Edgar Filing: GLOBAL SOURCES LTD /BERMUDA

(This filing is made pursuant to Rule 424(b)(2)
under the Securities Act of 1933
in connection with Registration No. 333-114411.)

PROSPECTUS SUPPLEMENT
To Prospectus dated May 25, 2004

(Company's Logo)

GLOBAL SOURCES LTD.

3,000,000 Common Shares

We are offering up to 3,000,000 common shares to selected institutional
investors pursuant to this prospectus supplement.

Our common shares trade on the Nasdaq National Market under the symbol
"GSOL." On March 17, 2005, the last reported sales price of our common shares
was $16.78 per share.

WR Hambrecht + Co, LLC has agreed to act as placement agent for the sale of
up to 3,000,000 of our common shares. The placement agent is not required to
sell any specific number or dollar amount of our common shares, but will use its
best efforts to arrange for the sale of all 3,000,000 common shares.

Investing in our common shares involves risks. "Risk Factors" begin on page
S-3 of this prospectus supplement.

Per Share Total
-------------- -----------
Public offering price $13.50 $40,500,000
Placement agent's fee $0.675 $2,025,000
Proceeds to us (before expenses) $12.825 $38,475,000

Neither the Securities and Exchange Commission nor any state securities
commission has approved or disapproved of these securities or determined if this
prospectus supplement and the accompanying prospectus are truthful or complete.
Any representation to the contrary is a criminal offense.

WR HAMBRECHT + CO

As Placement Agent

The date of this prospectus supplement is March 18, 2005.

TABLE OF CONTENTS

Page

Prospectus Supplement
Summary.....................................................................S-1
Cautionary Note Regarding Forward-Looking Statements........................S-2
Risk Factors................................................................S-3
Use of Proceeds............................................................S-12
Price Range of Common Shares...............................................S-12
Dividend Policy............................................................S-12
Capitalization.............................................................S-13
Ratio of Earnings to Fixed Charges and Preferred Share Dividends...........S-13
Dilution...................................................................S-14
Plan of Distribution.......................................................S-15
Legal Matters..............................................................S-16
Experts....................................................................S-16

Appendix A:
Audited Consolidated Financial Statements for year ended December 31, 2004..A-1

Prospectus
Cautionary Note Regarding Forward-Looking Statements.........................ii
Prospectus Summary............................................................1
Summary Historical Consolidated Financial and Operating Data..................4
Risk Factors..................................................................6
Use of Proceeds..............................................................14
Price Range of Common Shares.................................................14
Dividend Policy..............................................................14
Selected Historical Consolidated Financial and Operating Data................15
Ratio of Earnings to Fixed Charges and Preferred Share Dividends.............17
Management's Discussion and Analysis of Financial Condition and
Results of Operations......................................................18
Business.....................................................................30
Senior Management and Directors..............................................41
Security Ownership of Certain Beneficial Owners and Management...............47
General Description of the Offered Securities................................50
Description of Share Capital.................................................50
Description of Preferred Shares..............................................58
Description of Debt Securities...............................................60
Description of Warrants to Purchase Common Shares or Preferred Shares........72
Description of Warrants to Purchase Debt Securities..........................74
Description of Share Purchase Contracts and Share Purchase Units.............75
Selling Shareholder..........................................................77
Plan of Distribution.........................................................78
Where You Can Find More Information..........................................80
Incorporation of Documents by Reference......................................80
About This Prospectus........................................................81
Legal Matters................................................................82
Experts......................................................................82
Index to Consolidated Financial Statements..................................F-1

You should read this prospectus supplement along with the accompanying
prospectus carefully before deciding to invest in our common shares. These
documents contain important information you should consider when making your
investment decision. This prospectus supplement contains information about the
common shares offered hereby and the accompanying prospectus contains
information about our securities generally. This prospectus supplement may add,
update or change information in the accompanying prospectus. You should rely
only on the in-

-i-

formation provided in this prospectus supplement, the accompanying prospectus or
incorporated by reference in the accompanying prospectus. We have not authorized
anyone to provide you with any other information.

-ii-

SUMMARY

This summary highlights information contained elsewhere or incorporated by
reference in this prospectus supplement and the accompanying prospectus. This
summary does not contain all of the information that you should consider before
deciding to invest in our common shares. You should read this entire prospectus
supplement and the accompanying prospectus carefully, including the "Risk
Factors" section beginning on page S-3 of this prospectus supplement.

About Global Sources Ltd.

Overview

We are a leading business-to-business (B2B) media company that provides
information and integrated marketing services to facilitate global trade, with a
particular focus on the China market. For more than 33 years, we have been in
the business of helping buyers find products and suppliers in Asia.

Our online services account for the majority of our revenue, with
substantially all other revenue coming from trade publications and trade shows.
We derive most of our revenue from suppliers for marketing and advertising
services. At any point in time, several thousand suppliers are promoting their
products through our media. These suppliers range from large companies such as
Hitachi, Motorola, Philips, Texas Instruments and Toshiba, to hundreds of
smaller firms.

We have a significant presence across a number of industry sectors,
including electronics, fashion accessories, hardware and gifts. We have been
particularly effective in facilitating China's two-way trade of electronic
goods, its largest import and export sector.

The Offering

Common shares offered in this offering Up to 3,000,000 shares

Common shares to be outstanding after this
offering 34,847,414 shares

Use of proceeds We intend to use the net
proceeds from the sale of
our shares for working
capital for general
corporate purposes and
strategic acquisitions.

Nasdaq National Market symbol GSOL

The number of our common shares to be outstanding after this offering is
based on the number of common shares outstanding as of March 17, 2005, as
adjusted for the one-for-ten bonus share issuance announced on March 1, 2005,
and does not include:

o common shares issuable upon exercise of stock options and warrants
outstanding as of that date; and

o common shares available as of that date for future grant or issuance
pursuant to our share grant plans.

Recent Developments

On March 1, 2005 we announced a one-for-ten bonus share issuance on our
outstanding common shares. Shareholders of record on March 4, 2005 will receive
one additional common share for every ten common shares held. The bonus shares
will be distributed on or about April 1, 2005.

S-1

CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS

Except for any historical information contained herein, the matters
discussed in this prospectus supplement and the accompanying prospectus contain
certain "forward-looking statements" within the meaning of the Private
Securities Litigation Reform Act of 1995 with respect to our financial
condition, results of operations and business. These statements relate to
analyses and other information which are based on forecasts of future results
and estimates of amounts not yet determinable. These statements also relate to
our future prospects, developments and business strategies. These
forward-looking statements are identified by their use of terms and phrases such
as "anticipate," "believe," "could," "estimate," "expect," "intend," "may,"
"plan," "predict," "will" and similar terms and phrases, including references to
assumptions. These forward-looking statements, including current trend
information, projections for future business activities and other trend
projections, involve risks and uncertainties that may cause our actual future
activities and results of operations to be materially different from those
suggested or described in this prospectus.

These risks include:

o customer satisfaction and quality issues;

o competition;

o our ability to achieve and execute internal business plans;

o worldwide political instability and economic downturns and inflation,
including any weakness in the economic and political conditions of
countries in the Asia-Pacific region, including China; and

o other factors described herein under "Risk Factors."

If one or more of these risks or uncertainties materialize, or if
underlying assumptions prove incorrect, our actual results may vary materially
from those expected, estimated or projected. Given these uncertainties, users of
the information included in this prospectus, including investors and prospective
investors, are cautioned not to place undue reliance on such forward-looking
statements. We do not intend to update the forward-looking statements included
in this prospectus.

In this prospectus supplement and in the accompanying prospectus, except as
specified otherwise or unless the context requires otherwise, "we," "us," "our,"
the "Company" and "Global Sources" refer to Global Sources Ltd. and its
subsidiaries. All references to "fiscal" in connection with a year shall mean
the year ended December 31.

All financial information contained herein is expressed in United States
dollars, unless otherwise stated.

S-2

RISK FACTORS

In addition to other information in this prospectus supplement and the
accompanying prospectus, the following risk factors should be carefully
considered in evaluating an investment in our company because such factors may
have a significant impact on our business, operating results and financial
condition. As a result of the risk factors set forth below and elsewhere in this
prospectus, and the risks discussed in our other Securities and Exchange
Commission (SEC) filings, actual results could differ materially from those
projected in any forward-looking statements.

General economic uncertainty may reduce spending for business-to-business
marketing and advertising.

The revenue growth and profitability of our business depend significantly
on the overall demand for business-to-business media and especially online
marketplace services, trade publications and trade shows. We believe that the
markets for these services are subject to the potentially negative impact of a
number of factors, including reductions in marketing expenditures by suppliers
and the overall weakening of global economies. These factors may give rise to a
number of market trends that adversely affect our business and revenues.

The Chinese market is key to our current and future revenue growth, and
political instability in this market could reduce our revenue and seriously harm
our business.

Our customers in China provided more than 43% of our total revenues in
fiscal 2003 and approximately 47% of our total revenues in fiscal 2004, and we
believe our operations in China will continue to grow for the next several
years. Our dependence on the China market and its revenues is significant, and
adverse political changes in China may harm our business and cause our revenues
to decline.

The Chinese government has instituted a policy of economic reform which has
included encouraging foreign trade and investment, and greater economic
decentralization. However, the Chinese government may discontinue or change
these policies, or these policies may not be successful. Moreover, despite
progress in developing its legal system, China does not have a comprehensive and
highly developed system of laws, particularly as it relates to foreign
investment activities and foreign trade. Enforcement of existing and future
laws, regulations and contracts is uncertain, and implementation and
interpretation of these laws and regulations may be inconsistent. As the Chinese
legal system develops, new laws and regulations, changes to existing laws and
regulations and the interpretation or enforcement of laws and regulations may
adversely affect business operations in China. While the Hong Kong SAR (Special
Administrative Region) has had a long history of promoting foreign investment,
its incorporation into China means that the uncertainty related to China and its
policies may now also affect the Hong Kong SAR.

The international markets, and in particular the Asia-Pacific region, in which
we do business are subject to political and economic instability, which may
interfere with our ability to do business, increase our costs and decrease our
revenue.

The international markets in which we operate are subject to risks,
including:

o fluctuations in regional economic conditions;

o political instability;

o the threat of terrorist attacks;

o conflicting and changing legal and regulatory requirements;

o restrictions placed on our operations due to our foreign status;

o significant changes in tax rates and reporting requirements;

S-3

o the loss of revenue, property and equipment from expropriation,
nationalization, war, insurrection, terrorism and other political
risks;

o adverse governmental actions, such as restrictions on transfers of
funds and trade protection measures, including tariffs and export
quotas; and

o fluctuations in currency exchange rates.

In 2004, we derived more than 90% of our revenue from customers in the
Asia-Pacific region. We expect that a majority of our future revenue will
continue to be generated from customers in this region. At the time of the Asian
economic crisis of 1997 and 1998, our revenue and operating results were
adversely affected. During the Asian economic crisis, both our sales and revenue
declined. If there is future political or economic instability in the
Asia-Pacific region, our business may be harmed and our revenue may decrease.

Because we operate internationally, foreign exchange rate fluctuations may
have a material impact on our results of operations. To the extent significant
currency fluctuations occur in Asian currencies, our revenue and profits would
be affected. At the time of the Asian economic crisis of 1997 and 1998, certain
of our contracts were denominated and priced in foreign currencies. The
conversion of these contract proceeds into U.S. dollars resulted in losses and
is indicative of the foreign exchange risk assumed by us. Currently, we do not
hedge our exposure to foreign currency fluctuations.

Our limited operating history in the trade show business as well as other
factors could adversely affect our ability to operate in this business
successfully.

Our trade show business to date has been limited. To increase our scale in
the trade show business, we will need to hire additional personnel and expend
additional capital. The trade show business also requires us to make substantial
non-refundable deposits to secure venue dates far in advance of our conducting
the trade show. We may not have sufficient access to capital to expand our trade
show business and we can give no assurances that our operation of this business
will be incremental to our growth.

In China, due to increasing competition in the trade show industry, we may
not be able to obtain the necessary trade show licenses we need, which may limit
the number of trade shows we are able to hold.

In addition, while we expect that a significant portion of our future
revenue will be derived from our trade show business, several factors could
negatively affect our financial performance in this business, including:

o the spread of SARS, Avian influenza and other similar epidemics;

o political instability and the threat of terrorist attacks;

o decrease in demand for booth space;

o limited availability of venues and appropriate venue dates;

o competing trade shows; and

o our inability to effectively expand our staff and infrastructure.

If our current and potential customers are not willing to adopt and renew our
services, we may not attract and retain a critical mass of customers.

S-4

online services and other media, or if we are unable to attract and retain a
critical mass of buyers and suppliers for our online services and other media,
our business will suffer and our revenue may decrease.

None of the buyers or suppliers that currently pay to use our services are
under any long-term contractual obligation to continue using our services. A
significant percentage of our customers do not renew their contracts and we
experience high customer turnover from year to year. If we cannot replace
non-renewing customers with new customers, our business could be adversely
affected.

We may not be successful in identifying and consummating acquisitions, joint
ventures and alliances to expand our business.

We are regularly evaluating potential strategic acquisitions, joint
ventures and alliances and we believe that such transactions are an integral
part of our business strategy. However, we may not be able to negotiate terms
successfully, finance the acquisition or arrangement, or integrate any new
businesses, products or technologies into our existing business and operations.
Even if we are successful in integrating any new businesses, products or
technologies into our existing business, we may not achieve expected results, or
we may not realize other expected benefits. If we are unable to make
acquisitions and enter into joint ventures and alliance arrangements
successfully, our growth potential may be harmed.

If we are unable to compete effectively, we will lose current customers and fail
to attract new customers.

Our industry is intensely competitive, evolving and subject to rapid
change. Barriers to entry are minimal, and competitors are able to launch new
websites and other media at a low cost. Competition is likely to result in price
reductions, reduced margins and loss of market share, any one of which may harm
our business. We compete for our share of customers' marketing and advertising
budgets with other online marketplaces, trade publications and trade shows.
Competitors vary in size, geographic scope, industries served and breadth of the
products and services offered. We may encounter competition from companies which
offer more comprehensive content, services, functionality and/or lower prices.

Many of our current and potential competitors may have greater financial,
technical, marketing and/or other resources and experience and greater name
recognition than we have. In addition, many of our competitors may have
established relationships with one another and with our current and potential
suppliers and buyers and may have extensive knowledge of our industry. Current
and potential competitors have established or may establish cooperative
relationships with third parties to increase the ability of their products to
address customer needs. Accordingly, our competitors may develop and rapidly
acquire significant market share.

Our quarterly operating results may have seasonal fluctuations, and we may fail
to meet analyst, investor and shareholder expectations, causing our share price
to decline.

We have experienced seasonal quarter-to-quarter fluctuations. Our buyer
activity is often relatively slower during the summer and year-end vacation and
holiday periods. Additionally, our online and trade publication advertising
revenue is seasonal and tends to be highest in the fourth quarter of each
calendar year as a result of increased advertising and media buying in that
quarter. Virtually all of our trade shows are expected to be held in April and
October of each year. As a result, second and fourth quarter revenue are likely
to be substantially higher than the first and third quarter revenue. However,
certain expenses associated with these revenue are likely to be incurred in
preceding quarters, which may cause results to be lower in those quarters. If
revenue in a quarter fails to meet or exceed the expectations of public market
analysts, investors and shareholders, the price of our shares may decline.

Current weakness of the telecommunications and Internet infrastructure in the
Asia-Pacific region could harm our business.

We are likely to continue to derive the majority of our Internet-based
online marketplace revenue from the Asia-Pacific region. The quality of some of
the telecommunications and Internet infrastructure and telephone line
availability in China and in some Asia-Pacific countries is poor. This may
contribute to lower than expected adoption of many of our services and may cause
usage growth and revenue to fall below expectations. In addition, ac-

S-5

cess fees are high in many Asia-Pacific countries, which also contributes to low
usage and may adversely affect our growth and revenue potential.

Customer concerns regarding security may deter use of our online products and
services.

Widely publicized security breaches involving the Internet or in online
services generally, or our failure to prevent security breaches, may cause our
current and potential customers not to use our products and services and
adversely affect our revenue. We may be required to incur additional costs to
protect against security breaches or to alleviate problems caused by these
breaches. Our potential for growth depends on our customers' confidence in the
security of our products and services.

The failure of outside parties to meet our service level and information
accuracy expectations may make our services less attractive to customers and
harm our business.

We rely on outside parties for some information, licenses, product delivery
and technology products and services. We rely on technology relationships with
software developers and providers, systems integrators and other technology
firms to support, enhance and develop our products and services. Although we
have contracts with technology providers to enhance, expand, manage and maintain
our computer and communications equipment and software, these service providers
may not provide acceptable services. Services provided by third parties include
managing our Global Sources Online network Web server, maintaining our
communications lines and managing our network data centers and software
development. These relationships may not continue or we may not be able to
develop additional third-party relationships on acceptable commercial terms,
which could cause customer dissatisfaction and/or a delay in the launch of new
software or services.

We license some components of our technology from third parties. These
licenses may not be available to us on commercially reasonable terms in the
future. The loss of these licenses could delay release or enhancement of our
services until equivalent technology could be licensed, developed or otherwise
obtained. Any such delay could have a material adverse effect on our business.
These factors may deter customers from using our services, damage our business
reputation, cause us to lose current customers, and harm our ability to attract
new customers.

We have no control over the accuracy, timeliness or effectiveness of the
information, products and services of these outside parties. As a result of
outside party actions, we may fail to provide accurate, complete and current
information about customers and their products in a timely manner and to deliver
information to buyers in a satisfactory manner.

We rely on independent sales representative firms and the loss of any
significant firm or members of a firm would harm our business and revenue.

We rely on the services of independent sales representative organizations
for the sales and marketing of our products and services. We have service
agreements with various sales representative firms that employ sales
representatives. Six sales representative firms in China are responsible for
supplier accounts which in the aggregate accounted for approximately 47% of our
total revenue for the year ended December 31, 2004. Generally, either we or the
sales representative firm may terminate the service agreement between us upon
short notice. It is possible that we may not retain some of our sales
representative firms, or they may not retain some of their sales personnel or be
able to replace them with equally qualified personnel. Furthermore, if a sales
representative firm terminates its agreement with us, some of our customers with
a direct relationship with that sales representative firm or its personnel may
terminate their relationship with us. Although these firms and their employees
are independent from us, there can be no assurance that our reputation and our
business will not be harmed by their acts or omissions.

The loss of one or more of our executive officers or key employees, either to a
competitor or otherwise, could harm our business.

S-6

cer and chief information officer are important to our operations. If
competitors hire our key personnel, it could allow them to compete more
effectively by diverting customers from us and facilitating more rapid
development of their competitive offerings. We do not maintain key man insurance
on any of our executive officers.

Our inability to maintain effective Internet domain names could create confusion
and direct traffic away from our online services.

If we are not able to prevent third parties from acquiring Internet domain
names that are similar to the various Internet domain names that we own, third
parties could create confusion that diverts traffic to other websites away from
our online services, thereby adversely affecting our business. The acquisition
and maintenance of Internet domain names generally are regulated by governmental
agencies. The regulation of Internet domain names in the United States and in
foreign countries is subject to change. As a result, we may not be able to
acquire or maintain relevant Internet domain names. Furthermore, the
relationship between regulations governing such addresses and laws protecting
proprietary rights is unclear.

If we release new services, catalog tools or software that contain defects, we
may need to suspend further sales and services until we fix the defects, and our
reputation could be harmed.

Our services depend on software that is complex and that may contain
unknown and undetected defects, errors or performance problems. We may not
discover defects, errors or performance problems that affect our new or current
services or enhancements until after they are deployed. These defects, errors or
performance problems could force us to suspend sales and services or cause
service interruptions which could damage our reputation or increase our service
costs, cause us to lose revenues, delay market acceptance or divert our
development resources, any of which could severely harm our business.

Risk of failure of our computer and communications hardware systems increases
without redundant facilities.

Our business depends on the efficient and uninterrupted operation of our
computer and communications hardware systems. Any system interruptions that
cause Global Sources Online or any of our online sites to be unavailable may
drive away buyers and reduce the attractiveness of these sites to advertisers
and could adversely affect our business, financial condition and operating
results. We maintain most of our computer systems in one web-hosting and
internal support facility in Singapore. We do not have redundant facilities or
disaster recovery systems for our computer systems. Interruptions could result
from natural disasters as well as catastrophic hardware failures, software
problems, extended power loss, telecommunications failure and similar events.

We may be subject to legal liability for publishing or distributing content over
the Internet or in our trade publications or trade shows.

We may be subject to legal claims relating to the content on Global Sources
Online or our other websites, or the downloading and distribution of such
content, as well as legal claims arising out of the products or companies
featured in our trade publications and tradeshows. Claims could involve matters
such as libel and defamation, patent, trademark, copyright and design
infringement, fraud, and invasion of privacy. Media companies have been sued in
the past, sometimes successfully, based on the content published or made
available by them. Like many companies in our industry, we have received notices
of claims based on content made available on our website. In addition, some of
the content provided on Global Sources Online is manually entered from data
compiled by other parties, including governmental and commercial sources, and
this data may have errors, or we may introduce errors when entering such data.
If our content is improperly used or if we supply incorrect information, third
parties may take legal action against us. In addition, we may violate usage
restrictions placed on text or data that is supplied to us by third parties. Our
insurance may not cover claims of this type, or may not provide sufficient
coverage, which could harm our reputation and operating results.

Evolving regulation of the Internet and commercial e-mail may affect us
adversely.

S-7

gressive enforcement, could reduce our ability to promote our services and our
ability to facilitate communications between suppliers and buyers and, as a
result, adversely affect our business.

In addition, taxation of products and services provided over the Internet
or other charges imposed by government agencies or by private organizations for
accessing the Internet may also be imposed. Any regulation imposing greater fees
for Internet use or restricting information exchange over the Internet could
result in a decline in the use of the Internet and the viability of
Internet-based services, which could harm our business and operating results.

The laws governing Internet transactions and market access over the
Internet are evolving and remain largely unsettled. The adoption or modification
of laws or regulations relating to the Internet may harm our business by
increasing our costs and administrative burdens. It may take years to determine
whether and how existing laws apply to the Internet.

Our intellectual property protection is limited, and others may infringe upon
it, which may reduce our ability to compete and may divert our resources.

Our success depends upon proprietary technology, content and other
intellectual property rights. We have relied on a combination of copyright,
trade secret and trademark laws and nondisclosure and other contractual
restrictions to protect ourselves. Our efforts to protect our intellectual
property rights may not be adequate. Our competitors may independently develop
similar technology or duplicate our software and services. If others are able to
develop or use technology and/or content we have developed, our competitive
position may be negatively affected.

We have in the past co-developed, and may in the future co-develop, some of
our intellectual property with independent third parties. In these instances, we
take all action that we believe is necessary and advisable to protect and to
gain ownership of all co-developed intellectual property. However, if such third
parties were to introduce similar or competing online products and services that
achieve market acceptance, the success of our online services and our business,
financial condition, prospects and operating results may be harmed.

We cannot determine whether future patent, service mark or trademark
applications, if any, will be granted. No certainty exists as to whether our
current intellectual property or any future intellectual property that we may
develop will be challenged, invalidated or circumvented or will provide us with
any competitive advantages.

Litigation may be necessary to enforce our intellectual property rights,
protect trade secrets, determine the validity and scope of the proprietary
rights of others, or defend against claims of infringement or invalidity.
Intellectual property laws provide limited protection. Moreover, the laws of
some foreign countries do not offer the same level of protection for
intellectual property as the laws of the United States. In addition, we may be
unable to detect unauthorized use of our intellectual property. Litigation may
result in substantial costs and diversion of resources, regardless of its
outcome, which may limit our ability to develop new services and compete for
customers.

If third parties claim that we infringe upon their intellectual property rights,
our ability to use technologies and products may be limited, and we may incur
substantial costs to resolve these claims.

Litigation regarding intellectual property rights is common in the Internet
and software industries. Defending against these claims could be expensive and
divert our attention from operating our business. We expect third-party
infringement claims involving Internet technologies and software products and
services to increase. If we become liable to third parties for infringing their
intellectual property rights, we could be required to pay substantial damage
awards and be forced to develop non-infringing technology, obtain a license or
cease using the products and services that contain the infringing technology or
content. We may be unable to develop non-infringing technology or content or to
obtain a license on commercially reasonable terms, or at all.

In the past, we have received notices alleging intellectual property
infringements. Although, to date, there has been no successful litigation
directed against us with respect to the infringement and/or improper use of the
intellectual property rights of third parties, there can be no assurances that
there will not be any successful litigation in the future.

S-8

We may also be named as a defendant in litigation alleging infringement of
intellectual property rights by our customers. We may be required to defend
ourselves and our customers against infringement claims. In the event of a claim
of infringement, we and our customers may be required to pay significant damages
or obtain one or more licenses from third parties, and we may be unable to
obtain necessary licenses at a reasonable cost or at all. Inability to obtain
licenses may prevent us from offering products and services, which may limit our
revenue.

Our lengthy sales and implementation cycle could cause delays in revenue growth.

The period between our initial contact with a potential customer and the
purchase by it of our products and services is often long and unpredictable and
may have delays associated with the lengthy budgeting and approval processes of
our customers. This lengthy sales and implementation cycle may affect our
ability to estimate our revenue in future quarters.

Our growth could strain our resources, and if we are unable to implement
appropriate controls and procedures to manage our growth, we may not be able to
successfully implement our business plan.

We plan to increase substantially the number of independent sales
representatives in China in order to pursue our business objectives. Our success
will depend in part upon the ability of our senior management to implement and
manage this growth effectively. To do this, additional new representatives must
be recruited and trained. If our new representatives perform poorly, or if their
training and management is unsuccessful, or if our relationships with our
existing representatives fail, our business may be harmed. To manage the
expected growth of our operations, we will need to continue to improve our
operational, financial and management controls and our reporting systems and
procedures. If we fail to manage our growth successfully, we will be unable to
execute our business plan.

Merle A. Hinrichs, our Chairman and Chief Executive Officer, is also our
controlling shareholder and he may take actions that conflict with your
interest.

Merle A. Hinrichs beneficially owns 67.2% of our common shares. On an as
adjusted basis after giving effect to the offering, Mr. Hinrichs will
beneficially own 61.4% of our common shares. Accordingly, Mr. Hinrichs controls
the power to elect our directors, to appoint new management and to oppose
actions requiring shareholder approval, such as adopting amendments to our
articles of incorporation and approving mergers or sales of all or substantially
all of our assets. Such concentration of ownership may have the effect of
delaying or preventing a change of control even if a change of control is in the
best interest of all shareholders. In addition, Mr. Hinrichs may still
effectively control our company even if his share holdings are significantly
reduced. There may be instances in which the interest of our controlling
shareholder may conflict with the interest of a holder of securities sold
pursuant to this prospectus.

There is a limited public market for our shares and the trading volume for our
shares is low which may limit your ability to sell your shares or purchase more
shares.

Our common shares have been traded in the public market for a limited time
and this market may not be sustained. As a result of the April 2000 share
exchange, 1,189,949 of our common shares were listed on the Nasdaq National
Market. As of December 31, 2004 we had approximately 1,030 shareholders, and
approximately 7,789,448 shares that were tradable on the Nasdaq National Market.

However, because of the small number of shareholders and the small number
of publicly tradable shares, we cannot be sure that an active trading market
will develop or be sustained or that you will be able to sell or buy common
shares when you want to. As a result, it may be difficult to make purchases or
sales of our common shares in the market at any particular time or in any
significant quantity. If our shareholders sell our common shares in the public
market, the market price of our common shares may fall. In addition, such sales
may create the perception by the public of difficulties or problems with our
products and services or management. As a result, these sales may make it more
difficult for us to sell equity or equity related securities in the future at a
time or price that is appropriate.

S-9

Future sales of our common shares could depress the price of the common shares.

Future sales of common shares by us or our existing shareholders could
adversely affect the prevailing market price of the common shares. As of
December 31, 2004, we had 31,847,414 common shares outstanding. At least
21,806,529 common shares outstanding are beneficially owned by people who may be
deemed "affiliates," as defined by Rule 405 of the Act, and are "restricted
securities" which can be resold in the public market only if registered with the
SEC or pursuant to an exemption from registration.

We cannot predict what effect, if any, that future sales of such restricted
shares or the availability of shares for future sale, will have on the market
price of the common shares from time to time. Sales of substantial amounts of
common shares in the public market, or the perception that such sales could
occur, could adversely affect prevailing market prices for the common shares and
could impair our ability to raise additional capital through an offering of our
equity securities.

Because we are governed by Bermuda law rather than the laws of the United States
and our assets are outside the U.S., our shareholders may have more difficulty
protecting their rights because of differences in the laws of the jurisdictions.

We are organized under the laws of Bermuda. In addition, certain of our
directors and officers reside outside the United States and a substantial
portion of our assets are located outside the United States. As a result, it may
be difficult for investors to effect service of process within the United States
upon such persons or to realize against them judgments of courts of the United
States predicated upon civil liabilities under the United States federal
securities laws. We have been advised by our legal counsel in Bermuda, Appleby
Spurling Hunter, that there is doubt as to the enforcement in Bermuda, in
original actions or in actions for enforcement of judgments of United States
courts, of liabilities predicated upon U.S. federal securities laws, although
Bermuda courts will enforce foreign judgments for liquidated amounts in civil
matters subject to certain conditions and exceptions.

It may be difficult for a third party to acquire us, and this may depress our
share price.

Our bye-laws contain provisions that may have the effect of delaying,
deferring or preventing a change in control or the displacement of our
management. These provisions may discourage proxy contests and make it more
difficult for the shareholders to elect directors and take other corporate
actions. These provisions may also limit the price that investors might be
willing to pay in the future for our common shares. These provisions include:

o providing for a staggered board of directors, so that it would take
three successive annual general meetings to replace all directors;

o requiring the approval of 100% of shareholders for shareholder action
by written consent;

o establishing advance notice requirements for submitting nominations
for election to the board of directors and for proposing matters that
may be acted upon by shareholders at a general meeting; and

o restricting business combinations with interested shareholders that
have not been approved by at least two-thirds of the holders of our
voting shares (other than the interested shareholder) or by a majority
of the continuing directors or if certain prescribed conditions are
met assuming that we will receive fair market value in exchange for
such business combination. In this context, a "business combination"
includes mergers, asset sales and other material transactions
resulting in a benefit to the interested shareholder or the adoption
of a plan for our liquidation or dissolution; a "continuing director"
is a member of our board of directors that is not an affiliate or
associate of an interested shareholder and was a member of our board
prior to such person becoming an interested shareholder; and an
"interested shareholder" is any person (other than us or any of our
subsidiaries, any employee benefit or other similar plan or any of our
shareholders who owned shares prior to the listing of our shares on
the Nasdaq National Market) that owns or has announced its intention
to own, or with respect to any of our affiliates or associates, within
the prior two years did own, at least 15% of our voting shares.

S-10

Issues related to Arthur Andersen may impede our ability to access the capital
markets.

SEC rules and regulations require us to present historical audited
financial statements in various SEC filings, including registration statements,
along with our accountants' consent to our inclusion of its audit report in
those filings. Prior to August 8, 2002, Arthur Andersen served as our
independent auditors. Effective August 8, 2002, Arthur Andersen resigned as our
independent public accountants and we subsequently retained Ernst & Young as our
independent auditors for the fiscal years ended December 31, 2002 and December
31, 2003. On August 31, 2002, Arthur Andersen ceased practicing before the SEC
and, as a result, we are unable to obtain their written consent to incorporate
by reference or include Arthur Andersen's reports on our financial statements.
If the SEC ceased accepting financial statements previously audited by Arthur
Andersen without Arthur Andersen's written consent, we would be unable to access
the public capital markets unless Ernst & Young, our current independent
accountant, or another independent accountant, is able to re-audit the financial
statements originally audited by Arthur Andersen. In addition, investors in the
securities offered hereby and in any future offerings we make for which we use
Arthur Andersen audit reports will not be entitled to recovery against Arthur
Andersen under the Securities Act for any material misstatements or omissions in
those financial statements. Furthermore, Arthur Andersen will be unable to
participate in the "due diligence" process that would customarily be performed
by potential investors, underwriters or placement agents in our securities,
which process includes having Arthur Andersen perform procedures to assure the
continued accuracy of its report on our audited financial statements and to
confirm its review of unaudited interim periods presented for comparative
purposes. As a result, we may not be able to bring to the market successfully an
offering of our securities. Consequently, our financing costs may increase or we
may miss attractive market opportunities.

S-11

USE OF PROCEEDS

We intend to use the net proceeds from the sale of the common shares
offered under this prospectus supplement, approximately $38.475 million after
deducting placement agency fees, for working capital, general corporate purposes
and strategic acquisitions.

PRICE RANGE OF COMMON SHARES

Our common shares are traded on the Nasdaq National Market under the symbol
"GSOL." For the periods presented below, the high and low sales prices for our
common shares as reported on the Nasdaq National Market as adjusted for the
one-for-ten share split resulting from the bonus share issue, were as follows:

Period High Low
------ ---- ---
2002
First Quarter.................................... $ 4.55 $ 2.99
Second Quarter................................... $ 4.18 $ 3.31
Third Quarter.................................... $ 3.44 $ 2.33
Fourth Quarter................................... $ 4.25 $ 2.75
2003
First Quarter.................................... $ 4.34 $ 3.39
Second Quarter................................... $ 4.95 $ 3.32
Third Quarter.................................... $ 9.08 $ 3.93
Fourth Quarter................................... $ 8.18 $ 5.72
2004
First Quarter.................................... $ 15.14 $ 6.07
Second Quarter................................... $ 11.54 $ 7.16
Third Quarter.................................... $ 8.64 $ 5.27
Fourth Quarter................................... $ 12.05 $ 5.54

On March 17, 2005, the closing sales price for our common shares as
reported on the Nasdaq National Market was $16.78. As of March 1, 2005, and
based on information provided to us by our transfer agent, there were
approximately 1038 holders of record of our common shares.

DIVIDEND POLICY

Under Bermuda law, a company may declare and pay dividends unless there are
reasonable grounds for believing that the company is, or would, after the
payment, be unable to pay its liabilities as they become due or that the
realizable value of the company's assets would thereby be less than the
aggregate of its liabilities and issued share capital and share premium
accounts.

Under our bye-laws, each share is entitled to a dividend if, as and when
dividends are declared by the board of directors. The board of directors may
determine that any dividend may be paid in cash or will be satisfied by paying
up in full common shares in Global Sources to be issued to the shareholders
credited as fully paid or partly paid. The board of directors may also pay any
fixed cash dividend which is payable on any of our common shares half-yearly or
on other dates, whenever our position, in the opinion of the board of directors,
justifies such payment.

Dividends, if any, on our common shares will be paid at the discretion of
our board of directors and will depend on our future operations and earnings,
capital requirements, surplus and general financial conditions, as our board of
directors may deem relevant.

We have not paid any cash dividends on our common shares since October
1999. Previously, we paid dividends as a private company as a means to
distribute earnings to shareholders. Beginning in October 1999, we have focused
on the implementation of our growth plans, and we have retained earnings in
furtherance of such plans. We are not permitted to pay a dividend under Bermuda
law until such time as we have positive retained earnings. In any event, we do
not intend to pay dividends for the foreseeable future in order to focus on our
growth plans.

S-12

CAPITALIZATION

The following table sets forth our capitalization (1) on an actual basis as
of December 31, 2004, and (2) on an as adjusted basis to reflect the sale of
3,000,000 of our common shares at the public offering price of $13.50 per share
(less estimated offering expenses and placement agency fees of $2,196,500 as if
it occurred on December 31, 2004), each to reflect the one-for-ten bonus share
issuance on outstanding common shares that will be distributed on or about April
1, 2005. You should read this information in conjunction with the consolidated
financial statements and related notes included in this prospectus and other
financial information incorporated by reference in this prospectus supplement
and the accompanying prospectus.

As of
December 31, 2004
---------------------------------
Actual As Adjusted
------------- ---------------
(Unaudited, in thousands
except number of shares)
Liabilities:

Total liabilities...................................................... $ 47,002 $ 47,002
------------- ---------------
Shareholders' equity:
Common shares, US $0.01 par value; 50,000,000 shares authorized; 31,847,414
shares issued and outstanding, actual; 34,847,414 shares
issued and outstanding, as adjusted.................................... $ 319 $ 349
Additional paid-in-capital............................................. 86,373 124,647
Retained deficit....................................................... (34,577) (34,577)
Less: unearned compensation............................................ (6,831) (6,831)
Accumulated other comprehensive income................................. 239 239
------------- ---------------
Total shareholders' equity........................................... 45,523 83,827
------------- ---------------
Total capitalization................................................. $ 92,525 $ 130,829
============= ===============

RATIO OF EARNINGS TO FIXED CHARGES AND PREFERRED SHARE DIVIDENDS

Because we did not have any preferred shares outstanding during the period
presented, the ratio of earnings to combined fixed charges and preference
dividends was the same as the ratio of earnings to fixed charges. The ratio of
earnings to fixed charges, and any deficiency, where applicable, for each of the
periods set forth below is as follows (in thousands except ratio):

Year Ended
December 31,
----------------- ---------------- ---------------- --------------- --------------
2000 2001 2002 2003 2004
----------------- ---------------- ---------------- --------------- --------------

Ratio of earnings to fixed
charges........................ -- 12 N/A N/A N/A
Deficiency of earnings to
cover fixed charges............ (66,856) -- N/A N/A N/A

"Fixed Charges" consists of:

o interest expensed and capitalized, and

o an estimate of the interest within rental expense.

S-13

"Earnings" consists of income from continuing operations before income
taxes and fixed charges (excluding capitalized interest).

DILUTION

Our net tangible book value as of December 31, 2004 which represents our
total shareholders' equity was approximately $45.5 million, or $1.429 per share.
"Net tangible book value" per common shares represents our total tangible assets
reduced by our total liabilities and divided by the number of common shares
outstanding. Assuming the sale of 3,000,000 of our common shares at an offering
price of $13.50 per share (less estimated offering expenses and placement agency
fees of $2,196,500 as if it occurred on December 31, 2004), our adjusted net
tangible book value as of December 31, 2004 would have been approximately $83.8
million or approximately $2.406 per share. The increase in net tangible book
value of $0.977 per share would be due solely to the purchase of the shares in
this offering. Purchasers in this offering will immediately incur a dilution of
$11.094 per share from the $13.50 offering price of the shares. "Dilution" is
determined by subtracting net tangible book value per share after the offering
from the offering price.

Public offering price per share $ 13.50
Net tangible book value per share as of December 31, 2004 $ 1.429
Increase per share attributable to new investors $ 0.977
-----
Net tangible book value per share after the offering $ 2.406
------
Dilution per share to new investors $ 11.094
======

S-14

PLAN OF DISTRIBUTION

WR Hambrecht + Co, LLC, referred to as the placement agent, has entered
into a placement agency agreement with us in which they have agreed to act as
placement agent in connection with the offering. The placement agent is using
its best efforts to introduce us to selected institutional investors who will
purchase the shares. The placement agent has no obligation to buy any of the
shares from us nor is the placement agent required to arrange the purchase or
sale of any specific number or dollar amount of the shares, but has agreed to
use reasonable best efforts to arrange for the sale of all of the shares.

We have agreed to indemnify the placement agent and other persons against
specific liabilities under the Securities Act of 1933, as amended. The placement
agent has informed us that it will not engage in overallotment, stabilizing
transactions or syndicate covering transactions in connection with the offering.

We have agreed to pay the placement agent a fee equal to 5% of the proceeds
of this offering. The following table shows the per share and total commissions
we will pay to the placement agent in connection with the sale of the shares
offered pursuant to this prospectus supplement and the accompanying prospectus,
assuming the purchase of all of the shares offered hereby.

Per share $ 0.675
Total $ 2,025,000

We and our officers, directors and certain of our shareholders have agreed
to a 90-day "lock-up" with respect to our common shares and other of our
securities that they beneficially own, including securities that are convertible
into our common shares and securities that are exchangeable or exercisable for
our common shares. This means that, subject to certain exceptions, for a period
of 90 days following the closing of this offering, we and such persons may not
offer, sell, pledge or otherwise dispose of these securities without the prior
written consent of WR Hambrecht + Co, LLC.

This is a brief summary of the material provisions of the placement agency
agreement and does not purport to be a complete statement of its terms and
conditions. A copy of the placement agency agreement will be filed with the SEC
and incorporated by reference into the registration statement of which this
prospectus supplement forms a part. See "Where You Can Find More Information" on
page 80 of the accompanying prospectus.

S-15

LEGAL MATTERS

Certain legal matters with respect to United States and New York law will
be passed upon for us by Cahill Gordon & Reindel LLP, New York, New York.
Certain legal matters with respect to Bermuda law will be passed upon by Appleby
Spurling Hunter, Hamilton, Bermuda. Morrison & Foerster LLP, New York, New York
will pass upon certain matters for the placement agent.

EXPERTS

The consolidated financial statements of Global Sources Ltd and
subsidiaries at December 31, 2003 and 2004, and for each of the three years in
the period ended December 31, 2004 appearing in this Prospectus Supplement have
been audited by Ernst & Young, independent registered public accounting firm, as
set forth in their report appearing elsewhere herein and are included in
reliance upon such report given on the authority of such firm as experts in
accounting and auditing.

The consolidated financial statements of Global Sources Ltd. as of December
31, 2001 and for the year then ended have been audited by Arthur Andersen,
independent auditors, as indicated in their report with respect thereto, and are
included herein in reliance upon the authority of said firm as experts in giving
said reports.

Effective August 8, 2002, Arthur Andersen resigned as our independent
auditors and we subsequently retained Ernst & Young as our independent auditors
for the fiscal year ended December 31, 2002. On August 31, 2002, Arthur Andersen
ceased practicing before the SEC. We are unable to obtain Arthur Andersen's
written consent to include in this offering memorandum its reports on our
financial statements for the year ended December 31, 2001. The Securities Act
permits the filing of this Registration Statement without a written consent from
Arthur Andersen. The cessation of Arthur Andersen's practice and the absence of
such written consent from Arthur Andersen each may limit your ability to assert
claims for any untrue statement of a material fact contained in the financial
statements audited by Arthur Andersen or any omission to state a material fact
required to be stated therein.

S-16

APPENDIX A

GLOBAL SOURCES LTD. AND SUBSIDIARIES

Index to Consolidated Financial Statements
December 31, 2004

Page

Report of Independent Registered Public Accountants.................... 2
Consolidated Balance Sheets............................................ 3
Consolidated Statements of Income...................................... 4
Consolidated Statements of Cash Flows.................................. 5
Consolidated Statement of Shareholders' Equity......................... 6
Notes to Consolidated Financial Statements............................. 7 - 28

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTANTS

To the Board of Directors and Shareholders of
Global Sources Ltd.

We have audited the accompanying consolidated balance sheets of Global Sources
Ltd. (a company incorporated under the laws of Bermuda) and its subsidiaries as
of December 31, 2004 and 2003, and the related consolidated statements of
income, shareholders' equity and cash flows for each of the three years in the
period ended December 31, 2004. These financial statements are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these financial statements based on our audits.

We conducted our audits in accordance with the standards of the Public Company
Accounting Oversight Board (United States). 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 consideration of
internal control over financial reporting as a basis for designing audit
procedures that are appropriate in the circumstances, but not for the purpose of
expressing an opinion on the effectiveness of the Company's internal control
over financial reporting. Accordingly, we express no such opinion. An audit also
includes examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements, assessing the accounting principles
used and significant estimates made by management, and evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.

In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the consolidated financial position of Global
Sources Ltd. and its subsidiaries as of December 31, 2004 and 2003, and the
consolidated results of their operations and cash flows for each of the three
years in the period ended December 31, 2004, in conformity with accounting
principles generally accepted in the United States of America.

/s/ ERNST & YOUNG

Singapore
March 15, 2005

GLOBAL SOURCES LTD. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS

(In U.S. Dollars Thousands, Except Number of Shares and Per Share Data)

At December 31 At December 31
-------------- --------------
2003 2004
-------------- --------------

ASSETS
Current Assets:

Cash and cash equivalents................................................ $ 26,227 $ 41,195
Available-for-sale securities............................................ 35,140 10,172
Accounts receivable, net................................................. 4,507 5,147
Receivables from sales representatives................................... 3,883 3,407
Inventory of paper....................................................... 703 750
Prepaid expenses and other current assets................................ 1,883 2,926
-------------- --------------
Total Current Assets....................................... 72,343 63,597
-------------- --------------
Property and equipment, net................................................. 7,870 24,902
Long term investments....................................................... 100 100
Bonds held to maturity, at amortized cost................................... 992 666
Other assets................................................................ 1,236 3,260
-------------- --------------
Total Assets.............................................. $ 82,541 $ 92,525
============== ==============

LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities:
Accounts payable......................................................... $ 4,432 $ 4,798
Deferred income and customer prepayments................................. 27,454 28,775
Accrued liabilities...................................................... 5,803 5,921
Income taxes payable..................................................... 804 384
-------------- --------------
Total Current Liabilities................................. 38,493 39,878
-------------- --------------
Liabilities for incentive and bonus plans................................... 682 467
Deferred income and customers prepayments - long term....................... -- 1,420
Amount due to a shareholder................................................. 11,404 --
Minority interest........................................................... 3,684 4,910
Deferred tax liability...................................................... 298 327
-------------- --------------
Total Liabilities......................................... 54,561 47,002
-------------- --------------
Shareholders' Equity:
Common shares, US$0.01 par value; 50,000,000 shares authorized;
31,847,414 (2003: 31,841,364) shares issued and outstanding......... 318 319
Additional paid in capital............................................... 81,896 86,373
Retained deficit......................................................... (50,346) (34,577)
Less: Unearned compensation............................................. (4,563) (6,831)
Accumulated other comprehensive income................................... 675 239
-------------- --------------
Total Shareholders' Equity................................ 27,980 45,523
-------------- --------------
Total Liabilities and Shareholders' Equity........................... $ 82,541 $ 92,525
============== ==============

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

GLOBAL SOURCES LTD. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME

(In U.S. Dollars Thousands, Except Number of Shares and Per Share Data)

Year Ended December 31,
-----------------------------------------------
2002 2003 2004
------------- ------------- --------------

Revenue:

Online and other media services........................ $ 84,400 $ 87,685 $ 92,325
Exhibitions............................................ 2,455 3,327 13,010
Miscellaneous.......................................... 631 657 511
------------- ------------- --------------
87,486 91,669 105,846
------------- ------------- --------------
Operating Expenses:
Sales.................................................. 28,659 30,113 29,956
Event production....................................... 933 930 3,774
Community.............................................. 12,481 12,331 16,967
General and administrative............................. 28,885 28,682 31,252
Online services development............................ 5,378 4,960 4,232
Non-cash compensation expense (Note a)................. 2,564 1,419 2,117
Amortization of intangibles/software costs............. 3,740 4,453 1,480
------------- ------------- --------------
Total Operating Expenses.................................. 82,640 82,888 89,778
------------- ------------- --------------
Income from Operations.................................... 4,846 8,781 16,068
------------- ------------- --------------
Interest income........................................ 439 122 219
Gain (loss) on sale of available-for-sale securities... -- (40) 1,120
Foreign exchange gains (losses), net...................
50 -- 240
------------- ------------- --------------
Income before Income Taxes................................ 5,335 8,863 17,647
Income Tax Provision...................................... (720) (668) (651)
------------- ------------- --------------
Net Income before Minority Interest....................... $ 4,615 $ 8,195 $ 16,996
------------- ------------- --------------
Minority interest......................................... (308) (861) (1,227)
------------- ------------- --------------
Net Income................................................ $ 4,307 $ 7,334 $ 15,769
============= ============= ==============
Basic net income per share................................ $ 0.14 $ 0.23 $ 0.50
============= ============= ==============
Shares used in basic net income per share calculations (Note
2(u)).................................................. 31,834,353 31,840,403 31,846,439
============= ============= ==============
Diluted net income per share.............................. $ 0.14 $ 0.23 $ 0.49
============= ============= ==============
Shares used in diluted net income
per share calculations (Note 2(u))..................... 31,834,353 31,861,780 31,934,079
============= ============= ==============

Note: a. Reflects the non-cash compensation expenses associated with the
employee equity compensation plans. Approximately $626 (2003: $323, 2002:
$623) represents sales expenses, $93 (2003: $96, 2002: $238) represents
community, $1,066 (2003: $691, 2002: $1,179) represents general and
administrative and $332 (2003: $309, 2002: $524) represents online services
development expenses.

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

GLOBAL SOURCES LTD. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS

(In U.S. Dollars Thousands)

Year Ended December 31,
---------------------------------------
2002 2003 2004
----------- ----------- -----------
Cash flows from operating activities:

Net income....................................................... $ 4,307 $ 7,334 $ 15,769
Adjustments to reconcile net income to net cash provided by
operating activities:
Depreciation and amortization.................................... 8,989 8,509 4,052
Profit on sale of property and equipment......................... (1) (7) (1)
Accretion of U.S. Treasury strips zero % coupon.................. (99) (74) (57)
(Gain) loss on sale of available-for-sale securities............. -- 40 (1,120)
Interest income on available-for-sale securities .............. -- -- (92)
Bad debt expense................................................. 670 202 (716)
Non-cash compensation expense.................................... 2,564 1,419 2,117
Income attributable to minority shareholder...................... 308 861 1,227
Property and equipment written off............................... 153 12 26
----------- ----------- -----------
16,891 18,296 21,205
Changes in assets and liabilities:
Accounts receivables............................................. 871 (540) 76
Receivables from sales representatives........................... (2,223) (951) 476
Receivables from related party sales representatives............. 2,900 -- --
Inventory of paper............................................... 311 (158) (47)
Prepaid expenses and other current assets........................ (25) (742) (1,108)
Long term assets................................................. 118 (155) (2,024)
Accounts payable................................................. 659 148 366
Accrued liabilities and liabilities for incentive and bonus plans (175) 99 (97)
Deferred income and customer prepayments......................... 1,137 9,195 2,741
Tax liability.................................................... 198 131 (391)
----------- ----------- -----------
Net cash provided by operating activities................... 20,662 25,323 21,197
----------- ----------- -----------

Cash flows from investing activities:
Purchase of property and equipment............................... (4,193) (2,307) (21,111)
Proceeds from sales of property and equipment.................... 3 32 2
Proceeds from matured bonds...................................... 450 440 383
Purchase of available-for-sale securities........................ (26,199) (19,300) (131,444)
Proceeds from sale of available-for-sale securities.............. -- 11,000 157,253
----------- ----------- -----------
Net cash generated from (used for) investing activities.... (29,939) (10,135) 5,083
----------- ----------- -----------

Cash flows from financing activities:
Repayment of amount due to a shareholder......................... -- -- (11,404)
Amount received towards directors purchase plan.................. 50 30 92
----------- ----------- -----------
Net cash generated from (used for) financing activities.... 50 30 (11,312)
----------- ----------- -----------

Net increase (decrease) in cash and cash equivalents............... (9,227) 15,218 14,968
Cash and cash equivalents, beginning of the year................... 20,236 11,009 26,227
----------- ----------- -----------
Cash and cash equivalents, end of the year......................... $ 11,009 $ 26,227 $ 41,195
=========== =========== ===========

Supplemental cash flow disclosures:
Income tax paid.................................................. $ 522 $ 537 $ 1,042
=========== =========== ===========

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

GLOBAL SOURCES LTD. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF SHAREHOLDERS' EQUITY

(In U.S. Dollars Thousands, Except Number of Shares)

Common shares
----------------------------
Accumulated
Additional Unearned other Total
Number of paid in Retained compensa- comprehensive shareholders'
shares Amounts capital deficit tion income equity
---------- --------- ---------- ---------- ---------- ------------- -------------

Balance at December 31, 2001..... 31,829,264 $ 318 $ 80,141 $ (61,987) $(6,871) -- $ 11,601

Net income....................... -- -- -- 4,307 -- -- $ 4,307

Non-cash compensation expense.... -- -- 240 -- -- -- $ 240

Unearned compensation............ -- -- -- -- 2,324 -- $ 2,324

Amount received towards directors
- purchase plan.......... -- -- 50 -- -- -- $ 50

Issuance of shares under directors
- purchase plan.............. 6,050 -- -- -- -- -- --
---------- --------- ---------- ---------- ---------- ------------- -------------
Balance at December 31, 2002..... 31,835,314 $ 318 $ 80,431 $ (57,680) $(4,547) -- $ 18,522

Net income....................... -- -- -- 7,334 -- -- $ 7,334

Non-cash compensation expense.... -- -- 1,435 -- -- -- $ 1,435

Unearned compensation............ -- -- -- -- (16) -- $ (16)

Amount received towards directors
- purchase plan.......... -- -- 30 -- -- -- $ 30

Issuance of shares under directors
- purchase plan........... 6,050 -- -- -- -- -- --

Loss realized on sale of
available-for-sale securities,
net of income tax of $NIL .... -- -- -- -- -- 40 $ 40

Unrealized gain on
available-for-sale securities,
net of income tax of $NIL..... -- -- -- -- 635 $ 635
---------- --------- ---------- ---------- ---------- ------------- -------------
Balance at December 31, 2003..... 31,841,364 $ 318 $ 81,896 $ (50,346) $(4,563) $ 675 $ 27,980

Net income....................... -- -- -- 15,769 -- -- $ 15,769

Non-cash compensation expense.... -- -- 4,386 -- -- -- $ 4,386

Unearned compensation............ -- -- -- -- (2,268) -- $ (2,268)

Amount received towards directors
- purchase plan.......... -- -- 92 -- -- -- $ 92

Issuance of shares under directors
- purchase plan........... 6,050 1 (1) -- -- -- --

Gain, interest income realized on
sale of available-for-sale
securities, net of income tax of
$NIL ......................... -- -- -- -- -- (1,212) $ (1,212)

Unrealized gain on
available-for-sale securities,
net of income tax of $NIL..... -- -- -- -- 776 $ 776
---------- --------- ---------- ---------- ---------- ------------- -------------
Balance at December 31, 2004..... 31,847,414 $ 319 $ 86,373 $ (34,577) $(6,831) $ 239 $ 45,523
========== ========= ========== ========== ========== ============= =============

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

GLOBAL SOURCES LTD. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(In U.S. Dollars Thousands, Except Number of Shares and Per Share Data)

1. The Company

The Company's principal business is to provide services that allow global
buyers to identify suppliers and products, and enable suppliers to market
their products to a large number of buyers. The Company's primary online
service is creating and hosting marketing websites that present suppliers'
product and company information in a consistent, easily searchable manner
on Global Sources Online. The Company also offers electronic cataloguing
services for buyers and suppliers. My Catalogs enable buyers to maintain
customized information on suppliers. Private Supplier Catalogs are
password-protected online environments where suppliers can develop and
maintain their own product and company data. Complementing these services
are various trade magazines and CD-ROMs. The Company launched China
Sourcing Fairs exhibitions in 2003. These offer international buyers direct
access to China and other Asian manufacturers. The Company's businesses are
conducted primarily through Trade Media Limited, its wholly owned
subsidiary, which was incorporated in October 1984 under the laws of Cayman
Islands. Through certain other wholly owned subsidiaries, the Company also
organizes China Sourcing Fairs exhibitions, conferences and exhibitions on
technology related issues and licenses Asian Sources / Global Sources
Online and catalog services.

2. Summary of Significant Accounting Policies

(a) Basis of Consolidation and Presentation

(i) The accompanying consolidated financial statements are prepared in
accordance with accounting principles generally accepted in the United
States of America and comprise the financial statements of the
Company, its majority owned subsidiaries and those owned through
nominee shareholders. All significant intercompany transactions and
balances have been eliminated on consolidation.

(ii) The results of subsidiaries acquired or disposed of during the year
are included in the consolidated statement of income from the
effective dates of acquisition or up to the effective dates of
disposal.

(iii) The functional currency of the Company and certain subsidiaries is
the United States dollar. The functional currencies of other
subsidiaries are their respective local currencies. United States
dollars are used as the reporting currency as the Company's operations
are global.

(b) Use of Estimates

The preparation of financial statements in conformity with accounting
principles generally accepted in the United States of America ("U.S. GAAP")
requires management to make estimates and assumptions that affect the
amounts reported in the consolidated financial statements and accompanying
notes. Actual results could differ from those estimates.

The Company considers all highly liquid investments purchased with an
original maturity of three months or less to be cash equivalents.

(d) Available-for-sale Securities

GLOBAL SOURCES LTD. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(In U.S. Dollars Thousands, Except Number of Shares and Per Share Data)

losses, net of related tax effect if any, presented under shareholders'
equity as accumulated other comprehensive income.

Realized gains and losses and declines in values judged to be
other-than-temporary on available-for-sale securities are included in the
statement of income. Other-than-temporary is determined through the
assessment of the Company's ability and intent to hold the investment,
extent and duration of the impairment, and the forecasted recovery of fair
value. The cost of securities sold is based on the average cost method.

(e) Inventory of Paper

Inventory of paper is stated at the lower of cost or market value. Cost is
determined on the first-in, first-out basis.

(f) Property and Equipment

(i) Property and equipment are stated at cost less accumulated
depreciation. Cost represents the purchase price of the asset and
other costs incurred to bring the asset into its existing use.

(ii) Depreciation on property and equipment is calculated to amortize their
cost on a straight-line basis over their estimated useful lives as
follows:

Fixtures, fittings and office equipment.......... 5 years
Leasehold improvements........................... 5 years
Motor vehicles................................... 5 years
Computer equipment and software.................. 3 years

(iii) EffectiveJanuary 1, 1999, the Company adopted Statement of Position
98-1, "Accounting for the Costs of Computer Software Developed or
Obtained for Internal Use," to account for the costs incurred to
develop computer software for internal use. Costs incurred in the
preliminary project stage with respect to the development of software
for internal use are expensed as incurred; costs incurred during the
application development stage are capitalized and are amortized over
the estimated useful life of three years upon the commissioning of
service of the software. Training and maintenance costs are expensed
as incurred. To account for the development costs related to the
products to be sold, leased or otherwise marketed, the Company adopted
SFAS No. 86, "Accounting for the Costs of Computer Software to Be
Sold, Leased, or Otherwise Marketed." Development costs incurred
subsequent to the establishment of the technological feasibility of
the product are capitalized. The capitalization ends when the product
is available for general release to customers.

The Company expensed $64, $38 and $241 during the years ended December
31, 2002, 2003 and 2004, respectively, for the costs incurred prior to
the establishment of the technological feasibility with respect to the
development of products to be sold, leased or otherwise marketed.

(g) Intangible Assets

Prior to the adoption of SFAS No. 142 effective on January 1, 2002,
copyrights were amortized on a straight-line basis over a period of ten
years and goodwill, was amortized on a straight-line basis over twenty
years.

GLOBAL SOURCES LTD. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(In U.S. Dollars Thousands, Except Number of Shares and Per Share Data)

Intangible Assets, net:

At December 31,
---------------------------
2003 2004
------------ ------------
Goodwill................................. $ 654 $ 654
Copyrights............................... 3,706 3,706
------------ ------------
4,360 4,360
Less: Accumulated amortization.......... (4,360) (4,360)
------------ ------------
$ -- $ --
============ ============
(h) Long Term Investments

Long term investments for business and strategic purposes in privately-held
companies where such investments are less than 20% of the equity capital of
the investees, with no significant influence over the investees, are stated
at cost.

Long term investments in companies where such investments are in the range
of 20% to 50% of the equity capital of the investees and over whom the
Company exercises significant influence, are accounted under the equity
method.

Interests in subsidiaries with more than 50% ownership are consolidated and
the ownership interests of minority investors are recorded as minority
interest.

Long term investments in U.S. Treasury strips zero % coupon, held to
maturity are stated at amortized cost. The interest income from investments
in U.S. Treasury strips zero % coupon is recognized as it accrues, taking
into account the effective yield on the asset.

(i) Impairment of Long-lived Assets

The Company reviews the carrying value of its long-lived assets based upon
a cash flow basis and will recognize an impairment whenever events or
changes in circumstances indicate the carrying amount of the assets may not
be fully recoverable. The impairment loss is measured based on the
difference between the carrying amount of the asset and its fair value.
There was no impairment of the Company's property and equipment as of
December 31, 2004.

(j) Revenue Recognition

The Company derives its revenues from advertising fees in its published
trade magazines and websites, sales of trade magazines, fees from licensing
its trade and service marks, service fees from the provision of software
maintenance service, and organizing exhibitions and business seminars.

Revenues from advertising in trade magazines and websites are recognized
ratably over the period in which the advertisement is displayed.
Advertising contracts do not exceed one year. Revenue from sales of trade
magazines is recognized upon delivery of the magazine. Magazine
subscriptions received in advance are deferred and recognized as revenue
upon delivery of the magazine. Revenue from the provision of maintenance
service is deferred and recognized ratably over the maintenance service
period. Revenue from organizing exhibitions and business seminars is
recognized at the conclusion of the event and the related direct event
production costs are deferred and recognized as expenses upon conclusion of
the event.

GLOBAL SOURCES LTD. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(In U.S. Dollars Thousands, Except Number of Shares and Per Share Data)

The Company receives license fees and royalties from licensing its trade
and service marks. Revenue from license fees is recognized ratably over the
term of the license, currently four to five years. Royalties from license
arrangements are earned ratably over the period in which the advertisement
is displayed by the licensee.

(k) Transactions with Sales Representatives and Related Party Sales
Representatives

The Company utilizes sales representatives and in the past utilized related
party sales representatives in various territories to promote the Company's
products and services. Under these arrangements, these sales
representatives are entitled to commissions as well as marketing fees.
Commissions expense is recorded when owed to these sales representatives
and is included in sales expenses.

These sales representatives, which are mainly corporate entities, handle
collections from clients on behalf of the Company. Included in receivables
from these sales representatives are amounts collected on behalf of the
Company as well as cash advances made to these sales representatives.

As of December 31, 2001, the boards of directors of eight of these sales
representative companies each included a director nominated by the Company
to monitor the receivables collected from the Company's clients by these
related party sales representatives, and to monitor any changes to the
authorized signatories of the depository bank accounts. The nominated
directors were employees of the Company. The Company and the nominated
directors did not have any interest in the share capital of these related
party sales representatives companies. However as of December 31, 2002,
2003 and 2004, the Company does not have any nominated directors on the
board of directors of any of the Company's sales representative companies.
Approximately $9,986, $NIL and $NIL of the commissions and marketing fees
expense was associated with these related party sales representative
companies for 2002, 2003 and 2004, respectively.

(l) Advertising Expenses

Advertising expenses are expensed as incurred. The Company recorded
advertising expenses of $161, $244 and $1,551 during the years ended
December 31, 2002, 2003 and 2004, respectively.

(m) Operating Leases

The Company leases certain office facilities under cancelable and
non-cancelable operating leases. Rentals under operating leases are
expensed on a straight-line basis over the life of the leases.

(n) Liabilities for Bonus Plan

Before the commencement of the Equity Compensation Plans as described in
Note 22, the Company rewarded its senior management staff based on their
performance through long term discretionary bonus awards. These awards were
payable in cash generally at the end of five or ten years from the date of
the award, even in the event of termination of employment unless certain
non-compete provisions had been violated. These awards were expensed in the
period to which the performance bonus relates.

(o) Retirement Contributions

The Company operates a number of defined contribution retirement plans.
Contributions are based on a percentage of each eligible employee's salary
and are expensed as the related salaries are incurred.

GLOBAL SOURCES LTD. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(In U.S. Dollars Thousands, Except Number of Shares and Per Share Data)

(p) Income Taxes

The Company accounts for deferred income taxes using the liability method,
under which the expected future tax consequences of temporary differences
between the financial reporting and tax basis of its assets and liabilities
are recognized as deferred tax assets and liabilities. A valuation
allowance is established for any deferred tax asset when it is more likely
than not that the deferred tax asset will not be recovered.

(q) Minority Interest

In 2000, the Company entered into an agreement with CMP Media Inc., through
United Professional Media B.V. (previously known as United Business Media
B.V.), a subsidiary of United News and Media plc. (CMP) to set-up a
corporation (eMedia Asia Ltd.) to provide new technology content, media and
e-commerce services to the electronics technology market in Asia. The
Company holds a 60.1% controlling equity interest in eMedia Asia Ltd. and
consolidates the results of operations. As part of obtaining its 39.9%
interest, CMP has committed to pay $6,000 and interest thereon to the
Company upon the payment of specified future dividends of eMedia Asia Ltd.
Pursuant to an internal restructuring within the CMP group, United
Professional Media B.V.'s 39.9% interest in eMedia Asia Ltd. and associated
obligations were novated and assigned to UBM Asia B.V. (another subsidiary
within the CMP group) in October 2003. Due to the contingent nature of the
payment, the Company did not record in its balance sheet the promissory
note receivable of $6,000 due from CMP and no interest income was accrued
as at December 31, 2004, 2003 and 2002. The minority interest liability of
$4,910 and $3,684 at December 31, 2004 and 2003, respectively, reflects
CMP's proportionate interest of the net book value of eMedia Asia Ltd.

(r) Foreign Currencies

Transactions in currencies other than the functional currency are measured
and recorded in the functional currency using the exchange rate in effect
on the date of the transaction. As of the balance sheet date, monetary
assets and liabilities that are denominated in currencies other than the
functional currency are remeasured using the exchange rate at the balance
sheet date. All gains and losses arising from foreign currency transactions
and remeasurement of foreign currency denominated accounts are included in
the determination of net income in the year in which they occur.

The financial statements of the subsidiaries reporting in their respective
local currencies are translated into U.S. dollars for consolidation as
follows: assets and liabilities at the exchange rate as of the balance
sheet date, shareholders' equity at the historical rates of exchange, and
income and expense amounts at the average monthly exchange rates. The
cumulative translation differences were not material as of December 31,
2003 and 2004.

(s) Segment Reporting

SFAS No. 131, "Disclosures about Segments of an Enterprise and Related
Information" requires that companies report separately, in the financial
statements, certain financial and descriptive information about operating
segment profit or loss, certain specific revenue and expense items, and
segment assets. Additionally, companies are required to report information
about the revenues derived from their products and services groups, about
geographic areas in which the Company earns revenues and holds assets, and
about major customers.

The Company identifies its operating segments based on business activities,
management responsibility and geographic location. The Company has two
reportable segments: online and other media services and exhibitions.

GLOBAL SOURCES LTD. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(In U.S. Dollars Thousands, Except Number of Shares and Per Share Data)

(t) Comprehensive Income

SFAS No. 130, "Reporting Comprehensive Income," establishes standards for
reporting comprehensive income and its components in financial statements.
Comprehensive income is defined as the change in equity of a company during
a period from transactions and other events and circumstances excluding
transactions resulting from investment by owners and distribution to
owners.

Accumulated other comprehensive income consists of the following:

Year Ended December 31,
------------------------------------------------
2002 2003 2004
-------------- ------------- -------------

Unrealized gain on available-for-sale securities,
net of income tax of $NIL...................... $ -- $ 635 $ 1,451
(Gain) loss realized on sale of available-for-sale
securities, net of income tax of $NIL.......... $ -- $ 40 $ (1,212)
-------------- ------------- -------------
Accumulated other comprehensive income........... $ -- $ 675 $ 239
============== ============= =============

(u) Basic and Diluted Net Income Per Share

Basic net income per share is computed by dividing net income by the
weighted average number of shares of common shares outstanding during the
period. Diluted net income per share is calculated using the weighted
average number of outstanding common shares, plus other dilutive potential
common shares.

The following table reconciles the number of shares utilized in the net
income per share calculations:

Year Ended December 31,
-------------------------------------------------
2002 2003 2004
------------- ------------- ---------------

Net income....................................... $ 4,307 $ 7,334 $ 15,769
============= ============= ===============
Basic net income per share....................... $ 0.14 $ 0.23 $ 0.50
============= ============= ===============
Diluted net income per share..................... $ 0.14 $ 0.23 $ 0.49
============= ============= ===============
Weighted average common shares outstanding,

used in basic net income per share
calculation................................... 31,834,353 31,840,403 31,846,439
Effect of dilutive shares........................ -- 21,377 87,640
------------- ------------- ---------------
Weighted average common shares outstanding,
used in diluted net income per share
calculation................................... 31,834,353 31,861,780 31,934,079
============= ============= ===============

Antidilutive share options....................... 96,000 10,500 --

Antidilutive share options had exercise prices greater than the average
market price during the year.

(v) Stock Based Compensation

The Company has adopted the disclosure only provisions of SFAS No. 123,
"Accounting for Stock-Based Compensation." The Company accounts for
stock-based compensation using the intrinsic value method prescribed in APB
No. 25, "Accounting for Stock Issued to Employees" and related
interpretations. Accordingly, compensation cost of stock options is
measured as the excess, if any, of the fair value of the

GLOBAL SOURCES LTD. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(In U.S. Dollars Thousands, Except Number of Shares and Per Share Data)

Company's stock at the date of the grant over the option exercise price and
is charged to operations over the vesting period.

The Company accounts for equity instruments issued to non-employees in
accordance with the provisions of SFAS No. 123 and EITF Issue No. 96-18,
"Accounting for Equity Instruments that are Issued to Other Than Employees
for Acquiring, or in Conjunction with Selling Goods and Services." All
transactions in which services are received for the issuance of equity
instruments are accounted for based on the fair value of the consideration
received or the fair value of the equity instrument issued, whichever is
more reliably measurable. The measurement date of the fair value of the
equity instrument issued is the earlier of the date on which the
counterparty's performance is complete or the date on which it is probable
that performance will occur.

A majority of the Company's employee stock compensation plans are share
grants without any exercise price or exercise period. Therefore the fair
value of the share grants at the date of grant approximates the intrinsic
value. As a result, the impact of fair value based accounting under SFAS
No. 123 is not significantly different from the intrinsic value method
under APB No. 25.

(w) Allowance for Doubtful Debts

The Company estimates the collectibility of the accounts receivable based
on the analysis of accounts receivable, historical bad debts, customer
credit-worthiness and current economic trends and maintains adequate
allowance for doubtful debts.

(x) Recent Accounting Pronouncements

In January 2003, FASB issued FIN No. 46, "Consolidation of Variable
Interest Entities." FIN 46 requires a beneficiary to consolidate a variable
interest entity ("VIE") if it is the primary beneficiary of that entity.
The primary beneficiary is defined as having a variable interest in a VIE
that will absorb a majority of the entity's expected losses if they occur,
receives a majority of the entity's expected residual returns if they
occur, or both. In December 2003, FASB completed deliberations of proposed
modifications to FIN 46 ("Revised Interpretations") resulting in multiple
effective dates based on the nature as well as the creation date of the
VIE. VIEs created after January 31, 2003, but prior to January 1, 2004, may
be accounted for either based on the original interpretation or the Revised
Interpretations. However, the Revised Interpretations must be applied no
later than the Company's first quarter of fiscal 2004. VIEs created after
December 31, 2003 must be accounted for under the Revised Interpretations.
Special Purpose Entities ("SPEs") created prior to February 1, 2003, may be
accounted for under the original or revised interpretation's provisions no
later than the first period ended after December 15, 2003. Non-SPEs created
prior to February 1, 2003, should be accounted for under the revised
interpretation's provisions no later than the Company's first quarter of
fiscal 2004. We believe that the adoption of FIN 46 did not have a material
impact on the Company's financial statements of position, results of
operations, or cash flows.

In March 2004, the Emerging Issues Task Force ("EITF") reached a consensus
on Issue No. 03-1, "The Meaning of Other-Than-Temporary Impairment and Its
Application to Certain Investments." EITF 03-1 provides guidance on
other-than-temporary impairment models for marketable debt and equity
securities accounted for under SFAS No. 115, "Accounting for Certain
Investments in Debt and Equity Securities," and SFAS No. 124, "Accounting
for Certain Investments Held by Not-for-Profit Organizations," and
non-marketable equity securities accounted for under the cost method. The
EITF developed a basic three-step model to evaluate whether an investment
is other-than-temporarily impaired. The provisions of EITF 03-1 will be
effective for interim or annual reporting periods beginning after June 15,
2004 and will be applied prospectively to all current and future
investments. Quantitative and qualitative disclosures for investments

GLOBAL SOURCES LTD. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(In U.S. Dollars Thousands, Except Number of Shares and Per Share Data)

accounted for under SFAS No. 115 are effective for the first annual
reporting period after December 15, 2003. In September, 2004, FASB issued
FSP EITF Issue "03-1-1", "Effective Date of Paragraphs 10-20 of EITF 03-1,
The Meaning of Other Than Temporary Impairment", delaying the effective
date for the recognition and measurement guidance of EITF 03-1, as
contained in paragraphs 10-20, until certain implementation issues are
addressed and a final FSP providing implementation guidance is issued. The
disclosure requirements of the consensus remain in effect. The Company does
not expect the adoption of EITF 03-1 to have a material effect on its
results of operations and financial condition.

In December 2004, the FASB issued SFAS No. 123R, "Share-Based Payment"
("SFAS 123R"), a revision of SFAS No. 123, "Accounting for Stock-Based
Compensation." SFAS 123R requires, among other things, measurement of all
employee stock-based compensation awards using a fair value method and
recording such expense in the consolidated financial statements. The
provisions of SFAS 123R are effective for the first interim or annual
reporting period that begins after June 15, 2005. We are currently
evaluating the effect, if any, that the adoption of SFAS 123R will have on
our financial statements of position, results of operations or cash flows.

3. Available-for-sale Securities:

At December 31,
------------------------------
2003 2004
------------ -------------

Cost................................... $ 34,465 $ 9,933
Unrealized holding gain................ 675 239
------------ -------------
Fair value............................. $ 35,140 $ 10,172
============ =============

4. Current Assets:

At December 31,
------------------------------
2003 2004
------------ -------------
Accounts receivable:
Gross trade receivables................ $ 6,604 $ 6,175
Less: Allowance for doubtful debts.... (2,097) (1,028)
------------ -------------
$ 4,507 $ 5,147
============ =============

Movements in allowance for doubtful debts:

Year Ended December 31,
-----------------------------------------------
2002 2003 2004
------------ ------------ -------------

Balance at beginning of year..................... $ 2,132 $ 1,966 $ 2,097
Charged to bad debt expenses..................... 670 202 --
Allowance for doubtful debts written-back........ -- -- (716)
Write-off of bad debts........................... (836) (71) (353)
------------ ------------ -------------
Balance at end of year........................... $ 1,966 $ 2,097 $ 1,028
============ ============ =============

GLOBAL SOURCES LTD. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(In U.S. Dollars Thousands, Except Number of Shares and Per Share Data)

At December 31,
-----------------------------
2003 2004
------------- ------------
Prepaid expenses and other current assets:

Unsecured employee loans and other debtors....................... $ 73 $ 60
Prepaid expenses................................................. 324 410
Deferred expenses................................................ 535 895
Other current assets............................................. 951 1,561
------------- ------------
$ 1,883 $ 2,926
------------- ------------

5. Property and Equipment, net:

At December 31,
-----------------------------
2003 2004
------------- ------------

Capital work-in-progress.......................................... $ - $ 19,213
Leasehold improvements............................................ 6,936 6,951
Motor vehicles.................................................... 191 191
Computers, fixtures, fittings and office equipment................ 22,866 24,111
Software development costs........................................ 15,664 4,474
------------- ------------
Property and equipment, at cost................................... 45,657 54,940
Less: Accumulated depreciation................................... (37,787) (30,038)
------------- ------------
$ 7,870 $ 24,902
------------- ------------

Depreciation expense for the years ended December 31, 2002, 2003 and 2004
was $5,249, $4,056 and $2,572 respectively and the amortization of Software
development cost for the years ended December 31, 2002, 2003 and 2004 was
$3,737, $4,453 and $1,480 respectively.

During 2004, the Company entered into an agreement to purchase
approximately 9,000 sq meters of office space in a commercial building
under construction in Shenzhen, China at purchase price of $19,027 which
has been fully paid during 2004 and is included under capital
work-in-progress as at December 31, 2004. The construction is expected to
be completed before end of March 2005. Depreciation of the property will
only commence upon completion of the construction and the property is ready
to be put to use.

6. Long-term Investments and Bonds Held to Maturity:

(i) As at December 31, 2004, the Company holds equity instruments carried
at $100 in a privately held unaffiliated electronic commerce company
for business and strategic purposes. The investment is accounted for
under the cost method since the ownership is less than 20% and the
Company does not have the ability to exercise significant influence
over the investee. The investment is shown under long term investments
in the consolidated balance sheets.

The Company's policy is to regularly review the carrying values of the
non-quoted investments and to identify and provide for when
circumstances indicate impairment other than a temporary decline in
the carrying values of such assets has occurred.

The net carrying value of the long term investment as at December 31,
2003 and 2004 was $100. The Company will continue to evaluate this
investment for impairment.

GLOBAL SOURCES LTD. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(In U.S. Dollars Thousands, Except Number of Shares and Per Share Data)

(ii) U.S. Treasury strips zero % coupon

At December 31,
------------------------------
2003 2004
------------ ------------
The amortized cost classified by date of contractual
maturity is as follows:

Due within one year........................................ $ 364 $ 229
Due after one year through five years...................... 628 437
------------ ------------
$ 992 $ 666
------------ ------------

At December 31,
------------------------------
2003 2004
------------ ------------
The fair value based on the market price, classified
by date of contractual maturity is as follows:

Due within one year........................................ $ 380 $ 235
Due after one year through five years...................... 691 466
------------ ------------
$ 1,071 $ 701
------------ ------------

At December 31,
------------------------------
2003 2004
------------ ------------

Gross unrealized holding gains............................. $ 79 $ 35
------------ ------------

7. Other Assets:

At December 31,
------------------------------
2003 2004
------------ ------------

Employee housing loans..................................... $ 231 $ 191
Club memberships........................................... 514 418
Deferred expenses - long term.............................. - 296
Rental, utility and other deposits......................... 491 2,355
------------ ------------
$ 1,236 $ 3,260
------------ ------------

8. Current Liabilities:

At December 31,
------------------------------
2003 2004
------------ ------------
Deferred income and customer prepayments:

Advertising................................................ $ 19,475 $ 20,612
Exhibitions, subscription and others....................... 7,979 8,163
------------ ------------
$ 27,454 $ 28,775
------------ ------------

GLOBAL SOURCES LTD. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(In U.S. Dollars Thousands, Except Number of Shares and Per Share Data)

At December 31,
------------------------------
2003 2004
------------ ------------
Accrued liabilities:

Salaries, wages and commissions............................ $ 1,239 $ 1,181
Retirement contribution plans.............................. 548 696
Current portion of liabilities for incentive and bonus plans 1,106 1,075
Others..................................................... 2,910 2,969
------------ ------------
$ 5,803 $ 5,921
------------ ------------

9. Liabilities for Incentive and Bonus Plans

At December 31,
------------------------------
2003 2004
------------ ------------

Liability for long term discretionary bonus plan........... $ 682 $ 467
------------ ------------

10. Deferred Income and Customer Prepayments - Long Term

At December 31,
------------------------------
2003 2004
------------ ------------

Exhibitions................................................ $ - $ 1,420
------------ ------------

11. Related Party Transactions

The Company has extended loans to some of its employees to finance their
purchase or lease of residences. The loans for the purchase of a residence
are secured by the subject residence, bear interest at a rate of LIBOR plus
2% to 3%, generally have a term of ten years and become due and payable
immediately under certain circumstances, including their termination of
employment with the Company. The loans for the lease of a residence are
unsecured, interest free and are repayable in equal monthly installments
over the period of the lease, typically less than or equal to twelve
months. Loans due from employees for purchase of residences were $231 and
$191 as of December 31, 2003 and 2004 respectively. Loans due from
employees for lease of residences were $61 and $55 as of December 31, 2003
and 2004, respectively. There were no other loans due from the Company's
directors and executive officers as at December 31, 2003 and 2004. Other
temporary advances to staff, which are generally repayable within twelve
months, were $14 and $5 as of December 31, 2003 and 2004, respectively.

The Company leases certain office facilities from subsidiaries of the
Former Parent Company under cancelable and non-cancelable operating leases
that include both rental and building maintenance services. During the
years ended December 31, 2002, 2003 and 2004, the Company incurred rental
and building management services expenses of $1,048, $756 and $NIL
respectively, with respect to these leases. These leases were no longer
related party transactions during the year 2004.

The Company also receives legal, treasury management consultancy services
and investment consultancy services from subsidiaries of the Former Parent
Company. During the year ended December 31, 2002,

GLOBAL SOURCES LTD. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(In U.S. Dollars Thousands, Except Number of Shares and Per Share Data)

2003 and 2004, the Company incurred such legal, secretarial and treasury
management consultancy services expenses of $275, $259 and $NIL
respectively with respect to such services. These services were no longer
related party transactions during the year 2004.

The Company had $11,404 and $NIL due to the Former Parent Company as of
December 31, 2003 and 2004, respectively. Due to the disposal of the shares
by the Former Parent Company to the Company's chairman and chief executive
officer discussed in Note 1, this liability as at December 31, 2003 was
reclassified and disclosed as "Amount due to a shareholder" in the
Company's consolidated balance sheet as at December 31, 2003. The amount
due to the Former Parent Company was unsecured. This amount has been fully
re-paid during the year 2004.

In addition to the transactions with related party sales representatives
discussed in Note 2(k), the Company provided technical services to these
sales representatives for a fee. During the year ended December 31, 2002,
2003 and 2004, the Company derived such service fees of $156, $NIL and $NIL
respectively. During the years ended December 31, 2002, 2003 and 2004, the
Company has incurred costs of $47, $NIL and $NIL respectively with respect
to the incentive awards discussed in Note 12, relating to the related party
sales representatives.

12. Liabilities for Incentive and Bonus Plans

Before the commencement of the Equity Compensation Plans the Company
rewarded its senior management staff based on their current performance
through long term discretionary bonus awards. These awards are payable
approximately at the end of five or ten years from the date of the award,
even in the event of termination of employment unless certain non-compete
provisions have been violated. The Company did not incur any expenses
related to these awards during the years ended December 31, 2002, 2003 and
2004. The required funds were set aside for payment of the discretionary
bonuses by purchasing U.S. Treasury strips zero % coupons maturing in
either five or ten years. These investments are held until maturity and the
proceeds are used for payment of the discretionary bonuses.

Certain sales representatives of the Company are eligible for incentive
awards under plans administered by the Company. Costs incurred related to
incentive awards under plans administered by the Company for the years
ended December 31, 2002, 2003 and 2004 were $128, $116 and $164
respectively.

13. Retirement Contribution Plans

The Company operates a number of defined contribution retirement plans.
Employees working in a jurisdiction where there is no statutory provision
for retirement contributions are covered by the Company's plans.

The two principal defined contribution plans are plans where employees are
not required to make contributions. One of these two plans is separately
administered by an independent trustee and the plan assets are held
independent of the Company. The other one is not independently administered
and is currently unfunded. The Company's liabilities under this unfunded
plan as of December 31, 2003 and 2004 were $520 and $664, respectively.

The Company incurred costs of $1,101, $1,102 and $1,099 with respect to the
retirement plans in the years ended December 31, 2002, 2003 and 2004,
respectively.

GLOBAL SOURCES LTD. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(In U.S. Dollars Thousands, Except Number of Shares and Per Share Data)

14. Income Taxes

The Company and certain of its subsidiaries operate in the Cayman Islands
and other jurisdictions where there are no taxes imposed on companies
(collectively referred to as "Cayman Islands"). Certain of the Company's
subsidiaries operate in Hong Kong SAR and Singapore and are subject to
income taxes in their respective jurisdictions. Also, the Company is
subject to withholding taxes for revenues earned in certain other
countries.

Income before income taxes consists of:

Year Ended December 31,
-----------------------------------------------------
2002 2003 2004
--------------- ------------- ------------

Cayman Islands............................ $ 3,587 $ 5,420 $ 12,746
Foreign................................... 1,748 3,443 4,901
--------------- ------------- ------------
$ 5,335 $ 8,863 $ 17,647
--------------- ------------- ------------

The provision for income taxes consists of:

Year Ended December 31,
-----------------------------------------------------
2002 2003 2004
--------------- ------------- ------------
Current tax expense:

Cayman Islands.......................... $ -- $ -- $ --
Foreign................................. 726 974 622
Deferred tax expense:
Cayman Islands.......................... -- -- --
Foreign................................. (6) (306) 29
--------------- ------------- ------------
Total provision........................... $ 720 $ 668 $ 651
--------------- ------------- ------------

The provision for income taxes for the years ended December 31, 2002, 2003
and 2004 differed from the amount computed by applying the statutory income
tax rate of 0% as follows:

Year Ended December 31,
-----------------------------------------------------
2002 2003 2004
--------------- ------------- ------------

Income taxes at statutory rate............ $ -- $ -- $ --
Foreign income and revenues taxed at higher
rates..................................... $ 720 668 651
--------------- ------------- ------------
Total..................................... $ 720 $ 668 $ 651
--------------- ------------- ------------
Effective tax rate........................ 13.50% 7.54% 3.69%
--------------- ------------- ------------

GLOBAL SOURCES LTD. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(In U.S. Dollars Thousands, Except Number of Shares and Per Share Data)

Deferred tax assets consist of the following:

At December 31,
-------------------------------
2003 2004
------------- -------------
Net operating loss carry forwards.......$ 7,462 $ 7,410
Less: valuation allowance.............. (7,462) (7,410)
------------- -------------
Deferred tax assets.....................$ -- $ --
------------- -------------

The Company recorded a full valuation allowance for the deferred tax assets
due to the uncertainty as to their ultimate realization. The net change in
valuation allowance for the years ended December 31, 2002, 2003 and 2004
was an increase/(decrease) of approximately $26, $2 and $(52),
respectively, resulting primarily from net operating losses incurred and
profits made by some of the subsidiaries during the respective years.

As of December 31, 2004 and 2003, a United States subsidiary has net
operating loss carry forwards of approximately $17,188 and $17,250
respectively. These losses which expire in year 2020 can be utilized to
reduce future taxable income of the subsidiary subject to compliance with
the taxation legislation and regulations in the relevant jurisdiction.

The Company recognized a deferred tax liability of $298 and $327 as at
December 31, 2003 and 2004, respectively, which primarily arose from the
temporary differences between the financial reporting and the tax bases of
property and equipment in one of the subsidiaries of the Company.

15. Share Capital

On February 28, 2002, 2003 and 2004, the Company issued 6,050, 6,050 and
6,050 common shares, respectively, under the Directors Purchase Plan. The
authorized share capital of the Company as at December 31, 2003 and 2004 is
50,000,000 common shares of $0.01 par value. As at December 31, 2003 and at
December 31, 2004, the Company has 31,841,364 and 31,847,414 common shares
issued and outstanding, respectively.

16. Fair Value of Financial Instruments

17. Concentration of Credit Risk and Other Risks

Financial instruments, which potentially subject the Company to
concentration of credit risk, consist primarily of investment in checking
and money market accounts, available-for-sale securities, investment in
U.S. Treasury strips zero % coupon, accounts receivable and receivables
from sales representatives. The Company maintains checking, money market
accounts and available-for-sale securities with high quality institutions.
The Company has a large number of customers, operates in different
geographic areas and generally does not require collateral on accounts
receivable or receivables from sales representatives. In addition, the
Company is continuously monitoring the credit transactions and maintains
reserves for credit losses where necessary. No customer accounted for more
than 10% of the Company's revenues for each of

GLOBAL SOURCES LTD. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(In U.S. Dollars Thousands, Except Number of Shares and Per Share Data)

the years ended December 31, 2002, 2003 and 2004. No customer accounted for
more than 10% of the accounts receivable as of December 31, 2003 and 2004.

In 2004, the Company derived approximately 92% of its revenue from
customers in Asia. The Company expects that a majority of its future
revenue will continue to be generated from customers in this region. Future
political or economic instability in Asia could negatively impact the
business.

18. Operating Leases

The Company leases office facilities under cancelable and non-cancelable
operating leases. During the years ended December 31, 2002, 2003 and 2004,
the Company's operating lease rental and building management services
expenses were $1,872, $1,484 and $1,275 respectively. The estimated future
minimum lease rental payments under non-cancelable operating leases as of
December 31, 2004 are as follows:

Year Ending December 31, Operating Leases
--------------------------------------- -------------------

2005 .................................. 31
2006 onwards........................... --
-------------------
$ 31
-------------------

19. Segment and Geographic Information

The Company has two reportable segments: online and other media services
and exhibitions. Certain prior year items have been reclassified to conform
to the current presentation. Revenues by geographic location are based on
the location of the customer.

(a) Segment Information

Year Ended December 31,
-----------------------------------------------------
2002 2003 2004
-------------- -------------- ---------------
Revenues:

Online and other media services (Note (a)).. $ 84,400 $ 87,685 $ 92,325
Exhibitions................................. 2,455 3,327 13,010
Miscellaneous............................... 631 657 511
-------------- -------------- ---------------
Consolidated................................ $ 87,486 $ 91,669 $ 105,846
-------------- -------------- ---------------

Year Ended December 31,
-----------------------------------------------------
2002 2003 2004
-------------- -------------- ---------------
Income/(Loss) from Operations:

Online and other media services............. $ 4,859 $ 9,390 $ 17,700
Exhibitions................................. (315) (1,215) (2,133)
Miscellaneous............................... 302 606 501
-------------- -------------- ---------------
Consolidated................................ $ 4,846 $ 8,781 $ 16,068
-------------- -------------- ---------------

GLOBAL SOURCES LTD. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(In U.S. Dollars Thousands, Except Number of Shares and Per Share Data)

At December 31,
--------------------------------
2003 2004
------------- --------------
Identifiable Assets:
Online and other media services...... $ 79,122 $ 79,894
Exhibitions.......................... 2,855 12,103
Miscellaneous........................ 564 528
------------- --------------
Consolidated......................... $ 82,541 $ 92,525
------------- --------------

Note: (a) Online and other media services consists of:

Year Ended December 31,
-----------------------------------------------------
2002 2003 2004
-------------- -------------- ----------------

Online services............................. $ 51,268 $ 51,367 $ 52,106
Print services.............................. 33,132 36,318 40,219
-------------- -------------- ----------------
$ 84,400 $ 87,685 $ 92,325
-------------- -------------- ----------------

(b) Foreign Operations

Year Ended December 31,
-----------------------------------------------------
2002 2003 2004
-------------- -------------- ----------------
Revenues:

Asia....................................... $ 81,456 $ 84,856 $ 97,876
United States.............................. 4,986 5,970 6,573
Europe..................................... 525 437 597
Others..................................... 519 406 800
-------------- -------------- ----------------
Consolidated............................... $ 87,486 $ 91,669 $ 105,846
-------------- -------------- ----------------

At December 31,
----------------------------------
2003 2004
-------------- ---------------
Long-Lived Assets:
Asia......................... $ 9,206 $ 28,257
United States................ - 5
-------------- ---------------
Consolidated................. $ 9,206 $ 28,262
-------------- ---------------

20. Contingencies

From time to time the Company is involved in litigation in the normal
course of business. While the results of such litigation and claims cannot
be predicted with certainty, the Company believes that the probability is
remote that the outcome of the outstanding litigation and claims as of the
current date will have a material adverse effect on the Company's
consolidated financial position and results of operations.

GLOBAL SOURCES LTD. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(In U.S. Dollars Thousands, Except Number of Shares and Per Share Data)

21. Capital Commitments

The commitments as at December 31, 2004 for the purchase and commissioning
of software amounted to $31. The capital commitments as at December 31,
2003 were $160 for the purchase and commissioning of software.

22. Restricted Share Award Plan

On February 4, 2000, the Company established a restricted share award plan
for the benefit of its chairman and chief executive officer in recognition
of services to the Company. In conjunction with the restricted share award
plan, the Former Parent Company assigned 4,849,949 common shares of the
Company, representing a 16% equity interest in the Company to the Company.
The Company then awarded these shares to its chairman and chief executive
officer. The chairman and chief executive officer's entitlement to 606,245
of these shares is subject to an employment agreement with one of the
Company's United States subsidiaries and entitlement to such shares vested
immediately. The chairman and chief executive officer's entitlement to the
remaining 4,243,704 shares is subject to employment, non-compete and
vesting terms under an employment agreement with one of the Company's
United States subsidiaries. The 4,243,704 shares were to vest ratably over
10 years, 10% each year on each anniversary date from the grant date.
However, effective August 30, 2000, the Company's Board of Directors
approved the accelerated vesting of all the restricted shares granted to
the chairman and chief executive officer resulting in immediate vesting of
all the shares. The Company recorded total $64,000 non-cash compensation
expense associated with these awards in the year ended December 31, 2000.
At the modification date and subsequently the Company, based on historical
evidence and the Company's forecast of future employee separations,
estimated that the chairman and chief executive officer will not terminate
employment and appointment as director prior to the date that vesting in
the shares would have occurred absent the modification. Therefore, the
Company has estimated that additional compensation expense to be recognized
as a result of the modification is nil. Should actual results differ from
this estimate, adjustment in future reporting periods will be required.

23. Equity Compensation Plans

On December 30, 1999, the Company established The Global Sources Employee
Equity Compensation Trust (the "Trust") for the purpose of administering
monies and other assets to be contributed by the Company to the Trust for
the establishment of equity compensation and other benefit plans. The Trust
is administered by Harrington Trust Limited (the "Bermuda Trustee"). The
Bermuda Trustee in the exercise of its power under the Declaration of Trust
may be directed by the plan committee, including the voting of securities
held in the Trust. The Board of Directors of the Company will select the
members of the plan committee.

On February 4, 2000, in conjunction with the establishment of the Trust and
the Share Exchange, the Former Parent Company assigned 3,031,218 common
shares of the Company at a historical cost of less than $1, representing a
10% equity interest in the Company, for the establishment of share option
plans and/or share award plans, known as ECP I, ECP II and ECP III.
Subsequently, share option plans and/or share award plans, known as ECP IV,
ECP V, ECP VI and ECP VII were established.

Eligible employees, directors and consultants under ECP I are entitled to
purchase common shares of Global Sources Ltd. at a price determined by the
plan committee at the time of the grant. The exercise price of these
options may be below the fair market value of the Company's common shares.
The plan committee determines who will receive, and the terms of, the
options.

GLOBAL SOURCES LTD. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(In U.S. Dollars Thousands, Except Number of Shares and Per Share Data)

Optionees may pay for common shares purchased upon exercise of options in
the manner determined by the plan committee at the time of grant.

Eligible employees, directors and consultants under ECP II were entitled to
purchase common shares of Global Sources Ltd. at an exercise price
determined by the plan committee at the time of the grant. There are two
types of options under this plan. The exercise price of both of these
options were below the fair market value of the Company's common shares at
that time. The plan committee determines who will receive, and the terms
of, the options. Employees could decide whether to take up the options for
a period of 95 days ending June 29, 2000. All the options granted were
exercised. Optionees were able to pay for common shares purchased upon
exercise of options by check to the Trust. Payment has been made to the
Trust. Entitlement of the employees, directors and consultants to these
common shares is subject to employment and vesting terms.

Eligible employees, directors and consultants under ECP III were awarded a
defined amount of compensation payable in Global Sources Ltd. common
shares, the number of which were determined by dividing the amount of
compensation awarded by an amount determined by the plan committee prior to
the Share Exchange.

Entitlement of the employees to these common shares is subject to
employment and vesting terms.

The non-cash compensation expense associated with awards in accordance with
APB No. 25 and SFAS No. 123, under ECP II and ECP III of approximately
$2,904 and $2,357, respectively, were recognized ratably over the three
year vesting term from the respective award dates.

Eligible employees, directors and consultants under ECP IV are awarded a
defined amount of compensation payable in Global Sources Ltd. common
shares, the number of which are determined by the plan committee
periodically.

Entitlement of the employees, directors and consultants to these common
shares is subject to employment and vesting terms.

Eligible employees, directors and consultants under ECP V were awarded a
one-time grant of shares, the number of which were determined by the plan
committee.

Entitlement of the employees to these common shares is subject to
employment and vesting terms.

The Equity Compensation Plan committee approved the awards of common shares
under ECP IV and ECP V on January 23, 2001. The Equity Compensation Plan
committee approved additional awards of common shares under ECP IV on April
1, 2001, July 1, 2001 and August 29, 2001 and under ECP V on August 29,
2001, January 1, 2002 and January 2, 2004.

The non-cash compensation expenses associated with the above awards in
accordance with APB No. 25 and SFAS No. 123, under ECP IV and ECP V of
approximately $3,232 and $2,273, respectively, are recognized over the five
year vesting term from the respective award dates.

Eligible employees, directors and consultants under ECP VI are awarded a
one-time grant of Global Sources Ltd. common shares, the number of which
are determined by the plan committee.

Entitlement of the employees, directors and consultants to these common
shares is subject to non-compete and vesting terms.

GLOBAL SOURCES LTD. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(In U.S. Dollars Thousands, Except Number of Shares and Per Share Data)

The Equity Compensation Plan committee approved ECP VI on March 13, 2001
and made awards of common shares under plan on various dates during the
year 2001, 2002 and on July 28, 2004.

The non-cash compensation expenses associated with the awards in accordance
with APB No. 25 and SFAS No. 123, under ECP VI totaling to approximately
$1,002, are recognized over the five year vesting term from the respective
award dates.

Eligible employees, directors and consultants under ECP VII are awarded a
grant of defined number of Global Sources Ltd. common shares, the number of
which are determined by the plan committee periodically.

The Equity Compensation Plan committee approved the awards of common shares
under ECP VII on January 1, 2002 and made further awards on March 31, 2003,
on June 19, 2003 and on January 2, 2004. The non-cash compensation expenses
associated with the above awards in accordance with APB No. 25 and SFAS No.
123, under ECP VII of approximately $5,352 are recognized over the six
years vesting term from the respective award dates.

Entitlement of the employees, directors and consultants to these common
shares is subject to employment and vesting terms.

The Company expensed $2,564, $1,419 and $2,117 in non-cash compensation
costs associated with the awards under the above ECP plans in the years
ended December 31, 2002, 2003 and 2004, respectively.

GLOBAL SOURCES LTD. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(In U.S. Dollars Thousands, Except Number of Shares and Per Share Data)

ECP II ECP III ECP IV ECPV ECP VI ECP VII
----------------------- ---------- ---------- ---------- -------- ---------
Purchase Grant Grant
Plan Gift Plan Grant Plan Grant Plan Grant Plan Plan Plan
---------- ---------- ---------- ---------- ---------- -------- ---------
Plan Inception March, March, March, January, January, March, January,
2000 2000 2000 2001 2001 2001 2002
---------- ---------- ---------- ---------- ---------- -------- ---------

Number of Shares:
At December 31, 2000... 97,874 243,313 124,449 -- -- -- --
---------- ---------- ---------- ---------- ---------- ---------- ----------
Original restricted
shares granted in
year 2001............ -- -- -- 632,049 366,630 94,743 --

Shares forfeited to
beneficial trustee... -- (29,607) (24,006) (106,284) (110,715) -- --
---------- ---------- ---------- ---------- ---------- ---------- ----------

Balance at December 31, 97,874 213,706 100,443 525,765 255,915 94,743 --
2001..........

Original restricted
shares granted in
year 2002............ -- -- -- -- 36,300 12,100 162,682

Shares forfeited to
beneficial trustee... -- ( 11,961) (2,758) (46,851) (34,364) -- (11,124)
---------- ---------- ---------- ---------- ---------- ---------- ----------

Balance at December 31,
2002................... 97,874 201,745 97,685 478,914 257,851 106,843 151,558

Original restricted
shares granted in
year 2003............ -- -- -- -- -- -- 347,665

Shares forfeited to
beneficial trustee... -- (1,583) -- (14,879) (4,356) -- (13,676)
---------- ---------- ---------- ---------- ---------- ---------- ----------

Balance at December 31,
2003................... 97,874 200,162 97,685 464,035 253,495 106,843 485,547
Original restricted
shares granted in
year 2004............ -- -- -- -- 36,300 11,000 354,393

Shares forfeited to
beneficial trustee... -- -- -- (28,124) (5,203) -- (34,386)
---------- ---------- ---------- ---------- ---------- ---------- ----------

Balance at December
31, 2004............. 97,874 200,162 97,685 435,911 284,592 117,843 805,554
========== ========== ========== ========== ========== ========== ==========

Grant Price Per Share.. $ 19.84 $ NIL $ NIL $ NIL $ NIL $ NIL $ NIL
========== ========== ========== ========== ========== ========== ==========

Weighted average fair
value of the shares
granted.............. $ 2.06 $ 21.9 $ 21.9 $ 7.16 $ 6.91 $ 4.79 $ 4.48
========== ========== ========== ========== ========== ========== ==========

Weighted average fair value of the shares granted is estimated to be the average
market value of the shares at the time of the grant.

24. Directors Purchase Plan

A 2000 Non-Employee Directors Share Option Plan was approved on October 26,
2000 by the shareholders of the Company. Each eligible Director on the date
of the first board meeting of each calendar year, commencing in 2001, would
receive the grant of an option to purchase 24,200 common shares on that
date. The Options granted are subject to such terms and conditions as
determined by the Board of Directors at the grant.

The option price, per share, payable before the end of each February, is
determined by the Board of Directors for each such grant of options. The
non-employee Directors may decline all or part of the award, which is
non-transferable.

GLOBAL SOURCES LTD. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(In U.S. Dollars Thousands, Except Number of Shares and Per Share Data)

The Board granted the first awards under the above plan in 2001. The option
price was fifteen percent less than the average closing price of the shares
for the last five trading days of the previous calendar year. The award
vests over four years with one quarter of the shares vesting each year.
Full payment must be made upon exercising the option. Upon resignation of
an eligible Director, all unvested shares are forfeited and the option
price received for the forfeited unvested shares is refunded. Only one
Director accepted the offer on February 10, 2001 for the 24,200 shares
granted under option. The $164 received as proceeds of this plan was
included in additional paid-in capital. On February 28, 2002, 2003 and
2004, the Company issued to the Director the 6,050, 6,050 and 6,050 common
shares, respectively, that vested on those dates, adjusted to reflect the
shares split discussed in Note 27 and Note 29.

As per the terms of the plan, the Board granted options to all eligible
Directors again in February 2002. These awards will vest after four years.
Optionees must pay 15% of the option price, which is the average closing
price of the shares for the last five trading days of year 2001, at the
time of exercising the option. The balance of 85% must be paid on or before
the vesting date. The resignation of a Director following his or her
exercise of the Grant of Options and payment of the Option Price shall not
cause a forfeiture of the unvested shares. All the eligible non-employee
Directors accepted the offer before February 28, 2002. The $50 received
towards the 15% of the option price was included in additional paid in
capital.

The Board granted options to all eligible directors again in February 2003.
These awards will vest after four years. Optionees must pay 10% of the
option price, which is the average closing price of the shares for the last
five trading days of year 2002, at the time of exercising the option. The
balance of 90% must be paid on or before the vesting date. The resignation
of a Director following his or her exercise of the grant of options and
payment of the option price shall not cause a forfeiture of the unvested
shares. Three eligible directors accepted the offer before February 28,
2003. The $30 received towards the 10% of the option price was included in
the additional paid in capital.

On May 8, 2003, shareholders approved the amendments to the 2000
Non-Employee Directors Share Option Plan to allow both employee and
non-employee Directors to participate in the plan. The plan was renamed as
Directors Purchase Plan by the Board of Directors on August 14, 2003.

Directors purchasing the shares under the plan pay 10% of the purchase
price which is the average closing price of the shares for the last five
trading days of year 2003, on or before February 28, 2004. The balance of
90% is paid by February 28, 2008 and the shares will be issued thereafter.
The resignation of a Director following his or her purchase of the shares
and payment of the 10% initial installment shall not cause a forfeiture of
the purchased shares. Six directors opted to purchase 24,200 shares each
and one director opted to purchase part of the 24,200 shares. The amount of
$92 received towards the 10% of the purchase price was included in the
additional paid in capital.

As per the terms of the Directors Purchase Plan, Directors purchasing the
shares under the plan in year 2005, pay 10% of the purchase price which is
the average closing price of the shares for the last five trading days of
the year 2004, on or before February 28, 2005. The balance of 90% is paid
by February 28, 2009 and the shares will be issued thereafter. The
resignation of a Director following his or her purchase of the shares and
payment of the 10% initial installment shall not cause a forfeiture of the
purchased shares. Five directors opted to purchase 22,000 shares each. The
amount of $118 received towards the 10% of the purchase price will be
included in the additional paid in capital.

GLOBAL SOURCES LTD. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(In U.S. Dollars Thousands, Except Number of Shares and Per Share Data)

25. Credit Facilities

The Company holds a Documentary Credit facility with the Hongkong and
Shanghai Banking Corporation Limited, for providing documentary credits to
the Company's suppliers. This facility has a maximum limit of $577. As at
December 31, 2004, the unutilized amount under this facility was
approximately $350. Hongkong and Shanghai Banking Corporation Limited has
also provided guarantees on behalf of the Company to the Company's
suppliers. As at December 31, 2004, such guarantees amounted to $3.

26. Other Commitments

The Company has entered into a number of licence agreements during the year
for its exhibition events amounting to $29,730 in payments over five (5)
years. The agreements are cancelable under Force Majeure conditions, and
with the consent of the other party but may be subject to a payment
penalty. As of December 31, 2004 the amount paid under these agreements was
$1,924. The amount paid will be expensed when the related events are held.

The Company also entered into several agreements for the event specific
promotion of our exhibition events amounting to $3,043 in payments over
four years. The amount paid under these agreements as of December 31, 2004
was $571.

27. Bonus Shares

On February 16, 2004, the Company announced a one for ten bonus share issue
on the Company's outstanding common shares. Shareholders of record on March
1, 2004 will receive one additional common share for every ten common
shares held, of face value of $0.01 each. The bonus share issue was
distributed in April 2004. All common shares and per-share amounts in the
consolidated financial statements and related notes have been retroactively
adjusted to reflect the one for ten bonus share issue for all periods
presented. In addition, the Company has reclassified $26 and $26 from
additional paid in capital to common share capital as of December 31, 2003
and 2004, respectively.

28. Reclassification

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

29. Post Balance Sheet Events

On March 1, 2005, the Company announced a one for ten bonus share issue on
the Company's outstanding common shares. Shareholders of record on March 4,
2005 will receive one additional common share for every ten common shares
held, of face value of $0.01 each. The bonus share issue will be
distributed on or about April 1, 2005. All common shares and per-share
amounts in the consolidated financial statements and related notes have
been retroactively adjusted to reflect the one for ten bonus share issue
for all periods presented. In addition, the Company has reclassified $29
and $29 from additional paid in capital to common share capital as of
December 31, 2003 and 2004, respectively.

PROSPECTUS
$300,000,000
GLOBAL SOURCES LTD.

Common Shares, Preferred Shares, Debt Securities, Warrants to Purchase Common
Shares, Preferred Shares or Debt Securities, Share Purchase Contracts and Share
Purchase Units and Common Shares Offered by the Selling Shareholder

The following are types of securities that may be offered and sold by us under
this prospectus from time to time up to an aggregate initial offering price of
$300,000,000:

o common shares;
o preferred shares;
o unsecured debt securities;
o warrants to purchase common shares, preferred shares or debt
securities; and o share purchase contracts and share purchase units.

In addition, this prospectus also covers potential sales by a selling
shareholder named herein who may resell in one or more offerings a portion of
our common shares that he owns or that will be issued upon conversion or
exchange of options or warrants.

A prospectus supplement, which must accompany this prospectus, will describe the
securities to be offered and sold, as well as the specific terms of the
securities. Those terms may include, among others, as applicable:

o aggregate principal amount;
o issue price;
o denomination;
o currency or composite currency;
o maturity;
o interest rate;
o dividend rate;
o sinking fund terms;
o ranking;
o redemption terms;
o conversion terms;
o warrant exercise price;
o warrant expiration date;
o listing on a securities exchange;
o amount payable at maturity; and
o liquidation preference.

The prospectus supplement may also supplement or update information contained in
this prospectus; provided that such information does not constitute material
changes to the information herein such that it alters the nature of the offering
or the securities offered. You should read both this prospectus and any
prospectus supplement together with the additional information described under
the heading "Incorporation of Documents by Reference" before investing in our
securities.

Neither the Securities and Exchange Commission nor any state securities
commission has approved or disapproved of these securities or determined if this
prospectus is truthful or complete. Any representation to the contrary is a
criminal offense.

Our common shares are traded on the Nasdaq National Market under the symbol
"GSOL." The closing price of our common shares was $11.29 per share on April 30,
2004.

INVESTING IN OUR SECURITIES INVOLVES CERTAIN RISKS. SEE "RISK FACTORS" BEGINNING
ON PAGE 6.

The date of this prospectus is May 25, 2004.

TABLE OF CONTENTS

Page

Cautionary Note Regarding Forward-Looking Statements.........................ii
Prospectus Summary............................................................1
Summary Historical Consolidated Financial and Operating Data..................4
Risk Factors..................................................................6
Use of Proceeds..............................................................14
Price Range of Common Shares.................................................14
Dividend Policy..............................................................14
Selected Historical Consolidated Financial and Operating Data................15
Ratio of Earnings to Fixed Charges and Preferred Share Dividends.............17
Management's Discussion and Analysis of Financial Condition and
Results of Operations.......................................................18
Business.....................................................................30
Senior Management and Directors..............................................41
Security Ownership of Certain Beneficial Owners and Management...............47
General Description of the Offered Securities................................50
Description of Share Capital.................................................50
Description of Preferred Shares..............................................58
Description of Debt Securities...............................................60
Description of Warrants to Purchase Common Shares or Preferred Shares........72
Description of Warrants to Purchase Debt Securities..........................74
Description of Share Purchase Contracts and Share Purchase Units.............75
Selling Shareholder..........................................................77
Plan of Distribution.........................................................78
Where You Can Find More Information..........................................80
Incorporation of Documents by Reference......................................80
About This Prospectus........................................................81
Legal Matters................................................................82
Experts......................................................................82
Index to Consolidated Financial Statements..................................F-1

______________

CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS

Except for any historical information contained herein, the matters
discussed in this prospectus contain certain "forward-looking statements" within
the meaning of the Private Securities Litigation Reform Act of 1995 with respect
to our financial condition, results of operations and business. These statements
relate to analyses and other information which are based on forecasts of future
results and estimates of amounts not yet determinable. These statements also
relate to our future prospects, developments and business strategies. These
forward-looking statements are identified by their use of terms and phrases such
as "anticipate," "believe," "could," "estimate," "expect," "intend," "may,"
"plan," "predict," "will" and similar terms and phrases, including references to
assumptions. These forward-looking statements, including current trend
information, projections for future business activities and other trend
projections, involve risks and uncertainties that may cause our actual future
activities and results of operations to be materially different from those
suggested or described in this prospectus.

These risks include:

o customer satisfaction and quality issues;

o competition;

o our ability to achieve and execute internal business plans;

o worldwide political instability and economic downturns and inflation,
including any weakness in the economic and political conditions of
countries in the Asia-Pacific region, including China; and

o other factors described herein under "Risk Factors."

In this prospectus and in the accompanying prospectus supplement, except as
specified otherwise or unless the context requires otherwise, "we," "us," "our,"
the "Company" and "Global Sources" refer to Global Sources Ltd. and its
subsidiaries, and do not include or refer to the selling shareholder. All
references to "fiscal" in connection with a year shall mean the year ended
December 31.

All financial information contained herein is expressed in United States
dollars, unless otherwise stated.

PROSPECTUS SUMMARY

This summary is not complete and does not contain all the information you should
consider. You should read this entire prospectus and any supplements to this
prospectus carefully, including without limitation, the documents incorporated
by, reference in this prospectus and the section entitled "Risk Factors."

Our Company

Global Trade and the Role of Media

Asia has become the primary supply market for many of the consumer products
sold in the world. China's admission to the World Trade Organization in 2001 led
to a dramatic shift in global trade, with more orders flowing to China and away
from traditional supply markets such as Taiwan and Hong Kong SAR. For example,
from 1999 to 2003, China's exports to the US grew by a compound annual growth
rate of 15%, while exports from Taiwan and Hong Kong SAR each declined by 8%.

With a population that is more than 15 times as large as Hong Kong, Taiwan
and Korea combined, and with comparably more manufacturing facilities, the
potential scale of China as an exporter is very substantial. China's exporters
include state-owned enterprises, joint ventures and a rapidly growing number of
entrepreneurial companies. Many of these companies are relatively inexperienced
with exporting.

International trade is complex, making it difficult for many suppliers and
buyers to effectively participate. With thousands of manufacturers spread across
vast regions, and given the large distances between them and their customers, it
is difficult for buyers and suppliers to identify and communicate with each
other.

Media play a key role in helping buyers and suppliers find, connect and
transact with each other. Buyers use online marketplaces, trade publications and
trade shows to stay informed about supply market developments and purchasing
opportunities. Suppliers use these media to find new buyers and new markets for
their products. Most suppliers want to use a full range of media to make sure
they reach the majority of their target market, because of the benefits of
different exposures to buyers, and because each type of media plays a different
role in the sales cycle.

The Global Sources Solution

We provide online marketplaces, trade publications and trade shows that
connect Asian suppliers with buyers worldwide.

o Global Sources Online is comprised of marketplaces for nine industry
sectors.

o We publish seven monthly trade publications, plus various other
quarterly and seasonal publications.

o We have six China Sourcing Fairs scheduled in Shanghai during 2004.

On the buyer side, we serve an independently certified community of more
than 400,000 active members in more than 200 countries and territories, up from
209,000 at the end of 2000. Active members are buyers who have received a
magazine or a CD-ROM, or who have made an inquiry through Global Sources Online
within the past year. During 2003, buyers sent more than 3.8 million requests
for information (RFIs) to the 130,000 suppliers listed on Global Sources Online.

During 2003, more than 6,600 suppliers paid us for marketing and/or
advertising services. More than 5,900 of these suppliers were located in greater
China, which includes over 3,100 in mainland China, 1,900 in Taiwan, and 950 in
Hong Kong SAR.

With the combination of our online, print and trade show offerings,
supported by our creative and production services, we offer suppliers a virtual,
one-stop shop for most of their export marketing communications needs. We
believe that we are the largest company offering such an integrated solution to
companies engaged in international trade with China.

Strategy

Our objective is to be the preferred provider of essential information and
integrated marketing services in the markets we serve. Our primary strategy to
achieve this is by serving industry sectors with each of online, trade
publication and trade show media. This range of media enables suppliers to reach
their prospective markets in multiple ways. It may also give us a competitive
advantage over media companies who do not offer a full range of media.

Our growth strategy has five primary components:

o Expand Trade Show Business. We plan to launch more trade shows,
including six China Sourcing Fairs in 2004.

o Add New Customers for Existing Services. We believe we can
significantly increase the number of suppliers who will purchase our
online marketplace, trade publication and trade show services for
three primary reasons: the overall strength and differentiation of our
services; the largest community of independently certified buyers we
have involved in global B2B trade; and the increasing number of buyers
making inquiries through Global Sources Online.

o Cross-Sell Services to Existing Customers. We see significant
potential to convince more of our online marketplace and trade
publication customers to also exhibit in our trade shows; and to
convince more of our trade show exhibitors to also become customers of
our online marketplaces and trade publications.

o Seek Acquisitions, Joint Ventures and Alliances. We intend to
selectively pursue acquisitions, joint ventures and alliances to help
us accelerate achievement of our strategic goals.

Competitive Strengths

o We are diversified in terms of products and services offered,
industries served and customer base.

o We are well positioned to grow along with China's exports and imports
in our chosen industry sectors.

o We have powerful and valuable assets including: the Global Sources
brand; leading products and market positions; a long history and
extensive presence in China; and substantial online leadership and
expertise.

Challenges Facing the Company

Our current business, competitive strengths and strategy are subject to
significant risks, including the following:

o Reliance on the China Market. Customers in China provided more than
36% of our total revenue in fiscal 2002 and approximately 43% in 2003.
Our dependence on China is significant, and adverse political and/or
economic changes may harm our business and cause our revenue to
decline.

o Limited Operating History in the Trade Show Business. To grow our
trade show business, we will need to hire additional personnel and
expend additional capital, including advance deposits to secure

venues. In addition, factors such as the spread of SARS and the threat
of terrorist attacks may have an adverse impact on our trade show
business.

o Managing Growth in China Sales Representation. We plan to
substantially increase the number of independent sales representatives
in China from the approximately 800 team members that we currently
have in over 40 locations. Our success will depend in part upon our
ability to implement and manage this growth effectively.

History and Principal Executive Office

We originally were incorporated under the laws of Hong Kong in 1970. In
April 2000, we completed a share exchange with a publicly traded company based
in Bermuda, and our shareholders became the majority shareholders of the Bermuda
corporation. As a result of the share exchange, we became incorporated under the
laws of Bermuda and changed our name to Global Sources Ltd.

Our primary operating offices are located in Shenzhen, China; Hong Kong
SAR; Singapore; and Makati, Philippines. Our registered office is located at
Canon's Court, 22 Victoria Street, Hamilton, HM 12, Bermuda, and our telephone
number at that address is (441) 295-2244. Our website address is
www.globalsources.com. Information contained on our website or available through
our website is not incorporated by reference into this prospectus and should not
be considered a part of this prospectus.

SUMMARY HISTORICAL CONSOLIDATED FINANCIAL AND OPERATING DATA

The following summary historical consolidated financial and operating data
for the three-year period ended December 31, 2003 and for the three months ended
March 31, 2004 and 2003 should be read in conjunction with "Management's
Discussion and Analysis of Financial Condition and Results of Operations" and
our financial statements and the related notes which are included elsewhere in
this prospectus. We derived the financial data as of December 31, 2003 and 2002
and for the years ended December 31, 2003, 2002 and 2001 from our audited
financial statements included elsewhere in this prospectus. We derived the
financial data as of December 31, 2001 from our audited financial statements not
included in this prospectus. We derived the financial data as of March 31, 2004
and for the three months ended March 31, 2003 and 2004 from unaudited financial
statements included elsewhere in this prospectus.

Prior to August 8, 2002, Arthur Andersen served as our independent auditors.
Since Arthur Andersen ceased practicing before the SEC on August 31, 2002, we
are unable to obtain their written consent to incorporate or include by
reference its reports on our financial statements. See "Risk Factors--Issues
related to Arthur Andersen may impede our ability to access the capital
markets." Our consolidated financial statements for the year ended December 31,
2001 have been audited by Arthur Andersen.

Three Months Ended
Year Ended December 31, March 31,
------------------------------------------ ----------------------------
2001 2002 2003 2003 2004
--------- ------------- ------------- ------------ ------------
Income Statement Data: (Unaudited)
(In Thousands, Except Per Share Data)
Revenue:

Online services...................... $ 55,468 $ 51,268 $ 51,367 $ 12,585 $ 12,906
Other media services................. 36,391 33,132 36,318 8,071 9,118
Exhibitions.......................... 2,619 2,455 3,327 801 1,509
Miscellaneous........................ 807 631 657 183 129
--------- ------------- ------------- ------------ ------------
Total revenue........................ 95,285 87,486 91,669 21,640 23,662
Total operating expenses............. 91,900 82,640 82,888 20,118 20,531
--------- ------------- ------------- ------------ ------------
Income from operations............... $ 3,385 $ 4,846 $ 8,781 $ 1,522 $ 3,131
Interest expense................... (172) -- -- -- --
Interest income.................... 357 439 122 22 36
Loss on sale of
available-for-sale securities.... -- -- (40) -- --
Foreign exchange gains (losses),
net.............................. (470) 50 -- (24) 52
Write down of investments.......... (1,150) -- -- -- --
--------- ------------- ------------- ------------ ------------
Income before income taxes........... 1,950 5,335 8,863 1,520 3,219
Income tax provision................. (1,143) (720) (668) (91) (194)
--------- ------------- ------------- ------------ ------------
Income before minority interest ..... $ 807 $ 4,615 $ 8,195 $ 1,429 $ 3,025
Equity in income of affiliate........ 51 -- -- -- --
Minority interest.................... (83) (308) (861) (104) (397)
--------- ------------- ------------- ------------ ------------
Net income........................... $ 775 $ 4,307 $ 7,334 $ 1,325 $ 2,628
========== ============= ============= ============ ============
Basic and diluted net income per
share.............................. $ 0.03 $ 0.15 $ 0.25 $ 0.05 $ 0.09
========== ============= ============= ============ ============
Shares used in basic net income per
share calculations(1).............. 28,936 28,940 28,946 28,943 28,949
Shares used in diluted net income
per share calculations(1).......... 28,936 28,940 28,973 28,943 29,062
========== ============= ============= ============ ============

Three Months Ended
Year Ended December 31, March 31
---------------------------------------- -------------------------
2001 2002 2003 2003 2004
--------- --------- ---------- ---------- ----------
(Unaudited)
(In U.S. Dollars Thousands, except Buyer community)
Other Data:
Net cash provided by operating

activities......................... $15,464 $20,662 $25,323 $3,686 $2,486
Buyer community(2)................. 309,943 378,031 402,987 385,926 409,388

December 31, March 31,
------------------------------------------ ---------------
2001 2002 2003 2004
----------- ----------- ------------ ---------------
(In U.S. Dollars Thousands)
Balance Sheet Data:

Cash and cash equivalents............ $ 20,236 $ 11,009 $ 26,227 $ 12,065
Available-for-sale securities........ -- 26,199 35,140 51,978
Total assets ........................ 53,602 62,650 82,541 86,794
Net assets .......................... 11,601 18,522 27,980 31,776
Long-term debt, less current portion.. 15,963 15,856 16,068 16,583
Total shareholders' equity ........ 11,601 18,522 27,980 31,776

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

(1) On February 16, 2004, we announced a one for ten bonus share issue on our
outstanding common shares. All common shares and per-share amounts have
been retroactively adjusted to reflect the eleven for ten share split for
all periods presented. For a further discussion on the share split, please
see Note 26 of our consolidated financial statements appearing elsewhere in
this prospectus. Fractional shares were rounded up resulting in an
additional 1,350 common shares upon distribution of the bonus shares on
April 1, 2004.

(2) Represents number of buyers who have received a magazine or a CD-ROM or who
have made an inquiry through the Global Sources website
(www.globalsources.com) within applicable period.

RISK FACTORS

In addition to other information in this prospectus, the following risk
factors should be carefully considered in evaluating an investment in our
company because such factors may have a significant impact on our business,
operating results and financial condition. As a result of the risk factors set
forth below and elsewhere in this prospectus, and the risks discussed in our
other Securities and Exchange Commission filings, actual results could differ
materially from those projected in any forward-looking statements.

General economic uncertainty may reduce spending for business-to-business
marketing and advertising.

The Chinese market is key to our current and future revenue growth, and
political instability in this market could reduce our revenue and seriously harm
our business.

Our customers in China provided more than 36% of our total revenues in
fiscal 2002 and approximately 43% of our total revenues in fiscal 2003, and we
believe our operations in China will continue to grow for the next several
years. Our dependence on the China market and its revenues is significant, and
adverse political changes in China may harm our business and cause our revenues
to decline.

The Chinese government has instituted a policy of economic reform which has
included encouraging foreign trade and investment, and greater economic
decentralization. However, the Chinese government may discontinue or change
these policies, or these policies may not be successful. Moreover, despite
progress in developing its legal system, China does not have a comprehensive and
highly developed system of laws, particularly as it relates to foreign
investment activities and foreign trade. Enforcement of existing and future
laws, regulations and contracts is uncertain, and implementation and
interpretation of these laws and regulations may be inconsistent. As the Chinese
legal system develops, new laws and regulations, changes to existing laws and
regulations and the interpretation or enforcement of laws and regulations may
adversely affect business operations in China. While Hong Kong SAR (Special
Administrative Region) has had a long history of promoting foreign investment,
its incorporation into China means that the uncertainty related to China and its
policies may now also affect Hong Kong SAR.

The international markets in which we operate are subject to risks,
including:

o fluctuations in regional economic conditions;

o political instability;

o the threat of terrorist attacks;

o conflicting and changing legal and regulatory requirements;

o restrictions placed on our operations due to our foreign status;

o significant changes in tax rates and reporting requirements;

o the loss of revenue, property and equipment from expropriation,
nationalization, war, insurrection, terrorism and other political
risks;

o adverse governmental actions, such as restrictions on transfers of
funds and trade protection measures, including tariffs and export
quotas; and

o fluctuations in currency exchange rates.

In 2003, we derived more than 90% of our revenue from customers in the
Asia-Pacific region. We expect that a majority of our future revenue will
continue to be generated from customers in this region. At the time of the Asian
economic crisis of 1997 and 1998, our revenue and operating results were
adversely affected. During the

Asian economic crisis, both our sales and revenue declined. If there is future
political or economic instability in the Asia-Pacific region, our business may
be harmed and our revenue may decrease.

Because we operate internationally, foreign exchange rate fluctuations may
have a material impact on our results of operations. To the extent significant
currency fluctuations occur in Asian currencies, our revenue and profits would
be affected. At the time of the Asian economic crisis of 1997 and 1998, certain
of our contracts were dominated and priced in foreign currencies. The conversion
of these contract proceeds into U.S. dollars resulted in losses and is
indicative of the foreign exchange risk assumed by us. Currently, we do not
hedge our exposure to foreign currency fluctuations.

Our limited operating history in the trade show business as well as other
factors could adversely affect our ability to operate in this business
successfully.

o the spread of SARS, Avian influenza and other similar epidemics;

o political instability and the threat of terrorist attacks;

o decrease in demand for booth space;

o limited availability of venues and appropriate venue dates;

o competing trade shows; and

o our inability to effectively expand our staff and infrastructure.

If our current and potential customers are not willing to adopt and renew our
services, we may not attract and retain a critical mass of customers.

Our services will be attractive to suppliers only if buyers use our
services to identify suppliers and purchase their products. The content,
products and suppliers currently available on our websites and other media or
made available by suppliers may not be sufficient to attract and retain buyers.
If buyers and suppliers do not accept our online services and other media, or if
we are unable to attract and retain a critical mass of buyers and suppliers for
our online services and other media, our business will suffer and our revenue
may decrease.

We may not be successful in identifying and consummating acquisitions, joint
ventures and alliances to expand our business.

If we are unable to compete effectively, we will lose current customers and fail
to attract new customers.

for our share of customers' marketing and advertising budgets with other online
marketplaces, trade publications and trade shows. Competitors vary in size,
geographic scope, industries served and breadth of the products and services
offered. We may encounter competition from companies which offer more
comprehensive content, services, functionality and/or lower prices.

Our quarterly operating results may have seasonal fluctuations, and we may fail
to meet analyst, investor and shareholder expectations, causing our share price
to decline.

Current weakness of the telecommunications and Internet infrastructure in the
Asia-Pacific region could harm our business.

Customer concerns regarding security may deter use of our online products and
services.

The failure of outside parties to meet our service level and information
accuracy expectations may make our services less attractive to customers and
harm our business.

We rely on independent sales representative firms and the loss of any
significant firm or members of a firm would harm our business and revenue.

We rely on the services of independent sales representative organizations
for the sales and marketing of our products and services. We have service
agreements with various sales representative firms that employ sales
representatives. Four sales representative firms in China are responsible for
supplier accounts which in the aggregate accounted for approximately 43% of our
total revenue for the year ended December 31, 2003. Generally, either we or the
sales representative firm may terminate the service agreement between us upon
short notice. It is possible that we may not retain some of our sales
representative firms, or they may not retain some of their sales personnel or be
able to replace them with equally qualified personnel. Furthermore, if a sales
representative firm terminates its agreement with us, some of our customers with
a direct relationship with that sales representative firm or its personnel may
terminate their relationship with us. Although these firms and their employees
are independent from us, there can be no assurance that our reputation and our
business will not be harmed by their acts or omissions.

The loss of one or more of our executive officers or key employees, either to a
competitor or otherwise, could harm our business.

Our executive officers and key employees are critical to our business. Our
executive officers and key personnel may not remain with us and their loss may
negatively impact our operations, and may reduce our revenues and cash flows. In
particular, the services of our chief executive officer, chief financial
officer, chief operating officer and chief information officer are important to
our operations. If competitors hire our key personnel, it could allow them to
compete more effectively by diverting customers from us and facilitating more
rapid development of their competitive offerings. We do not maintain key man
insurance on any of our executive officers.

Our inability to maintain effective Internet domain names could create confusion
and direct traffic away from our online services.

If we release new services, catalog tools or software that contain defects, we
may need to suspend further sales and services until we fix the defects, and our
reputation could be harmed.

Risk of failure of our computer and communications hardware systems increases
without redundant facilities.

We may be subject to legal liability for publishing or distributing content over
the Internet or in our trade publications or trade shows.

Evolving regulation of the Internet and commercial e-mail may affect us
adversely.

As Internet commerce continues to evolve, increasing regulation by federal,
state or foreign agencies becomes more likely. Strict legal prohibitions on the
transmission of unsolicited commercial email, coupled with aggressive
enforcement, could reduce our ability to promote our services and our ability to
facilitate communications between suppliers and buyers and, as a result,
adversely affect our business.

Our intellectual property protection is limited, and others may infringe upon
it, which may reduce our ability to compete and may divert our resources.

Our lengthy sales and implementation cycle could cause delays in revenue growth.

Our growth could strain our resources, and if we are unable to implement
appropriate controls and procedures to manage our growth, we may not be able to
successfully implement our business plan.

Merle A. Hinrichs, our Chairman and Chief Executive Officer, is also our
controlling shareholder and he may take actions that conflict with your
interest.

Merle A. Hinrichs beneficially owns 67.2% of our common shares.
Accordingly, Mr. Hinrichs controls the power to elect our directors, to appoint
new management and to oppose actions requiring shareholder approval, such as
adopting amendments to our articles of incorporation and approving mergers or
sales of all or substantially all of our assets. Such concentration of ownership
may have the effect of delaying or preventing a change of control even if a
change of control is in the best interest of all shareholders. In addition, Mr.
Hinrichs may still effectively control our company even if his share holdings
are significantly reduced. There may be instances in which the interest of our
controlling shareholder may conflict with the interest of a holder of securities
sold pursuant to this prospectus.

There is a limited public market for our shares and the trading volume for our
shares is low which may limit your ability to sell your shares or purchase more
shares.

Our common shares have been traded in the public market for a limited time
and this market may not be sustained. As a result of the April 2000 share
exchange, 1,189,949 of our common shares were listed on the Nasdaq National
Market. As of April 30, 2004 we had approximately 1,037 shareholders, and
approximately 7,081,316 shares that were tradable on the Nasdaq National Market.

common shares when you want to. As a result, it may be difficult to make
purchases or sales of our common shares in the market at any particular time or
in any significant quantity. If our shareholders sell our common shares in the
public market, the market price of our common shares may fall. In addition, such
sales may create the perception by the public of difficulties or problems with
our products and services or management. As a result, these sales may make it
more difficult for us to sell equity or equity related securities in the future
at a time or price that is appropriate.

Future sales of our common shares could depress the price of the common shares.

Future sales of common shares by us or our existing shareholders could
adversely affect the prevailing market price of the common shares. As of April
30, 2004, we had 28,952,194 common shares outstanding. At least 19,921,092
common shares outstanding are beneficially owned by people who may be deemed
"affiliates," as defined by Rule 405 of the Act, and are "restricted securities"
which can be resold in the public market only if registered with the Securities
and Exchange Commission or pursuant to an exemption from registration.

It may be difficult for a third party to acquire us, and this may depress our
share price.

o providing for a staggered board of directors, so that it would take
three successive annual general meetings to replace all directors;

o requiring the approval of 100% of shareholders for shareholder action
by written consent;

o establishing advance notice requirements for submitting nominations
for election to the board of directors and for proposing matters that
may be acted upon by shareholders at a general meeting; and

or with respect to any of our affiliates or associates, within the
prior two years did own, at least 15% of our voting shares.

Issues related to Arthur Andersen may impede our ability to access the capital
markets.

SEC rules and regulations require us to present historical audited
financial statements in various SEC filings, including registration statements,
along with our accountants' consent to our inclusion of its audit report in
those filings. Prior to August 8, 2002, Arthur Andersen served as our
independent auditors. Effective August 8, 2002, Arthur Andersen resigned as our
independent public accountants and we subsequently retained Ernst & Young as our
independent auditors for the fiscal years ended December 31, 2002 and December
31, 2003. On August 31, 2002, Arthur Andersen ceased practicing before the SEC
and, as a result, we are unable to obtain their written consent to incorporate
by reference or include Arthur Andersen's reports on our financial statements.
If the SEC ceased accepting financial statements previously audited by Arthur
Andersen without Arthur Andersen's written consent, we would be unable to access
the public capital markets unless Ernst & Young, our current independent
accountant, or another independent accountant, is able to re-audit the financial
statements originally audited by Arthur Andersen. In addition, investors in the
securities offered hereby and in any future offerings we make for which we use
Arthur Andersen audit reports will not be entitled to recovery against Arthur
Andersen under the Securities Act for any material misstatements or omissions in
those financial statements. Furthermore, Arthur Andersen will be unable to
participate in the "due diligence" process that would customarily be performed
by potential investors in our securities, which process includes having Arthur
Andersen perform procedures to assure the continued accuracy of its report on
our audited financial statements and to confirm its review of unaudited interim
periods presented for comparative purposes. As a result, we may not be able to
bring to the market successfully an offering of our securities. Consequently,
our financing costs may increase or we may miss attractive market opportunities.

USE OF PROCEEDS

Except as may otherwise be described in the prospectus supplement relating
to an offering of securities, the net proceeds from the sale of the securities
included in this prospectus will be used for general corporate purposes. Any
specific allocation of the net proceeds of an offering of securities to a
specific purpose will be determined at the time of such offering and will be
described in the related prospectus supplement.

We will not receive any of the proceeds from the sale of our common shares
by the selling shareholder.

PRICE RANGE OF COMMON SHARES

Our common shares are traded on the Nasdaq National Market under the symbol
"GSOL." For the periods presented below, the high and low sales prices for our
common shares as reported on the Nasdaq National Market as adjusted for the
eleven for ten share split resulting from the bonus share issue, were as
follows:

Period High Low
------ ---- ---
2002
First Quarter....................................... $5.06 $3.32
Second Quarter...................................... $4.64 $3.68
Third Quarter....................................... $3.82 $2.59
Fourth Quarter...................................... $4.72 $3.05
2003
First Quarter....................................... $4.82 $3.77
Second Quarter...................................... $5.50 $3.69
Third Quarter....................................... $10.09 $4.37
Fourth Quarter...................................... $9.09 $6.36
2004
First Quarter....................................... $16.82 $6.74
Second Quarter (through April 30, 2004)............. $12.82 $10.60

On April 30, 2004, the closing sales price for our common shares as
reported on the Nasdaq National Market was $11.29. As of April 30, 2004, and
based on information provided to us by our transfer agent, there were
approximately 1,037 holders of record of our common shares.

DIVIDEND POLICY

SELECTED HISTORICAL CONSOLIDATED FINANCIAL AND OPERATING DATA

The following table sets forth selected historical consolidated financial
and operating data for the five-year period ended December 31, 2003 and for the
three months ended March 31, 2004 and 2003. Such data should be read in
conjunction with "Management's Discussion and Analysis of Financial Condition
and Results of Operations" and our financial statements and the related notes
which are included elsewhere in this prospectus. We derived the financial data
as of December 31, 2003 and 2002 and for the years ended December 31, 2003, 2002
and 2001 from our audited financial statements included elsewhere in this
prospectus. We derived the financial data as of March 31, 2004 and for the three
months ended March 31, 2004 and 2003 from unaudited financial statements
included elsewhere in this prospectus. We derived the financial data as of
December 31, 2001, 2000 and 1999 and for the years ended December 31, 2000 and
1999 from our audited financial statements not included in this prospectus.

Our consolidated financial statements for the years ended December 31,
2001, 2000 and 1999 have been audited by Arthur Andersen. Since Arthur Andersen
ceased practicing before the SEC on August 31, 2002, we are unable to obtain
their written consent to incorporate or include by reference its reports on our
financial statements. See "Risk Factors--Issues related to Arthur Andersen may
impede our ability to access the capital markets."

Three Months Ended
Year Ended December 31, March 31,
--------------------------------------------------------------- ----------------------
1999 2000 2001 2002 2003 2003 2004
---------- ---------- ---------- ---------- ----------- ---------- ----------
(Unaudited)
(In Thousands, Except Per Share Data)
Income Statement Data:
Revenue:

Online services............... $ 25,463 $ 55,121 $ 55,468 $ 51,268 $ 51,367 $ 12,585 $ 12,906
Other media services.......... 61,778 44,113 36,391 33,132 36,318 8,071 9,118
Exhibitions................... 1,906 2,635 2,619 2,455 3,327 801 1,509
Miscellaneous................. 1,125 1,184 807 631 657 183 129
---------- ---------- ---------- ---------- ----------- ---------- ----------
Total revenue................... 90,272 103,053 95,285 87,486 91,669 21,640 23,662
Operating Expenses:
Sales......................... 29,481 33,847 31,236 28,659 30,113 7,042 7,504
Event production.............. 562 795 811 933 930 236 180
Community .................... 13,120 13,710 12,735 12,481 12,331 2,879 3,136
General and administrative.... 31,521 35,618 32,748 28,885 28,682 7,084 7,437
Online services development... 3,461 6,665 8,393 5,378 4,960 1,315 1,072
Non-cash compensation expense(1) -- 65,689 2,501 2,564 1,419 537 833
Other(2) ..................... 371 2,371 3,476 3,740 4,453 1,025 369
---------- ---------- ---------- ---------- ----------- ---------- ----------
Total operating expenses ....... 78,516 158,695 91,900 82,640 82,888 20,118 20,531
---------- ---------- ---------- ---------- ----------- ---------- ----------
Income (loss) from operations .. $11,756 $ (55,642) $ 3,385 $ 4,846 $ 8,781 $ 1,522 $ 3,131
Interest expense ............. (337) (649) (172) -- -- -- --
Interest income .............. 558 1,135 357 439 122 22 36
Loss on sale of
available-for-sale
securities.................. -- -- -- -- (40) -- --
Foreign exchange gains (losses),
net......................... 427 50 (470) 50 -- (24) 52
Write-down of investments..... -- (11,750) (1,150) -- -- -- --
---------- ---------- ---------- ---------- ----------- ---------- ----------
Income (loss) before income taxes 12,404 (66,856) 1,950 5,335 8,863 1,520 3,219
Income tax provision............ (1,435) (1,277) (1,143) (720) (668) (91) (194)
---------- ---------- ---------- ---------- ----------- ---------- ----------
Income (loss) before minority
interest ..................... $ 10,969 $ (68,133) $ 807 $ 4,615 $ 8,195 $ 1,429 $ 3,025
Equity in income (loss) of
affiliate..................... -- (51) 51 -- -- -- --
Minority interest............... -- (37) (83) (308) (861) (104) (397)
---------- ---------- ---------- ---------- ----------- ---------- ----------
Net income (loss)............... $ 10,969 $ (68,221) $ 775 $ 4,307 $ 7,334 $ 1,325 $ 2,628
========== ========== ========== ========== =========== ============ ===========
Basic and diluted net income
(loss) per share.............. $ 0.40 $ (2.39) $ 0.03 $ 0.15 $ $0.25 $ 0.05 $ 0.09
========== ========== ========== ========== =========== ============ ===========
Cash dividends declared per share 0.54 -- -- -- -- -- --

Shares used in basic net income
per share calculations(3)..... 27,557 28,544 28,936 28,940 28,946 28,943 28,949
Shares used in diluted net income
per share calculations(3)..... 27,557 28,544 28,936 28,940 28,973 28,943 29,062
========== ========== ========== ========== =========== ============ ===========

December 31, March 31,
--------------------------------------------------------- -----------
1999 2000 2001 2002 2003 2004
---------- ---------- ---------- ---------- ---------- -----------
(Unaudited)
(In U.S. Dollars Thousands)
Balance Sheet Data:

Cash and cash equivalents............ $ 15,433 $ 12,727 $ 20,236 $ 11,009 $ 26,227 $ 12,065
Available-for-sale securities........ -- -- -- 26,199 35,140 51,978
Total assets ........................ 46,645 55,706 53,602 62,650 82,541 86,794
Net assets .......................... 5,710 8,161 11,601 18,522 27,980 31,776
Long-term debt, less current portion.. 3,540 16,084 15,963 15,856 16,068 16,583
Total shareholders' equity ........ 5,710 8,161 11,601 18,522 27,980 31,776

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

(1) Reflects the non-cash compensation expenses associated with the grants
under the employee equity compensation plans and for year 2000, also
includes the non-cash compensation expenses associated with the transfer of
shares from Hung Lay Si Co. Ltd., our former parent company, to our
chairman and chief executive officer. Non-cash compensation expense was
allocated according to the category under which a staff employee and team
member functioned as follows: approximately $323 (2002: $623; 2001: $381;
2000: $291; three months ended March 31, 2004: $261; three months ended
March 31, 2003: $81) represents sales expenses, $96 (2002: $238; 2001: $87;
2000: $168; three months ended March 31, 2004;: $31; three months ended
March 31, 2003: $26) represents community expenses, $691 (2002: $1,179;
2001: $1,546; 2000: $65,044; three months ended March 31, 2004: $463; three
months ended March 31, 2003: $328) represents general and administrative
expenses and $309 (2002: $524; 2001: $487; 2000: $186; three months ended
March 31, 2004: $78; three months ended March 31, 2003: $102) represents
online services development expenses.

(2) Includes amortization of intangibles/software development cost and for the
year ended December 31, 2000 also includes non-cash listing expenses of
approximately $1.4 million.

(3) On February 16, 2004, we announced a one for ten bonus share issue on our
outstanding common shares. All common shares and per-share amounts have
been retroactively adjusted to reflect the eleven for ten share split for
all periods presented. For a further discussion on the share split, please
see Note 26 of our consolidated financial statements appearing elsewhere in
this prospectus. Fractional shares were rounded up resulting in an
additional 1,350 common shares upon distribution of the bonus shares on
April 1, 2004.

RATIO OF EARNINGS TO FIXED CHARGES AND PREFERRED SHARE DIVIDENDS

Three
Months
Year Ended Ended
December 31, March 31,
-------------------------------------------------------- ---------
1999 2000 2001 2002 2003 2004
-------- -------- -------- -------- --------- ---------

Ratio of earnings to fixed charges. 38 -- 12 N/A N/A N/A
Deficiency of earnings to cover
fixed charges...................... -- (66,856) -- -- -- --

"Fixed Charges" consists of:

o interest expensed and capitalized, and

o an estimate of the interest within rental expense.

"Earnings" consists of income from continuing operations before income
taxes and fixed charges (excluding capitalized interest).

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

The following discussion of our financial condition and results of
operations should be read in conjunction with the "Selected Financial Data" and
the accompanying financial statements and the notes to those statements
appearing elsewhere in this prospectus. The following discussion contains
forward-looking statements that reflect our plans, estimates and beliefs. Our
actual results could differ materially from those discussed in these
forward-looking statements. Factors that could cause or contribute to such
differences include, but are not limited to, those discussed below and elsewhere
in this prospectus, particularly under the caption "Risk Factors."

Overview

We are a leading business-to-business (B2B) media company that provides
information and integrated marketing services, with a particular focus on the
China market. Our mission is to facilitate global trade between buyers and
suppliers by providing the right information, at the right time, in the right
format. Although our range of media has grown, for more than 33 years we have
been in the same basic business of helping buyers worldwide find products and
suppliers in Asia.

We were originally incorporated under the laws of Hong Kong in 1970. In
1971, we launched Asian Sources, a trade magazine to serve global buyers
importing products in volume from Asia. In 1985, we launched Electronics News
for China for this purpose. Realizing the importance of the Internet, we became
one of the first providers of business-to-business online services by launching
Asian Sources Online in 1995. In 1999, we changed the name of Asian Sources
Online to Global Sources Online. Today we have several publications, their
associated websites plus leading events and conferences that provide information
to high-tech design engineers and manufacturers in China and throughout Asia.

In April 2000, we completed a share exchange with a publicly traded company
based in Bermuda, and our shareholders became the majority shareholders of the
Bermuda corporation. As a result of the share exchange, we became incorporated
under the laws of Bermuda and changed our name to Global Sources Ltd. Today we
are one of Asia's leading providers of trade information in print, online, on
CD-ROM and face-to-face, meeting the marketing and sourcing needs of our
supplier and buyer communities.

Revenue

We derive revenue from three principal sources.

Online services -- Our primary service is creating and hosting marketing
websites that present suppliers' products and company information in a
consistent and easily searchable manner on Global Sources Online. We also derive
revenue from banner advertising fees. We ratably recognize the fees we receive
to display a supplier's advertisement or company data over the contractual term,
which is generally six to twelve months.

Other media services -- We publish trade magazines, which consist primarily
of product advertisements from suppliers and our independent editorial reports
and product surveys. We publish our core trade magazines monthly, and a host of
specialized magazines seasonally. Suppliers pay for advertising in our trade
magazines to promote their products and companies. We also derive revenue from
buyers that subscribe to our trade publications. We also offer CD-ROM versions
of the content on Global Sources Online. We recognize revenue ratably over the
period during which the advertisement is displayed, generally not exceeding one
year.

Exhibitions - trade shows and seminars -- We launched a new line of trade
shows, called the China Sourcing Fairs. They offer international buyers direct
access to China and other Asian manufacturers. The first fair was held during
the fourth quarter of 2003. Future fairs will be held mainly in the second
quarter and fourth quarter of each financial year. We recognize exhibitor
services revenue at the conclusion of the related events.

Critical Accounting Policies

Our significant accounting policies are described in Note 2 to the
consolidated financial statements appearing elsewhere in this prospectus. The
following is a discussion of our critical accounting policies:

Revenue Recognition

We derive our revenue primarily from receipt of advertising fees in our
published trade magazines and websites, sale of trade magazines, receipt of fees
from licensing our trade and service marks, receipt of service fees from the
provision of software maintenance services, and from organizing exhibitions and
business seminars.

Revenue from advertising in trade magazines and websites is recognized
ratably over the period in which the advertisement is displayed. Advertising
contracts do not exceed one year. When advertising fees from published trade
magazines and websites are contracted under a single arrangement, we allocate
the total advertising fees to the multiple deliverables based on their relative
fair values. The fair value of the revenue from published trade magazines and
websites is based on our average historical selling prices. Revenue from sales
of trade magazines is recognized upon delivery of the magazine. Magazine
subscriptions received in advance are deferred and recognized as revenue upon
delivery of the magazine. Revenue from the provision of maintenance service is
deferred and recognized ratably over the maintenance service period. Revenue
from organizing exhibitions or trade shows and business seminars is recognized
at the conclusion of the event and the related direct event production costs and
direct event promotion costs are deferred and recognized as expenses upon
conclusion of the event.

We receive license fees and royalties from licensing our trade and service
marks. Revenue from license fees is recognized ratably over the term of the
license, currently four to five years. Royalties from license arrangements are
earned ratably in the period in which the advertisement is displayed by the
licensee.

The correct measurement of timing and the duration of the contracts with
our customers are essential to the recognition of our revenue. Any delays in
recognizing the revenue could cause our operating results to vary significantly
from period to period. In addition our revenue recognition determines the timing
of certain expenses such as commissions, circulation expenses, direct event
production costs and direct event promotion expenses. We believe that we have
adequate controls and processes in place to ensure the accuracy of the revenue
recording.

Capitalization of Development Costs of Software for Internal Use

We adopted Statement of Position 98-1, "Accounting for the Costs of
Computer Software Developed or Obtained for Internal Use." Costs incurred in the
preliminary project stage with respect to the development of software for
internal use are expensed as incurred; costs incurred during the application
development stage are capitalized and are amortized over the estimated useful
life of three years upon the commissioning of service of the software. Training
and maintenance costs are expensed as incurred.

To account for the development costs related to the products to be sold,
leased or otherwise marketed, we adopted SFAS No. 86, "Accounting for the Costs
of Computer Software to Be Sold, Leased, or Otherwise Marketed." Development
costs incurred subsequent to the establishment of the technological feasibility
of the product are capitalized. The capitalization will end when the product is
available for general release to customers.

Our policies on capitalized software development costs determine the timing
and our recognition of certain development costs. In addition, these policies
determine whether the costs are capitalized or recorded as expenses.

Estimation of Allowance for Doubtful Debts

The preparation of financial statements requires management to make
estimates and assumptions that affect the reported amounts of assets and
liabilities in our financial statements.

We estimate the collectibility of our accounts receivable based on our
analysis of the accounts receivable, historical bad debts, customer
credit-worthiness and current economic trends. We continuously monitor
collections from our customers and maintain adequate allowance for doubtful
accounts. While credit losses have historically been within our expectations and
the allowances we established, if the bad debts significantly exceed our
provisions, our operating results and liquidity would be adversely affected.

Impairment of Long-Lived Assets

Property and equipment are amortized over their estimated useful lives.
Useful lives are based on our estimates of the period that the assets will
generate revenue and can be productively employed.

We periodically review the carrying values of our long-lived assets based
on the anticipated gross cash flows and will provide for impairment whenever
events or changes in circumstances indicate that the carrying amount of the
assets may not be fully recoverable. The impairment loss is measured based on
the difference between the carrying amount of the asset and its fair value.

While we believe our estimation of the useful lives and future cash flows
are reasonable, different assumptions regarding such useful lives and cash flows
could materially affect our valuations.

Results of Operations

The following table sets forth the results of our operations as a
percentage of total revenue:

Three Months
Ended
Year Ended December 31, March 31,
--------------------------------- --------------------
2001 2002 2003 2003 2004
---------- --------- -------- --------- ---------
Income statement data:
Revenue:

Online services......................... 58% 59% 56% 58% 55%
Other media services.................... 38 38 39 37 38
Exhibitions............................. 3 2 4 4 6
Miscellaneous........................... 1 1 1 1 1
Total revenue.................... 100 100 100 100 100
Operating expenses:
Sales................................... 33 33 33 33 32
Event production........................ 1 1 1 1 1
Community............................... 13 14 13 13 13
General and administrative.............. 34 33 31 33 31
Online services development............. 9 6 5 6 5
Non-cash compensation................... 3 3 2 2 3
Other................................... 3 4 5 5 2
Total operating expenses......... 96 94 90 93 87
Income from operations.................. 4% 6% 10% 7% 13%
Net income.............................. 1% 5% 8% 6% 11%
========== ========= ======== ========= =========

The following table represent our revenue by geographical areas as a percentage
of total revenue:

Three Months
Ended
Year Ended December 31, March 31,
--------------------------------- --------------------
2001 2002 2003 2003 2004
---------- --------- -------- --------- ---------

Asia....................................... 93% 93% 93% 93% 93%
United States.............................. 5 6 6 6 7
Europe..................................... 1 1 1 1 0
Others..................................... 1 0 0 0 0
---------- --------- ---------- ---------- -----------
Total revenue..................... 100% 100% 100% 100% 100%
========== ========= ========== ========== ===========

Three Months Ended March 31, 2004 Compared to Three Months Ended March 31, 2003

Revenue

Our total revenue grew by 9% to $23.7 million during the three months ended
March 31, 2004 from $21.6 million during the three months ended March 31, 2003.
Our online services revenue grew from $12.6 million during the three months
ended March 31, 2003 to $12.9 million during the three months ended March 31,
2004, a growth of 2% reflecting our growth in China. Our other media services
revenue grew from $8.1 million during the three months ended March 31, 2003 to
$9.1 million during the three months ended March 31, 2004, a growth of 12%
reflecting our growth in China, growth in certain of our print publications and
growth in marketing services or print inserts. Our exhibitions revenue grew from
$0.8 million during the three months ended March 31, 2003 to $1.5 million during
the three months ended March 31, 2004, a growth of 88% as a result of an
increase in the number of exhibitors.

We have made substantial progress in developing our customer base in China,
our largest market. Revenue from China grew by 19% during the three months ended
March 31, 2004 compared to the three months ended March 31, 2003. China
accounted for 44% of total revenue for the three months ended March 31, 2004.

Operating expenses

Sales. We utilize independent sales representatives employed by independent
sales representative organizations in various countries and territories to
promote our products and services. Under these arrangements, the sales
representative organizations are entitled to commissions as well as marketing
fees. Commission expense is recorded when the associated revenue is recognized
or when the associated accounts receivable are paid, whichever is earlier, and
is included in sales expenses.

Sales costs consist of the commissions and marketing fees paid and
incentives provided to our independent sales representative organizations, as
well as sales support fees for processing sales contracts. These representative
organizations sell online services, advertisements in our trade magazines and
exhibitor services and earn a commission as a percentage of revenue generated.
Sales costs increased from $7.0 million during the three months ended March 31,
2003 to $7.5 million during the three months ended March 31, 2004, an increase
of 7% due mainly to an increase in revenue in the first quarter of 2004.

Event Production. With the launch of China Sourcing Fairs in the fourth
quarter of 2003, we are presenting the costs associated with production of the
exhibition or trade show and seminar events as a separate category in our Income
Statement. Accordingly, certain of our costs for the first three months of 2003
have been reclassified from sales costs to event production costs, to conform to
our current presentation.

Event production costs consist of the costs incurred for hosting the
exhibition or trade show and seminar events. The event production costs include
venue rental charges, booth construction costs, travel costs incurred for the
event hosting and other event organizing costs. The event production costs are
deferred and recognized as an expense when the related event occurs.

Event production costs remained at $0.2 million during the three months
ended March 31, 2003 and during the three months ended March 31, 2004.

Community. During the third quarter of 2003, we enhanced the scope of our
circulation function and renamed it Community Development. Certain items of
costs for the first quarter of 2003 have been reclassified from general and
administrative costs to community costs to conform to current presentation.

Community costs consist of the costs incurred for servicing our buyer
community and for marketing our products and services to the global buyer
community. Community costs also include costs relating to our trade magazine
publishing business, specifically printing, paper, bulk circulation,
subscription promotions, customer services costs and the marketing promotions
costs incurred for promoting the China Sourcing Fairs events to the buyer
community. The promotions costs incurred for promoting the China Sourcing Fairs
to the buyer community are deferred and recognized as an expense when the
related event occurs. Community costs increased from $2.9 million during the
three months ended March 31, 2003 to $3.1 million during the three months ended
March 31, 2004, an increase of 7%. This increase was due mainly to increases in
paper costs, payroll costs, cost of participation in third-party trade shows to
promote our products and services to the buyer community and subscription
promotion expenses.

General and Administrative. General and administrative costs consist mainly
of corporate staff compensation, information technology support services,
content management services, marketing costs, office rental, depreciation,
communication and travel costs. General and administrative costs increased from
$7.1 million during the three months ended March 31, 2003 to $7.4 million during
the three months ended March 31, 2004, an increase of 4%, due mainly to the
increase in content management services costs and marketing costs.

Online Services Development. Online services development costs consist
mainly of payroll, office rental and depreciation costs relating to the
enhancements of Global Sources Online. Online services development costs to fund
the expansion of our online services declined from $1.3 million during the three
months ended March 31, 2003 to $1.1 million during the three months ended March
31, 2004, a decline of 15% due mainly to a reduction in depreciation costs.

Non-Cash Compensation Expenses. We have issued share awards under several
equity compensation plans (ECP) to both employees and team members. The total
non-cash compensation expense, resulting from the ECP, recorded by us during the
three months ended March 31, 2004 was $0.8 million compared to $0.5 million
recorded during the three months ended March 31, 2003. This increase was a
result of new shares awards in January 2004 and an increase in our share price.
The corresponding amounts for the non-cash compensation expenses are credited to
shareholders' equity.

Other Non-Cash Expenses. Other non-cash expenses consist of amortization of
software development costs.

Other non-cash expenses during the three months ended March 31, 2004, were
$0.4 million, compared to $1.0 million for the three months ended March 31,
2003.

Income From Operations. The total income from operations during the three
months ended March 31, 2004 was $3.1 million as compared to $1.5 million during
the three months ended March 31, 2003. The increase in total income from
operations resulted mainly from the increase in revenue, declines in online
services development costs and amortization of software development costs,
off-set partially by increases in sales costs, community costs, general and
administrative costs and non-cash compensation expenses. Income from operations
for online services grew to $2.2 million during the three months ended March 31,
2004 from $1.4 million during the three months ended March 31, 2003, an increase
of 57%. The growth was mainly attributable to growth in online services revenue,
declines in online services development costs and amortization of software
development costs.

Income Taxes. We and certain of our subsidiaries operate in the Cayman
Islands and other jurisdictions where there are no taxes imposed on companies.
Certain of our subsidiaries operate in Hong Kong SAR and Singapore and are
subject to income taxes in their respective jurisdictions. Also, we are subject
to withholding taxes for revenue earned in certain other countries.

We reported a tax provision of $0.2 million during the three months ended
March 31, 2004 and $0.1 million during the three months ended March 31, 2003.

Net Income. Net income was $2.6 million during the three months ended March
31, 2004, compared to $1.3 million during the three months ended March 31, 2003.
This growth resulted mainly from the increase in revenue, declines in online
services development costs, amortization of software development costs and
foreign exchange losses, off-set partially by increases in sales costs,
community costs, general and administrative costs, non-cash compensation
expenses, increases in tax provision and in the current quarter share of profits
attributable to a minority shareholder due to profitable performance of a
subsidiary.

Fiscal Year 2003 Compared to Fiscal Year 2002

Revenue

During the year ended December 31, 2003, our total revenue grew to $91.7
million from $87.5 million during the year ended December 31, 2002, a growth of
5%. Our online services revenue grew marginally by $0.1 million to $51.4 million
during the year ended December 31, 2003, as compared with $51.3 million during
the year ended December 31, 2002. Revenue from our other media services grew by
$3.2 million or 10% to $36.3 million during the year ended December 31, 2003 as
compared with $33.1 million during the year ended December 31, 2002. Our
exhibitions or trade shows revenue grew from $2.5 million during the year ended
December 31, 2002 to $3.3 million during the year ended December 31, 2003, a
growth of 32%, due to launching our China Sourcing Fairs

event held in the fourth quarter of 2003. This offers international buyers
direct access to suppliers in China and other Asian countries. Future fairs will
be held mainly in the second quarter and fourth quarter of each financial year.

We made substantial progress in developing our customer base in China,
which has offset much of the decline we experienced in other markets such as
Hong Kong SAR and Taiwan. Revenue from China grew by 40% during the three months
ended December 31, 2003 compared to the three months ended December 31, 2002
making China the Company's largest market.

Operating Expenses

Sales

We utilize independent sales representatives employed by independent sales
representative organizations in various territories to promote our products and
services. Under these arrangements, the sales representatives are entitled to
commissions as well as marketing fees. Commissions expense is recorded when the
associated revenue is recognized or when the associated accounts receivable are
paid, whichever is earlier, and is included in sales expenses.

The sales representative organizations handle collections from customers on
our behalf. We include these collections as well as cash advances made to the
sales representatives in receivables from sales representatives. As of June 30,
2002, the board of directors of two of these sales representative companies
included a director we nominated to monitor the receivables collected from our
customers by these related party sales representatives, and to monitor any
changes to the authorized signatories of the depository bank accounts. The
nominated directors were our employees. We and the nominated directors did not
have any interest in the share capital of the sales representative companies.
However as of December 31, 2003 and December 31, 2002, we did not have any
nominated directors on the board of directors of any of our sales representative
organizations.

Sales costs consist of the commissions and marketing fees paid and
incentives provided to our independent sales representatives as well as sales
support fees for processing sales contracts. These representatives sell online
services, advertisements in our trade magazines and exhibitor services and earn
a commission as a percentage of revenue generated. Sales costs increased from
$28.7 million during the year ended December 31, 2002 to $30.1 million during
the year ended December 31, 2003, an increase of 5% due to increase in revenue
of 5%.

Event Production

With the launch of China Sourcing Fairs in fourth quarter of 2003, we are
presenting the costs associated with production of the exhibition or trade show
and seminar events as a separate category in our Income Statement. Accordingly,
certain of our costs for first nine months of 2003 and prior periods have been
reclassified from sales costs to event production costs to conform to current
presentation.

Event production costs consist of the cost incurred for hosting the
exhibition or trade show and seminar events. The event production costs include
venue rental charges, booth construction costs, travel costs incurred for the
event hosting and other event organizing costs. The event production costs are
deferred and recognized as expense at the conclusion of the related events.

Event production costs remained at $0.9 million during the year ended
December 31, 2003 and the year ended December 31, 2002, due to a decline in
event production costs of our technical seminars and exhibitions during year
2003, which was offset by the additional production costs of our first China
Sourcing Fair, held in the fourth quarter of 2003. Event production costs are
expected to increase in 2004 from our sponsoring of six China Sourcing Fairs.

Community

During the third quarter of 2003, we enhanced the scope of our circulation
function and renamed it as Community Development. Certain items of costs for the
first half of 2003 and prior periods have been reclassified from general and
administrative costs to community costs to conform to our current year
presentation.

community. The promotions costs incurred for promoting the China Sourcing Fairs
to the buyer community are deferred and recognized as expense at the conclusion
of the related events.

Community costs declined from $12.5 million during the year ended December
31, 2002 to $12.3 million during the year ended December 31, 2003, a decline of
2% due mainly to a decline in payroll costs, rental costs of premises, utilities
and fees paid to third parties offset partially by an increase in buyer
marketing promotions costs.

General and Administrative

General and administrative costs consist mainly of corporate staff
compensation, information technology support services, content management
services, marketing costs, office rental, depreciation, communication and travel
costs.

General and administrative costs declined marginally from $28.9 million
during the year ended December 31, 2002 to $28.7 million during the year ended
December 31, 2003, due mainly to a decline in information technology support
services costs.

Online Services Development

Online services development costs consist mainly of payroll, office rental
and depreciation costs relating to the enhancements of Global Sources Online.

Online services development costs to fund the expansion of our online
services declined from $5.4 million during the year ended December 31, 2002 to
$5.0 million during the year ended December 31, 2003, a decline of 7%. This
decline resulted mainly from a decline in depreciation costs.

Non-Cash Compensation Expenses

We have issued share awards under several equity compensation plans (ECP)
to both employees and team members. The total non-cash compensation expense,
resulting from the ECP, recorded by us during the year ended December 31, 2003
was $1.4 million compared to $2.6 million recorded during the year ended
December 31, 2002. This decline was a result of earlier share awards that were
fully vested in April 2003. The corresponding amounts for the non-cash
compensation expenses are credited to shareholders' equity.

Other Non-Cash Expenses

Other non-cash expenses consist mainly of amortization of software
development costs.

Other non-cash expenses during the year ended December 31, 2003 were $4.5
million, compared to $3.7 million for the year ended December 31, 2002.

Income from Operations

The total income from operations during the year ended December 31, 2003
was $8.8 million compared to $4.8 million during the year ended December 31,
2002. The improvement was mainly due to growth in revenue, declines in community
costs, general and administrative costs, online services development costs and
non-cash compensation expenses, offset partially by an increase in sales costs
and amortization of software development costs. Income from operations for
online services declined from $6.3 million during the year ended December 31,
2002 to $6.0 million during the year ended December 31, 2003, a decline of 5%.
The decline resulted mainly from an increase in amortization of software
development costs offset partially by a decline in online services development
costs.

Income Taxes

We and certain of our subsidiaries operate in the Cayman Islands and other
jurisdictions where there are no taxes imposed on companies. Certain of our
subsidiaries operate in Hong Kong SAR and Singapore and are subject to income
taxes in their respective jurisdictions. Also, we are subject to withholding
taxes for revenue earned in certain other countries.

We reported a tax provision of $0.7 million during the year ended December
31, 2003 and the year ended December 31, 2002.

Net Income

Net income was $7.3 million during the year ended December 31, 2003,
compared to a net income of $4.3 million during the year ended December 31,
2002. The improvement was mainly due to growth in revenue, declines in community
costs, general and administrative costs, online services development costs,
non-cash compensation expenses and income taxes, offset partially by increases
in sales costs, amortization of software development costs, the share of profits
attributable to a minority shareholder during the year ended December 31, 2003
due to profitable performance of a subsidiary and a decline in interest income.

Fiscal Year 2002 Compared to Fiscal Year 2001

Revenue

During the year ended December 31, 2002, our online services revenue
declined by $4.2 million or 8% to $51.3 million as compared with $55.5 million
during the year ended December 31, 2001. Revenue from our other media services
declined by $3.3 million or 9% to $33.1 million during the year ended December
31, 2002 as compared with $36.4 million during the year ended December 31, 2001.
Our exhibitions or trade shows revenue declined by $0.1 million or 4% from $2.6
million to $2.5 million. Total revenue for the year ended December 31, 2002 was
$87.5 million compared with $95.3 million for the year ended December 31, 2001,
a decline of $7.8 million or 8%.

Revenue has been affected by the poor global economy, and especially the
severe recession in some of our traditional markets, Hong Kong SAR and Taiwan,
which together accounted for 60% of our revenue for fiscal year 2000. However,
we have made substantial progress in developing our customer base in China which
has offset much of the decline in other markets. Revenue from China grew by 10%
during fiscal year 2002, making China the Company's largest market and China
accounted for 38% of total revenue in fourth quarter of fiscal year 2002.

Operating Expenses

Sales

Sales costs consist of the commissions and marketing fees paid and
incentives provided to our independent sales representative organizations and
sales support costs. Sales costs declined from $31.2 million during the year
ended December 31, 2001 to $28.7 million during the year ended December 31,
2002, a decline of 8% due mainly to a decline in revenue of 8%.

Event Production

Event production costs consist of costs incurred for hosting the exhibition
or trade show and seminar events. The event production costs include venue
rental charges, booth construction costs, travel costs incurred for the event
hosting and other event organizing costs.

Event production costs increased from $0.8 million during the year ended
December 31, 2001 to $0.9 million during the year ended December 31, 2002, an
increase of 13% due to increase in event organizing costs.

Community

Community costs consist of the costs incurred for servicing our buyer
community and for marketing our solutions to the global buyer community. The
community costs also include costs relating to our trade magazine publishing
business, specifically printing, paper, bulk circulation, subscription
promotions and customer services costs.

Community costs declined slightly from $12.7 million during the year ended
December 31, 2001 to $12.5 million during the year ended December 31, 2002, a
decline of 2% due to a decline in printing costs and paper consumption.

General and Administrative

General and administrative costs consist mainly of corporate staff
compensation, information and technology support services, content management
services, marketing costs, office rental, depreciation, communication and travel
costs.

General and administrative costs declined from $32.7 million during the
year ended December 31, 2001 to $28.9 million during the year ended December 31,
2002, a decline of 12% due to our cost reduction measures that

resulted in a decline in marketing expenses, information technology support
costs, telecommunications costs and payroll costs, and a decline in content
management services costs in the first half of 2002.

Online Services Development

Online services development costs consist mainly of payroll, office rental
and depreciation costs relating to the enhancements of Global Sources Online.

Online services development costs to fund the expansion of our online
services declined from $8.4 million during the year ended December 31, 2001 to
$5.4 million during the year ended December 31, 2002, a decline of 36%. This
decline resulted from reductions in fees paid to consultants and capitalization
of costs related to the internal development of new software and software tools.

Non-Cash Compensation Expenses

We have issued share awards under several equity compensation plans ("ECP")
to both employees and team members. The total non-cash compensation expense,
resulting from the ECP, recorded by us during the years ended December 31, 2002
and 2001 was $2.6 million and $2.5 million, respectively. The corresponding
amounts for the non-cash compensation expenses are credited to shareholders'
equity.

Other Non-Cash Expenses

Other non-cash expenses consist of amortization of software development
costs and amortization of intangibles.

Other non-cash expenses during the year ended December 31, 2002 were $3.7
million, consisting mainly of amortization of software development costs,
compared to $3.5 million for the year ended December 31, 2001, consisting of
$3.1 million for amortization of software development costs and $0.4 million for
amortization of intangibles.

Income from Operations

Income from operations for online services grew to $6.3 million during the
year ended December 31, 2002 from $6.0 million during the year ended December
31, 2001, an increase of 5%. The improvement resulted mainly from declines in
sales costs, general administrative costs and online development costs compared
to 2001, offset partially by the decline in online services revenue. The total
income from operations during the year ended December 31, 2002 was $4.8 million
compared to $3.4 million during the year 2001. The improvement was mainly due to
declines in sales costs, general administrative costs and online development
costs compared to 2001, offset partially by the decline in total revenue.

Income Taxes

We reported a tax provision of $0.7 million during the year ended December
31, 2002 and $1.1 million during the year ended December 31, 2001.

Net Income

Net income was $4.3 million during the year ended December 31, 2002,
compared to a net income of $0.8 million during the year ended December 31,
2001. The improvement primarily was due to declines in sales costs, general and
administrative costs, online development costs and exchange loss compared to the
year ended December 31, 2001, and the $1.2 million write-down of investments
recorded in year 2001 and offset partially by a decline in revenue.

Liquidity and Capital Resources

We have reclassified the available-for-sale securities from cash and cash
equivalents and disclosed the available-for-sale securities separately on our
balance sheet.

We financed our activities for three months ended March 31, 2004 using cash
generated from our operations.

Net cash generated from operating activities was $2.5 million during the
three months ended March 31, 2004, compared to $3.7 million cash generated from
operating activities during the three months ended March 31, 2003. The primary
source of cash from operating activities was collections from our customers
received through our independent sales representative organizations.

Net cash used for investing activities was $16.7 million during the three
months ended March 31, 2004, which was used principally for capital expenditures
for computers, softwares, office furniture and purchase of available-for-sale
securities. Net cash used for investing activities during the three months ended
March 31, 2003 was $2.7 million, which was used principally for capital
expenditure for computers, software development, a motor vehicle and purchase of
available-for-sale securities, off-set partially by $0.2 million proceeds from
bonds which matured during the quarter.

Net cash generated from financing activities was $0.1 million during the
three months ended March 31, 2004, which represents the amount received from
directors for the shares subscribed by them in the Director Purchase Plan. Net
cash generated from financing activities was $0.03 million during the three
months ended March 31, 2003, which represents amount received from directors for
the shares subscribed by them in the Director Purchase Plan.

We hold a Documentary Credit facility with the Hongkong and Shanghai
Banking Corporation Limited, for providing documentary credits to our suppliers.
This facility has a maximum limit of approximately $0.6 million. As at March 31,
2004, the unutilized amount under this facility was approximately $0.4 million.
Hongkong and Shanghai Banking Corporation Limited has also provided guarantees
on our behalf to our suppliers. As at March 31, 2004, such guarantees amounted
to $0.009 million.

We continuously monitor collections from our customers and maintain an
adequate allowance for doubtful accounts. While credit losses have historically
been within our expectations and the allowances established, if the bad debts
significantly exceed our provisions, additional allowances may be required.

Advance payments received from customers were $28.2 million as of March 31,
2004, compared to $27.5 million as at December 31, 2003, improving our
liquidity.

During the first quarter of 2004, we entered into a number of license
agreements for our exhibition events amounting to $29.9 million in payments over
five years. The agreements are cancelable under Force Majeure conditions, and
with the consent of the other party but may be subject to a payment penalty.

On February 16, 2004, we announced a one for ten bonus share issue on our
outstanding common shares. Shareholders of record on March 1, 2004 received one
additional common share for every ten common shares held, of face value of $0.01
each. The bonus share issue was distributed on April 1, 2004. All common shares
and per-share amounts in the consolidated financial statements have been
retroactively adjusted to reflect the eleven for ten share split for all periods
presented. In addition, we have reclassified $0.026 million from additional paid
in capital to common share capital as of December 31, 2003 and March 31, 2004,
in connection with the bonus share issue.

The following table summarizes our contractual obligations as at March 31, 2004:

Payments due by period (in U.S. Dollars Thousands)
--------------------------------------------------
Less than 1-3 3-5 More than
Total 1 year years years 5 years
-------- ---------- -------- -------- ---------
Contractual Obligations

Operating leases.............................. $ 329 $ 306 $ 23 $ -- $ --
Liabilities for incentive and bonus plans..... 1,025 343 375 307 --
Amount owed to Hung Lay Si Co. Ltd..(1)....... 12,017 315 2,493 2,445 6,764
Purchase obligations.......................... 464 464 -- -- --
-------- ---------- -------- -------- ---------
Total......................................... $ 13,835 $ 1,428 $ 2,891 $ 2,752 $ 6,764
======== ========== ======== ======== =========

(1) Interest on the principal amount owed to Hung Lay Si Co. Ltd. will accrue
beginning January 1, 2005 at the U.S. Federal Funds rate. The rate assumed
for purpose of the contractual obligation on the amount owed to Hung Lay Si
Co. Ltd. is based on the U.S. Federal Funds rate as at March 31, 2004.

We anticipate that cash on hand and cash generated from operations will be
adequate to satisfy our working capital, capital expenditure requirements and
cash commitments based on the current levels of our operations. We have no bank
debt as of March 31, 2004.

Recent Accounting Pronouncements

In June 2001, FASB issued SFAS No. 143, "Accounting for Asset Retirement
Obligations." This statement addresses financial accounting and reporting for
obligations associated with the retirement of tangible long-lived assets and the
associated asset retirement costs. The purpose of this statement is to develop
consistent accounting for asset retirement obligations and related costs in the
financial statements and provides more information about future cash outflows,
leverage and liquidity regarding retirement obligations and the gross investment
in long-lived assets. We adopted SFAS No. 143 effective January 1, 2003 and
believe that the adoption of this standard did not have a material impact on the
Company's financial statements of position, results of operations, or cash
flows.

In December 2002, FASB issued SFAS No. 148, "Accounting for Stock-Based
Compensation - Transition and Disclosure," which requires additional disclosures
in interim and annual financial statements about the method of accounting for
stock-based employee compensation and the effect of the method used on reported
results. The disclosure provisions of SFAS No. 148 are effective for fiscal
years ending after December 15, 2002.

In January 2003, FASB issued FIN No. 46, "Consolidation of Variable
Interest Entities." FIN 46 requires a beneficiary to consolidate a variable
interest entity ("VIE") if it is the primary beneficiary of that entity. The
primary beneficiary is defined as having a variable interest in a VIE that will
absorb a majority of the entity's expected losses if they occur, receives a
majority of the entity's expected residual returns if they occur, or both. In
December 2003, FASB completed deliberations of proposed modifications to FIN 46
("Revised Interpretations") resulting in multiple effective dates based on the
nature as well as the creation date of the VIE. VIEs created after January 31,
2003, but prior to January 1, 2004, may be accounted for either based on the
original interpretation or the Revised Interpretations. However, the Revised
Interpretations must be applied no later than the Company's first quarter of
fiscal 2004. VIEs created after December 31, 2003 must be accounted for under
the Revised Interpretations. Special Purpose Entities ("SPEs") created prior to
February 1, 2003, may be accounted for under the original or revised
interpretation's provisions no later than the first period ending after December
15, 2003. Non-SPEs created prior to February 1, 2003, should be accounted for
under the revised interpretation's provisions no later than the Company's first
quarter of fiscal 2004. We believe that the adoption of FIN 46 did not have a
material impact on the Company's financial statements of position, results of
operations, or cash flows.

In November 2002, the EITF reached consensus on EITF Issue No. 00-21,
"Accounting for Revenue Arrangements with Multiple Deliverables," which
addresses how to account for arrangements that may involve the delivery or
performance of multiple products, services, and/or rights to use assets. The
final consensus of EITF 00-21 is applicable to agreements entered into in fiscal
periods beginning after June 15, 2003. We believe that the adoption of EITF
00-21 does not have a material impact on the Company's financial statements of
position, results of operations or cash flows.

Qualitative and Quantitative Disclosures about Market Risk

We operate internationally and foreign exchange rate fluctuations may have
a material impact on our results of operations. Historically, currency
fluctuations have been minimal on a year to year basis in the currencies of the
countries where we have operations. As a result, foreign exchange gains or
losses in revenue and accounts receivable have been offset by corresponding
foreign exchange losses or gains arising from expenses. However, during the
Asian economic crisis of 1997 to 1998, both advertising sales and the value of
Asian currencies declined, which caused a significant decline in our revenue
that was not fully offset by lower expense levels in Asian operations.

This decline in revenue occurred due to contracts being denominated and
priced in foreign currencies prior to devaluations in Asian currencies. The
conversion of these contract proceeds to U.S. dollars resulted in losses and
reflects the foreign exchange risk assumed by us between contract signing and
the conversion of cash into U.S. dollars. We believe this risk is mitigated
because historically a majority (ranging between 55% to 60%) of our revenue is
denominated in U.S. dollars or is received in the Hong Kong currency which is
currently pegged to the U.S. dollar. Correspondingly, a majority (approximately
85%) of our expenses are denominated in Asian currencies. To the extent
significant currency fluctuations occur in the New Taiwan dollar, the Chinese
Renminbi or other Asian currencies, or if the Hong Kong dollar is no longer
pegged to the U.S. dollar, our revenue and expenses may fluctuate in tandem thus
reducing the net impact on our profits.

During the three months ended March 31, 2004 and the three months ended
March 31, 2003, we have not engaged in foreign currency hedging activities.

In the first quarter of 2004 and the year 2003, we derived more than 90% of
our revenue from customers in the Asia-Pacific region. We expect that a majority
of our future revenue will continue to be generated from customers in this
region. Future political or economic instability in the Asia-Pacific region
could negatively impact our business.

BUSINESS

Summary

We are a leading business-to-business (B2B) media company that provides
information and integrated marketing services, with a particular focus on the
Chinese market. Our mission is to facilitate global trade between buyers and
suppliers by providing the right information, at the right time, in the right
format. Although our range of media has grown, for more than 33 years we have
been in the same basic business of helping buyers worldwide find products and
suppliers in Asia.

Buyers rely on our media to stay current with available purchasing
opportunities. Suppliers use our media to find new buyers and markets for their
products. With our broad range of online, trade magazine and trade show
offerings, we provide comprehensive export marketing media and services.

We have a significant presence across a number of industry sectors
including electronics, fashion accessories, hardware and gifts. We are
particularly strong in facilitating China's two-way trade of electronics,
China's largest import and export sector. Our revenue from China has grown 59%
since 2000.

We serve an independently certified community of more than 400,000 active
members in more than 200 countries and territories. This buyer community has
almost doubled in size from 209,000 at the end of 2000. During 2003, buyers sent
more than 3.8 million requests for information (RFIs) to the 130,000 suppliers
listed on Global Sources Online, up from 2.4 million for the year 2000.

We are diversified in terms of products and services offered, industries
served and our customer base. We have powerful and valuable assets including:
the Global Sources brand; leading products and market positions; a long history
and extensive presence in China; and substantial online leadership and
expertise. We believe that all of these provide a strong platform for success
and that we are well positioned to grow along with China's exports and imports
in the industry segments within which we operate.

Industry Background

Global Trade and the Role of China

Over the past few decades, as communications and logistics technologies
have improved and as more free trade agreements have been signed, international
trade has grown at a pace far exceeding the growth of overall global production.
For example, from 1990 to 2002, world exports increased at an average annual
rate of 6.0% while world GDP grew at an average annual rate of 2.2%. Asia, and
China in particular, have been significant contributors to the growth of global
trade.

According to the World Trade Organization (WTO), China is the world's
fourth largest economy, after the European Union, the United States and Japan.
China is rapidly expanding as both an exporter and an importer of goods and
services. According to the US-China Business Council (UCBC), from 1999 to 2003
China's exports have grown from $195 billion to $438 billion, a compound annual
growth rate (CAGR) of 22%, and its imports have grown from $166 billion to $413
billion, a CAGR of 26%.

China has become a major manufacturer and exporter of a wide range of
products, due to its significant labor cost advantages, large population,
improving quality controls and increasing amounts of foreign investment. Being
admitted to the WTO in 2001 was a very important turning point for China.
Membership led to a dramatic shift in global trade, with more orders flowing to
China and away from traditional supply markets.

As an indicator of China's export strength, exports to the United States
grew by a CAGR of 15% between 1999 and 2003, from $81.8 billion to $152.4
billion. This is in sharp contrast to other traditional trading powers, such as
Taiwan and Hong Kong SAR, which have each experienced an 8% decrease in their
exports to the United States over the same period.

The graph below illustrates the recent growth of China's exports to the
United States across a range of selected product categories.

China Exports to the US in Selected Product Categories (US dollars In Millions)

------------------------------------------------------------------------------------------------------
Industry Segment 2001 2002 2003 CAGR*
---- ---- ---- -----

Household goods............................. $19,296 $24,473 $28,864 22%
Computers and accessories,
peripherals and parts.................... 10,406 14,774 21,988 45%
Sporting goods, footwear, and toys.......... 15,411 18,166 20,007 14%
Television receivers, VCRs & other video
equipment................................ 2,416 4,276 5,749 54%
Telecommunications equipment................ 2,069 2,812 3,747 35%
Electric apparatus and parts................ 2,846 3,115 3,484 11%
Automotive parts and accessories............ 1,350 1,697 2,144 26%

___________________________

Source: Foreign Trade Division, U.S. Census Bureau
* Compound annual growth rate

The largest segment of China's overall global trade, for both imports and
exports, is electrical machinery and equipment. According to the UCBC, this
segment includes consumer electronics, semiconductors, computers and
communications equipment. The UCBC estimates that China:

o Exported $89 billion worth of electrical machinery and equipment in
2003. This is up 36% from 2002 and represents 20% of China's total
exports.

o Imported $104 billion worth of electrical machinery and equipment in
2003. This is up 42% from 2002 and represents 18% of China's total
imports.

With a population that is more than 15 times as large as Hong Kong SAR,
Taiwan and Korea combined, and with comparably more manufacturing facilities,
the potential scale of China as an exporter is very substantial. China's
exporters include state-owned enterprises, joint ventures and a rapidly growing
number of entrepreneurial companies. Many of these companies are relatively
inexperienced with exporting.

With thousands of manufacturers spread across vast regions, and given the
large distances between them and their customers, it is difficult for buyers and
suppliers to identify and communicate with each other. Accordingly, buyers'
search and evaluation costs, and suppliers' advertising and marketing expenses
can be substantial.

The Role of Media in Global Trade

In global trade, media play a key role in helping suppliers and buyers
find, connect and transact with each other. To facilitate this, media companies
provide three major offerings -- online marketplaces, trade publications and
trade shows. Many media companies, however, offer just one or two of these types
of media.

For media companies doing business in Asia, the fragmentation existing in
many markets presents significant challenges. They need to find, qualify and
visit tens of thousands of suppliers and then assist them to promote their
products to the global marketplace. Building a sales force to contact these
suppliers is a significant undertaking and typically requires substantial
financial and manpower commitments and resources. In particular, there is a huge
challenge to effectively and efficiently hire, train and manage a network of
sales representatives across such an immense area, where multiple jurisdictions
have varying legal requirements, languages, currencies and customs.

Buyers rely on media to stay current with all available purchasing
opportunities. They use the media to identify and pursue new suppliers with
which they can compare both pricing and product quality with their existing
suppliers. They also seek to purchase new product lines appropriate to their
distribution channels. Buyers choose media based on the quality and quantity of
information relevant to their interests, and on the range and flexibility of the
formats and delivery methods.

Most suppliers frequently introduce new products and actively seek new
buyers and markets through the use of media. Their objective is to make sure
their products are seen by as many potential buyers as possible, and sold to
buyers that will provide them the best price and the right order size. Suppliers
select media based on the number and quality of buyers reached, and on the
reputation of the medium and its cost. Also, particularly in China, creative
services for ad design and English language copywriting play a significant role
in media selection. Suppli-

ers measure the return on their promotional investments by the quantity and
quality of sales leads, or RFIs, that they receive, and where possible, by the
actual orders generated.

Operators of online marketplaces generate most of their business from
selling marketing services to suppliers, such as hosting and publishing a
suppliers' website or catalog, and from advertising. Online marketplaces have
the advantages of content depth and timeliness and provide a venue where
suppliers can make detailed product and company information accessible to
buyers. In the past several years, the use of the Internet for sourcing and
purchasing activities has increased significantly. In the United States for
example, Forrester Research and the Institute for Supply Chain Management stated
that 69% of companies surveyed indicated that they were using the Internet as
part of the request for proposal (RFP) process.

Trade magazine publishers garner the vast majority of their revenue from
the sale of advertising. Magazines offer buyers the convenience of portability
while offering suppliers a proven medium that delivers a targeted audience.
Magazine advertising formats are effective since they enable suppliers to do
high-impact, display advertising that can strongly position their company and
their products. Advertising in trade magazines contributes greatly to making
buyers aware that a company is a potential supplier, and if the buyer is in an
active sourcing mode, these advertisements often stimulate the buyer to make an
inquiry or to visit the supplier's website.

Trade show organizers generate most of their business from selling booth
space to suppliers. Trade shows play a unique role in the sales process since
they allow sellers to make face-to-face presentations to buyers and to negotiate
and take orders at the booth. In international trade, this is something that
cannot be accomplished by online or print media.

Many suppliers want to reach their customers and prospects in multiple
ways: online, in print and in person at trade shows. Suppliers need this full
range of media to make sure they reach their entire target market, because of
the benefits of different exposures to buyers, and because each of the media
plays a different role in the sales cycle.

Our Offerings

Our primary business relates to connecting buyers worldwide with suppliers
in Asia and other emerging markets. However, we also enable trade in the other
direction with a range of media that facilitate selling to Asia and China.

We provide a broad set of business-to-business (B2B) media products and
services to stimulate and streamline the marketing and sourcing processes of
global trade. In particular, we believe that we are the largest company offering
such an integrated solution to suppliers and buyers engaged in international
trade with China.

Buyers request information and purchase goods from suppliers who market
themselves through our online services, trade magazines, CD-ROMs and trade
shows. We provide information to help buyers evaluate numerous sourcing options
so they can place orders with suppliers that offer them the best terms. We help
suppliers market their products and their capabilities to our community of
buyers worldwide. By receiving inquiries from a wide selection of buyers,
suppliers have more opportunities to achieve the best possible terms, and to
learn about the demand and specific requirements in different markets.

With the combination of our print, online and trade show offerings,
supported by our creative and production services, we offer suppliers a virtual
one-stop shop for most of their export marketing communications needs.

Media for Buyers Worldwide

Online Services

Through Global Sources Online, our online marketplace, buyers are able to
identify and make inquiries to suppliers. Our primary source of revenue is from
suppliers who pay for marketing websites. Each marketing website is comprised of
a home page, a company profile and a virtual showroom containing product profile
pages on the supplier's products. Each product profile page contains detailed
product information, specifications and full color images. Many suppliers choose
to supplement their marketing websites with additional online marketing
services. For example, suppliers can sponsor a particular product or other
search category and when a buyer searches that category, the supplier's banner
advertisement is displayed promoting its products or services, with a link to
that supplier's marketing website.

Buyers may search Global Sources Online by product, keyword, supplier or
country. Buyers can reach a large potential supply base by searching among,
and/or making inquiries to the 130,000 suppliers who are catego-

rized according to the products they can supply. In listing suppliers for a
specific product, we give prominence to those who maintain marketing websites
with us.

A key feature of Global Sources Online for buyers is the standard format
for suppliers' information, making it unnecessary for buyers to leave our
website to visit numerous individual supplier websites, each with a different
data structure and design. Another important feature is our "Product Alert."
Buyers register their profiles and are then notified by e-mail whenever there is
new advertising or editorial content in the product categories they specified.

Trade Publications

We publish seven monthly publications, plus other quarterly and seasonal
publications, that are circulated to buyers worldwide. Our trade publications
contain paid advertisements from suppliers, as well as our independent editorial
features, which include market reports and product surveys. In addition to our
paid subscription base, we distribute samples of our trade magazines and CD-ROMs
free of charge to prospective buyers worldwide at a variety of trade shows and
events. Our CD-ROMs provide buyers with an offline, electronic means of
accessing content found within the industry sectors on Global Sources Online. We
do not charge suppliers separately for including their information on CD-ROMs.

Trade Shows

We have six China Sourcing Fairs scheduled for 2004 in Shanghai. The shows
bring buyers from around the world to meet face-to-face with Chinese suppliers.
The first China Sourcing Fair was held in Shanghai in October 2003. It featured
nearly 600 booths and was attended by 15,000 buyers from more than 100 countries
and territories.

Our online Trade Show Center provides extensive event, exhibitor and
product information and enables buyers to search for products, send inquiries or
make appointments with suppliers at the listed events. We also publish show
guides with CD-ROMs for China Sourcing Fairs.

Advertising Creative Services

We offer our customers advertising and marketing creative services, which
assist them in communicating their unique selling propositions and in executing
integrated marketing campaigns across our online services, trade magazines and
trade shows. Account managers and copywriters in our customer service centers
assist suppliers with various creative services -- including digital photography
of products, translation, copywriting, ad layout and quality control. Basic
media and creative services are included in our media charges.

Private Catalogs

My Catalog is an online service for buyers to make their sourcing and
purchasing activities more efficient. My Catalog has all the functionality of
Global Sources Online plus additional content, functionality and support. My
Catalog enables buyers to maintain personalized product and supplier information
for current and/or potential suppliers. As of March 2004, a variety of companies
were using this service including large buying organizations such as AEON, Best
Buy and Kingfisher.

Our Private Supplier Catalogs enable suppliers to enter, manage, update and
distribute their product and company data for a variety of online marketing and
cataloging applications. We provide tools within the catalog to assist suppliers
with creating, updating and posting content.

Our online catalog offerings are maintained in a private,
password-protected environment where the catalog user has the sole right of
access and data entry. We currently derive little revenue from these services.

Media for Asian Engineers and Executives

In addition to our primary media, which connect export suppliers in Asia
with buyers worldwide, we are a leading provider of information to electronics
engineers and executives within Asia. For this segment of our business, we have
six websites, seven magazines and host several conferences and events each year.

Strategy

Our objective is to be the preferred provider of essential information and
integrated marketing solutions in the markets we serve, with a particular
emphasis on the large and rapidly growing China market. Our primary strategy to
achieve this objective is to serve our industry sectors with each of online,
trade publication and trade show media. This full range of media enables
suppliers to reach their target market in multiple ways. This strategy can also
enable us to achieve a competitive advantage versus other media companies who do
not provide this full range of media.

Our focus for growth is to invest in the organic development of our core
businesses and competencies, where we believe significant opportunities exist,
and to seek acquisitions and alliances. More specifically, there are five
principal components of our growth strategy:

o Continue to Expand in China. We are significantly expanding our sales
representation, marketing and infrastructure in China to enable us to
grow our revenue along with the anticipated growth of China trade in
the industry sectors we serve. Our revenue from China has grown
approximately 59% since 2000 and we expect revenue from China to
continue to grow.

o Expand Trade Show Business. Our primary initiative is to launch more
trade shows. Building on the success of our first China Sourcing Fair,
which was held in October 2003, we currently have six China Sourcing
Fairs scheduled in 2004. We are looking to expand the number of
exhibitors, industry sectors served, frequency, and locations where
our trade shows are held.

o Add New Customers for Existing Services. To date, we have sold our
solutions to a relatively small number of the 130,000 suppliers
currently listed on Global Sources Online. We believe we can
significantly increase the number of suppliers who will purchase our
online marketplace, trade publication and trade show services for
three primary reasons: the overall strength and differentiation of our
services; the largest community of independently certified buyers we
are involved in global B2B trade; and the increasing number of buyers
making inquiries through Global Sources Online. We also intend to
further penetrate the high-tech sector in Asia, which we serve in
several languages, and where we see significant potential to continue
to increase our revenue.

o Cross-Sell Services to Existing Customers. We believe that we can
increase our revenues by cross-selling our existing products and
services to suppliers who are already customers. We see significant
potential to convince more of our online marketplace and trade
publication customers to also exhibit in our trade shows; and to
convince more of our trade show exhibitors to also become customers of
our online marketplaces and trade publications.

o Seek Acquisitions, Joint Ventures and Alliances. We intend to
selectively pursue acquisitions, joint ventures and alliances to help
us accelerate achievement of our strategic goals and maintain and
achieve market-leading positions. Specific objectives currently
include: gaining greater penetration into existing or adjacent
additional industry sectors, expanding into new industry sectors, and
gaining access to a larger number of potential users.

At the core of our strategy is one basic goal: to steadily increase the
usage of our media. As we do this, we expect to increase the size and loyalty of
the communities we serve. Our belief is that as our community of active buyers
increases, our products and services become increasingly attractive to
suppliers. As the number of buyers and sellers using our products and services
grows, our offerings become incrementally more attractive to additional buyers
and sellers, which we believe will drive revenue growth through further adoption
of our online, publication and trade show products and services.

Products & Services

Media for Buyers Worldwide

Online Services

Global Sources Onlines, our primary online service, is comprised of the
following industry sector marketplaces:

Computer Products Hardwares
Electronic Components Security Products

Electronics Telecom Products
Fashion Accessories & Supplies Timepieces
Gifts & Home Products

Trade Publications

We publish the following industry-specific trade magazines monthly:

Asian Sources Computer Products Asian Sources Gifts & Home Products
Asian Sources Electronic Components Asian Sources Hardwares
Asian Sources Electronics Asian Sources Telecom Products
Asian Sources Fashion Accessories & Supplies

We also publish the following specialized magazines and CD-ROMs seasonally
and/or for special trade events:

Global Sources Electronic Components Global Sources Security Products
Global Sources Lighting Products Global Sources Timepieces

Trade Shows

Trade Show Description
---------- -----------

China Sourcing Fair: DIY & Home Improvement o Primary product
categories include: DIY &
home center; furniture &
furnishings; garden &
outdoor products; and
lighting & electrical.
o Spring and fall 2004
events in Shanghai.

China Sourcing Fair: Gifts & Home Products o Primary product
categories include:
gifts, premiums & toys;
sporting goods; Christmas
& holiday products;
stationery; health &
beauty products; and
kitchen & household
appliances.
o Spring and fall 2004
events in Shanghai.

China Sourcing Fair: Electronics &
Components o Primary product
categories include:
personal & mobile
electronics; computers &
networking products;
electronic components;
security & safety
products; telecom
products & accessories;
and home & office
electronics.
o Spring and fall 2004
events in Shanghai.

Media for Asian Engineers and Executives

Magazines

Magazine Description
-------- -----------

Electronic Engineering Times - Asia o Editions published
bi-weekly in simplified
and traditional Chinese,
Korean and English;
covers the latest
technology and design
techniques for
electronics engineers.

Electronic Buyers' News - China o Published monthly in
simplified Chinese;
delivers technology and
business intelligence
required by procurement,
production and corporate
management who oversee
electronics manufacturing
in China, select technol-

ogy solutions and approve
vendor selection.

Chief Executive China o Published monthly in
simplified Chinese;
serves mainland China
senior management with
case studies and
information on management
techniques and
strategies.

Websites

Website Description
------- -----------

Electronic Engineering Times - Asia Online o Provides industry news,
new product information
and feature stories
covering electronic
technology and its
application; websites in
traditional and
simplified Chinese,
English and Korean.

Electronic Buyers' News - China Online o Provides global and local
industry news, technology
trends and product
updates in simplified
Chinese.

Chief Executive China Online o A resource focusing on
excellent management
practices for China's
business leaders in
simplified Chinese.

Trade Shows and Exhibitions:

Trade Show Description
---------- -----------

The 9th Annual International IC - China
Conference & Exhibition o Mainland China's premiere
showcase of integrated
circuits (IC) application
technologies and high-end
components.
o March 2004 events in
mainland China.

The 4th Annual Embedded Systems Conferences -
Asia & China o Embedded systems design,
skills training and
technologies in mainland
China and Taiwan.
o March 2004 events in
mainland China and July
2004 in Taiwan.

The 3rd EDA & Test - China Conference &
Exhibition & 12th EDA & Test - Taiwan
Conference & Exhibition o Asia-Pacific's largest,
longest-running showcase
of electronic design
automation and test
technologies.
o March 2004 in mainland
China and July 2004 in
Taiwan

Franchising China 2004 Conference &
Exhibition o China's foremost showcase
of international
franchising concepts.
o November 2004 events in
mainland China.

Customers

We provide services to a broad range of international buyers and suppliers
in various industry sectors.

Suppliers

During 2003, more than 6,600 suppliers paid us for marketing or advertising
services. More than 5,900 of these suppliers were located in greater China,
including approximately 3,100 located in mainland China, 1,900 in Taiwan and 950
in Hong Kong SAR. Customers during 2003 included: Analog Devices, Hitachi,
Honeywell, Matsushita, Motorola Semiconductor, NEC, Philips, Seiko, TDK, Texas
Instruments and Toshiba. However, most cus-

tomers do not have brands or company names that are well-known by those not
involved in our industry sectors. None of our supplier customers represented
more than 2% of our revenue during 2003.

Buyers

For our primary group of media, which connect export suppliers in Asia with
buyers worldwide, we serve an independently certified community of more than
400,000 active members in more than 200 countries and territories. This figure
is based on procedures to ensure that only buyers who have received a magazine
or a CD-ROM, or who have made an inquiry through the Global Sources website
(www.globalsources.com) within the 12 month period ended December 31, 2003 are
extracted from the databases. This community is up from approximately 209,000 at
the end of 2000, representing a compound annual growth rate of 24%.

We have developed our services primarily for retailers, distributors and
manufacturers who import in volume for resale. We serve a specialized group of
senior executives with large import buying power. We believe a significant
portion of these executives are owners, partners, presidents, vice presidents,
general managers or directors of their respective companies.

We derive a relatively small proportion of our total revenue from these
buyers for subscriptions to our magazines, reports, and to My Catalog.

Sales and Marketing

Our sales organization consists of approximately 870 independent
representatives in approximately 60 cities worldwide, with 45 of these locations
in Greater China. We have a staff of nine full-time employees that oversee and
monitor the independent sales representative organizations that employ these
representatives.

These organizations operate pursuant to service agreements with us that
generally are terminable by either party on short notice. These representatives
focus on developing and maintaining relationships with suppliers that are
current customers and they seek to increase the number of new suppliers using
our services. Substantially all of our contracts with suppliers are entered into
directly between the supplier and us. Online services and print advertising
revenue is seasonal and tends to be highest in the fourth quarter of each
calendar year. Revenue for trade shows is highly seasonal as it is recognized in
the month in which each show is held. Our sales representatives collectively
make an average of 40,000 supplier visits per month. The largest representative
sales offices are located in Beijing, Guangzhou, Shanghai, Shenzhen, Hong Kong
SAR and Taipei. Our four largest sales representatives in China accounted for
approximately 43% of our total revenue in 2003.

Our marketing strategy leverages our database of approximately 130,000
suppliers currently listed on Global Sources Online. Sophisticated analyses of
buyer and supplier profile data enable us to target our sales and marketing
programs to new geographic areas, and to specific product categories within
industry sectors.

Our sales representative organization is generally structured to offer an
integrated marketing solution of our media to customers. With this approach, the
focus is on the customers' needs as opposed to separate sales representatives
selling individual media. Our community development group is responsible for
marketing our services to the global buyer community through online
advertisements and promotions, trade shows and direct mail campaigns.

Content Development

Our content development group, comprised of 289 team members, is
responsible for compiling, editing, integrating and processing the content that
appears in our online services, print media and CD-ROMs. Within content
development, the advertisement operations and editorial groups compile materials
from suppliers and freelance writers, respectively, and transform these
materials into the advertising and editorial content. Research teams analyze
customer content usage to direct content development and they work with sales
representatives and marketing staff to develop appropriate content for new
industry sectors. Our site team is responsible for evaluating and integrating
content into our online services, as well as maintaining the overall integrity
of such services. In addition, members of the content development group manage
the pre-press production work and print production processes associated with the
creation of our trade magazines. They also maintain the back-end supplier
database, which is the foundation for our online supplier and product
information.

Strategic Relationships

We own 60.1% of a joint venture with CMP Media Inc., through UBM Asia B.V.,
a subsidiary of United News & Media plc. We entered into the joint venture in
September 2000, to provide new technology content, media

and online services for the Asian electronics market, focusing on new
opportunities in the greater China market. During 2001, we increased the
frequency of the joint ventures' publications.

In November 2001, we formed a strategic alliance with the WorldWide Retail
Exchange (WWRE), to offer a supplier sourcing program for WWRE members and Asian
suppliers.

We have formed license-based partnerships with third parties to operate
regional online marketing services such as South African Sources, and Turkish
Sources. These enable suppliers within the relevant geographic regions to
promote their products and services to buyers located primarily outside of such
regions.

Technology and Systems

We use a combination of commercial software and internally developed
systems to operate our websites and services. We have invested more than $35.3
million from 1995 to December 31, 2003 in online services development. As of
December 31, 2003, we had 138 team members engaged in technology development,
maintenance, software customization and data center operations.

Our online marketplace services are run on the Oracle DBMS release 8. The
catalog application that supports Global Sources Online's core functions uses a
Java Application Platform.

Our servers are hosted by Singapore Telecommunications ("SingTel"). We have
a dedicated 10Mbps link to SingTel's IX backbone, while SingTel maintains a 777
Mbps link to the United States and direct links to most countries in Asia. We
use Storage Tech Enterprise tape back-up systems as well as servers located at
our Singapore facility for back-up. For the year ended December 31, 2003 our
external network had approximately 99.99% uptime availability.

Our platform applications use standard industry database protocols. We can,
therefore, integrate our systems with products from other vendors written in
traditional program languages or more innovative systems. Our Internet offerings
are based on industry standard Web technologies. We may deploy our Web offerings
on any modern Internet browser platform, which means that our Web clients do not
need to download the software onto their personal computers.

All of our systems use secure socket layer, known as SSL, to encrypt
sensitive communications between browsers and Web servers. SSL enables secure
communication by encoding information transmitted over the Internet. We use
Extensible Markup Language, referred to in the industry as XML, as an open
communication protocol for information delivery.

Competition

For our online marketplaces, trade magazines and trade show services, the
market is highly fragmented and potential competition and competitors vary by
the range of services provided, geographic focus and the industry sector served.
Some competitors only offer trade shows and other competitors only offer online
services. However, across the range of our services, geographic focus and
industry sectors served, we do not believe that there is a dominant direct
competitor.

We may compete to some extent with a variety of organizations that have
announced their intention to launch, or have already launched, products and
services that compete to a certain degree with ours. These businesses include
business media companies, trade show organizers, consortium exchanges,
government trade promotion bodies, domestic retail marketplaces, international
trade marketplaces, global standards organizations, transaction software and
services providers, electronic sourcing application and/or service providers,
and distributor, sell-side marketplaces. We may be at a competitive disadvantage
to companies that have greater financial resources, that have more advanced
technology, that have greater experience or that offer lower cost solutions than
ours. In addition, some buyers and suppliers may have developed in-house
solutions for the online sourcing and marketing of goods and may be unwilling to
use ours.

Intellectual Property

Our primary product and supplier content, in addition to our in-house
produced editorial content, is held under common law copyright. We actively
protect this intellectual property by several means, including the use of
digital watermark technology on the images on our website, which enables us to
identify unauthorized use on other websites.

We have also developed several proprietary technology applications. In the
future, we may apply for patents for these technology applications, where
appropriate. However, we may not be successful in obtaining the patents for
which we applied. Even if we are issued a patent, it is possible that others may
be able to challenge such a patent or that no competitive advantage will be
gained from such patent.

Our intellectual property is very important to our business. We rely on a
combination of contractual provisions, employee and third-party nondisclosure
agreements, and copyright, trademark, service mark, trade secret and patent laws
to establish and protect the proprietary rights of our software and services.

We have registered trademarks for "Asian Sources" and/or "Global Sources"
in Australia, the European Community, Germany, Hong Kong SAR, Indonesia, Israel,
Malaysia, Mexico, Japan, the Philippines, the People's Republic of China,
Singapore, South Africa, South Korea, Switzerland, Taiwan, Thailand, Turkey and
the USA, and we have trademarks pending registration in various countries,
including Australia, the European Community, Hong Kong SAR, India, Indonesia,
Japan, Malaysia, Mexico, the People's Republic of China, the Philippines, South
Africa, Thailand, Turkey and the USA.

We have in the past, and may in the future, co-develop some of our
intellectual property with independent third parties. In these instances, we
take all action that we believe is necessary or advisable to protect and to gain
ownership of all co-developed intellectual property. However, if such third
parties were to introduce similar or competing online services that achieve
market acceptance, the success of our online services and our business,
financial condition, prospects and operating results may be harmed.

Government Regulation

Our services are subject to government regulation.

Internet Regulation

There are an increasing number of laws and regulations pertaining to the
Internet. In addition, a number of legislative and regulatory proposals are
under consideration by federal, state and local and foreign governments and
agencies. Laws or regulations may be adopted with respect to the Internet
relating to the liability for information retrieved from or transmitted over the
Internet, online content regulation, user privacy, taxation and the quality of
products and services. Moreover, it may take years to determine whether and how
existing laws, such as those governing issues relating to intellectual property
ownership and infringement, privacy, libel, copyright, trademark, trade secret,
design rights, taxation, and the regulation of, or any unanticipated application
or interpretation of existing laws, may decrease the use of the Internet, which
could in turn decrease the demand for our services, increase our cost of doing
business or otherwise have a material adverse effect on our business, financial
condition, prospects and operating results.

Regulation of Communications Facilities

To some extent, the rapid growth of the Internet in the United States has
been due to the relative lack of government intervention in the marketplace for
Internet access. For example, several telecommunications carriers are seeking to
have telecommunications over the Internet regulated in the same manner as are
certain other telecommunications services. Additionally, local telephone
carriers have petitioned the Federal Communications Commission to regulate
Internet service providers in a manner similar to long distance telephone
carriers and to impose access fees on such providers. Some Internet service
providers are seeking to have broadband Internet access over cable systems
regulated in much the same manner as telephone services, which could slow the
deployment of broadband Internet access services. Because of these proceedings
or others, new laws or regulations could be enacted, which could burden the
companies that provide the infrastructure on which the Internet is based,
thereby slowing the rapid expansion of the medium and its availability to new
users.

Employees

As of December 31, 2003, we had 464 employees worldwide, the majority of
whom work in management, technical or administrative positions. We consider our
employee relationships to be satisfactory. Our employees are not represented by
labor unions and we are not aware of any attempts to organize our employees. Our
team members include full-time employees, independent sales representatives,
consultants and others paid on a contract basis.

The following summarizes the approximate number of employees and
independent contractors by function:

Independent
Function Employees Contractors Total
-------- --------- ----------- -----

Content Development......................................... 103 186 289
Corporate Human Resources & Administration.................. 34 38 72
Corporate Marketing......................................... 8 37 45
Community Development....................................... 91 25 116
Sales....................................................... 9 870 879
Publishing.................................................. 17 49 66
Electronic Commerce Services................................ 6 16 22
Information System Department............................... 109 29 138
Corporate Accounts.......................................... 62 57 119
Office of the CEO, COO, CTO................................. 9 0 9
Legal and Group Secretarial................................. 4 6 10
Conference & Trade Show Services............................ 12 4 16
----------- ----------- --------
Total................................................... 464 1,317 1,781
=========== =========== ========

Properties

We do not own any of our offices. Generally, we lease our office space
under cancelable and non-cancelable arrangements with terms of two to five
years. We also service our customers through independent sales representative
offices located in Australia, Hong Kong SAR, India, Israel, Japan, Malaysia, the
Netherlands, the Philippines, Singapore, Taiwan, Thailand, the United Kingdom,
the United States and over 40 locations in mainland China. We lease in the
aggregate approximately 117,915 square feet of executive and administrative
offices in China, Hong Kong SAR, the Philippines, Singapore and Taiwan. Our
aggregate base rental and building management fee payments for the year ended
December 31, 2003 were approximately $1.5 million.

Legal Proceedings

We are a party to litigation from time to time in the ordinary course of
our business. We do not expect the outcome of any pending litigation to have a
material adverse effect on our business.

SENIOR MANAGEMENT AND DIRECTORS

Senior Management and Directors

The following table sets forth information regarding the persons who are
our senior management and directors.

Name Age Position
---- --- --------

Merle A. Hinrichs................... 62 Director, Chairman and Chief Executive Officer
Eddie Heng Teng Hua................. 53 Director and Chief Financial Officer
J. Craig Pepples.................... 43 Chief Operating Officer
Bill Georgiou....................... 59 Chief Information Officer
James W. W. Strachan................ 52 Executive Vice President, Corporate Development
Sarah Benecke....................... 47 Director
Roderick Chalmers................... 56 Director
Dr. H. Lynn Hazlett................. 67 Director
David F. Jones...................... 39 Director
Jeffrey J. Steiner.................. 67 Director

Mr. Hinrichs has been a director since April 2000 and is currently our
Chairman and Chief Executive Officer. Mr. Hinrichs is our co-founder and was the
principal executive officer of our predecessor company, Trade Media Holdings
Limited, a Cayman Islands corporation which is now wholly owned by us ("Trade
Media"), from 1971 through 1993 and resumed that position in September 1999.
From 1994 to August 1999, Mr. Hinrichs was chairman of the ASM Group, which
included Trade Media. Mr. Hinrichs is a director of Trade Media and has also
been the Chairman of the Board of Trade Media. Mr. Hinrichs graduated from the
University of Nebraska and Thunderbird, the American Graduate School of
International Management ("Thunderbird"). Mr. Hinrichs is a co-founder and
former chairman of the Society of Hong Kong Publishers. He is a member of the
board of trustees of Thunderbird and is a board member of the Economic Strategy
Institute. His term as director expires in 2006.

Mr. Heng has been the Chief Financial Officer (previously entitled vice
president of finance) since 1994 and has been a director since April 2000. He
joined us in August 1993 as deputy to the vice president of finance. He received
an MBA from Shiller International University in London in 1993, is a Singapore
Certified Public Accountant, a member of the Institute of Certified Public
Accountants, Singapore, and a Fellow Member of The Association of Chartered
Certified Accountants in the United Kingdom. Prior to joining us, he was the
regional financial controller of Hitachi Data Systems, a joint venture between
Hitachi and General Motors. His term as director expires in 2004.

Mr. Pepples has been our Chief Operating Officer since June 1999 and is
responsible for our worldwide operations, including interactive media, corporate
marketing, community development, information services, human resources and
finance. Mr. Pepples joined Trade Media in October 1986 in an editorial
capacity, managed Trade Media's sales in China from 1989 to 1992, and served as
country manager for China from 1992 to June 1999. Mr. Pepples graduated with a
B.A. in Linguistics from Yale University.

Mr. Georgiou was appointed our Chief Information Officer (previously Chief
Technology Officer) in January 2001. Mr. Georgiou has had over 20 years'
experience in information technology, most recently as a consultant with 3Com
Technologies during 2000 and as IT Director with Park N'Shop (HK) Ltd., a
subsidiary company of A.S. Watson, from 1999 to 2000. He received his B.Ec.
(Honours degree) and M.B.A. from the University of Adelaide.

Mr. Strachan has been our Executive Vice President, Corporate Development
since May 2000, and is responsible for business development, partner and
investor relations, and strategic planning in North America. Mr. Strachan joined
us in 1979 and became vice president, sales and marketing in 1984. Mr. Strachan
served as a group publisher beginning in 1988 before being appointed executive
vice-president of sales and marketing in 1994. Mr. Strachan received his M.B.A.
from the University of Hawaii.

Ms. Benecke has been a director since April 2000, and, since 1993, has been
a director of Trade Media Holdings Ltd. Ms. Benecke was our principal executive
officer from January 1994 through August 1999. She joined us in May 1980 and
served in numerous positions, including publisher from 1988 to December 1992 and
chief operating officer in 1993. Since September 1999, Ms. Benecke has been a
consultant to Publishers Represen-

tatives, Ltd. (Hong Kong), a subsidiary of our company. She is also a director
of Hintak Ltd. (Hong Kong). She graduated with a B.A. from the University of New
South Wales, Australia. Her term as director expires in 2004.

Mr. Chalmers has been a director since October 2000. He was chairman,
Asia-Pacific, of PricewaterhouseCoopers LLP ("PwC") and a member of PwC's Global
Management Board from 1998 until his retirement in July 2000. He was a 30-year
veteran with PwC's merger partner Coopers & Lybrand with specialist experience
in the securities industry. He has at various times been a non-executive
director of the Hong Kong SAR Securities and Futures Commission, a member of the
Takeovers and Mergers Panel, and chairman of the Working Group on Financial
Disclosure. He is a director of Gasan Group Limited (Malta) and Gasan Mamo
Insurance Co. Limited (Malta). His term as director expires in 2006.

Dr. H. Lynn Hazlett has been a director since October 2000. He was a former
chief executive officer and president of QRS Corporation, a leading US-based
provider of supply chain management solutions to the retail industry, until his
retirement in 2000. He previously managed Supply Chain Associates, an
international consulting firm until 1997. Prior to that he was corporate vice
president at VF Corporation, the US apparel company, from 1989 to 1994.
Currently he is the owner and managing partner of RxD Citrus Ltd., a grower of
citrus fruit. He is also managing partner of AMI Bayshore Developer LLC and GFB
LLC, both coastal land development companies. Dr. Hazlett has a doctorate in
Economics and Automated Systems from George Washington University. His term as
director expires in 2005.

Mr. Jones has been a director since April 2000. Mr. Jones was an executive
at MacQuarie Direct Investment, a venture capital firm in Sydney, Australia from
1994 to August 1999. He founded and ran UBS Capital in Australia from July 1999
to September 2002. Since September 2002, Mr. Jones has been a director of Castle
Harlan Australian Mezzanine Partners Pty Ltd., an Australian buyout firm. He is
currently a director of the following companies: Otowa Pty Ltd.; Sheridan
Australia Pty Ltd.; Austar United Ltd.; New Price Retail; and Penrice Soda
Products Pty Ltd. Mr. Jones has an MBA from Harvard Business School and is a
mechanical engineering graduate from the University of Melbourne. His term as
director expires in 2005.

Mr. Steiner has been a director since November 1999. Mr. Steiner also has
been a director of The Fairchild Corporation ("Fairchild") since 1985. He has
been the chairman of the board and chief executive officer of Fairchild from
December 1985 to the present. Mr. Steiner was president of Fairchild from July
1991 to September 1998. His term as director expires in 2006.

In 2003, Mr. Jeffrey Steiner was convicted in France on a charge of
unjustified use (in 1990) of the corporate funds of Elf Acquitaine, which is a
criminal offense in France. Mr. Steiner was given a suspended sentence of one
year and ordered to pay a fine of (euro)500,000 by the French court.

Compensation

For the year ended December 31, 2003, we and our subsidiaries provided our
nine directors and executive officers as a group aggregate remuneration, pension
contributions, allowances and other benefits of approximately $2,370,591
including the non-cash compensation of $301,013 associated with the share award
and ECP plans. Of that amount, $195,000 was paid under a performance based,
long-term discretionary bonus plan which we implemented in 1989 for members of
our senior management. Under the plan, members of senior management may, at our
discretion, receive a long-term discretionary bonus payment. The awards, which
are payable in either five or ten years' time, are paid to a member of senior
management if his or her performance is satisfactory to us. There are five
current members of senior management and four former members of senior
management who may receive payments on maturity.

In 2003, we and our subsidiaries incurred $30,079 in costs to provide
pension, retirement or similar benefits to our respective officers and directors
pursuant to our retirement plan and pension plan.

Employment Agreements

We have employment agreements with Merle A. Hinrichs under which he serves
as our chairman and chief executive officer and as president of Global Sources
USA, Inc., one of our subsidiaries. The agreements contain covenants restricting
Mr. Hinrichs' ability to compete with us during his term of employment and
preventing him from disclosing any confidential information during the term of
his employment agreement and for a period of three years after the termination
of his employment agreement. In addition, we retain the rights to all trademarks
and copyrights acquired and any inventions or discoveries made or discovered by
Mr. Hinrichs in the course of his employment. Upon a change of control, if Mr.
Hinrichs is placed in a position of lesser stature than that of a senior

executive officer, a significant change in the nature or scope of his duties is
effected, Mr. Hinrichs ceases to be a member of the board or there is a breach
of those sections of his employment agreements relating to compensation,
reimbursement, title and duties or termination, each of us and such subsidiary
shall pay Mr. Hinrichs a lump sum cash payment equal to five times the sum of
his base salary prior to the change of control and the bonus paid to him in the
year preceding the change of control. The agreements may be terminated by either
party by giving six months notice.

We have employment agreements with each of our executive officers. Each
employment agreement contains a non-competition provision, preventing the
employee from undertaking or becoming involved in any business activity or
venture during the term of employment without notice to us and our approval. The
employee must keep all of our proprietary and private information confidential
during the term of employment and for a period of three years after the
termination of the agreement. We can assign the employee to work for another
company if the employee's duties remain similar. In addition, we retain the
rights to all trademarks and copyrights acquired and any inventions or
discoveries made or discovered by the employee during the employee's term of
employment. Each employment agreement contains a six months' notice provision
for termination, and does not have a set term of employment. Bonus provisions
are determined on an individual basis.

Board Practices

Our board of directors consists of seven members divided into three
classes, the terms of which expire at the general meeting of shareholders to be
held in each year indicated above. Each director holds office until his or her
term expires and his or her successor has been elected and qualified. At each
general meeting of shareholders, directors nominated to a class with a term that
expires in that year will be elected for a three-year term. Executive officers
serve at the discretion of the board of directors. Officers are elected at the
annual meeting of the directors held immediately after the annual general
meeting of shareholders. Our executive officers have, on average, 16 years of
service with us. Directors receive a cash fee of $10,000 per year, plus an
additional $2,500 for each board meeting attended.

Committees of the Board of Directors

We have established an audit committee and an executive committee of our
board of directors. The audit committee recommends the appointment of auditors,
oversees accounting and audit functions and other key financial matters of our
company. David Jones, Roderick Chalmers and Lynn Hazlett are the members of the
audit committee and the board of directors determined that Mr. Chalmers is an
audit committee financial expert as defined under appropriate SEC guidelines.
The executive committee acts for the entire board of directors between board
meetings. Merle Hinrichs and Eddie Heng are the members of the executive
committee.

Code of Ethics

We have adopted a Code of Ethics ("Code of Ethics") that applies to our
chief executive officer, chief financial officer, chief accounting officer or
controller and persons performing similar functions. Any amendments or waivers
to our Code of Ethics that apply to the chief executive officer or senior
financial officers will be promptly disclosed on our website as required by law
or by the Securities and Exchange Commission or by the Nasdaq National Market.

Share Ownership

Information on the ownership of our Common Shares is given under "Security
Ownership of Certain Beneficial Owners and Management."

Equity Compensation Plans

We established The Global Sources Employee Equity Compensation Trust (the
"Trust") on December 30, 1999. The Trust is administered by Harrington Trust
Limited, as trustee. The purpose of the Trust is to administer monies and other
assets contributed to the trustee for the establishment of equity compensation
and other benefit plans, including the equity compensation plans described
below. The number of shares that may be sold pursuant to these plans is limited
to the number of our shares held by the Trust. Following our takeover of Trade
Media on April 14, 2000, the Trade Media shares were exchanged for our common
shares. These Trade Media shares currently represent our common shares. As of
December 31, 2003, after adjustment to reflect the share split discussed in Note
26 to our consolidated financial statements included elsewhere in this
prospectus, the Trust holds 2,165,844 of our common shares. The Trust has
informed us that it does not intend to acquire any additional shares. In
exer-

cising its powers, including the voting of securities held in the Trust, the
trustee may be directed by a plan committee, selected by the board of directors
of one of our wholly owned subsidiaries.

Global Sources Equity Compensation Plans Numbers I, II and III

In March 2000, we adopted the Global Sources Equity Compensation Plans
(ECP) Numbers I, II and III. Employees, directors, consultants, advisors and
independent contractors of ours, our subsidiaries or affiliates are eligible to
receive option grants under ECP I. Employees, directors and consultants of ours,
our subsidiaries or affiliates are eligible to receive grants under ECP II and
III. Options granted under ECP I and II will be exercisable, and coupons granted
under ECP III will be redeemable, for our shares held by the Trust.

ECPs I, II and III are administered by the trustee subject to the
directions of the plan committee of one of our wholly-owned subsidiaries. The
plan committee determines who will receive, and the terms of, the options under
ECP I and II. The exercise price of these options may be below the fair market
value of our shares. Under ECP I, payment for shares being purchased upon
exercise of an option may be made in the manner determined by us at the time of
grant. Under ECP II optionees may pay for common share purchased upon exercise
of options by check to the Trust. Under ECP II, the number of common shares that
optionees may purchase is based on the number of years they have been employed
by, or have been working with us, our subsidiaries or affiliates.

Under ECP III, outstanding coupons are redeemable for a defined amount of
compensation payable in our common shares, which will be transferred from the
Trust to the coupon holders. The number of shares will be determined by dividing
the amount of compensation awarded by an amount determined by the plan
committee. Under each of ECPs I and III, the maximum number of shares that may
be issued to any individual in any calendar year may not exceed 25% of the total
shares available under such plan.

On each of the first three annual anniversaries of the listing of our
common shares on a securities exchange, the trustee will release one-third of
the common shares purchased by an optionee, under ECP II, and one-third of the
shares granted to each coupon holder, under ECP III, if such optionee or holder,
as the case may be, is still employed with us on these dates. Under ECP II, the
consideration paid for any common share purchased by an optionee fired for cause
or who becomes an employee of one of our competitors, but not yet released by
the trustee, will be returned to the optionee by the Trust and the right to
receive these shares will be forfeited and revert back to the trustee. Under ECP
III, common shares allotted by, but not yet released by the trustee, to an
employee who is subsequently fired for cause or who becomes an employee of one
of our competitors, are forfeited and revert back to the trustee for future use.
Options are not transferable under ECPs I and II and coupons are not
transferable under ECP III.

Under ECPs I and II, all options held by an optionee terminate on the date
of that optionee's termination for cause or resignation. Death, disability or
retirement does not affect an optionee's right to exercise an option.

All outstanding options are adjusted to preserve the optionee's benefits
under ECPs I and II and all outstanding common shares are adjusted to preserve
the interests of the holders of these common shares under ECP III if there is a
change in the number of our outstanding common shares or an exchange for
securities of a successor entity as a result of our: (i) reorganization; (ii)
recapitalization; (iii) stock dividend; or (iv) stock split.

If a person or group of persons acting together becomes the beneficial
owner of at least 50% of our issued and outstanding common shares, by tender
offer or otherwise, all unexercised options under ECPs I and II become
immediately exercisable and all optionees will be entitled to sell to the
trustee all unexercised options at a price equal to the greater of fair market
value or the tender offer price.

If ECPs I, II and III terminate, all optionees will be entitled to sell to
the trustee all unexercised options at a price equal to the difference between
the fair market value of the common shares and the aggregate exercise price of
the options under ECPs I and II and securities and any cash held by the trustee
shall be distributed in equal shares to people who received coupons under ECP
III, upon our: (i) dissolution or liquidation; (ii) reorganization, merger or
consolidation; or (iii) sale of our business. If none of these events occurs,
ECPs I, II and III terminate in February 2010.

The non-cash compensation expense associated with the awards under ECP II
and ECP III of approximately $2,904,000 and $2,357,000, respectively, were
recognized ratably over the three year vesting term from the respective award
dates.

Global Sources Equity Compensation Plans Numbers IV and V

Eligible employees, directors, consultants, advisors and independent
contractors under ECP IV are awarded a defined amount of compensation payable in
Global Sources Ltd. common shares the number of which are determined by the plan
committee periodically.

Entitlement of the employees, directors, consultants, advisors and
independent contractors to these common shares is subject to employment and
vesting terms.

Eligible employees, directors, consultants, advisors and independent
contractors under ECP V were awarded a one-time grant of shares the number of
which were determined by the plan committee.

Entitlement of the employees, directors, consultants, advisors and
independent contractors to these common shares is subject to employment and
vesting terms.

The Equity Compensation Plan committee approved the awards of common shares
under ECP IV and ECP V on January 23, 2001. The Equity Compensation Plan
Committee approved additional awards of common shares under ECP IV on April 1,
2001 and July 1, 2001 and under ECP V in January 2002.

The non-cash compensation expenses associated with the above awards under
ECP IV and ECP V of approximately $3,095,000 and $1,823,000, respectively, are
recognized over the five year vesting term from the respective award dates.

Global Sources Equity Compensation Plan VI

Eligible employees, directors, consultants, advisors and independent
contractors under ECP VI are awarded a one-time grant of our common shares the
number of which are determined by the plan committee.

Entitlement of the employees, directors, consultants, advisors and
independent contractors to these common shares is subject to non-compete and
vesting terms.

The Equity Compensation Plan committee approved the ECP VI on March 13,
2001 and made awards of common shares under the plan on various dates during the
year 2001 and 2002.

The non-cash compensation expenses associated with the awards in accordance
with ECP VI totaling approximately $589,000 are recognized over the five year
vesting term from the respective award dates.

Global Sources Equity Compensation Plan VII

Eligible employees, directors, consultants, advisors and independent
contractors under ECP VII are awarded a grant of a defined number of our common
shares, the number of which are determined by the plan committee periodically.

Entitlement of the employees, directors, consultants, advisors and
independent contractors to these common shares is subject to employment and
vesting terms.

The Equity Compensation Plan committee approved the awards of common shares
under ECP VII in January 2002 and made further awards on March 31, 2003 and on
June 19, 2003. The non-cash compensation expenses associated with the above
awards under ECP VII of approximately $1,967,000 are recognized over the six
year vesting term from the respective award dates.

Directors Purchase Plan

A 2000 Non-Employee Directors Share Option Plan was approved on October 26,
2000 by our shareholders. Each eligible director on the date of the first board
meeting of each calendar year, commencing in 2001, receives the grant of an
option to purchase 22,000 common shares on that date. The options granted are
subject to such terms and conditions as determined by the board of directors at
the time of the grant.

The option price per share, payable before the end of each February, is
determined by the board of directors for each such grant of options. The
non-employee directors may decline all or part of the award, which is
non-transferable.

The board of directors granted the first awards under the above plan in
2001. The option price was fifteen percent less than the average closing price
of the shares for the last five trading days of the previous calendar year. Full
payment must be made upon exercising the option. The award vests over four years
with one quarter of the

shares vesting each year. Upon resignation of an eligible director, all unvested
shares are forfeited and the option price received for the forfeited unvested
shares is refunded. Only one director accepted the offer for the 22,000 shares
granted under the option on February 10, 2001. On February 28, 2002, 2003 and
2004, we issued to the director 5,500, 5,500 and 5,500 of our common shares,
respectively, that vested on those dates, adjusted to reflect the share split
discussed in Note 26 to the consolidated financial statements. As of December
31, 2003, $164,300 from the proceeds of this plan was included in additional
paid in capital.

As per the terms of the plan, the board of directors granted options to all
eligible directors in February 2002. These awards will vest after four years.
Optionees must pay 15% of the option price, which is the average closing price
of the shares for the last five trading days of year 2001, at the time of
exercising the option. The balance of 85% must be paid on or before the vesting
date. The resignation of a director following his or her exercise of the grant
of options and payment of the option price shall not cause a forfeiture of the
unvested shares. All the eligible non-employee directors accepted the offer
before February 28, 2002. We received $49,896 towards the 15% of the option
price which was included in additional paid in capital.

The board of directors granted options to all eligible directors again in
February 2003. These awards will vest after four years. Optionees must pay 10%
of the option price, which is the average closing price of the shares for the
last five trading days of year 2002, at the time of exercising the option. The
remaining 90% must be paid on or before the vesting date. The resignation of a
director following his or her exercise of the grant of options and payment of
the option price shall not cause a forfeiture of the unvested shares. Three
eligible directors accepted the offer before February 28, 2003. The $29,700
received towards the 10% of the option price was included in the additional paid
in capital.

On May 8, 2003, shareholders approved the amendments to the 2000
Non-Employee Directors Share Option Plan to allow both employee and non-employee
directors to participate in the plan. The plan was renamed as Directors Purchase
Plan by the board of directors on August 14, 2003.

Directors purchasing the shares under the plan pay 10% of the purchase
price which is the average closing price of the shares for the last five trading
days of year 2003, on or before February 28, 2004. The balance of 90% is paid by
February 28, 2008 and the shares will be issued thereafter. The resignation of a
director following his or her purchase of the shares and payment of the 10%
initial installment shall not cause a forfeiture of the purchased shares. Six
directors opted to purchase 22,000 shares each and a director opted to purchase
part of the 22,000 shares. The amount of $92,069 received towards the 10% of the
purchase price will be included in the additional paid in capital.

SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

Major Shareholders

The following table sets forth information about those persons who hold
more than 5% of our common shares and the share ownership of our directors and
officers as a group. The information is based upon our knowledge of the share
ownership of such persons on April 30, 2004.

Prior to November 27, 2003, the Quan Gung 1986 Trust (through Hung Lay Si
Co. Ltd., its wholly owned subsidiary) beneficially owned approximately 61% of
our common shares. Hung Lay Si Co. Ltd. is a company organized under the laws of
the Cayman Islands. The Quan Gung 1986 Trust was formed under the laws of the
Island of Jersey. Counsel to the trustee has informed us that, by virtue of the
terms of the Trust and the laws of the Island of Jersey, the trustee cannot make
disclosure of the names of the beneficiaries and settlor of the Trust in breach
of the obligations placed on it and in accordance with its duties of
confidentiality.

On November 27, 2003, Merle A. Hinrichs acquired 15,033,846 of our common
shares, after adjustment to reflect the share split resulting from our bonus
share distribution of one share for every ten shares held as of March 1, 2004,
representing 51.9% of the outstanding common shares, from Hung Lay Si Co. Ltd.
As a result, Mr. Hinrichs owns approximately 67.2% of our outstanding common
shares. As consideration for the purchase of the common shares, Mr. Hinrichs
agreed to pay Hung Lay Si Co. Ltd. the purchase price of $109,337,056 payable on
November 27, 2013. Mr. Hinrichs has granted to Hung Lay Si Co. Ltd. a security
interest in all 15,033,846 common shares he purchased pending payment of the
consideration. A copy of the purchase agreement and security agreement was filed
by Mr. Hinrichs with the SEC on Schedule 13D on December 8, 2003, and jointly by
the Trust and Hung Lay Si Co. Ltd. on Schedule 13D/A on the same day, and
reference is made to those filings for the complete terms of the transaction.
The agreements provide that in the event of cash dividends declared and paid by
us, Mr. Hinrichs will pay to Hung Lay Si Co. Ltd. 50% of the dividends for any
of the common shares purchased by Mr. Hinrichs that remain subject to Hung Lay
Si Co. Ltd.'s security interest in the shares. If Mr. Hinrichs wishes to
transfer or sell any shares subject to those agreements to someone other than
Hung Lay Si Co. Ltd., Hung Lay Si Co. Ltd. has a right of first refusal to offer
to purchase those shares. If Hung Lay Si Co. Ltd. waives its right to purchase
the shares, upon consummation of a sale to the other person, at least 80% of the
proceeds of the sale will be applied to the payment of the purchase price. Hung
Lay Si Co. Ltd. may also be deemed, under Securities and Exchange Commission
rules, to be a beneficial owner of the shares in which it has a right of first
refusal and a security interest.

Common Shares Beneficially Owned
-----------------------------------
Name of Beneficial Owner Shares Percentage
------------------------------------------ ---------------- ----------------
Merle A. Hinrichs......................... 19,457,276 67.2%
Hung Lay Si Co. Ltd....................... 2,605,082 9.0%
Harrington Trust Limited.................. 2,369,261 8.2%
Jeffrey J. Steiner (1).................... 366,812 1.3%
Eddie Heng Teng Hua....................... * *
J. Craig Pepples.......................... * *
Bill Georgiou............................. * *
Sarah Benecke............................. * *
David F. Jones............................ * *
Roderick Chalmers......................... * *
Dr. H. Lynn Hazlett....................... * *
All officers and directors as a group
(9 persons)............................. 19,921,092 68.8%

--------------------------------------------------------------------------------
* Indicates beneficial ownership of less than 1%.

(1) Mr. Jeffrey J. Steiner may be deemed to beneficially own the same common
shares owned directly or beneficially by The Steiner Group LLC. Mr. Steiner
disclaims beneficial ownership of shares owned by The Steiner Group LLC,
the Jeffrey Steiner Family Trust and shares owned by him as custodian for
his children. The Steiner Group LLC is a Delaware limited liability
company.

At April 30, 2004, we believe that 3,152,328 of our shares, or 10.89%, were
beneficially owned by U.S. holders and there were 821 shareholders of record in
the U.S.

Mr. Merle A. Hinrichs, our Chairman and Chief Executive Officer,
beneficially owns approximately 67.2% of our common shares and is deemed our
controlling shareholder.

Our major shareholders do not have different voting rights. We do not know
of any arrangement which may at a subsequent date result in a change in control
of our company.

Related Party Transactions

On December 31, 2003, we had $11,404,000 in obligations due to our former
controlling shareholder.

These obligations arose from:

o the transfer of intangibles, including copyrights for magazines, from
Hung Lay Si Co. Ltd. to us in 1983; and

o allocations of operating expenses from Hung Lay Si Co. Ltd. and its
affiliates to us prior to year 2000, when we became a public company
pursuant to a share exchange.

Effective January 1, 2000, we executed an unsecured promissory note in the
principal amount of $11,404,000 to establish the repayment terms of these
obligations owed to Hung Lay Si Co. Ltd. On January 1, 2005, we will begin
repayment of this promissory note by making quarterly payments of principal and
interest over the following ten years. Interest will accrue beginning on January
1, 2005 at the U.S. Federal Funds rate on the following business day and will be
adjusted quarterly. For each subsequent interest period, the interest rate will
be the U.S. Federal Funds rate on the first business day of the applicable
calendar quarter. If we fail to make a timely payment, the interest rate on that
payment will be adjusted quarterly to equal 2% over the U.S. Federal Funds rate
on the first business day of each calendar quarter that payment and the accrued
but unpaid interest are outstanding until that payment is made. The interest
that accrues on the unpaid amount will be payable quarterly unless Hung Lay Si
Co. Ltd. demands immediate payment. If we fail to make a payment, Hung Lay Si
Co. Ltd. may also accelerate the promissory note and demand full payment.

We have extended loans to some of our employees for the sole purpose of
financing the purchase or lease of a residence. The loans for the purchase of a
residence are secured by that residence, bear interest at a rate of LIBOR plus 2
to 3%, generally have a term of ten years and become due and payable immediately
upon the termination of the employee's employment. The loans for the lease of a
residence are unsecured, interest free and are repayable in equal monthly
installments over the period of the lease, which is typically less than or equal
to 12 months. The maximum loan amounts are limited to the lower of the aggregate
of two years' gross compensation of the borrower or $500,000. The loans were
made upon terms and subject to conditions that are more favorable to the
borrowers than those that would customarily be applied by commercial lending
institutions in the borrower's country of employment. Since the beginning of
2000, the largest aggregate amount of indebtedness of Mr. Pepples to us,
outstanding at any time during such period, was approximately $32,233. Mr.
Pepples has repaid his loan in full in November 2002. Mr. Pepples' loan was
interest free and unsecured. Except for the aforementioned loan, there were no
other loans due from our directors and executive officers as at December 31,
2002 and December 31, 2003. We do not expect to extend loans to our directors or
executive officers to the extent such loans would be prohibited by the
Sarbanes-Oxley Act of 2002.

We lease approximately 90,157 square feet of our office facilities from
companies controlled by a wholly-owned subsidiary of Hung Lay Si Co. Ltd. under
cancelable and non-cancelable operating leases and incur building maintenance
services fees to our former affiliated companies. We incurred rental and
building services expenses of $756,428 during the year ended December 31, 2003.
We also receive legal, secretarial and treasury management consultancy services
from wholly-owned subsidiaries of Hung Lay Si Co. Ltd. The expenses incurred for
these services during the year ended December 31, 2003 were $258,677.

We also have a documentary credit facility with the Hongkong and Shanghai
Banking Corporation Limited, for providing documentary credits to our suppliers.
As at December 31, 2002, this facility had a maximum limit of $0.8 million. One
of our former fellow subsidiaries has guaranteed our obligation under this
facility. This facility has been renewed during the year 2003 for a maximum
limit of $0.577 million and at the time of renewal, the guarantee given by our
former fellow subsidiary was released. The largest amount outstanding under this
facility during the fiscal year 2003, prior to the renewal date, was $0.475
million.

For further information on these transactions, see the notes to our audited
consolidated financial statements included elsewhere in this prospectus.

We believe these transactions are commercially reasonable in the
jurisdictions where we operate and for our employees where they reside or work.

GENERAL DESCRIPTION OF THE OFFERED SECURITIES

We may offer from time to time under this prospectus, separately or
together:

o common shares,

o preferred shares,

o unsecured senior or subordinated debt securities,

o warrants to purchase common shares, preferred shares or debt
securities,

o share purchase contracts to purchase common shares, and

o share purchase units, each consisting of (a) a common share purchase
contract, under which the holder or Global Sources Ltd., upon
settlement, will purchase a fixed or varying number of common shares,
and (b) a beneficial interest in either debt securities, preferred
shares or debt or equity obligations of third parties, including U.S.
Treasury securities, purchased with the proceeds from the sale of the
share purchase units.

The prior consent of the Bermuda Monetary Authority may be required for the
issue of any such securities. Material U.S. federal income tax considerations
pertaining to an investment in the securities offered will be described in the
applicable prospectus supplement.

References to "we," "our" or "us" in "Description of Share Capital,"
"Description of Preferred Shares," "Description of Debt Securities,"
"Description of Warrants to Purchase Common Shares or Preferred Shares,"
"Description of Warrants to Purchase Debt Securities" and "Description of Shares
Purchase Contracts and the Shares Purchase Units" refer solely to Global Sources
Ltd. and not its subsidiaries.

DESCRIPTION OF SHARE CAPITAL

Memorandum and Articles of Association

Description of Shareholder Rights Attaching to Our Common Shares

The following discussion of our common shares, and the laws governing the
rights of our shareholders, is based upon the advice of Appleby Spurling Hunter,
our Bermuda counsel.

Our authorized share capital consists of 50,000,000 common shares, par
value $0.01 per share. Effective April 1, 2004, we issued to all of our
shareholders a bonus share distribution of one share for every ten shares held
as of March 1, 2004. As of April 1, 2004, we had 28,952,194 common shares issued
and outstanding.

o Holders of common shares have no preemptive, redemption, conversion or
sinking fund rights.

o Holders of common shares are entitled to one vote per share on all
matters submitted to a vote of holders of common shares and do not
have any cumulative voting rights.

o In the event of our liquidation, dissolution or winding-up, the
holders of common shares are entitled to share ratably in our assets,
if any, remaining after the payment of all our debts and liabilities.

o Our outstanding common shares are fully paid and non-assessable.
Non-assessable as that term is understood under Bermuda Law means in
relation to fully-paid shares of a company and subject to any contrary
provision in any agreement in writing between such company and the
holder of shares, that no shareholder shall be obliged to contribute
further amounts to the capital of the company, either in order to
complete payment for their shares, to satisfy claims of creditors of
the company, or otherwise; and no shareholder shall be bound by an
alteration of the memorandum of association or bye-laws of the company
after the date on which he became a shareholder, if and so far as the
alteration requires him to take, or subscribe for additional shares,
or in any way increases his liability to contribute to the share
capital of, or otherwise to pay money to, the company.

o Additional authorized but unissued common shares may be issued by the
board of directors without the approval of the shareholders.

The holders of common shares will receive dividends, if any, as may be
declared by the board of directors out of funds legally available for purposes.
We may not declare or pay a dividend, or make a distribution out of contributed
surplus, if there are reasonable grounds for believing that:

o we are, or after the payment would be, unable to pay our liabilities
as they become due; or

o the realizable value of our assets after such payment or distribution
would be less than the aggregate amount of our liabilities and our
issued share capital and share premium accounts.

The following is a summary of provisions of Bermuda law and our
organizational documents, including the bye-laws. We refer you to our memorandum
of association and bye-laws, copies of which have been filed with the SEC. You
are urged to read these documents for a complete understanding of the terms of
the memorandum of association and bye-laws.

Share Capital

Our authorized capital consists of one class of common shares. Under our
bye-laws, our board of directors has the power to issue any authorized and
unissued shares on such terms and conditions as it may determine. Any shares or
class of shares may be issued with such preferred, deferred, qualified or other
special rights or such restrictions, whether in regard to dividend, voting,
return of capital or otherwise, as we may from time to time by resolution of the
shareholders prescribe.

Voting Rights

Generally, under Bermuda law and our bye-laws, questions brought before a
general meeting are decided by a simple majority vote of shareholders present or
represented by proxy. Each shareholder is entitled to one vote for each share
held. Matters will be decided, by way of votes cast on a show of hands, unless a
poll is demanded.

If a poll is demanded, each shareholder who is entitled to vote and who is
present in person or by proxy has one vote for each common share entitled to
vote on such question. A poll may only be demanded under the bye-laws by:

o the chairman of the meeting;

o at least three shareholders present in person or by proxy;

o any shareholder or shareholders present in person or by proxy and
holding between them not less than one-tenth of the total voting
rights of all shareholders having the right to vote at such meeting;
or

o a shareholder or shareholders present in person or represented by
proxy holding shares conferring the right to vote at such meeting,
being common shares on which an aggregate sum has been paid up equal
to not less than one-tenth of the total sum paid up on all such common
shares conferring such right.

No shareholder shall, unless the board of directors otherwise determines,
be entitled to vote at any general meeting unless all calls or other sums
presently payable by that shareholder in respect of all shares held by such
shareholder have been paid.

Dividend Rights

Under our bye-laws, each share is entitled to a dividend if, as and when
dividends are declared by the board of directors. The board of directors may
determine that any dividend may be paid in cash or will be satisfied in paying
up in full in our common shares to be issued to the shareholders credited as
fully paid or partly paid. The board of directors may also pay any fixed cash
dividend which is payable on any of our common shares half-yearly or on other
dates, whenever our position, in the opinion of the board of directors,
justifies such payment.

We have not paid any cash dividends on our common shares since October
1999. Previously, we paid dividends as a private company as a means to
distribute earnings to shareholders. Beginning in October 1999, we have focused
on the implementation of our growth plans, and we have retained earnings in
furtherance of such plans. Currently, we do not intend to pay dividends for the
foreseeable future in order to focus on our growth plans. We are not permitted
to pay a dividend under Bermuda law until such time as we have positive retained
earnings. In any event, we do not intend to pay dividends for the foreseeable
future in order to focus on our growth plans.

Purchase by a Company of its Own Common Shares

We may purchase our own common shares out of the capital paid up on the
common shares in question or out of funds that would otherwise be available for
dividend or distribution or out of the proceeds of a fresh issue of common
shares made for the purposes of the purchase. We may not purchase our shares if,
as a result, our issued share capital would be reduced below the minimum capital
specified in our memorandum of association.

However, to the extent that any premium is payable on the purchase, the
premium must be provided out of the funds of the company that would otherwise be
available for dividend or distribution or out of a company's share premium
account. Any common share purchased by a company are treated as cancelled and
the amount of the company's issued capital is diminished by the nominal value of
the shares accordingly but shall not be taken as reducing the amount of the
company's authorized share capital.

Variation of Rights

We may issue more than one class of shares and more than one series of
shares in each class. If we have more than one class of shares, the rights
attached to any class of shares may be altered or abrogated either:

o with the consent in writing of the holders of not less than
seventy-five percent of the issued common shares of that class; or

o with the sanction of a resolution passed at a separate general meeting
of the holders of such common shares, voting in proxy or present, at
which a quorum is present.

The bye-laws provide that a quorum for such a meeting shall be two persons
present in person or by proxy representing a majority of the shares of the
relevant class. The bye-laws specify that the creation or issue of shares
ranking on parity with existing shares will not, subject to any statement to the
contrary in the terms of issue of those shares or rights attached to those
shares, vary the special rights attached to existing shares.

Transfer of Common Shares

Subject to the "Transfer Restrictions" section below, a shareholder may
transfer title to all or any of his shares by completing an instrument of
transfer in the usual common form or in such other form as the board of
directors may approve.

Transfer Restrictions

The board of directors may in its absolute discretion and without assigning
any reason refuse to register the transfer of any share that is not fully paid.

The board of directors may refuse to register an instrument of transfer of
a share unless it:

o is duly stamped, if required by law, and lodged with us;

o is accompanied by the relevant share certificate and such other
evidence of the transferor's right to make the transfer as the board
of directors shall reasonably require;

o has obtained, where applicable, permission of the Bermuda Monetary
Authority; and

o is in respect of one class of shares.

A "blanket" authorization has been obtained from the Bermuda Monetary
Authority for all transfers of our common shares between persons who are not
resident in Bermuda for exchange control purposes, provided our

common shares remain listed on an "appointed stock exchange" (which includes
listing on the Nasdaq National Market).

Transmission of Shares

In the event of the death of a shareholder, the survivor or survivors,
where the deceased shareholder was a joint holder, or the legal personal
representative of such shareholder, including executors and administrators,
shall be the only persons recognized by us as having any title to the
shareholder shares.

Rights in Liquidation

Under Bermuda law, in the event of liquidation, dissolution or winding-up
of a company, after satisfaction in full of all claims of creditors and subject
to the preferential rights accorded to any series of preferred stock, the
proceeds of such liquidation, dissolution or winding-up are distributed among
the holders of shares in accordance with a company's bye-laws.

Under our bye-laws, if we are wound up, the liquidator may, with the
sanction of a resolution from us and any sanction required by the Companies Act,
divide amongst the shareholders in specie or kind the whole or part of our
assets, whether they shall consist of property of the same kind or not and may
for such purposes set such values as he deems fair upon any property to be
divided as set out above and may determine how such division shall be carried
out as between the shareholders.

Meetings of Shareholders

Under Bermuda law, a company is required to convene at least one general
meeting per calendar year. The directors of a company, notwithstanding anything
in its bye-laws, shall, on the requisition of the shareholders holding at the
date of the deposit of the requisition not less than one-tenth of the paid-up
capital of the company carrying the right of vote, duly convene a special
general meeting.

The bye-laws provide that the board of directors may convene a special
general meeting whenever in their judgment such a meeting is necessary. Unless
the bye-laws of a company specify otherwise, Bermuda law requires that
shareholders be given at least five days' notice of a meeting of the company.
Our bye-laws extend this period to provide that at least 21 days' written notice
of a general meeting must be given to those shareholders entitled to receive
such notice. The accidental omission to give notice to or non-receipt of a
notice of a meeting by any person does not invalidate the proceedings of a
meeting.

Under Bermuda law the number of shareholders constituting a quorum at any
general meeting of shareholders may not be less than two individuals. Our
bye-laws add to this quorum requirement to provide that no business can be
transacted at a general meeting unless a quorum of at least two shareholders
representing a majority of the issued shares of the company are present in
person or by proxy and entitled to vote. A shareholder present at a general
meeting or a meeting of a class of shareholders in person or by proxy shall be
deemed to have received appropriate notice of the meeting.

Under our bye-laws, notice to any shareholders may be delivered either
personally, by electronic means or by sending it through the post, by airmail
where applicable, in a pre-paid letter addressed to the shareholder at his
address as appearing in the share register or by delivering it to, or leaving it
at such registered address or, in the case of delivery by electronic means, by
delivering it to the shareholder at such address as may be provided to the
company by the shareholder for such purpose. A notice of a general meeting is
deemed to be duly given to the shareholder if it is sent to him by cable, telex,
telecopier or electronic means.

Access to Books and Records and Dissemination of Information

Under Bermuda law, members of the general public have the right to inspect
the public documents of a company available at the office of the Bermuda
Registrar of Companies. These documents include the memorandum of association
and any alteration to the memorandum of association.

Our shareholders and directors have the additional right to inspect our
minute books and our audited financial statements, which must be presented at an
annual general meeting.

Our bye-laws provide that our register of shareholders is required to be
open for inspection during normal business hours by shareholders without charge
and to members of the general public on the payment of a fee. A company is
required to maintain its share register in Bermuda but may, subject to the
provisions of the Companies

Act, establish a branch register outside of Bermuda. We have established a
branch register with our transfer agent, Mellon Investor Services, LLC, at 85
Challenger Road, Ridgefield Park, NJ 07660, USA.

Under Bermuda law, a company is required to keep at its registered office a
register of its directors and officers that is open for inspection for not less
than two hours in each day by members of the public without charge. Our bye-laws
extend this obligation to provide that the register of directors and officers be
available for inspection by the public during normal business hours. Bermuda law
does not, however, provide a general right for shareholders to inspect or obtain
copies of any other corporate records.

Election or Removal of Directors

The bye-laws provide that the number of directors will be such number not
less than two, as our shareholders by resolution may from time to time
determine. A director will serve until his successor is appointed or his prior
removal in the manner provided by the Companies Act or the bye-laws. Our
bye-laws provide that at each annual general meeting one-third of the directors
will retire from office on a rotational basis based on length of time served. A
director is not required to hold shares in a company to qualify to join the
board, and once appointed may sit on the board regardless of age, unless the
bye-laws provide otherwise. Our bye-laws do not require qualifying shares to
join the board and do not set age limits for directors who serve on the board.
All directors must provide written acceptance of their appointment within thirty
days of their appointment.

The board has the power at any time and from time to time to appoint any
individual to be a director so as to fill a casual vacancy. The board may
approve the appointment of alternate directors.

We may, in a special general meeting called for this purpose, remove a
director, provided notice of such meeting is served upon the director concerned
not less than fourteen days before the meeting and he shall be entitled to be
heard at that meeting.

The office of a director will be vacated in the event of any of the
following:

o if he resigns his office by notice in writing to be delivered to our
registered office or tendered at a meeting of the board of directors;

o if he becomes of unsound mind or a patient for any purpose of any
statute or applicable law relating to mental health;

o if he becomes bankrupt under the law of any country or compounds with
his creditors;

o if he is prohibited by law from being a director; or

o if he ceases to be a director by virtue of the Companies Act or is
removed from office pursuant to the bye-laws.

Amendment of Memorandum of Association and Bye-Laws

Bermuda law provides that the memorandum of association of a company may be
amended by resolution of the board subject to approval by a resolution passed at
a general meeting of which due notice has been given. An amendment to a
memorandum of association does not require the consent of the Minister of
Finance save for specific circumstances, for example, the adopting of any
objects which constitute restricted business activities under the Companies Act.

Under Bermuda law, the holders of:

o an aggregate of not less than twenty percent in par value of a
company's issued share capital or any class thereof, or

o not less in the aggregate than twenty percent of the company's
debentures entitled to object to alterations to its memorandum of
association,

have the right to apply to the Supreme Court of Bermuda for an annulment of any
amendment of the memorandum of association. Where such an application is made,
the amendment becomes effective only to the extent that it is confirmed by the
Bermuda Supreme Court. An application for an annulment of an amendment of the
memorandum of association must be made within twenty-one days after the date on
which the resolution altering the memorandum of association is passed and may be
made on behalf of the persons entitled to make the application by one or more of

their number as they may appoint in writing for the purpose. No such application
may be made by persons voting in favor of the amendment or any persons who have
given to the company a statement in writing duly signed that he, having had
notice, consents to the alteration.

Our bye-laws provide that they may be amended in the manner provided for in
the Companies Act. The Companies Act provides that the directors may amend the
bye-laws, provided that any such amendment shall be operative only to the extent
approved by the shareholders.

Transactions with Interested Shareholders

Our bye-laws prohibit us from engaging in a business combination with any
interested shareholder unless the business combination is approved by two-thirds
of the holders of our voting shares (other than shares held by that interested
shareholder), or by a simple majority if the business combination is approved by
a majority of continuing directors or if certain prescribed conditions are met
assuring that we will receive fair market value in exchange for such business
combination. In this context, a "business combination" includes mergers, asset
sales and other material transactions resulting in a benefit to the interested
shareholder or the adoption of a plan for our liquidation or dissolution; a
"continuing director" is a member of our board of directors that is not an
affiliate or associate of an interested shareholder and was a member of our
board prior to such person becoming an interested shareholder; and an
"interested shareholder" is any person (other than us or any of our
subsidiaries, any employee benefit or other similar plan or any of our
shareholders that received our shares in connection with our share exchange in
2000 prior to the listing of our shares on the Nasdaq National Market) that owns
or has announced its intention to own, or with respect to any of our affiliates
or associates, within the prior two years did own, at least 15% of our voting
shares.

Appraisal Rights and Shareholder Suits

Amalgamation

The Companies Act provides that, subject to the terms of a company's
bye-laws, the amalgamation of a Bermuda company with another company requires
the amalgamation agreement to be approved by the board of directors and at a
meeting of the shareholders by seventy-five percent of the members present and
entitled to vote at that meeting in respect of which the quorum shall be two
persons holding or representing at least one-third of the issued shares of the
company or class, as the case may be.

Our bye-laws alter the majority vote required and provide that any
resolution submitted for the consideration of shareholders at any general
meeting to approve a proposed amalgamation with another company requires the
approval of two-thirds of the votes of disinterested shareholders cast at such
meeting.

Under Bermuda law, in the event of an amalgamation of a Bermuda company, a
shareholder who did not vote in favor of the amalgamation and who is not
satisfied that fair value has been offered for such shareholder's shares, may
apply to a Bermuda court within one month of notice of the meeting of
shareholders to appraise the fair value of those shares.

Class Actions and Derivative Actions

Class actions and derivative actions are generally not available to
shareholders under Bermuda law. Under Bermuda law, a shareholder may commence an
action in the name of a company to remedy a wrong done to the company where the
act complained of is alleged to be beyond the corporate power of the company, or
is illegal or would result in the violation of the company's memorandum of
association or bye-laws. Furthermore, consideration would be given by a Bermuda
court to acts that are alleged to constitute a fraud against the minority
shareholders or, for instance, where an act requires the approval of a greater
percentage of the company's shareholders than those who actually approved it.

When the affairs of a company are being conducted in a manner which is
oppressive or prejudicial to the interests of some part of the shareholders, one
or more shareholders may apply to a Bermuda court, which may make such order as
it sees fit, including an order regulating the conduct of the company's affairs
in the future or ordering the purchase of the shares of any shareholders, by
other shareholders or by the company.

Capitalization of Profits and Reserves

Under our bye-laws, the board of directors may resolve to capitalize all or
any part of any amount for the time being standing to the credit of any reserve
or fund which is available for distribution or to the credit of our

share premium account; and accordingly make that amount available for
distribution among the shareholders who would be entitled to it if distributed
by way of a dividend in the same proportions and on the footing that the same
may be paid not in cash but be applied either in or towards:

o paying up amounts unpaid on any of our shares held by the
shareholders; or

o payment up in full of our unissued shares, debentures, or other
obligations to be allotted and credited as fully paid amongst such
shareholders.

As a proviso to the foregoing, the share premium account may be applied
only in paying up unissued shares to be issued to shareholders credited as fully
paid, and provided, further, that any sum standing to the credit of a share
premium account may only be applied in crediting as fully paid shares of the
same class as that from which the relevant share premium was derived.

Registrar or Transfer Agent

Our transfer agent and registrar is Mellon Investor Services, LLC. In
addition to a register held by Mellon Investor Services, a register of holders
of the shares is maintained by Appleby Spurling Hunter in Bermuda located at
Canon's Court, 22 Victoria Street, Hamilton HM 12 Bermuda.

Untraced Shareholders

We are entitled to sell the common shares of a person entitled to such
common shares provided such person goes untraced for a period of 12 years. We
shall be held to account to the rightful holder of such common shares for an
amount equal to the proceeds of sale. Any dividend or distribution out of
contributed surplus unclaimed for a period of six years from the date of
declaration of that dividend or distribution shall be forfeited and shall revert
to us and the payment by the board of directors of any unclaimed dividend,
distribution, interest or other sum payable on or in respect of the common share
into a separate account shall not constitute us a trustee in respect thereof.

Personal Liability of Directors and Indemnity

The Companies Act requires every officer, including directors, of a company
in exercising powers and discharging duties, to act honestly in good faith with
a view to the best interests of the company, and to exercise the care, diligence
and skill that a reasonably prudent person would exercise in comparable
circumstances. The Companies Act further provides that any provision whether in
the bye-laws of a company or in any contract between the company and any officer
or any person employed by the company as auditor exempting such officer or
person from, or indemnifying him against, any liability which by virtue of any
rule of law would otherwise attach to him, in respect of any fraud or dishonesty
of which he may be guilty in relation to the company, shall be void.

Every director, officer, resident representative and committee member shall
be indemnified out of our funds against all liabilities, loss, damage or
expense, including liabilities under contract, tort and statute or any
applicable foreign law or regulation and all reasonable legal and other costs
and expenses properly payable, incurred or suffered by him as director, officer,
resident representative or committee member; provided that the indemnity
contained in the bye-laws will not extend to any matter which would render it
void under the Companies Act as discussed above.

Exchange Controls

Bermuda Law

We have been designated as a non-resident under the Exchange Control Act of
1972 by the Bermuda Monetary Authority. This designation will allow us to engage
in transactions in currencies other than the Bermuda dollar.

The Registrar of Companies (Bermuda) has neither approved nor disapproved
of the securities to which this document relates, nor passed on the accuracy or
adequacy of this document and accepts no responsibility for the financial
soundness of any proposals or the correctness of any statements made or opinions
expressed with regard to such securities. Approvals or permissions received from
the Bermuda Monetary Authority do not constitute a guarantee by the Bermuda
Monetary Authority as to our performance or our creditworthiness. Accordingly,
in giving such approvals or permissions, the Bermuda Monetary Authority will not
be liable for our performance or default or for the correctness of any opinions
or statements expressed in this document.

The transfer of common shares between persons regarded as resident outside
Bermuda for exchange control purposes and the issue of common shares to such
persons may be effected without specific consent under the Control Act and
regulations thereunder. Issues and transfers of common shares to any person
regarded as resident in Bermuda for exchange control purposes require specific
prior approval from the Bermuda Monetary Authority under the Control Act.

There are no limitations on the rights of persons regarded as non-resident
of Bermuda for foreign exchange control purposes owning our shares. Because we
have been designated as a non-resident for Bermuda exchange control purposes,
there are no restrictions on our ability to transfer funds, other than funds
denominated in Bermuda dollars, in and out of Bermuda or to pay dividends to
non-Bermuda residents who are holders of our shares, other than in respect of
local Bermuda currency.

Under Bermuda law, share certificates are only issued in the names of
corporations, partnerships or individuals. In the case of an applicant acting in
a special capacity, for example an executor or a trustee, certificates may, at
the request of the applicant, record the capacity in which the applicant is
acting.

Notwithstanding the recording of any such special capacity, we are not
bound to investigate or incur any responsibility in respect of the proper
administration of any such estate or trust.

We will take no notice of any trust applicable to any of our common shares
whether or not we had notice of such trust.

As an "exempted company," we are exempt from Bermuda laws which restrict
the percentage of share capital that may be held by non-Bermudians. However, as
an exempted company we may not participate in designated business transactions,
including:

o the acquisition or holding of land in Bermuda (except that required
for our business and held by way of lease or tenancy agreement for a
term not exceeding 50 years or, with the consent of the Minister
granted in his discretion, land held by way of lease or tenancy for a
term of not more than 21 years in order to provide accommodation or
recreational facilities for our officers and employees); o the taking
of mortgages on land in Bermuda to secure an amount in excess of
$50,000 without the consent of the Minister of Finance of Bermuda;

o the acquisition of bonds or debentures secured on land in Bermuda,
unless they are issued by the Bermuda Government or a public
authority; or

o the carrying on of business of any kind in Bermuda, except in
furtherance of our business carried on outside Bermuda or under a
license granted by the Minister of Finance of Bermuda.

Taxation

Bermuda Taxation

We have received from the Minister of Finance a written undertaking under
the Exempted Undertakings Tax Protection Act, 1996 (as amended) of Bermuda, to
the effect that in the event of there being enacted in Bermuda any legislation
imposing tax computed on profits or income, or computed on any capital asset,
gain or appreciation, or any tax in the nature of estate duty or inheritance
tax, then the imposition of any such tax shall not be applicable to us or to any
of our operations or to our shares, debentures or other obligations until March
28, 2016. These assurances are subject to the proviso that they are not
construed so as to prevent the application of any tax or duty to such persons as
are ordinarily resident in Bermuda or to prevent the imposition of property
taxes on any company owning real property or leasehold interests in Bermuda.

Currently there is no Bermuda withholding tax on dividends that may be
payable by us in respect to the holders of our common shares. No income,
withholding or other taxes or stamp duty or other duties are imposed upon the
issue, transfer or sale of the shares or on any payment thereunder. There is no
income tax treaty between Bermuda and the United States.

DESCRIPTION OF PREFERRED SHARES

General

The following summary of terms of our preferred shares is not complete. You
should refer to the provisions of our memorandum of association and bye-laws and
the terms of each class or series of the preferred shares which will be filed
with the SEC at or prior to the time of issuance of such class or series of
preferred shares and described in the applicable prospectus supplement. The
applicable prospectus supplement may also state that any of the terms set forth
herein are inapplicable to that series of preferred shares, provided that the
information set forth in the prospectus supplement does not constitute material
changes to the information herein such that it alters the nature of the offering
or the securities offered.

Our bye-laws allow the board, subject to the prior consent of our
shareholders, to authorize the creation and issuance of preferred shares in one
or more series, and may fix the rights and preferences of those shares,
including as to dividends, voting, redemption, conversion rights and otherwise.

Issuances of preferred shares are subject to the applicable rules of the
Nasdaq National Market or other organizations on whose systems our preferred
shares may then be quoted or listed. Depending upon the terms of the preferred
shares established by our board of directors, any or all series of preferred
shares could have preferences over the common shares with respect to dividends
and other distributions and upon liquidation of the company. Issuance of any
such shares with voting powers, or issuance of additional common shares, would
dilute the voting power of the outstanding common shares.

Terms

The terms of each series of preferred shares will be described in any
prospectus supplement related to that series of preferred shares.

The board of directors in approving the issuance of a series of preferred
shares has authority to determine, and the applicable prospectus supplement may
set forth with respect to that series, the following terms, among others:

o the number of shares constituting that series and the distinctive
designation of that series;

o the dividend rate on the shares of that series, if any, whether
dividends will be cumulative and, if so, from which date or dates, and
the relative rights of priority, if any, of payment of dividends on
shares of that series;

o the voting rights for shares of the series, if any, in addition to the
voting rights provided by law, and the terms of those voting rights;

o the conversion or exchange privileges for shares of the series, if any
(including, without limitation, conversion into shares of common
share), and the terms and conditions of such conversion or exchange,
including provisions for adjustment of the conversion or exchange rate
in those events as the board will determine;

o whether or not the shares of that series will be redeemable and, if
so, the terms and conditions of the redemption, including the manner
of selecting shares for redemption if less than all shares are to be
redeemed, the date or dates upon or after which they will be
redeemable, and the amount per share payable in case of redemption,
which amount may vary under different conditions and at different
redemption dates;

o any sinking fund for the redemption or purchase of shares of that
series and the terms and amount of the sinking fund;

o the right of the shares of that series to the benefit of conditions
and restrictions upon the creation of indebtedness by us or any of our
subsidiaries, upon the issue of any additional shares (including
additional shares of such series or any other series) and upon the
payment of dividends or the

making of other distributions on, and the purchase, redemption or
other acquisition by us or any of our subsidiaries of, any of our
outstanding shares;

o the rights of the shares of that series in the event of our voluntary
or involuntary liquidation, dissolution or winding up, and the
relative rights of priority, if any, of payment of shares of that
series; and

o any other relevant participating, optional or other special rights,
qualifications, limitations or restrictions of that series.

Non-U.S. Currency

If the purchase price of any preferred share is payable in a currency other
than U.S. dollars, the specific terms with respect to such preferred share and
such foreign currency will be specified in the applicable prospectus supplement.

DESCRIPTION OF DEBT SECURITIES

We may issue debt securities from time to time in one or more series, under
one or more indentures, each dated as of a date on or prior to the issuance of
the debt securities to which it relates. Senior debt securities and subordinated
debt securities may be issued pursuant to separate indentures, a senior
indenture and a subordinated indenture, respectively, in each case between us
and a trustee qualified under the Trust Indenture Act of 1939, as amended. The
form of such indentures have been filed as exhibits to the registration
statement of which this prospectus is a part, subject to such amendments or
supplements as may be adopted from time to time. The senior indenture and the
subordinated indenture, as amended or supplemented from time to time, are
sometimes referred to individually as an "indenture" and collectively as the
"indentures." Each indenture will be subject to and governed by the Trust
Indenture Act. The aggregate principal amount of debt securities which may be
issued under each indenture will be unlimited and each indenture will set forth
the specific terms of any series of debt securities or provide that such terms
will be set forth in, or determined pursuant to, an authorizing resolution, as
defined in the applicable prospectus supplement, and/or a supplemental
indenture, if any, relating to such series.

The statements made below relating to the debt securities and the
indentures are summaries of the anticipated provisions thereof, do not purport
to be complete and are subject to, and are qualified in their entirety by
reference to, all of the provisions of the applicable indenture and any
applicable U.S. federal income tax considerations as well as any applicable
modifications of or additions to the general terms described below in the
applicable prospectus supplement. The applicable prospectus supplement also may
state that any of the terms set forth herein are inapplicable to a particular
series of debt securities; provided, that the information set forth in that
prospectus supplement does not constitute a material change to the information
herein such that it alters the nature of the offering or the securities offered.

Terms

The debt securities will be our unsecured obligations.

The senior debt securities will rank equal in right of payment with all our
other unsecured and unsubordinated indebtedness.

The subordinated debt securities will be subordinated in right of payment
to the prior payment in full of all our senior indebtedness, which is defined in
the section called "--Ranking of Debt Securities" below.

The specific terms of each series of debt securities will be set forth in
the applicable prospectus supplement relating thereto, including the following,
as applicable:

(1) the title of such debt securities and whether the debt securities are
senior debt securities or subordinated debt securities and, if
subordinated debt securities, the specific subordination provisions
applicable thereto;

(2) the aggregate principal amount of the debt securities and any limit on
the aggregate principal amount;

(3) the price (expressed as a percentage of the principal amount thereof)
at which such debt securities will be issued and, if other than the
principal amount thereof, the portion of the principal amount thereof
payable upon declaration of acceleration of the maturity thereof, or
if applicable, the portion of the principal amount of the debt
securities that is convertible into shares of common shares or shares
of preferred shares or the method by which any such portion, if any,
will be determined;

(4) if convertible into shares of common shares or preferred shares, the
terms on which the debt securities are convertible, including the
initial conversion price, the conversion period, any events requiring
an adjustment of the applicable conversion price and any requirements
relating to the reservation of such common shares or preferred shares
for purposes of conversion;

(5) the date(s), or the method for determining the date or dates, on which
the principal of the debt securities will be payable and, if
applicable, the terms on which the maturity may be extended;

(6) the rate(s) (which may be fixed or floating), or the method by which
the rate or rates will be determined, at which the debt securities
will bear interest, if any, including if applicable, that the debt
securities will bear interest at an increased rate (up to a specified
maximum) upon the occurrence of an event of default and/or under
certain circumstances described in the applicable pro-

spectus supplement (which may include, among other things, a reduction
in the trading price of our common shares below certain levels for a
minimum period of time);

(7) the date(s), or the method for determining the date or dates, from
which any such interest will accrue, the dates on which the interest
will be payable, the record dates for the interest payment dates, or
the method by which the dates will be determined, the persons to whom
the interest will be payable, and the basis upon which interest will
be calculated if other than that of a 360-day year of twelve 30-day
months;

(8) the place(s) where the principal of and interest, if any, on the debt
securities will be payable, where the securities may be surrendered
for registration of transfer or exchange and where notices or demands
to or upon us in respect of the debt securities and the applicable
indenture may be served;

(9) the period(s), if any, within which, the price or prices at which and
the other terms and conditions upon which the debt securities may,
pursuant to any optional or mandatory redemption provisions, be
redeemed, as a whole or in part, at our option;

(10) our obligation, if any, to redeem, repay or repurchase the debt
securities pursuant to any sinking fund (as defined in the applicable
supplemental indenture) or analogous provision or at the option of a
holder thereof, and the period or periods within which, the price or
prices at which and the other terms and conditions upon which the debt
securities will be redeemed, repaid or purchased, as a whole or in
part, pursuant to those obligations;

(11) if other than U.S. dollars, the currency or currencies in which the
principal of and interest, if any, on such debt securities are
denominated and payable, which may be a foreign currency or units of
two or more foreign currencies or a composite currency or currencies,
and the terms and conditions relating thereto;

(12) whether the amount of payments of principal of or interest, if any, on
the debt securities may be determined with reference to an index,
formula or other method (which index, formula or method may, but need
not be, based on the yield on or trading price of other securities,
including United States Treasury securities, or on a currency,
currencies, currency unit or units, or composite currency or
currencies) and the manner in which those amounts will be determined;

(13) whether the principal of or interest, if any, on the debt securities
of the series is to be payable, at our election or a holder thereof,
in a currency or currencies, currency unit or units or composite
currency or currencies other than that in which the debt securities
are denominated or stated to be payable and the period or periods
within which, and the terms and conditions upon which, an election may
be made;

(14) provisions, if any, granting special rights to the holders of debt
securities of the series upon the occurrence of particular events as
may be specified;

(15) any deletions from, modifications of or additions to the events of
default or our covenants with respect to debt securities of the
series, whether or not such events of default or covenants are
consistent with the events of default or covenants described herein;

(16) whether debt securities of the series are to be issuable initially in
temporary global form and whether any debt securities of the series
are to be issuable in permanent global form and, if so, whether
beneficial owners of interests in any such security in permanent
global form may exchange their interests for debt securities of the
same series and of like tenor of any authorized form and denomination
and the circumstances under which any exchanges may occur, if other
than in the manner provided in the applicable indenture, and, if debt
securities of the series are to be issuable as a global security, the
identity of the depository for that series;

(17) the applicability, if any, of the defeasance and covenant defeasance
provisions of the applicable indenture to the debt securities of the
series;

(18) if exchangeable into another series of our debt securities, the terms
on which those debt securities are exchangeable; and

(19) any other terms of the series of debt securities and any additions,
deletions or modifications to the applicable indenture.

The debt securities, if convertible or exchangeable, will not be
convertible into or exchangeable for securities of a third party.

If the applicable prospectus supplement provides, the debt securities may
be issued at a discount below their principal amount and provide for less than
the entire principal amount thereof to be payable upon declaration of
acceleration of the maturity thereof.

Except as may be set forth in the applicable prospectus supplement, the
debt securities will not contain any provisions that would limit our ability to
incur indebtedness or that would afford holders of debt securities protections
against transactions involving us, including a highly leveraged transaction
involving us or a change of control. The applicable prospectus supplement will
contain information with respect to any deletions from, modifications of or
additions to the events of default or covenants described below, including any
addition of a covenant or other provision providing event risk or similar
protection.

Denomination, Interest, Registration and Transfer

We will issue the debt securities of each series only in registered form,
without coupons, in denominations of $1,000, or in such other currencies or
denominations as may be set forth in the applicable supplemental indenture or
specified in, or pursuant to, an authorizing resolution and/or supplemental
indenture, if any, relating to that series of debt securities.

The principal of and interest, if any, on any series of debt securities
will be payable at the corporate trust office of the trustee, the address of
which will be stated in the applicable prospectus supplement. However, at our
option, interest payments may be made by check mailed to the address of the
person entitled thereto as it appears in the applicable register for such debt
securities.

Subject to certain limitations imposed upon debt securities issued in
book-entry form, the debt securities of any series:

o will be exchangeable for any authorized denomination of other debt
securities of the same series and of a like aggregate principal amount
and tenor upon surrender of the debt securities at the trustee's
corporate trust office or at the office of any registrar designated by
us for that purpose; and

o may be surrendered for registration of transfer or exchange thereof at
the corporate trust office of the trustee or at the office of any
registrar designated by us for that purpose.

No service charge will be made for any registration of transfer or
exchange, but we may require payment of a sum sufficient to cover any tax or
other governmental charge payable in connection with certain transfers and
exchanges. We may act as registrar and may change any registrar without notice.

Certain Covenants

The applicable prospectus supplement will describe any material covenants
in respect of a series of debt securities that are not described in this
prospectus.

Unless otherwise indicated in the applicable prospectus supplement, senior
debt securities and the subordinated debt securities will include the provision
described below.

Merger, Consolidation or Sale of Assets

We may not (1) consolidate with or merge into any other person (other than
a subsidiary) or convey, transfer, sell or lease all of substantially all of our
properties and assets as an entirety to any other person or (2) permit any
person (other than a subsidiary) to consolidate with or merge into us unless:

o in the case of (1) and (2) above, if we are not the surviving person,
the surviving person assumes the payment of the principal of, premium,
if any, and interest on the debt securities and the performance of our
other covenants under the applicable indenture, and

o in all cases, immediately after giving effect to the transaction, no
event of default, and no event that, after notice or lapse of time or
both, would become an event of default, will have occurred and be
continuing.

Payment of Principal, Premium and Interest

We will duly and punctually pay the principal of (and premium, if any) and
interest on the debt securities in accordance with the terms of such debt
securities.

Maintenance of Office or Agency

We will maintain an office or agency where the debt securities may be
presented or surrendered for registration of transfer or exchange and where
notices and demands to or upon us in respect of the debt securities may be made.

Money for Securities; Payments to Be Held in Trust

If we will at any time act as our own paying agent with respect to any debt
securities, we will, on or before each due date of the principal of (and
premium, if any) or interest on any of the debt securities, segregate and hold
in trust for the benefit of the persons entitled thereto a sum sufficient to pay
the principal (and premium, if any) or interest so becoming due until such sums
will be paid to such persons or otherwise disposed of as provided in the
indentures and will promptly notify the trustee of our action or failure so to
act.

Corporate Existence

Except as permitted under "--Merger, Consolidation or Sale of Assets"
above, we will do or cause to be done all things necessary to preserve and keep
in full force and effect our corporate existence, rights (charter and statutory)
and franchises; provided, however, that we will not be required to preserve any
such right or franchise if the board determines that the preservation thereof is
no longer desirable in our conduct of business and that the loss thereof is not
disadvantageous in any material respect to the holders.

Maintenance of Properties

We will use our reasonable efforts to cause all material properties used or
useful in the conduct of our business to be maintained and kept in good
condition, repair and working order (subject to wear and tear) and supplied with
all necessary material equipment and will use our reasonable efforts to cause to
be made all necessary material repairs, renewals, replacements, betterments and
improvements thereof, all as in our judgment may be necessary so that the
business carried on in connection therewith may be properly and advantageously
conducted at all times; provided, however, that nothing will prevent us from
discontinuing the operation or maintenance of any of such properties if such
discontinuance is, in our judgment, desirable in the conduct of our business and
not disadvantageous in any material respect to the holders.

Statement by Officers as to Default

We will deliver to the trustee, within 120 days after the end of each of
our fiscal years, a certificate of our principal executive officer, principal
financial officer or principal accounting officer stating whether or not to the
best knowledge of the signers thereof we are in default in the performance and
observance of any of the terms, provisions and conditions of the indenture, and
if we are in default, specifying all such defaults and the nature and status
thereof of which they may have knowledge.

Waiver of Certain Covenants

We may omit in any particular instance to comply with any term, provision
or condition of the foregoing covenants if before or after the time for such
compliance the holders of at least a majority in principal amount of the
outstanding debt securities (taken together as one class) will, by act of such
holders, either waive such compliance in such instance or generally waive
compliance with such term, provision or condition except to the extent so
expressly waived, and, until such waiver will become effective, our obligations
and the duties of the trustee in respect of any such term, provision or
condition will remain in full force and effect.

Ranking of Debt Securities

General

We currently conduct some of our operations through our subsidiaries and
our subsidiaries generate substantially all of our operating income and cash
flow. As a result, distributions and advances from our subsidiaries will be a
principal source of funds necessary to meet our debt service obligations.
Contractual provisions or laws, as well as our subsidiaries' financial condition
and operating and regulatory requirements, may limit our ability to obtain cash
from our subsidiaries that we require to pay our debt service obligations.
Holders of the debt securities will have a junior position to the claims of
creditors of our subsidiaries on their assets and earnings.

Senior Debt Securities

The senior debt securities will be our unsecured unsubordinated obligations
and will:

o rank equal in right of payment with all our other unsecured and
unsubordinated indebtedness;

o be effectively subordinated in right of payment to all our secured
indebtedness to the extent of the value of the assets securing such
indebtedness; and

o be effectively subordinated to all of our subsidiaries' indebtedness.

As of March 31, 2004, the aggregate amount of our outstanding consolidated
indebtedness for money borrowed was approximately $11.4 million, none of which
was secured. The senior debt that may be issued under the senior debt securities
indenture would be effectively subordinated in right of payment to any secured
indebtedness and would rank equal in right of payment with all of our other
senior unsecured obligations. All obligations (including insurance obligations
of our subsidiaries) would be effectively senior to any senior or subordinated
debt issued by us.

Except as otherwise set forth in the applicable senior indenture or
specified in an authorizing resolution and/or supplemental indenture, if any,
relating to a series of senior debt securities to be issued, there will be no
limitations in any senior indenture on the amount of additional indebtedness
which may rank equal with the senior debt securities or on the amount of
indebtedness, secured or otherwise, which may be incurred by any of our
subsidiaries.

Subordinated Debt Securities

The subordinated debt securities will be our unsecured subordinated
obligations. Unless otherwise provided in the applicable prospectus supplement,
the payment of principal of, interest on and all other amounts owing in respect
of the subordinated debt securities will be subordinated in right of payment to
the prior payment in full in cash of principal of, interest on and all other
amounts owing in respect of all of our senior indebtedness. Upon any payment or
distribution of our assets of any kind or character, whether in cash, property
or securities, to creditors upon any total or partial liquidation, dissolution,
winding up, reorganization, assignment for the benefit of creditors or
marshaling of our assets or in a bankruptcy, reorganization, insolvency,
receivership or other similar proceeding relating to us or our property, whether
voluntary or involuntary, all principal of, interest on and all other amounts
due or to become due will be paid, first, to all senior indebtedness in full in
cash, or such payment duly provided for to the satisfaction of the holders of
senior indebtedness, before any payment or distribution of any kind or character
is made on account of any principal of, interest on or other amounts owing in
respect of the subordinated debt securities, or for the acquisition of any of
the subordinated debt securities for cash, property or otherwise.

If any default occurs and is continuing in the payment when due, whether at
maturity, upon any redemption, by declaration or otherwise, of any principal of,
interest on, unpaid drawings for letters of credit issued in respect of, or
regularly accruing fees with respect to, any senior indebtedness, no payment of
any kind or character will be made by or on behalf of us or any other person on
our or their behalf with respect to any principal of, interest on or other
amounts owing in respect of the subordinated debt securities or to acquire any
of the subordinated debt securities for cash, property or otherwise.

As of March 31, 2004, the aggregate amount of our consolidated indebtedness
for money borrowed was approximately $11.4 million, of which all would rank
senior in right of payment to the subordinated debt issuable under the
subordinated debt securities indenture. All obligations (including insurance
obligations of our subsidiaries) would be effectively senior to any senior or
subordinated debt issued by us.

If any other event of default occurs and is continuing with respect to any
designated senior indebtedness, as such event of default is defined in the
instrument creating or evidencing such designated senior indebtedness,
permitting the holders of such designated senior indebtedness then outstanding
to accelerate the maturity thereof and if the representative (as defined in the
applicable indenture) for the respective issue of designated senior indebtedness
gives written notice of the event of default to the trustee (a "default
notice"), then, unless and until all events of default have been cured or waived
or have ceased to exist or the trustee receives notice from the representative
for the respective issue of designated senior indebtedness terminating the
blockage period (as defined below), during the 179 days after the delivery of
such default notice (the "blockage period"), neither we nor any other person on
our behalf will:

(1) make any payment of any kind or character with respect to any
principal of, interest on or other amounts owing in respect of the
subordinated debt securities; or

(2) acquire any of the subordinated debt securities for cash, property or
otherwise.

Notwithstanding anything herein to the contrary, in no event will a
blockage period extend beyond 179 days from the date the payment on the
subordinated debt securities was due and only one such blockage period may be
commenced within any 360 consecutive days. No event of default which existed or
was continuing on the date of the commencement of any blockage period with
respect to the designated senior indebtedness will be, or be made, the basis for
commencement of a second blockage period by the representative of such
designated senior indebtedness whether or not within a period of 360 consecutive
days unless such event of default will have been cured or waived for a period of
not less than 90 consecutive days (it being acknowledged that any subsequent
action, or any breach of any financial covenants for a period commencing after
the date of commencement of such blockage period that, in either case, would
give rise to an event of default pursuant to any provisions under which an event
of default previously existed or was continuing will constitute a new event of
default for this purpose).

As a result of the foregoing provisions, in the event of our insolvency,
holders of the subordinated debt securities may recover ratably less than our
general creditors.

"Senior indebtedness," unless otherwise specified in one or more applicable
supplemental indentures or approved pursuant to a board resolution in accordance
with the applicable indenture, means, with respect to us,

(1) the principal (including redemption payments), premium, if any,
interest and other payment obligations in respect of (a) our
indebtedness for money borrowed and (b) our indebtedness evidenced by
securities, debentures, bonds, notes or other similar instruments
issued by us, including any such securities issued under any deed,
indenture or other instrument to which we are a party (including, for
the avoidance of doubt, indentures pursuant to which senior debt
securities have been or may be issued);

(2) all of our obligations issued or assumed as the deferred purchase
price of property, all of our conditional sale obligations, all of our
hedging agreements and agreements of a similar nature thereto and all
agreements relating to any such agreements, and all of our obligations
under any title retention agreement (but excluding trade accounts
payable arising in the ordinary course of business);

(3) all of our obligations for reimbursement on any letter of credit,
banker's acceptance, security purchase facility or similar credit
transaction;

(4) all obligations of the type referred to in clauses (1) through (3)
above of other persons for the payment of which we are responsible or
liable as obligor, guarantor or otherwise;

(5) all obligations of the type referred to in clauses (1) through (4)
above of other persons secured by any lien on any of our property or
asset (whether or not such obligation is assumed by us) and

(6) any deferrals, amendments, renewals, extensions, modifications and
refundings of all obligations of the type referred to in clauses (1)
through (5) above, in each case whether or not contingent and whether
outstanding at the date of effectiveness of the applicable indenture
or thereafter incurred,

except, in each case, for the subordinated debt securities and any such other
indebtedness or deferral, amendment, renewal, extension, modification or
refunding that contains express terms, or is issued under a deed, indenture or
other instrument, which contains express terms, providing that it is subordinate
to or ranks equal with the subordinated debt securities.

Such senior indebtedness will continue to be senior indebtedness and be
entitled to the benefits of the subordination provisions of the applicable
indenture irrespective of any amendment, modification or waiver of any term of
such senior indebtedness and notwithstanding that no express written
subordination agreement may have been entered into between the holders of such
senior indebtedness and the trustee or any of the holders.

Discharge and Defeasance

Under the terms of the indenture, we will be discharged from any and all
obligations in respect of the debt securities of any series and the applicable
indenture (except in each case for certain obligations to register the transfer
or exchange of debt securities, replace stolen, lost or mutilated debt
securities, maintain paying agencies and hold moneys for payment in trust) if we
deposit with the applicable trustee, in trust, moneys or U.S. government
obligations in an amount sufficient to pay all the principal of, and interest
on, the debt securities of such series on the dates such payments are due in
accordance with the terms of such debt securities.

In addition, unless the applicable prospectus supplement and supplemental
indenture provide otherwise, we may elect either (1) to defease and be
discharged from any and all obligations with respect to such debt securities
("defeasance") or (2) to be released from our obligations with respect to such
debt securities under certain covenants in the applicable indenture, and any
omission to comply with such obligations will not constitute a default or an
event of default with respect to such debt securities ("covenant defeasance"):

(1) by delivering all outstanding debt securities of such series to the
trustee for cancellation and paying all sums payable by it under such
debt securities and the indenture with respect to such series; or

(2) after giving notice to the trustee of our intention to defease all of
the debt securities of such series, by irrevocably depositing with the
trustee or a paying agent

(a) in the case of any debt securities of any series denominated in
U.S. dollars, cash or U.S. government obligations sufficient to
pay all principal of and interest on such debt securities; and

(b) in the case of any debt securities of any series denominated in
any currency other than U.S. dollars, an amount of the applicable
currency in which the debt securities are denominated sufficient
to pay all principal of and interest on such debt securities.

Such a trust may only be established if, among other things:

(1) the applicable defeasance or covenant defeasance does not result in a
breach or violation of, or constitute a default under or any material
agreement or instrument to which we are a party or by which we are
bound;

(2) no event of default or event which with notice or lapse of time or
both would become an event of default with respect to the debt
securities to be defeased will have occurred and be continuing on the
date of establishment of such a trust after giving effect to such
establishment; and

(3) we have delivered to the trustee an opinion of counsel (as specified
in the applicable supplemental indenture) to the effect that the
holders will not recognize income, gain or loss for United States
federal income tax purposes as a result of such defeasance or covenant
defeasance and will be subject to United States federal income tax on
the same amounts, in the same manner and at the same times as would
have been the case if such defeasance or covenant defeasance had not
occurred, and such opinion of counsel, in the case of defeasance, must
refer to and be based upon a letter ruling of the Internal Revenue
Service received by us, a Revenue Ruling published by the Internal
Revenue Service or a change in applicable United States federal income
tax law occurring after the date of the applicable supplemental
indenture.

In the event we effect covenant defeasance with respect to any debt
securities and such debt securities are declared due and payable because of the
occurrence of any event of default, other than an event of default with respect
to any covenant as to which there has been covenant defeasance, the government
obligations on deposit with the trustee will be sufficient to pay amounts due on
such debt securities at the time of the stated maturity but may not be
sufficient to pay amounts due on such debt securities at the time of the
acceleration resulting from such event of default.

Modification and Waiver

We, when authorized by a board resolution, and the trustee may modify,
amend and/or supplement the applicable indenture and the applicable debt
securities with the consent of the holders of not less than a majority in
principal amount of the outstanding debt securities of all series affected
thereby (voting as a single class); provided, however, that such modification,
amendment or supplement may not, without the consent of each holder of the debt
securities affected thereby:

(1) change the stated maturity of the principal of or any installment of
interest with respect to the debt securities;

(2) reduce the principal amount of, or the rate of interest on, the debt
securities;

(3) change the currency of payment of principal of or interest on the debt
securities;

(4) impair the right to institute suit for the enforcement of any payment
on or with respect to the debt securities;

(5) reduce the above-stated percentage of holders of the debt securities
of any series necessary to modify or amend the indenture relating to
such series;

(6) modify the foregoing requirements or reduce the percentage of
outstanding debt securities necessary to waive any covenant or past
default;

(7) in the case of any subordinated indenture, modify the subordination
provisions thereof in a manner adverse to the holders of subordinated
debt securities of any series then outstanding; or

(8) in the case of any convertible debt securities, adversely affect the
right to convert the debt securities into shares of common shares or
preferred shares in accordance with the provisions of the applicable
indenture.

Holders of not less than a majority in principal amount of the outstanding
debt securities of all series affected thereby (voting as a single class) may
waive certain past defaults and may waive compliance by us with any provision of
the indenture relating to such debt securities (subject to the immediately
preceding sentence); provided, however, that:

(1) without the consent of each holder of debt securities affected
thereby, no waiver may be made of a default in the payment of the
principal of or interest on any debt security or in respect of a
covenant or provision of the indenture that expressly states that it
cannot be modified or amended without the consent of each holder
affected; and

(2) only the holders of a majority in principal amount of debt securities
of a particular series may waive compliance with a provision of the
indenture relating to such series or the debt securities of such
series having applicability solely to such series.

We, when authorized by a board resolution, and the trustee may amend or
supplement the indentures or waive any provision of such indentures and the debt
securities without the consent of any holders of debt securities in some
circumstances including:

o to cure any ambiguity, omission, defect or inconsistency;

o to make any other change that does not, in the good faith opinion of
our board of directors and the trustee, adversely affect the interests
of holders of such debt securities in any material respect;

o to provide for the assumption of our obligations under the applicable
indenture by a successor upon any merger, consolidation or asset
transfer permitted under the applicable indenture;

o to provide any security for or guarantees of such debt securities;

o to add events of default with respect to such debt securities;

o to add covenants that would benefit the holders of such debt
securities or to surrender any rights or powers we have under the
applicable indenture;

o to make any change necessary for the registration of the debt
securities under the Securities Act or to comply with the Trust
Indenture Act of 1939, or any amendment thereto, or to comply with any
requirement of the SEC in connection with the qualification of the
applicable indenture under the Trust Indenture Act of 1939; provided,
however, that such modification or amendment does not, in the good
faith opinion of our board of directors and the trustee, adversely
affect the interests of the holders of such debt securities in any
material respect;

o to provide for uncertificated debt securities in addition to or in
place of certificated debt securities or to provide for bearer debt
securities;

o to add to or change any of the provisions of the applicable indenture
to such extent as will be necessary to permit or facilitate the
issuance of the debt securities in bearer form, registrable or not
registrable as to principal, and with or without interest coupons;

o to change or eliminate any of the provisions of the applicable
indenture; provided, however, that any such change or elimination will
become effective only when there is no debt security outstanding of
any series created prior to the execution of such supplemental
indenture which is entitled to the benefit of such provision;

o to establish the form or terms of debt securities of any series as
permitted by the applicable indenture; or

o to evidence and provide for the acceptance of appointment by a
successor trustee with respect to the debt securities of one or more
series and to add to or change any of the provisions of the applicable
indenture as will be necessary to provide for or facilitate the
administration of the trusts under the applicable indenture by more
than one trustee, pursuant to the requirements of the applicable
indenture.

Events of Default and Notice Thereof

The following are events that we anticipate will constitute "events of
default" with respect to any series of debt securities issued thereunder:

(1) default in the payment of any interest upon any debt securities of
that series when it becomes due and payable, and continuance of such
default for a period of 60 days; or

(2) default in the payment of the principal of (or premium, if any, on)
any debt securities of that series when due; or

(3) default in the deposit of any sinking fund payment, when and as due by
the terms of any debt securities of that series; or

(4) default in the performance, or breach, of any material covenant or
warranty of ours in the indenture (other than a covenant or warranty
added to the indenture solely for the benefit of another series of
debt securities) for a period of 60 days after there has been given,
and continuance of such by registered or certified mail, to us by the
trustee or to us and the trustee by the holders of at least 25% in
principal amount of the outstanding debt securities a written notice
specifying such default or breach and requiring it to be remedied and
stating that such notice is a "Notice of Default" hereunder; or

(5) certain events of bankruptcy, insolvency or reorganization.

Additional or different events of default, if any, applicable to the series
of debt securities in respect of which this prospectus is being delivered will
be specified in the applicable prospectus supplement.

The trustee under such indenture will, within 90 days after the occurrence
of any default (the term "default" to include the events specified above without
grace or notice) with respect to any series of debt securities actually known to
it, give to the holders of such debt securities notice of such default;
provided, however, that, except in the case of a default in the payment of
principal of or interest on any of the debt securities of such series or in the
payment of a sinking fund installment, the trustee for such series will be
protected in withholding such notice if it in good faith determines that the
withholding of such notice is in the interest of the holders of such debt
securities; and provided, further, that in the case of any default of the
character specified in clause (2) above with respect to debt

securities of such series, no such notice to holders of such debt securities
will be given until at least 30 days after the occurrence thereof. We will
certify to the trustee quarterly as to whether any default exists.

If an event of default, other than an event of default resulting from
bankruptcy, insolvency or reorganization, with respect to any series of debt
securities will occur and be continuing, the trustee for such series or the
holders of at least 25% in aggregate principal amount of the debt securities of
such series then outstanding, by notice in writing to us (and to the trustee for
such series if given by the holders of the debt securities of such series), will
be entitled to declare all unpaid principal of and accrued interest on such debt
securities then outstanding to be due and payable immediately.

In the case of an event of default resulting from certain events of
bankruptcy, insolvency or reorganization, all unpaid principal of and accrued
interest on all debt securities of such series then outstanding will be due and
payable immediately without any declaration or other act on the part of the
trustee for such series or the holders of any debt securities of such series.

Such acceleration may be annulled and past defaults (except, unless
theretofore cured, a default in payment of principal of or interest on the debt
securities of such series) may be waived by the holders of a majority in
principal amount of the debt securities of such series then outstanding upon the
conditions provided in the applicable indenture.

No holder of the debt securities of any series issued thereunder may pursue
any remedy under such indenture unless the trustee for such series will have
failed to act after, among other things, notice of an event of default and
request by holders of at least 25% in principal amount of the debt securities of
such series of which the event of default has occurred and the offer to the
trustee for such series of indemnity satisfactory to it; provided, however, that
such provision does not affect the right to sue for enforcement of any overdue
payment on such debt securities.

Conversion and Exchange Rights

The terms and conditions, if any, upon which the debt securities of any
series will be convertible into common shares or preferred shares or upon which
the senior debt securities of any series will be exchangeable into another
series of debt securities will be set forth in the prospectus supplement
relating thereto. Such terms will include the conversion or exchange price (or
manner of calculation thereof), the conversion or exchange period, provisions as
to whether conversion or exchange will be at the option of the holders of such
series of debt securities or at our option or automatic, the events requiring an
adjustment of the conversion or exchange price and provisions affecting
conversion or exchange in the event of the redemption of such series of debt
securities. The debt securities, if convertible or exchangeable, will not be
convertible into or exchangeable for securities of a third party.

The Trustee

Subject to the terms of the applicable indenture, the trustee for each
series of debt securities will be named in the prospectus supplement relating to
each issuance of debt securities. Each indenture will contain certain
limitations on a right of the trustee, as our creditor, to obtain payment of
claims in certain cases, or to realize on certain property received in respect
of any such claim as security or otherwise. The trustee will be permitted to
engage in other transactions; provided, however, that if it acquires any
conflicting interest, it must eliminate such conflict or resign.

Subject to the terms of the applicable indenture, the holders of a majority
in principal amount of all outstanding debt securities of a series (or if more
than one series is affected thereby, of all series so affected, voting as a
single class) will have the right to direct the time, method and place of
conducting any proceeding for exercising any remedy or power available to the
trustee for such series or all such series so affected.

In case an event of default will occur (and will not be cured) under any
indenture relating to a series of debt securities and is actually known to a
responsible officer of the trustee for such series, such trustee will exercise
such of the rights and powers vested in it by such indenture and use the same
degree of care and skill in its exercise as a prudent person would exercise or
use under the circumstances in the conduct of his own affairs. Subject to such
provisions, the trustee will not be under any obligation to exercise any of its
rights or powers under the applicable indenture at the request of any of the
holders of debt securities unless they will have offered to the trustee security
and indemnity satisfactory to it.

Governing Law

The indentures and the debt securities will be governed by the laws of the
State of New York.

Global Securities; Book-Entry System

We may issue the debt securities of any series in whole or in part in the
form of one or more global securities to be deposited with, or on behalf of, a
depository (the "depository") identified in the prospectus supplement relating
to such series. "Global securities" represent in the aggregate the total
principal or face amount of the securities and once on deposit with a
depository, allow trading of the securities through the depository's book-entry
system as further described below. Global securities, if any, issued in the
United States are expected to be deposited with The Depository Trust Company
("DTC"), as depository. Global securities will be issued in fully registered
form and may be issued in either temporary or permanent form. Unless and until
it is exchanged in whole or in part for the individual debt securities
represented thereby, a global security may not be transferred except as a whole
by the depository for such global security to a nominee of such depository or by
a nominee of such depository to such depository or another nominee of such
depository or by such depository or any nominee of such depository to a
successor depository or any nominee of such successor.

The specific terms of the depository arrangement with respect to any series
of debt securities will be described in the prospectus supplement relating to
such series. We expect that unless otherwise indicated in the applicable
prospectus supplement, the following provisions will apply to depository
arrangements.

Upon the issuance of a global security, the depository for such global
security or its nominee will credit on its book-entry registration and transfer
system the respective principal amounts of the individual debt securities
represented by such global security to the accounts of persons that have
accounts with such depository ("participants"). Such accounts will be designated
by the underwriters, dealers or agents with respect to such debt securities or
by us if such debt securities are offered directly by us. Ownership of
beneficial interests in such global security will be limited to participants or
persons that may hold interests through participants.

We expect that, pursuant to procedures established by DTC, ownership of
beneficial interests in any global security with respect to which DTC is the
depository will be shown on, and the transfer of that ownership will be effected
only through, records maintained by DTC or its nominee (with respect to
beneficial interests of participants) and records of participants (with respect
to beneficial interests of persons who hold through participants). Neither we
nor the trustee will have any responsibility or liability for any aspect of the
records of DTC or for maintaining, supervising or reviewing any records of DTC
or any of its participants relating to beneficial ownership interests in the
debt securities. The laws of some states require that certain purchasers of
securities take physical delivery of such securities in definitive form. Such
limits and laws may impair the ability to own, pledge or transfer beneficial
interest in a global security.

So long as the depository for a global security or its nominee is the
registered owner of such global security, such depository or such nominee, as
the case may be, will be considered the sole owner or holder of the debt
securities represented by such global security for all purposes under the
applicable indenture. Except as described below or in the applicable prospectus
supplement, owners of beneficial interest in a global security will not be
entitled to have any of the individual debt securities represented by such
global security registered in their names, will not receive or be entitled to
receive physical delivery of any such debt securities in definitive form and
will not be considered the owners or holders thereof under the applicable
indenture. Beneficial owners of debt securities evidenced by a global security
will not be considered the owners or holders thereof under the applicable
indenture for any purpose, including with respect to the giving of any
direction, instructions or approvals to the trustee thereunder. Accordingly,
each person owning a beneficial interest in a global security with respect to
which DTC is the depository must rely on the procedures of DTC and, if such
person is not a participant, on the procedures of the participant through which
such person owns its interests, to exercise any rights of a holder under the
applicable indenture. We understand that, under existing industry practice, if
it requests any action of holders or if an owner of a beneficial interest in a
global security desires to give or take any action which a holder is entitled to
give or take under the applicable indenture, DTC would authorize the
participants holding the relevant beneficial interest to give or take such
action, and such participants would authorize beneficial owners through such
participants to give or take such actions or would otherwise act upon the
instructions of beneficial owners holding through them.

Payments of principal of, and any interest on, individual debt securities
represented by a global security registered in the name of a depository or its
nominee will be made to or at the direction of the depository or its nominee, as
the case may be, as the registered owner of the global security under the
applicable indenture. Under the terms of the applicable indenture, we and the
trustee may treat the persons in whose name debt securities, including a global
security, are registered as the owners thereof for the purpose of receiving such
payments. Consequently, neither we nor the trustee has or will have any
responsibility or liability for the payment of such amounts to

beneficial owners of debt securities (including principal and interest). We
believe, however, that it is currently the policy of DTC to immediately credit
the accounts of relevant participants with such payments, in amounts
proportionate to their respective holdings of beneficial interests in the
relevant global security as shown on the records of DTC or its nominee. We also
expect that payments by participants to owners of beneficial interests in such
global security held through such participants will be governed by standing
instructions and customary practices, as is the case with securities held for
the account of customers in bearer form or registered in street name, and will
be the responsibility of such participants. Redemption notices with respect to
any debt securities represented by a global security will be sent to the
depository or its nominee. If less than all of the debt securities of any series
are to be redeemed, we expect the depository to determine the amount of the
interest of each participant in such debt securities to be redeemed to be
determined by lot. None of us, the trustee, any paying agent or the registrar
for such debt securities will have any responsibility or liability for any
aspect of the records relating to or payments made on account of beneficial
ownership interests in the global security for such debt securities or for
maintaining any records with respect thereto.

Neither we nor the trustee will be liable for any delay by the holders of a
global security or the depository in identifying the beneficial owners of debt
securities and we and the trustee may conclusively rely on, and will be
protected in relying on, instructions from the holder of a global security or
the depository for all purposes. The rules applicable to DTC and its
participants are on file with the SEC.

If a depository for any debt securities is at any time unwilling, unable or
ineligible to continue as depository and a successor depository is not appointed
by us within 90 days, we will issue individual debt securities in exchange for
the global security representing such debt securities. In addition, we may at
any time and in our sole discretion, subject to any limitations described in the
prospectus supplement relating to such debt securities, determine not to have
any of such debt securities represented by one or more global securities and in
such event we will issue individual debt securities in exchange for the global
security or securities representing such debt securities. Individual debt
securities so issued will be issued in denominations of $1,000 and integral
multiples thereof.

All moneys paid by us to a paying agent or a trustee for the payment of the
principal of or interest on any debt security which remain unclaimed at the end
of two years after such payment has become due and payable will be repaid to us,
and the holder of such debt security thereafter may look only to us for payment
thereof.

Non-U.S. Currency

If the purchase price of any debt securities is payable in a currency other
than U.S. dollars, the specific terms with respect to such debt securities and
such foreign currency will be specified in the applicable prospectus supplement.

DESCRIPTION OF WARRANTS TO PURCHASE
COMMON SHARES OR PREFERRED SHARES

General

We may issue warrants to purchase common shares or preferred shares
independently or together with any securities offered by any prospectus
supplement and such common share warrants or preferred share warrants may be
attached to or separate from such securities. Each series of share warrants will
be issued under a separate warrant agreement to be entered into between us and a
bank or trust company, as warrant agent, all as set forth in the applicable
prospectus supplement. The warrant agent will act solely as our agent in
connection with the certificates representing the share warrants and will not
assume any obligation or relationship of agency or trust for or with any holders
of share warrant certificates or beneficial owners of share warrants.

The following summaries of certain provisions of the warrant agreement and
share warrant certificate are not complete. You should look at the warrant
agreement relating to, and the applicable share warrant certificate
representing, the applicable series of common shares warrants or preferred share
warrants.

The applicable prospectus supplement may also state that any of the terms
set forth herein are inapplicable to such series; provided that the information
set forth in such prospectus supplement does not constitute material changes to
the information herein such that it alters the nature of the offering or the
securities offered. Warrants for the purchase of common shares or preferred
share will be offered and exercisable for U.S. dollars only and will be in
registered form only.

Terms

An applicable prospectus supplement will set forth and describe other
specific terms regarding each series of common share warrants or preferred share
warrants offered hereby, including:

(1) the offering price;

(2) the number of common shares or preferred shares purchasable upon
exercise of each such common share warrant or preferred share warrant
and the price at which such number of common shares or preferred
shares may be purchased upon such exercise;

(3) the date on which the right to exercise such share warrants will
commence and the date on which such right will expire; and

(4) any other terms of such share warrants.

Exercise of Share Warrants

Each share warrant will entitle the holder thereof to purchase common
shares or preferred shares, as the case may be, at such exercise price as will
in each case be set forth in, or calculable from, the prospectus supplement
relating to the offered share warrants. After the close of business on the
expiration date of each shares warrant or such later date to which such
expiration date may be extended by us, unexercised share warrants will become
void.

Share warrants may be exercised by delivering to the warrant agent payment
as provided in the applicable prospectus supplement of the amount required to
purchase common shares or preferred shares purchasable upon such exercise,
together with certain information set forth on the reverse side of the share
warrant certificate. Upon receipt of such payment and the shares warrant
certificate properly completed and duly executed at the corporate trust office
of the warrant agent or any other office indicated in the applicable prospectus
supplement, we will, as soon as practicable, issue and deliver the common shares
or preferred shares purchasable upon such exercise. If fewer than all of the
share warrants represented by such certificate are exercised, a new share
warrant certificate will be issued for the remaining amount of share warrants.

Amendments and Supplements to Warrant Agreement

The warrant agreement for a series of shares warrants may be amended or
supplemented without the consent of the holders of the share warrants issued
thereunder to effect changes that are not inconsistent with the provisions of
the share warrants and that do not adversely affect the interests of the holders
of the share warrants.

Anti-dilution and Other Provisions

Unless otherwise indicated in the applicable prospectus supplement, the
exercise price of, and the number of common shares or preferred shares covered
by, each share warrant is subject to adjustment in certain events, including:

(1) the issuance of common shares or preferred shares as a dividend or
distribution on the common shares or preferred shares;

(2) certain subdivisions and combinations of the common shares or
preferred shares;

(3) the issuance to all holders of common shares or preferred shares of
certain rights or warrants entitling them to subscribe for or purchase
common shares or preferred shares, at less than the current market
value, as defined in the applicable share warrant agreement for such
series of share warrants; and

(4) the distribution to all holders of common shares or preferred shares
of certain evidences of our indebtedness or assets, other than certain
cash dividends and distributions described below.

No adjustment in the exercise price of, and the number of shares covered
by, the share warrant will be made for regular quarterly or other periodic or
recurring cash dividends or distributions or for cash dividends or distributions
to the extent paid from retained earnings. No adjustment will be required unless
such adjustment would require a change of at least one percent in the exercise
price and exercise rate then in effect; provided, however, that any such
adjustment not so made will be carried forward and taken into account in any
subsequent adjustment; provided, further, that any such adjustment not so made
will be made no later than three years after the occurrence of the event
requiring such adjustment to be made or carried forward. Except as stated above,
the exercise price of, and the number of common shares or preferred shares
covered by, a share warrant will not be adjusted for the issuance of common
shares or preferred shares or any securities convertible into or exchangeable
for common shares or preferred shares, or securities carrying the right to
purchase any of the foregoing.

In the case of:

(1) a reclassification or change of the common shares or preferred shares;

(2) certain consolidation or merger events involving us; or

(3) a sale or conveyance to another corporation of our property and assets
as an entirety or substantially as an entirety,

in each case as a result of which holders of our common shares or preferred
shares will be entitled to receive shares, securities, other property or assets
(including cash) with respect to or in exchange for such shares, the holders of
the share warrants then outstanding will be entitled thereafter to convert such
share warrants into the kind and amount of common shares, preferred shares and
other securities or property which they would have received upon such
reclassification, change, consolidation, merger, sale or conveyance had such
shares warrants been exercised immediately prior to such reclassification,
change, consolidation, merger, sale or conveyance.

Non-U.S. Currency

If the purchase price of any warrants to purchase common shares or
preferred shares is payable in a currency other than U.S. dollars, the specific
terms with respect to such warrants to purchase common shares or preferred
shares and such foreign currency will be specified in the applicable prospectus
supplement.

DESCRIPTION OF WARRANTS TO PURCHASE DEBT SECURITIES

General

We may issue debt warrants independently or together with any securities
offered by any prospectus supplement and such debt warrants may be attached to
or separate from such securities. Each series of debt warrants will be issued
under a separate debt warrant agreement to be entered into between us and a debt
warrant agent, all as set forth in the applicable prospectus supplement. The
debt warrant agent will act solely as our agent in connection with the
certificates representing the debt warrants and will not assume any obligation
or relationship of agency or trust for or with any holders of debt warrant
certificates or beneficial owners of debt warrants.

The following summaries of certain provisions of the debt warrant agreement
and debt warrant certificate are not complete. You should look at the debt
warrant agreement relating to, and the debt warrant certificate representing, a
series of debt warrants.

The applicable prospectus supplement may also state that any of the terms
set forth herein are inapplicable to such series; provided that the information
set forth in such prospectus supplement does not constitute material changes to
the information herein such that it alters the nature of the offering or the
securities offered. Debt warrants for the purchase of shares of common shares or
shares of preferred shares will be offered and exercisable for U.S. dollars only
and will be in registered form only.

Terms

An applicable prospectus supplement will set forth and describe other
specific terms regarding each series of debt warrants offered hereby, including:

(1) the offering price;

(2) the designation, aggregate principal amount and the terms of the debt
securities purchasable upon exercise of the debt warrants;

(3) the date on which the right to exercise such debt warrants will
commence and the date on which such right will expire; and

(4) any other terms of such debt warrants.

Warrant holders will not have any of the rights of holders of debt
securities, including the right to receive the payment of principal of, any
premium or interest on, or any additional amounts with respect to, the debt
securities or to enforce any of the covenants of the debt securities or the
applicable indenture except as otherwise provided in the applicable indenture.

Exercise of Debt Warrants

Debt warrants may be exercised by delivering to the debt warrant agent
payment as provided in the applicable prospectus supplement, together with
certain information set forth on the reverse side of the debt warrant
certificate. Upon receipt of such payment and the debt warrant certificate
properly completed and duly executed at the corporate trust office of the debt
warrant agent or any other office indicated in the applicable prospectus
supplement, we will, as soon as practicable, issue and deliver the debt
securities purchasable upon such exercise. If fewer than all of the debt
warrants represented by such debt warrant certificate are exercised, a new debt
warrant certificate will be issued for the remaining amount of debt warrants.

Amendments and Supplements to Warrant Agreement

The debt warrant agreement for a series of debt warrants may be amended or
supplemented without the consent of the holders of the debt warrants issued
thereunder to effect changes that are not inconsistent with the provisions of
the debt warrants and that do not adversely affect the interests of the holders
of the debt warrants.

Non-U.S. Currency

If the purchase price of any warrants to purchase debt securities is
payable in a currency other than U.S. dollars, the specific terms with respect
to such warrants to purchase debt securities and such foreign currency will be
specified in the applicable prospectus supplement.

DESCRIPTION OF SHARE PURCHASE CONTRACTS AND SHARE PURCHASE UNITS

We may issue share purchase contracts, representing contracts obligating
holders to purchase from us, and obligating us to sell to the holders, or
holders to sell to us and us to purchase from the holders, a fixed or varying
number of common shares at a future date or dates. The price per share of common
shares may be fixed at the time the share purchase contracts are entered into or
may be determined by reference to a specific formula set forth in the share
purchase contracts. Any share purchase contract may include anti-dilution
provisions to adjust the number of shares to be delivered pursuant to such share
purchase contract upon the occurrence of certain events. The share purchase
contracts may be entered into separately or as a part of share purchase units
consisting of one or more share purchase contracts and any one or more of:

(1) our debt securities;

(2) our preferred shares; or

(3) debt or equity obligations of third parties, including U.S. Treasury
securities.

The share purchase contracts may require us to make periodic payments to
the holders of the share purchase units or vice versa, and such payments may be
unsecured or pre-funded and may be paid on a current or on a deferred basis. The
share purchase contracts may require holders to secure their obligations in a
specified manner and in certain circumstances we may deliver newly issued
prepaid share purchase contracts upon release to a holder of any collateral
securing such holder's obligations under the original share purchase contract.
Any one or more of the above securities, common shares, share purchase contracts
or other collateral may be pledged as security for the holders' obligations to
purchase or sell, as the case may be, the common shares under the share purchase
contracts. The share purchase contracts may also allow the holders, under
certain circumstances, to obtain the release of the security for their
obligations under such contracts by depositing with the collateral agent, as
substitute collateral, treasury securities with a principal amount at maturity
equal to the collateral so released or the maximum number of common shares
deliverable by such holders under common share purchase contracts requiring the
holders to sell such common shares to us.

The applicable prospectus supplement may contain, where applicable, the
following information about the share purchase contracts and share purchase
units, as the case may be:

o whether the share purchase contracts obligate the holder to purchase
or sell, or both purchase and sell, our common shares and the nature
and amount of the common shares, or the method of determining those
amounts;

o whether the share purchase contracts are to be prepaid or not;

o whether the share purchase contracts are to be settled by delivery, or
by reference or linkage to the value, performance or level of our
common shares;

o any acceleration, cancellation, termination or other provisions
relating to the settlement of the share purchase contracts;

o the designation and terms of the units and of the securities composing
the units, including whether and under what circumstances those
securities may be held or transferred separately;

o any provisions for the issuance, payment, settlement, transfer or
exchange of the units or of the securities comprising the units; and

o whether the share purchase contracts and/or share purchase units will
be issued fully registered or global form.

The applicable prospectus supplement will describe the terms of any share
purchase contracts or share purchase units and, if applicable, prepaid share
purchase contracts. The description in the prospectus supplement will be
qualified in its entirety by reference to (1) the share purchase contracts, (2)
the collateral arrangements and depositary arrangements, if applicable, relating
to such share purchase contracts or share purchase units and (3) if applicable,
the prepaid share purchase contracts and the document pursuant to which such
prepaid share purchase contracts will be issued.

Non-U.S. Currency

If the purchase price of any share purchase contract is payable in a
currency other than U.S. dollars, the specific terms with respect to such share
purchase contract and such foreign currency will be specified in the applicable
prospectus supplement.

SELLING SHAREHOLDER

We have filed a registration statement, of which this prospectus forms a
part, in order to permit the selling shareholder to resell to the public a
portion of the common shares that he owns.

The following table sets forth certain information as of April 30, 2004
regarding beneficial ownership of our common shares by the selling shareholder.
Beneficial ownership is determined in accordance with Securities and Exchange
Commission rules and generally includes voting or investment power with respect
to securities. Common Shares are issuable upon the exercise of outstanding
options, warrants, conversion of preferred stock or exercise of other purchase
rights are treated as outstanding for purposes of computing such selling
shareholder's ownership, to the extent exercisable or convertible within sixty
days of the date of this prospectus.

Number of
Shares
Shares Beneficially Owned Which May Be Shares Beneficially Owned
Prior to the Offering Offered After Offering
-------------------------- ------------ --------------------------
Name Number Percent Number Percent
---- ------ ------- ------ -------

Merle A. Hinrichs 19,457,276 67.2% 4,000,000 15,457,276 53.4%

PLAN OF DISTRIBUTION

We may sell our common shares, preferred shares, debt securities, warrants
to purchase common shares, preferred shares or debt securities, share purchase
contracts and share purchase units and each selling shareholder may sell any or
all of our common shares owned by such selling shareholder, through
underwriters, agents, dealers, or directly without the use of any underwriter,
agent or dealer to one or more purchasers. We and each selling shareholder may
distribute these securities from time to time in one or more transactions,
including, but not limited to, block transactions, privately negotiated
transactions, transactions on the Nasdaq National Market or any other organized
market where the securities may be traded, through the writing of options on
securities, short sales or any combination of these methods. The securities may
be sold at a fixed price or prices, at market prices prevailing at the times of
sale, at prices related to these prevailing market prices or at negotiated
prices. Any such price may be changed from time to time. The selling shareholder
will act independently of us in making decisions with respect to the timing,
manner of sale, amount of securities to be sold in and the pricing of any
transaction. The registration of the selling shareholder's common shares does
not necessarily mean that the selling shareholder will offer or sell any of his
shares.

We may determine the public offering price of the securities offered under
this prospectus by use of an electronic auction. We will describe how any
auction will determine the price or any other terms, how potential investors may
participate in the auction and the nature of the underwriters' obligations in
the related supplement to this prospectus.

In addition, we and the selling shareholder may enter into derivative
transactions with third parties (including the writing of options), or sell
securities not covered by this prospectus to third parties in privately
negotiated transactions. If the applicable prospectus supplement indicates, in
connection with such a transaction the third parties may, pursuant to this
prospectus and the applicable prospectus supplement, sell securities covered by
this prospectus and the applicable prospectus supplement. If so, the third party
may use securities borrowed from us, the selling shareholder or others to settle
such sales and may use securities received from us to close out any related
short positions. We and the selling shareholder may also loan or pledge
securities covered by this prospectus and the applicable prospectus supplement
to third parties, who may sell the loaned securities or, in an event of default
in the case of a pledge, sell the pledged securities pursuant to this prospectus
and the applicable prospectus supplement.

The terms of the offering of the securities with respect to which this
prospectus is being delivered will be set forth in the applicable prospectus
supplement and will include:

o the identity of any underwriters, dealers or agents who purchase
securities, as required;

o the amount of securities sold, the public offering price and
consideration paid, and the proceeds we and/or the selling shareholder
will receive from that sale;

o whether or not the securities will trade on any securities exchanges
or the Nasdaq National Market;

o the amount of any indemnification provisions, including
indemnification from liabilities under the federal securities laws;
and

o any other material terms of the distribution of securities.

Upon receipt of notice from the selling shareholder, we will file any
amendment or prospectus supplement that may be required in connection with any
sale by the selling shareholder.

We and/or the selling shareholder may offer the securities to the public
through one or more underwriting syndicates represented by one or more managing
underwriters, or through one or more underwriters without a syndicate. If
underwriters are used in the sale, we and/or the selling shareholder will
execute an underwriting agreement with those underwriters relating to the
securities that we and/or the selling shareholder will offer and will name the
underwriters and describe the terms of the transaction in the prospectus
supplement. The securities subject to the underwriting agreement will be
acquired by the underwriters for their own account and may be resold by them, or
their donees, pledgees, or transferees, from time to time in one or more
transactions, including negotiated transactions, at a fixed public offering
price or at varying prices determined at the time of sale. Subject to the
conditions specified in the underwriting agreement, underwriters will be
obligated to purchase all of these securities if they are purchased or will act
on a best efforts basis to solicit purchases for the period of their
appointment, unless stated otherwise in the prospectus supplement.

We and/or the selling shareholder may authorize underwriters to solicit
offers by institutions to purchase the securities subject to the underwriting
agreement from us and/or the selling shareholder at the public offering price
stated in the prospectus supplement under delayed delivery contracts providing
for payment and delivery on a specified date in the future. If we and/or the
selling shareholder sell securities under delayed delivery contracts, the
prospectus supplement will state that as well as the conditions to which these
delayed delivery contracts will be subject and the commissions payable for that
solicitation.

Underwriters may sell these securities to or through dealers.
Alternatively, we and/or the selling shareholder may sell the securities in this
offering to one or more dealers, who would act as a principal or principals.
Dealers may resell such securities to the public at varying prices to be
determined by the dealers at the time of the resale.

We and/or the selling shareholder may also sell the securities offered with
this prospectus through other agents designated by them from time to time. We
will identify any agent involved in the offer and sale of these securities who
may be deemed to be an underwriter under the federal securities laws, and
describe any commissions or discounts payable by us and/or the selling
shareholder to these agents, in the prospectus supplement. Any such agents will
be obligated to purchase all of these securities if any are purchased or will
act on a best efforts basis to solicit purchases for the period of their
appointment, unless stated otherwise in the prospectus supplement.

In connection with the sale of securities offered by this prospectus or
otherwise, the selling shareholder may enter into hedging transactions with
brokers, dealers or other financial institutions relating to our securities. In
connection with such hedging transactions, such brokers, dealers or other
financial institutions may engage in short sales of our securities in the course
of hedging the positions that they assume from the selling shareholder. These
hedging transactions may require or permit the selling shareholder to deliver
the shares to such brokers, dealers or other financial institutions to settle
such hedging transactions. The selling shareholder may also sell our securities
short and deliver securities covered by this prospectus to close out such short
position, subject to Section 16(c) of the Exchange Act, if applicable.

In connection with the sale of securities offered with this prospectus,
underwriters, dealers or agents may receive compensation from us, the selling
shareholder or from purchasers of the securities for whom they may act as
agents, in the form of discounts, concessions or commissions. These discounts,
concessions or commissions may be changed from time to time. Underwriters,
dealers and/or agents may engage in transactions with us, or perform services
for us, in the ordinary course of business, and may receive compensation in
connection with those arrangements. In the event any underwriter, dealer or
agent who is a member of the NASD participates in a public offering of these
securities, the maximum commission or discount to be received by any such NASD
member or independent broker-dealer will not be greater than 8% of the offering
proceeds from securities offered with this prospectus.

The selling shareholder, underwriters, dealers, agents or purchasers that
participate in the distribution of the securities may be deemed to be
underwriters under the Securities Act. Broker-dealers or other persons acting on
behalf of parties that participate in the distribution of securities may also be
deemed underwriters. Any discounts or commissions received by them and any
profit on the resale of the securities received by them may be deemed to be
underwriting discounts and commissions under the Securities Act.

Underwriters and purchasers that are deemed underwriters under the
Securities Act may engage in transactions that stabilize, maintain or otherwise
affect the price of the securities, including the entry of stabilizing bids or
syndicate covering transactions or the imposition of penalty bids. Such
purchasers will be subject to the applicable provisions of the Securities Act
and Exchange Act and the rules and regulations thereunder, including Rule 10b-5
and Regulation M. Regulation M may restrict the ability of any person engaged in
the distribution of the securities to engage in market-making activities with
respect to those securities. In addition, the anti-manipulation rules under the
Exchange Act may apply to sales of the securities in the market. All of the
foregoing may affect the marketability of the securities and the ability of any
person to engage in market-making activities with respect to the securities.

We and/or the selling shareholder may provide underwriters, agents, dealers
or purchasers with indemnification against civil liabilities, including
liabilities under the Securities Act, or contribution with respect to payments
that the underwriters, agents, dealers or purchasers may make with respect to
such liabilities.

Because the selling shareholder may be deemed to be an "underwriter" within
the meaning of Section 2(11) of the Securities Act, the selling shareholder may
be subject to the prospectus delivery requirements of the Securities Act.

WHERE YOU CAN FIND MORE INFORMATION

We are required to comply with the reporting requirements of the Securities
Exchange Act of 1934, as amended, applicable to a foreign private issuer. We
will file annually a Form 20-F no later than six months after the close of our
fiscal year, which is December 31. As a foreign private issuer, we are exempt
from the rules under the Exchange Act prescribing the furnishing and content of
proxy statements, and our officers, directors and principal shareholders are
exempt from the reporting and short-swing profit recovery provisions contained
in Section 16 of the Exchange Act. We will furnish our shareholders with annual
reports, which will include a review of operations and annual audited
consolidated financial statements prepared in conformity with U.S. GAAP. We
intend, although we are not obligated to do so, to furnish our shareholders with
quarterly reports by mail with the assistance of a corporate services provider,
which will include unaudited interim financial information prepared in
conformity with U.S. GAAP for each of the three quarters of each fiscal year
following the end of each such quarter. We may discontinue providing quarterly
reports at any time without prior notice to our shareholders.

Our reports and other information, when so filed, may be inspected and
copied at the public reference facilities maintained by the Securities and
Exchange Commission at Judiciary Plaza, 450 Fifth Street, N.W., Room 1024,
Washington, D.C. 20549. Copies of such material may be obtained from the Public
Reference Section of the Securities and Exchange Commission, 450 Fifth Street,
N.W., Washington, D.C. 20549 at prescribed rates.

These reports and other information may also be inspected at the offices of
the Nasdaq National Market, 1735 K Street, N.W., Washington, D.C. 20006.

INCORPORATION OF DOCUMENTS BY REFERENCE

The SEC allows us to "incorporate by reference" information into this
prospectus, which means that it can disclose important information by referring
you to another document filed separately with the SEC. This prospectus
incorporates by reference the documents listed below which have been filed by us
with the SEC (000-50041) and any future filings with the SEC under Section
13(a), 13(c), 14 or 15(d) of the Exchange Act.

o Annual report on Form 20-F for the year ended December 31, 2003.

o Reports on Form 6-K dated April 30, 2004, May 5, 2004 and May 13, 2004
(excluding in each case any information furnished in such report and
excluding exhibits filed or furnished, which are not incorporated by
reference into this prospectus).

o The description of Global Sources Ltd. common shares contained in our
registration statement on Form F-1 filed on April 3, 2000.

We are also incorporating by reference the information contained in all
other documents that we file with the SEC between the date of the initial filing
of the registration statement of which this prospectus is a part and the
effectiveness of the registration statement, as well as between the date of this
prospectus and the time that all of the securities registered under the
registration statement are sold. The information contained in any of these
documents will be considered part of this prospectus from the date these
documents are filed.

Any statement contained in this prospectus or in a document incorporated or
deemed to be incorporated by reference herein will be deemed to be modified or
superseded for purposes of this prospectus to the extent that a statement
contained herein or in any other subsequently filed document which also is or is
deemed to be incorporated by reference herein modifies or supersedes such
statement. Any statement so modified or superseded will not be deemed, except as
so modified or superseded, to constitute a part of this prospectus.

If you would like to receive a copy of any document incorporated by
reference into this prospectus (which will not include any of the exhibits to
the document other than those exhibits that are themselves specifically
incorporated by reference into this prospectus) or our constitutional documents,
you should call or write to us at Canon's Court, 22 Victoria Street, Hamilton,
HM 12 Bermuda (telephone number: (441) 295-2244). We will provide these
documents, without charge, by first class mail.

We have not authorized anyone to give any information or make any
representation about us that is different from, or in addition to, that
contained in this prospectus or in any of the materials that have incorporated
by reference into this prospectus. Therefore, if anyone does give you
information of this sort, you should not rely on it. If you are in a
jurisdiction where offers to exchange or sell, or solicitations of offers to
exchange or purchase, the securities offered by this document or the
solicitation of proxies is unlawful, or if you are a person to whom it is
unlaw-

ful to direct these types of activities, then the offer presented in this
prospectus does not extend to you. The information contained in this prospectus
speaks only as of the date of this document, unless the information specifically
indicates that another date applies.

ABOUT THIS PROSPECTUS

This prospectus is part of a registration statement that we have filed with
the Securities and Exchange Commission utilizing a "shelf" registration process.
Under this shelf process, we may sell the securities described in this
prospectus in one or more offerings for up to an aggregate initial offering
price of $300,000,000, and the selling shareholder may resell a portion of
common shares that he owns in one or more offerings. This prospectus provides
you with a general description of the securities that we and the selling
shareholder may offer. This prospectus does not contain all of the information
set forth in the registration statement as permitted by the rules and
regulations of the SEC. For additional information regarding us, or the selling
shareholder and the offered securities, please refer to the registration
statement. Each time we or the selling shareholder sell securities, we will file
a prospectus supplement with the SEC that will contain specific information
about the terms of that offering. You should read both this prospectus and any
prospectus supplement together with additional information described under the
heading "Where You Can Find More Information."

LEGAL MATTERS

Certain legal matters with respect to United States and New York law will
be passed upon for us by Cahill Gordon & Reindel LLP, New York, New York.
Certain legal matters with respect to Bermuda law will be passed upon by Appleby
Spurling Hunter, Hamilton, Bermuda. If counsel for any underwriter, dealer or
agent passes on legal matters in connection with an offering made by this
prospectus, we will name that counsel in the prospectus supplement relating to
the offering.

EXPERTS

The consolidated financial statements of Global Sources Ltd. for the year
ended December 31, 2003 have been audited by Ernst & Young, independent
auditors, as set forth in their report thereon and incorporated herein by
reference. Such consolidated financial statements are incorporated herein by
reference in reliance upon such report given on the authority of such firm as
experts in accounting and auditing.

INDEX TO CONSOLIDATED FINANCIAL STATEMENTS

Audited Financial Statements
Reports of Independent Public Accountants.............................. F-2
Consolidated Balance Sheets............................................ F-4
Consolidated Statements of Income...................................... F-5
Consolidated Statements of Cash Flows.................................. F-6
Consolidated Statement of Shareholders' Equity......................... F-7
Notes to Consolidated Financial Statements............................. F-8
Unaudited Financial Statements
Consolidated Balance Sheets............................................ F-32
Consolidated Statements of Income...................................... F-33
Consolidated Statements of Cash Flows.................................. F-35

F-1

REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS

To the Board of Directors and Shareholders of
Global Sources Ltd.

We have audited the accompanying consolidated balance sheets of Global Sources
Ltd. (a company incorporated under the laws of Bermuda) and its subsidiaries as
of December 31, 2003 and 2002, and the related consolidated statements of
income, shareholders' equity and cash flows for each of the two years in the
period ended December 31, 2003. These financial statements are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these financial statements based on our audits. The financial
statements of the Company as of December 31, 2001 were audited by other auditors
who have ceased operations and whose report dated February 28, 2002 expressed an
unqualified opinion.

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

In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the consolidated financial position of Global
Sources Ltd. and its subsidiaries as of December 31, 2003 and 2002, and the
consolidated results of their operations and cash flows for each of the two
years in the period ended December 31, 2003, in conformity with accounting
principles generally accepted in the United States of America.

/s/ ERNST & YOUNG

Singapore
March 10, 2004

F-2

THE FOLLOWING REPORT IS A COPY OF THE INDEPENDENT PUBLIC ACCOUNTANTS' REPORT
PREVIOUSLY ISSUED BY ARTHUR ANDERSEN. THE REPORT HAS NOT BEEN REISSUED BY ARTHUR
ANDERSEN.

REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS

To the Board of Directors and Shareholders of
Global Sources Ltd.

We have audited the accompanying consolidated balance sheets of Global Sources
Ltd. (a company incorporated under the laws of Bermuda) and its subsidiaries as
of December 31, 2001 and 2000, and the related consolidated statements of
income, shareholders' equity and cash flows for each of the three years in the
period ended December 31, 2001. These financial statements are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these financial statements based on our audits.

In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the consolidated financial position of Global
Sources Ltd. and its subsidiaries as of December 31, 2001 and 2000, and the
results of their operations and cash flows for each of the three years in the
period ended December 31, 2001, in conformity with accounting principles
generally accepted in the United States of America.

/s/ ARTHUR ANDERSEN

Singapore
February 28, 2002

F-3

GLOBAL SOURCES LTD. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS

(In U.S. Dollars Thousands, Except Number of Shares and Per Share Data)

At December 31 At December 31
-------------- --------------
2002 2003
-------------- --------------

ASSETS
Current Assets:

Cash and cash equivalents................................................ $ 11,009 $ 26,227
Available-for-sale securities............................................ 26,199 35,140
Accounts receivable, net................................................. 4,169 4,507
Receivables from sales representatives................................... 2,932 3,883
Inventory of paper....................................................... 545 703
Prepaid expenses and other current assets................................ 1,147 1,883
-------------- --------------
Total Current Assets....................................... 46,001 72,343
-------------- --------------

Property and equipment, net................................................. 14,110 7,870
Long term investments....................................................... 100 100
Bonds held to maturity, at amortized cost................................... 1,358 992
Other assets................................................................ 1,081 1,236
-------------- --------------
Total Assets.............................................. $ 62,650 $ 82,541
============== ==============

LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities:
Accounts payable......................................................... $ 4,284 $ 4,432
Deferred income and customer prepayments................................. 18,259 27,454
Accrued liabilities...................................................... 5,361 5,803
Income taxes payable..................................................... 368 804
-------------- --------------
Total Current Liabilities................................. 28,272 38,493
-------------- --------------

Liabilities for incentive and bonus plans................................... 1,025 682
Amount due to parent company................................................ 11,404 --
Amount due to a shareholder................................................. -- 11,404
Minority interest........................................................... 2,823 3,684
Deferred tax liability...................................................... 604 298
-------------- --------------
Total Liabilities......................................... 44,128 54,561
-------------- --------------
Shareholders' Equity:
Common shares, US$0.01 par value; 50,000,000 shares authorized;
28,945,344 (2002: 28,939,844) shares issued and outstanding......... 289 289
Additional paid in capital............................................... 80,460 81,925
Retained deficit......................................................... (57,680) (50,346)
Less: Unearned compensation............................................. (4,547) (4,563)
Accumulated other comprehensive income................................... -- 675
-------------- --------------
Total Shareholders' Equity................................ 18,522 27,980
-------------- --------------
Total Liabilities and Shareholders' Equity........................... $ 62,650 $ 82,541
============== ==============

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

F-4

GLOBAL SOURCES LTD. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME

(In U.S. Dollars Thousands, Except Number of Shares and Per Share Data)

Year Ended December 31,
----------------------------------------------
2001 2002 2003
------------ ------------ ------------

Revenues:

Online services........................................ $ 55,468 $ 51,268 $ 51,367
Other media services................................... 36,391 33,132 36,318
Exhibitions............................................ 2,619 2,455 3,327
Miscellaneous.......................................... 807 631 657
------------ ------------ ------------
95,285 87,486 91,669
------------ ------------ ------------
Operating Expenses:
Sales.................................................. 31,236 28,659 30,113
Event production....................................... 811 933 930
Community.............................................. 12,735 12,481 12,331
General and administrative............................. 32,748 28,885 28,682
Online services development............................ 8,393 5,378 4,960
Non-cash compensation expense (Note a)................. 2,501 2,564 1,419
Amortization of intangibles/Software development cost.. 3,476 3,740 4,453
------------ ------------ ------------
Total Operating Expenses.................................. 91,900 82,640 82,888
------------ ------------ ------------
Income from Operations.................................... 3,385 4,846 8,781
------------ ------------ ------------
Interest expense....................................... (172) -- --
Interest income........................................ 357 439 122
Loss on sale of available-for-sale securities.......... -- -- (40)
Foreign exchange gains (losses), net................... (470) 50 --
Write-down of investments.............................. (1,150) -- --
------------ ------------ ------------
Income before Income Taxes................................ 1,950 5,335 8,863
Income Tax Provision...................................... (1,143) (720) (668)
------------ ------------ ------------
Net Income before Minority Interest....................... $ 807 $ 4,615 $ 8,195
------------ ------------ ------------
Equity in income of affiliate............................. 51 -- --
Minority interest......................................... (83) (308) (861)
------------ ------------ ------------
Net Income................................................ $ 775 $ 4,307 $ 7,334
============ ============ ============
Basic net income per share................................ $ 0.03 $ 0.15 $ 0.25
============ ============ ============
Shares used in basic net income per share calculations (Note
2(u)).................................................. 28,934,344 28,938,970 28,944,470
============ ============ ============
Diluted net income per share.............................. $ 0.03 $ 0.15 $ 0.25
============ ============ ============
Shares used in diluted net income
per share calculations (Note 2(u))..................... 28,934,344 28,940,309 28,979,339
============ ============ ============

Note: a. Reflects the non-cash compensation expenses associated with the
employee equity compensation plans. Approximately $323 (2002: $623, 2001:
$381) represents sales expenses, $96 (2002: $238, 2001: $87) represents
community, $691 (2002: $1,179, 2001: $1,546) represents general and
administrative and $309 (2002: $524, 2001: $487) represents online services
development expenses.

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

F-5

GLOBAL SOURCES LTD. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS

(In U.S. Dollars Thousands)

Year Ended December 31,
----------------------------------------
2001 2002 2003
---------- --------- -----------
Cash flows from operating activities:

Net income....................................................... $ 775 $ 4,307 $ 7,334
Adjustments to reconcile net income to net cash provided by
operating activities:
Depreciation and amortization.................................... 8,934 8,989 $ 8,509
Loss/(Profit) on sale of property and equipment.................. 34 (1) (7)
Accretion of U.S. Treasury strips zero % coupon.................. (122) (99) (74)
Loss on sale of available-for-sale securities.................... -- -- 40
Bad debt expense................................................. 765 670 202
Non-cash compensation expense.................................... 2,501 2,564 1,419
Income attributable to minority shareholder...................... 83 308 861
Write-down of investments........................................ 1,150 -- --
Equity in income of affiliate.................................... (51) -- --
Property and equipment written off............................... 108 153 12
---------- --------- -----------
14,177 16,891 18,296
Changes in assets and liabilities:
Accounts receivables............................................. 1,328 871 (540)
Receivables from sales representatives........................... (153) (2,223) (951)
Receivables from related party sales representatives............. 538 2,900 --
Inventory of paper............................................... 357 311 (158)
Prepaid expenses and other current assets........................ 646 (25) (742)
Long term assets................................................. 147 118 (155)
Accounts payable................................................. (1,911) 659 148
Accrued liabilities and liabilities for incentive and bonus plans (1,061) (175) 99
Deferred income and customer prepayments......................... 1,234 1,137 9,195
Tax liability.................................................... 162 198 131
Net cash provided by operating activities................... 15,464 20,662 25,323

Cash flows from investing activities:
Purchase of property and equipment............................... (4,874) (4,193) (2,307)
Proceeds from sales of property and equipment.................... 315 3 32
Proceeds from matured bonds...................................... 440 450 440
Purchase of available-for-sale securities........................ -- (26,199) (19,300)
Proceeds from sale of available-for-sale securities.............. -- -- 11,000
---------- --------- -----------
Net cash used for investing activities...................... (4,119) (29,939) (10,135)
---------- --------- -----------

Cash flows from financing activities:
Repayment of short-term borrowings............................... (4,000) -- --
Amount received towards directors purchase plan.................. 164 50 30
---------- --------- -----------
Net cash (used for)/generated from financing activities..... (3,836) 50 30
---------- --------- -----------

Net increase/(decrease) in cash and cash equivalents............... 7,509 (9,227) 15,218
Cash and cash equivalents, beginning of the year................... 12,727 20,236 11,009
---------- --------- -----------
Cash and cash equivalents, end of the year......................... $ 20,236 $ 11,009 $ 26,227
========== ========= ===========

Supplemental cash flow disclosures:
Income tax paid.................................................. $ 981 $ 522 $ 537
Interest paid.................................................... 172 -- --
========== ========= ===========

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

F-6

GLOBAL SOURCES LTD. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF SHAREHOLDERS' EQUITY

(In U.S. Dollars Thousands, Except Number of Shares)

Common shares

Accumulated Total
Additional Unearned other share-
Number of paid in Retained compensa- comprehen- holders'
shares Amounts capital deficit tion sive income equity
----------- ---------- ------------ -------- --------- ----------- --------

Balance at December 31, 2000..... 28,934,344 $ 289 $ 75,700 $ (62,762) $(5,066) -- $ 8,161
Net income....................... -- -- -- 775 -- -- $ 775
Non-cash compensation expense.... -- -- 4,306 -- -- -- $ 4,306
Unearned compensation............ -- -- -- -- (1,805) -- $ (1,805)
Amount received towards directors
purchase plan................. -- -- 164 -- -- -- $ 164
----------- ---------- ------------ -------- --------- ----------- --------
Balance at December 31, 2001..... 28,934,344 $ 289 $ 80,170 $ (61,987) $(6,871) -- $ 11,601
Net income....................... -- -- -- 4,307 -- -- $ 4,307
Non-cash compensation expense.... -- -- 240 -- -- -- $ 240
Unearned compensation............ -- -- -- -- 2,324 -- $ 2,324
Amount received towards directors
- purchase plan.......... -- -- 50 -- -- -- $ 50
Issuance of shares under directors
purchase plan................. 5,500 -- -- -- -- -- --
----------- ---------- ------------ -------- --------- ----------- --------
Balance at December 31, 2002..... 28,939,844 $ 289 $ 80,460 $ (57,680) $(4,547) -- $ 18,522
Net income....................... -- -- -- 7,334 -- -- $ 7,334
Non-cash compensation expense.... -- -- 1,435 -- -- -- $ 1,435
Unearned compensation............ -- -- -- -- (16) -- $ (16)
Amount received towards directors
- purchase plan.......... -- -- 30 -- -- -- $ 30

Issuance of shares under directors
- purchase plan........... 5,500 -- -- -- -- -- --
Loss realized on sale of
available-for-sale securities, -- -- -- -- -- 40 $ 40
net of income tax of $NIL ....
Unrealized gain on
available-for-sale securities,
net of income tax of $NIL..... -- -- -- -- -- 635 $ 635
----------- ---------- ------------ --------- --------- ----------- --------
Balance at December 31, 2003..... 28,945,344 $ 289 $ 81,925 $ (50,346) $(4,563) $ 675 $ 27,980
=========== ========== ============ ========= ========= =========== =========

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

F-7

GLOBAL SOURCES LTD. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(In U.S. Dollars Thousands, Except Number of Shares and Per Share Data)

1. The Company

Global Sources Ltd. (the "Company") was incorporated in November 1999 under
the laws of Bermuda. Prior to December 2, 2003, the Company was majority
owned by Hung Lay Si Co. Ltd. (the "Former Parent Company"). The Former
Parent Company is a company organized under the laws of Cayman Islands. It
is wholly owned by the Quan Gung 1986 Trust, a trust formed under the laws
of the Island of Jersey. Hill Street Trustees Ltd. is the trustee of the
trust (the "Trustee") and the Trustee has sole and exclusive voting
investment and depositive power over the shares of capital stock of the
Former Parent Company owned by the trust. On November 27, 2003, the
chairman and chief executive officer of the Company acquired 15,033,846
common shares of the Company representing 51.9 percent of the outstanding
common shares of the Company, from the Former Parent Company. On December
2, 2003, the shares transfer was completed and as a result the chairman and
chief executive officer is the beneficial owner of 19,455,543 or 67.2
percent of the Company's outstanding common shares and he has the sole
power to vote the shares beneficially owned by him. As a consideration of
the purchase of the common shares, the chairman and chief executive officer
has agreed to pay the Former Parent Company $109,337, payable on November
27, 2013, with a right to prepay such amount at anytime. Pending payment of
the said amount, the Former Parent Company will have a security interest in
common shares of the Company held by the chairman and chief executive
officer of the Company.

2. Summary of Significant Accounting Policies

(a) Basis of Consolidation and Presentation

F-8

GLOBAL SOURCES LTD. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(In U.S. Dollars Thousands, Except Number of Shares and Per Share Data)

(b) Use of Estimates

The Company considers all highly liquid investments purchased with an
original maturity of three months or less to be cash equivalents.

(d) Available-for-sale Securities

Short-term investments in marketable securities are classified as
available-for-sale securities. Investments classified as available-for-sale
securities are carried at market value with any unrealized holding gains
and losses, net of related tax effect if any, presented under shareholders'
equity as accumulated other comprehensive income.

Realized gains and losses and declines in values judged to be
other-than-temporary on available-for-sale securities are included in the
statement of income. The cost of securities sold is based on the average
cost method.

(e) Inventory of Paper

Inventory of paper is stated at the lower of cost or market value. Cost is
determined on the first-in, first-out basis.

(f) Property and Equipment

(i) Property and equipment are stated at cost less accumulated
depreciation. Cost represents the purchase price of the asset and
other costs incurred to bring the asset into its existing use.

(ii) Depreciation on property and equipment is calculated to amortize their
cost on a straight-line basis over their estimated useful lives as
follows:

Fixtures, fittings and office equipment........... 5 years
Leasehold improvements............................ 5 years
Motor vehicles.................................... 5 years
Computer equipment and software................... 3 years

F-9

GLOBAL SOURCES LTD. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(In U.S. Dollars Thousands, Except Number of Shares and Per Share Data)

To account for the development costs related to the products to be
sold, leased or otherwise marketed, the Company adopted SFAS No. 86,
"Accounting for the Costs of Computer Software to Be Sold, Leased, or
Otherwise Marketed." Development costs incurred subsequent to the
establishment of the technological feasibility of the product are
capitalized. The capitalization ends when the product is available for
general release to customers.

The Company expensed $1,117, $64 and $38 during the years ended
December 31, 2001, 2002 and 2003, respectively, for the costs incurred
prior to the establishment of the technological feasibility with
respect to the development of products to be sold, leased or otherwise
marketed.

(g) Intangible Assets

In June 2001, FASB issued SFAS No. 141, "Business Combinations," and SFAS
No. 142, "Goodwill and Other Intangible Assets." SFAS No. 141 requires all
business combinations initiated after June 30, 2001 to be accounted for
using the purchase method and broadened the criteria for recording
intangible assets separated from goodwill. Under SFAS No. 142, goodwill and
intangible assets with indefinite lives are no longer amortized but are
reviewed annually (or more frequently if impairment indicators arise) for
impairment. Separable intangible assets that are not deemed to have
indefinite lives will continue to be amortized over their useful lives (but
with no maximum life). The amortization provisions of SFAS No. 142 apply
immediately to goodwill and intangible assets acquired after June 30, 2001.
With respect to goodwill and intangible assets acquired prior to July 1,
2001, we adopted SFAS No. 142 effective January 1, 2002. As goodwill was
fully amortized and no acquisitions occurred during 2001, the Company
believes that the adoption of these standards did not have a material
impact on the Company's financial statements of position, results of
operations, or cash flows.

Intangible Assets, net:

At December 31,
----------------------------
2002 2003
----------- -------------
Goodwill................................ $ 654 $ 654
Copyrights.............................. 3,706 3,706
----------- -------------
4,360 4,360
Less: Accumulated amortization......... (4,360) (4,360)
----------- -------------
$ -- $ --
----------- -------------

(h) Long Term Investments

F-10

GLOBAL SOURCES LTD. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(In U.S. Dollars Thousands, Except Number of Shares and Per Share Data)

Interests in subsidiaries with more than 50% ownership are consolidated and
the ownership interests of minority investors are recorded as minority
interest.

Long term investments in U.S. Treasury strips zero % coupon, held to
maturity are stated at amortized cost.

(i) Impairment of Long-lived Assets

The Company reviews the carrying value of its long-lived assets based upon
a gross cash flow basis and will reserve for impairment whenever events or
changes in circumstances indicate the carrying amount of the assets may not
be fully recoverable. The impairment loss is measured based on the
difference between the carrying amount of the asset and its fair value.
There was no impairment of the Company's property and equipment as of
December 31, 2003.

(j) Revenue Recognition

Revenues from advertising in trade magazines and websites are recognized
ratably over the period in which the advertisement is displayed.
Advertising contracts do not exceed one year. When advertising fees from
published trade magazines and websites are contracted under a single
arrangement, the Company allocates the total advertising fees to the
multiple deliverables based on their relative fair values. The fair value
of the revenues from published trade magazines and websites is based on the
Company's average historical selling prices. Revenue from sales of trade
magazines is recognized upon delivery of the magazine. Magazine
subscriptions received in advance are deferred and recognized as revenue
upon delivery of the magazine. Revenue from the provision of maintenance
service is deferred and recognized ratably over the maintenance service
period. Revenue from organizing exhibitions and business seminars is
recognized at the conclusion of the event and the related direct event
production costs and direct event promotion costs are deferred and
recognized as expenses upon conclusion of the event.

The interest income from investments in U.S. Treasury strips zero % coupon
is recognized as it accrues, taking into account the effective yield on the
asset.

(k) Transactions with Sales Representatives and Related Party Sales
Representatives

F-11

GLOBAL SOURCES LTD. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(In U.S. Dollars Thousands, Except Number of Shares and Per Share Data)

As of December 31, 2001, the boards of directors of eight of these sales
representative companies each included a director nominated by the Company
to monitor the receivables collected from the Company's clients by these
related party sales representatives, and to monitor any changes to the
authorized signatories of the depository bank accounts. The nominated
directors were employees of the Company. The Company and the nominated
directors did not have any interest in the share capital of these related
party sales representatives companies. However as of December 31, 2002 and
2003, the Company does not have any nominated directors on the board of
directors of any of the Company's sales representative companies.
Approximately $20,172, $9,986 and $NIL of the commissions and marketing
fees expense was associated with these related party sales representative
companies for 2001, 2002 and 2003, respectively.

(l) Advertising Expenses

Advertising expenses are expensed as incurred. The Company incurred
advertising expenses of $277, $161 and $244 during the years ended December
31, 2001, 2002 and 2003, respectively.

(m) Operating Leases

The Company leases certain office facilities under cancelable and
non-cancelable operating leases that expire in two to five years. Rentals
under operating leases are expensed on a straight-line basis over the life
of the leases.

(n) Liabilities for Bonus Plan

(o) Retirement Benefits

The Company operates a number of defined contribution retirement benefit
plans. Contributions are based on a percentage of each eligible employee's
salary and are expensed as the related salaries are incurred.

(p) Income Taxes

(q) Minority Interest

F-12

GLOBAL SOURCES LTD. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(In U.S. Dollars Thousands, Except Number of Shares and Per Share Data)

of specified future dividends of eMedia Asia Ltd. Pursuant to an internal
restructuring within the CMP group, United Professional Media B.V.'s 39.9%
interest in eMedia Asia Ltd. and associated obligations were novated and
assigned to UBM Asia B.V. (another subsidiary within the CMP group) in
October 2003. Due to the contingent nature of the payment, the Company did
not record in its balance sheet the promissory note receivable of $6,000
due from CMP and no interest income was accrued as at December 31, 2003,
2002 and 2001. The minority interest liability of $3,684 and $2,823 at
December 31, 2003 and 2002, respectively, reflects CMP's proportionate
interest of the net book value of eMedia Asia Ltd.

(r) Foreign Currencies

(s) Segment Reporting

The Company identifies its operating segments based on business activities,
management responsibility and geographic location. The Company has three
reportable segments: online services, other media services and exhibitions.

(t) Comprehensive Income

Accumulated other comprehensive income consists of the following:

Year Ended December 31,
------------------------------------------------
2001 2002 2003
----------- ------------- ---------------
Unrealized gain on available-for-sale securities,

net of income tax of $NIL...................... $ -- $ -- $ 635

Loss realized on sale of available-for-sale
securities, net of income tax of $NIL.......... $ -- $ -- $ 40
----------- ------------- ---------------
Accumulated other comprehensive income............ $ -- $ -- $ 675
============ ============= ===============

F-13

GLOBAL SOURCES LTD. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(In U.S. Dollars Thousands, Except Number of Shares and Per Share Data)

(u) Basic and Diluted Net Income Per Share

The following table reconciles the number of shares utilized in the net
income per share calculations:

Year Ended December 31,
------------------------------------------------
2001 2002 2003
------------- ------------- --------------

Net income....................................... $ 775 $ 4,307 $ 7,334
============= ============= ==============
Basic net income per share....................... $ 0.03 $ 0.15 $ 0.25
============= ============= ==============
Diluted net income per share..................... $ 0.03 $ 0.15 $ 0.25
============= ============= ==============
Weighted average common shares outstanding,
used in basic net income per share calculation 28,934,344 28,938,970 28,944,470

Effect of dilutive shares........................ -- 1,339 34,869
-------------- -------------- --------------
Weighted average common shares outstanding,
used in diluted net income per share
calculation................................... 28,934,344 28,940,309 28,979,339
============== ============== ==============
Antidilutive share options....................... 21,500 16,000 --

Antidilutive share options had exercise prices greater than the average
market price during the year, and due to the net loss in first quarter of
2001.

(v) Stock Based Compensation

F-14

GLOBAL SOURCES LTD. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(In U.S. Dollars Thousands, Except Number of Shares and Per Share Data)

(w) Allowance for Doubtful Debts

(x) Recent Accounting Pronouncements

In June 2001, FASB issued SFAS No. 143, "Accounting for Asset Retirement
Obligations." This statement addresses financial accounting and reporting
for obligations associated with the retirement of tangible long-lived
assets and the associated asset retirement costs. The purpose of this
statement is to develop consistent accounting for asset retirement
obligations and related costs in the financial statements and provides more
information about future cash outflows, leverage and liquidity regarding
retirement obligations and the gross investment in long-lived assets. We
adopted SFAS No. 143 effective January 1, 2003 and believe that the
adoption of this standard did not have a material impact on the Company's
financial statements of position, results of operations, or cash flows.

In December 2002, FASB issued SFAS No. 148, "Accounting for Stock-Based
Compensation - Transition and Disclosure," which requires additional
disclosures in interim and annual financial statements about the method of
accounting for stock-based employee compensation and the effect of the
method used on reported results. The disclosure provisions of SFAS No. 148
are effective for fiscal years ending after December 15, 2002.

In January 2003, FASB issued FIN No. 46, "Consolidation of Variable
Interest Entities." FIN 46 requires a beneficiary to consolidate a variable
interest entity ("VIE") if it is the primary beneficiary of that entity.
The primary beneficiary is defined as having a variable interest in a VIE
that will absorb a majority of the entity's expected losses if they occur,
receives a majority of the entity's expected residual returns if they
occur, or both. In December 2003, FASB completed deliberations of proposed
modifications to FIN 46 ("Revised Interpretations") resulting in multiple
effective dates based on the nature as well as the creation date of the
VIE. VIEs created after January 31, 2003, but prior to January 1, 2004, may
be accounted for either based on the original interpretation or the Revised
Interpretations. However, the Revised Interpretations must be applied no
later than the Company's first quarter of fiscal 2004. VIEs created after
December 31, 2003 must be accounted for under the Revised Interpretations.
Special Purpose Entities ("SPEs") created prior to February 1, 2003, may be
accounted for under the original or revised interpretation's provisions no
later than the first period ending after December 15, 2003. Non-SPEs
created prior to February 1, 2003, should be accounted for under the
revised interpretation's provisions no later than the Company's first
quarter of fiscal 2004. We believe that the adoption of FIN 46 will not
have a material impact on the Company's financial statements of position,
results of operations, or cash flows.

In November 2002, the EITF reached consensus on EITF Issue No. 00-21,
"Accounting for Revenue Arrangements with Multiple Deliverables", which
addresses how to account for arrangements that may involve the delivery or
performance of multiple products, services, and/or rights to use assets.
The final consensus of EITF 00-21 is applicable to agreements entered into
in fiscal periods beginning after June 15, 2003. We believe that the
adoption of EITF 00-21 does not have a material impact on the Company's
financial statements of position, results of operations or cash flows.

F-15

GLOBAL SOURCES LTD. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(In U.S. Dollars Thousands, Except Number of Shares and Per Share Data)

3. Available-for-sale Securities:

At December 31,
-----------------------------
2002 2003
------------ -------------
Cost.................................... $ 26,199 $ 34,465
Unrealized holding gain................. - 675
------------ -------------
Fair value.............................. $ 26,199 $ 35,140
============ =============
4. Current Assets:

At December 31,
-----------------------------
2002 2003
------------ -------------
Accounts receivable:
Gross trade receivables................. $ 6,135 $ 6,604
Less: Allowance for doubtful debts..... (1,966) (2,097)
------------ -------------
$ 4,169 $ 4,507
============ ============

Movements in allowance for doubtful debts:

Year Ended December 31,
-----------------------------------------------
2001 2002 2003
------------ ------------- -------------

Balance at beginning of year..................... $ 2,400 $ 2,132 $ 1,966
Charged to bad debt expenses..................... 765 670 202
Write-off of bad debts........................... (1,033) (836) (71)
------------ ------------- -------------
Balance at end of year........................... $ 2,132 $ 1,966 $ 2,097
============ ============= =============

At December 31,
------------------------------
2002 2003
------------- -------------
Prepaid expenses and other current assets:

Unsecured employee loans and other debtors....................... $ 108 $ 73
Prepaid expenses................................................. 284 324
Deferred expenses................................................ - 535
Other current assets............................................. 755 951
------------- -------------
$ 1,147 $ 1,883
============= =============

5. Property and Equipment, net:

At December 31,
------------------------------
2002 2003
------------- -------------
Capital work-in-progress........ $ 192 $ -
Leasehold improvements.......... 6,806 6,936

F-16

GLOBAL SOURCES LTD. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(In U.S. Dollars Thousands, Except Number of Shares and Per Share Data)

Motor vehicles.................................................... 98 191
Computers, fixtures, fittings and office equipment................ 22,463 22,866
Software development costs........................................ 14,723 15,664
------------ -----------
Property and equipment, at cost................................... 44,282 45,657
Less: Accumulated depreciation................................... (30,172) (37,787)
------------ -----------
$ 14,110 $ 7,870
============ ===========

Depreciation expense for the years ended December 31, 2001, 2002 and 2003
was $5,458, $5,249 and $4,056, respectively and the amortization of
Software development cost for the years ended December 31, 2001, 2002 and
2003 was $3,106, $3,737 and $4,453 respectively.

6. Long-term Investments and Bonds Held to Maturity:

(i) As at December 31, 2003, the Company holds equity instruments carried
at $100 in a privately held unaffiliated electronic commerce company
for business and strategic purposes. The investment is accounted for
under the cost method since the ownership is less than 20% and the
Company does not have the ability to exercise significant influence
over the investee. The investment is shown under long term investments
in the consolidated balance sheets.

The Company's policy is to regularly review the carrying values of the
non-quoted investments and to identify and provide for impairment when
circumstances indicate impairment other than a temporary decline in
the carrying values of such assets.

During the year 2001, the Company recorded a $1,150 impairment loss
for other than a temporary decline in the carrying value of the
investment based on economic events and other factors. The net
carrying value of the long term investment as at December 31, 2002 and
2003 was $100. The Company will continue to evaluate this investment
for impairment.

(ii) U.S. Treasury strips zero % coupon

At December 31,
--------------------------------
2002 2003
------------ --------------

The amortized cost classified by date of contractual maturity is as
follows:

Due within one year........................................ $ 426 $ 364
Due after one year through five years...................... 854 628
Due after five years through ten years..................... 78 -
------------ --------------
$ 1,358 $ 992
------------ --------------

At December 31,
--------------------------------
2002 2003
------------ --------------
The fair value based on the market price, classified by date of
contractual maturity is as follows:
Due within one year........................................ $ 437 $ 380
Due after one year through five years...................... 964 691
Due after five years through ten years..................... 86 -
------------ --------------

F-17

GLOBAL SOURCES LTD. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(In U.S. Dollars Thousands, Except Number of Shares and Per Share Data)

$ 1,487 $ 1,071
------------ --------------

F-18

GLOBAL SOURCES LTD. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(In U.S. Dollars Thousands, Except Number of Shares and Per Share Data)

At December 31,
--------------------------------
2002 2003
------------ --------------

Gross unrealized holding gains............................. $ 129 $ 79
------------ --------------

7. Other Assets:

At December 31,
--------------------------------
2002 2003
------------ --------------
Employee housing loans..................................... $ 270 $ 231
Club memberships........................................... 514 514
Rental, utility and other deposits......................... 297 491
------------ --------------
$ 1,081 $ 1,236
------------ --------------

8. Current Liabilities:

At December 31,
--------------------------------
2002 2003
------------ --------------
Deferred income and customer prepayments:
Advertising................................................ $ 15,582 $ 19,475
Exhibitions, subscription and others....................... 2,677 7,979
------------ --------------
$ 18,259 $ 27,454
------------ --------------

At December 31,
--------------------------------
2002 2003
------------ --------------
Accrued liabilities:
Salaries, wages and commissions............................ $ 1,261 $ 1,239
Retirement benefit plans................................... 491 548
Current portion of liabilities for incentive and bonus plans 1,174 1,106
Others..................................................... 2,435 2,910
------------ --------------
$ 5,361 $ 5,803
------------ --------------

9. Liabilities for Incentive and Bonus Plans

At December 31,
--------------------------------
2002 2003
------------ --------------
Liability for long term discretionary bonus program........ $ 1,025 $ 682
------------ --------------

10. Related Party Transactions

F-19

GLOBAL SOURCES LTD. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(In U.S. Dollars Thousands, Except Number of Shares and Per Share Data)

tain circumstances, including their termination of employment with the
Company. The loans for the lease of a residence are unsecured, interest
free and are repayable in equal monthly installments over the period of the
lease, typically less than or equal to twelve months. Loans due from
employees for purchase of residences were $270 and $231 as of December 31,
2002 and 2003 respectively. Loans due from employees for lease of
residences were $81 and $61 as of December 31, 2002 and 2003, respectively.
There were no other loans due from the Company's directors and executive
officers as at December 31, 2002 and 2003. Other temporary advances to
staff, which are generally repayable within twelve months, were $26 and $14
as of December 31, 2002 and 2003, respectively.

The Company leases certain office facilities from subsidiaries of the
Former Parent Company under cancelable and non-cancelable operating leases
that include both rental and building maintenance services. During the
years ended December 31, 2001, 2002 and 2003, the Company incurred rental
and building management services expenses of $1,044, $1,048 and $756
respectively, with respect to these office facilities.

The Company also receives legal, secretarial and treasury management
consultancy services from subsidiaries of the Former Parent Company. During
the year ended December 31, 2001, 2002 and 2003, the Company incurred such
legal, secretarial and treasury management consultancy services expenses of
$464, $275 and $259, respectively.

The Company had $11,404 and $11,404 due to the Former Parent Company as of
December 31, 2002 and 2003, respectively. Due to the disposal of the shares
by the Former Parent Company to the Company's chairman and chief executive
officer discussed in Note 1, this liability as at December 31, 2003 was
reclassified and disclosed as "Amount due to a shareholder" in the
Company's consolidated balance sheet as at December 31, 2003. The amount
due to the Former Parent Company is unsecured.

Effective January 1, 2000, the Company executed an unsecured promissory
note in the principal amount of $11,404 to establish the repayment terms of
amounts owed to the Former Parent Company. On January 1, 2005, the Company
will begin repayment of this promissory note. The Company will make
quarterly payments of principal and interest over the following ten years.
Interest will accrue beginning January 1, 2005 at the applicable U.S.
Federal Funds rate.

In addition to the transactions with related party sales representatives
discussed in Note 2(k), the Company provided technical services to these
sales representatives for a fee. During the year ended December 31, 2001,
2002 and 2003, the Company derived such service fees of $259, $156 and $NIL
respectively. During the years ended December 31, 2001, 2002 and 2003, the
Company has incurred costs of $76, $47 and $NIL respectively with respect
to the incentive awards discussed in Note 11, relating to the related party
sales representatives.

11. Liabilities for Incentive and Bonus Plans

Before the commencement of the Equity Compensation Plans the Company
rewarded its senior management staff based on their current performance
through long term discretionary bonus awards. These awards are payable
approximately at the end of five or ten years from the date of the award,
even in the event of termination of employment unless certain non-compete
provisions have been violated. The Company did not incur any expenses
related to these awards during the years ended December 31, 2001, 2002 and
2003. The required funds were set aside for payment of the discretionary
bonuses by purchasing U.S. Treasury

F-20

GLOBAL SOURCES LTD. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(In U.S. Dollars Thousands, Except Number of Shares and Per Share Data)

strips zero % coupons maturing in either five or ten years. These
investments are held until maturity and the proceeds are used for payment
of the discretionary bonuses.

Certain sales representatives of the Company are eligible for incentive
awards under plans administered by the Company. Costs incurred related to
incentive awards under plans administered by the Company for the years
ended December 31, 2001, 2002 and 2003 were $78, $128 and $116
respectively. Amounts under liabilities for incentive plans include amounts
owed under plans previously administered by the Company.

12. Retirement Benefit Plans

The Company operates a number of defined contribution retirement benefit
plans. Employees working in a jurisdiction where there is no statutory
provision for retirement benefits are covered by the Company's plans.

The Company incurred costs of $1,085, $1,101 and $1,102 with respect to the
retirement plans in the years ended December 31, 2001, 2002 and 2003,
respectively.

13. Income Taxes

The Company and certain of its subsidiaries operate in the Cayman Islands
and other jurisdictions where there are no taxes imposed on companies.
Certain of the Company's subsidiaries operate in Hong Kong SAR and
Singapore and are subject to income taxes in their respective
jurisdictions. Also, the Company is subject to withholding taxes for
revenues earned in certain other countries.

Income before income taxes consists of:

Year Ended December 31,
-----------------------------------------------------
2001 2002 2003
--------------- ------------ ------------

Cayman Islands............................ $ 401 $ 3,587 $ 5,420
Foreign................................... 1,549 1,748 3,443
--------------- ------------ ------------
$ 1,950 $ 5,335 $ 8,863
--------------- ------------ ------------

The provision for income taxes consists of:

Year Ended December 31,
-----------------------------------------------------
2001 2002 2003
--------------- ------------ ------------
Current tax expense:
Cayman Islands.......................... $ -- $ -- $ --
Foreign................................. 987 726 974
Deferred tax expense:
Cayman Islands.......................... -- -- --

F-21

GLOBAL SOURCES LTD. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(In U.S. Dollars Thousands, Except Number of Shares and Per Share Data)

Foreign................................. 156 (6) (306)
--------------- ------------ ------------
Total provision........................... $ 1,143 $ 720 $ 668
--------------- ------------ ------------

The provision for income taxes for the years ended December 31, 2001, 2002
and 2003 differed from the amount computed by applying the statutory income
tax rate of 0% as follows:

Year Ended December 31,
-------------------------------------------------------
2001 2002 2003
--------------- ------------- --------------

Income taxes at statutory rate............ $ -- $ -- $ --
Foreign income and revenues taxed at higher
rates..................................... 1,143 720 668
--------------- ------------- --------------
Total..................................... $ 1,143 $ 720 $ 668
--------------- ------------- --------------
Effective tax rate........................ 58.62% 13.50% 7.54%
--------------- ------------- --------------

Deferred tax assets consist of the following:

At December 31,
--------------------------------
2002 2003
-------------- ------------
Net operating loss carry forwards......$ 7,460 $ 7,462
Less: valuation allowance............. (7,460) (7,462)
-------------- ------------
Deferred tax assets....................$ -- $ --
-------------- ------------

The Company recorded a full valuation allowance for the deferred tax assets
due to the uncertainty as to their ultimate realization. The net change in
valuation allowance for the years ended December 31, 2001, 2002 and 2003
was a (decrease)/increase of approximately ($91), $26 and $2, respectively,
resulting primarily from net operating losses incurred by some of the
subsidiaries during the respective years.

As of December 31, 2003 and 2002, a United States subsidiary has net
operating loss carry forwards of approximately $17.3 million. These losses
which expire in year 2020 can be utilized to reduce future taxable income
of the subsidiary subject to compliance with the taxation legislation and
regulations in the relevant jurisdiction.

The Company recognized a deferred tax liability of $604 and $298 as at
December 31, 2002 and 2003, respectively, which primarily arose from the
temporary differences between the financial reporting and the tax bases of
property and equipment in one of the subsidiaries of the Company.

14. Share Capital

On April 14, 2000, in conjunction with the Share Exchange Agreement dated
December 6, 1999, Fairchild (Bermuda), Ltd. issued 27,556,518 common shares
to the shareholders of Trade Media Holdings Ltd., predecessor to Global
Sources Ltd., in exchange for all of its 10,000 ordinary shares outstanding
at that date. All share and per share amounts in these consolidated
financial statements have been restated for the year ended December 31,
1999 in a manner similar to a 2,756 to 1 stock split. In addition,
Fairchild (Bermuda), Ltd. issued 68,891 common shares and 1,308,935 common
shares to The Fairchild Corporation and the shareholders of The Fairchild
Corporation, respectively. After the share exchange Fairchild (Bermuda),
Ltd was renamed Global Sources Ltd. On February 28, 2002 and 2003, the
Company issued 5,500 and

F-22

GLOBAL SOURCES LTD. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(In U.S. Dollars Thousands, Except Number of Shares and Per Share Data)

5,500 common shares, respectively, under the Directors Purchase Plan. The
authorized share capital of the Company as at December 31, 2002 and 2003 is
50,000,000 common shares of $0.01 par value. As at December 31, 2002 and at
December 31, 2003, the Company has 28,939,844 and 28,945,344 common shares
issued and outstanding, respectively.

15. Fair Value of Financial Instruments

The carrying amounts of the Company's cash equivalents, accounts
receivable, accounts payable and accrued liabilities approximate fair value
due to their short maturities. The fair value of available-for-sale
securities is disclosed in Note 3. The fair value of related party payables
cannot be determined due to the related party nature. The information with
respect to long term payables to the Former Parent Company is disclosed in
Note 10. The carrying amount and market value of long term investments are
discussed in Note 6.

16. Concentration of Credit Risk and Other Risks

In 2003, the Company derived approximately 93% of its revenue from
customers in Asia. The Company expects that a majority of its future
revenue will continue to be generated from customers in this region. Future
political or economic instability in Asia could negatively impact the
business.

17. Operating Leases

The Company leases office facilities under cancelable and non-cancelable
operating leases that expire in two to five years. During the years ended
December 31, 2001, 2002 and 2003, the Company's operating lease rental and
building management services expenses were $1,897, $1,872 and $1,484,
respectively. The estimated future minimum lease rental payments under
non-cancelable operating leases as of December 31, 2003 are as follows:

Year Ending December 31, Operating Leases
--------------------------------------- -------------------
2004................................... 468
2005 .................................. 31
2006 onwards........................... --
-------------------
$ 499
-------------------

F-23

GLOBAL SOURCES LTD. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(In U.S. Dollars Thousands, Except Number of Shares and Per Share Data)

18. Segment and Geographic Information

With the launch of China Sourcing Fairs in the fourth quarter of 2003, the
Company realigned its products and services into three groups. Thus the
Company has three reportable segments: online services, other media
services and exhibitions. Certain prior year items have been reclassified
to conform to the 2003 presentation. Revenues by geographic location are
based on the location of the customer.

(a) Segment Information

Year Ended December 31,
-----------------------------------------------------
2001 2002 2003
-------------- -------------- ---------------
Revenues:

Online services............................. $ 55,468 $ 51,268 $ 51,367
Other media services........................ 36,391 33,132 36,318
Exhibitions................................. 2,619 2,455 3,327
Miscellaneous............................... 807 631 657
-------------- -------------- ---------------
Consolidated................................ $ 95,285 $ 87,486 $ 91,669
-------------- -------------- ---------------

Year Ended December 31,
-----------------------------------------------------
2001 2002 2003
-------------- -------------- ---------------
Income/(Loss) from Operations:

Online services............................. $ 5,958 $ 6,311 $ 6,018
Other media services........................ (850) (1,452) 3,372
Exhibitions................................. (220) (315) (1,215)
Miscellaneous............................... (1,503) 302 606
-------------- -------------- ---------------
Consolidated................................ $ 3,385 $ 4,846 $ 8,781
-------------- -------------- ---------------

At December 31,
---------------------------------
2002 2003
-------------- ---------------
Identifiable Assets:

Online services.................... $ 39,497 $ 47,907
Other media services............... 20,876 31,215
Exhibitions........................ 1,545 2,855
Miscellaneous...................... 732 564
-------------- ---------------
Consolidated....................... $ 62,650 $ 82,541
-------------- ---------------

(b) Foreign Operations

Year Ended December 31,
------------------------------------------------------
2001 2002 2003
-------------- ------------- ----------------
Revenues:

Asia....................................... $ 88,427 $ 81,456 $ 84,856
United States.............................. 5,255 4,986 5,970

F-24

GLOBAL SOURCES LTD. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(In U.S. Dollars Thousands, Except Number of Shares and Per Share Data)

Europe..................................... 908 525 437
Others..................................... 695 519 406
-------------- ------------- ----------------
Consolidated............................... $ 95,285 $ 87,486 $ 91,669
-------------- ------------- ----------------

At December 31,
------------------------------------
2002 2003
------------- -----------------
Long-Lived Assets:
Asia.................... $ 15,285 $ 9,206
United States........... 6 -
------------- -----------------
Consolidated............ $ 15,291 $ 9,206
------------- -----------------

19. Contingencies

20. Capital Commitments

The commitments as at December 31, 2003 for the purchase and commissioning
of software amounted to $160. There were no material capital commitments as
at December 31, 2002.

21. Restricted Share Award Plan

On February 4, 2000, the Company established a restricted share award plan
for the benefit of its chairman and chief executive officer in recognition
of services to the Company. In conjunction with the restricted share award
plan, the Former Parent Company assigned 4,409,044 common shares of the
Company, representing a 16% equity interest in the Company to the Company.
The Company then awarded these shares to its chairman and chief executive
officer. The chairman and chief executive officer's entitlement to 551,131
of these shares is subject to an employment agreement with one of the
Company's United States subsidiaries and entitlement to such shares vested
immediately. The chairman and chief executive officer's entitlement to the
remaining 3,857,913 shares is subject to employment, non-compete and
vesting terms under an employment agreement with one of the Company's
United States subsidiaries. The 3,857,913 shares were to vest ratably over
10 years, 10% each year on each anniversary date from the grant date.
However, effective August 30, 2000, the Company's Board of Directors
approved the accelerated vesting of all the restricted shares granted to
the chairman and chief executive officer resulting in immediate vesting of
all the shares. The Company recorded total $64,000 non-cash compensation
expense associated with these awards in the year ended December 31, 2000.
At the modification date and subsequently the Company, based on historical
evidence and the Company's forecast of future employee separations,
estimated that the chairman and chief executive officer will not terminate
employment and appointment as director prior to the date that vesting in
the shares would have occurred absent the modification. Therefore, the
Company has estimated that additional compensation expense to be recognized
as a result of the modification is nil. Should actual results differ from
this estimate, adjustment in future reporting periods will be required.

F-25

GLOBAL SOURCES LTD. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(In U.S. Dollars Thousands, Except Number of Shares and Per Share Data)

22. Equity Compensation Plans

On December 30, 1999, the Company established the Global Sources Employee
Equity Compensation Trust (the "Trust") for the purpose of administering
monies and other assets to be contributed by the Company to the Trust for
the establishment of equity compensation and other benefit plans. The Trust
is administered by Harrington Trust Limited (the "Bermuda Trustee"). The
Bermuda Trustee in the exercise of its power under the Declaration of Trust
may be directed by the plan committee, including the voting of securities
held in the Trust. The Board of Directors of the Company will select the
members of the plan committee.

On February 4, 2000, in conjunction with the establishment of the Trust and
the Share Exchange, the Former Parent Company assigned 2,755,652 common
shares of the Company, representing a 10% equity interest in the Company,
for the establishment of share option plans and/or share award plans, known
as ECP I, ECP II and ECP III. Subsequently, share option plans and/or share
award plans, known as ECP IV, ECP V, ECP VI and ECP VII were established.

Optionees may pay for common shares purchased upon exercise of options in
the manner determined by the plan committee at the time of grant.

Entitlement of the employees to these common shares is subject to
employment and vesting terms.

F-26

GLOBAL SOURCES LTD. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(In U.S. Dollars Thousands, Except Number of Shares and Per Share Data)

Entitlement of the employees, directors and consultants to these common
shares is subject to employment and vesting terms.

Eligible employees, directors and consultants under ECP V were awarded a
one-time grant of shares, the number of which were determined by the plan
committee.

Entitlement of the employees to these common shares is subject to
employment and vesting terms.

The Equity Compensation Plan committee approved the awards of common shares
under ECP IV and ECP V on January 23, 2001. The Equity Compensation Plan
committee approved additional awards of common shares under ECP IV on April
1, 2001 and July 1, 2001 and under ECP V on January 1, 2002.

The non-cash compensation expenses associated with the above awards in
accordance with APB No. 25 and SFAS No. 123, under ECP IV and ECP V of
approximately $3,095 and $1,823, respectively, are recognized over the five
year vesting term from the respective award dates.

Eligible employees, directors and consultants under ECP VI are awarded a
one-time grant of Global Sources Ltd. common shares, the number of which
are determined by the plan committee.

Entitlement of the employees, directors and consultants to these common
shares is subject to non-compete and vesting terms.

The Equity Compensation Plan committee approved ECP VI on March 13, 2001
and made awards of common shares under plan on various dates during the
year 2001 and 2002.

The non-cash compensation expenses associated with the awards in accordance
with APB No. 25 and SFAS No. 123, under ECP VI totaling to approximately
$589, are recognized over the five year vesting term from the respective
award dates.

The Equity Compensation Plan committee approved the awards of common shares
under ECP VII on January 1, 2002 and made further awards on March 31, 2003
and on June 19, 2003. The non-cash compensation expenses associated with
the above awards in accordance with APB No. 25 and SFAS No. 123, under ECP
VII of approximately $1,967 are recognized over the six years vesting term
from the respective award dates.

Entitlement of the employees, directors and consultants to these common
shares is subject to employment and vesting terms.

The Company expensed $2,501, $2,564 and $1,419 in non-cash compensation
costs associated with the awards under the above ECP plans in the years
ended December 31, 2001, 2002 and 2003, respectively.

ECP II ECP III ECP IV ECPV ECP VI ECP VII
-------------------------- ---------- ---------- ---------- ---------- ----------
Purchase Plan Gift Plan Grant Plan Grant Plan Grant Plan Grant Plan Grant Plan
------------- --------- ---------- ---------- ---------- ---------- ----------
Plan Inception March, March, March, January, January, March, January,
2000 2000 2000 2001 2001 2001 2002
------------- --------- ---------- ---------- ---------- ---------- ----------
Number of Shares:

F-27

GLOBAL SOURCES LTD. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(In U.S. Dollars Thousands, Except Number of Shares and Per Share Data)

At December 31, 2000... 88,976 221,193 113,135 -- -- -- --

Original restricted
shares granted in
year 2001............ -- -- -- 574,590 333,300 86,130 --

Shares forfeited to
beneficial trustee... -- (26,915) (21,823) (96,621) (100,650) -- --
------------- --------- ---------- ---------- ---------- ---------- ----------

Balance at December 31, 2001 88,976 194,278 91,312 477,969 232,650 86,130 --

Original restricted
shares granted in
year 2002............ -- -- -- -- 33,000 11,000 147,892

Shares forfeited to
beneficial trustee... -- (10,873) (2,507) (42,591) (31,240) -- (10,112)
------------- --------- ---------- ---------- ---------- ---------- ----------

Balance at December 31, 2002 88,976 183,405 88,805 435,378 234,410 97,130 137,780

Original restricted
shares granted in
year 2003............ -- -- -- -- -- -- 316,059

Shares forfeited to
beneficial trustee... -- (1,439) -- (13,526) (3,960) -- (12,432)
------------- --------- ---------- ---------- ---------- ---------- ----------

Balance at
December 31, 2003.... 88,976 181,966 88,805 421,852 230,450 97,130 441,407
============= ========= ========== ========== ========== ========== ==========
Grant Price Per Share.. $ 21.82 $ NIL $ NIL $ NIL $ NIL $ NIL $ NIL
============= ========= ========== ========== ========== ========== ==========

Weighted average fair
value of the shares
granted.............. $ 2.27 $ 24.09 $ 24.09 $ 7.88 $ 7.95 $ 5.00 $ 3.90
============= ========= ========== ========== ========== ========== ==========

Weighted average fair value of the shares granted is estimated to be the average
market value of the shares at the time of the grant.

23. Directors Purchase Plan

A 2000 Non-Employee Directors Share Option Plan was approved on October 26,
2000 by the shareholders of the Company. Each eligible Director on the date
of the first board meeting of each calendar year, commencing in 2001, would
receive the grant of an option to purchase 22,000 common shares on that
date. The Options granted are subject to such terms and conditions as
determined by the Board of Directors at the grant.

The Board granted the first awards under the above plan in 2001. The option
price was fifteen percent less than the average closing price of the shares
for the last five trading days of the previous calendar year. The award
vests over four years with one quarter of the shares vesting each year.
Full payment must be made upon exercising the option. Upon resignation of
an eligible Director, all unvested shares are forfeited and the option
price received for the forfeited unvested shares is refunded. Only one
Director accepted the offer on February 10, 2001 for the 22,000 shares
granted under option. The $164 received as proceeds of this plan was
included in additional paid-in capital. On February 28, 2002 and 2003, the
Company issued to the

F-28

GLOBAL SOURCES LTD. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(In U.S. Dollars Thousands, Except Number of Shares and Per Share Data)

Director the 5,500 and 5,500 common shares, respectively, that vested on
those dates, adjusted to reflect the shares split discussed in Note 26.

Directors purchasing the shares under the plan pay 10% of the purchase
price which is the average closing price of the shares for the last five
trading days of year 2003, on or before February 28, 2004. The balance of
90% is paid by February 28, 2008 and the shares will be issued thereafter.
The resignation of a Director following his or her purchase of the shares
and payment of the 10% initial installment shall not cause a forfeiture of
the purchased shares. Six directors opted to purchase 22,000 shares each
and one director opted to purchase part of the 22,000 shares. The amount of
$92 received towards the 10% of the purchase price will be included in the
additional paid in capital.

24. Credit Facilities

On March 17, 2000, the Company entered into a credit facility with the Bank
of Bermuda (Isle of Man) Limited. The credit facility has a term of one
year and provides for borrowings of up to $25,000, with minimum borrowings
of $1,000. The lender may request security from time to time to secure
borrowings under the credit facility. The credit facility bears interest,
payable quarterly in arrears, at the London Inter-Bank Market Rate plus
0.5%. The former parent company has guaranteed all of the Company's
obligations under the credit facility.

On March 20, 2002, the credit facility was renewed for $10,000 for one more
year subject to the same terms and conditions as applicable to the original
facility.

This credit facility was renewed for $10,000 for a further one year period
on March 7, 2003, subject to the same terms and conditions as applicable to
the original facility.

As of December 31, 2002 and 2003, the outstanding principal amount under
this credit facility was $NIL.

F-29

GLOBAL SOURCES LTD. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(In U.S. Dollars Thousands, Except Number of Shares and Per Share Data)

The Company also holds a Documentary Credit facility with the Hongkong and
Shanghai Banking Corporation Limited, for providing documentary credits to
the Company's suppliers. This facility has a maximum limit of $577. As at
December 31, 2003, the unutilized amount under this facility was
approximately $265. Hongkong and Shanghai Banking Corporation Limited has
also provided guarantees on behalf of the Company to the Company's
suppliers. As at December 31, 2003, such guarantees amounted to $9.

25. Reclassification

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

26. Post Balance Sheet Events

Subsequent to the balance sheet date, the Company has entered into a number
of licence agreements for its exhibition events amounting to $29,868 in
payments over five (5) years. The agreements are cancelable under Force
Majeure conditions, and with the consent of the other party but may be
subject to a payment penalty.

On February 16, 2004, the Company announced a one for ten bonus share issue
on the Company's outstanding common shares. Shareholders of record on March
1, 2004 will receive one additional common share for every ten common
shares held, of face value of $0.01 each. The bonus share issue will be
distributed on or about April 1, 2004. All common shares and per-share
amounts in the consolidated financial statements and related notes have
been retroactively adjusted to reflect the eleven for ten share split for
all periods presented. In addition, the Company has reclassified $26 and
$26 from additional paid in capital to common share capital as of December
31, 2003 and 2002, respectively.

F-30

GLOBAL SOURCES LTD. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(In U.S. Dollars Thousands, Except Number of Shares and Per Share Data)

At At
March 31, December 31,
-------------- --------------
2004 2003
-------------- --------------
(Unaudited)
ASSETS
Current Assets:

Cash and cash equivalents................................................ $ 12,065 $ 26,227
Available-for-sale securities............................................ 51,978 35,140
Accounts receivable, net................................................. 3,860 4,507
Receivables from sales representatives................................... 3,550 3,883
Inventory of paper....................................................... 747 703
Prepaid expenses and other current assets................................ 3,373 1,883
-------------- --------------
Total Current Assets............................................... 75,573 72,343
-------------- --------------

Property and equipment, net................................................... 7,169 7,870
Long term investments ........................................................ 100 100
Bonds held to maturity, at amortized cost .................................... 1,008 992
Other assets.................................................................. 2,944 1,236
-------------- --------------
Total Assets....................................................... $ 86,794 $ 82,541
============== ==============
LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities:
Accounts payable......................................................... $ 4,149 $ 4,432
Deferred income and customer prepayments................................. 28,191 27,454
Accrued liabilities...................................................... 5,223 5,803
Income taxes payable..................................................... 872 804
-------------- --------------
Total Current Liabilities.......................................... 38,435 38,493
-------------- --------------
Liabilities for incentive and bonus plans..................................... 682 682
Amount due to a shareholder .................................................. 11,404 11,404
Minority interest ............................................................ 4,156 3,684
Deferred tax liability ....................................................... 341 298
-------------- --------------
Total Liabilities.................................................. 55,018 54,561
-------------- --------------

Shareholders' Equity:
Common shares, US$0.01 par value; 50,000,000 shares authorized;
28,952,194 (2003: 28,946,694) shares issued and outstanding............. 290 289
Additional paid in capital .............................................. 86,390 81,925
Retained deficit ........................................................ (47,718) (50,346)
Less : Unearned compensation ........................................... (8,103) (4,563)
Accumulated other comprehensive income .................................. 917 675
-------------- --------------
Total Shareholders' Equity......................................... 31,776 27,980
-------------- --------------
Total Liabilities and Shareholders' Equity......................... $ 86,794 $ 82,541
============== ==============

F-31

GLOBAL SOURCES LTD. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
(In U.S. Dollars Thousands, Except Number of Shares and Per Share Data)

Three months ended
March 31,
----------------------------------
2004 2003
-------------- --------------
(Unaudited) (Unaudited)
Revenue:

Online services....................................................... $ 12,906 $ 12,585
Other media services.................................................. 9,118 8,071
Exhibitions........................................................... 1,509 801
Miscellaneous......................................................... 129 183
-------------- --------------
23,662 21,640

Operating Expenses:
Sales................................................................. 7,504 7,042
Event production ..................................................... 180 236
Community ............................................................ 3,136 2,879
General and administrative............................................ 7,437 7,084
Online services development........................................... 1,072 1,315
Non-cash compensation expense (Note 1) ............................... 833 537
Amortization of software development cost............................. 369 1,025
-------------- --------------
Total Operating Expenses................................................. 20,531 20,118
-------------- --------------
Income from Operations................................................... 3,131 1,522
-------------- --------------
Interest income....................................................... 36 22
Foreign exchange gains (losses), net.................................. 52 (24)
-------------- --------------
Income before Income Taxes............................................... 3,219 1,520
Income Tax Provision..................................................... (194) (91)
-------------- --------------
Net Income before Minority Interest ..................................... $ 3,025 $ 1,429
-------------- --------------
Minority interest........................................................ $ (397) $ (104)
-------------- --------------
Net Income .............................................................. $ 2,628 $ 1,325
Retained deficit brought forward ........................................ $ (50,346) $ (57,680)
-------------- --------------
Retained deficit carried forward ........................................ (47,718) (56,355)
============== ==============
Basic net income per share .............................................. $ 0.09 $ 0.05
============== ==============
Shares used in basic net income per share calculations .................. 28,948,628 28,943,150
============== ==============
Diluted net income per share ............................................ $ 0.09 $ 0.05
============== ==============
Shares used in diluted net income per share calculations ................ 29,062,255 28,943,150
============== ==============

Note: 1. Reflects the non-cash compensation expenses associated with the
employee equity compensation plans. Non-cash compensation represents the
following categories of expenses:

F-32

Three months ended
March 31,
-----------------------------------
2004 2003
-------------- ---------------
(Unaudited) (Unaudited)

Sales.............................. $ 261 $ 81
Community ......................... 31 26
General and administrative ........ 463 328
Online services development........ 78 102
-------------- ---------------
$ 833 $ 537
-------------- ---------------

2. Certain reclassifications have been made to prior period amounts to
conform to the current period presentation.

F-33

GLOBAL SOURCES LTD. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In U.S. Dollars Thousands, Except Number of Shares and Per Share Data)

Three months ended
March 31
-------------------------------------
2004 2003
---------------- --------------
(Unaudited) (Unaudited)
Cash flows from operating activities:

Net income.............................................................. $ 2,628 $ 1,325
Adjustments to reconcile net income to net cash provided by
operating activities
Depreciation and amortization........................................... 993 2,220
Profit on sale of property and equipment................................ - (4)
Accretion of U.S. Treasury strips zero % coupons........................ (16) (19)
Bad debt expense........................................................ 21 122
Non-cash compensation expense........................................... 833 537
Income attributable to minority shareholder............................. 397 104
---------------- --------------
4,856 4,285
Changes in assets and liabilities:
Accounts receivables.................................................... 626 124
Receivables from sales representatives.................................. 333 74
Inventory of paper...................................................... (44) 106
Prepaid expenses and other current assets............................... (1,562) (188)
Long term assets........................................................ (1,708) 55
Accounts payable........................................................ (283) (407)
Accrued liabilities and liabilities for incentive and bonus plans....... (580) 304
Deferred income and customer prepayments................................ 737 (697)
Tax liability........................................................... 111 30
---------------- --------------
Net cash provided by operating activities............................ 2,486 3,686
---------------- --------------

Cash flows from investing activities:
Purchase of property and equipment...................................... (292) (413)
Proceeds from sales of property and equipment........................... - 6
Proceeds from matured bonds............................................. - 185
Purchase of available-for-sale securities............................... (16,448) (2,500)
---------------- --------------
Net cash used for investing activities............................... (16,740) (2,722)
---------------- --------------

Cash flows from financing activities:
Amount received towards directors purchase plan......................... 92 30
---------------- --------------
Net cash generated from financing activities......................... 92 30
---------------- --------------

Net increase (decrease) in cash and cash equivalents..................... (14,162) 994
Cash and cash equivalents, beginning of the period....................... 26,227 11,009
---------------- --------------
Cash and cash equivalents, end of the period............................. $ 12,065 $ 12,003
================ ==============

F-34

Supplemental cash flow disclosures:
Income tax paid....................................................... $ 83 $ 61
================ ==============

F-35