opinion of the Securities and
Exchange Commission such indemnification is against public policy as expressed
in the Act and is, therefore, unenforceable. In the event that a claim for
indemnification against such liabilities (other than the payment by the
registrant of expenses incurred or paid by a director, officer or controlling
person of the registrant in the successful defense of any action, suit or
proceeding) is asserted by such director, officer or controlling person in
connection with the securities being registered, the registrant will, unless in
the opinion of its counsel the matter has been settled by controlling precedent,
submit to a court of appropriate jurisdiction the question of whether such
indemnification by it is against public policy as expressed in the Act and will
be governed by the final adjudication of such issue.
 
     (6) The undersigned registrant hereby undertakes to provide to the
underwriters, at the closing specified in the underwriting agreement,
certificates in such denominations and registered in such names as required by
the underwriter to permit prompt delivery to each purchaser.
 
                                      II-5
<PAGE>   118
 
                                   SIGNATURES
 
   
     Pursuant to the requirements of the Securities Act of 1933, the Registrant
certifies that is has reasonable grounds to believe that it meets all of the
requirements for filing on Form F-1 and has duly caused this registration
statement or amendment to be signed on its behalf by the undersigned, thereunto
duly authorized in Hong Kong, on the 7th day of March, 1997.
    
 
                                          EURO TECH HOLDINGS COMPANY LIMITED
 
                                          By: /s/  T.C. Leung
                                            T.C. Leung,
                                            Chairman of the Board of Directors
 
     Pursuant to the requirements of the Securities Act of 1933, this
registration statement has been signed by the following persons in the
capacities and on the dates indicated:
 
   
<TABLE>
<CAPTION>
               SIGNATURE                                  TITLE                       DATE
- ----------------------------------------  -------------------------------------  --------------
<S>                                       <C>                                    <C>
 
/s/  T.C. Leung                           Chairman of the Board of Directors,    March 7, 1997
- ----------------------------------------  Chief Executive Officer and Director
T.C. Leung                                (Principal Executive Officer)
 
/s/  Jerry Wong                           Chief Financial Officer and Director   March 7, 1997
- ----------------------------------------  (Principal Accounting and Financial
Jerry Wong                                Officer)
 
     *                                    Director                               March 7, 1997
- ----------------------------------------
Nancy Wong
 
     *                                    Director                               March 7, 1997
- ----------------------------------------
Nancy Wong
 
     *                                    Director                               March 7, 1997
- ----------------------------------------
Alex Sham
 
*By: /s/  T.C. Leung
    ------------------------------------
    T.C. Leung
    Attorney-in-Fact
                                                                                 March 7, 1997
</TABLE>
    
 
                                      II-6
<PAGE>   119
 
                           AUTHORIZED REPRESENTATIVE
 
   
     Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed below on March 10, 1997 by the
undersigned as the duly authorized representative of Euro Tech Holdings Company
Limited in the United States.
    
 
                                          /s/  PATRICK W. LEUNG
 
                                          --------------------------------------
                                               Patrick W. Leung
 
900 Palisade Ave. 8F
Fort Lee, NJ 07024
 
                                      II-7
<PAGE>   120
 
                                 EXHIBIT INDEX
 
<TABLE>
<CAPTION>
                                                                                   SEQUENTIALLY
   EXHIBIT                                                                           NUMBERED
    NO.                                 DESCRIPTION                                    PAGE
   -----   ----------------------------------------------------------------------  ------------
   <C>     <S>                                                                     <C>
     1.1   Form of Underwriting Agreement (2)
     3.1   Registrant's Restated Memorandum and Articles of Association (1)
     4.1   Form of Underwriter's Warrant Certificate (2)
     4.2   Form of Financial Consulting Agreement to be entered into by and
           between the Registrant and the Underwriter (2)
     4.3   Form of Common Stock Certificate (2)
     4.4   Form of Redeemable Common Stock Purchase Warrants (2)
     4.5   Form of Warrant Agreement between Registrant and American Stock
           Transfer & Trust Company (2)
     5.1   Opinion of Smith Hughes, Raworth & McKenzie (2)
    10.1   Form of Stock Exchange Agreement (2)
    10.2   Preliminary Agreement between the Shanghai Thermometric Instrument
           Plant and Euro Tech (Far East) Ltd. (1)
    10.3   Lease For Euro Tech (Far East) Ltd.'s Hong Kong Office (1)
    10.4   Lease For Euro Tech (Far East) Ltd.'s Guangzhou Office (1)
    10.5   Purchase Agreement between Beijing China International Industry and
           Commerce Co. Ltd. and Euro Tech (Far East) Ltd. (Beijing sales office)
           (1)
    10.6   Purchase Agreement between Shanghai Xing Tai Real Estate Development
           Incorp. and Euro Tech (Far East) Ltd. (Shanghai sales office) (1)
    10.7   International Sales Representative and Distribution Agreement between
           Wallace & Tiernan and Euro Tech (Far East) Ltd. (1)
    10.8   Sales Representative Agreement between the Finnigan Corporation and
           Euro Tech (Far East) Ltd. (1)
    10.9   Distributorship Agreement between Hach Company and Euro Tech (Far
           East) Limited (1)
   10.10   Hong Kong Bank Mortgage Commitment Letter with Euro Tech (Far East)
           Ltd. (regarding Beijing sales office) (1)
   10.11   The Bank of East Asia Limited Mortgage Commitment Letter with Euro
           Tech (Far East) Limited (regarding Shanghai sales office) (1)
   10.12   Hong Kong Bank Mortgage with Euro Tech (Far East) Limited (regarding
           new office) (1)
   10.13   Standard Chartered Bank Mortgage with Euro Tech (Far East) Limited
           (regarding investment property) (1)
   10.14   Form of Agreement among Registrant, Euro Tech (Far East) Limited and
           Shereman Enterprises Ltd. (for the services of T.C. Leung) (2)
   10.15   Registrant's Stock Option Plan (2)
   10.16   Consulting Agreement with Sidford International Ltd. (2)
    23.1   Consent of Smith Hughes, Raworth & McKenzie (included in Exhibit 5.1)
           (2)
    23.2   Consents of Arthur Anderson & Co., Hong Kong (3)
    23.3   Consent of Gusrae, Kaplan & Bruno (2)
    23.4   Consent of Hastings & Co. (2)
    23.5   Consent of Jingtian Associates (2)
    24.1   Power of Attorney included on Page II-6 of initial filing.
</TABLE>
 
- ---------------
 
(1) Previously filed with initial filing.
 
(2) Previously filed with Amendment No. 1 on January 31, 1997.
 
(3) Filed herewith.

<PAGE>   1
 
                                                                    EXHIBIT 23.2
 
   
                                                                  March 10, 1997
    
 
The Directors
Euro Tech (Far East) Limited
18/F Gee Chang Hong Centre
65 Wong Chuk Hang Road
Hong Kong
 
Dear Sirs,
 
     As independent public accountants, we hereby consent to the use of our
reports dated November 13, 1996 included in this registration statement and to
all references to our Firm included in this registration statement.
 
                                          Very truly yours,
 
                                          /s/  ARTHUR ANDERSEN & CO.
 
                                          --------------------------------------
                                               Arthur Andersen & Co.
<PAGE>   2
 
                                                                    EXHIBIT 23.2
 
   
                                                                  March 10, 1997
    
 
The Directors
Euro Tech Holdings Company Limited
18/F Gee Chang Hong Centre
65 Wong Chuk Hang Road
Hong Kong
 
Dear Sirs,
 
     As independent public accountants, we hereby consent to the use of our
reports dated November 13, 1996 included in this registration statement and to
all references to our Firm included in this registration statement.
 
                                          Very truly yours,
 
                                          /s/  ARTHUR ANDERSEN & CO.
 
                                          --------------------------------------
                                               Arthur Andersen & Co.


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