globalf3_103108.htm
As
filed with the Securities and Exchange Commission on November 3, 2008
Registration No. 333-______
SECURITIES
AND EXCHANGE COMMISSION
Washington,
D.C. 20549
___________________
FORM
F-3
REGISTRATION
STATEMENT UNDER THE SECURITIES ACT OF 1933
___________________
GLOBAL
SOURCES LTD.
(Exact
name of registrant as specified in its charter)
___________________
Bermuda
|
[Not
Applicable]
|
(State
or other jurisdiction of incorporation or
organization)
|
(I.R.S.
Employer Identification Number)
|
Canon’s
Court
22
Victoria Street
Hamilton,
HM 12 Bermuda
(441)
295-2244
(Address,
including zip code, and telephone number, including area code, of registrant’s
principal executive office)
James
J. Clark, Esq.
Cahill
Gordon & Reindel LLP
80
Pine Street
New
York, New York 10005
(212)
701-3000
(Name,
address, including zip code, and telephone number, including area code, of agent
for service)
Copies
to:
|
James
J. Clark, Esq.
Cahill
Gordon & Reindel llp
80
Pine Street
New
York, New York 10005
(212)
701-3000
|
James
Bodi, Esq.
Appleby
Canon’s
Court
22
Victoria Street
Hamilton,
HM 12 Bermuda
(441)
295-2244
|
|
Approximate
date of commencement of proposed sale to the public: From time to
time after the registration statement becomes effective.
If the
only securities being registered on this Form are being offered pursuant to
dividend or interest reinvestment plans, please check the following
box. o
If any of
the securities being registered on this Form are to be offered on a delayed or
continuous basis pursuant to Rule 415 under the Securities Act of 1933,
please check the following box. x
If this
Form is filed to register additional securities for an offering pursuant to
Rule 462(b) under the Securities Act, check the following box and list the
Securities Act registration statement number of the earlier effective
registration statement for the same offering. o
If this
Form is a post-effective amendment filed pursuant to Rule 462(c) under the
Securities Act, check the following box and list the Securities Act registration
statement number of the earlier effective registration statement for the same
offering. o
If this
Form is a registration statement pursuant to General Instruction I.C. or a
post-effective amendment thereto that shall become effective upon filing with
the Commission pursuant to Rule 462(e) under the Securities Act, check the
following box. o
If this
Form is a post-effective amendment to a registration statement filed pursuant to
General Instruction I.C. filed to register additional securities or additional
classes of securities pursuant to Rule 413(b) under the Securities Act, check
the following box. o
The
registrant hereby amends this registration statement on such date or dates as
may be necessary to delay its effective date until the registrant shall file a
further amendment which specifically states that this registration statement
shall thereafter become effective in accordance with Section 8(a) of the
Securities Act of 1933, as amended, or until this registration statement shall
become effective on such date as the Commission, acting pursuant to said Section
8(a), may determine.
CALCULATION
OF REGISTRATION FEE
Title
of each class of
securities
to be registered
|
|
Proposed
maximum
offering
price
per
unit
|
Proposed
maximum
aggregate
offering
price
|
Amount
of
registration
fee (6)
|
Common
shares, par value U.S. $0.01 per share (1)
|
(4)(5)
|
(5)(6)
|
(4)(5)(6)
|
(6)
|
Preferred
shares, par value U.S. $0.01 per share (2)
|
(4)(5)
|
(5)(6)
|
(4)(5)(6)
|
(6)
|
Unsecured
debt securities (3)
|
(4)(5)
|
(5)(6)
|
(4)(5)(6)
|
(6)
|
Warrants
purchase common shares
|
(4)(5)
|
(5)(6)
|
(4)(5)(6)
|
(6)
|
Warrants
to purchase preferred shares
|
(4)(5)
|
(5)(6)
|
(4)(5)(6)
|
(6)
|
Warrants
to purchase debt securities
|
(4)(5)
|
(5)(6)
|
(4)(5)(6)
|
(6)
|
Share
purchase contracts
|
(4)(5)
|
(5)(6)
|
(4)(5)(6)
|
(6)
|
Share
purchase units (7)
|
(4)(5)
|
(5)(6)
|
(4)(5)(6)
|
(6)
|
Units
consisting of two or more of the above
|
(4)(5)
|
(5)(6)
|
(4)(5)(6)
|
(6)
|
Total
|
(4)(5)
|
(5)(6)
|
$300,0000,000(6)
|
0(6)
|
(1)
|
Also
includes such presently indeterminate number of Global Sources Ltd. common
shares into which certain series of Global Sources Ltd. debt securities
and Global Sources Ltd. preferred shares may be converted and for which no
separate consideration will be received and for which Global Sources Ltd.
warrants to purchase common stock may be exercised. A portion of the
Global Sources Ltd. common shares registered hereunder may be sold by the
selling shareholder from time to time pursuant to this registration
statement. Estimated solely for the purpose of determining the
registration fee pursuant to Rule 457(c) of the Securities Act of 1933 on
the basis of the average of the high and low sales prices of the Global
Sources Ltd. common shares on the Nasdaq National Market on
October 24, 2008.
|
(2)
|
Also
includes such presently indeterminate number of Global Sources Ltd.
preferred shares into which certain series of Global Sources Ltd. debt
securities may be converted and for which no separate consideration will
be received and for which Global Sources Ltd. debt warrants may be
exercised.
|
(3)
|
Also
includes presently indeterminate number of Global Sources Ltd. debt
securities for which certain Global Sources Ltd. preferred shares may be
exchanged and for which no separate consideration will be
received.
|
(4)
|
There
are being registered under this registration statement such indeterminate
numbers of securities of Global Sources Ltd. as will have an aggregate
initial offering price not to exceed $300,000,000.00. The initial public
offering price of any securities denominated in any foreign currencies or
currency units will be the U.S. dollar equivalent thereof based on the
prevailing exchange rates at the respective times such securities are
first offered. If any Global Sources Ltd. debt securities are issued at an
original issue discount, then the securities registered will include such
additional Global Sources Ltd. unsecured debt securities as may be
necessary such that the aggregate initial public offering price of all
securities issued pursuant to this registration statement will not exceed
$300,000,000.00. In addition, pursuant to Rule 416 under the Securities
Act of 1933, this registration statement will cover such indeterminate
number of Global Sources Ltd. common shares that may be issued with
respect to share splits, share dividends and similar transactions. A portion
of the Global Sources Ltd. common shares registered hereunder may be sold
by the selling shareholder from time to time pursuant to this registration
statement. Estimated solely for the purpose of determining the
registration fee pursuant to Rule 457(c) of the Securities Act of 1933 on
the basis of the average of the high and low sales prices of the Global
Sources Ltd. common shares on the Nasdaq National Market on October 24,
2008.
|
(5)
|
Pursuant
to General Instruction II.C to Form F-3, the amounts to be registered,
proposed maximum aggregate offering price per security, and proposed
maximum aggregate offering price have been omitted for each class of
securities that is offered hereby by the
registrant.
|
(6)
|
The
registration fee has been calculated in accordance with Rule 457(o) under
the Securities Act of 1933 and reflects the maximum offering price of the
securities that may be issued. Global Sources Ltd. previously
paid a registration fee of $38,010 with respect to securities that were
previously registered pursuant to the registrant’s prior registration
statement on Form F-3, (SEC file no. 333-114411), filed on April 12, 2004,
of which $32,878.65 remaining available fees carried over pursuant to Rule
457(p) of the Securities Act and has been applied against the registration
fee of $11,790 due in connection with the filing of this registration
statement hereunder.
|
(7)
|
Each
Global Sources Ltd. share purchase unit consists of (a) a Global Sources
Ltd. common share purchase contract, under which the holder or Global
Sources Ltd., upon settlement, will purchase a fixed or varying number of
Global Sources Ltd. common shares, and (b) a beneficial interest in either
Global Sources Ltd. debt securities, Global Sources Ltd. preferred shares
or debt or equity obligations of third parties, including United States
Treasury securities, purchased with the proceeds from the sale of the
Global Sources Ltd. share purchase units. No separate consideration will
be received for the Global Sources Ltd. share purchase contracts or the
related beneficial interests.
|
———————————————
Subject
to Completion, dated November 3, 2008
The
information in this preliminary prospectus is not complete and may be
changed. We may not sell these securities until the
registration statement filed with the Securities and Exchange Commission
is effective. The preliminary prospectus is not an offer to
sell these securities and is not soliciting an offer to buy these
securities in any state where the offer or sale is not
permitted.
|
PRELIMINARY
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:
·
|
unsecured
debt securities;
|
·
|
warrants
to purchase common shares, preferred shares or debt securities;
and
|
·
|
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 based on market conditions at the time of the relevant
offering. Those terms may include, among others, as
applicable:
·
|
aggregate
principal amount;
|
·
|
currency
or composite currency;
|
·
|
warrant
exercise price;
|
·
|
warrant
expiration date;
|
·
|
listing
on a securities exchange;
|
·
|
amount
payable at maturity; and
|
·
|
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.”
INVESTING
IN OUR SECURITIES INVOLVES CERTAIN RISKS. SEE “RISK FACTORS”
BEGINNING ON PAGE 3.
TABLE OF
CONTENTS
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Page
|
|
|
Cautionary Note Regarding Forward-Looking
Statements
|
vi
|
Prospectus Summary
|
1
|
Risk Factors
|
3
|
Use of Proceeds
|
18
|
Price Range of Common
Shares
|
18
|
Ratio of Earnings to Fixed Charges and Preferred
Share Dividends
|
19
|
Management’s Discussion and Analysis of Financial
Condition and Results of Operations
|
20
|
General Description of the Offered
Securities
|
29
|
Description of Share
Capital
|
30
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Description of Preferred
Shares
|
39
|
Description of Debt
Securities
|
40
|
Description of Warrants to Purchase Common Shares
or Preferred Shares
|
54
|
Description of Warrants to Purchase Debt
Securities
|
57
|
Description of Share Purchase Contracts and Share
Purchase Units
|
59
|
Selling Shareholder
|
61
|
Plan of Distribution
|
62
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Where You Can Find More
Information
|
64
|
Incorporation of Documents by
Reference
|
64
|
About This Prospectus
|
65
|
Legal Matters
|
65
|
Experts
|
65
|
Enforceability of Civil
Liabilities
|
66
|
Index
to Consolidated Financial Statements
|
67
|
Information
Not Required in Prospectus
|
II-1
|
Exhibit
Index
|
E-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:
·
|
customer
satisfaction and quality issues;
|
·
|
our
ability to achieve and execute internal business
plans;
|
·
|
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
|
·
|
other
factors described herein under “Risk
Factors.”
|
A further
list and description of these risks, uncertainties and other matters can be
found in Global Sources Ltd.’s Annual Report on Form 20-F for the fiscal year
ended December 31, 2007 incorporated by reference herein. We do not
assume any obligation to update any forward-looking statements, whether as a
result of new information, future events or otherwise.
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.
The
information contained in this prospectus is a statement of our present
intention, beliefs or expectations and is based upon, among other things, the
existing regulatory environment, industry conditions, market conditions and
prices, the economy in general and their and our assumptions. We may
change our or their intention, belief or expectation, at any time and without
notice, based upon any changes in such factors, in our or their assumptions or
otherwise. We do not undertake to update the forward-looking statements or risk
factors contained or incorporated in this prospectus to reflect future events or
circumstances.
Neither
we or any of our or its affiliates undertakes any obligation to review or
confirm analysts’ expectations or estimates or to release publicly any revisions
to any forward-looking statements to reflect events or circumstances after the
date hereof or to reflect the occurrence of unanticipated events.
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
We are a
leading business-to-business (B2B) media company that provides information and
integrated marketing services, with a particular focus on the Greater China
market, which includes mainland China, Hong Kong and Taiwan. Our
mission is to facilitate global trade between buyers and suppliers by providing
export marketing services and sourcing information. Although our
range of media has grown, for more than 37 years we have been in the same
primary business of helping buyers worldwide find products and suppliers in Asia
(with a particular focus on Greater China).
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. We believe we offer the most extensive range of
media and export marketing services in the industries we
serve. Suppliers using our four primary channels – online
marketplaces, print magazines, trade shows and direct online sales – are
supported by our advertising creative services, education programs and online
content management applications.
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.
We serve
an independently certified community of over 657,000 active members (as of the
end of 2007) in more than 200 countries and territories. This buyer
community has more than tripled in size from 209,000 at the end of
2000. During 2007, buyers sent more than 27 million sales leads, or
requests for information (RFIs) to the 170,000 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 Greater 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 Greater China’s
exports and imports in the industry segments within which we
operate.
Dividend
Policy
We have
not paid any cash dividends on our common shares since October
1999. Previously, we paid cash 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. The Company’s board
of directors reviews its options for the use of cash on a regular basis,
including whether or not to pay any cash dividends.
History and Principal
Executive Office
We are a
leading facilitator of global merchandise trade. Our business began
in 1971 in Hong Kong when we launched Asian Sources, a trade magazine to serve
global buyers importing products in volume from Asia. Today, we are
one of Asia’s leading providers of trade information using online media, print
media and face-to-face events, meeting the marketing and sourcing needs of our
supplier and buyer communities.
While our
core business facilitates exports from Asia (with a particular focus on Greater
China) to the world, we also facilitate trade from the world to Asia (with a
particular focus on Greater China). In 1985, we launched Electronics News for China
for this purpose. Today we have several publications, their
associated websites plus
events and conferences that provide information to electronic engineers and
executives at manufacturing companies in Greater China and throughout
Asia.
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.
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
capital expenditures during the six months ended June 30, 2008 and the year
ended December 31, 2007, 2006 and 2005 amounted to $3.6 million, $11.3 million,
$4.9 million and $7.3 million respectively. For six months ended June 30, 2008,
such expenditure was incurred mainly for purchase of computers, software, office
furniture, leasehold improvements, software development and for deposits paid
for purchase of office premises in China and Hong Kong. For 2007,
such expenditure was incurred mainly for purchase of office premises in China,
computers, software, leasehold improvements, office furniture and software
development. For 2006, such expenditure was incurred mainly on
computers, software, leasehold improvements, office furniture and software
development. For 2005, such expenditure was incurred mainly on office
premises, computers, software, leasehold improvements, office furniture and
software development. Our capital expenditures were financed using
cash generated from our operations. The net book value of capital
assets disposed during the year ended December 31, 2007, 2006 and 2005 amounted
to $0.3 million, $0.002 million and $0.9 million respectively.
Our
primary operating offices are located in Shenzhen, China; Hong Kong, China; and
Singapore. 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
http://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.
Securities We May
Offer
We may
use this prospectus to offer up to $300,000,000.00 of:
·
|
purchase
contracts; and
|
We may
also offer securities of the types listed above that are convertible or
exchangeable into one or more of the securities listed above. In
addition, the selling shareholder (“Selling Shareholder”) may sell in one or
more offerings pursuant to this registration statement up to 6,000,000 of our
common shares that were previously acquired in private
transactions. We will not receive any of the proceeds from the sale
of our common shares sold by the Selling Shareholder.
A
prospectus supplement will describe the specific types, amounts, prices, and
detailed terms of any of these securities that we or the Selling Shareholder may
offer and may describe certain risks associated with an investment in the
securities. Terms used in the prospectus supplement will have the meanings
described in this prospectus, unless otherwise specified.
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.
Exports
from mainland China are key to our current and future revenue growth and
uncompetitive cost conditions in this market, or a potential backlash against
mainland Chinese-made products arising from consumer standard concerns, could
reduce our revenue and seriously harm our business.
Mainland
China is the largest supplier of consumer products to the world. Our
actual and potential customers are mainly suppliers who are based in mainland
China. Should mainland China manufacturers’ production costs go up
substantially (for example, due to the further appreciation of the Chinese
Renminbi (“RMB”), wage and product input price inflation, reduced export rebates
and new environment or labor regulations), products from mainland China may
become less competitive on price. If products from mainland China
become less competitive on price, it would likely have a negative impact on the
demand in mainland China for our various export-focused media and marketing
services.
During
2007, there were several highly publicized incidents involving products made in
mainland China not meeting consumer standards in overseas markets. If
this continues or worsens, there may be a strong backlash against products made
in mainland China and our business may consequently suffer.
The
mainland China 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 mainland China provided approximately 53% of our total revenues in
fiscal 2006, and approximately 60% of our total revenues in fiscal 2007, and we
believe our operations in mainland China will continue to grow for the next
several years. Our dependence on the mainland China market and its
revenues is significant, and adverse political, legal or economic changes in
mainland 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, mainland 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 mainland China. While Hong Kong has had
a long history of promoting foreign investment, its incorporation into China
means that the uncertainty related to mainland China and its policies may now
also affect Hong Kong.
The
international markets, and in particular the Greater China region (which
includes mainland China, Hong Kong and Taiwan), in which we do business are
subject to political, legal and economic instability, which may interfere with
our ability to do business, increase our costs and decrease our
revenues.
The
international markets in which we operate are subject to risks,
including:
·
|
fluctuations
in regional economic conditions;
|
·
|
the
threat of terrorist attacks;
|
·
|
conflicting
and/or changing legal and regulatory
requirements;
|
·
|
restrictions
placed on the operations of companies with a foreign
status;
|
·
|
significant
changes in tax rates and reporting
requirements;
|
·
|
governments
could increase trade protection measures including tariffs, quotas, import
duties or taxes, thereby significantly reducing demand for imported
goods;
|
·
|
the
loss of revenues, property and equipment from expropriation,
nationalization, war, insurrection, terrorism and other political
risks;
|
·
|
adverse
governmental actions, such as restrictions on transfers of
funds;
|
·
|
oil
embargoes or significant increases in oil prices;
and
|
·
|
fluctuations
in currency exchange rates.
|
In 2007,
we derived approximately 91% of our revenues from customers in the Greater China
region. We expect that a majority of our future revenues will
continue to be generated from customers in this region. At the time
of the Asian economic crisis of 1997 and 1998, our revenues and operating
results were adversely affected, and both our sales and revenues
declined. If there is future political, legal or economic instability
in the Greater China region, our business may be harmed and our revenues 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 revenues and
profits may be affected, relative to the U.S. dollar. 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.
Recently,
the RMB has been appreciating versus the U.S. dollar and other currencies and is
expected to continue appreciating. Although we bill in RMB and have
expenses in RMB in mainland China, the continuing appreciation of the RMB could
have an adverse effect on our financial condition. If RMB continues
to appreciate, our current and potential supplier customers may become less
competitive with suppliers from other regions, leading to less demand for our
advertising services.
Currently,
we do not hedge our exposure to foreign currency fluctuations.
The
revenue growth and profitability of our business depends significantly on the
overall demand for business-to-business media services and especially online
marketplace services, trade publications and trade shows. We believe
that the demand for these services is subject to the potentially negative impact
by a number of factors, including the overall weakening of the global economy,
where for example consumer spending has declined in the United States and
Western Europe, and may decline further. Such situations and events
may give rise to a number of trends that adversely affect our business and
revenues.
Future
outbreaks of avian influenza, Severe Acute Respiratory Syndrome (“SARS”) or
other widespread public health problems could adversely affect our
business.
In the
event of future outbreaks of avian influenza, SARS or other widespread public
health problems, some ways in which our business might be adversely affected
could include the following:
·
|
quarantine
or travel restrictions (whether required by government or public health
authorities, or self-imposed) could result in the closure of some of our
offices and other disruptions to our
operations;
|
·
|
sickness
or death of our key officers and
employees;
|
·
|
a
general slowdown in international trade and the global
economy;
|
·
|
our
trade shows may have to be cancelled;
and
|
·
|
exhibitor
and visitor participation at our trade show could be significantly
curtailed or otherwise adversely
affected.
|
Our
inability to sustain and/or increase our average revenue per customer could
adversely affect our operating results.
The
market for print, online and trade show services has fluctuated over the past
few years. We sell our products separately and in various
combinations. If we are unable to maintain or increase average
revenue per customer and/or make up for any decline in average revenue per
customer by increasing our total number of customers, our business could
suffer. Similarly, if we are unable to maintain and/or increase
historic pricing levels for advertising on our websites and in our trade
journals and for booths at our trade shows, our revenues could be adversely
affected.
We
depend upon Internet search engines and other online marketing channels (such as
“pay per click” marketing) to attract a significant portion of the users who
visit our websites, and if we were listed less prominently in Internet search
result listings, or if we are unable to rely on our other online marketing
channels as a cost-effective means of driving visitors to our websites, our
business and operating results could be harmed.
We derive
a significant portion of our website traffic from users who search for content
through Internet search engines, such as Google, MSN, Baidu and Yahoo! A
critical factor in attracting users to our websites is whether we are
prominently displayed in such Internet search results.
Search
result listings are determined and displayed in accordance with a set of
formulas or algorithms developed by the particular Internet search
engine. The algorithms determine the order of the listing of results
in response to the user’s Internet search. From time to time, search
engines revise these algorithms. In some instances, these modifications may
cause our websites to be listed less prominently in unpaid search results, which
will result in decreased traffic from search engine users to our
websites. Our websites may also become listed less prominently in
unpaid search results for other reasons, such as search engine technical
difficulties, search engine technical changes and changes we make to our
websites. In addition, search engines have deemed the practices of
some companies to be inconsistent with search engine guidelines and have decided
not to list their websites in search result listings at all. If we
are listed less prominently or not at all in search result listings for any
reason, the traffic to our websites will likely decline, which could harm our
operating results. If we decide to attempt to replace this traffic,
we may be required to increase our marketing expenditures, which also could harm
our operating results.
We also
rely on other cost-effective online marketing channels (such as “pay per click”
marketing) as an increasingly important means of driving visitors to our
websites. However, the cost of such online marketing channels can
change very frequently (often daily), and it is unclear whether such online
marketing channels will remain cost-effective for us. If we are
unable to rely on such online marketing channels as a cost-effective means of
driving visitors to our websites, our business and operating results could be
harmed; or if we continue to rely on such marketing channels despite their
increased costs, our marketing expenditures will increase, which also could harm
our operating results.
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 through our various media, or made available
by suppliers, may not be sufficient to attract and retain buyers as users of our
services. If buyers and suppliers do not accept our media and
services, or if we are unable to attract and retain a critical mass of buyers
and suppliers for our media and services, our business will suffer and our
revenues may decrease.
None of
the suppliers that currently pay to use our services are under any long-term
contractual obligation to continue using our services. Generally,
their advertising contracts with us for our online and print media are for 6 to
12 months in duration, while their booth contracts with us for our China
Sourcing Fairs are for 2 years. 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.
Our
industry is intensely competitive, evolving and subject to rapid change, where
if we are unable to compete effectively we will lose current customers and fail
to attract new customers.
Our
industry is intensely competitive. Barriers to entry are minimal, and
competitors are able to launch new websites and other media at a low
cost. We constantly face threats from competition, including from
non-traditional competitors and new forms of media. 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. The marketing and pricing decisions of our competitors
strongly influence our business. Increased competition in the
industry has caused significant downward pricing pressure. To the
extent that potential and existing customers make decisions solely or primarily
on price, we may be unable to retain existing customers or attract new
customers, or we may be forced to reduce prices to keep existing customers or to
attract new customers.
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.
We
may not be successful in identifying, consummating and/or effectively
integrating acquisitions, joint ventures and alliances to expand our
business.
We are
regularly evaluating potential strategic acquisitions, joint ventures and
alliances and we believe that establishing such third-party relationships is a
key component of our business strategy. However, we may not be
successful in identifying acquisitions, joint ventures and alliances, or we may
not be able to negotiate satisfactory terms or consummate the transactions
successfully. In these circumstances, our growth potential may be
harmed.
If we do
identify and consummate an acquisition, joint venture or alliance, there is
still a risk that we may not be able to integrate any new businesses, products
or technologies into our existing business and
operations. Alternatively,
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.
The
costs associated with potential acquisitions or strategic partnerships could
dilute your investment or adversely affect our operating results.
In order
to finance acquisitions, investments or strategic partnerships, we may use
equity securities, debt, cash, or a combination of the foregoing. Any
issuance of equity securities or securities convertible into equity may result
in substantial dilution to our existing stockholders, reduce the market price of
our common stock, or both. Any debt financing is likely to have
financial and other covenants based on our performance or results, and there
could be an adverse impact on us if we do not achieve the covenanted performance
or results. In addition, the related increases in expenses could
adversely affect our results of operations.
Various
factors outlined below could adversely affect our ability to operate our China
Sourcing Fair trade show business successfully and we can give no assurances
that this business will be instrumental to our success.
In 2007,
our China Sourcing Fairs accounted for approximately 88% of our total
exhibitions revenue and have contributed substantially to our growth and
success. The first China Sourcing Fair was held in Shanghai in 2003,
the first of our series of China Sourcing Fairs in Hong Kong was launched in
April 2006, the first of our series of China Sourcing Fairs in Dubai was
launched in June 2007, a new series of China Sourcing Fairs in mainland China
focusing on serving mainland China’s domestic market was launched in December
2007, and a new series of China Sourcing Fairs in Mumbai is scheduled for launch
in November 2008. Our China Sourcing Fairs in Dubai, the domestic
China Sourcing Fairs in mainland China and the China Sourcing Fairs in Mumbai
are new business initiatives and we are uncertain as to our ability to attract
the quality and quantity of exhibitors and buyers that would enable these trade
shows to be successful.
In
addition, there are substantial and long-established trade shows in Hong Kong
and southern mainland China, which compete with our China Sourcing Fairs in Hong
Kong, and which are expected to have access to expanded venue space from 2008
and 2009. Because of these expanded venues, we may not be able to
attract the desired quantity and quality of exhibitors and buyers.
Also,
because of the uncertainty of launching new trade shows and the competition, we
may not achieve our desired sales objectives. Furthermore, in an
effort to rapidly grow our trade show business, additional personnel were hired
and additional capital expended. We may be unable to effectively
execute the operations, which would jeopardize our ability to be successful in
the trade show business.
Our
various trade show businesses also require us to make substantial non-refundable
deposits and progress payments to secure venue dates far in advance of our
conducting the trade show. In addition, the date and location can
greatly impact the profitability. The market for desirable dates and
locations is highly competitive. If we cannot secure desirable dates
and locations for our trade shows, their profitability and future prospects
would suffer, and our financial condition and results of operations would be
materially and adversely affected.
In
addition, while we expect that a significant portion of our future revenues will
be derived from our trade show business (in particular, our China Sourcing Fair
business), several other factors could negatively affect our financial
performance in this business, including:
·
|
the
spread of SARS, avian influenza and other similar
epidemics;
|
·
|
political
instability and the threat of terrorist
attacks;
|
·
|
conflicting
and/or changing legal and regulatory
requirements;
|
·
|
natural
catastrophes, labor strikes and transportation
shutdowns;
|
·
|
decrease
in demand for booth
space;
|
·
|
particularly
in mainland China, we may not always be able to obtain the required trade
show licenses, which may limit the number of trade shows we are able to
hold;
|
·
|
our
sales representative companies’ inability to effectively
expand their staff and
infrastructure;
|
·
|
inability
to renew our venue contracts on favorable terms or at desired times;
and
|
·
|
a
possible slowdown in product demand from outlet
markets.
|
In view
of the various risks outlined above, we can give no assurances that our
operation of the trade show business will be instrumental to our
success.
Even
though we may increase our revenues, our margins and profits may not
increase.
Even if
we are able to grow our revenue, this does not necessarily translate to a growth
of our margins and profits, which may or may not increase at all.
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.
We
may not be able to attract, hire and retain qualified personnel
cost-effectively, which could impact the quality of our content and services and
the effectiveness and efficiency of our management, resulting in increased costs
and losses in revenues.
Our
success depends on our ability to attract, hire and retain at commercially
reasonable rates, qualified technical, sales support management, marketing,
customer support, financial and accounting, legal and other managerial
personnel. The competition for personnel in the industries in which
we operate is intense. Our personnel may terminate their employment
at any time for any reason. Loss of personnel may also result in
increased costs for replacement hiring and training. If we fail to
attract and hire new personnel or retain and motivate our current personnel, we
may not be able to operate our businesses effectively or efficiently, serve our
customers properly or maintain the quality of our content and
services.
We
rely on independent sales representative companies for the sales and marketing
of our products and services and the loss of any significant sales
representative company or employees of a sales representative company, or if the
sales representative company cannot expand its number of employees as
anticipated, it would harm our business and revenues.
We have
agreements with various sales representative companies that employ sales
representatives. Seven sales representative companies in mainland
China are responsible for approximately 60% of our total revenues for the year
ended December 31, 2007. Generally, either we or the sales
representative companies may terminate the service agreement between them and us
upon short notice. It is possible that we may not retain some of our
sales representative
companies, or they may not retain some of their sales personnel (due to
competition from other companies in hiring and retaining sales personnel) or be
able to replace them with equally qualified personnel. Furthermore,
if a sales representative company terminates its agreement with us, some of our
customers with a direct relationship with that sales representative company or
its personnel may terminate their relationship with us. Although
these sales representative companies 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. If sufficient numbers of employees
are not recruited, properly trained, integrated, motivated, retained and managed
by these sales representative companies, or if they perform poorly, or if our
relationship with these sales representative companies fail or deteriorate, our
business may be harmed.
Our
China Global Sources Online website, which we recently launched to facilitate
trade in mainland China’s domestic market, has yet to generate revenue and may
not ever be profitable.
We have
launched our China Global Sources Online website in November of 2007 to
facilitate trade in mainland China’s domestic market. We have not
generated any revenues since our launch and may not ever achieve
revenue. We may not have sufficient access to capital to develop and
market the China Global Sources Online website and we give no assurances that
our operation of this business will be incremental to our growth. We
cannot be sure that the China Global Sources Online website will generate any
operating revenues or ever achieve profitable operations and its failure could
have a materially adverse effect on our financial condition.
Our
limited experience in direct online sales business as well as other factors
could adversely affect our ability to operate our business
successfully.
Our
direct online sales business, primarily referred to by us as “Global Sources
Direct”, is a relatively new business, having started in 2006, both for us and
for most of the suppliers we are targeting as potential
customers. The lack of an established history and track record for
this new sales channel, both on our part and in the industry, may make it
difficult for us to successfully market this service to, and attract and
maintain, a sufficient number of customers that we would need in order to grow
the direct online sales business to a scale that would be profitable for
us.
Other
factors that could adversely impair the success of our direct online sales
business include the following:
·
|
We
utilize credit card payment processes. Under the terms of our
arrangements with the credit card payment processors, they are entitled to
charge back amounts to us in the event of any fraudulent or disputed
transaction. They may also decide to withhold or delay fund
payments to us for an indefinite period, or even discontinue their
arrangements with us, if the charge back rate is too high or
frequent.
|
·
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We
use various third parties’ online services (for example, for hosting and
payment processing), and any disruptions to their services may adversely
affect our own ability to complete transactions or may cause other
disruptions to our own service.
|
·
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Online
fraud and fraudulent orders are potential risks. We may not
have detected or been aware of, or be able to detect in the future, such
fraudulent transactions, and if we act pursuant thereto (for example, by
shipping products under a fraudulent order), we may subsequently be unable
to collect payment, be required to refund payments, or be liable for the
costs or losses related thereto.
|
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We
rely on the quality of our suppliers’ products being acceptable to buyers,
and therefore conduct (or engage third parties to conduct) inspections of
those products. It is possible, however, that we will pay a
supplier for its product before the buyer receives delivery of the
product. Hence, if despite our (or the third parties’)
inspection efforts, or if we (or the third parties) fail to conduct
inspections properly or at all and, any defects or inferior quality of the
products are not
spotted, the buyer may return such products. In such cases, we
may have difficulty recovering our funds from the supplier and incur a
loss.
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·
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It
is possible that we may unknowingly sell suppliers’ products which
infringe upon a third party’s intellectual property rights. A shipment by
us containing products which are actually, potentially or
perceived to be in infringement of the intellectual property rights of a
third party (together with other non-infringing products within the same
shipment) may be seized and confiscated by customs authorities at their
destination, and we may be liable to refund to the buyers concerned any
payments they may already have made to us for such products and/or we may
have difficulty recovering or be unable to recover from the suppliers
concerned any payments we may already have made to them for such products.
In such cases, we may therefore incur costs and
losses.
|
·
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We
have a growing number of competitors who may be able to source and/or sell
more effectively than us.
|
We
may not innovate at a successful pace, which could harm our operating
results.
Our
industry is rapidly adopting new technologies and standards to create and
satisfy the demands of users and advertisers. It is critical that we
continue to innovate by anticipating and adapting to these changes to ensure
that our content-delivery platforms and services remain effective and
interesting to our users, advertisers and partners. In addition, we
may discover that we must make significant expenditures to achieve these
goals. If we fail to accomplish these goals, we may lose users and
the advertisers that seek to reach those users, which could harm our operating
results.
We
may not have sufficient access to capital to enter into acquisitions, joint
ventures and alliances, or to expand our business, or to take advantage of
organic growth opportunities.
We may
not have sufficient access to capital to enter into strategic acquisitions,
joint ventures and alliances, or to expand our business, or to take advantage of
organic growth opportunities. In such circumstances, our growth
potential may be harmed.
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 achieve our
business objectives.
Our sales
representatives in mainland China plan to increase substantially the number of
sales representative team members in mainland China in order to help us in
pursuing our business objectives. Our success will depend in part
upon the ability of this growth to be implemented and managed
effectively. To do this, additional new sales representative team
members must be recruited and trained. If new sales representative
team members perform poorly, or if their training and management is
unsuccessful, or if our relationships with existing sales representative team
members 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 achieve our business objectives.
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 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 and could cause delays in
revenue growth.
We
may be subject to legal liability for publishing or distributing content over
the Internet or in our trade publications or at our 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 at our tradeshows. Claims could involve matters such
as libel and defamation, negligent misstatements, patent, trademark, copyright
and design infringement, fraud, invasion of privacy or other legal theories
based on the nature, creation or distribution of our content (for example, the
use of hypertext links to other websites operated by third
parties). 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, our users or
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. Regardless of the merit of such claims or legal
actions, they could divert management time and attention away from our business,
result in significant costs to investigate and defend, and damage our reputation
(which could result in client cancellations or overall decreased demand for our
products and services), thereby harming our business, financial condition and
operating results. In addition, if we are not successful in defending
against such claims or legal actions, we may be liable to pay substantial
damages. Our insurance may not cover claims or legal actions of this
type, or may not provide sufficient coverage.
We
may be subject to legal liability for the verification services that we offer to
buyers and suppliers.
We offer
verification services (by ourselves and/or through third parties whom we engage)
to buyers in respect of certain of our supplier customers, and to suppliers in
respect of their buyers. The verification services which we offer to
buyers in respect of suppliers include: verification of a supplier’s company and
business details; supplier credit profiles and credit reports; and supplier
capability assessment and product inspection reports. The
verification services which we offer to suppliers in respect of buyers include:
buyer trade profile reports and company background and contact
information. We may be subject to legal claims and actions for any
inaccurate, erroneous, incomplete or misleading information provided in
connection with such verification services. While we may have
liability disclaimers associated with such verification services, such liability
disclaimers may nevertheless be insufficient to deter a complainant from
attempting to raise a claim or to institute legal action against us, or may be
held by a court to be invalid or unenforceable. As for those
verification services which are not provided directly by us but by third parties
engaged by us, a complainant may nevertheless attempt to hold us responsible for
such third parties. Regardless of the merit of any such claims or
legal actions, they could divert management time and attention away from our
business, result in significant costs to investigate and defend, and damage our
reputation (which could result in client cancellations or overall decreased
demand for our products and services), thereby harming our business, financial
condition and operating results. In addition, if we are not
successful in defending against such claims or legal actions, we may be liable
to pay substantial damages. Our insurance may not cover claims or
legal actions of this type, or may not provide sufficient coverage.
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 and ability to compete are dependent in part upon our proprietary
technology, content and information databases, the goodwill associated with our
trademarks, and other intellectual property rights. We have relied on
a combination of copyright, trade secret and trademark laws and non-disclosure
and other contractual restrictions to protect ourselves. However, our
efforts to protect our intellectual property rights may not be
adequate. Although we have filed (and continue to file) applications
for and have obtained registration of many of our key trademarks in various
jurisdictions, we may not always be able to obtain successful
registrations. 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, copyright, 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. Such laws may not always
be sufficient to prevent others from copying or otherwise obtaining and using
our content, technologies, or trademarks. In addition, policing our
intellectual property rights worldwide is a difficult task, and we may be unable
to detect unauthorized use of our intellectual property or to identify
infringers. 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 are infringing 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 with costly royalties 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. All of this
could therefore have a material adverse effect on our business, results of
operations and financial condition.
We may
not have, in all cases, conducted formal or comprehensive investigations or
evaluations to confirm that our content and trademarks do not or will not
infringe upon the intellectual property rights of third parties. As a
result, we cannot be certain that we do not or will not infringe upon the
intellectual property rights of third parties. If we are found to
have infringed a third party’s intellectual property rights, the value of our
brands and our business reputation could be impaired, and our business could
suffer.
Evolving
regulation of the Internet and commercial e-mail may affect us
adversely.
As
Internet commerce continues to evolve, increasing legislation and regulation by
governments and agencies become more likely. We use e-mail as a
significant means of communicating with our existing and potential customers and
users. We also provide “@globalsources.com” e-mail addresses to our
clients, for their use. The laws and regulations governing the use of
e-mail for marketing purposes continue to evolve, and the growth and development
of the market for commerce over the Internet may lead to the adoption of
additional legislation and/or changes to existing laws. Existing, new
or additional legal prohibitions on the transmission of unsolicited commercial
e-mail (commonly known as “spam”), coupled with aggressive enforcement, could
reduce our ability to promote our services in a cost-efficient manner and our
ability to facilitate communications between suppliers and buyers and, as a
result, adversely affect our business.
In
addition to legal restrictions on the use of e-mail, Internet service providers,
various operators of Internet mailbox services, anti-spam organizations and
others typically attempt to block the transmission of unsolicited e-mail and
are increasing the number and volume of unsolicited e-mails they are
blocking. With this increasing vigilance also comes an increased rate
of “false positives”, i.e. legitimate e-mails being wrongly
identified as “spam”. If an Internet or other service provider or
software program identifies e-mail from us (or from our clients to whom we have
provided “@globalsources.com” e-mail addresses) as “spam”, we could be placed on
a restricted list that would block our e-mails to our actual or potential
customers or users who maintain e-mail accounts with these Internet service or
other providers or who use these software programs or our e-mails could be
routed to bulk folders and ignored. If we are unable to communicate
by e-mail with our actual or potential customers or users as a result of
legislation, blockage of our e-mails, routing of our e-mails to bulk folders, or
otherwise, our business, operating results and financial condition could be
harmed.
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.
Changes
in regulations could adversely affect our business and results of
operations.
It is
possible that new laws and regulations or new interpretations of existing laws
and regulations in the United States, the European Union, mainland China and
elsewhere will be adopted covering issues affecting our business,
including:
·
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privacy,
data security and use of personally identifiable
information;
|
·
|
copyrights,
trademarks and domain names; and
|
·
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marketing
practices, such as e-mail or direct
marketing.
|
Increased
government regulation, or the application of existing laws to online activities,
could:
·
|
decrease
the growth rate of our business;
|
·
|
increase
our operating expenses; or
|
·
|
expose
us to significant liabilities.
|
Furthermore,
the relationship between regulations governing domain names and laws protecting
trademarks and similar proprietary rights is still
evolving. Therefore, we might be unable to prevent third parties from
acquiring domain names that infringe or otherwise decrease the value of our
trademarks and other proprietary rights. Any impairment in the value
of these important assets could cause our stock price to decline. We
cannot be sure what effect any future material non-compliance by us with these
laws and regulations or any material changes in these laws and regulations could
have on our business, operating results and financial condition.
Changes
in laws and standards relating to data collection and use practices and the
privacy of Internet users and other individuals could impair our efforts to
maintain and grow our audience and thereby decrease our advertising
revenue.
We
collect information from our users who register for services or respond to
surveys. Subject to each user’s permission (or right to decline), we
may use this information to inform our users of products and services that may
be of interest to them. We may also share this information with our
advertising clients for those who have granted us permission to share their
information with third parties. Governments in various jurisdictions,
including the United States, the European Union and Canada, have adopted or
proposed limitations on the collection, distribution and use of personal
information of Internet users. In addition, growing public concern
about privacy, data security and the collection, distribution and use of
personal information has led to self-regulation of these practices by the
Internet advertising and direct marketing industry, and to increased
governmental regulation. Because many of the proposed laws or
regulations are in their early stages, we cannot yet determine the impact these
regulations may have on our business over time. Although, to date,
our efforts to comply with applicable laws and regulations have not hurt our
business, additional or more burdensome laws or regulations, including consumer
privacy and data security laws, could be enacted or applied to us or our
customers. Such laws or regulations could impair our ability to collect
user information that helps us to provide more targeted advertising to our
users, thereby impairing our ability to maintain and grow our audience and
maximize advertising revenue from our advertising
clients.
Our
quarterly operating results may have seasonal fluctuations, and we may fail to
meet analyst, investor and shareholder expectations.
We
typically experience seasonal quarter-to-quarter fluctuations in our
revenue. Buyer’s usage of our media and services is typically
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. Currently, most of our largest trade shows are
expected to be held in April and October of each year. The net result
of the above seasonality is that second and fourth quarter revenues are likely
to be substantially higher than the first and third quarter
revenues. In 2007, approximately 29% of our revenue was generated
during the second quarter and approximately 33% during the fourth
quarter. The first quarter accounted for approximately 19% of revenue
in 2007 and the third quarter accounted for approximately 19% of revenue in
2007. In addition, certain expenses associated with future revenues
are likely to be incurred in the preceding quarters, which may cause
profitability to be lower in those preceding quarters. Also, because
event revenue is recognized when a particular event is held, we may also
experience fluctuations in quarterly revenue based on the movement of annual
trade show dates from one quarter to another.
Our
share prices may fluctuate in response to a number of events and
factors.
Our share
price may fluctuate in response to a number of events and factors such as
quarterly variations in operating results; announcements of new services or
pricing options by us or our competitors; changes in financial estimates and
recommendations by securities analysts; failure to meet our financial guidance
and/or the financial forecasts of analysts; the operating and share price
performance of other companies that investors may deem comparable; news reports
relating to trends in the Internet and information technology industry;
announcements by us or our competitors of significant acquisitions, strategic
partnerships, joint ventures or capital commitments; or changes in laws in the
countries in which we operate.
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 (“Nasdaq”). As of August 31, 2008 we had approximately 939
shareholders, and approximately 14,479,880 shares that were tradable on the
Nasdaq.
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.
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 August 31,
2008, we had 46,703,058 common shares outstanding, out of which at least
approximately 32,223,178 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.
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.
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:
·
|
providing
for a staggered board of directors, so that it would take three successive
annual general meetings to replace all
directors;
|
·
|
requiring
the approval of 100% of shareholders for shareholder action by written
consent;
|
·
|
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
|
·
|
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 Nasdaq) 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.
|
Merle
A. Hinrichs, our Chairman and Chief Executive Officer, is also our controlling
shareholder and he may take actions that conflict with your
interest.
As of
August 31, 2008, Merle A. Hinrichs beneficially owned approximately 61.2% 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 our
securities.
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 marketplace
revenues from the Asia-Pacific region. The quality of some of the
telecommunications and Internet infrastructure and telephone line availability
in mainland China and in some Asia-Pacific countries is
unreliable. This may contribute to lower than expected adoption of
many of our services and may cause usage growth and revenues to fall below
expectations. In addition,
access fees in some Asia-Pacific countries may contribute to low usage and may
adversely affect our growth and revenues
potential.
The
failure of our computer systems, network and communications hardware and
software could materially and adversely affect our business and results of
operation.
Our
business depends on the high availability, good performance and strong security
of our computer systems, network, and associated hardware and
software. Any system interruptions, poor performance or security
breaches impacting on Global
Sources Online or any of our online sites may drive buyers and other
registered users away and reduce the attractiveness of these sites to
advertisers, and therefore adversely affect our business, financial condition
and operating results.
We host
our key customer-facing computer systems with major Internet Service Providers
(ISPs) in Hong Kong. Interruptions to these ISPs’ and/or their
partners’ hosting services could result from natural disasters as well as
catastrophic hardware failures, software problems, extended power loss,
telecommunications failure and similar events. While these ISPs may
have their own disaster recovery capabilities and/or be able to provide us with
disaster recovery facilities on request in such circumstances, nevertheless, if
there is any failure, inability or delay on their part in providing such
disaster recovery facilities as committed, serious and prolonged disruptions to
our systems and services could result.
Although
we support the integrity of our security with IDS (Intrusion Detection Systems),
anti-virus and other tools as a precaution against hackings, denial-of-service
and other cyber intrusions, such security systems and programs are not
completely foolproof or error-free, and new updates to deal with the latest
viruses or security threats may not yet be available or may not yet have been
implemented. Hence, security breaches could still occur, and we
cannot give any assurances that we will always be able to prevent individuals
from gaining unauthorized access to our servers. Any such
unauthorized access to our database servers, including abuse by our employees,
could result in the theft of confidential customer or user information contained
in our database servers. If such confidential information is
compromised, we could lose customers or become subject to liability or
litigation and our reputation could be harmed, any of which could materially and
adversely affect our business and results of operations.
The
failure of outside parties to meet committed service levels 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,
telecommunications and technology products and services. We rely on
relationships and/or contractual agreements with software developers and
providers, systems integrators and other technology or telecommunications 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 providing application licenses, hosting our
Global Sources Online
servers and database, maintaining our communications and managing the network
and data centers which we rely on for the provision of our
services. These relationships may not continue or may not be
available on the same commercial terms in the future, 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 the same commercial terms in the
future. The loss of these licenses could delay the 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 direct control over the accuracy, timeliness or effectiveness of the
information, products and services or performances 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 and/or other registered users in a
satisfactory manner.
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.
Customer
concerns regarding Internet security may deter use of our online products and
services.
Widely
publicized security breaches involving the Internet or 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 revenues. 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.
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.
Because
we are governed by Bermuda law rather than the laws of the United States and our
assets are outside of the United States, 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 enforce judgments of courts of the
United States against them predicated upon civil liabilities under United States
federal securities laws. We have been advised by our legal counsel in
Bermuda, Appleby, 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 United States federal
securities laws.
We
may not pay cash dividends in the foreseeable future.
We may
not pay cash dividends in the foreseeable future. This may reduce the
demand for our shares.
USE
OF PROCEEDS
Unless we
specify otherwise in any prospectus supplement, the net proceeds from the sale
of securities by us offered under this prospectus will be used for general
corporate purposes. 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 one for ten bonus share issues announced on February 16, 2004,
March 1, 2005, March 6, 2006, March 5, 2007 and on December 20, 2007 were as
follows:
|
|
|
|
|
|
|
Year
2003
|
|
$ |
6.89 |
|
|
$ |
2.52 |
|
Year
2004
|
|
$ |
11.49 |
|
|
$ |
4.00 |
|
Year
2005
|
|
$ |
15.59 |
|
|
$ |
4.52 |
|
Year
2006
|
|
$ |
14.88 |
|
|
$ |
7.02 |
|
Year
2007
|
|
$ |
35.35 |
|
|
$ |
12.64 |
|
First
Quarter 2006
|
|
|
8.73 |
|
|
|
7.03 |
|
Second
Quarter 2006
|
|
|
10.33 |
|
|
|
7.02 |
|
Third
Quarter 2006
|
|
|
10.82 |
|
|
|
7.02 |
|
Fourth
Quarter 2006
|
|
|
14.88 |
|
|
|
8.00 |
|
First
Quarter 2007
|
|
|
17.27 |
|
|
|
12.66 |
|
Second
Quarter 2007
|
|
|
20.91 |
|
|
|
12.64 |
|
Third
Quarter 2007
|
|
|
22.58 |
|
|
|
13.85 |
|
Fourth
Quarter 2007
|
|
|
35.35 |
|
|
|
19.22 |
|
First
Quarter 2008
|
|
|
29.35 |
|
|
|
10.50 |
|
Second
Quarter 2008
|
|
|
16.89 |
|
|
|
11.84 |
|
December
2007
|
|
|
30.85 |
|
|
|
24.22 |
|
January
2008
|
|
|
29.35 |
|
|
|
12.50 |
|
February
2008
|
|
|
15.13 |
|
|
|
12.20 |
|
March
2008
|
|
|
16.50 |
|
|
|
10.50 |
|
April
2008
|
|
|
15.70 |
|
|
|
11.84 |
|
May
2008
|
|
|
16.89 |
|
|
|
12.88 |
|
June
2008
|
|
|
15.99 |
|
|
|
12.23 |
|
July
2008
|
|
|
15.60 |
|
|
|
12.62 |
|
August
2008
|
|
|
16.01 |
|
|
|
10.49 |
|
September
2008
|
|
|
11.71 |
|
|
|
9.50 |
|
On
October 30, the closing sales price for our common shares as reported on
the Nasdaq National Market was $7.35. As of August 31, 2008, and
based on information provided to us by our transfer agent, there were
approximately 939 holders of record of our common shares.
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:
|
|
|
|
|
Six
Months Ended
June
30,
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Ratio
of earnings to fixed charges
|
|
|
N/A |
|
|
|
N/A |
|
|
|
N/A |
|
|
|
N/A |
|
|
|
N/A |
|
|
|
N/A |
|
Deficiency
of earnings to cover fixed charges
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
“Fixed
Charges” consists of:
·
|
interest
expensed and capitalized, and
|
·
|
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 accompanying financial statements.
Overview
We are a
leading business-to-business (B2B) media company and a primary facilitator of
two-way trade with Greater China. The core business is facilitating trade from
Greater China to the world, using a wide range of English-language media. The
other key business segment facilitates trade from the world to Greater China
using Chinese-language media. We provide sourcing information to volume buyers
and integrated marketing services to suppliers. 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 37 years we have been in the same basic business of helping buyers
worldwide find products and suppliers in Asia.
Global
Sources’ mission is to connect global buyers and suppliers by providing the
right information, at the right time, in the right format.
Our key
business objective is to be the preferred provider of content, services, and
integrated marketing solutions that enable our customers to achieve a
competitive advantage.
We
believe we offer the most extensive range of media and export marketing services
in the industries we serve through our three primary channels – online
marketplaces, magazines and trade shows.
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. 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.
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.
Revenue
We derive
revenue from three principal sources.
Online Services — Our primary
service is creating and hosting marketing websites that present suppliers’
product and company information in a consistent and easily searchable manner on
Global Sources Online.
We also derive revenue from banner advertising fees.
Other Media Services — We
publish trade magazines, which consist primarily of product advertisements from
suppliers and our independent editorial reports and product
surveys. 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 and sourcing research reports.
We
recognize revenue from our Online and Other Media Services ratably over the
period in which the marketing website is hosted and/or the advertisement is
displayed. Our advertising contracts do not exceed one year.
Exhibitions – trade shows and
seminars — Our China Sourcing Fairs offer international buyers direct
access to manufacturers from China and elsewhere in Asia. The first China
Sourcing Fair was held during the fourth quarter of 2003. Subsequently, we held
several China Sourcing Fairs events in the second and fourth quarters of 2004 to
2007 and in the second quarter of 2008. In addition, in 2007 we launched new
China Sourcing Fairs events in Dubai
and Shanghai. Future China Sourcing Fairs are scheduled to be held mainly in the
second quarter and fourth quarter of each financial year. International IC China
Conferences and Exhibitions were held in March 2008 in the current year and
these same exhibitions were held in March 2007 last year. We derive revenue
primarily from exhibit space rentals, but also from advertising and sponsorship
fees in show guides and other locations in and around our event venues. We also
receive fees from attendees to attend our technical conferences held during the
events. We recognize exhibitor services revenue at the conclusion of the related
events. As a result, second and fourth quarter revenue is expected to be higher
than the first and third quarter revenue. Revenue from exhibitions is likely to
grow as a percentage of total revenue in future years as we hold more China
Sourcing Fairs.
Results
of Operations
The
following table sets forth the results of our operations:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenue:
|
|
|
|
|
|
|
Online
and other media services (Note 1)
|
|
$ |
70,416 |
|
|
$ |
59,579 |
|
Exhibitions
|
|
|
31,220 |
|
|
|
25,699 |
|
Miscellaneous
|
|
|
2,638 |
|
|
|
2,214 |
|
|
|
|
104,274 |
|
|
|
87,492 |
|
Operating
Expenses:
|
|
|
|
|
|
|
|
|
Sales
|
|
|
32,873 |
|
|
|
28,802 |
|
Event
production
|
|
|
11,079 |
|
|
|
10,077 |
|
Community
|
|
|
15,449 |
|
|
|
12,708 |
|
General
and
administrative
|
|
|
24,067 |
|
|
|
21,445 |
|
Online
services
development
|
|
|
2,981 |
|
|
|
2,586 |
|
Amortization
of software cost and intangibles
|
|
|
97 |
|
|
|
80 |
|
Total
Operating
Expenses
|
|
|
86,546 |
|
|
|
75,698 |
|
Income
from
Operations
|
|
|
17,728 |
|
|
|
11,794 |
|
Net
Income
|
|
$ |
16,625 |
|
|
$ |
10,718 |
|
Note
: 1. Online
and other media services consists of:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Online
services
|
|
$ |
46,034 |
|
|
$ |
35,762 |
|
Print
services
|
|
|
24,382 |
|
|
|
23,817 |
|
|
|
$ |
70,416 |
|
|
$ |
59,579 |
|
The
following table represents our revenue by geographical areas:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Asia
|
|
$ |
98,547 |
|
|
$ |
82,302 |
|
United
States
|
|
|
4,922 |
|
|
|
4,325 |
|
Europe
|
|
|
194 |
|
|
|
111 |
|
Others
|
|
|
611 |
|
|
|
754 |
|
Total
revenue
|
|
$ |
104,274 |
|
|
$ |
87,492 |
|
Consolidated
Results
Revenue
Total
revenue grew to $104.3 million during the six months ended June 30, 2008 from
$87.5 million during the six months ended June 30, 2007, a growth of 19% driven
primarily by the growth in our Online and Other Media Services and Exhibitions
revenue. Our Online and Other Media Services revenue grew by $10.8 million or
18% to $70.4 million during the six months ended June 30, 2008, as compared with
$59.6 million during the six months ended June 30, 2007 due to a 30% growth in
our China market and the growth in our Taiwan and USA markets, partially off-set
by a decline in some of our other markets during the six months ended June 30,
2008. China represented 63% of Online and Other Media Services revenue during
the six months ended June 30, 2008 compared to 58% during the six months ended
June 30, 2007. Our Exhibitions revenue grew from $25.7 million during the six
months ended June 30, 2007 to $31.2 million during the six months ended June 30,
2008, a growth of 21%, due mainly to growth in revenue of our China Sourcing
Fairs during the second quarter of 2008 held in Hong Kong and Dubai and the
growth in our International IC China Conferences and Exhibitions held in the
first quarter of 2008. Our Exhibitions revenue from China grew by 30% during the
six months ended June 30, 2008 compared to six months ended June 30, 2007. China
represented 67% of Exhibitions revenue during the six months ended June 30, 2008
compared to 62% during the six months ended June 30, 2007.
We have
made substantial progress in developing our customer base in China, our largest
market. Total revenue from China grew by 30% during the six months ended June
30, 2008 compared to six months ended June 30, 2007 due to growth in our China
Sourcing Fairs, International IC China Conferences and Exhibitions and Online
and Other Media Services revenue. We expect revenue from our China market as a
percentage of total revenue to continue to grow and the overall revenue from the
China market to continue to grow.
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. For online and other media services the
commission expense is recognized when the associated revenue is recognized or
when the associated accounts receivable are paid, whichever is earlier. For
exhibitions, the commission expense is recognized when the associated revenue is
recognized upon conclusion of the event.
Sales
costs consist of operating costs for our sales departments and 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
$28.8 million during the six months ended June 30, 2007 to $32.9 million during
the six months ended June 30, 2008, an increase of 14% due mainly to increase in
sales commission resulting from an increase in revenue, increase in sales
marketing fees for new initiatives off-set partially by a reduction in non-cash
compensation expense relating to share awards to sales team members under our
equity compensation plans (Please see paragraph on “Non-Cash Compensation
Expense”).
Event Production. 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 increased by 10% from $10.1 million during the six months ended
June 30, 2007 to $11.1 million during the six months ended June 30, 2008,
primarily due to an increase in the number of booths sold in our China Sourcing
Fairs exhibition events in Dubai and Hong Kong and an increase in the number of
our International IC China Conferences and Exhibitions in the first quarter of
2008 compared to the first quarter of 2007.
Community. 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 and
marketing inserts business, specifically printing, paper, bulk circulation,
magazine subscription promotions, promotions for our on-line services, customer
services costs and the event specific promotions costs incurred for promoting
the China Sourcing Fairs events and the technical conferences, exhibitions and
seminars to the buyer community. The event specific promotion costs incurred for
events are expensed during the event months in the year in which the expenses
are incurred.
Community
costs increased from $12.7 million during the six months ended June 30, 2007 to
$15.4 million during the six months ended June 30, 2008, an increase of 21%.
This increase was due mainly to an increase in bulk circulation costs, paper
costs, printing charges, magazine subscription promotion costs, promotions for
our on-line services to buyer community, payroll costs, fees paid to third
parties and promotion costs for our exhibition events.
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 $21.4 million during the six months
ended June 30, 2007 to $24.1 million during the six months ended June 30, 2008,
an increase of 13%, due mainly to the increases in fees paid to third parties,
content management services costs, information technology services costs,
marketing costs, payroll costs, travel costs, depreciation costs off-set
partially by a reduction in non-cash compensation expense relating to share
awards to team members under our equity compensation plans (Please see paragraph
on “Non-Cash Compensation Expense”).
Online Services Development.
Online services development costs consist mainly of payroll, office rental and
depreciation costs relating to the updating and maintenance of Global Sources
Online.
Online
services development costs to fund the updating and maintenance of our online
services increased by 15% from $2.6 million during the six months ended June 30,
2007 to $3.0 million during the six months ended June 30, 2008 due mainly to
increases in computer equipment and software maintenance costs and internet
communications costs and fees paid to third parties.
Non-Cash Compensation
Expense. We have issued share awards under several equity compensation
plans (“ECP”) to both employees and team members. We also recognize non-cash
compensation expenses relating to the shares purchased by our directors under
Directors Purchase Plan.
The total
non-cash compensation credit, resulting from the ECP and the Directors Purchase
Plan recorded by us and included under the respective categories of expenses
during the six months ended June 30, 2008 was $0.1 million compared to an
expense of $3.3 million recorded during the six months ended June 30,
2007. The reduction is due mainly to re-measurement of equity
compensation expense relating to non-employee share awards based on our
prevailing share price and the completion of vesting of some of the past share
awards, off-set partially by the new share awards during the six months ended
June 30, 2008.
The
corresponding amounts for the non-cash compensation credit/expenses are
charged/credited to shareholders’ equity.
Amortization of software
costs. Amortization of software cost was $0.1 million during the six
months ended June 30, 2008 compared to $0.08 million during the six months ended
June 30, 2007.
Income From Operations. The
total income from operations during the six months ended June 30, 2008 was $17.7
million as compared to $11.8 million during the six months ended June 30, 2007.
The growth in total income from operations resulted mainly from growth in
revenue, off-set partially by increases in sales costs, event production costs,
community costs, general and administrative costs and online services
development costs.
Interest and dividend income.
We recorded an interest income of $1.9 million arising mainly from U.S. Treasury
securities compared to an interest income of $3.1 million during the six months
ended June 30, 2007.
Loss on investment, net.
During the six months ended June 30, 2007, we recorded an impairment charge of
approximately $2.3 million on our investment in HC International, Inc and
received $0.5 million pursuant to the indemnification obligations of the vendor
under the purchase agreement for the HC International investment. The $1.8
million represents the impairment loss, net of the $0.5 million received. There
was no such impairment charge for the six months ended June 30, 2008 as we sold
all our investment in HC International, Inc during the fourth quarter of
2007.
Income Taxes. We and certain
other subsidiaries of the group 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, Singapore, China and certain other
jurisdictions and are subject to income taxes in their respective
jurisdictions.
We
reported a tax provision of $0.4 million during the six months ended June 30,
2008 compared to a tax provision of $0.6 million during the six months ended
June 30, 2007.
Net Income. Net income was
$16.6 million during the six months ended June 30, 2008, compared to a net
income of $10.7 million during the six months ended June 30, 2007. The growth in
net income resulted mainly from growth in revenue, reductions in loss on
investment and tax provision, off-set partially by increases in sales costs,
event production costs, community costs, general and administrative costs,
online services development costs, foreign exchange losses and decline in
interest income.
Liquidity
and Capital Resources
We
financed our activities for the six months period ended June 30, 2008 using cash
generated from our operations.
Net cash
generated from operating activities was $26.2 million during the six months
ended June 30, 2008, compared to $30.4 million cash generated from operating
activities during the six months ended June 30, 2007. The primary source of cash
from operating activities was collections from our customers received through
our independent sales representative organizations.
Advance
payments received from customers were $86.8 million as of June 30, 2008,
compared to $83.1 million as at December 31, 2007, improving our liquidity. A
majority of our customers in China pay us in advance for our Online and other
media services business. Our Exhibitions business collections generally are all
advance payments. We expect the growth in our revenues from China to continue
and we plan to launch more Exhibition events in the future. As a result, we
expect that the advance payments received from customers to continue to increase
in the future as our revenue increases.
Receivables
from sales representatives declined from $12.3 million as of December 31, 2007
to $11.2 million as of June 30, 2008 which improved our liquidity. Though the
receivables from sales representatives may decline in the near future as the
collections are transferred to our bank account, we expect the receivables from
sales representatives to increase slightly in the long term due to expected
growth in our China business and our Exhibitions business. All the authorized
signatories to the collection depository bank accounts maintained by our sales
representatives in China are our senior management staff.
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 in
future.
Net cash
used in investing activities was $10.1 million during the six months ended June
30, 2008, resulting from the purchase of available-for-sale securities of $6.5
million, and $3.6 million cash used for capital expenditures
mainly for purchase of computers, software, office furniture, leasehold
improvements, software development and for deposits paid for purchase of office
premises in China and Hong Kong. Net cash used in investing activities during
the six months ended June 30, 2007 was $8.6 million, resulting mainly from the
cash used for capital expenditures primarily for purchase of office premises in
China, for office furniture, computers, software, leasehold improvements and
software development.
We invest
our excess cash in U.S. Treasury securities and available-for-sale securities to
generate income from interest received as well as capital gains, while the funds
are held to support our business.
As of
June 30, 2008, U.S. Treasury securities with an original maturity of three
months or less are presented under cash and cash equivalents. We have
reclassified such securities as at June 30, 2007 of $125.1 million from
available-for-sale securities to cash and cash equivalents to conform to current
year presentation.
Generally,
we hold the securities with specified maturity dates such as Treasury Bills
until their maturity but the securities managed by high quality institutions
that do not have fixed maturity dates are generally sold at the end of each
quarter and proceeds reinvested in similar securities at the beginning of the
following quarter. During the six months ended June 30, 2008, we purchased $6.5
million available-for-sale securities using the proceeds from the sale of such
similar securities in the fourth quarter of 2007.
We do not
engage in buying and selling of securities with the objective of generating
profits on short-term differences in price.
Net cash
generated from financing activities was $0.4 million during the six months ended
June 30, 2008, consisting of $0.9 million received from directors for the shares
subscribed by them in the Directors Purchase Plan and $0.5 million dividend
payment to minority shareholder by a subsidiary. Net cash generated from
financing activities was $0.4 million during the six months ended June 30, 2007,
which represents the amount received from directors for the shares subscribed by
them in the Directors 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 June 30, 2008, the unutilized
amount under this facility was approximately $0.2 million. Hongkong and Shanghai
Banking Corporation Limited has also provided a guarantee on our behalf to our
suppliers. As at June 30, 2008, such guarantee amounted to $0.003
million.
We
recorded a valuation allowance for the deferred tax assets of $6.5 million as at
June 30, 2008 as it was more likely than not that they would not be realized.
These deferred tax assets resulted from the net operating losses in some of our
subsidiaries.
During
the first quarter of 2004, we entered into a number of license agreements for
our exhibition events amounting to $29.7 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. As of June
30, 2008, we paid $27.4 million under these agreements. Subsequently, during the
first quarter of 2007, we entered into a number of venue license agreements for
our exhibition events amounting to $44.4 million in payments over five and a
half years. The agreements are cancelable under Force Majeure conditions, or
upon notice and payment of cancellation charges to the other party. The amounts
paid will be expensed when the related events are held. As of June 30, 2008, we
paid approximately $2.3 million under these agreements.
We also
entered into several agreements for the event specific promotion of our
exhibition events amounting to $4.0 million, in payments over five years. As of
June 30, 2008, we paid $3.7 million under these agreements.
On
December 20, 2007, we announced a one for ten bonus share issue on our
outstanding common shares. Shareholders of record on January 1, 2008 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 or about February 1, 2008.
In addition, we have reclassified $0.042 million and $0.042 million from
additional paid in capital to common share capital as of June 30, 2008 and
December 31, 2007 respectively, in connection with the bonus share
issue.
On
February 4, 2008, our board of directors has authorized a program to buyback up
to $50 million of common shares. We intend, from time to time, as business
conditions warrant, to purchase shares in the open market or through private
transactions. The buyback program does not obligate us to buyback any specific
number of shares and may be suspended or terminated at any time at management’s
discretion. The timing and amount of any buyback of shares will be determined by
management based on its evaluation of market conditions and other factors. As of
September 30, 2008, we have not bought back any of our shares.
In May
2008, we entered into a letter of intent to purchase approximately 6,364.50
square meters (gross) of office space in a commercial building known as Shenzhen
International Chamber of Commerce Tower in Shenzhen at a price of approximately
$35.0 million, and paid a deposit of approximately $0.2
million. Subsequently, in July 2008, we entered into the final
property purchase agreements, and paid an additional deposit of approximately
$17.2 million. Our payment of the balance of the total purchase price, in an
amount of approximately $17.6 million, and the delivery of the property to us,
occurred in September 2008.
On June
18, 2008, we entered into a formal sale and purchase agreement to purchase
approximately 22,874 square feet (gross) of office space, together with 6 car
parking spaces, in a commercial building known as Southmark in Hong Kong, for a
total purchase price of approximately $11.9 million, and paid a total deposit of
approximately $1.8 million in the second quarter of 2008. Completion of the
property purchase and payment of the balance of the purchase price, in an amount
of approximately $10.1 million, occurred in August 2008.
In June
2008, approval of the board of directors and the shareholders of eMedia Asia
Ltd. was obtained for distribution of the excess cash in eMedia Asia Ltd. to
shareholders of eMedia Asia Ltd., by way of a one-for-one issue of new shares
(as share dividends) and then a purchase back by eMedia Asia Limited of those
share dividends and a consequent reduction of its share capital.
Pursuant
thereto, eMedia Asia Ltd. completed the issuance of 1,000 shares to its
shareholders as share dividends in June 2008, and the subsequent purchase of
those 1,000 shares (at a price of $5,000 per share) and the reduction of its
share capital through the cancellation of those 1,000 purchased shares in July
2008.
Upon the
completion of the aforesaid capital reduction, in July 2008, we recorded the
$1.995 million payable to the minority shareholder pursuant to the above
transaction as a reduction of the non-controlling interest liability. The
distribution of the total amount of $5.0 million to its shareholders by way of a
share purchase dividend was completed in July 2008.
We have
no bank debt as at June 30, 2008.
We
anticipate that our cash and securities on hand and expected positive cash-flows
from our operations will be adequate to satisfy our working capital, capital
expenditure requirements and cash commitments based on the current levels of our
operations.
Recent
Accounting Pronouncements
The
following recent accounting pronouncements that are applicable to us do not have
a material effect on our results of operations and financial
condition:
|
(i)
|
SFAS
No. 157, “Fair Value Measurements” (“SFAS No. 157”).
|
|
|
|
|
(ii)
|
SFAS
No. 159, “The Fair Value Option for Financial Assets and Financial
Liabilities – including an amendment of FASB Statement No.
115”.
|
|
|
|
|
(iii)
|
SFAS
No. 162, “The Hierarchy of Generally Accepted Accounting
Principles”.
|
We are
currently evaluating whether the adoption of the following recent accounting
pronouncements have any impact on our consolidated financial
statements:
|
(i)
|
|
SFAS
No. 141(R), Business
Combinations.
|
|
(i)
|
|
SFAS
No. 160, “Accounting and Reporting of Noncontrolling Interest in
Consolidated Financial Statements - an amendment of ARB
No.51”.
|
|
(i)
|
|
SFAS
No. 161, “Disclosures About Derivative Instruments and Hedging Activities
– an amendment of FASB Statement No.
133”.
|
|
(i)
|
|
FSP
142-3, “Determination of the Useful Life of Intangible Assets, (FSP
142-3)”.
|
|
(i)
|
|
FSP
EITF 03-6-1, “Determining Whether Instruments Granted in Share-Based
Payment Transactions Are Participating Securities (FSP EITF
03-6-1)”.
|
In
September 2006, the FASB issued Statement of Financial Accounting Standards No.
157, “Fair Value Measurements” (“SFAS No. 157”). This Standard defines fair
value, establishes a framework for measuring fair value in accordance with
generally accepted accounting principles and expands disclosures about fair
value measurements. SFAS No. 157 is effective for fiscal years beginning after
November 15, 2007. As required under SFAS No. 157, the statement shall be
applied prospectively as of the beginning of the fiscal year in which this
Statement is initially applied, except that the Statement shall be applied
retrospectively to certain financial instruments as of the beginning of the
fiscal year in which this Statement is initially applied (a limited form of
retrospective application). However in February 2008, the FASB issued FSP FAS
157-2, which delays the effective date of SFAS No. 157 for all nonfinancial
assets and nonfinancial liabilities, except those that are recognized or
disclosed at fair values in the financial statements on a recurring basis. This
FSP partially defers the effective date of SFAS No. 157 to fiscal years
beginning after November 15, 2008. We adopted SFAS No. 157 with effect from
January 1, 2008, except as it applies to those nonfinancial assets and
nonfinancial liabilities as noted in FSP FAS 157-2. The adoption of this
accounting standard does not have any material impact on our consolidated
financial statements.
In
February 2007, the FASB issued SFAS No. 159, “The Fair Value Option for
Financial Assets and Financial Liabilities – including an amendment of FASB
Statement No. 115.” SFAS No. 159 permits entities to choose to measure many
financial instruments and certain other items at fair value. Unrealized gains
and losses on items for which the fair value option has been elected will be
recognized in earnings at each subsequent reporting date. SFAS No. 159 is
effective for fiscal year beginning after November 15, 2007. We adopted SFAS No.
159 with effect from January 1, 2008 and the adoption of this accounting
standard does not have any material impact on our consolidated financial
statements.
In
December 2007, the FASB issued SFAS No. 141(R), Business Combinations, to
replace SFAS No. 141, Business Combinations.
SFAS No. 141(R) requires use of the acquisition method of accounting,
defines the acquirer, establishes the acquisition date and broadens the scope to
all transactions and other events in which one entity obtains control over one
or more other businesses. SFAS No. 141(R) is effective for business
combinations for which the acquisition date is on or after the beginning of the
first annual reporting period beginning on or after December 15,
2008. The impact of adopting SFAS No. 141(R) will be
dependent on business combinations that we may pursue after its effective
date.
In
December 2007, the FASB issued SFAS No. 160, “Accounting and Reporting of
Noncontrolling Interest in Consolidated Financial Statements - an amendment of
ARB No.51”. SFAS No. 160 establishes accounting and reporting requirements for
ownership interests in subsidiaries held by parties other than parent, the
amount of consolidated net income attributable to the parent and to the
non-controlling interest. SFAS No. 160 is effective for fiscal years beginning
after December 15, 2008. We are currently evaluating whether the adoption of
SFAS No. 160 has any impact on our consolidated financial
statements.
In March
2008, the FASB issued SFAS No. 161, “Disclosures About Derivative Instruments
and Hedging Activities – an amendment of FASB Statement No. 133 (SFAS No. 161)”.
SFAS No. 161 expands quarterly disclosure requirements in SFAS No. 133 about an
entity’s derivative instruments and hedging activities. SFAS No. 161 is
effective for fiscal years beginning after November 15, 2008. We are currently
evaluating whether the adoption of SFAS No. 161 has any impact on our
consolidated financial statements.
In April
2008, the FASB issued FSP 142-3, “Determination of the Useful Life of Intangible
Assets, (FSP 142-3)”. FSP 142-3 amends the factors that should be considered in
developing renewal or extension assumptions used to determine the useful life of
a recognized intangible asset under SFAS No. 142, “Goodwill and Other Intangible
Assets”. FSP 142-3 is effective for fiscal years beginning after December 15,
2008. We are currently evaluating whether the adoption of FSP 142-3 has any
impact on our consolidated financial statements.
In May
2008, the FASB issued SFAS No. 162, “The Hierarchy of Generally Accepted
Accounting Principles (SFAS No. 162)”. SFAS No. 162 identifies the sources of
accounting principles and the framework for selecting the principles used in the
preparation of financial statements. SFAS No. 162 is effective 60 days following
the SEC’s approval of the Public Company Accounting Oversight Board amendments
to AU Section 411, “The Meaning of Present Fairly in Conformity with Generally
Accepted Accounting Principles”. The implementation of this standard will not
have a material impact on our consolidated financial statements.
In June
2008, the FASB issued FSP EITF 03-6-1, “Determining Whether Instruments Granted
in Share-Based Payment Transactions Are Participating Securities (FSP EITF
03-6-1)”. FSP EITF 03-6-1 clarified that all outstanding unvested share-based
payment awards that contain rights to nonforfeitable dividends participate in
undistributed earnings with common shareholders. Awards of this nature are
considered participating securities and the two-class method of computing basic
and diluted earnings per share must be applied. FSP EITF 03-6-1 is effective for
fiscal years beginning after December 15, 2008. We are currently evaluating
whether the adoption of FSP EITF 03-6-1 has any impact on our consolidated
financial statements.
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 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. The following table summarizes our
foreign currency Accounts Receivable and provides the information in U.S. Dollar
equivalent:
|
|
As
of June 30, 2008 (in U.S. Dollars Thousands)
(Unaudited)
|
|
|
As
of December 31, 2007 (in U.S. Dollars Thousands)
(Unaudited)
|
|
|
|
Expected
maturity dates
|
|
|
|
|
|
|
|
|
Expected
maturity dates
|
|
|
|
|
|
|
|
Currency
|
|
Within 1 year
|
|
|
Thereafter
|
|
|
Total
|
|
|
Fair value
|
|
|
2007
|
|
|
Thereafter
|
|
|
Total
|
|
|
Fair value
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
HKD
|
|
|
1,773 |
|
|
|
- |
|
|
|
1,773 |
|
|
|
1,773 |
|
|
|
1,549 |
|
|
|
- |
|
|
|
1,549 |
|
|
|
1,549 |
|
CNY
|
|
|
2,550 |
|
|
|
- |
|
|
|
2,550 |
|
|
|
2,550 |
|
|
|
2,918 |
|
|
|
- |
|
|
|
2,918 |
|
|
|
2,918 |
|
TWD
|
|
|
758 |
|
|
|
- |
|
|
|
758 |
|
|
|
758 |
|
|
|
774 |
|
|
|
- |
|
|
|
774 |
|
|
|
774 |
|
JPY
|
|
|
113 |
|
|
|
- |
|
|
|
113 |
|
|
|
113 |
|
|
|
160 |
|
|
|
- |
|
|
|
160 |
|
|
|
160 |
|
|
|
|
5,194 |
|
|
|
- |
|
|
|
5,194 |
|
|
|
5,194 |
|
|
|
5,401 |
|
|
|
- |
|
|
|
5,401 |
|
|
|
5,401 |
|
We
believe this risk is mitigated because historically a majority (ranging between
98% to 99%) of our revenue is denominated in U.S. Dollars or is received in the
Hong Kong Dollar which is currently pegged to the U.S. Dollar, the Chinese
Renminbi, which historically remained relatively stable but slightly
strengthened recently against the U.S. Dollar and the New Taiwan Dollar which is
relatively stable against U.S. Dollar. Correspondingly, a majority
(approximately 60% to 80%) 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 will fluctuate and
our profits will be affected.
During
the six months ended June 30, 2008 and the six months ended June 30, 2007, we
have not engaged in foreign currency hedging activities.
In the
six months ended June 30, 2008 and the six months ended June 30, 2007, 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.
Forward-looking
Statements
Except
for any historical information contained herein, the matters discussed in this
report 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,”
“project,” “plan,” “predict,” “strategy,” “forecast,” “will” and similar terms
and phrases, including references to assumptions.
These
forward-looking statements include current trend information, projections for
deliveries, business growth strategies and plans, projected capital expenditure,
expansion plans and liquidity. These forward looking statements 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
report on Form 6-K. These risks include but are not limited to: product demand;
customer satisfaction and quality issues; labor disputes; competition, changes
in technology and the marketplace; our ability to achieve and execute internal
business plans; the success of our business partnerships and alliances;
worldwide political instability and economic growth; changes in regulatory and
tax legislation in the countries in which we operate; and the impact of any
weakness in the currencies in Asia in which we operate.
In
addition to the foregoing factors, certain other risks and uncertainties, which
could cause actual results to differ materially from those expected, estimated
or projected can be found in the section “Risk Factors” in our Annual Report on
Form 20-F filed with the United States Securities and Exchange
Commission.
If one or
more of these risks or uncertainties materializes, 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 report on Form 6-K, 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 report.
GENERAL
DESCRIPTION OF THE OFFERED SECURITIES
We may
offer from time to time under this prospectus, separately or
together:
·
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unsecured
senior or subordinated debt
securities,
|
·
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warrants
to purchase common shares, preferred shares or debt
securities,
|
·
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share
purchase contracts to purchase common shares,
and
|
·
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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 United States 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 United States 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, our Bermuda
counsel.
Our
authorized share capital consists of 75,000,000 common shares, par value $0.01
per share. A bonus share distribution of one share for every ten
shares was issued to all of our shareholders of record on January 1, 2008
and distributed on or about February 1, 2008. As of August 31, 2008,
we had 46,703,058 common shares issued and outstanding.
·
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Holders
of common shares have no preemptive, redemption, conversion or sinking
fund rights.
|
·
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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.
|
·
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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.
|
·
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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.
|
·
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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:
·
|
we
are, or after the payment would be, unable to pay our liabilities as they
become due; or
|
·
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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:
·
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the
chairman of the meeting;
|
·
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at
least three shareholders present in person or by
proxy;
|
·
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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
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·
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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
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 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.
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 cash 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. The Company’s board of directors
reviews its options for the use of cash on a regular basis, including whether or
not to pay any cash dividends.
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. However, pursuant
to recent changes to the Companies Act 1981 of Bermuda, effective December 29,
2006, a company may purchase its own shares, to be held as treasury shares, if
authorized to do so by its memorandum of association or bye-laws. A proposed
resolution for the amendment of our bye-laws, to authorize us to purchase our
own shares, to be held as treasury shares, was put forth to our shareholders for
approval at our Annual General Meeting, held on June 18, 2007 (Hong Kong time).
The resolution was approved by our shareholders, so we are now able to acquire
our own shares and hold them as treasury shares, subject always of course to the
provisions of the Companies Act 1981 of Bermuda, to the securities laws of the
United States and to the rules of Nasdaq National Market. On February 4, 2008,
we announced via a press release that our board of directors has authorized a
program to repurchase up to $50 million of our common shares in the open market
or through private transactions, from time to time, as business conditions
warrant, but on the basis that we are not obligated to repurchase any specific
number of shares and that the program may be suspended or terminated at any time
at our management’s discretion. The timing and amount of the repurchase of
shares (if any) will be determined by our management, based on its evaluation of
market conditions and other factors. As of August 31, 2008, no repurchases of
our common shares have been made.
Preemptive
Rights
Our
bye-laws do not provide the holders of our common shares with preemptive rights
in relation to any issues of common shares held by us or any transfer of our
shares.
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:
·
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with
the consent in writing of the holders of not less than seventy-five
percent of the issued common shares of that class;
or
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·
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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.
Change
of Control
The
Company’s bye-laws have two provisions that could delay a change of control. The
first is the classified board, which means that only a portion of the directors
come up for election every year, thus delaying a change in the composition of
the Board. The second is the “Business Combinations” bye-law, which requires the
approval of sixty-six and two-thirds percent (66 ⅔%) of shareholders voting at a
general meeting, over and above any other approvals required by the bye-laws to
permit certain mergers, amalgamations or similar transaction to go
forward.
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:
·
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is
duly stamped, if required by law, and lodged with
us;
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·
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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;
|
·
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has
obtained, where applicable, permission of the Bermuda Monetary Authority;
and
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·
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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
Nasdaq).
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.
Disclosure
of Interests
Our
bye-laws provide that a director who has at least a five percent interest,
directly or indirectly, in an entity that is interested in a contract or
proposed contract or arrangement with us, shall declare the nature of such
interest at the first opportunity at a meeting of the board of directors, or by
writing to the board of directors. If the director has complied with the
relevant sections of the Companies Act and the bye-laws with regard to the
disclosure of his interest, the director may vote at a meeting of the board of
directors or a committee thereof on a contract, transaction or arrangement in
which that director is interested and he will be taken into account in
ascertaining whether a quorum is present.
Under
Bermuda law, the Company may not make loans to directors unless approved by a
majority of the shareholders holding 90% of the voting rights.
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. For the avoidance of doubt, with respect to the aforesaid
inspection of our minute books, our shareholders only have the right under our
bye-laws to inspect minutes of shareholder meetings.
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, Computershare Investor Services, LLC, at 655 Montgomery Street, Suite
830, San Francisco, CA 94111, 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. As set forth in our
bye-laws, a casual director so appointed shall hold office only until the next
following annual general meeting, and if not reappointed at such annual general
meeting shall vacate office. 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:
·
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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;
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·
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if
he becomes of unsound mind or a patient for any purpose of any statute or
applicable law relating to mental
health;
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·
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if
he becomes bankrupt under the law of any country or compounds with his
creditors;
|
·
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if
he is prohibited by law from being a
director;
|
·
|
if
he ceases to be a director by virtue of the Companies Act or is removed
from office pursuant to the
bye-laws;
|
·
|
if
he (or his alternate director, if any) is absent from more than three
consecutive board of directors’ meetings without the permission of the
board of directors and the board of directors resolves that his office be
vacated; or
|
·
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if
he is requested to resign in writing by not less than three quarters of
the other directors.
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Amendment
of Memorandum of Association and Bye-Laws
Bermuda
law provides that the memorandum of association of a company may be amended by a
resolution passed at a general meeting of the shareholders 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.
In
certain limited circumstances, shareholders can apply to the court of Bermuda to
annual an amendment to the memorandum of association.
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 Nasdaq) 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:
·
|
paying
up amounts unpaid on any of our shares held by the shareholders;
or
|
·
|
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 branch registrar is Computershare Investor Services,
LLC. In addition to a register held by Computershare Investor
Services, LLC, a register of holders of the shares is maintained by Appleby in
Bermuda located at Canon’s Court, 22 Victoria Street, Hamilton HM 12
Bermuda.
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.
Our
bye-laws also contain provisions for the advancement of funds to our directors,
officers and other indemnified persons for expenses incurred in defending legal
proceedings against them arising from the course of their duties. At our Annual
General Meeting on June 11, 2008, our shareholders approved amendments to our
bye-laws to extend the coverage of these provisions to our auditors and to
provide more specifically that if any fraud or dishonesty on the part of the
director, officer, auditor or other indemnified person concerned is proved, any
such funds advanced to him or her must be repaid. These amendments conformed our
bye-laws with changes to the Companies Act.
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. However, as an
exempted company, we are generally not permitted to participate in most business
transactions and activities conducted from within Bermuda, except in furtherance
of our business carried on outside Bermuda or under a license granted by the
Minister of Finance of Bermuda.
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.
For so
long as our shares are listed on the Nasdaq, our shares may be transferred
without obtaining specific consent under the Exchange Control Act and
regulations thereunder.
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:
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the
number of shares constituting that series and the distinctive designation
of that series;
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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;
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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;
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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;
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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;
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any
sinking fund for the redemption or purchase of shares of that series and
the terms and amount of the sinking
fund;
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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;
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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
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any
other relevant participating, optional or other special rights,
qualifications, limitations or restrictions of that
series.
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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 United States
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:
A. 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;
B. the
aggregate principal amount of the debt securities and any limit on the aggregate
principal amount;
C. 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;
D. 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;
E. 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;
F. 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
prospectus 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);
G. 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;
H. 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;
I. 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;
J. 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;
K. 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;
L. 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;
M. 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;
N. 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;
O. 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;
P. 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;
Q. the
applicability, if any, of the defeasance and covenant defeasance provisions of
the applicable indenture to the debt securities of the series;
R. if
exchangeable into another series of our debt securities, the terms on which
those debt securities are exchangeable; and
S. 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:
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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
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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.
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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 or 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:
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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
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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.
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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:
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rank
equal in right of payment with all our other unsecured and unsubordinated
indebtedness;
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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
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be
effectively subordinated to all of our subsidiaries’
indebtedness.
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As of
June 30, 2008, we have no outstanding consolidated indebtedness for money
borrowed. 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
June 30, 2008, we have no outstanding consolidated indebtedness for money
borrowed. 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:
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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
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acquire
any of the subordinated debt securities for cash, property or
otherwise.
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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,
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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);
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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);
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all
of our obligations for reimbursement on any letter of credit, banker’s
acceptance, security purchase facility or similar credit
transaction;
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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;
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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
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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,
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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”):
·
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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
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·
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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
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1.
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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
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2.
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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.
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Such a
trust may only be established if, among other things:
·
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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;
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·
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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
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·
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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.
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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:
·
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change
the stated maturity of the principal of or any installment of interest
with respect to the debt
securities;
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·
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reduce
the principal amount of, or the rate of interest on, the debt
securities;
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·
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change
the currency of payment of principal of or interest on the debt
securities;
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·
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impair
the right to institute suit for the enforcement of any payment on or with
respect to the debt securities;
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·
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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;
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·
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modify
the foregoing requirements or reduce the percentage of outstanding debt
securities necessary to waive any covenant or past
default;
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·
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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
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·
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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.
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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:
·
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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
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·
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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.
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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:
·
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to
cure any ambiguity, omission, defect or
inconsistency;
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·
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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;
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·
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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;
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·
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to
provide any security for or guarantees of such debt
securities;
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·
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to
add events of default with respect to such debt
securities;
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·
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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;
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·
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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;
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·
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to
provide for uncertificated debt securities in addition to or in place of
certificated debt securities or to provide for bearer debt
securities;
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·
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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;
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·
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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;
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·
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to
establish the form or terms of debt securities of any series as permitted
by the applicable indenture; or
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·
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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.
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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:
·
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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
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·
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default
in the payment of the principal of (or premium, if any, on) any debt
securities of that series when due;
or
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·
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default
in the deposit of any sinking fund payment, when and as due by the terms
of any debt securities of that series;
or
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·
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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
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·
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certain
events of bankruptcy, insolvency or
reorganization.
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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 share 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 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 common share warrants or preferred share warrants
offered hereby, including:
·
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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;
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·
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the
date on which the right to exercise such share warrants will commence and
the date on which such right will expire;
and
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·
|
any
other terms of such share warrants.
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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:
·
|
the
issuance of common shares or preferred shares as a dividend or
distribution on the common shares or preferred
shares;
|
·
|
certain
subdivisions and combinations of the common shares or preferred
shares;
|
·
|
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
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·
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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:
·
|
a
reclassification or change of the common shares or preferred
shares;
|
·
|
certain
consolidation or merger events involving us;
or
|
·
|
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
share 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:
·
|
the
designation, aggregate principal amount and the terms of the debt
securities purchasable upon exercise of the debt
warrants;
|
·
|
the
date on which the right to exercise such debt warrants will commence and
the date on which such right will expire;
and
|
·
|
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:
·
|
our
preferred shares; or
|
·
|
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:
·
|
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;
|
·
|
whether
the share purchase contracts are to be prepaid or
not;
|
·
|
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;
|
·
|
any
acceleration, cancellation, termination or other provisions relating to
the settlement of the share purchase
contracts;
|
·
|
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;
|
·
|
any
provisions for the issuance, payment, settlement, transfer or exchange of
the units or of the securities comprising the units;
and
|
·
|
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 August 31, 2008 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.
|
|
Shares
Beneficially Owned
|
|
|
Number
of
Shares
Which
May Be
Offered
|
|
|
Shares
Beneficially Owned
|
|
Name
|
|
Number
|
|
|
Percent
|
|
|
|
|
|
Number
|
|
|
Percent
|
|
Merle
A. Hinrichs
|
|
28,576,844
|
|
|
61.2%
|
|
|
6,000,000
|
|
|
22,576,844
|
|
|
48.3% |
|
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 the Selling Shareholder may sell any or all of our
common shares owned by such, through underwriters, agents, dealers, or directly
without the use of any underwriter, agent or dealer to one or more
purchasers. We and the 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:
·
|
the
identity of any underwriters, dealers or agents who purchase securities,
as required;
|
·
|
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;
|
·
|
whether
or not the securities will trade on any securities exchanges or the Nasdaq
National Market;
|
·
|
the
amount of any indemnification provisions, including indemnification from
liabilities under the federal securities laws;
and
|
·
|
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 Financial Industry
Regulatory Authority (FINRA), formerly the National Association of Securities
Dealers, Inc., or NASD, participates in a public offering of these securities,
the maximum commission or discount to be received by any such FINRA member or
independent broker-dealer will not be greater than eight percent (8%)
of the gross proceeds received by us for the sale of any securities being
registered pursuant to SEC Rule 415 under the Securities Act.
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, he 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, without charge,
and copies may be obtained at prescribed rates, at the public reference facility
maintained by the Commission at its principal office at 100 F Street, N.E.,
Washington, D.C. 20549. You may obtain information on the operation
of the public reference facility by calling 1-800-SEC-0330. The
Commission also maintains a website (http://www.sec.gov) that contains reports,
proxy and information statements and other information regarding registrants
that file electronically with the Commission.
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.
·
|
Annual
report on Form 20-F for the year ended December 31,
2007.
|
·
|
Reports
on Form 6-K dated July 3, 2008, August 15, 2008 and
August 22, 2008 (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).
|
·
|
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 all subsequent annual reports on Form 20-F that
we file with the Commission and certain reports on Form 6-K that we furnish to
the Commission after the date of this prospectus (if they state they are
incorporated by reference into this prospectus) until we file a post-effective
amendment indicating that
the offering of the securities made by this prospectus has been terminated. 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.
We will
provide, free of charge upon written or oral request, to each person to whom
this prospectus is delivered, including any beneficial owner of the securities,
a copy of any or all of the information incorporated by reference into this
prospectus, but which has not been delivered with the
prospectus. Requests for such information should be made to us at
Canon’s Court, 22 Victoria Street, Hamilton, HM 12 Bermuda (telephone number:
(441) 295-2244).
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 been 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 unlawful 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 $300,000,000.00, 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, 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, 2007 have been audited by Ernst & Young LLP, independent
registered public accountants, 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.
Effective
August 22, 2008, the Company’s board of directors and shareholders voted to
terminate the Company’s relationship with Ernst & Young LLP (Please see Form
6-K dated August 22, 2008).
ENFORCEABILITY
OF CIVIL LIABILITIES
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 enforce judgments of courts of the United States against
them predicated upon the civil liabilities under United States federal
securities laws. We have been advised by our legal counsel in Bermuda, Appleby,
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 United States federal securities laws.
GLOBAL
SOURCES LTD. AND SUBSIDIARIES
Index
to Consolidated Financial Statements (Unaudited)
June
30, 2008
|
|
Page
|
|
|
|
Consolidated
Balance Sheets
|
|
68
|
Consolidated
Statements of Income
|
|
69
|
Consolidated
Statements of Cash Flows
|
|
71
|
Consolidated
Statements of Shareholders’ Equity
|
|
72
|
Notes
to Consolidated Financial Statements
|
|
73
- 82
|
GLOBAL
SOURCES LTD. AND SUBSIDIARIES
CONSOLIDATED
BALANCE SHEETS (UNAUDITED)
(In
U.S. Dollars Thousands, Except Number of Shares and Per Share Data)
|
|
|
|
|
|
|
ASSETS
|
|
|
|
|
|
|
Current
Assets:
Cash
and cash
equivalents
|
|
$ |
214,348 |
|
|
$ |
197,825 |
|
Available-for-sale
securities
|
|
|
6,292 |
|
|
|
- |
|
Accounts
receivable,
net
|
|
|
6,621 |
|
|
|
6,665 |
|
Receivables
from sales
representatives
|
|
|
11,237 |
|
|
|
12,303 |
|
Inventory
|
|
|
1,145 |
|
|
|
1,108 |
|
Prepaid
expenses and other current
assets
|
|
|
15,392 |
|
|
|
15,333 |
|
Deferred
tax
assets
|
|
|
46 |
|
|
|
46 |
|
Total Current
Assets
|
|
|
255,081 |
|
|
|
233,280 |
|
Property
and equipment,
net
|
|
|
37,029 |
|
|
|
35,352 |
|
Long
term
investments
|
|
|
100 |
|
|
|
100 |
|
Bonds
held to maturity, at amortized
cost
|
|
|
101 |
|
|
|
99 |
|
Deferred
tax assets - long
term
|
|
|
202 |
|
|
|
196 |
|
Other
assets
|
|
|
2,141 |
|
|
|
2,781 |
|
Total
Assets
|
|
$ |
294,654 |
|
|
$ |
271,808 |
|
LIABILITIES AND SHAREHOLDERS’
EQUITY
|
|
|
|
|
|
|
|
|
Current
Liabilities:
Accounts
payable
|
|
$ |
6,592 |
|
|
$ |
5,577 |
|
Deferred
income and customers’
prepayments
|
|
|
81,363 |
|
|
|
78,141 |
|
Accrued
liabilities
|
|
|
11,847 |
|
|
|
12,546 |
|
Income
taxes
payable
|
|
|
826 |
|
|
|
694 |
|
Total Current
Liabilities
|
|
|
100,628 |
|
|
|
96,958 |
|
Deferred
income and customers’ prepayments -- long term
|
|
|
5,458 |
|
|
|
4,934 |
|
Deferred
tax
liability
|
|
|
296 |
|
|
|
283 |
|
Total
Liabilities
|
|
|
106,382 |
|
|
|
102,175 |
|
Non-controlling
interest
|
|
|
5,795 |
|
|
|
4,940 |
|
Shareholders’
equity:
Common
shares, US$0.01 par value; 75,000,000 shares authorized;
46,702,092
(2007: 46,572,092) shares issued and outstanding
|
|
|
467 |
|
|
|
466 |
|
Additional
paid in
capital
|
|
|
134,768 |
|
|
|
133,987 |
|
Retained
earnings
|
|
|
45,454 |
|
|
|
28,829 |
|
Accumulated
other comprehensive
income
|
|
|
1,788 |
|
|
|
1,411 |
|
Total Shareholders’
Equity
|
|
|
182,477 |
|
|
|
164,693 |
|
Total Liabilities and Shareholders’
Equity
|
|
$ |
294,654 |
|
|
$ |
271,808 |
|
|
|
|
|
|
|
|
|
|
The
accompanying notes are an integral part of these financial
statements.
GLOBAL
SOURCES LTD. AND SUBSIDIARIES
CONSOLIDATED
STATEMENTS OF INCOME (UNAUDITED)
(In
U.S. Dollars Thousands, Except Number of Shares and Per Share Data)
|
|
Six
months ended June 30,
|
|
|
|
|
|
|
|
|
Revenue:
Online
and other media
services
|
|
$ |
70,416 |
|
|
$ |
59,579 |
|
Exhibitions
|
|
|
31,220 |
|
|
|
25,699 |
|
Miscellaneous
|
|
|
2,638 |
|
|
|
2,214 |
|
|
|
|
104,274 |
|
|
|
87,492 |
|
Operating
Expenses:
Sales
(Note
1)
|
|
|
32,873 |
|
|
|
28,802 |
|
Event
production
|
|
|
11,079 |
|
|
|
10,077 |
|
Community
(Note
1)
|
|
|
15,449 |
|
|
|
12,708 |
|
General
and administrative (Note
1)
|
|
|
24,067 |
|
|
|
21,445 |
|
Online
services development (Note
1)
|
|
|
2,981 |
|
|
|
2,586 |
|
Amortization
of software
costs
|
|
|
97 |
|
|
|
80 |
|
Total
Operating
Expenses
|
|
|
86,546 |
|
|
|
75,698 |
|
Income
from
Operations
|
|
|
17,728 |
|
|
|
11,794 |
|
Interest
and dividend
income
|
|
|
1,946 |
|
|
|
3,116 |
|
Loss
on investment,
net
|
|
|
- |
|
|
|
(1,846 |
) |
Foreign
exchange gains (losses),
net
|
|
|
(1,295 |
) |
|
|
(464 |
) |
Income
before Income
Taxes
|
|
|
18,379 |
|
|
|
12,600 |
|
Income
Tax
Expense
|
|
|
(421 |
) |
|
|
(557 |
) |
Net
Income before Non-controlling Interest
|
|
$ |
17,958 |
|
|
$ |
12,043 |
|
Non-controlling
interest
|
|
|
(1,333 |
) |
|
|
(1,325 |
) |
Net
Income
|
|
$ |
16,625 |
|
|
$ |
10,718 |
|
Basic
net income per common share
|
|
$ |
0.36 |
|
|
$ |
0.23 |
|
Diluted
net income per common share
|
|
$ |
0.35 |
|
|
$ |
0.23 |
|
Common
shares used in basic net income per common share
calculations..
|
|
|
45,436,638 |
|
|
|
44,985,718 |
|
Common
shares used in diluted net income per common share
calculations
|
|
|
45,493,829 |
|
|
|
45,113,770 |
|
Basic
net income per non-vested restricted share
|
|
$ |
0.36 |
|
|
$ |
0.23 |
|
Diluted
net income per non-vested restricted share
|
|
$ |
0.35 |
|
|
$ |
0.23 |
|
Non-vested
restricted shares used in basic net income per non-vested restricted share
calculations
|
|
|
1,223,801 |
|
|
|
1,563,110 |
|
Non-vested
restricted shares used in diluted net income per non-vested restricted
share calculations
|
|
|
1,941,126 |
|
|
|
1,729,887 |
|
|
|
|
|
|
|
|
|
|
Note
:
|
1.
Non-cash compensation expenses associated with the employee equity
compensation plans and Directors Purchase Plan included under various
categories of expenses are approximately as
follows:
|
|
|
Six months ended June
30,
|
|
|
|
|
|
|
|
|
Sales
|
|
$ |
(808 |
) |
|
$ |
1,386 |
|
Community
|
|
|
180 |
|
|
|
102 |
|
General
administrative
|
|
|
400 |
|
|
|
1,645 |
|
Online
services
development
|
|
|
125 |
|
|
|
160 |
|
|
|
$ |
(103 |
) |
|
$ |
3,293 |
|
|
|
|
|
|
|
|
|
|
The
accompanying notes are an integral part of these financial
statements.
GLOBAL
SOURCES LTD. AND SUBSIDIARIES
CONSOLIDATED
STATEMENTS OF CASH FLOWS (UNAUDITED)
(In
U.S. Dollars Thousands, Except Number of Shares and Per Share Data)
|
|
Six
months ended June 30,
|
|
|
|
|
|
|
|
|
Cash
flows from operating activities:
Net
income
|
|
$ |
16,625 |
|
|
$ |
10,718 |
|
Adjustments
to reconcile net income to net cash provided by
operating
activities:
Depreciation
and
amortization
|
|
|
2,611 |
|
|
|
2,154 |
|
Accretion
of U.S. Treasury strips zero %
coupons
|
|
|
(2 |
) |
|
|
(8 |
) |
Provision
for doubtful
debts
|
|
|
66 |
|
|
|
100 |
|
Non-cash
compensation expense
(credit)
|
|
|
(103 |
) |
|
|
3,293 |
|
Income
attributable to non-controlling
shareholder
|
|
|
1,333 |
|
|
|
1,325 |
|
Equipment
written
off
|
|
|
4 |
|
|
|
4 |
|
Impairment
of
investment
|
|
|
- |
|
|
|
2,301 |
|
Exchange
rate
realignment
|
|
|
35
|
|
|
|
-
|
|
|
|
|
20,569 |
|
|
|
19,887 |
|
Changes
in assets and liabilities:
Accounts
receivable
|
|
|
(22 |
) |
|
|
821 |
|
Receivables
from sales
representatives
|
|
|
1,071 |
|
|
|
3,332 |
|
Inventory
|
|
|
(37 |
) |
|
|
(276 |
) |
Prepaid
expenses and other current
assets
|
|
|
(23 |
) |
|
|
445 |
|
Long
term
assets
|
|
|
647 |
|
|
|
(1,688 |
) |
Accounts
payable
|
|
|
958 |
|
|
|
(638 |
) |
Accrued
liabilities and liabilities for incentive and bonus plans
|
|
|
(751 |
) |
|
|
(848 |
) |
Deferred
income and customer
prepayments
|
|
|
3,724 |
|
|
|
9,051 |
|
Tax
liability
|
|
|
108
|
|
|
|
276
|
|
Net
cash provided by operating
activities
|
|
|
26,244
|
|
|
|
30,362
|
|
Cash
flows from investing activities:
Purchase
of property and
equipment
|
|
|
(3,616 |
) |
|
|
(8,636 |
) |
Purchase
of available-for-sale
securities
|
|
|
(6,467 |
) |
|
|
- |
|
Proceeds
from sale of available-for-sale
securities
|
|
|
-
|
|
|
|
8
|
|
Net
cash used in investing
activities
|
|
|
(10,083 |
) |
|
|
(8,628 |
) |
Cash
flows from financing activities:
Amount
received towards directors purchase
plan
|
|
|
886 |
|
|
|
422 |
|
Payment
of dividend to non-controlling shareholder by a subsidiary
|
|
|
(479 |
) |
|
|
-
|
|
Net
cash generated from financing
activities
|
|
|
407
|
|
|
|
422
|
|
Effect
of exchange rate changes on cash
equivalents
|
|
|
(45 |
) |
|
|
- |
|
Net
increase in cash and cash
equivalents
|
|
|
16,568 |
|
|
|
22,156 |
|
Cash
and cash equivalents, beginning of the
period
|
|
|
197,825
|
|
|
|
135,093
|
|
Cash
and cash equivalents, end of the
period
|
|
$ |
214,348 |
|
|
$ |
157,249 |
|
|
|
|
|
|
|
|
|
|
Supplemental
cash flow disclosures:
|
|
|
|
|
|
|
|
|
Income
tax
paid
|
|
$ |
282
|
|
|
$ |
281
|
|
The
accompanying notes are an integral part of these financial
statements.
GLOBAL
SOURCES LTD. AND SUBSIDIARIES
CONSOLIDATED
STATEMENTS OF SHAREHOLDERS’ EQUITY (UNAUDITED)
(In
U.S. Dollars Thousands, Except Number of Shares)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Additional
paid
in
capital
|
|
|
Retained
earnings
(deficit)
|
|
|
|
|
|
Accumu-
lated
other
comprehen-
sive
income
|
|
|
Total
shareholders’
equity
|
|
Balance
at December 31, 2006
|
|
|
46,499,492 |
|
|
$ |
465 |
|
|
$ |
125,790 |
|
|
$ |
4,830 |
|
|
$ |
- |
|
|
$ |
2,566 |
|
|
$ |
133,651 |
|
Net
income
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
10,718 |
|
|
|
- |
|
|
|
- |
|
|
$ |
10,718 |
|
Non-cash
compensation expense
|
|
|
- |
|
|
|
- |
|
|
|
3,291 |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
$ |
3,291 |
|
Amount
received towards directors -purchase
plan and issuance of shares under
the plan
|
|
|
72,600 |
|
|
|
1 |
|
|
|
421 |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
$ |
422 |
|
Reclassification
adjustment for gains, net of
losses included in net income, net of income tax of $NIL
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
(2,127 |
) |
|
$ |
(2,127 |
) |
Balance
at June 30,
2007
|
|
|
46,572,092 |
|
|
$ |
466 |
|
|
$ |
129,502 |
|
|
$ |
15,548 |
|
|
$ |
- |
|
|
$ |
439 |
|
|
$ |
145,955 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Additional
paid
in
capital
|
|
|
Retained
earnings
(deficit)
|
|
|
|
|
|
Accumu-
lated
other
comprehen-
sive
income
|
|
|
Total
shareholders’
equity
|
|
Balance
at December 31,
2007
|
|
|
46,572,092 |
|
|
$ |
466 |
|
|
$ |
133,987 |
|
|
$ |
28,829 |
|
|
$ |
- |
|
|
$ |
1,411 |
|
|
$ |
164,693 |
|
Net
income
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
16,625 |
|
|
|
- |
|
|
|
- |
|
|
$ |
16,625 |
|
Non-cash
compensation expense
|
|
|
- |
|
|
|
- |
|
|
|
(103 |
) |
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
$ |
(103 |
) |
Cumulative
translation differences
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
552 |
|
|
$ |
552 |
|
Amount
received towards directors -
purchase
plan and issuance of shares under the plan
|
|
|
130,000 |
|
|
|
1 |
|
|
|
884 |
|
|
|
|
|
|
|
|
|
|
|
- |
|
|
$ |
885 |
|
Unrealized
loss on available-for-sale securities, net of income tax of
$NIL
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
|
|
|
|
(175 |
) |
|
$ |
(175 |
) |
Balance
at June 30,
2008
|
|
|
46,702,092 |
|
|
$ |
467 |
|
|
$ |
134,768 |
|
|
$ |
45,454 |
|
|
$ |
- |
|
|
$ |
1,788 |
|
|
$ |
182,477 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The
accompanying notes are an integral part of these financial
statements.
GLOBAL
SOURCES LTD. AND SUBSIDIARIES
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
(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. Complementing this service are various trade magazines. 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, licenses Asian Sources / Global
Sources Online and catalog services, re-sells products that are purchased on
consignment basis and engages in direct sale of products that are
purchased.
2. Basis
of Presentation
The
consolidated financial statements as of June 30, 2008 and for the six months
ended June 30, 2008 and June 30, 2007, are unaudited; however, in the opinion of
the Company, the consolidated financial statements include all adjustments,
consisting of normal recurring adjustments, necessary for a fair statement of
results for the interim periods. The consolidated financial statements should be
read in conjunction with the consolidated financial statements and related notes
included in the Company’s 2007 Annual Report on Form 20-F.
3. Basic
and Diluted Net Income Per Share
The
Company discloses the earnings per share under two-class method, prescribed by
SFAS No. 128, “Earnings Per Share” and Emerging Issues Task Force (“EITF”) Issue
No. 03-6, “Participating Securities and the Two-Class Method under FASB
Statement No.128”. The net income has been allocated to non-vested restricted
shares under the Company’s stock compensation plans and common shares
outstanding during the period in the ratio of respective class of shares to the
combined weighted average shares of both the classes.
Basic net
income per share is computed by dividing net income allocated to each class of
shares by the weighted average number of shares of the respective class of
shares outstanding during the period. Diluted net income per share is calculated
using the weighted average number of outstanding shares under each class of
shares, plus other dilutive potential common shares.
The
following table reconciles the number of shares utilized in the net income per
share calculations:
|
|
Six
months ended June 30,
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
income
|
|
$ |
16,625 |
|
|
$ |
10,718 |
|
Basic
net income per common share
|
|
$ |
0.36 |
|
|
$ |
0.23 |
|
Diluted
net income per common share
|
|
$ |
0.35 |
|
|
$ |
0.23 |
|
Weighted
average common shares used in basic net income per common share
calculations
|
|
|
45,436,638 |
|
|
|
44,985,718 |
|
Effect
of dilutive shares
|
|
|
57,191 |
|
|
|
128,052 |
|
Weighted
average common shares used in diluted net income per share
calculations
|
|
|
45,493,829 |
|
|
|
45,113,770 |
|
Basic
net income per non-vested restricted share
|
|
$ |
0.36 |
|
|
$ |
0.23 |
|
Diluted
net income per non-vested restricted share
|
|
$ |
0.35 |
|
|
$ |
0.23 |
|
Weighted
average non-vested restricted shares used in basic net income per
non-vested restricted share calculations
|
|
|
1,223,801 |
|
|
|
1,563,110 |
|
Effect
of dilutive shares
|
|
|
717,325 |
|
|
|
166,777 |
|
Weighted
average non-vested restricted shares used in diluted net income per
non-vested restricted share calculations
|
|
|
1,941,126 |
|
|
|
1,729,887 |
|
Antidilutive
share subscriptions
|
|
|
110,000 |
|
|
|
— |
|
GLOBAL
SOURCES LTD. AND SUBSIDIARIES
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
(In
U.S. Dollars Thousands, Except Number of Shares and Per Share
Data)
Antidilutive
share subscriptions had exercise prices greater than the average market price
during the year.
4.
|
Recent
Accounting Pronouncements
|
In
September 2006, the FASB issued Statement of Financial Accounting Standards No.
157, “Fair Value Measurements” (“SFAS No. 157”). This Standard defines fair
value, establishes a framework for measuring fair value in accordance with
generally accepted accounting principles and expands disclosures about fair
value measurements. SFAS No. 157 is effective for fiscal years beginning after
November 15, 2007. As required under SFAS No. 157, the statement
shall be applied prospectively as of the beginning of the fiscal year in which
this Statement is initially applied, except that the Statement shall be applied
retrospectively to certain financial instruments as of the beginning of the
fiscal year in which this Statement is initially applied (a limited form of
retrospective application). However in February 2008, the FASB issued
FSP FAS 157-2, which delays the effective date of SFAS No. 157 for all
nonfinancial assets and nonfinancial liabilities, except those that are
recognized or disclosed at fair values in the financial statements on a
recurring basis. This FSP partially defers the effective date of SFAS No. 157 to
fiscal years beginning after November 15, 2008. The Company adopted SFAS No. 157
with effect from January 1, 2008, except as it applies to those nonfinancial
assets and nonfinancial liabilities as noted in FSP FAS 157-2. The adoption of
this accounting standard does not have any material impact on the Company’s
consolidated financial statements.
In
February 2007, the FASB issued SFAS No. 159, “The Fair Value Option for
Financial Assets and Financial Liabilities – including an amendment of FASB
Statement No. 115.” SFAS No. 159 permits entities to choose to measure many
financial instruments and certain other items at fair value. Unrealized gains
and losses on items for which the fair value option has been elected will be
recognized in earnings at each subsequent reporting date. SFAS No. 159 is
effective for fiscal year beginning after November 15, 2007. The Company adopted
SFAS No. 159 with effect from January 1, 2008 and the adoption of this
accounting standard does not have any material impact on the Company’s
consolidated financial statements.
In
December 2007, the FASB issued SFAS No. 141(R), Business Combinations,
to replace SFAS No. 141, Business Combinations. SFAS No.
141(R) requires use of the acquisition method of accounting, defines the
acquirer, establishes the acquisition date and broadens the scope to all
transactions and other events in which one entity obtains control over one or
more other businesses. SFAS No. 141(R) is effective for business
combinations for which the acquisition date is on or after the beginning of the
first annual reporting period beginning on or after December 15,
2008. The impact of adopting SFAS No. 141(R) will be
dependent on business combinations that the Company may pursue after its
effective date.
In
December 2007, the FASB issued SFAS No. 160, “Accounting and Reporting of
Noncontrolling Interest in Consolidated Financial Statements — an amendment of
ARB No. 51”. SFAS No. 160 establishes accounting and reporting requirements
for ownership interests in subsidiaries held by parties other than parent, the
amount of consolidated net income attributable to the parent and to the
non-controlling interest. SFAS No. 160 is effective for fiscal year beginning
after December 15, 2008. The Company is currently evaluating whether the
adoption of SFAS No. 160 has any impact on its consolidated financial
statements.
In March
2008, the FASB issued SFAS No. 161, “Disclosures About Derivative Instruments
and Hedging Activities — an amendment of FASB Statement No. 133” (SFAS No. 161).
SFAS No. 161 expands quarterly disclosure requirements in SFAS No. 133 about an
entity’s derivative instruments and hedging activities. SFAS No. 161 is
effective for fiscal years beginning after November 15, 2008. The company is
currently evaluating whether the adoption of SFAS No. 161 has any impact on its
consolidated financial statements.
In April
2008, the FASB issued FSP 142-3, “Determination of the Useful Life of Intangible
Assets” (FSP 142-3). FSP 142-3 amends the factors that should be considered in
developing renewal or extension assumptions
used to determine the useful life of a recognized intangible asset under SFAS
No. 142, “Goodwill and Other Intangible Assets”. FSP 142-3 is effective for
fiscal years beginning after December 15, 2008. The company is currently
evaluating whether the adoption of FSP 142-3 has any impact on its consolidated
financial statements.
GLOBAL
SOURCES LTD. AND SUBSIDIARIES
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
(In
U.S. Dollars Thousands, Except Number of Shares and Per Share
Data)
In May
2008, the FASB issued SFAS No. 162, “The Hierarchy of Generally Accepted
Accounting Principles” (SFAS No. 162). SFAS No. 162 identifies the sources of
accounting principles and the framework for selecting the principles used in the
preparation of financial statements. SFAS No. 162 is effective 60 days following
the SEC’s approval of the Public Company Accounting Oversight Board amendments
to AU Section 411, “The Meaning of Present Fairly in Conformity with Generally
Accepted Accounting Principles”. The implementation of this standard will not
have a material impact on the Company’s consolidated financial
statements.
In June
2008, the FASB issued FSP EITF 03-6-1, “Determining Whether Instruments Granted
in Share-Based Payment Transactions Are Participating Securities” (FSP EITF
03-6-1). FSP EITF 03-6-1 clarified that all outstanding unvested share-based
payment awards that contain rights to nonforfeitable dividends participate in
undistributed earnings with common shareholders. Awards of this nature are
considered participating securities and the two-class method of computing basic
and diluted earnings per share must be applied. FSP EITF 03-6-1 is effective for
fiscal years beginning after December 15, 2008. The company is currently
evaluating whether the adoption of FSP EITF 03-6-1 has any impact on its
consolidated financial statements.
5. Property
and Equipment, net
|
|
At
June 30,
|
|
|
At
December 31,
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Building
|
|
$ |
27,513 |
|
|
$ |
27,012 |
|
Capital
work-in-progress
|
|
|
2,138 |
|
|
|
501 |
|
Leasehold
improvements
|
|
|
10,408 |
|
|
|
10,147 |
|
Motor
vehicles
|
|
|
176 |
|
|
|
176 |
|
Computer
equipment, software, fixtures, fittings and office
equipment
|
|
|
24,929 |
|
|
|
22,877 |
|
Reusable
trade show booths
|
|
|
296 |
|
|
|
228 |
|
Software
development costs
|
|
|
4,187 |
|
|
|
3,893 |
|
Property
and equipment, at cost
|
|
|
69,647 |
|
|
|
64,834 |
|
Less: Accumulated
depreciation
|
|
|
(32,618 |
) |
|
|
(29,482 |
) |
|
|
$ |
37,029 |
|
|
$ |
35,352 |
|
Depreciation
expense for the six months period ended June 30, 2008 and 2007 was $2,514 and
$2,074 respectively and the amortization of software costs for the six months
period ended June 30, 2008 and 2007 was $97 and $80 respectively. The
accumulated amortization of software costs as of June 30, 2008 and December 31,
2007 was $3,821 and $3,724 respectively.
During
2004, the Company entered into an agreement to purchase approximately 9,000
square meters of office space in a commercial building in Shenzhen,
China. The building is situated on a leasehold land. The
lease period of the land is 50 years, commencing from year 2002. At
the end of the lease period, the building together with land will revert to the
local government authority. The construction was completed and the property was
put in use during the year 2005. Depreciation of the property commenced during
the year 2005. This building which is under capital lease is depreciated on a
straight-line basis over the remaining lease term.
GLOBAL
SOURCES LTD. AND SUBSIDIARIES
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
(In
U.S. Dollars Thousands, Except Number of Shares and Per Share
Data)
During
2007, the Company purchased approximately 1,939.38 square meters of office space
in a commercial building in Shenzhen, China. The building is situated on a
leasehold land. The lease period of the land is 50 years, commencing from year
2002. At the end of the lease period the building together with the land will
revert to the local government authority. The delivery of the office space to
the Company was completed in 2007. The depreciation on this property commenced
during 2007. The building, which is under capital lease is depreciated on a
straight-line basis over the remaining lease term.
6.
|
Deferred
income and customer prepayments
|
|
|
At
June 30,
|
|
|
At
December 31,
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Deferred income and customer
prepayments:
|
|
|
|
|
|
|
Advertising
|
|
$ |
48,935 |
|
|
$ |
43,896 |
|
Exhibitions,
subscription and
others
|
|
|
32,428 |
|
|
|
34,245 |
|
|
|
$ |
81,363 |
|
|
$ |
78,141 |
|
Deferred
Income and Customer Prepayments — Long Term
|
|
At
June 30,
|
|
|
At
December 31,
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Exhibitions
|
|
$ |
5,458 |
|
|
$ |
4,934 |
|
On
February 28, 2008, the Company issued 130,000 common shares under the Directors
Purchase Plan. During 2006, the Company increased its authorized share capital
form 50,000,000 common shares of $0.01 par value to 75,000,000 common shares of
$0.01 par value. The authorized share capital of the Company as at June 30, 2008
as well as at December 31, 2007 is 75,000,000 common shares of $0.01 par value.
As at June 30, 2008 and December 31, 2007, the Company has 46,702,092 and
46,572,092 common shares issued and outstanding, respectively.
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, Singapore, the People’s Republic of China and certain other
jurisdictions 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.
The
Company recorded a full valuation allowance for the deferred tax assets of
$6,465 relating to net operating loss carry forwards due to the uncertainty as
to their ultimate realization.
As of
June 30, 2008 and December 31, 2007, a United States subsidiary had net
operating loss carry forwards of approximately $16,836 and $16,861 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.
GLOBAL
SOURCES LTD. AND SUBSIDIARIES
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
(In
U.S. Dollars Thousands, Except Number of Shares and Per Share
Data)
The
Company’s subsidiary in Dubai, United Arab Emirates has been granted a fifty
year tax holiday in Dubai since it is located in a Free Trade Zone, which may be
subject to further renewal upon expiry of the initial fifty-year period in
2057.
The
Company recognized a deferred tax liability of $296 and $283 as at June 30, 2008
and December 31, 2007, 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.
The
Company adopted the provisions of FASB Interpretation No. 48, “Accounting for
Uncertainty in Income Taxes” (“FIN 48”) on January 1, 2007.
Under
FIN 48, the impact of an uncertain income tax position on the income tax return
must be recognized at the largest amount that is more-likely-than-not to be
sustained upon audit by the relevant taxing authority. An uncertain income tax
position will not be recognized if it has less than a 50% likelihood of being
sustained. Additionally, FIN 48 provides guidance on derecognition,
classification, interest and penalties, accounting in interim periods,
disclosure and transition.
The total
amount of unrecognized tax benefits as of January 1, 2008 and June 30, 2008 were
not material. As a result of the implementation of FIN 48, the Company did not
recognize an increase in the liability for unrecognized tax benefits and no
retained earnings adjustment was recorded as of January 1, 2007.
The
Company’s subsidiaries are subject to taxation in Hong Kong, the People’s
Republic of China, Singapore and other jurisdictions. There are no ongoing
examinations by taxing authorities as of June 30, 2007. These subsidiaries’ tax
returns mainly for years 2006 and 2007 remain open in various local tax
jurisdictions.
The
Company’s policy is to recognize interest and/or penalties related to uncertain
tax positions in income tax expense. To the extent accrued interest and
penalties do not ultimately become payable, amounts accrued will be reduced and
reflected as a reduction of the overall income tax provision in the period that
such determination is made. During the six months period ended June 30, 2008,
the Company did not record any interest or penalty relating to uncertain tax
positions.
9.
|
Segment
and Geographic Information
|
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. The
Company has determined these segments based on the business activities whose
operating results are reviewed by the Company’s chief operating decision maker,
which is the Company’s board of directors to assess their performance and to
make decisions about resources to be allocated to each segment.
The
Company has two reportable segments: online and other media services
and exhibitions. Revenues by geographic location are based on the
location of the customer.
(a) Segment
Information
|
|
Six
months ended June 30,
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenue:
|
|
|
|
|
|
|
Online
and other media services (Note
(a))
|
|
$ |
70,416 |
|
|
$ |
59,579 |
|
Exhibitions
|
|
|
31,220 |
|
|
|
25,699 |
|
Miscellaneous
|
|
|
2,638 |
|
|
|
2,214 |
|
Consolidated
|
|
$ |
104,274 |
|
|
$ |
87,492 |
|
|
|
|
|
|
|
|
|
|
GLOBAL
SOURCES LTD. AND SUBSIDIARIES
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
(In
U.S. Dollars Thousands, Except Number of Shares and Per Share
Data)
Miscellaneous
revenue consists mainly of technical services fee income, rental income,
commission income from consignment sales and revenue from resale of products
purchased.
Revenue
from barter transactions was $1,360 and $645 during the six months period ended
June 30, 2008 and 2007, respectively. Similarly the expenses from barter
transactions were $1,405 and $767 during the six months period ended June 30,
2008 and 2007, respectively.
|
|
Six
months ended June 30,
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income
from Operations:
|
|
|
|
|
|
|
Online
and other media
services
|
|
$ |
13,555 |
|
|
$ |
10,643 |
|
Exhibitions
|
|
|
3,346 |
|
|
|
724 |
|
Miscellaneous
|
|
|
827 |
|
|
|
427 |
|
Consolidated
|
|
$ |
17,728 |
|
|
$ |
11,794 |
|
|
|
At
June 30,
|
|
|
At
December 31,
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
Assets:
|
|
|
|
|
|
|
Online
and other media
services
|
|
$ |
193,191 |
|
|
$ |
180,499 |
|
Exhibitions
|
|
|
94,446 |
|
|
|
84,762 |
|
Miscellaneous
|
|
|
7,017 |
|
|
|
6,547 |
|
Consolidated
|
|
$ |
294,654 |
|
|
$ |
271,808 |
|
|
|
|
|
|
|
|
|
|
Note: (a)
Online and other media services consist of:
|
|
Six
months ended June 30,
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Online
services
|
|
$ |
46,034 |
|
|
$ |
35,762 |
|
Print
services
|
|
|
24,382 |
|
|
|
23,817 |
|
|
|
$ |
70,416 |
|
|
$ |
59,579 |
|
|
|
|
|
|
|
|
|
|
|
|
Six
months ended June 30,
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenue:
|
|
|
|
|
|
|
Asia
|
|
$ |
98,547 |
|
|
$ |
82,302 |
|
United
States
|
|
|
4,922 |
|
|
|
4,325 |
|
Europe
|
|
|
194 |
|
|
|
111 |
|
Others
|
|
|
611 |
|
|
|
754 |
|
Consolidated
|
|
$ |
104,274 |
|
|
$ |
87,492 |
|
|
|
|
|
|
|
|
|
|
GLOBAL
SOURCES LTD. AND SUBSIDIARIES
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
(In
U.S. Dollars Thousands, Except Number of Shares and Per Share
Data)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Long-Lived
Assets:
|
|
|
|
|
|
|
Asia
|
|
$ |
39,472 |
|
|
$ |
38,429 |
|
United
States
|
|
|
- |
|
|
|
- |
|
Consolidated
|
|
$ |
39,472 |
|
|
$ |
38,429 |
|
10.
|
Non-controlling
Interest
|
The
Company’s wholly-owned subsidiary, Trade Media Holdings Limited, holds a 60.1%
controlling equity interest in eMedia Asia Ltd and the remaining 39.9% equity
interest in eMedia Asia Ltd. was held by UBM Asia B.V.
eMedia
Asia Ltd. had excess reserves of cash as it was not allowed to pay cash
dividends. In June 2008, approval of the board of directors and the shareholders
of eMedia Asia Ltd. were obtained for distribution of the excess cash in eMedia
Asia Ltd. to shareholders of eMedia Asia Ltd., by way of a one-for-one issue of
new shares (as share dividends) and then a purchase back by eMedia Asia Limited
of those share dividends and a consequent reduction of its share
capital.
Pursuant
thereto, eMedia Asia Ltd. completed the issuance of 1,000 shares to its
shareholders as share dividends in June 2008, and the subsequent purchase of
those 1,000 shares (at a price of $5,000 per share) and the reduction of its
share capital through the cancellation of those 1,000 purchased shares in July
2008.
Upon the
completion of the aforesaid capital reduction, in July 2008, the Company
recorded the $1,995 payable to the minority shareholder pursuant to the above
transaction as a reduction of the non-controlling interest liability. The
distribution of the total amount of $5,000 to its shareholders by way of a share
purchase dividend was completed in July 2008.
The
Non-controlling interest of $5,795 and $4,940 as at June 30, 2008 and December
31, 2007, respectively, reflects UBM Asia B.V’s proportionate interest in the
net book value of eMedia Asia Ltd.
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 will have a material
adverse effect on the Company’s consolidated financial position and results of
operations.
12.
|
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 6,455,283 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 806,913 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 5,648,370 shares is subject to
employment, non-compete and vesting terms under an employment agreement with one
of the
Company’s United States subsidiaries. The 5,648,370 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 a total of $64,000 in 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.
GLOBAL
SOURCES LTD. AND SUBSIDIARIES
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
(In
U.S. Dollars Thousands, Except Number of Shares and Per Share
Data)
13.
|
Equity
Compensation Plans
|
During
the six months ended June 30, 2008 the Company’s Plan Committee approved certain
awards of common shares under the Company’s share grant award plans as described
in Note 23 of the Company’s consolidated financial statements on Form 20-F for
the year ended December 31, 2007. The Company recorded a credit to expenses of
$103 during six months ended June 30, 2008 and recorded an expense of $3,293
during the six months ended June 30, 2007 in non-cash compensation costs
associated with the awards under the above ECP plans. As of June 30,
2008, there was $12,505 of unrecognized non-cash compensation cost associated
with the awards under the above ECP plans, which is expected to be recognized
over the next six years.
The
Company’s non-vested shares as of June 30, 2008 and changes during the six
months period ended June 30, 2008 were as follows:
|
|
|
|
|
|
|
|
|
|
|
The
Global Sources Share Grant Award Plan
|
|
|
The
Global Sources Retention Share Grant Plan
|
|
|
|
|
|
|
Weighted
average grant date fair value
|
|
|
|
|
|
Weighted
average grant date fair value
|
|
|
|
|
|
Weighted
average grant date fair value
|
|
|
|
|
|
Weighted
average grant date fair value
|
|
|
|
|
|
Weighted
average grant date fair value
|
|
Non-vested
at January 1, 2008
|
|
|
30,403 |
|
|
$ |
16.13 |
|
|
|
21,829 |
|
|
$ |
7.22 |
|
|
|
1,382,009 |
|
|
$ |
6.23 |
|
|
|
390,282 |
|
|
$ |
14.16 |
|
|
|
7,850 |
|
|
$ |
21.16 |
|
Granted
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
426,094 |
|
|
$ |
13.03 |
|
|
|
14,565 |
|
|
$ |
15.46 |
|
Vested
|
|
|
(11,728 |
) |
|
$ |
16.16 |
|
|
|
(5,324 |
) |
|
$ |
7.89 |
|
|
|
(304,674 |
) |
|
$ |
4.99 |
|
|
|
- |
|
|
|
- |
|
|
|
(966 |
) |
|
$ |
16.41 |
|
Forfeited
|
|
|
- |
|
|
|
|
|
|
|
-- |
|
|
|
|
|
|
|
(12,733 |
) |
|
$ |
6.97 |
|
|
|
(20,601 |
) |
|
$ |
(22.26 |
) |
|
|
- |
|
|
|
|
|
Non-vested
at June 30, 2008
|
|
|
18,675 |
|
|
$ |
16.12 |
|
|
|
16,505 |
|
|
$ |
7.00 |
|
|
|
1,064,602 |
|
|
$ |
6.50 |
|
|
|
795,775 |
|
|
$ |
7.17 |
|
|
|
21,549 |
|
|
$ |
17.49 |
|
The total
fair value of shares vested during the six months period ended June 30, 2008 and
2007 were as follows:
Six
months ended
June
30,
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Retention
Share
Grant
Plan
|
|
|
|
|
2007
|
|
$ |
- |
|
|
$ |
295 |
|
|
$ |
116 |
|
|
$ |
3,030 |
|
|
|
- |
|
|
$ |
3,441 |
|
2008
|
|
$ |
- |
|
|
$ |
195 |
|
|
$ |
83 |
|
|
$ |
8,583 |
|
|
$ |
15 |
|
|
$ |
8,876 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
GLOBAL
SOURCES LTD. AND SUBSIDIARIES
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
(In
U.S. Dollars Thousands, Except Number of Shares and Per Share
Data)
14.
|
Directors
Purchase Plan
|
A summary
of share option activity during the six months period ended June 30, 2008, under
Directors Purchase Plan as described in Note 24 of the Company’s consolidated
financial statements on Form 20-F for the year ended December 31, 2007, was as
follows:
|
|
|
|
|
|
|
Outstanding
at January 1,
2008
|
|
|
- |
|
|
|
- |
|
Granted
|
|
|
140,000 |
|
|
|
28.4033 |
|
Exercised
|
|
|
20,000 |
|
|
|
28.4033 |
|
Forfeited
|
|
|
- |
|
|
|
- |
|
Expired
|
|
|
120,000 |
|
|
|
28.4033 |
|
Outstanding
at June 30,
2008
|
|
|
- |
|
|
|
- |
|
Exercisable
at June 30,
2008
|
|
|
- |
|
|
|
- |
|
|
|
|
|
|
|
|
|
|
The
Company has entered into a number of license agreements during the year 2004 for
its exhibition events amounting to $29,730 including fee increases for year 2007
and 2008, 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 June 30, 2008
the amount paid under these agreements was $27,399. The amount paid
is expensed when the related events are held. Subsequently, in March 2007, the
Company entered into a number of venue license agreements for its exhibition
events amounting to $44,396 in payments over five and a half years. The
agreements are cancelable under Force Majeure conditions, or upon notice and
payment of cancellation charges to the other party. The amounts paid will be
expensed when the related events are held. As of June 30, 2008, approximately
$2,305 was paid under these agreements.
The
Company also entered into several agreements for the event specific promotion of
exhibition events amounting to $4,033 in payments over four
years. The amount paid under these agreements as of June 30, 2008 was
$3,700.
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 June 30, 2008, the
unutilized amount under this facility was approximately $205. Hongkong and
Shanghai Banking Corporation Limited has also provided guarantees on behalf of
the Company to the Company’s suppliers. As at June 30, 2008, such guarantees
amounted to $3.
In May
2008, the Company entered into a letter of intent to purchase approximately
6,364.50 square meters (gross) of office space in a commercial building known as
Shenzhen International Chamber of Commerce Tower in Shenzhen at a price of
approximately $35,000, and as of June 30, 2008, paid a deposit of approximately
$200. Subsequently, in July 2008, the Company entered into the final
property purchase agreements, and paid an additional deposit of approximately
$17,200. The Company’s payment of the balance of the total purchase price, in an
amount of approximately $17,600, and the delivery of the property to the
Company, occurred in September 2008.
On June
18, 2008, the Company entered into a formal sale and purchase agreement to
purchase approximately 22,874 square feet (gross) of office space, together with
6 car parking spaces, in a commercial building
known as Southmark in Hong Kong, for a total purchase price of approximately
$11,900 and as of June 30, 2008, paid a total deposit of approximately $1,800.
Completion of the property purchase and payment of the balance of the purchase
price, in an amount of approximately $10,100, occurred in August of
2008.
GLOBAL
SOURCES LTD. AND SUBSIDIARIES
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
(In
U.S. Dollars Thousands, Except Number of Shares and Per Share
Data)
On
December 20, 2007, the Company announced a one for ten bonus share issue on the
Company’s outstanding common shares. Shareholders of record on January 1, 2008
received one additional common share for every ten common shares held, of face
value of $0.01 each. The bonus shares have been distributed on or about February
1, 2008. 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 $42 and $42 from additional paid in capital to common share
capital as of December 31, 2007 and June 30, 2008, respectively.
18.
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Share
buyback program
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On
February 4, 2008 the Company’s board of directors has authorized a program to
buyback up to $50,000 of common shares. The Company intends, from time to time,
as business conditions warrant, to purchase shares in the open market or through
private transactions. The buyback program does not obligate the Company to
buyback any specific number of shares and may be suspended or terminated at any
time at its discretion. The timing and amount of any buyback of shares will be
determined by the Company based on its evaluation of market conditions and other
factors. As of September 30, 2008, the Company has not bought back any of its
shares.
PART II. INFORMATION NOT
REQUIRED IN PROSPECTUS
Item
8. Indemnification of Directors and Officers.
The
Companies Act 1981 of Bermuda 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.
Our
bye-laws also contain provisions for the advancement of funds to our directors,
officers and other indemnified persons for expenses incurred in defending legal
proceedings against them arising from the course of their duties. At our Annual
General Meeting on June 11, 2008, our shareholders approved amendments to our
bye-laws to extend the coverage of these provisions to our auditors and to
provide more specifically that if any fraud or dishonesty on the part of the
director, officer, auditor or other indemnified person concerned is proved, any
such funds advanced to him or her must be repaid. These amendments conformed our
bye-laws with changes to the Companies Act.
Item
9. Exhibits.
A list of
the exhibits to this registration statement is set forth in the Exhibit Index on
page E-1 of this registration statement and is incorporated herein by
reference.
Item
10. Undertakings.
THE
UNDERSIGNED REGISTRANT HEREBY UNDERTAKES:
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1.
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To
file, during any period in which offers or sales are being made, a
post-effective amendment to this registration
statement:
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To
include any prospectus required by section 10(a)(3) of the Securities Act
of 1933;
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To
reflect in the prospectus any facts or events arising after the effective
date of the registration statement (or the most recent post-effective
amendment thereof) which, individually or in the aggregate, represent a
fundamental change in the information set forth in the registration
statement. Notwithstanding the foregoing, any increase or decrease in
volume of securities offered (if the total dollar value of securities
offered would not exceed that which was registered) and any deviation from
the low or high end of the estimated maximum offering range may be
reflected in the form of prospectus filed with the Commission pursuant to
Rule 424(b) if, in the aggregate, the changes in volume and price
represent no more than 20% change in the maximum aggregate offering price
set forth in the “Calculation of Registration Fee” table in the effective
registration statement.
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To
include any material information with respect to the plan of distribution
not previously disclosed in the registration statement or any material
change to such information in the registration
statement;
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Provided
however, That:
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Paragraphs
(1)(i) and (1)(ii) of this section do not apply if the registration
statement is on Form S-8, and the information required to be included in a
post-effective amendment by those paragraphs is contained in reports filed
with or furnished to the Commission by the registrant pursuant to section
13 or section 15(d) of the Securities Exchange Act of 1934 that are
incorporated by reference in the registration statement;
and
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Paragraphs
(1)(i), (1)(ii) and (1)(iii) of this section do not apply if the
registration statement is on Form F-3 and the information required to be
included in a post-effective amendment by those paragraphs is contained in
reports filed with or furnished to the Commission by the registrant
pursuant to section 13 or section 15(d) of the Securities Exchange Act of
1934 that are incorporated by reference in the registration statement, or
is contained in a form of prospectus filed pursuant to Rule 424(b) that is
part of the registration statement.
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That,
for the purpose of determining any liability under the Securities Act of
1933, each such post-effective amendment shall be deemed to be a new
registration statement relating to the securities offered therein, and the
offering of such securities at that time shall be deemed to be the initial
bona fide offering thereof.
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To
remove from registration by means of a post-effective amendment any of the
securities being registered which remain unsold at the termination of the
offering.
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To
file a post-effective amendment to the registration statement to include
any financial statements required by Item 8.A. of Form 20-F (17 CFR
249.220f) at the start of any delayed offering or throughout a continuous
offering. Financial statements and information otherwise required by
Section 10(a)(3) of the Act need not be furnished, provided that the
registrant includes in the prospectus, by means of a post-effective
amendment, financial statements required pursuant to this paragraph (4)
and other information necessary to ensure that all other information in
the prospectus is at least as current as the date of those financial
statements. Notwithstanding the foregoing, a post-effective amendment need
not be filed to include financial statements and information required by
Section 10(a)(3) of the Act or Rule 3-19 of this chapter if such financial
statements and information are contained in periodic reports filed with or
furnished to the Commission by the registrant pursuant to section 13 or
section 15(d) of the Securities Exchange Act of 1934 that are incorporated
by reference in the Form F-3.
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That,
for the purpose of determining liability under the Securities Act of 1933
to any purchaser:
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Each
prospectus filed by the registrant pursuant to Rule 424(b)(3) shall be
deemed to be part of the registration statement as of the date the filed
prospectus was deemed part of and included in the registration statement;
and
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Each
prospectus required to be filed pursuant to Rule 424(b)(2), (b)(5), or
(b)(7) as part of a registration statement in reliance on Rule 430B
relating to an offering made pursuant to Rule 415(a)(1)(i), (vii), or (x)
for the purpose of providing the information required by section 10(a) of
the Securities Act of 1933 shall be deemed to be part of and included in
the registration statement as of the earlier of the date such form of
prospectus is first used after effectiveness or the date of the first
contract of sale of securities in the offering described in the
prospectus. As provided in Rule 430B, for liability purposes of the issuer
and any person that is at that date an underwriter, such date shall be
deemed to be a new effective date of the registration statement relating
to the securities in the registration statement to which that prospectus
relates, and the offering of such securities at that time shall be deemed
to be the initial bona fide offering thereof. Provided, however, that no
statement made in a registration statement or prospectus that is part of
the registration statement or made in a document incorporated or deemed
incorporated by reference into the registration statement or prospectus
that is part of the registration statement will, as to a purchaser with a
time of contract of sale prior to such effective date, supersede or modify
any statement that was made in the registration statement or prospectus
that was part of the registration statement or made in any such document
immediately prior to such effective date;
or
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If
the Registrant is subject to Rule 430C, each prospectus filed pursuant to
Rule 424(b) as part of a registration statement relating to an offering,
other than registration statements relying on Rule 430B or other than
prospectuses filed in reliance on Rule 430A, shall be deemed to be part of
and included in the registration statement as of the date it is first used
after effectiveness. Provided, however, that no statement made in a
registration statement or prospectus that is part of the registration
statement or made in a document incorporated or deemed incorporated by
reference into the registration statement or prospectus that is part of
the registration statement will, as to a purchaser with a time of contract
of sale prior to such first use, supersede or modify any statement that
was made in the registration statement or prospectus that was part of the
registration statement or made in any such document immediately prior to
such date of first use.
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That,
for the purpose of determining liability of the registrant under the
Securities Act of 1933 to any purchaser in the initial distribution of the
securities: The undersigned registrant undertakes that in a primary
offering of securities of the undersigned registrant pursuant to this
registration statement, regardless of the underwriting method used to sell
the securities to the purchaser, if the securities are offered or sold to
such purchaser by means of any of the following communications, the
undersigned registrant will be a seller to the purchaser and will be
considered to offer or sell such securities to such
purchaser:
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Any
preliminary prospectus or prospectus of the undersigned registrant
relating to the offering required to be filed pursuant to Rule
424;
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Any
free writing prospectus relating to the offering prepared by or on behalf
of the undersigned registrant or used or referred to by the undersigned
registrant;
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The
portion of any other free writing prospectus relating to the offering
containing material information about the undersigned registrant or its
securities provided by or on behalf of the undersigned registrant;
and
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Any
other communication that is an offer in the offering made by the
undersigned registrant to the
purchaser.
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Insofar
as indemnification for liabilities arising under the Securities Act of 1933 may
be permitted to directors, officers and controlling persons of the registrant
pursuant to the provisions described under Item 18 above, or otherwise, the
Registrant has been advised that in the opinion of the Securities and Exchange
Commission such indemnification is against public policy as expressed in the
Securities Act of 1933 and is, therefore, unenforceable. In the event
that a claim for indemnification against such liabilities (other than the
payment by the Registrant of expenses incurred or paid by a director, officer or
controlling person of the Registrant in the successful defense of any action,
suit or proceeding) is asserted by such director, officer or controlling person
in connection with the securities being registered, the Registrant will, unless
in the opinion of its counsel the matter has been settled by controlling
precedent, submit to a court of appropriate jurisdiction the question whether
such indemnification by it is against public policy as expressed in the
Securities Act of 1933 and will be governed by the final adjudication of such
issue.
SIGNATURES
Pursuant
to the requirements of the Securities Act, the Registrant certifies that it has
reasonable grounds to believe that it meets all of the requirements for filing
on Form F-3 and has duly caused this registration statement to be signed on its
behalf by the undersigned, thereunto duly authorized on October 31,
2008.
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GLOBAL
SOURCES LTD.
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By:
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/s/
Merle A. Hinrichs
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Name: Merle
A. Hinrichs
Title: Chairman
and Chief Executive
Officer
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KNOW ALL
MEN BY THESE PRESENTS THAT each person whose signature appears below does hereby
constitute and appoint Merle A. Hinrichs and Eddie Heng Teng Hua, and each of
them, as his true and lawful attorney-in-fact and agent and in his or her name,
place, and stead, and in any and all capacities, to sign his or her name to the
Registration Statement of Global Sources Ltd., a Bermuda corporation, on Form
F-3 under the Securities Act of 1933 and to any and all amendments or
supplements thereto (including any post-effective amendments, including any
registration statement filed under Rule 462(b) under the Securities Act of
1933), with all exhibits thereto and other documents in connection therewith and
to cause the same to be filed with the Securities and Exchange Commission,
granting unto said attorneys and each of them full power and authority to do and
perform any act and thing necessary and proper to be done in the premises, as
fully and to all intents and purposes as the undersigned could do if personally
present, and the undersigned hereby ratifies and confirms all that said
attorneys or any one of them shall lawfully do or cause to be done by virtue
hereof.
Pursuant
to the requirements of the Securities Act of 1933, this registration statement
has been duly signed below by the following persons on behalf of the Registrant
and in the capacities and on the dates indicated.
Signature
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Title
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Date
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/s/
Merle A. Hinrichs
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Chairman
of the Board and Chief Executive Officer (principal executive
officer)
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October
31, 2008
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/s/
Eddie Heng Teng Hua
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Chief
Financial Officer and Director (principal financial officer and principal
accounting officer)
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October
31, 2008
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/s/
Sarah Benecke
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Director
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October
31, 2008
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/s/
Roderick Chalmers
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Director
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October
31, 2008
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/s/
David F. Jones
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Director
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October
31, 2008
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/s/
Robert Lees
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Director
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October
31, 2008
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/s/
James Watkins
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Director
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October
31, 2008
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EXHIBITS
Exhibit
Number
|
Description
|
1.1*
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Form
of Underwriting Agreement (Equity).
|
1.2*
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Form
of Underwriting Agreement (Debt).
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1.3*
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Form
of Underwriting Agreement (Share Purchase Contracts).
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1.4*
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Form
of Underwriting Agreement (Share Purchase Units).
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3.1(1)
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Memorandum
of Association of the Company.
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3.2(1)
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Bye-laws
of the Company.
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3.3(2)
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Amendments
to the Bye-laws of Global Sources Ltd, as approved at the May 6, 2002
Annual General Meeting of Shareholders.
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4.1(1)
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Specimen
Common Share Certificate.
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4.2(3)
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Form
of Senior Debt Securities Indenture.
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4.3(3)
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Form
of Senior Debt Securities (included as part of Exhibit
4.2).
|
4.4(3)
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Form
of Subordinated Debt Securities Indenture.
|
4.5(3)
|
Form
of Subordinated Debt Securities (included as part of Exhibit
4.4).
|
4.6*
|
Form
of Standard Share Warrant Agreement.
|
4.7*
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Form
of Standard Share Warrant Certificate.
|
4.8*
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Form
of Standard Debt Warrant Agreement.
|
4.9*
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Form
of Standard Debt Warrant Certificate.
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4.10*
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Form
of Standard Share Purchase Contract Agreement.
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5.1**
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Opinion
of Appleby.
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5.2**
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Opinion
of Cahill Gordon & Reindel LLP
|
12.1**
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Computation
of ratio of earnings to fixed
charges.
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23.1**
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Consent
of Appleby (included as part of Exhibit 5.1).
|
23.2**
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Consent
of Cahill Gordon & Reindel LLP (included
as part of Exhibit 5.2).
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23.3**
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Consent
of Ernst & Young LLP.
|
24.1**
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Power
of Attorney (included on signature page to this Registration
Statement).
|
25.1*
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Form
T-1 Statement of Eligibility of Trustee (Senior Debt Securities Indenture
and Subordinated Debt Securities
Indenture).
|
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*
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To
be filed as an amendment to this registration statement or as an exhibit
to an Exchange Act report of the Registrant(s) and incorporated herein by
reference.
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(1)
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Incorporated
herein by reference to Global Sources Ltd.’s (previously named Fairchild
(Bermuda), Ltd.) annual report on Form 20-F (File No. 000-30678), as
filed with the Securities and Exchange Commission on June 30,
2000.
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(2)
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Incorporated
herein by reference to Form 6-K filed with the Securities and
Exchange Commission on May 6, 2002 (File No.
000-30678).
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(3)
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Incorporated
herein by reference to the Registration Statement of Global Sources Ltd.
on Form F-3 filed with the Securities and Exchange Commission on April 12,
2004.
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E-1