UNITED
      STATES




SECURITIES
      AND EXCHANGE COMMISSION




Washington,
      D.C.  20549




FORM
      20-F




(Mark
      One)


[  
       ] Registration
      Statement Pursuant To Section 12(b) or (g) of the Securities Exchange Act of
      1934


OR


[
                X
                ]
            Annual
                Report Pursuant To Section 13 or 15 (d) of the Securities Exchange
                Act of
                1934


For the fiscal year ended December 31, 2005.


OR


[  
       ] Transition
      Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of
      1934




OR


[  
       ] Shell
      Company Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act
      of
      1934


Date
      of
      event requiring this shell company report........................For the transition
      period


from
      ....................................... to
      ............................................ Commission file number
      000-30678




GLOBAL
      SOURCES LTD.


(Exact
      Name of Registrant as Specified in its Charter)




Global
      Sources Ltd.


(Translation
      of Registrant’s Name into English)




Bermuda


(Jurisdiction
      of incorporation or organization)




Canon’s
      Court


22
      Victoria Street


Hamilton,
      HM 12 Bermuda


(Address
      of principal executive offices)




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




**Title
                of Each Class**
            **Name
                of Each Exchange on Which Registered**Common
                Shares, $0.01 Par Value
            NASDAQ
                National Market





Securities
      registered or to be registered pursuant to Section 12(g) of the Act:
      NONE




Securities
      for which there is a reporting obligation pursuant to Section 15(d) of the
      Act:
      NONE




Indicate
      the number of outstanding shares of each of the issuer’s classes of capital or
      common stock as of the close of the period covered by the annual
      report:




38,428,310
      common shares, $0.01 par value, outstanding as of April 17, 2006.




Indicate
      by check mark if the registrant is a well-known seasoned issuer, as defined
      in
      Rule 405 of the Securities act




Yes
            
            
            No
            x





If
      this
      report is an annual or transition report, indicate by check mark if the
      registrant is not required to file reports pursuant to Section 13 or 15(d)
      of
      the Securities Exchange Act of 1934




Yes
            x
            
            No





Note-Checking
      the box above will not relieve any registrant required to file reports pursuant
      to Section 13 or 15(d) of the Securities Exchange Act of 1934 from their
      obligations under those Sections.












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




Yes
            x
            
            No





Indicate
      by check mark whether the registrant is a large accelerated filer, an
      accelerated filer, or a non-accelerated filer. See definition of “accelerated
      filer and large accelerated filer” in Rule 12b-2 of the Exchange Act. (Check
      one):




Large
                accelerated filer
            
            
            Accelerated
                filer
            x
            
            Non-accelerated
                filer





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




Item
                17
            
            
            Item
                18
            x





If
      this
      is an annual report, indicate by check mark whether the registrant is a shell
      company (as defined in Rule 12b-2 of the Exchange Act)




Yes
            
            
            No
            x





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




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




Yes
            
            
            No










**TABLE
      OF CONTENTS**




**GENERAL
      INFORMATION**




**Page**




PART
                IITEM
                1.
            IDENTITY
                OF DIRECTORS, SENIOR MANAGEMENT AND ADVISERS
            2ITEM
                2.
            OFFER
                STATISTICS AND EXPECTED TIMETABLE
            2ITEM
                3.
            KEY
                INFORMATION
            2ITEM
                4.
            INFORMATION
                ON THE COMPANY
            14ITEM
                4A.
            UNRESOLVED
                STAFF COMMENTS
            27ITEM
                5.
            OPERATING
                AND FINANCIAL REVIEW AND PROSPECTS
            27ITEM
                6.
            DIRECTORS,
                SENIOR MANAGEMENT AND EMPLOYEES
            41ITEM
                7.
            MAJOR
                SHAREHOLDERS AND RELATED PARTY TRANSACTIONS
            48ITEM
                8.
            FINANCIAL
                INFORMATION
            50ITEM
                9.
            THE
                OFFER AND LISTING
            79ITEM
                10.
            ADDITIONAL
                INFORMATION
            79ITEM
                11.
            QUANTITATIVE
                AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
            90ITEM
                12.
            DESCRIPTION
                OF SECURITIES OTHER THAN EQUITY SECURITIES
            90PART
                IIITEM
                13.
            DEFAULTS,
                DIVIDEND ARREARAGES AND DELINQUENCIES
            91ITEM
                14.
            MATERIAL
                MODIFICATIONS TO THE RIGHTS OF SECURITY HOLDERS AND USE OF
                PROCEEDS
            91ITEM
                15.
            CONTROLS
                AND PROCEDURES
            91ITEM
                16A.
            AUDIT
                COMMITTEE FINANCIAL EXPERT
            91ITEM
                16B.
            CODE
                OF ETHICS
            91ITEM
                16C.
            PRINCIPAL
                ACCOUNTANT FEES AND SERVICES
            91ITEM
                16D.
            EXEMPTIONS
                FROM THE LISTING STANDARDS FOR AUDIT COMMITTEES
            92ITEM
                16E.
            PURCHASES
                OF EQUITY SECURITIES BY THE ISSUER AND AFFILIATED
                PURCHASERS
            92PART
                IIIITEM
                17.
            FINANCIAL
                STATEMENTS
            92ITEM
                18.
            FINANCIAL
                STATEMENTS
            92ITEM
                19.
            EXHIBITS
            92














**FORWARD-LOOKING
      STATEMENTS**




Except
      for any historical information contained herein, the matters discussed in this
      Annual Report on Form 20-F 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
      involve risks and uncertainties, including current trend information,
      projections for deliveries, backlog and other trend projections, that may cause
      our actual future activities and results of operations to be materially
      different from those suggested or described in this Annual Report on Form
      20-F.




These
      risks include:




·
            customer
                satisfaction and quality issues;




·
            competition;




·
            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.”




If
      one or
      more of these risks or uncertainties materialize, or if underlying assumptions
      prove incorrect, our actual results may vary materially from those expected,
      estimated or projected. Given these uncertainties, users of the information
      included in this Annual Report on Form 20-F, 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 Annual Report on Form 20-F.




In
      this
      Annual Report on Form 20-F, except as specified otherwise or unless the context
      requires otherwise, “we,” “our,” “us,” the “Company,” and “Global Sources” refer
      to Global Sources Ltd. and its subsidiaries. All references to “fiscal” in
      connection with a year shall mean the year ended December 31.




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




**PART
      I**




**ITEM
      1.** **IDENTITY
      OF** **DIRECTORS,
      SENIOR MANAGEMENT AND ADVISERS**


**- (Not applicable)**




**ITEM
      2.** **OFFER
      STATISTICS AND EXPECTED TIMETABLE**


-
      (Not applicable)




**ITEM
      3.**  **KEY
      INFORMATION**




**Selected
      Financial Data**




The
      following historical financial information should be read in conjunction with
      the section entitled “Operating and Financial Review and Prospects” and our
      audited consolidated financial statements and related notes, which are included
      elsewhere in this document. The consolidated statements of income data for
      each
      of the three years ended December 31, 2003, 2004 and 2005 and selected
      consolidated balance sheet data as of December 31, 2004 and 2005 are
      derived from, and qualified by reference to, our audited consolidated financial
      statements included elsewhere in




-2-


this
      document. The consolidated statements of income data for each of the years
      ended
      December 31, 2001 and 2002 and selected consolidated balance sheet data as
      of December 31, 2001, 2002 and 2003 are derived from our audited financial
      statements not included in this document.




**Year
                Ended December 31,****2001**
            
            **2002**
            
            **2003**
            
            **2004**
            
            **2005**(In
                Thousands, Except Per Share Data)**Income
                Statement Data:**Revenue:Online
                and other media services
            
            $
            91,859
            
            $
            84,400
            
            $
            87,685
            
            $
            92,325
            
            $
            97,062Exhibitions
            
            
            2,619
            
            
            2,455
            
            
            3,327
            
            
            13,010
            
            
            14,300Miscellaneous
            
            
            807
            
            
            631
            
            
            657
            
            
            511
            
            
            832Total
                revenue
            
            
            95,285
            
            
            87,486
            
            
            91,669
            
            
            105,846
            
            
            112,194Operating
                expenses:Sales
            
            
            31,236
            
            
            28,659
            
            
            30,113
            
            
            29,956
            
            
            33,910Event
                production
            
            
            811
            
            
            933
            
            
            930
            
            
            3,774
            
            
            3,920Community
            
            
            13,325
            
            
            13,099
            
            
            13,155
            
            
            17,890
            
            
            20,623General
                and administrative
            
            
            32,158
            
            
            28,267
            
            
            27,858
            
            
            30,329
            
            
            33,641Online
                services development
            
            
            8,393
            
            
            5,378
            
            
            4,960
            
            
            4,232
            
            
            3,920Non-cash
                compensation expense(1)
            
            
            2,501
            
            
            2,564
            
            
            1,419
            
            
            2,117
            
            
            1,948Other(2)
            
            
            3,476
            
            
            3,740
            
            
            4,453
            
            
            1,480
            
            
            1,335Total
                operating expenses
            
            
            91,900
            
            
            82,640
            
            
            82,888
            
            
            89,778
            
            
            99,297Income
                from operations
            
            $
            3,385
            
            $
            4,846
            
            $
            8,781
            
            $
            16,068
            
            $
            12,897Interest
                expense
            
            
            (172
            )
            
            —
            
            
            —
            
            
            —
            
            
            —Interest
                and dividend income
            
            
            357
            
            
            439
            
            
            122
            
            
            219
            
            
            1,624Gain
                (loss) on sale of available-for-sale
              Securities
            
            
            —
            
            
            —
            
            
            (40
            )
            
            1,120
            
            
            977Foreign
                exchange gains (losses), net
            
            
            (470
            )
            
            50
            
            
            —
            
            
            240
            
            
            (80
            )Write-down
                of investments
            
            
            (1,150
            )
            
            —
            
            
            —
            
            
            —
            
            
            —Income
                before income taxes
            
            
            1,950
            
            
            5,335
            
            
            8,863
            
            
            17,647
            
            
            15,418Income
                tax provision
            
            
            (1,143
            )
            
            (720
            )
            
            (668
            )
            
            (651
            )
            
            (759
            )Income
                before minority interest
            
            $
            807
            
            $
            4,615
            
            $
            8,195
            
            $
            16,996
            
            $
            14,659Equity
                in income of affiliate
            
            
            51
            
            
            —
            
            
            —
            
            
            —
            
            
            —Minority
                interest
            
            
            (83
            )
            
            (308
            )
            
            (861
            )
            
            (1,227
            )
            
            (1,281
            )Net
                income
            
            $
            775
            
            $
            4,307
            
            $
            7,334
            
            $
            15,769
            
            $
            13,378Basic
                net income per share
            
            $
            0.0221
            
            $
            0.1230
            
            $
            0.2094
            
            $
            0.4501
            
            $
            0.3558Diluted
                net income per share
            
            $
            0.0221
            
            $
            0.1230
            
            $
            0.2093
            
            $
            0.4492
            
            $
            0.3550Cash
                dividends declared per share
            
            
            —
            
            
            —
            
            
            —
            
            
            —
            
            
            —Shares
                used in basic net income per share
              calculations(3)
            
            
            35,014
            
            
            35,020
            
            
            35,027
            
            
            35,033
            
            
            37,598Shares
                used in diluted net income per share
              calculations(3)
            
            
            35,014
            
            
            35,020
            
            
            35,043
            
            
            35,108
            
            
            37,681





**December
                31,****2001**
            
            **2002**
            
            **2003**
            
            **2004**
            
            **2005**(In
                U.S. Dollars Thousands)**Balance
                Sheet Data:**Cash
                and cash equivalents
            
            $
            20,236
            
            $
            11,009
            
            $
            26,227
            
            $
            41,195
            
            $
            94,321Available-for-sales
                securities
            
            
            —
            
            
            26,199
            
            
            35,140
            
            
            10,172
            
            
            23,982Total
                assets
            
            
            53,602
            
            
            62,650
            
            
            82,541
            
            
            92,525
            
            
            171,680Net
                assets
            
            
            14,116
            
            
            21,345
            
            
            31,664
            
            
            50,433
            
            
            105,432Long-term
                debt, less current portion...............
            
            
            13,448
            
            
            13,033
            
            
            12,384
            
            
            2,214
            
            
            1,091Total
                shareholders’ equity
            
            
            11,601
            
            
            18,522
            
            
            27,980
            
            
            45,523
            
            
            99,241





-3-





___________________





(1)
            Reflects
                the non-cash compensation expenses associated with the grants under
                the
                employee equity compensation plans and Directors Purchase Plan. Non-cash
                compensation expense was allocated according to the category under
                which a
                staff employee and team member functioned as follows: approximately
                $505
                (2004: $626; 2003: $323; 2002: $623; 2001: $381) represents sales
                expenses, $103 (2004: $93; 2003: $96; 2002: $238; 2001: $87) represents
                community expenses, $1,025 (2004: $1,066; 2003: $691; 2002: $1,179;
                2001:
                $1,546) represents general and administrative expenses and $315 (2004:
                $332; 2003: $309; 2002: $524; 2001: $487) represents online services
                development expenses.




(2)
            Includes
                amortization of intangibles/software
                cost.




(3)
            On
                March 1, 2005, we announced a one for ten bonus share issue on our
                outstanding common shares. For a further discussion on the bonus
                shares,
                please see Note 27 of our consolidated financial statements appearing
                elsewhere in this annual report. Fractional shares were rounded up
                resulting in an additional 521 common shares upon distribution of
                the
                bonus shares on April 1, 2005. On March 6, 2006, we once again announced
                a
                one for ten bonus shares issue on our outstanding common shares.
                All
                common shares and per-share amounts have been retroactively adjusted
                to
                reflect the one for ten bonus share issue for all periods presented.
                For a
                further discussion on the bonus shares, please see Note 29 of our
                consolidated financial statements appearing elsewhere in this annual
                report. Fractional shares were rounded up resulting in an additional
                1,531
                common shares upon distribution of the bonus shares on April 17,
                2006.




**Risk
      Factors**




In
      addition to other information in this annual report, the following risk factors
      should be carefully considered in evaluating us and our business 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 annual report, 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.




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




Our
      customers in China provided approximately 47% of our total revenues in fiscal
      2004 and approximately 50% of our total revenues in fiscal 2005, and we believe
      our operations in China will continue to grow for the next several years. Our
      dependence on the China market and its revenues is significant, and adverse
      political changes or uncompetitive cost conditions in China may harm our
      business and cause our revenues to decline.




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




Our
      customers are mainly suppliers who are based in China. Should China labor costs
      go up substantially and such cost costs are passed on to the customer (for
      example, due to limited skilled labor availability), China’s products may become
      less price competitive. If this occurs, it would likely have a negative impact
      on the demand in China for our various media and marketing
      services.




-4-







*Our
      limited history in operating the China Sourcing Fair business as well as several
      factors outlined below could adversely affect our ability to operate our trade
      show business successfully and we can give no assurances that this business
      will
      be incremental to our growth.*




Our
      first
      China Sourcing Fairs was held in Shanghai in 2003, so we have a fairly limited
      history of operating our China Sourcing Fair trade show business.




The
      first
      of a series of China Sourcing Fairs in the Hong Kong SAR, launched in April
      2006, are held in a brand new venue in the Hong Kong SAR, Asia World-Expo,
      which
      many buyers have never visited before. In addition, there are substantial and
      long-established competing trade shows in the Hong Kong SAR and southern China,
      and we may not be able to attract the desired quantity and quality of buyers.
      Accordingly, because of the uncertainty of a new business launch and the
      competition, we may not achieve our desired sales objectives. Furthermore,
      in an
      effort to rapidly grow this business, additional personnel have had to be hired
      and additional capital has had to be expended, and we may be unable to
      effectively execute the operations, which would jeopardize our ability to be
      successful in this 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.




For
      our
      trade shows in general, the date and location can greatly impact their
      profitability and prospects. The market for desirable dates and locations is
      highly competitive. If we cannot secure desirable dates and locations for our
      trade shows and conferences, 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;




·
            natural
                catastrophes, labor strikes and transportation
                shutdowns




·
            decrease
                in demand for booth space;




·
            particularly
                in 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;




·
            competing
                trade shows; and




·
            our
                inability to effectively expand our staff and
                infrastructure.




In
      view
      of the various risks outlined above, we can give no assurances that our
      operation of the trade show business will be incremental to our
      growth.




*Our
      limited experience in the direct online sales business as well as other factors
      could adversely affect our ability to operate this business
      successfully.*




Our
      direct online sales business, primarily referred to by us as “Global Sources
      Direct”, is a brand new business, 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 the effectiveness of 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 ramp up this business to a scale that would be profitable
      for us.




-5-







Other
      factors that could adversely impair the success of our direct online sales
      business include the following:




·
            Most
                of the goods sold are air-shipped. The costs of air shipments are
                dependent to a large degree on oil prices. A substantial increase
                in oil
                prices may therefore result in air shipment becoming a cost prohibitive
                means of delivery.




·
            We
                rely on a variety of logistic service providers for executing and
                fulfilling our service. However, there are only a limited number
                of
                appropriate logistic service providers. If any one or more of them
                cease
                to operate, our ability to carry on the direct online sales service
                could
                be severely curtailed or impaired.




·
            We
                utilize payment processes provided by third parties. Many of these
                payment
                processors are from jurisdictions other than those of our relevant
                subsidiaries which operate our direct online sales business. These
                payment
                processors may therefore be reluctant to offer their payment process
                services to us, or may charge us high rates.




·
            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.




·
            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.




·
            Online
                fraud and fraudulent orders are potential risks. We may not be able
                to
                detect, or we may not have detected or been aware of, such fraudulent
                circumstances, and if we act pursuant thereto (for example, by shipping
                products under a fraudulent order), we may subsequently be unable
                to
                collect payment, or be required to refund payments, or be liable
                for the
                costs or losses of the innocent
                victim.




*General* *economic uncertainty, slowdowns, or recessions may reduce spending for
      business-to-business marketing services.*




The
      revenue growth and profitability of our business depends significantly on the
      overall demand for business-to-business media 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 of a number of
      factors, including the overall weakening of global economies. Such situations
      and events as these may give rise to a number of trends that adversely affect
      our business and revenues.




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




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




·
            fluctuations
                in regional economic conditions;




·
            political
                instability;




·
            the
                threat of terrorist attacks;




·
            conflicting
                and changing legal and regulatory
                requirements;




·
            restrictions
                placed on the operations of companies with a foreign
                status;




-6-







·
            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
      2005,
      we derived more than 90% of our revenues from customers in the Asia-Pacific
      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
      or economic instability in the Asia-Pacific 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 United States 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. Currently, we do not hedge our exposure to foreign currency
      fluctuations.




*Future
      outbreaks of Severe Acute Respiratory Syndrome (“SARS”), Avian influenza or
      other widespread public health problems could adversely affect our
      business.*




In
      the
      event of future outbreaks of SARS, Avian influenza 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 shows, could be significantly
                curtailed or otherwise adversely affected
                .




*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.




-7-







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.




*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 or
      inorganic 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 or inorganic growth opportunities. In such circumstances, our growth
      potential may be harmed.




*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 would
      harm
      our business and revenues.*




We
      have
      agreements with various sales representative companies that employ sales
      representatives. Six sales representative companies in China are responsible
      for
      supplier accounts which in the aggregate accounted for approximately 50% of
      our
      total revenues for the year ended December 31, 2005. Generally, either we or
      the
      sales representative company 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 or be able to replace
      them
      with equally qualified personnel. Furthermore, if a sales represent ative
      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 represe ntative
      companies and their employees are independent from us, there can be no assurance
      that our reputation and our business wil l
      not be
      harmed by their acts or omissions. If sufficient numbers of employees are not
      recruited, properly trained, retained and ma naged
      by
      these sales representative companies, or if they perform poorly, or if our
      relationship with these sales representat ive
      companies fail or deteriorate, our business 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.*




We
      plan
      to increase substantially the number of independent sales representative team
      members in China in order to pursue our business objectives. Our success will
      depend in part upon the ability of our senior management to implement and manage
      this growth effectively. To do this, additional new sales representative team
      members must be recruited and trained. If our new sales representative team
      members perform poorly, or if their training and management is unsuccessful,
      or
      if our relationships with our 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.




*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 buyers or suppliers that currently pay to use our services are under any
      long-term contractual obligation to continue using our services. A significant
      percentage of our customers do not renew their contracts and we experience
      high
      customer turnover from year to year. If we cannot replace non-renewing customers
      with new customers, our business could be adversely affected.




-8-







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




Our
      industry is intensely competitive, evolving and subject to rapid change.
      Barriers to entry are minimal, and competitors are able to launch new websites
      and other media at a low cost. Competition is likely to result in price
      reductions, reduced margins and loss of market share, any one of which may
      harm
      our business. We compete for our share of customers’ marketing and advertising
      budgets with other online market-places, 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.




*Our
      lengthy sales and implementation cycle could cause delays in revenues
      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 revenues in future quarters.




*Our
      quarterly operating results may have seasonal fluctuations, and we may fail
      to
      meet analyst, investor and shareholder expectations.*




We
      have
      experienced seasonal quarter-to-quarter fluctuations. 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. Virtually all 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 2005,
      approximately 28% of our revenue was generated during the second quarter and
      approximately 29% during the fourth quarter. The first quarter accounted for
      approximately 20% of revenue in 2005 and the third quarter accounted for
      approximately 23% of revenue in 2005. 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, such as what happened in 2005
      when
      IIC China show was moved from the second to the first quarter.




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




Our
      common shares have been traded in the public market for a limited time and
      this
      market may not be sustained. As a result of the April 2000 share exchange,
      1,189,949 of our common shares were listed on the Nasdaq National Market. As
      of
      April 17, 2006 we had approximately 1,000 shareholders, and approximately
      11,929,907 shares that were tradable on the Nasdaq National Market.




However,
      because of the small number of shareholders and the small number of publicly
      tradable shares, we cannot be sure that an active trading market will develop
      or
      be sustained or that you will be able to sell or buy common shares when you
      want
      to. As a result, it may be difficult to make purchases or sales of our common
      shares in the




-9-


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




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




Future
      sales of common shares by us or our existing shareholders could adversely affect
      the prevailing market price of the common shares. As of April 17, 2006, we
      had
      38,428,310 common shares outstanding , out of which at least 23,975,251 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 the
                Nasdaq National Market) that owns or has announced its intention
                to own,
                or with respect to any of our affiliates or associates, within the
                prior
                two years did own, at least 15% of our voting
                shares.




*Our* *share
      prices may fluctuate in response to a number of events and factors as outlined
      below.*




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 compete-




-10-


tors
      of
      significant acquisitions, strategic partnerships, joint ventures or capital
      commitments; or changes in laws in the countries in which we
      operate.




*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.




*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
      April 17, 2006, Merle A. Hinrichs beneficially owned 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 online
      marketplace revenues from the Asia-Pacific region. The quality of some of the
      telecommunications and Internet infrastructure and telephone line availability
      in China and in some Asia-Pacific countries is poor. This may contribute to
      lower than expected adoption of many of our services and may cause usage growth
      and revenues to fall below expectations. In addition, access fees are high
      in
      some Asia-Pacific countries, which also contributes to low usage and may
      adversely affect our growth and revenues potential.




*Risk
      of failure of our computer systems, network and communications hardware and
      software.*




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 customer-facing computer systems with major Internet Service Providers
      (ISPs) in Singapore and the Hong Kong SAR. Interruptions to these ISPs’ 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 have committed to provide 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.




-11-







*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 and
      technology products and services. We rely on relationships and/or contractual
      agreements with software developers and providers, systems integrators and
      other
      technology firms to support, enhance and develop our products and services.




Although
      we have contracts with technology providers to enhance, expand, manage and
      maintain our computer and communications equipment and software, these service
      providers may not provide acceptable services. Services provided by third
      parties include 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 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 security may deter use of our online products and
      services.*




Widely
      publicized security breaches involving the Internet or in online services
      generally, or our failure to prevent security breaches, may cause our current
      and potential customers not to use our products and services and adversely
      affect our 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.




-12-







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




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




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.




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




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




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




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




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




Litigation
      may be necessary to enforce our intellectual property rights, protect trade
      secrets, determine the validity and scope of the proprietary rights of others,
      or defend against claims of infringement or invalidity. Intellectual property
      laws provide limited protection. Moreover, the laws of some foreign countries
      do
      not offer the same level




-13-


of
      protection for intellectual property as the laws of the United States. In
      addition, we may be unable to detect unauthorized use of our intellectual
      property. Litigation may result in substantial costs and diversion of resources,
      regardless of its outcome, which may limit our ability to develop new services
      and compete for customers.




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




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




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




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




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




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




*We
      do
      not anticipate paying cash dividends in the foreseeable future and this may
      reduce the demand for our shares*




We
      do not
      anticipate paying cash dividends in the foreseeable future. This may reduce
      the
      demand for our shares.




**ITEM
      4.**  **INFORMATION
      ON THE COMPANY**




**History
      and Development of the Company**




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 in print, online and
      face-to-face, meeting the marketing and sourcing needs of our supplier and
      buyer
      communities.




While
      our
      core business facilitates exports from Asia to the world, we also facilitate
      trade from the world to Asia. In 1985, we launched *Electronics
      News for China* for
      this
      purpose. Today we have several publications, their associ-




-14-


ated
      websites plus events and conferences that provide information to electronic
      engineers and executives at manufacturing companies in 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 year ended December 31, 2005 amounted to $7.3
      million, incurred mainly on office premises, for computers, software, reusable
      trade show booths, 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, 2005, amounted to $0.09 million.




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




**Business
      Overview**




We
      are a
      leading business-to-business (B2B) media company that provides information
      and
      integrated marketing services, with a particular focus on the Chinese market.
      Our mission is to facilitate global trade between buyers and suppliers by
      providing export marketing services and sourcing information. Although our
      range
      of media has grown, for more than 35 years we have been in the same primary
      business of helping buyers worldwide find products and suppliers in
      Asia.




Buyers
      rely on our media to stay current with available purchasing opportunities.
      Suppliers use our media to find new buyers and markets for their products.
      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, 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. Our revenue from China has grown 124% since 2000.




We
      serve
      an independently certified community of more than 479,000 active members in
      some
      230 countries and territories. This buyer community has more than doubled in
      size from 209,000 at the end of 2000. During 2005, buyers sent more than 5.8
      million sales leads, or requests for information (RFIs) to the 130,000 suppliers
      listed on *Global
      Sources Online* ,
      up from
      2.4 million for the year 2000.




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




-15-







The
      following table sets forth our revenue by category for the last three fiscal
      years:




**Year
                Ended December 31,****2003**
            
            **2004**
            
            **2005****Revenue:**Online
                and other media services
            
            $
            87,685
            
            $
            92,325
            
            $
            97,062Exhibitions
                - trade shows and seminars
            
            
            3,327
            
            
            13,010
            
            
            14,300Miscellaneous
            
            
            657
            
            
            511
            
            
            832**$**
            **91,669**
            
            **$**
            **105,846**
            
            **$**
            **112,194**





The
      following table represents our revenue by geographical area for the last three
      fiscal years:




**Year
                Ended December 31,****2003**
            
            **2004**
            
            **2005****Revenue:**Asia
            
            $
            84,856
            
            $
            97,876
            
            $
            104,746United
                States
            
            
            5,970
            
            
            6,573
            
            
            6,175Europe
            
            
            437
            
            
            597
            
            
            679Others
            
            
            406
            
            
            800
            
            
            594Consolidated
            
            **$**
            **91,669**
            
            **$**
            **105,846**
            
            **$**
            **112,194**




We
      currently generate the majority of our revenue from suppliers in Asia, with
      China being our largest market at 55% of total revenue during fourth Quarter
      of
      2005. Our revenue is derived from three primary 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 advertisements
                from
                suppliers and our independent editorial reports and product surveys.
                We
                publish our core trade magazines monthly, and a host of specialized
                magazines seasonally. We also derive revenue from buyers that subscribe
                to
                our trade publications.




·
            ***Exhibitions
                - Trade Shows and Seminars****-*We
                launched a new line of trade shows called the China Sourcing Fairs.
                They
                offer international buyers direct access to manufacturers in China
                and
                other Asian countries. The first fair was held during the fourth
                quarter
                of 2003. Future fairs will be held mainly in the second quarter and
                fourth
                quarter of each financial year.




**Industry
      Background**




*Global
      Trade and the Role of China*




Over
      the
      past few decades, as communications and logistics technologies have improved
      and
      as more free trade agreements have been signed, international trade has grown
      at
      a pace far exceeding the growth of overall global production. Asia, and China
      in
      particular, have been significant contributors to the growth of global
      trade.




Greater
      China defined as mainland China, Hong Kong and Taiwan, is the world’s largest
      merchandise exporter. Mainland China, especially, is rapidly expanding as both
      an exporter and an importer of goods and services. According to the OECD,
      China’s 2005 exports reached $762 billion, up 28% compared to 2004, while
      imports grew by 17% to $660 billion. Also, China has overtaken the United States
      as the world’s largest exporter of information and communications technology
      goods.




-16-







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




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




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




*The
      Role of Media in Global Trade*




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




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




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




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




Operators
      of online marketplaces generate most of their business from selling marketing
      services to suppliers, such as hosting and publishing a suppliers’ website or
      catalog, and from advertising. Online marketplaces have the advantages of
      content depth and timeliness and provide a venue where suppliers can make
      detailed product and company information accessible to buyers.




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




-17-







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




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




**Our
      Offerings**




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




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




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




With
      the
      combination of our online, print and trade show offerings, supported by our
      creative and production services, we offer suppliers a virtual one-stop shop
      for
      most of their export marketing communications needs. Moreover, we believe that
      we are uniquely capable of helping suppliers create and deliver integrated
      marketing programs that impact all stages of the buying process - from awareness
      and lead generation - right through to purchase orders.




*Media
      for Buyers Worldwide*




Online
      Services




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




Buyers
      can reach a large potential supply base on *Global
      Sources Online* by
      searching among, and/or making inquiries to approximately 130,000 suppliers
      who
      are categorized according to the products they can supply. In listing suppliers
      for a specific product, we give prominence to those who maintain marketing
      websites with us.




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




-18-







Trade
      Publications




We
      publish ten monthly publications, plus other quarterly and seasonal
      publications, that are circulated to buyers worldwide. Our trade publications
      contain paid advertisements from suppliers, as well as our independent editorial
      features, which include market reports and product surveys. In addition to
      our
      paid subscription base, we distribute samples of our trade magazines
      free-of-charge to qualified buyers worldwide at a variety of trade shows and
      events.




Trade
      Shows




We
      have
      six China Sourcing Fairs scheduled for 2006 in the Hong Kong SAR. The shows
      bring buyers from around the world to meet face-to-face with suppliers. The
      first *China
      Sourcing Fair* was held
      in Shanghai in October 2003. Regarding our 2005 China Sourcing Fairs,
      Electronics & Components and Gifts & Home Products were each held twice
      in Shanghai - once in the spring and once in the fall. The fall shows attracted
      over 37,000 buyers from 136 countries and featured nearly 1,900 booths. The
      spring shows featured nearly 1,600 booths and were attended by over 38,000
      buyers from 117 countries and territories.




Direct
      Online Sales




In
      2005
      we launched Global Sources Direct. This new initiative enables suppliers to
      sell
      their products online - both in China and internationally through multiple
      online channels, including eBay International sites and GlobalSourcesDirect.com.
      The service facilitates the sale of wholesale lots, or what some call LCL or
      ‘less than container load’ orders, and enables buyers to import without having
      to understand or deal with most of the intricacies involved.




Advertising
      Creative Services




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




China
      Sourcing Reports




We
      currently have more than 100 different reports for sale and we are scheduled
      to
      publish more than 60 reports in 2006. Formerly called, Market Intelligence
      Reports, each China Sourcing Report provides extremely detailed,
      product-specific information on suppliers and supply market conditions
      throughout Greater China that is based on our factory visits, face-to-face
      interviews, and detailed questionnaires. Revenue is derived from sales to
      buyers.




Private
      Catalogs




Our *Private
      Supplier Catalogs* enable
      suppliers to enter, manage, update and distribute their product and company
      data
      for a variety of online marketing and cataloging applications. We provide tools
      within the catalog to assist suppliers with creating, updating and posting
      content. Also the catalogs are maintained in a private, password-protected
      environment where the catalog user has the sole right of access and data entry.
      We currently derive little revenue from these services.




*Media
      for Engineers and Executives in China and Asia*




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




-19-







**Strategy**




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




Our
      growth strategy has six key components: continue to expand in China; expand
      our
      trade show business; develop new or related verticals; cross-sell services
      to
      existing customers; develop *Global
      Sources Direct* ;
      and
      seek acquisitions, joint ventures and alliances.




·
            *Continue
                to Expand in China*.
                We are expanding our sales representation, marketing and infrastructure
                in
                China to enable us to grow our revenue along with the anticipated
                growth
                of China trade in the industry sectors we serve. Our revenue from
                China
                has grown approximately 124% since 2000 and we expect revenue from
                China
                to continue to grow.




·
            *Expand
                Trade Show Business*.
                We are focused on expanding our trade show business and in particular
                our
                China Sourcing Fairs. Throughout 2005, substantial progress was made
                in
                establishing trade shows as a powerful addition to our online and
                print
                media - and in building the foundation to operate a much larger trade
                show
                business. We are also considering shows for new product categories
                and
                shows in new locations, such as our recent announcement of a China
                Sourcing Fair in Dubai in 2007.




·
            *Develop
                New or Related Verticals*.
                We continue to develop new and related verticals. We launched two
                new
                verticals last year. Garments & Textiles and Auto Parts &
                Accessories. In 2006, we launched Electronics Design - China in March
                and
                we recently announced the upcoming 2006 launch of a magazine and
                online
                marketplace titled Baby & Children’s
                Products.




·
            *Cross-Sell
                Services to Existing Customers*.
                We believe that we can increase our revenues by cross-selling our
                existing
                products and services to suppliers who are already customers. We
                see
                significant potential to convince more of our online marketplace
                and trade
                publication customers to also exhibit in our trade shows; and to
                convince
                more of our trade show exhibitors to also become customers of our
                online
                marketplaces and trade publications. For example, we have many trade
                show
                exhibitors who are new customers to Global Sources - who are now
                primary
                prospects for our online marketplaces and
                magazines.




·
            *Develop
                Global Sources Direct*.
                In 2006, the focus will include expanding and training the sales
                team,
                adding products to the website, expanding online marketing and developing
                the systems required to sell to multiple countries.




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




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




-20-







**Products
      & Services**




*Media
      for Buyers Worldwide*




Online
      Services




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




Computer
                Products
            Auto
                Parts & AccessoriesElectronic
                Components
            Hardware
                & DIYElectronics
            Security
                ProductsFashion
                Accessories
            Telecom
                ProductsGarments
                & Textiles
            Gifts
                & Home Products





Trade
      Publications




We
      publish the following industry-specific trade magazines monthly:




Global
                Sources Auto Parts & Accessories
            Global
                Sources Garments & TextilesGlobal
                Sources Computer Products
            Global
                Sources Gifts & Home ProductsGlobal
                Sources Electronic Components
            Global
                Sources Hardware & DIYGlobal
                Sources Electronics
            Global
                Sources Telecom ProductsGlobal
                Sources Fashion Accessories





Trade
      Shows




**Trade
                Show**
            **Description**Global
                Sources China Sourcing Fair: Gifts & Home Products
            ·Primary
                product categories include: gifts, premiums & toys; sporting goods;
                Christmas & holiday products; stationery; health & beauty
                products; kitchen & household appliances; DIY & home center;
                furniture & furnishings; garden & outdoor products; and lighting
                & electrical.
              ·Spring
                and fall 2006 events in Hong Kong.Global
                Sources China Sourcing Fair: Electronics & Components
            ·Primary
                product categories include: personal & mobile electronics; computers
                & networking products; electronic components; security & safety
                products; telecom products & accessories; and home & office
                electronics.
              ·Spring
                and fall 2006 events in Hong Kong.Global
                Sources China Sourcing Fair: Fashion Accessories
            ·Primary
                product categories include: handbags, special purpose bags, footwear,
                hats
                and caps, umbrellas, belts, sunglasses, gloves, ties, socks, watches,
                luggage, swimwear, bridal products, lingerie and sleepwear.Spring
                and fall
                2006 events in Hong Kong.







-21-


*Media
      for Asian Engineers and Executives*




Magazines




**Magazine**
            **Description**Electronic
                Engineering Times - Asia
            ·Editions
                published bi-weekly in simplified and traditional Chinese, Korean
                and
                English; provides design engineers with innovative design ideas and
                in-depth technology analysis.Electronic
                Design - China
            ·Published
                monthly in simplified Chinese; provides electronics design &
                development engineers and engineering managers with the latest in
                emerging
                technology and ‘how-to’ methodologies.Electronics
                Supply & Manufacturing - China
            ·Published
                monthly in simplified Chinese; provides electronics manufacturers
                in China
                with the business and technology information.Global
                Sources Chief Executive China
            ·Published
                monthly in simplified Chinese; serves mainland China senior management
                with case studies and information on management techniques and
                strategies.





Websites




**Website**
            **Description**Electronic
                Engineering Times - Asia Online
            ·Provides
                industry news, new product information and technical features covering
                new
                technology and its application; websites in traditional and simplified
                Chinese, English and Korean; and several application specific websites
                for
                Chinese engineers.Electronic
                Design - China Online
            ·Provides
                China’s design engineers with access to detailed solutions, methodologies
                and white papers.ElectronicSupply
                & Manufacturing-ChinaOnline
            ·Provides
                corporate engineering, procurement and manufacturing management with
                access to new manufacturing strategies, technology and supplier
                news.Global
                Sources Chief Executive China Online
            ·A
                resource focusing on excellent management practices for China’s business
                leaders in simplified Chinese.Global
                Sources Career Sources China Online
            ·Provides
                resources and information regarding career
                opportunities.





Trade
      Shows and Exhibitions




-22-







**Trade
                Show**
            **Description**The
                12th Annual International IC - China Conference & Exhibition
            ·Mainland
                China’s premiere showcase of integrated circuits (IC) application
                technologies and high-end components.
              ·Spring
                2006 events in mainland China’s key technology hubs Shenzhen, Beijing and
                Shanghai.The
                6th Annual Embedded Systems Conference - Taiwan
            ·Taiwan’s
                largest showcase of embedded systems design, skills training and
                technologies.
              ·August
                2006 event in Taipei.The
                14th EDA-&-Test - Taiwan Conference & Exhibition
            ·Asia-Pacific’s
                largest, longest-running showcase of electronic design automation
                and test
                technologies.
              ·August
                2006 in Taipei.





**Customers**




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




*Suppliers*




During
      2005, more than 7,900 suppliers paid us for marketing or advertising services.
      More than 7,300 of these suppliers were located in greater China, including
      approximately 4,600 located in mainland China, 1,800 in Taiwan and 980 in the
      Hong Kong SAR. No individual supplier customer represented more than 2% of
      our
      revenue during 2005.




*Buyers*




For
      our
      primary group of media, which connect export suppliers in Asia with buyers
      worldwide, we serve an independently certified community of more than 479,000
      active members in more than 200 countries and territories. This figure is based
      on procedures to ensure that only buyers who have received a magazine or who
      have made an inquiry through the Global Sources website within the 12 month
      period ended December 31, 2005 are extracted from the databases. This community
      is up from approximately 209,000 at the end of 2000.




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




We
      derive
      a relatively small proportion of our total revenue from these buyers for
      subscriptions to our magazines and for China Sourcing Reports.




**Sales
      and Marketing**




Our
      sales
      organization consists of approximately 1,211 independent representatives in
      approximately 67 cities worldwide, with 48 of these locations in Greater China.
      We have a staff of 40 full-time employees that oversee and monitor the
      independent sales representative organizations that employ these
      representatives. These organizations operate pursuant to service agreements
      with
      us that generally are terminable by either party on short notice. These
      representatives focus on developing and maintaining relationships with suppliers
      that are current customers and they seek to increase the number of new suppliers
      using our services. Substantially all of our contracts with suppliers are
      entered into directly between the supplier and us. Online services and print
      advertising revenue is seasonal and tends to be highest in the fourth quarter
      of
      each calendar year. Revenue for trade shows is highly seasonal as it is
      recognized in the month in which each show is held. Our sales representatives
      collectively make an average of 50,000 supplier visits per month. The largest
      representative sales offices are located in Beijing, Guangzhou,
      Shang-




-23-


hai,
      Shenzhen, the Hong Kong SAR and Taipei. Our six sales representative
      organizations in China accounted for approximately 50% of our total revenue
      in
      2005.




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




Our
      sales
      representative organizations are generally structured to offer an integrated
      marketing solution of our media to customers. Most of the sales representative
      organizations have the primary responsibility of selling our online and print
      media while other sales representative organizations are focused on selling
      trade show booth space. Our community development group is responsible for
      marketing our services to the global buyer community through online
      advertisements and promotions, search engine marketing, trade shows and direct
      mail campaigns.




**Content
      Development**




Our
      content development group, comprised of 439 team members, is responsible for
      compiling, editing, integrating and processing the content that appears in
      our
      online services and print media. Within content development, the advertisement
      operations and editorial groups compile materials from suppliers and freelance
      writers, respectively, and transform these materials into the advertising and
      editorial content. Research teams analyze customer content usage to direct
      content development and they work with sales representatives and marketing
      staff
      to develop appropriate content for new industry sectors. Our site team is
      responsible for evaluating and integrating content into our online services,
      as
      well as maintaining the overall integrity of such services. In addition, members
      of the content development group manage the pre-press production work and print
      production processes associated with the creation of our trade magazines. They
      also maintain the back-end supplier database, which is the foundation for our
      online supplier and product information.




**Strategic
      Relationships**




We
      own
      60.1% of a joint venture with CMP Media Inc., through UBM Asia B.V., a
      subsidiary of United News & Media plc. We entered into the joint
      venture in September 2000, to provide new technology content, media and
      online services for the Asian electronics market, focusing on new opportunities
      in the greater China market.




In
      November 2001, we formed a strategic alliance with the WorldWide Retail
      Exchange, LLC (WWRE), to offer a supplier sourcing program for WWRE members
      and
      Asian suppliers. This evolved in 2005 to a new and expanded agreement with
      Agentrics LLC, which was recently formed by the merger of WWRE and
      GlobalNetXchange LLC. Agentrics LLC is an organization representing 50 global
      retailers with $1 trillion in annual sales, including some of the world’s
      largest retailers.




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




In
      August
      2005, one of the Company’s subsidiaries, eMedia Asia Limited (“eMedia”), formed
      a strategic alliance with Penton Media Inc. (“Penton”) to launch *Electronic
      Design - China* ,
      a
      simplified Chinese edition of Penton’s electronics magazine, *Electronic
      Design* .
      This
      new *Electronic
      Design - China* publication aims to provide the latest technology and application methodologies
      to design engineers and engineering managers in China. The online website was
      launched in January 2006, and the first print monthly issue was launched in
      March 2006. eMedia is also entitled to draw content from Penton’s electronics
      publications, including *Electronic
      Design, EE Product News* and *Microwaves
      & RF.* A
      description of the agreements between eMedia and Penton is set out in the
“Material Contracts” section.




HC
      International, Inc. (“HC International”) is a company listed on the Growth
      Enterprise Market of The Stock Exchange of Hong Kong Limited. On May 24, 2006,
      we entered into an agreement for the acquisition of a certain amount of shares
      of HC International. We have also entered into a call option deed for a certain
      amount of shares of HC International, and another call option deed for a certain
      amount of shares of an indirect subsidiary of HC Inter-




-24-


national.
      Details of these arrangements are set out in the “Material Contracts” section.
      This is a strategic investment by us, with the intention of establishing a
      strategic relationship with HC International. Our aim is to leverage the
      strengths, assets and customer relationships of the Company and HC
      International, to offer enhance services to suppliers and buyers. However,
      the
      nature and extent of this strategic relationship are matters which are yet
      to be
      fully determined, but we intend to explore areas of potential synergies and
      co-operation with HC International in the coming months.




**Technology
      and Systems**




We
      use a
      combination of commercial software and internally developed systems to operate
      our websites and services.




We
      have
      invested $8.2 million for years 2004 and 2005 combined in online services
      development.




As
      of
      December 31, 2005, we had 144 team members engaged in technology development,
      maintenance, software customization and data center operations.




As
      of
      December 31, 2005, our online marketplace services are run on the Oracle DBMS
      release 9i. The catalog application that supports *Global
      Sources Online* ’s
      core
      functions uses a Java platform.




Our
      servers are hosted by Singapore Telecommunications (“SingTel”). We have dual
      redundant 100Mbps link connection directly to SingTel’s IX backbone, while
      SingTel maintains a 2,015 Mbps link to the United States and direct links to
      most countries in Asia.




We
      use
      StorageTek Enterprise tape back-up systems as well as servers located at our
      Singapore facility for back-up. We have deployed EMC SAN Enterprise disk storage
      systems for mission critical data and load balancers and application
      accelerators for traffic workload balancing, redundancy and response time
      management respectively.




For
      the
      year ended December 31, 2005 our external network had approximately 99.99%
      uptime availability.




Our
      platform applications deploy standard industry database protocols. We can,
      therefore, integrate our systems with products from third-party vendors. Our
      offerings are also based on industry standard Web technologies and we are able
      to deploy with the aid of most common industry browser solutions.




Where
      appropriate, our systems use secure socket layer, (SSL), to encrypt sensitive
      communications between browsers and Web servers. We also use Extensible Markup
      Language, (XML), as an open communication protocol for information delivery
      to
      various applications and/or partners.




**Competition**




For
      our
      online marketplaces, trade magazines and trade show services, the market is
      highly fragmented and potential competition and competitors vary by the range
      of
      services provided, geographic focus and the industry sector served. Some
      competitors only offer trade shows and other competitors only offer online
      services.




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




-25-







**Intellectual
      Property**




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




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




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




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




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




**Government
      Regulation**




Our
      services are subject to government regulation.




*Internet
      Regulation*




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




*Regulation
      of Communications Facilities*




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




-26-


burden
      the companies that provide the infrastructure on which the Internet is based,
      thereby slowing the rapid expansion of the medium and its availability to new
      users.




**Properties**




During
      2004, we entered into a contract for the purchase of approximately 9,000 square
      meters of office space in the Shenzhen International Chamber of Commerce Tower
      in Shenzhen, Guangdong province, People’s Republic of China, at a purchase price
      of approximately $19.0 million. Full payment of the purchase price was made
      during 2004, the physical handover of the premises occurred on or around March
      30, 2005 and we have received the title certificates. Our usage right in respect
      of this property is for a period of 50 years, expiring on 7 January 2052, after
      which the land could revert to the China government. In addition, we generally
      lease our office space under cancelable and non-cancelable arrangements with
      terms of two to five years, generally with an option to renew upon expiry of
      the
      lease term. We lease in the aggregate approximately 112,715 square feet of
      executive and administrative offices in China, Hong Kong SAR, the Philippines,
      Singapore and Taiwan. Our aggregate base rental and building management fee
      payments for the year ended December 31, 2005 were approximately
      $1.4 million.




**Legal
      Proceedings**




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




**ITEM
      4A.**  **UNRESOLVED
      STAFF COMMENTS**




None.




**ITEM
      5.**  **OPERATING
      AND FINANCIAL REVIEW AND PROSPECTS**




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




**Overview**




We
      are a
      leading business-to-business (B2B) media company and a primary facilitator
      of
      two-way trade with Greater China. 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 35 years we have been in the same basic business of
      helping buyers worldwide find products and suppliers in Asia.




We
      believe we offer the most extensive range of media and export marketing services
      to our suppliers in the industries we serve through our four primary channels
      -
      online marketplaces, magazines, trade shows and direct online
      sales.




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.




-27-







**Revenue**




We
      derive
      revenue from three principal sources.




*Online
      services* —
Our
      primary service is creating and hosting marketing websites that present
      suppliers’ products and company information in a consistent and easily
      searchable manner on *Global
      Sources Online* .
      We also
      derive revenue from banner advertising fees.




*Other
      media services* —
We
      publish trade magazines, which consist primarily of product advertisements
      from
      suppliers and our independent editorial reports and product surveys. We publish
      our core trade magazines monthly, and a host of specialized magazines
      seasonally. Suppliers pay for advertising in our trade magazines to promote
      their products and companies. We also derive revenue from buyers that subscribe
      to our trade publications.




We
      recognize revenue from our Online and other media services ratably over the
      period in which 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 China and other
      Asian
      manufacturers. The first China Sourcing fair was held during the fourth quarter
      of 2003. We held two series of three China Sourcing fairs in each the second
      quarter and fourth quarter of 2004 and a series of two China Sourcing fairs
      in
      each the second quarter and fourth quarter of 2005. Future China Sourcing fairs
      will be held mainly in the second quarter and fourth quarter of each financial
      year. International IC China Conferences and Exhibitions were held in March
      2004
      last year and these same exhibitions were held in April 2005 in current year.
      We
      derive revenue from exhibit space rental, advertising and sponsorship fees
      for
      advertisements in show guide, on billboards and banners and other forms of
      advertisements at and around our event venues. We also receive fees from
      attendees to our conferences held during the events. We recognize exhibitor
      services revenue at the conclusion of the related events. As a result, second
      quarter and fourth quarter revenue will be higher than the first and third
      quarter revenue. Revenue from exhibitions will grow as a percentage of total
      revenue in future years as we hold more China Sourcing Fairs.




**Critical
      Accounting Policies**




Our
      significant accounting policies are described in Note 2 to the consolidated
      financial statements included in Item 8 of this document. The following is
      a
      discussion of our critical accounting policies:




*Revenue
      Recognition*




We
      derive
      our revenue primarily from receipt of advertising fees in our published trade
      magazines and websites, sale of trade magazines and reports, receipt of fees
      from licensing our trade and service marks, organizing exhibitions and business
      seminars and commission income from consignment sales.




Revenue
      from advertising in trade magazines and websites is recognized ratably over
      the
      period in which the advertisement is displayed. Advertising contracts do not
      exceed one year. When multiple deliverables are contracted under a single
      arrangement, we allocate the total consideration to each unit of accounting
      on a
      pro-rata method based on its relative percentage of the total fair value of
      all
      units of accounting included in the arrangement. Revenue from sales of trade
      magazines and reports is recognized upon delivery of the magazine / report.
      Magazine subscriptions received in advance are deferred and recognized as
      revenue upon delivery of the magazine. Revenue from organizing exhibitions
      and
      business seminars is recognized at the conclusion of the event and the related
      direct event production costs are deferred and recognized as expenses upon
      conclusion of the event.




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




-28-







We
      derive
      commission income on the re-sale of our customers’ products on a consignment
      basis. The commission income which is the sales proceeds, net of the cost of
      the
      purchased products payable to the consigner is recognized upon conclusion of
      the
      sale to the buyer.




The
      correct measurement of timing and the duration of the contracts with our
      customers are essential to the recognition of our revenue. Any delays in
      recognizing the revenue could cause our operating results to vary significantly
      from period to period. In addition our revenue recognition determines the timing
      of certain expenses such as commissions, circulation expenses, and direct event
      production costs.




*Capitalization
      of Development Costs of Software for Internal Use*




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




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




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




*Estimation
      of Allowance for Doubtful Debts*




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




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




*Impairment
      of Long-Lived Assets*




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




We
      periodically review the carrying values of our long-lived assets and recognize
      an impairment loss whenever events or changes in circumstances indicate the
      carrying amount of the assets may not be fully recoverable. The recoverability
      of an asset is measured by a comparison of the carrying amount of an asset
      to
      the estimated undiscounted future cash flows expected to be generated by the
      asset. If the carrying amount of an asset exceeds its estimated future cash
      flows, an impairment loss, measured based on the difference between the carrying
      amount of the asset and its fair value, is recognized.




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




*Exhibition
      events promotion costs*




The
      event
      specific promotion costs for our exhibition events incurred in the interim
      quarterly periods are deferred and recognized as expenses when the related
      events are held during the financial year. The event specific promotion




-29-


costs
      incurred for events to be held in the future financial years are expensed by
      the
      year-end in which such expenses are incurred.




Proper
      identification of the promotion expenses to the particular events is essential
      to recognize the costs correctly to the respective events and in the respective
      interim periods.




**Results
      of Operations**




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




**Year
                Ended December 31,****2003**
            
            **2004**
            
            **2005****Income
                statement data:****Revenue:**Online
                and other media services
            
            
            95
            %
            
            87
            %
            
            86
            %Exhibitions
            
            
            4
            
            
            12
            
            
            13Miscellaneous
            
            
            1
            
            
            1
            
            
            1Total
                revenue
            
            
            100
            
            
            100
            
            
            100**Operating
                expenses:**Sales
            
            
            33
            
            
            28
            
            
            30Event
                production
            
            
            1
            
            
            4
            
            
            4Community
            
            
            14
            
            
            17
            
            
            18General
                and administrative
            
            
            30
            
            
            29
            
            
            30Online
                services development
            
            
            5
            
            
            4
            
            
            3Non-cash
                compensation
            
            
            2
            
            
            2
            
            
            2Other
            
            
            5
            
            
            1
            
            
            1Total
                operating expenses
            
            
            90
            
            
            85
            
            
            88Income
                from operations
            
            
            10
            %
            
            15
            %
            
            12
            %Net
                income
            
            
            8
            %
            
            15
            %
            
            12
            %





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




**Year
                Ended December 31,****2003**
            
            **2004**
            
            **2005**Asia
            
            
            93
            %
            
            92
            %
            
            93
            %United
                States
            
            
            6
            
            
            6
            
            
            6Europe
            
            
            1
            
            
            1
            
            
            1Others
            
            
            0
            
            
            1
            
            
            0Total
                revenue
            
            
            100
            %
            
            100
            %
            
            100
            %





**Fiscal
      Year 2005 Compared to Fiscal Year 2004**




**Revenue**




Total
      revenue grew to $112.2 million during the year ended December 31, 2005 from
      $105.8 million during year ended December 31, 2004, a growth of 6%. Our online
      and other media services revenue grew by $4.8 million or 5% to $97.1 million
      during the year ended December 31, 2005, as compared with $92.3 million during
      the year ended December 31, 2004 due to a 13% growth in our China market and
      the
      growth in our Hong Kong and Taiwan markets off-set by drop in some of our other
      markets during the year ended December 31, 2005. China represented 48% of Online
      and other media services revenue during the year ended December 31, 2005
      compared to 45% during the year ended December 31, 2004. Our exhibitions revenue
      grew from $13.0 million during the year ended Decem-




-30-


ber
      31,
      2004 to $14.3 million during the year ended December 31, 2005, a growth of
      10%,
      due mainly to growth in revenue of our International IC China Conferences and
      Exhibitions for the year 2005.




We
      have
      made substantial progress in developing our customer base in China, our largest
      market. Total revenue from China grew by 12% during the year ended December
      31,
      2005 compared to the year ended December 31, 2004. China accounted for 50%
      of
      total revenue during the year ended December 31, 2005 compared to 47% of total
      revenue during the year ended December 31, 2004. We expect China as a percent
      of
      total revenue to continue to grow and China revenue overall 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. Commission
      expense is recorded when the associated revenue is recognized or when the
      associated accounts receivable are paid, whichever is earlier, and is included
      in sales expenses.




Sales
      costs consist of the commissions and marketing fees paid and incentives provided
      to our independent sales representative organizations, as well as sales support
      fees for processing sales contracts. These representative organizations sell
      online services, advertisements in our trade magazines and exhibitor services
      and earn a commission as a percentage of revenue generated.




Sales
      costs increased from $30.0 million for the year ended December 31, 2004 to
      $33.9
      million for the year ended December 31, 2005, due to an increase in sales
      commissions as a result of increase in revenue and increase in sales marketing
      costs and sales promotions for exhibitions.




*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 from $3.8 million during the year ended December
      31,
      2004 to $3.9 million during the year ended December 31, 2005, an increase of
      3%
      due to increase in venue rental charges.




*Community*




Effective
      from the year 2005 we are presenting the promotions costs incurred for promoting
      our technical conferences, exhibitions and seminars to buyer community and
      the
      printing and mailing costs of our marketing inserts business under community
      costs in our income statement. Accordingly such promotion costs and printing
      and
      mailing costs for year 2004 have been reclassified to community costs from
      general and administrative costs to conform to our current presentation.




Community
      costs consist of the costs incurred for servicing our buyer community and for
      marketing our products and services to the global buyer community. Community
      costs also include costs relating to our trade magazine publishing business
      and
      marketing inserts business, specifically printing, paper, bulk circulation,
      magazine subscription promotions, promotions for our on-line services, customer
      services costs, payroll costs relating to staff working on these activities
      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 for the exhibition events
      incurred in the interim quarterly periods are deferred and recognized as
      expenses when the related events are held during the financial year. The event
      specific promotion costs incurred for events to be held in the future financial
      years are expensed by the year-end in which the expenses are incurred.




-31-







Community
      costs increased from $17.9 million during the year ended December 31, 2004
      to
      $20.6 million during the year ended December 31, 2005, an increase of 15% due
      mainly to increase in bulk mailing costs, printing charges, paper costs, fees
      paid to consultants and promotion costs for our exhibition events. In addition,
      we increased our participation in third party trade shows to promote our
      products and services to buyer community. We also incurred promotions for our
      online services and these are expensed as incurred. As a result of the increase
      in these activities, we recorded an increase in payroll costs.




*General
      and Administrative*




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




General
      and administrative costs increased by 11% from $30.3 million during the year
      ended December 31, 2004 to $33.6 million during the year ended December 31,
      2005, due mainly to increases in information technology support services costs,
      content management services costs, marketing costs, depreciation and building
      management fees on new office premises that we purchased, administration support
      costs for our exhibitions and trade shows activity, travel costs and payroll
      costs.




*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 declined from $4.2 million during the year ended December 31, 2004
      to
      $3.9 million during the year ended December 31, 2005, a decline of 7%. This
      decline resulted mainly from a decline in depreciation costs and equipment
      and
      software maintenance costs.




*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 expense, resulting from the ECP and the Directors Purchase
      Plan, recorded by us declined by 10% from $2.1 million during the year ended
      December 31, 2004 to $1.9 million during the year ended December 31, 2005.
      The
      decline was a result of the re-measurement of equity compensation expense based
      on our prevailing share price and forfeiture of the unvested awards to the
      resigned staff.




The
      corresponding amounts for the non-cash compensation expenses are credited to
      shareholders’ equity.




*Other
      Non-cash Expenses*




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




Amortization
      of software cost during the year ended December 31, 2005 was $1.3 million
      compared to $1.5 million during the year ended December 31, 2004.




*Income
      From Operations*




The
      total
      income from operations during the year ended December 31, 2005 was $12.9 million
      compared to $16.1 million during the year ended December 31, 2004. The decline
      was mainly due to increases in sales costs, event production costs, community
      costs and general and administrative costs, off-set partially by growth in
      revenue and declines in online services development costs, non-cash compensation
      expenses and amortization of software costs. Income from operations for online
      and other media services declined from $17.7 million during the year ended
      De-




-32-


cember
      31, 2004 to $13.5 million during the year ended December 31, 2005, a decline
      of
      24%. The decline resulted mainly from increases in sales costs, community costs
      and general and administrative costs, off-set partially by growth in online
      and
      other media services revenue and declines in online services development costs,
      non-cash compensation expenses and amortization of software costs.




*Gain
      (loss) on Sale of Available-for-sale Securities*




We
      recorded a gain of $1.0 million arising from the sale of available-for-sale
      securities and interest and dividend income of $1.3 million arising from
      available-for-sale securities during the year ended December 31, 2005 compared
      to $1.1 million gain and interest and dividend income of $0.09 million during
      the year ended December 31, 2004.




*Income
      Taxes*




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




We
      reported a tax provision of $0.8 million during the year ended December 31,
      2005
      and $0.7 million during the year ended December 31, 2004.




*Net
      Income*




Net
      income was $13.4 million during the year ended December 31, 2005, compared
      to a
      net income of $15.8 million during the year ended December 31, 2004. The decline
      was mainly due to increases in sales costs, event production costs, community
      costs, general and administrative costs, foreign exchange losses, tax provision,
      share of profits attributable to a minority shareholder and decline in gain
      on
      sale of available-for-sale securities, off-set partially by increases in
      revenue, interest and dividend income and declines in online services
      development costs, non-cash compensation expenses and amortization of software
      costs.




**Fiscal
      Year 2004 Compared to Fiscal Year 2003**




**Revenue**




Our
      total
      revenue grew to $105.8 million during the year ended December 31, 2004 from
      $91.7 million during the year ended December 31, 2003, a growth of 15%. Our
      online and other media services revenue grew by $4.6 million or 5% to $92.3
      million during the year ended December 31, 2004, as compared with $87.7 million
      during the year ended December 31, 2003 due primarily to a 9% growth in our
      China market and the growth in our Hong Kong, Japan and USA markets off-set
      by
      drop in some of our other markets during the year. Our exhibitions revenue
      grew
      from $3.3 million during the year ended December 31, 2003 to $13.0 million
      during the year ended December 31, 2004, a growth of 294%, due mainly to
      increase in number of our China Sourcing Fairs events held in year
      2004.




We
      have
      made substantial progress in developing our customer base in China, our largest
      market. Revenue from China grew by 26% during the year ended December 31, 2004
      compared to the year ended December 31, 2003 partially as a result of increase
      in China Sourcing Fairs revenue. China accounted for 47% of total revenue during
      the year ended December 31, 2004.




**Operating
      expenses**






*Sales*




Sales
      costs consist of the commissions and marketing fees paid and incentives provided
      to our independent sales representative organizations, as well as sales support
      fees for processing sales contracts. These representative or-




-33-


ganizations
      sell online services, advertisements in our trade magazines and exhibitor
      services and earn a commission as a percentage of revenue
      generated.




Sales
      costs marginally declined from $30.1 million during the year ended December
      31,
      2003 to $30.0 million during the year ended December 31, 2004, due to increase
      in sales commissions as a result of increase in revenue, off-set by reduction
      in
      sales marketing costs and a $0.7 million write-back of provision for doubtful
      debts no longer required due to improvement in our collections
      performance.




*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 from $0.9 million during the year ended December
      31,
      2003 to $3.8 million during the year ended December 31, 2004, due to increase
      in
      number of our China Sourcing Fairs events held in the year 2004.




*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,
      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 to the buyer community.




Community
      costs increased from $13.2 million during the year ended December 31, 2003
      to
      $17.9 million during the year ended December 31, 2004, an increase of 36% due
      mainly to increase in event specific promotion costs incurred for promoting
      our
      China Sourcing Fairs events held in the second and fourth quarters of 2004
      to
      the buyer community. We also recorded $0.4 million event specific promotion
      costs incurred for our China Sourcing Fairs to be held in second and fourth
      quarters of 2005 in Shanghai, China and our Sourcing Fairs to be held in second
      and fourth quarters of 2006 in Hong Kong. We recorded increases in bulk mailing
      costs, printing charges, paper costs and magazine subscription promotion costs
      for our print publications business and promotions for our online services
      and
      these are expensed as incurred. In addition, we increased our participation
      in
      third party trade shows to promote our products and services to the buyer
      community. As a result of the increase in these activities, we recorded an
      increase in payroll costs.




*General
      and Administrative*




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




General
      and administrative costs increased by 9% from $27.9 million during the year
      ended December 31, 2003 to $30.3 million during the year ended December 31,
      2004, due mainly to increases in content management services costs, marketing
      costs, fees paid to consultants, professional fees paid in connection with
      the
      filing of our shelf registration statement, and administration support costs
      for
      our exhibitions and trade shows activity.




*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 declined from $5.0 million during the year ended December 31, 2003
      to
      $4.2 million during the year ended December 31, 2004, a de-




-34-


cline
      of
      16%. This decline resulted mainly from a decline in depreciation costs off-set
      partially by increase in fees paid to consultants




*Non-Cash
      Compensation Expenses*




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 expense, resulting from the ECP, recorded by us increased
      by 50% from $1.4 million during the year ended December 31, 2003 to $2.1 million
      during the year ended December 31, 2004 due mainly to new share awards in
      January 2004, re-measurement of equity compensation expense based on our
      prevailing share price and forfeiture of the unvested awards to the resigned
      staff.




The
      corresponding amounts for the non-cash compensation expenses are credited to
      shareholders’ equity.




*Other
      Non-Cash Expenses*




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




Amortization
      of software cost during the year ended December 31, 2004 were $1.5 million,
      compared to $4.5 million for the year ended December 31, 2003.




*Income
      From Operations*




The
      total
      income from operations during the year ended December 31, 2004 was $16.1 million
      compared to $8.8 million during the year ended December 31, 2003. The
      improvement was primarily due to growth in revenue and declines in online
      services development costs, and amortization of software costs, off-set
      partially by an increase in event production costs, community costs, general
      and
      administrative costs and non-cash compensation expenses. Income from operations
      for online and other media services grew from $9.4 million during the year
      ended
      December 31, 2003 to $17.7 million during the year ended December 31, 2004,
      a
      growth of 88%. The growth resulted mainly from growth in online and other media
      services revenue, declines in online services development costs and amortization
      of software costs, off-set partially by increases in community costs, general
      and administrative costs and non-cash compensation expense.




*Gain
      (loss) on Sale of Available-for-Sale Securities*




We
      recorded a gain of $1.1 million arising from the sale of available-for-sale
      securities and an interest and dividend income of $0.09 million arising from
      the
      available-for-sale securities during the year ended December 31,
      2004.




*Income
      Taxes*




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




We
      reported a tax provision of $0.7 million during the year ended December 31,
      2004
      and during the year ended December 31, 2003.




*Net
      Income*




Net
      income was $15.8 million during the year ended December 31, 2004, compared
      to a
      net income of $7.3 million during the year ended December 31, 2003. The
      improvement was mainly due to growth in revenue, increases in interest income,
      gain on sale of available-for-sale securities and foreign exchange gains, after
      charging increases in,




-35-


event
      production costs, community costs, general and administrative costs, non-cash
      compensation expenses and increase in the share of profits attributable to
      a
      minority shareholder during the year ended December 31, 2004 due to profitable
      performance of a subsidiary, off-set partially by declines in online services
      development costs and amortization of software costs.




**Liquidity
      and Capital Resources**




We
      financed our activities for the year ended December 31, 2005 using cash
      generated from our operations.




Net
      cash
      generated from operating activities was $35.6 million during the year ended
      December 31, 2005, compared to $22.5 million cash generated from operating
      activities during the year ended December 31, 2004. 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 $53.0 million as of December 31, 2005,
      compared to $30.2 million as at December 31, 2004, 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 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.




Receivable
      from sales representatives increased from $3.4 million as of December 31, 2004
      to $5.7 million as of December 31, 2005 due to the growth in our China business
      and our exhibitions business. We expect the receivable from sales
      representatives to slightly increase due to expected growth in our China
      business and our Exhibitions business.




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 for investing activities was $20.9 million during the year ended December
      31, 2005, resulting mainly from the net purchases of available-for-sale
      securities of $13.8 million and $7.3 million cash used for capital expenditures
      mainly on office premises, for computers, software, reusable tradeshow booths,
      leasehold improvements, office furniture and software development, off-set
      partially by $0.2 million proceeds from matured bonds. Net cash generated from
      investing activities during the year ended December 31, 2004 was $3.8 million,
      which resulted principally from net sale of available-for-sale securities of
      $24.5 million and $0.4 million proceeds from matured bonds off-set partially
      by
      $21.1 million capital expenditures for purchase of office premises then under
      construction, computers, software, software development, office furniture and
      leasehold improvements.




Capital
      expenditures during the three months period ended March 31, 2006 amounted to
      $0.7 million and were incurred mainly for computers, software, office furniture,
      leasehold improvements 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, 2005 and the three months
      ended March 31, 2006 amounted to $0.09 million and $NIL,
      respectively.




We
      invest
      our excess cash in available-for-sale securities to generate income from
      interest received as well as capital gains, while the funds are held to support
      our business. The majority of the available-for-sale securities have maturities
      of less than 3 months.




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 on a quarterly basis
      and proceeds reinvested in similar securities. The net purchase of
      available-for-sales securities of $13.8 million was from the funds we received
      from issue of common shares during the first half of the year.




-36-







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 $38.4 million during the year ended
      December 31, 2005, resulting from the $38.3 million proceeds from the issue
      of
      common shares, net of share issue expenses and $0.1 million received from
      directors for the shares subscribed by them in the Directors Purchase Plan.
      Net
      cash used for financing activities was $11.3 million during the year ended
      December 31, 2004, resulting from a repayment of $11.4 million owed to a
      shareholder, offset partially by $0.1 million received from directors for the
      shares subscribed by them in the Directors Purchase Plan.




On
      March
      23, 2005 we issued 3,000,000 common shares of par value $0.01 at US$13.50 per
      share. The total proceeds received from this issue was approximately $38.3
      million, net of the offering expenses of $2.2 million. Out of the total
      proceeds, $0.03 million was included in the common share capital and the balance
      approximately $38.27 million was included in additional paid in
      capital.




We
      intend
      to use the net proceeds from the sale of our common shares of approximately
      $38.3 million for working capital, general corporate purposes and strategic
      acquisitions.




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 December 31, 2005, the
      unutilized amount under this facility was approximately $0.3 million. Hongkong
      and Shanghai Banking Corporation Limited has also provided a guarantee on our
      behalf to our suppliers. As at December 31, 2005, such guarantee amounted to
      $0.003 million.




We
      recorded a full valuation allowance for the deferred tax assets of $7.4 million
      as at December 31, 2005 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
      December 31, 2005, we paid $5.0 million under these agreements. The amounts
      paid
      will be expensed when the related events are held.




We
      also
      entered into several agreements for the event specific promotion of our
      exhibition events amounting to $4.0 million, in payments over four years. As
      of
      December 31, 2005, we paid $1.5 million under these agreements.




During
      the third quarter of 2004, we entered into an agreement to purchase
      approximately 9,000 sq meters of office space in a commercial building in
      Shenzhen, China at a purchase price of $19.0 million, which was fully paid
      during the year 2004. The construction was completed by end of March 2005.
      The
      renovation of the premises was completed and the premises was occupied during
      fourth quarter of 2005.




In
      August
      2005, one of our subsidiaries, eMedia Asia Limited (“eMedia”) entered into an
      agreement with Penton Media Inc, (“Penton”) to publish and distribute, in
      certain Asian territories, local language editions of Penton’s “Electronic
      Design” publication, relating to the electronic design industry. The first
      edition to be launched was a simplified Chinese edition in mainland China
      entitled “ Electronic Design-China”, the online website of which was launched in
      January 2006, and the first monthly issue of which was launched in March 2006.
      Under the agreement eMedia pays Penton forty per cent of the net after-tax
      profits of the business and also an annual content license fee for usage of
      Penton’s editorial material. There was no revenue generated from this
      publication during the year 2005.




-37-







**The
      following table summarizes our contractual obligations as at December 31,
      2005:**




**Payments
                due by period (in U.S. Dollars Thousands**)**Total**
            
            **Less
                than**
              **1
                year**
            
            **1-3**
              **years**
            
            **3-5
                years**
            
            **More
                than**
              **5
                years****Contractual
                Obligations**Operating
                leases
            $
            350
            
            $
            350
            
            
            -
            
            
            -
            
            
            -Liabilities
                for incentive and bonus plans
            
            467
            
            
            160
            
            
            307
            
            
            -
            
            
            -Purchase
                obligations
            
            3,555
            
            
            2,337
            
            
            1,218
            
            
            -
            
            
            -Total
            $
            4,372
            
            $
            2,847
            
            $
            1,525
            
            
            -
            
            
            -





On
      March
      1, 2005, we announced a one for ten bonus share issue on our outstanding common
      shares. Shareholders of record on March 4, 2005 received one additional common
      share for every ten common shares held, of face value of $0.01 each. The bonus
      share issue was distributed on April 1, 2005. We have reclassified $0.029
      million from additional paid in capital to common share capital as of December
      31, 2005 and December 31, 2004, in connection with the bonus share
      issue.




On
      March
      6, 2006, we once again announced a one for ten bonus share issue on our
      outstanding common shares. Shareholders of record on March 15, 2006 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 April 17, 2006. All
      common shares and per-share amounts in the consolidated financial statements
      and
      related notes appearing elsewhere in this annual report have been retroactively
      adjusted to reflect the one for ten bonus share issue for all periods presented.
      In addition, we have reclassified $0.035 million and $0.032 million from
      additional paid in capital to common share capital as of December 31, 2005
      and
      December 31, 2004 respectively, in connection with the bonus share
      issue.




HC
      International, Inc. (“HC International”) is a company listed on the Growth
      Enterprise Market of The Stock Exchange of Hong Kong Limited. On May 24, 2006,
      Trade Media Holdings Limited (“TMH”), a wholly-owned subsidiary of the Company,
      IDG Technology Venture Investment, Inc. (“IDGVC”) and International Data Group,
      Inc. (“IDG”) entered into a conditional sale and purchase agreement (the “Sale
      and Purchase Agreement”) pursuant to which IDGVC has conditionally agreed to
      transfer 47,858,000 shares or 10% of the issued share capital of HC
      International, being part of its shareholding interests in HC International,
      to
      TMH at a consideration of approximately $9.9 million or approximately $0.2063
      per share, of HC International (the “HC Share(s)”), which is subject to
      adjustment to approximately $13.9 million or approximately $0.2896 per HC Share
      (the “HC Share Transfer”), if and when HC International achieves a certain
      benchmark with reference to the HC International group’s performance during the
      Option Period (as defined below) or upon completion of the sale and purchase
      of
      the Option HC Shares (as defined below). IDG, being the sole shareholder of
      IDGVC, has agreed to guarantee the due and punctual discharge by IDGVC of its
      obligations under the Sale and Purchase Agreement. Completion of the HC Share
      Transfer is subject to the fulfilment of the conditions as set out in the Sale
      and Purchase Agreement, which include obtaining all relevant consents,
      governmental and regulatory approvals (if any) and a confirmation from the
      Hong
      Kong Securities and Futures Commission (the “SFC”) that no mandatory offer
      obligation under Rule 26 of the Hong Kong Code on Takeovers and Mergers (the
      “Code”) will be triggered as a result of the transactions contemplated under the
      Sale and Purchase Agreement. Completion is expected to take place by the end
      of
      June 2006. Upon completion of the HC Share Transfer, we will own, together
      with
      5,916,000 HC Shares (which represent approximately 1.24% of the issued share
      capital of HC International as at May 24, 2006) currently owned by us, an
      approximate 11.24% equity interest in HC International. It is the intention
      of
      HC International to invite Merle Hinrichs, our Chairman and Chief Executive
      officer who is also a director of TMH, to join HC International’s board as a
      non-executive director upon completion of the HC Share Transfer.




TMH
      also
      entered into a call options deed (the “HC Options Deed”) with IDGVC, Guo
      Fansheng (“Guo”) and others which include certain members of the senior
      management of HC International (the “Option Grantors”), pursuant to which each
      of the aforesaid Option Grantors has agreed, subject to completion of the Sale
      and Purchase Agreement, to grant to TMH, (i) a right (the “HC Options”)
      exercisable during the 12-month period from the date of the completion of the
      Sale and Purchase Agreement (the “Option Period”) to purchase all, but not in
      part only, of the167,722,814 HC Shares owned by the respective parties
      (representing approximately 35.05% of the entire issued share capital of HC
      International) and any HC Shares that may be issued by HC International to
      certain directors of




-38-


HC
      International if the options granted in accordance with the share option schemes
      of HC International (amounting to an aggregate of 4,185,320 Option HC Shares)
      are exercised, which together amount to a maximum of approximately 35.61% of
      the
      entire issued share capital of HC International (the “Option HC Share(s)”) at an
      exercise price of approximately $0.2896 per Option HC Share; and (ii) an
      undertaking to accept any offer for the Option HC Shares at a price not less
      than approximately $0.2896 per Option HC Share, during the Option Period.Huicong
      Construction Co., Ltd. (“Huicong Construction”), in which Guo has an 80% equity
      interest, entered into a call option deed (the “Beijing Huicong Option Deed” and
      together with the HC Options Deed, the “Option Deeds”) with TMH, pursuant to
      which Huicong Construction has agreed, subject to completion of the Sale and
      Purchase Agreement, to grant to TMH a right (the “Beijing Huicong Option” and
      together with the HC Options, the “Options”) exercisable during the Option
      Period, to purchase (or to nominate a subsidiary of TMH to purchase) from
      Huicong Construction its entire 18% equity interest (“Beijing Huicong Equity
      Interest”) in Beijing Huicong International Information Co., Ltd. (“Beijing
      Huicong”), a 82% indirect subsidiary of HC International, at an aggregate
      exercise price of approximately $31.9 million.




The
      HC
      Options and the Beijing Huicong Option are inter-conditional. The sale and
      purchase of the Beijing Huicong Equity Interest is subject to confirmation
      from
      the SFC. If the SFC’s confirmation is not forthcoming, the sale and purchase of
      the Beijing Huicong Equity Interest will not be completed but TMH may proceed
      with the completion of the sale and purchase of the Option HC Shares.




Pursuant
      to the terms of the Beijing Huicong Option Deed and subject to the completion
      of
      the sale and purchase of the Beijing Huicong Equity Interest, Huicong
      Construction will also be required to transfer or assign its licenses and
      related contracts in relation to the provision of internet information and
      content services in the People’s Republic of China to a TMH-nominated company,
      but pending such transfer or assignment, Huicong Construction has agreed to
      continue to provide services in relation to the internet content provider
      license to Beijing Huicong in the same manner and on the same terms as currently
      agreed.




The
      exercise and completion of the HC Options by TMH, if materialized, will result
      in a change in control of HC International (as our aggregate shareholding in
      HC
      International will increase from approximately 11.24% to a maximum of
      approximately 46.75%) and will trigger an obligation on the part of TMH to
      make
      a general offer in compliance with Rule 26 of the Code to acquire all the issued
      HC Shares (other than those already owned by TMH or parties acting in concert
      with it).




We
      have
      no bank debt as at December 31, 2005.




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**




In
      March 2004, the Emerging Issues Task Force (“EITF”) reached a consensus on
      Issue No. 03-1, “The Meaning of Other-Than-Temporary Impairment and Its
      Application to Certain Investments.” EITF 03-1 provides guidance on
      other-than-temporary impairment models for marketable debt and equity securities
      accounted for under SFAS No. 115, “Accounting for Certain Investments in
      Debt and Equity Securities,” and SFAS No. 124, “Accounting for Certain
      Investments Held by Not-for-Profit Organizations,” and non-marketable equity
      securities accounted for under the cost method. The EITF developed a basic
      three-step model to evaluate whether an investment is other-than-temporarily
      impaired. The provisions of EITF 03-1 will be effective for interim or annual
      reporting periods beginning after June 15, 2004 and will be applied
      prospectively to all current and future investments. Quantitative and
      qualitative disclosures for investments accounted for under SFAS No. 115 are
      effective for the first annual reporting period after December 15, 2003. In
      September, 2004, the FASB issued FSP EITF Issue “03-1-1”, “Effective Date of
      Paragraphs 10-20 of EITF 03-1, The Meaning of Other Than Temporary Impairment”,
      delaying the effective date for the recognition and measurement guidance of
      EITF
      03-1, as contained in paragraphs 10-20, until certain implementation issues
      are
      addressed and a final FSP providing implementation guidance is issued. The
      disclosure requirements of the consensus remain in effect. In November, 2005
      the
      FASB issued FSP FAS 115-1 and FAS 124-1. The FSP FAS 115-1 and FAS 124-1
      nullifies certain requirements of EITF 03-1 and is applicable for reporting
      peri-




-39-


ods
      beginning after December 15, 2005. We do not expect the adoption of EITF 03-1
      to
      have a material effect on our results of operations and financial
      condition.




In
      December 2004, the FASB issued SFAS No. 123R, “Share-Based Payment”
(“SFAS 123R”), a revision of SFAS No. 123, “Accounting for Stock-Based
      Compensation.” SFAS 123R requires, among other things, measurement of all
      employee stock-based compensation awards using a fair value method and recording
      such expense in the consolidated financial statements. In April 2005, the
      Securities and Exchange Commission adopted a new rule that allows implementation
      of SFAS 123R at the beginning of next fiscal year beginning after June 15,
      2005.
      We will not be required to adopt Statement 123R until January 1, 2006. We do
      not
      expect the adoption of SFAS 123R to have a material effect on our financial
      statements of position, results of operations or cash flows.




In
      May 2005, the FASB issued SFAS No. 154, “Accounting Changes and Error
      Corrections, a replacement of Accounting Principles Board (“APB”) Opinion
      No. 20 and FASB Statement No. 3.” (“SFAS 154”). SFAS 154 requires
      retrospective application to prior periods’ financial statements of changes in
      accounting principle. It also requires that the changes in accounting principle
      be applied to the balances of assets and liabilities as of the beginning of
      the
      earliest period for which retrospective application is practicable and that
      a
      corresponding adjustment be made to the opening balance of retained earnings
      for
      that period rather than being reported in an income statement. The statement
      will be effective for accounting changes and corrections of errors made in
      fiscal years beginning after December 15, 2005. We do not expect the
      adoption of SFAS 154 to have a material 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 our revenue
      that was not fully offset by lower expense levels in Asian
      operations.




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




In
      the
      years ended December 31, 2004 and 2005, we have not engaged in foreign
      currency hedging activities.




During
      the years ended December 31, 2004 and 2005, 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.




-40-







**ITEM
      6.**  **DIRECTORS,
      SENIOR MANAGEMENT** **AND EMPLOYEES**




The
      following table sets forth information regarding the persons who are our
      executive officers and directors.




**Name**
            **Age**
            **Position**Merle
                A. Hinrichs
            64
            Director,
                Chairman and Chief Executive OfficerEddie
                Heng Teng Hua
            55
            Director
                and Chief Financial OfficerJ.
                Craig Pepples
            45
            Chief
                Operating OfficerBill
                Georgiou
            61
            Chief
                Information OfficerSarah
                Benecke
            49
            DirectorRoderick
                Chalmers
            58
            DirectorDavid
                F. Jones
            41
            DirectorJeffrey
                J. Steiner
            69
            DirectorJames
                Watkins
            60
            Director





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




*Mr.
      Heng* has
      been
      the Chief Financial Officer (previously entitled vice president of finance)
      since 1994 and has been a director since April 2000. He joined us in August
      1993 as deputy to the vice president of finance. He received an MBA from Shiller
      International University in London in 1993, is a Singapore Certified Public
      Accountant, a member of the Institute of Certified Public Accountants,
      Singapore, and a Fellow Member of The Association of Chartered Certified
      Accountants in the United Kingdom. Prior to joining us, he was the regional
      financial controller of Hitachi Data Systems, a joint venture between Hitachi
      and General Motors. His term as director expires in 2007.




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




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




*Ms.
      Benecke* has
      been
      a director since April 2000, and, since 1993, has been a director of Trade
      Media Holdings Ltd. Ms. Benecke was our principal executive officer from
      January 1994 through August 1999. She joined us in May 1980 and served in
      numerous positions, including publisher from 1988 to December 1992 and chief
      operating officer in 1993. Since September 1999, Ms. Benecke has been a
      consultant to Publishers Representatives, Ltd. (Hong Kong), a subsidiary of
      our
      company. Ms. Benecke is also a director of Hintak Ltd. (Hong Kong). She
      graduated with a B.A. from the University of New South Wales, Australia. Her
      term as director expires in 2007.




*Mr.
      Chalmers* has
      been
      a director since October 2000. He has been the Chairman of the Board of
      Directors of the Bank of Valetta, Malta Banking since 2004. He was chairman,
      Asia-Pacific, of PricewaterhouseCoopers LLP (“PwC”) and a member of PwC’s Global
      Management Board from 1998 until his retirement in July 2000. He is a 30-year
      veteran with PwC’s merger partner Coopers & Lybrand with specialist
      experience in the securities industry.




-41-


He
      has at
      various times been a non-executive director of the Hong Kong SAR Securities
      and
      Futures Commission, a member of the Takeovers and Mergers Panel, and chairman
      of
      the Working Group on Financial Disclosure. He is a director of Gasan Group
      Limited (Malta) and Gasan Mamo Insurance Co. Limited (Malta). His term as
      director expires in 2006.




*Mr.
      Jones* has
      been
      a director since April 2000. He is currently Executive Director at CHAMP
      Private Equity, a leading Australian buy-out firm. Mr. Jones was an executive
      at
      Macquarie Direct Investment, a private equity firm in Sydney, Australia from
      1994 to August 1999. He founded and ran UBS Capital in Australia from 1999
      to
      2002. He is currently a director of the following companies: Castle Harlan
      Australian Mezzanine Partners Pty. Limited, an Australian buyout firm; and
      Australian Discount Retail Pty Limited. Mr. Jones has an MBA from Harvard
      Business School and is a mechanical engineering graduate from the University
      of
      Melbourne. Mr. Jones serves as Chairman of the Audit Committee for Australian
      Discount Retail Pty Limited . His term as director expires in 2008.




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




In
      2003,
      Mr. Jeffrey Steiner was convicted in France on a charge of unjustified use
      (in
      1990) of the corporate funds of Elf Acquitaine, which is a criminal offense
      in
      France. Mr. Steiner was given a suspended sentence of one year and ordered
      to
      pay a fine of €500,000 by the French court. The French Court has since ordered
      that €259,000 of the €500,000 fine assessed against Mr Steiner be withdrawn from
      a part of the surety (caution) previously deposited by Fairchild in the
      Court.




In
      November 2004, Mr. Jeffrey Steiner was named in Noto
      v. Steiner, et al .,
      and Barbonel
      v. Steiner, et al .,
      in the
      Court of Chancery of the State of Delaware in and for New Castle County,
      Delaware. The plaintiffs in these actions are shareholders of Fairchild and
      purport to bring actions derivatively on behalf of Fairchild, claiming, among
      other things, that Fairchild executive officers have received excessive pay
      and
      perquisites in violation of fiduciary duties to Fairchild. The complaints name
      Mr. Steiner, as well as all of Fairchild’s directors, as defendants. On October
      24, 2005, a copy of a “Notice of Hearing and Proposed Supplemental Settlement of
      The Fairchild Corporation Stockholder Derivative Litigation” (the “Derivative
      Settlement”) was mailed to all shareholders of Fairchild and was filed with the
      SEC. On November 23, 2005, the Court of Chancery approved the Derivative
      Settlement, which approval became final on December 23, 2005.




*Mr.
      Watkins* was
      appointed as a casual director on February 28, 2005, and was re-elected as
      a
      director at the Annual General Meeting on May 9, 2005. Mr. Watkins was a
      Director and Group General Counsel of the Jardine Matheson Group in Hong Kong
      from 1997 until 2003. He was Group Legal Director of Schroeders plc in 1996-1997
      and of Trafalgar House plc from 1994-1996. He was previously a partner and
      solicitor in the London and Hong Kong offices of Linklaters from 1975 to 1994.
      He currently is a non-executive Director of Mandarin Oriental International
      Ltd,
      Jardine Cycle & Carriage Ltd, MCL Land Ltd and Advanced Semiconductor
      Manufacturing Corporation Ltd and is a member of the Audit Committees of Jardine
      Cycle & Carriage Ltd and MCL Land Ltd and the Chairman of the Audit
      Committee of Advanced Semiconductor Manufacturing Corporation Ltd. Mr Watkins
      has a law degree from the University of Leeds (First Class Hons.). His term
      as
      director expires in 2008.




**Compensation**




For
      the
      year ended December 31, 2005, we and our subsidiaries provided our nine
      directors and executive officers as a group aggregate remuneration, pension
      contributions, allowances and other benefits of approximately $2,827,448
      including the non-cash compensation of $486,645 associated with the share award
      and ECP plans. Of that amount, $105,000 was paid under a performance based,
      long-term discretionary bonus plan which we implemented in 1989 for members
      of
      our senior management. Under the plan, members of senior management may, at
      our
      discretion, receive a long-term discretionary bonus payment. The awards, which
      are payable in either five or ten years time, are paid to a member of senior
      management if his or her performance is satisfactory to us. There are three
      current members of senior management and two former members of senior management
      who may receive payments on maturity.




-42-







In
      2005,
      we and our subsidiaries incurred $29,510 in costs to provide pension, retirement
      or similar benefits to our respective officers and directors pursuant to our
      retirement plan and pension plan.




In
      addition to the above, during the year ended December 31, 2005, we recorded
      non-cash compensation expenses of $72,440 associated with the Directors Purchase
      Plan.




**Employment
      Agreements**




We
      have
      employment agreements with Merle A. Hinrichs under which he serves as our
      chairman and chief executive officer and as president of Global Sources USA,
      Inc., one of our subsidiaries. The agreements contain covenants restricting
      Mr. Hinrichs’ ability to compete with us during his term of employment and
      preventing him from disclosing any confidential information during the term
      of
      his employment agreement and for a period of three years after the termination
      of his employment agreement. In addition, we retain the rights to all trademarks
      and copyrights acquired and any inventions or discoveries made or discovered
      by
      Mr. Hinrichs in the course of his employment. Upon a change of control, if
      Mr. Hinrichs is placed in a position of lesser stature than that of a
      senior executive officer, a significant change in the nature or scope of his
      duties is effected, Mr. Hinrichs ceases to be a member of the board or
      there is a breach of those sections of his employment agreements relating to
      compensation, reimbursement, title and duties or termination, each of us and
      such subsidiary shall pay Mr. Hinrichs a lump sum cash payment equal to
      five times the sum of his base salary prior to the change of control and the
      bonus paid to him in the year preceding the change of control. The agreements
      may be terminated by either party by giving six months notice.




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




**Board
      Practices**




Our
      board
      of directors consists of seven members divided into three classes, the terms
      of
      which expire at the general meeting of shareholders to be held in each year
      indicated above. Each director holds office until his or her term expires and
      his or her successor has been elected and qualified. At each general meeting
      of
      shareholders, directors nominated to a class with a term that expires in that
      year will be elected for a three-year term. Executive officers serve at the
      discretion of the board of directors. Officers are elected at the annual meeting
      of the directors held immediately after the annual general meeting of
      shareholders. Our executive officers have, on average, 18 years of service
      with us. Directors receive a cash fee of $10,000 per year, plus an additional
      $2,500 for each board meeting attended.




**Committees
      of the Board of Directors**




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




We
      have a
      separately - designated standing compensation committee, consisting of the
      independent directors. The primary function of the compensation committee is
      to
      approve compensation packages for each of the Company’s executive officers. The
      compensation committee held 2 meetings in the fiscal year ended December 31,
      2005.




-43-







We
      have
      an executive sessions committee, consisting of the independent directors. The
      executive sessions committee held 2 meetings in the fiscal year ended December
      31, 2005.




**Code
      of Ethics**




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




**Employees**




As
      of
      December 31, 2005, we had 521 employees worldwide, the majority of whom work
      in
      management, technical or administrative positions. We consider our employee
      relationships to be satisfactory. Our employees are not represented by labor
      unions and we are not aware of any attempts to organize our
      employees.




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




**Function**
            
            **Employees**
            
            **Independent**
              **Contractors**
            
            **Total**Content
                Development
            
            102
            
            337
            
            439Corporate
                Human Resources & Administration
            
            
            33
            
            
            43
            
            
            76Corporate
                Marketing
            
            
            7
            
            
            33
            
            
            40Community
                Development
            
            
            109
            
            
            26
            
            
            135Sales
            
            
            40
            
            
            1,211
            
            
            1,251Electronic
                Commerce Services
            
            
            4
            
            
            0
            
            
            4Information
                System Department
            
            
            126
            
            
            18
            
            
            144Corporate
                Accounts
            
            
            61
            
            
            54
            
            
            115Office
                of the CEO, COO, CIO
            
            
            10
            
            
            0
            
            
            10Legal
                and Group Secretarial
            
            
            3
            
            
            6
            
            
            9Conference
                & Trade Show Services
            
            
            26
            
            
            25
            
            
            51**Total**
            
            
            **521**
            
            
            **1,753**
            
            
            **2,274**





**Share
      Ownership**




Information
      on the ownership of our Common Shares is given under Item 7, Major
      Shareholders and Related Party Transactions.




**Equity
      Compensation Plans**




We
      established The Global Sources Employee Equity Compensation Trust (the “Trust”)
      on December 30, 1999. The Trust is administered by Appleby Trust (Bermuda)
      Ltd (previously known as “Harrington Trust Limited”), as trustee. The purpose of
      the Trust is to administer monies and other assets contributed to the trustee
      for the establishment of equity compensation and other benefit plans, including
      the equity compensation plans described below. The number of shares that may
      be
      sold pursuant to these plans is limited to the number of our shares held by
      the
      Trust. Following our takeover of Trade Media on April 14, 2000, the Trade
      Media shares were exchanged for our common shares. These Trade Media shares
      currently represent our common shares. As of April 17, 2006, the Trust holds
      2,395,060 of our common shares. The Trust has informed us that it does not
      intend to acquire any additional shares. In exercising its powers, including
      the
      voting of securities held in the Trust, the trustee may be directed by a plan
      committee, selected by the board of directors of one of our wholly owned
      subsidiaries.




-44-







*Global
      Sources Equity Compensation Plans Numbers I, II and III*




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




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




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




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




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




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




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




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




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




-45-







*Global
      Sources Equity Compensation Plans Numbers IV and V*




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




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




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




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




The
      Equity Compensation Plan committee approved the awards of common shares under
      ECP IV and ECP V on January 23, 2001. The Equity Compensation Plan
      Committee approved additional awards of common shares under ECP IV on various
      dates during the year 2001 and under ECP V on various dates during the years
      2001 and 2002 and on January 2, 2004, on March 1, 2004, on January 2, 2005,
      on March 5, 2005 and on December 31, 2005.




The
      non-cash compensation expenses associated with the above awards under ECP IV
      and
      ECP V of approximately $3,024,000 and $2,311,000 respectively, are recognized
      over the five year vesting term from the respective award dates.




*Global
      Sources Equity Compensation Plan VI*




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




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




The
      Equity Compensation Plan committee approved the ECP VI on March 13, 2001
      and made awards of common shares under the plan on various dates during the
      years 2001 and 2002, on July 28, 2004 and on April l, 2005.




The
      non-cash compensation expenses associated with the awards in accordance with
      ECP
      VI totaling approximately $1,093,000 ** are
      recognized over the five year vesting term from the respective award
      dates.




*Global
      Sources Equity Compensation Plan VII*




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




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




The
      Equity Compensation Plan committee approved the awards of common shares under
      ECP VII in January 2002 and made further awards on March 31, 2003, on
      June 19, 2003, on January 2, 2004 (as revised on May 7, 2004), on January 3,
      2005 and on February 13, 2006. The non-cash compensation expenses associated
      with the above awards under ECP VII of approximately $10,812,000 are recognised
      over the six year vesting term from the respective award dates.




-46-







**Directors
      Purchase Plan**




A
      2000
      Non-Employee Directors Share Option Plan was approved on October 26, 2000 by
      the
      shareholders of the Company. Each eligible Director was entitled to an option
      to
      purchase up to 20,000 common shares at a price established at
      year-end.




Each
      option was exercisable before the end of each February following the year-end
      at
      which the option price was established. The non-employee Directors have the
      right to decline all or part of the award, which is
      non-transferable.




For
      grants attributable to the year 2001, the option price was 15% less than the
      average closing price of the shares for the last 5 trading days of the previous
      calendar year. The award vested over 4 years, with one-quarter of the shares
      vesting each year. Full payment was required upon exercising the option. Upon
      resignation of an eligible Director, all unvested shares would be forfeited
      and
      the option price received for the forfeited unvested shares would be refunded.
      Only one Director accepted the offer on February 10, 2001 for the 26,620 shares
      granted under the option. The $164,200 received as proceeds of this plan was
      included in additional paid-in capital. On February 28, 2002, 2003, 2004 and
      2005, the Company issued to the Director the 6,655, 6,655, 6,655 and 6,050
      common shares, respectively, that vested on those dates.




At
      the
      Board of Directors’ meeting on November 1to 2, 2001, the Board of Directors
      approved amendments to the terms of the plan for prospective grants, to require
      only 15% of the exercise price to be paid upon the exercise date, and to provide
      that the resignation of a Director would no longer result in a forfeiture of
      the
      subscribed shares. The plan entitled the Directors to a grant of options at
      a
      price established at the prior year-end. The ownership of the awards would
      transfer after 4 years. Optionees must pay 15% of the option price, which was
      the average closing price of the shares for the last 5 trading days of the
      year
      2001, at the time of exercising the option. The balance of 85% must be paid
      on
      or before the end of the holding period. The resignation of a Director following
      his or her exercise of the grant of options and payment of the option price
      would not cause a forfeiture of the subscribed shares. All the eligible
      non-employee Directors accepted the offer before February 28, 2002. The $49,896
      received towards the 15% of the option price was included in the additional
      paid-in capital.




At
      the
      Board of Directors’ meeting on February 27, 2002, the Board of Directors
      approved amendments to the terms of the plan for prospective grants, to require
      only 10% of the exercise price to be paid upon the exercise date. The plan
      entitled the Directors to a grant of options at a price established at the
      prior
      year-end. The ownership of the awards would transfer after 4 years. Optionees
      must pay 10% of the option price, which was the average closing price of the
      shares for the last 5 trading days of the year 2002, at the time of exercising
      the option. The balance of 90% must be paid on or before the end of the holding
      period. The resignation of a Director following his or her exercise of the
      grant
      of options and payment of the option price would not cause a forfeiture of
      the
      subscribed shares. Three eligible directors accepted the offer before February
      28, 2003. The $29,700 received towards the 10% of the option price was included
      in the additional paid-in capital.




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




Directors
      purchasing the shares under the plan must pay 10% of the purchase price, which
      is the average closing price of the shares for the last 5 trading days of the
      year 2003, on or before February 28, 2004. The balance of 90% must be paid
      by
      February 28, 2008 and the shares would be issued thereafter. The resignation
      of
      a Director following his or her purchase of the shares and payment of the 10%
      initial installment would not cause a forfeiture of the subscribed shares.
      Six
      Directors opted to purchase 26,620 shares each and one director opted to
      purchase part of the 26,620 shares. The amount of $92,069 received towards
      the
      10% of the purchase price was included in the additional paid-in
      capital.




As
      per
      the terms of the Directors Purchase Plan, Directors purchasing the shares under
      the plan in the year 2005 must pay 10% of the purchase price, which was the
      average closing price of the shares for the last 5 trading days of the year
      2004, on or before February 28, 2005. The balance of 90% must be paid by
      February 28, 2009 and the shares would be issued thereafter. The resignation
      of
      a Director following his or her purchase of the shares and




-47-


payment
      of the 10% initial installment would not cause a forfeiture of the subscribed
      shares. Five directors opted to purchase 24,200 shares each. The amount of
      $118,156 received towards the 10% of the purchase price was included in the
      additional paid-in capital.




At
      the
      Board of Directors’ meeting on 4 and 5 November 2005, the Board of Directors
      adopted a definitive form of the Directors Purchase Plan, known as the
“Directors Purchase Plan (as of 5 November 2005)”, which consolidated and
      clarified matters in earlier forms of the Directors Purchase Plan and previous
      shareholders’ and Board of Directors’ approvals and resolutions pertaining
      thereto.




As
      per
      the terms of the Directors Purchase Plan (as of 5 November 2005), Directors
      purchasing the shares under the plan in the year 2006, must pay 10% of the
      purchase price which was the average closing price of the shares for the last
      5
      trading days of the year 2005, on or before February 28, 2006. The balance
      of
      90% must be paid by February 28, 2010 and the shares will be issued thereafter.
      Failing to pay the 90% balance of the purchase price before the end of the
      holding period will results in the 10% deposit being forfeited and any and
      all
      rights under the purchase right and to the issuance of shares will automatically
      lapse and expire, and the shares will not be issued. The resignation of a
      Director following his or her purchase of the shares and payment of the 10%
      initial installment will not cause a forfeiture of the unissued shares, provided
      that the balance of the purchase price is paid in full on or before the due
      date
      thereof. Four directors opted to purchase 22,000 shares each. The amount of
      $76,768 received towards the 10% of the purchase price will be included in
      the
      additional paid-in capital.




**ITEM
      7.**  **MAJOR
      SHAREHOLDERS AND RELATED PARTY TRANSACTIONS**




**Major
      Shareholders**




The
      following table sets forth information about those persons who hold more than
      5%
      of our common shares and the share ownership of our directors and officers
      as a
      group. The information is based upon our knowledge of the share ownership of
      such persons on April 17, 2006.




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




On
      November 27, 2003, Merle A. Hinrichs acquired 18,190,955 of our common shares,
      after adjustment to reflect the share split resulting from our three bonus
      share
      distributions of one share for every ten shares held as of March 1, 2004,
      as of March 4, 2005 and as of March 15, 2006, representing 47.3% of the
      outstanding common shares, from Hung Lay Si Co. Ltd. As a result, Mr. Hinrichs
      owns approximately 61.2% of our outstanding common shares as at April 17, 2006.
      As consideration for the purchase of the common shares, Mr. Hinrichs agreed
      to
      pay Hung Lay Si Co. Ltd. the purchase price of $109,337,056 payable on November
      27, 2013. Mr. Hinrichs has granted to Hung Lay Si Co. Ltd. a security interest
      in all 18,190,955 common shares he purchased pending payment of the
      consideration. A copy of the purchase agreement and security agreement was
      filed
      by Mr. Hinrichs with the SEC on Schedule 13D on December 8, 2003, and jointly
      by
      the Trust and Hung Lay Si Co. Ltd. on Schedule 13D/A on the same day, and
      reference is made to those filings for the complete terms of the transaction.
      The agreements provide that in the event of cash dividends declared and paid
      by
      us, Mr. Hinrichs will pay to Hung Lay Si Co. Ltd. 50% of the dividends for
      any
      of the common shares purchased by Mr. Hinrichs that remain subject to Hung
      Lay
      Si Co. Ltd.’s security interest in the shares. If Mr. Hinrichs wishes to
      transfer or sell any shares subject to those agreements to someone other than
      Hung Lay Si Co. Ltd., Hung Lay Si Co. Ltd. has a right of first refusal to
      offer
      to purchase those shares. If Hung Lay Si Co. Ltd. waives its right to purchase
      the shares, upon consummation of a sale to the other person, at least 80% of
      the
      proceeds of the sale will be applied to the payment of the purchase price.
      Hung
      Lay Si Co. Ltd. may also be deemed, under Securities and Exchange Commission
      rules, to be a beneficial owner of the shares in which it has a right of first
      refusal and a security interest.




-48-


**Common
                  Shares Beneficially Owned****Name
                  of Beneficial Owner**
              **Shares**
              **Percentage**





Merle
                A. Hinrichs
            
            
            23,525,896
            
            
            61.2
            %Hung
                Lay Si Co. Ltd
            
            
            3,152,151
            
            
            8.2
            %Appleby
                Trust (Bermuda) Ltd. (previously know as “Har-
              rington
                Trust Limited”)
            
            
            2,395,060
            
            
            6.2
            %Jeffrey
                J. Steiner (1)
            
            
            449,355
            
            
            1.2
            %Eddie
                Heng Teng Hua
            
            
            *
            
            
            *J.
                Craig Pepples
            
            
            *
            
            
            *Bill
                Georgiou
            
            
            *
            
            
            *Sarah
                Benecke
            
            
            *
            
            
            *David
                F. Jones
            
            
            *
            
            
            *Roderick
                Chalmers
            
            
            *
            
            
            *James
                Watkins
            
            
            *
            
            
            *All
                officers and directors as a group (10 persons)
            
            
            24,157,876
            
            
            62.9
            %







________________________




*  Indicates
      beneficial ownership of less than 1%.




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




At
      April
      17, 2006, we believe that 7,757,295 of our shares or 20.19%, were beneficially
      owned by U.S. holders and there were 760 shareholders of record in the U.S.
      (excluding any U.S. holders who may be holding our shares through brokerage
      firms).




Mr.
      Merle
      A. Hinrichs, our Chairman and Chief Executive Officer, beneficially owns
      approximately 61.2% of our common shares and is deemed our controlling
      shareholder.




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




**Related
      Party Transactions**




During
      the year 2004, we have fully repaid the $11,404,000 in obligations due to Hung
      Lay Si Co. Ltd, our former controlling shareholder and the amount owed as at
      December 31, 2004 and 2005 were $NIL.




We
      have
      extended loans to some of our employees for the sole purpose of financing the
      purchase or lease of a residence. The loans for the purchase of a residence
      are
      secured by that residence, bear interest at a rate of LIBOR plus 2 to 3%,
      generally have a term of ten years and become due and payable immediately upon
      the termination of the employee’s employment. The loans for the lease of a
      residence are unsecured, interest free and are repayable in equal monthly
      installments over the period of the lease, which is typically less than or
      equal
      to 12 months. The maximum loan amounts are limited to the lower of the aggregate
      of two years’ gross compensation of the borrower or $500,000. The loans were
      made upon terms and subject to conditions that are more favorable to the
      borrowers than those that would customarily be applied by commercial lending
      institutions in the borrower’s country of employment. Since the beginning of
      2000, the largest aggregate amount of indebtedness of Mr. Pepples to us,
      outstanding at any time during such period, was approximately $32,233.
      Mr. Pepples has repaid his loan in full in November 2002. Mr. Pepples’
loan was interest free and unsecured. Except for the aforementioned loan, there
      were no other loans due from our directors and executive officers as at December
      31, 2003, 2004 and 2005. We do not expect to extend loans to our directors
      or
      executive officers to the extent such loans would be prohibited by the
      Sarbanes-Oxley Act of 2002.




We
      lease
      approximately 82,658 square feet of our office facilities from companies
      controlled by a wholly-owned subsidiary of Hung Lay Si Co. Ltd. under cancelable
      and non-cancelable operating leases and incur building main-




-49-


tenance
      services fees to our former affiliated companies. We incurred rental, building
      services expenses and reimbursement of membership fees for use of club
      memberships of $806,097 during the year ended December 31, 2005. We also
      received legal, treasury management consultancy services and receive investment
      consultancy services from wholly-owned subsidiaries of Hung Lay Si Co. Ltd.
      The
      expenses incurred for these services during the year ended December 31,
      2005 was $119,000.




For
      further information on these transactions, see the notes to our audited
      consolidated financial statements included elsewhere in this annual
      report.




We
      believe these transactions are commercially reasonable in the jurisdictions
      where we operate and for our employees where they reside or work.




**ITEM
      8.**  **FINANCIAL
      INFORMATION**




**Consolidated
      statements and other financial information**




**GLOBAL
      SOURCES LTD. AND SUBSIDIARIES**




**Index
      to Consolidated Financial Statements**


**December
      31, 2005**




**Page**




REPORT
                OF INDEPENDENT REGISTERED PUBLIC ACCOUNTANTS
            51CONSOLIDATED
                BALANCE SHEETS
            52CONSOLIDATED
                STATEMENTS OF INCOME
            53CONSOLIDATED
                STATEMENTS OF CASH FLOWS
            54CONSOLIDATED
                STATEMENTS OF SHAREHOLDERS’ EQUITY
            55NOTES
                TO CONSOLIDATED FINANCIAL STATEMENTS
            56-78





-50-


**REPORT
      OF INDEPENDENT REGISTERED PUBLIC ACCOUNTANTS**




To
      the
      Board of Directors and Shareholders of




Global
      Sources Ltd.




We
      have
      audited the accompanying consolidated balance sheets of Global Sources Ltd.
      (a
      company incorporated under the laws of Bermuda) and its subsidiaries as of
      December 31, 2005 and 2004, and the related consolidated statements of income,
      shareholders’ equity and cash flows for each of the three years in the period
      ended December 31, 2005. These financial statements are the responsibility
      of
      the Company’s management.  Our
      responsibility is to express an opinion on these financial statements based
      on
      our audits.




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




In
      our
      opinion, the consolidated financial statements referred to above present fairly,
      in all material respects, the consolidated financial position of Global Sources
      Ltd. and its subsidiaries as of December 31, 2005 and 2004, and the consolidated
      results of their operations and cash flows for each of the three years in the
      period ended December 31, 2005, in conformity with U.S. generally accepted
      accounting principles.




/s/
      ERNST
& YOUNG




Singapore


March
      21,
      2006










-51-


**GLOBAL
      SOURCES LTD. AND SUBSIDIARIES**


**CONSOLIDATED** **BALANCE SHEETS**




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




**At
                  December 31**
              **At
                  December 31******
              **2004**
              **2005****ASSETS**




**Current
                    Assets:**Cash and cash equivalents
                
                $
                41,195
                
                $
                94,321Available-for-sale securities
                
                
                10,172
                
                
                23,982Accounts receivable, net
                
                
                5,147
                
                
                5,545Receivables from sales representatives
                
                
                3,407
                
                
                5,659Inventory of paper
                
                
                750
                
                
                866Prepaid expenses and other current assets
                
                
                2,926
                
                
                10,585**Total Current Assets**
                
                
                63,597
                
                
                140,958Property
                    and equipment, net
                
                
                24,902
                
                
                28,178Long
                    term investments
                
                
                100
                
                
                100Bonds
                    held to maturity, at amortized cost
                
                
                666
                
                
                463Other
                    assets
                
                
                3,260
                
                
                1,981**Total Assets**
                
                $
                92,525
                
                $
                171,680**LIABILITIES
                    AND SHAREHOLDERS’ EQUITY****Current
                    Liabilities:**Accounts payable
                
                $
                4,798
                
                $
                5,484Deferred income and customers’ prepayments
                
                
                28,775
                
                
                52,624Accrued liabilities
                
                
                5,921
                
                
                6,644Income taxes payable
                
                
                384
                
                
                405**Total Current Liabilities**
                
                
                39,878
                
                
                65,157Liabilities
                    for incentive and bonus plans
                
                
                467
                
                
                307Deferred
                    income and customers’ prepayments - long term
                
                
                1,420
                
                
                348Deferred
                    tax liability..
                
                
                327
                
                
                436**Total Liabilities**
                
                
                42,092
                
                
                66,248Minority
                    interest
                
                
                4,910
                
                
                6,191**Shareholders’
                    Equity:**Common shares, US$0.01 par value; 50,000,000 shares
                    authorized;38,338,779 (2004: 35,032,729) shares issued and
                    outstanding
                
                
                350
                
                
                383Additional paid in capital
                
                
                86,342
                
                
                127,747Retained deficit
                
                
                (34,577
                )
                
                (21,199
                )Less: Unearned compensation
                
                
                (6,831
                )
                
                (7,900
                )Accumulated other comprehensive income
                
                
                239
                
                
                210**Total Shareholders’ Equity**
                
                
                45,523
                
                
                99,241**Total Liabilities and Shareholders’
Equity**
                
                $
                92,525
                
                $
                171,680


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




-52-


**GLOBAL
      SOURCES LTD. AND SUBSIDIARIES**


**CONSOLIDATED
      STATEMENTS OF INCOME**




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




**Year
                Ended December 31,****2003**
            
            **2004**
            
            **2005****Revenue:**Online
                and other media services
            
            $
            87,685
            
            $
            92,325
            
            $
            97,062Exhibitions
            
            
            3,327
            
            
            13,010
            
            
            14,300Miscellaneous
            
            
            657
            
            
            511
            
            
            832**91,669**
            
            
            **105,846**
            
            
            **112,194****Operating
                Expenses:**Sales
            
            
            30,113
            
            
            29,956
            
            
            33,910Event
                production
            
            
            930
            
            
            3,774
            
            
            3,920Community
            
            
            13,155
            
            
            17,890
            
            
            20,623General
                and administrative
            
            
            27,858
            
            
            30,329
            
            
            33,641Online
                services development
            
            
            4,960
            
            
            4,232
            
            
            3,920Non-cash
                compensation expense (Note a)
            
            
            1,419
            
            
            2,117
            
            
            1,948Amortization
                of software costs.
            
            
            4,453
            
            
            1,480
            
            
            1,335**Total
                Operating Expenses**
            
            
            **82,888**
            
            
            **89,778**
            
            
            **99,297****Income
                from Operations**
            
            
            **8,781**
            
            
            **16,068**
            
            
            **12,897**Interest
                and dividend income
            
            
            122
            
            
            219
            
            
            1,624Gain
                (loss) on sale of available-for-sale securities
            
            
            (40
            )
            
            1,120
            
            
            977Foreign
                exchange gains (losses), net
            
            
            -
            
            
            240
            
            
            (80
            )**Income
                before Income Taxes**
            
            
            **8,863**
            
            
            **17,647**
            
            
            **15,418****Income
                Tax Provision**
            
            
            **(668**
            **)**
            
            **(651**
            **)**
            
            **(759**
            **)****Net
                Income before Minority Interest**
            
            **$**
            **8,195**
            
            **$**
            **16,996**
            
            **$**
            **14,659**Minority
                interest
            
            
            (861
            )
            
            (1,227
            )
            
            (1,281
            )**Net
                Income**
            
            **$**
            **7,334**
            
            **$**
            **15,769**
            
            **$**
            **13,378****Basic
                net income per share**
            
            **$**
            **0.2094**
            
            **$**
            **0.4501**
            
            **$**
            **0.3558****Shares
                used in basic net income per share calculations (Note
                2(u))**
            
            
            **35,025,016**
            
            
            **35,031,656**
            
            
            **37,596,448****Diluted
                net income per share**
            
            **$**
            **0.2093**
            
            **$**
            **0.4492**
            
            **$**
            **0.3551****Shares
                used in diluted net income per share calculations (Note
                2(u))**
            
            
            **35,041,362**
            
            
            **35,106,227**
            
            
            **37,679,024**





Note:
      a.  Reflects
      the non-cash compensation expenses associated with the employee equity
      compensation plans and Directors Purchase Plan. Approximately $505 (2004: $626,
      2003: $323) represents sales expenses, $103 (2004: $93, 2003: $96) represents
      community, $1,025 (2004: $1,066, 2003: $691) represents general and
      administrative and $315 (2004: $332, 2003: $309) represents online services
      development expenses.




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




-53-


**GLOBAL
      SOURCES LTD. AND SUBSIDIARIES**


**CONSOLIDATED
      STATEMENTS OF CASH FLOWS**




**(In
      U.S. Dollars Thousands)**




**Year
                Ended December 31,****2003**
            
            **2004**
            
            **2005****Cash
                flows from operating activities:**Net
                income
            
            $
            7,334
            
            $
            15,769
            
            $
            13,378Adjustments
                to reconcile net income to net cash provided by
              operating
                activities:Depreciation
                and amortization
            
            
            8,509
            
            
            4,052
            
            
            3,975Profit
                on sale of equipment
            
            
            (7
            )
            
            (1
            )
            
            (12
            )Accretion
                of U.S. Treasury strips zero % coupon
            
            
            (74
            )
            
            (57
            )
            
            (37
            )Unrealized
                dividend income on available-for-sale securities
            
            
            (72
            )
            
            (7
            )
            
            (134
            )Bad
                debt expense
            
            
            202
            
            
            (716
            )
            
            18Non-cash
                compensation expense
            
            
            1,419
            
            
            2,117
            
            
            1,948Income
                attributable to minority shareholder
            
            
            861
            
            
            1,227
            
            
            1,281Equipment
                written off
            
            
            12
            
            
            26
            
            
            8618,184
            
            
            22,410
            
            
            20,503**Changes
                in assets and liabilities:**Accounts
                receivables
            
            
            (540
            )
            
            76
            
            
            (416
            )Receivables
                from sales representatives
            
            
            (951
            )
            
            476
            
            
            (2,252
            )Inventory
                of paper
            
            
            (158
            )
            
            (47
            )
            
            (116
            )Prepaid
                expenses and other current assets
            
            
            (664
            )
            
            (1,036
            )
            
            (7,525
            )Long
                term assets
            
            
            (155
            )
            
            (2,024
            )
            
            1,279Accounts
                payable
            
            
            148
            
            
            366
            
            
            686Accrued
                liabilities and liabilities for incentive and bonus plans
            
            
            99
            
            
            (97
            )
            
            563Deferred
                income and customer prepayments
            
            
            9,195
            
            
            2,741
            
            
            22,777Tax
                liability
            
            
            131
            
            
            (391
            )
            
            130**Net
                cash provided by operating activities**
            
            
            **25,289**
            
            
            **22,474**
            
            
            **35,629****Cash
                flows from investing activities:**Purchase
                of property and equipment
            
            
            (2,307
            )
            
            (21,111
            )
            
            (7,338
            )Proceeds
                from sales of equipment
            
            
            32
            
            
            2
            
            
            13Proceeds
                from matured bonds
            
            
            440
            
            
            383
            
            
            240Purchase
                of available-for-sale securities
            
            
            (19,300
            )
            
            (131,444
            )
            
            (363,544
            )Proceeds
                from sale of available-for-sale securities
            
            
            11,034
            
            
            155,976
            
            
            349,705**Net
                cash (used for) generated from investing
                activities**
            
            
            **(10,101**
            **)**
            
            **3,806**
            
            
            **(20,924**
            **)****Cash
                flows from financing activities:**Repayment
                of amount due to a shareholder
            
            
            -
            
            
            (11,404
            )
            
            -Proceeds
                from issue of common shares, net of share issue
                expenses................
            
            
            -
            
            
            -
            
            
            38,303Amount
                received towards directors purchase plan
            
            
            30
            
            
            92
            
            
            118**Net
                cash generated from (used for) financing
                activities**
            
            
            **30**
            
            
            **(11,312**
            **)**
            
            **38,421**Net
                increase in cash and cash equivalents
            
            
            15,218
            
            
            14,968
            
            
            53,126Cash
                and cash equivalents, beginning of the year
            
            
            11,009
            
            
            26,227
            
            
            41,195**Cash
                and cash equivalents, end of the year**
            
            **$**
            **26,227**
            
            **$**
            **41,195**
            
            **$**
            **94,321****Supplemental
                cash flow disclosures:**Income
                tax paid
            
            $
            537
            
            $
            1,042
            
            $
            629





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


-54-


**GLOBAL
      SOURCES LTD. AND SUBSIDIARIES**


**CONSOLIDATED** **STATEMENTS OF SHAREHOLDERS’ EQUITY**




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




**Common
                shares****Number
                of shares**
            
            **Amounts**
            
            **Additional**
              **paid
                in**
              **capital**
            
            **Retained
                deficit**
            
            **Unearned**
              **compensation**
            
            **Accumulated
                other comprehensive income**
            
            **Total**
              **shareholders’
                equity****Balance
                at December 31, 2002**
            
            
            **35,019,419**
            
            **$**
            **350**
            
            **$**
            **80,399**
            
            **$**
            **(57,680**
            **)**
            **$**
            **(4,547**
            **)**
            
            —
            
            **$**
            **18,522**Net
                income
            
            
            —
            
            
            —
            
            
            —
            
            
            7,334
            
            
            —
            
            
            —
            
            $
            7,334Non-cash
                compensation expense
            
            
            —
            
            
            —
            
            
            1,435
            
            
            —
            
            
            —
            
            
            —
            
            $
            1,435Unearned
                compensation
            
            
            —
            
            
            —
            
            
            —
            
            
            —
            
            
            (16
            )
            
            —
            
            $
            (16
            )Amount
                received towards directors - purchase plan
            
            
            —
            
            
            —
            
            
            30
            
            
            —
            
            
            —
            
            
            —
            
            $
            30Issuance
                of shares under directors - purchase plan
            
            
            6,655
            
            
            —
            
            
            —
            
            
            —
            
            
            —
            
            
            —
            
            
            —Reclassification
                adjustment for losses, net of gains included in net income, net of
                income
                tax of $NIL
            
            
            —
            
            
            —
            
            
            —
            
            
            —
            
            
            —
            
            
            40
            
            $
            40Unrealized
                gain on available-for-sale securities, net of income tax of
                $NIL
            
            
            —
            
            
            —
            
            
            —
            
            
            —
            
            
            —
            
            
            635
            
            $
            635**Balance
                at December 31, 2003**
            
            
            **35,026,074**
            
            **$**
            **350**
            
            **$**
            **81,864**
            
            **$**
            **(50,346**
            **)**
            **$**
            **(4,563**
            **)**
            **$**
            **675**
            
            **$**
            **27,980**Net
                income
            
            
            —
            
            
            —
            
            
            —
            
            
            15,769
            
            
            —
            
            
            —
            
            $
            15,769Non-cash
                compensation expense
            
            
            —
            
            
            —
            
            
            4,386
            
            
            —
            
            
            —
            
            
            —
            
            $
            4,386Unearned
                compensation
            
            
            —
            
            
            —
            
            
            —
            
            
            —
            
            
            (2,268
            )
            
            —
            
            $
            (2,268
            )Amount
                received towards directors - purchase plan
            
            
            —
            
            
            —
            
            
            92
            
            
            —
            
            
            —
            
            
            —
            
            $
            92Issuance
                of shares under directors - purchase plan
            
            
            6,655
            
            
            —
            
            
            —
            
            
            —
            
            
            —
            
            
            —
            
            
            —Reclassification
                adjustment for gains, net of losses included in net income, net of
                income
                tax of $NIL
            
            
            —
            
            
            —
            
            
            —
            
            
            —
            
            
            —
            
            
            (1,212
            )
            $
            (1,212
            )Unrealized
                gain on available-for-sale securities, net of income tax of
                $NIL
            
            
            —
            
            
            —
            
            
            —
            
            
            —
            
            
            —
            
            
            776
            
            $
            776**Balance
                at December 31, 2004**
            
            
            **35,032,729**
            
            **$**
            **350**
            
            **$**
            **86,342**
            
            **$**
            **(34,577**
            **)**
            **$**
            **(6,831**
            **)**
            **$**
            **239**
            
            **$**
            **45,523**Net
                income
            
            
            —
            
            
            —
            
            
            —
            
            
            13,378
            
            
            —
            
            
            —
            
            $
            13,378Non-cash
                compensation expense
            
            
            —
            
            
            —
            
            
            3,017
            
            
            —
            
            
            —
            
            
            —
            
            **$**
            3,017Unearned
                compensation
            
            
            —
            
            
            —
            
            
            —
            
            
            —
            
            
            (1,069
            )
            
            —
            
            **$**
            (1,069
            )Amount
                received towards directors - purchase plan
            
            
            —
            
            
            —
            
            
            118
            
            
            —
            
            
            —
            
            
            —
            
            $
            118Issuance
                of shares under directors - purchase plan
            
            
            6,050
            
            
            —
            
            
            —
            
            
            —
            
            
            —
            
            
            —
            
            
            —Issuance
                of common shares, net of share issue expenses
            
            
            3,300,000
            
            
            33
            
            
            38,270
            
            
            —
            
            
            —
            
            
            —
            
            $
            38,303Reclassification
                adjustment for gains, net of losses included in net income, net of
                income
                tax of $NIL
            
            
            —
            
            
            —
            
            
            —
            
            
            —
            
            
            —
            
            
            (977
            )
            $
            (977
            )Unrealized
                gain on available-for-sale securities, net of income tax of
                $NIL
            
            
            —
            
            
            —
            
            
            —
            
            
            —
            
            
            —
            
            
            948
            
            $
            948**Balance
                at December 31, 2005**
            
            
            **38,338,779**
            
            **$**
            **383**
            
            **$**
            **127,747**
            
            **$**
            **(21,199**
            **)**
            **$**
            **(7,900**
            **)**
            **$**
            **210**
            
            **$**
            **99,241**





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





-55-


**GLOBAL
      SOURCES LTD. AND SUBSIDIARIES**


**NOTES
      TO CONSOLIDATED FINANCIAL** **STATEMENTS**




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




**1.**  **The
      Company**




The
      Company’s principal business is to provide services that allow global buyers to
      identify suppliers and products, and enable suppliers to market their products
      to a large number of buyers. The Company’s primary online service is creating
      and hosting marketing websites that present suppliers’ product and company
      information in a consistent, easily searchable manner on Global Sources Online.
      The Company also offers electronic cataloguing services for suppliers. Private
      Supplier Catalogs are password-protected online environments where suppliers
      can
      develop and maintain their own product and company data. Complementing these
      services are various trade magazines. 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 and re-sells products that are
      purchased on consignment basis.




**2.**  **Summary
      of Significant Accounting Policies**




**(a)**  **Basis
      of Consolidation and Presentation**




(i)
            The
                accompanying consolidated financial statements are prepared in accordance
                with U.S. generally accepted accounting principles and comprise the
                financial statements of the Company, and its subsidiaries. All significant
                inter-company transactions and balances have been eliminated on
                consolidation.




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




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




**(b)**  **Use
      of Estimates**




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




**(c)**  **Cash
      Equivalents**




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




**(d)**  **Available-for-sale
      Securities**




The
      Company invests its excess cash in readily marketable securities managed by
      high
      quality institutions and in government-backed securities such as debt and equity
      securities. These are classified as available-for-sale securities. Investments
      classified as available-for-sale securities are carried at market value with




-56-


any
      unrealized holding gains and losses, net of related tax effect if any, presented
      under shareholders’ equity as accumulated other comprehensive
      income.




Generally
      the Company holds the securities with specific maturity dates until their
      maturity but the securities managed by high quality institutions are generally
      sold on a quarterly basis and proceeds reinvested in similar
      securities.




The
      Company records the sales of securities upon their maturity or
      sale.




As
      the
      Company’s objective and intent is not to generate profit from short-term price
      fluctuations, the Company classified its investments as available-for-sales
      securities, in accordance with SFAS 115, “Accounting for Certain Investments in
      Debts and Equity Securities”.




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




**(e)**  **Inventory
      of Paper**




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




**(f)**  **Property
      and Equipment**




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




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




Building
            50
                yearsFixtures,
                fittings and office equipment
            5
                yearsLeasehold
                improvements
            5
                yearsMotor
                vehicles
            5
                yearsComputer
                equipment and software
            3
                yearsReusable
                trade show booths
            2
                years





Depreciation
      of assets acquired under capital leases is included in depreciation
      expense.





(iii)
            Effective
                January 1, 1999, the Company adopted Statement of Position 98-1,
                “Accounting for the Costs of Computer Software Developed or Obtained
                for
                Internal Use,” to account for the costs incurred to develop computer
                software for internal use. Costs incurred in the preliminary project
                stage
                with respect to the development of software for internal use are
                expensed
                as incurred; costs incurred during the application development stage
                are
                capitalized and are amortized over the estimated useful life of three
                years upon the commissioning of service of the software. Training
                and
                maintenance costs are expensed as incurred. To account for the development
                costs related to the products to be sold, leased or otherwise marketed,
                the Company adopted SFAS No. 86, “Accounting for the Costs of Computer
                Software to Be Sold, Leased, or Otherwise Marketed.”
                Develop-




-57-


ment
      costs incurred subsequent to the establishment of the technological feasibility
      of the product are capitalized. The capitalization ends when the product is
      available for general release to customers.




The
      Company expensed $38, $241 and $66 during the years ended December 31, 2003,
      2004 and 2005, respectively, for the costs incurred prior to the establishment
      of the technological feasibility with respect to the development of products
      to
      be sold, leased or otherwise marketed.




**(g)**  **Intangible
      Assets**




The
      Company adopted SFAS No. 142, “Goodwill and Other Intangible Assets”, effective
      on January 1, 2002, to account for intangible assets. The net intangible
      assets as of December 31, 2004 and 2005 was $NIL for both years.




**(h)**  **Long
      Term Investments**




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




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




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




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




**(i)**  **Impairment
      of Long-lived Assets**




The
      Company reviews the carrying value of its long-lived assets and will recognize
      an impairment loss whenever events or changes in circumstances indicate the
      carrying amount of the assets may not be fully recoverable. The recoverability
      of an asset is measured by a comparison of the carrying amount of an asset
      to
      the estimated undiscounted future cash flows expected to be generated by the
      asset. If the carrying amount of an asset exceeds its estimated future cash
      flows, an impairment loss, measured based on the difference between the carrying
      amount of the asset and its fair value, is recognized. There was no impairment
      of the Company’s property and equipment as of December 31, 2005 and
      2004.




**(j)**  **Revenue
      Recognition**




The
      Company derives its revenues from advertising fees in its published trade
      magazines and websites, sales of trade magazines and reports, fees from
      licensing its trade and service marks, organizing exhibitions and business
      seminars, commission income from consignment sales.




Revenues
      from advertising in trade magazines and websites are recognized ratably over
      the
      period in which the advertisement is displayed. Advertising contracts do not
      exceed one year. When multiple deliverables are contracted under a single
      arrangement, the Company allocates the total consideration to each unit of
      accounting on a pro-rata method based on its relative percentage of the total
      fair value of all units of accounting included in the arrangement. Revenue
      from
      sales of trade magazines and reports is recognized upon




-58-


delivery
      of the magazine / report. Magazine subscriptions received in advance are
      deferred and recognized as revenue upon delivery of the magazine. Revenue from
      organizing exhibitions and business seminars is recognized at the conclusion
      of
      the event and the related direct event production costs are deferred and
      recognized as expenses upon conclusion of the event.




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




The
      Company derives commission income on the re-sale of its customers’ products on a
      consignment basis. The commission income which is the sales proceeds, net of
      the
      cost of the purchased products payable to the consigner is recognized upon
      conclusion of the sale to the buyer.




**(k)**  **Transactions
      with Sales Representatives**




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




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




**(l)**  **Advertising
      Expenses**




The
      event
      specific advertising and promotion costs incurred for events to be held in
      future financial years are expensed by the year-end in which the expenses are
      incurred. Other advertising and promotion expenses are expensed as incurred.
      The
      Company recorded advertising and promotion expenses of $145, $2,679 and $3,612
      during the years ended December 31, 2003, 2004 and 2005,
      respectively.




**(m)**  **Operating
      Leases**




The
      Company leases certain office facilities under cancelable and non-cancelable
      operating leases, generally with an option to renew upon expiry of the lease
      term. Rentals under operating leases are expensed on a straight-line basis
      over
      the life of the leases.




**(n)**  **Liabilities
      for Bonus Plan**




Before
      the commencement of the Equity Compensation Plans as described in Note 23,
      the
      Company rewarded its senior management staff based on their performance through
      long term discretionary bonus awards. These awards were payable in cash
      generally at the end of five or ten years from the date of the award, even
      in
      the event of termination of employment unless certain non-compete provisions
      had
      been violated. These awards were expensed in the period to which the performance
      bonus relates.




**(o)**  **Retirement
      Contributions**




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




-59-







**(p)**  **Income
      Taxes**




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




**(q)**  **Minority
      Interest**




In
      2000,
      the Company entered into an agreement with CMP Media Inc., through United
      Professional Media B.V. (previously known as United Business Media B.V.), a
      subsidiary of United News and Media plc. (CMP) to set-up a corporation (eMedia
      Asia Ltd.) to provide new technology content, media and e-commerce services
      to
      the electronics technology market in Asia. The Company holds a 60.1% controlling
      equity interest in eMedia Asia Ltd. and consolidates the results of operations.
      As part of obtaining its 39.9% interest, CMP has committed to pay $6,000 and
      interest thereon to the Company upon the payment of specified future dividends
      of eMedia Asia Ltd. Pursuant to an internal restructuring within the CMP group,
      United Professional Media B.V.’s 39.9% interest in eMedia Asia Ltd. and
      associated obligations were novated and assigned to UBM Asia B.V. (another
      subsidiary within the CMP group) in October 2003. Due to the contingent nature
      of the payment, the Company did not record in its balance sheet the promissory
      note receivable of $6,000 due from CMP and no interest income was accrued as
      at
      December 31, 2005, 2004 and 2003. The minority interest liability of $6,191
      and
      $4,910 at December 31, 2005 and 2004, respectively, reflects CMP’s proportionate
      interest in the net book value of eMedia Asia Ltd.




**(r)**  **Foreign
      Currencies**




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




The
      financial statements of the subsidiaries reporting in their respective local
      currencies are translated into U.S. dollars for consolidation as follows: assets
      and liabilities at the exchange rate as of the balance sheet date, shareholders’
equity at the historical rates of exchange, and income and expense amounts
      at
      the average monthly exchange rates. The cumulative translation differences
      were
      not material as of December 31, 2004 and 2005.




**(s)**  **Segment
      Reporting**




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




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




-60-







**(t)**  **Comprehensive
      Income**




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




Comprehensive
                income consists of the following:**Year
                Ended December 31,****2003**
            
            **2004**
            
            **2005**Unrealized
                gain on available-for-sale securities, net of income tax of
                $NIL
            
            $
            635
            
            $
            776
            
            $
            948Reclassification
                adjustment for gains, net of losses included in net income, net of
                income
                tax of $NIL
            
            $
            40
            
            $
            (1,212
            )
            $
            (977
            )Net
                income
            
            $
            7,334
            
            $
            15,769
            
            $
            13,378$
            8,009
            
            $
            15,333
            
            $
            13,349





**(u)**  **Basic
      and Diluted Net Income Per Share**




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




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




**Year
                Ended December 31,****2003**
            
            **2004**
            
            **2005**Net
                income
            
            $
            7,334
            
            $
            15,769
            
            $
            13,378Basic
                net income per share
            
            $
            0.2094
            
            $
            0.4501
            
            $
            0.3558Diluted
                net income per share
            
            $
            0.2093
            
            $
            0.4492
            
            $
            0.3551Weighted
                average common shares outstanding,
              used
                in basic net income per share calculation
            
            
            35,025,016
            
            
            35,031,656
            
            
            37,596,448Effect
                of dilutive shares
            
            
            16,346
            
            
            74,571
            
            
            82,576Weighted
                average common shares outstanding,
              used
                in diluted net income per share calculation
            
            
            35,041,362
            
            
            35,106,227
            
            
            37,679,024Antidilutive
                share subscriptions
            
            
            10,000
            
            
            —
            
            
            100,000





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




**(v)**  **Stock
      Based Compensation**




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




-61-


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




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




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




The
      Company accounts for the shares purchased by the directors under Directors
      Purchase Plan using the intrinsic value method prescribed in APB No.25,
“Accounting for Stock Issued to Employees” and related interpretations.
      Accordingly, compensation cost relating to the shares purchased by the directors
      is measured as the difference between the quoted market price of the stock
      at
      the grant date and the price paid by the directors (exercise price) on the
      measurement date. The exercise price and number of shares are both established
      on January 1 of each year, hence, fixed plan accounting is applied.




**(w)**  **Allowance
      for Doubtful Debts**




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




**(x)**  **Recent
      Accounting Pronouncements**




In
      March 2004, the Emerging Issues Task Force (“EITF”) reached a consensus on
      Issue No. 03-1, “The Meaning of Other-Than-Temporary Impairment and Its
      Application to Certain Investments.” EITF 03-1 provides guidance on
      other-than-temporary impairment models for marketable debt and equity securities
      accounted for under SFAS No. 115, “Accounting for Certain Investments in
      Debt and Equity Securities,” and SFAS No. 124, “Accounting for Certain
      Investments Held by Not-for-Profit Organizations,” and non-marketable equity
      securities accounted for under the cost method. The EITF developed a basic
      three-step model to evaluate whether an investment is other-than-temporarily
      impaired. The provisions of EITF 03-1 will be effective for interim or annual
      reporting periods beginning after June 15, 2004 and will be applied
      prospectively to all current and future investments. Quantitative and
      qualitative disclosures for investments accounted for under SFAS No. 115 are
      effective for the first annual reporting period after December 15, 2003. In
      September, 2004, the FASB issued FSP EITF Issue “03-1-1”, “Effective Date of
      Paragraphs 10-20 of EITF 03-1, The Meaning of Other Than Temporary Impairment”,
      delaying the effective date for the recognition and measurement guidance of
      EITF
      03-1, as contained in paragraphs 10-20, until certain implementation issues
      are
      addressed and a final FSP providing implementation guidance is issued. The
      disclosure requirements of the consensus remain in effect. In November, 2005
      the
      FASB issued FSP FAS 115-1 and FAS 124-1. The FSP FAS 115-1 and FAS 124-1
      nullifies certain requirements of EITF 03-1 and is applicable for reporting
      periods beginning after December 15, 2005. The Company does not expect the
      adoption of EITF 03-1 to have a material effect on its results of operations
      and
      financial condition.




-62-







In
      December 2004, the FASB issued SFAS No. 123R, “Share-Based Payment”
(“SFAS 123R”), a revision of SFAS No. 123, “Accounting for Stock-Based
      Compensation.” SFAS 123R requires, among other things, measurement of all
      employee stock-based compensation awards using a fair value method and recording
      such expense in the consolidated financial statements. In April 2005, the
      Securities and Exchange Commission adopted a new rule that allows implementation
      of SFAS 123R at the beginning of next fiscal year beginning after June 15,
      2005.
      As a result, the Company, with a fiscal year ended December 31 will not be
      required to adopt Statement 123R until January 1, 2006. The Company does not
      expect the adoption of SFAS 123R to have a material effect on its financial
      statements of position, results of operations or cash flows.




In
      May 2005, the FASB issued SFAS No. 154, “Accounting Changes and Error
      Corrections, a replacement of Accounting Principles Board (“APB”) Opinion
      No. 20 and FASB Statement No. 3.” (“SFAS 154”). SFAS 154 requires
      retrospective application to prior periods’ financial statements of changes in
      accounting principle. It also requires that the changes in accounting principle
      be applied to the balances of assets and liabilities as of the beginning of
      the
      earliest period for which retrospective application is practicable and that
      a
      corresponding adjustment be made to the opening balance of retained earnings
      for
      that period rather than being reported in an income statement. The statement
      will be effective for accounting changes and corrections of errors made in
      fiscal years beginning after December 15, 2005. The Company does not expect
      the adoption of SFAS 154 to have a material impact on its consolidated financial
      statements.




**3.**  **Available-for-sale
      Securities**




**At
                December 31,****2004**
            
            **2005**Cost
            
            $
            9,933
            
            $
            23,772Unrealized
                holding gain
            
            
            239
            
            
            210Fair
                value
            
            $
            10,172
            
            $
            23,982







The
      Company recorded dividend income derived from the available-for-sale securities
      of $NIL, $NIL, and $320 during the year ended December 31, 2003, 2004 and 2005
      respectively. The Company recorded interest income derived from the
      available-for-sale securities of $NIL, $92 and $963 during the year ended
      December 31, 2003, 2004 and 2005 respectively.




**4.**  **Current
      Assets**




**At
                December 31,****2004**
            
            **2005****Accounts
                receivable:**Gross
                trade receivables
            $
            6,175
            
            $
            6,197Less:
                Allowance for doubtful debts
            
            (1,028
            )
            
            (652
            )$
            5,147
            
            $
            5,545**Movements
                in allowance for doubtful debts:****Year
                Ended December 31,****2003**
            
            
            **2004**
            
            
            **2005****Balance
                at beginning of year**
            
            $
            1,966
            
            $
            2,097
            
            $
            1,028Provision
                during the year
            
            
            202
            
            
            —
            
            
            18Allowance
                for doubtful debts written-back
            
            
            —
            
            
            (716
            )
            
            —Write-off
                during the year
            
            
            (71
            )
            
            (353
            )
            
            (394
            )**Balance
                at end of year**
            
            $
            2,097
            
            $
            1,028
            
            $
            652





-63-





**At
                December 31,****2004**
            
            **2005****Prepaid
                expenses and other current assets:**Unsecured
                employee loans and other debtors
            
            $
            60
            
            $
            71Prepaid
                expenses
            
            
            410
            
            
            768Deferred
                expenses - short term
            
            
            895
            
            
            7,688Other
                current assets
            
            
            1,561
            
            
            2,058$
            2,926
            
            $
            10,585







**5.**  **Property
      and Equipment, net**




**At
                December 31,****2004**
            
            **2005**Building
            
            $
            —
            
            $
            19,384Capital
                work-in-progress
            
            
            19,213
            
            
            855Leasehold
                improvements
            
            
            6,951
            
            
            7,949Motor
                vehicles
            
            
            191
            
            
            198Computer
                equipment, software, fixtures, fittings and office
                equipment
            
            
            24,111
            
            
            18,348Reusable
                trade show booths
            
            
            —
            
            
            86Software
                development costs
            
            
            4,474
            
            
            3,571Property
                and equipment, at cost
            
            
            54,940
            
            
            50,391Less:
                Accumulated depreciation
            
            
            (30,038
            )
            
            (22,213
            )$
            24,902
            
            $
            28,178





Depreciation
      expense for the years ended December 31, 2003, 2004 and 2005 was $4,056, $2,572
      and $2,640 respectively and the amortization of software costs for the years
      ended December 31, 2003, 2004 and 2005 was $4,453, $1,480 and $1,335
      respectively. The accumulated amortization of software costs as of December
      31,
      2004 and 2005 was $2,186 and $2,280 respectively.




During
      2004, the Company entered into an agreement to purchase approximately 9,000
      sq
      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 to 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. The depreciation expenses on the said building amounted to US$311 during
      the year 2005.




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




(i)
            As
                at December 31, 2005, the Company holds equity instruments carried
                at $100
                in a privately held unaffiliated electronic commerce company for
                business
                and strategic purposes. The invest-




-64-


ment
      is
      accounted for under the cost method since the ownership is less than 20% and
      the
      Company does not have the ability to exercise significant influence over the
      investee. The investment is shown under long term investments in the
      consolidated balance sheets.




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




The
      net
      carrying value of the long term investment as at December 31, 2004 and 2005
      was
      $100. The Company will continue to evaluate this investment for
      impairment.




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




**At
                December 31,****2004**
            
            **2005**The
                amortized cost classified by date of contractual
              maturity
                is as follows:Due
                within one year
            
            $
            229
            
            $
            189Due
                after one year through five years
            
            
            437
            
            
            274$
            666
            
            $
            463








**At
                December 31,****2004**
            
            **2005**The
                fair value based on the market price, classified by date of contractual
                maturity is as follows:Due
                within one year
            
            $
            235
            
            $
            193Due
                after one year through five years
            
            
            466
            
            
            280$
            701
            
            $
            473








**At
                December 31,****2004**
            
            
            **2005**Gross
                unrealized holding gains
            
            $
            35
            
            $
            10








**7.**  **Other
      Assets**




**At
                December 31,****2004**
            
            **2005**Employee
                housing loans
            
            $
            191
            
            $
            152Club
                memberships
            
            
            418
            
            
            418Deferred
                expenses - long term
            
            
            296
            
            
            541Rental,
                utility and other deposits
            
            
            2,355
            
            
            870$
            3,260
            
            $
            1,981







-65-







**8.**  **Current
      Liabilities**




**At
                December 31,****2004**
            
            **2005****Deferred
                income and customers’ prepayments:**Advertising
            
            $
            20,612
            
            $
            28,846Exhibitions,
                subscription and others
            
            
            8,163
            
            
            23,778$
            28,775
            
            $
            52,624





**At
                December 31,****2004**
            
            **2005****Accrued
                liabilities:**Salaries,
                wages and commissions
            
            $
            1,181
            
            $
            1,326Retirement
                contribution plans
            
            
            696
            
            
            645Current
                portion of liabilities for incentive and bonus plans
            
            
            1,075
            
            
            1,169Printing,
                paper and bulk mailing cost
            
            
            -
            
            
            430Others
            
            
            2,969
            
            
            3,074$
            5,921
            
            $
            6,644







**9.**  **Liabilities
      for Incentive and Bonus Plans**




**At
                December 31,****2004**
            
            **2005**Liability
                for long term discretionary bonus plan
            
            $
            467
            
            $
            307







**10.**  **Deferred
      Income and Customers’ Prepayments - Long Term**




**At
                December 31,****2004**
            
            **2005**Exhibitions
            
            $
            1,420
            
            $
            348







**11.**  **Related
      Party Transactions**




The
      Company has extended loans to some of its employees to finance their purchase
      or
      lease of residences. The loans for the purchase of a residence are secured
      by
      the subject residence, bear interest at a rate of LIBOR plus 2% to 3%, generally
      have a term of ten years and become due and payable immediately under certain
      circumstances, including their termination of employment with the Company.
      The
      loans for the lease of a residence are unsecured, interest free and are
      repayable in equal monthly installments over the period of the lease, typically
      less than or equal to twelve months. Loans due from employees for purchase
      of
      residences were $191 and $152 as of December 31, 2004 and 2005 respectively.
      Loans due from employees for lease of residences were $55 and $61 as of December
      31, 2004 and 2005, respectively. There were no other loans due from the
      Company’s directors and executive officers as at December 31, 2004 and 2005.
      Other temporary advances to staff, which are generally repayable within twelve
      months, were $5 and $10 as of December 31, 2004 and 2005,
      respectively.




-66-







The
      Company leases certain office facilities from subsidiaries of Hung Lay Si Co.
      Ltd., the Company’s Former Parent Company (“Former Parent Company”) under
      cancelable and non-cancelable operating leases that include both rental and
      building maintenance services. During the years ended December 31, 2003, 2004
      and 2005, the Company incurred rental and building management services expenses
      of $756, $NIL and $NIL respectively, with respect to these leases. These leases
      were no longer related party transactions during the year 2004 and
      2005.




The
      Company also receives legal, treasury management consultancy services and
      investment consultancy services from subsidiaries of the Former Parent Company.
      During the year ended December 31, 2003, 2004 and 2005, the Company incurred
      such legal, secretarial and treasury management consultancy services expenses
      of
      $259, $NIL and $NIL respectively with respect to such services. These services
      were no longer related party transactions during the years 2004 and
      2005.




The
      Company had $11,404, $NIL and $NIL due to the Former Parent Company as of
      December 31, 2003, 2004 and 2005, respectively. Due to the disposal of the
      Company’s shares held by the Former Parent Company to the Company’s chairman and
      chief executive officer, this liability as at December 31, 2003 was reclassified
      and disclosed as “Amount due to a shareholder” in the Company’s consolidated
      balance sheet as at December 31, 2003. The amount due to the Former Parent
      Company was unsecured. This amount was fully re-paid during the year
      2004.




**12.**  **Liabilities
      for Incentive and Bonus Plans**




Before
      the commencement of the Equity Compensation Plans the Company rewarded its
      senior management staff based on their current performance through long term
      discretionary bonus awards. These awards are payable approximately at the end
      of
      five or ten years from the date of the award, even in the event of termination
      of employment unless certain non-compete provisions have been violated. The
      Company did not incur any expenses related to these awards during the years
      ended December 31, 2003, 2004 and 2005. The required funds were set aside for
      payment of the discretionary bonuses by purchasing U.S. Treasury strips zero
      %
      coupons maturing in either five or ten years. These investments are held until
      maturity and the proceeds are used for payment of the discretionary
      bonuses.




Certain
      sales representatives of the Company are eligible for incentive awards under
      plans administered by the Company. Costs incurred related to incentive awards
      under plans administered by the Company for the years ended December 31, 2003,
      2004 and 2005 were $116, $164 and $126 respectively.




**13.**  **Retirement
      Contribution Plans**




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




The
      two
      principal defined contribution retirement plans are plans where employees are
      not required to make contributions. One of these two plans is separately
      administered by an independent trustee and the plan assets are held independent
      of the Company. The other one is not independently administered and is currently
      unfunded. The Company’s liabilities under this unfunded plan as of December 31,
      2004 and 2005 were $664 and $591, respectively.




The
      Company incurred costs of $1,102, $1,099 and $1,166 with respect to the
      retirement plans in the years ended December 31, 2003, 2004 and 2005,
      respectively.




-67-







**14.**  **Income
      Taxes**




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




Income
      before income taxes consists of:




**Year
                Ended December 31,****2003**
            
            **2004**
            
            **2005**Cayman
                Islands
            
            $
            5,420
            
            $
            12,746
            
            $
            12,828Foreign
            
            
            3,443
            
            
            4,901
            
            
            2,590$
            8,863
            
            $
            17,647
            
            $
            15,418







The
      provision for income taxes consists of:




**Year
                Ended December 31,****2003**
            
            **2004**
            
            **2005**Current
                tax expense:Cayman
                Islands
            
            $
            —
            
            $
            —
            
            $
            —Foreign
            
            
            974
            
            
            622
            
            
            650Deferred
                tax expense:Cayman
                Islands
            
            
            —
            
            
            —
            
            
            —Foreign
            
            
            (306
            )
            
            29
            
            
            109Total
                provision
            
            $
            668
            
            $
            651
            
            $
            759





The
      provision for income taxes for the years ended December 31, 2003, 2004 and
      2005
      differed from the amount computed by applying the statutory income tax rate
      of
      0% as follows:




**Year
                Ended December 31,****2003**
            
            **2004**
            
            **2005**Income
                taxes at statutory rate
            
            $
            —
            
            $
            —
            
            $
            —Foreign
                income and revenues taxed at higher rates
            
            
            668
            
            
            651
            
            
            759Total
            
            $
            668
            
            $
            651
            
            $
            759Effective
                tax rate
            
            
            7.54
            %
            
            3.69
            %
            
            4.92
            %


Deferred
      tax assets consist of the following:









**At
                December 31,****2004**
            
            **2005**Net
                operating loss carry forwards
            
            $
            7,410
            
            $
            7,371Less:
                valuation allowance
            
            
            (7,410
            )
            
            (7,371
            )Deferred
                tax assets
            
            $
            —
            
            $
            —





-68-





The
      Company recorded a full valuation allowance for the deferred tax assets due
      to
      the uncertainty as to their ultimate realization. The net change in valuation
      allowance for the years ended December 31, 2003, 2004 and 2005 was an
      increase/(decrease) of approximately $2, $(52) and $(39), respectively,
      resulting primarily from net operating losses incurred and profits made by
      some
      of the subsidiaries during the respective years.




As
      of
      December 31, 2005 and 2004, a United States subsidiary had net operating loss
      carry forwards of approximately $17,099 and $17,188 respectively. These losses,
      which expire in year 2020, can be utilized to reduce future taxable income
      of
      the subsidiary subject to compliance with the taxation legislation and
      regulations in the relevant jurisdiction.




The
      Company recognized a deferred tax liability of $327 and $436 as at December
      31,
      2004 and 2005, respectively, which primarily arose from the temporary
      differences between the financial reporting and the tax bases of property and
      equipment in one of the subsidiaries of the Company.




**15.**  **Share
      Capital**




On
      February 28, 2004 and 2005, the Company issued 6,655 and 6,050 common shares,
      respectively, under the Directors Purchase Plan. On March 29, 2005, the Company
      issued 3,300,000 common shares of par value $0.01 at US$12.27 per share. The
      total proceeds received from this issue was $38,303 net of the offering expenses
      of $2,197. Out of the total proceeds $33 was included in the common share
      capital and the balance $38,270 was included in additional paid in capital.
      The
      authorized share capital of the Company as at December 31, 2004 and 2005 is
      50,000,000 common shares of $0.01 par value. As at December 31, 2004 and at
      December 31, 2005, the Company has 35,032,729 and 38,338,779 common shares
      issued and outstanding, respectively.




**16.**  **Fair
      Value of Financial Instruments**




The
      carrying amounts of the Company’s cash equivalents, accounts receivable,
      accounts payable and accrued liabilities approximate fair value due to their
      short maturities. The fair value of available-for-sale securities is disclosed
      in Note 3. The carrying amount and market value of long term investments are
      discussed in Note 6.




**17.**  **Concentration
      of Credit Risk and Other Risks**




Financial
      instruments, which potentially subject the Company to concentration of credit
      risk, consist primarily of investment in checking and money market accounts,
      available-for-sale securities, investment in U.S. Treasury strips zero % coupon,
      accounts receivable and receivables from sales representatives. The Company
      maintains checking, money market accounts and available-for-sale securities
      with
      high quality institutions. The Company has a large number of customers, operates
      in different geographic areas and generally does not require collateral on
      accounts receivable or receivables from sales representatives. In addition,
      the
      Company is continuously monitoring the credit transactions and maintains
      reserves for credit losses where necessary. No customer accounted for more
      than
      10% of the Company’s revenues for each of the years ended December 31, 2003,
      2004 and 2005. No customer accounted for more than 10% of the accounts
      receivable as of December 31, 2004 and 2005.




In
      2005,
      the Company derived approximately 93% of its revenue from customers in Asia.
      The
      Company expects that a majority of its future revenue will continue to be
      generated from customers in this region. Future political or economic
      instability in Asia could negatively impact the business.




-69-







**18.**  **Operating
      Leases**




The
      Company leases office facilities under cancelable and non-cancelable operating
      leases. During the years ended December 31, 2003, 2004 and 2005, the Company’s
      operating lease rental and building management services expenses were $1,484,
      $1,275 and $1,409 respectively. The estimated future minimum lease rental
      payments under non-cancelable operating leases as of December 31, 2005 are
      as
      follows:




**Year
                Ending December 31,**
            
            **Operating
                Leases**2006
            
            $
            3502007
                onwards
            
            
            —$
            350





**19.**  **Segment
      and Geographic Information**




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**




**Year
                Ended December 31,****2003**
            
            **2004**
            
            **2005**Revenue:Online
                and other media services (Note (a))
            
            $
            87,685
            
            $
            92,325
            
            $
            97,062Exhibitions
            
            
            3,327
            
            
            13,010
            
            
            14,300Miscellaneous
            
            
            657
            
            
            511
            
            
            832Consolidated
            
            $
            91,669
            
            $
            105,846
            
            $
            112,194





Miscellaneous
      revenue consists mainly of technical services fee income, and for year 2005
      also
      includes rental income and commission income from consignment
      sales.




**Year
                Ended December 31,****2003**
            
            **2004**
            
            **2005**Income/(Loss)
                from Operations:Online
                and other media services
            
            $
            9,390
            
            $
            17,700
            
            $
            13,460Exhibitions
            
            
            (1,215
            )
            
            (2,133
            )
            
            (1,258
            )Miscellaneous
            
            
            606
            
            
            501
            
            
            695Consolidated
            
            $
            8,781
            
            $
            16,068
            
            $
            12,897





**At
                December 31,****2004**
            
            **2005**Identifiable
                Assets:Online
                and other media services
            
            $
            79,894
            
            $
            141,076Exhibitions
            
            
            12,103
            
            
            29,316Miscellaneous
            
            
            528
            
            
            1,288Consolidated
            
            $
            92,525
            
            $
            171,680







-70-







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




**Year
                Ended December 31,****2003**
            
            **2004**
            
            **2005**Online
                services
            
            $
            51,367
            
            $
            52,106
            
            $
            53,829Print
                services
            
            
            36,318
            
            
            40,219
            
            
            43,233$
            87,685
            
            $
            92,325
            
            $
            97,062







**(b)**  **Foreign
      Operations**




**Year
                Ended December 31,****2003**
            
            **2004**
            
            **2005**Revenue:Asia
            
            $
            84,856
            
            $
            97,876
            
            $
            104,746United
                States
            
            
            5,970
            
            
            6,573
            
            
            6,175Europe
            
            
            437
            
            
            597
            
            
            679Others
            
            
            406
            
            
            800
            
            
            594Consolidated
            
            $
            91,669
            
            $
            105,846
            
            $
            112,194





**At
                December 31,****2004**
            
            **2005**Long-Lived
                Assets:Asia
            
            $
            28,257
            
            $
            30,208United
                States
            
            
            5
            
            
            51Consolidated
            
            $
            28,262
            
            $
            30,259





**20.**  **Contingencies**




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




**21.**  **Capital
      Commitments**




The
      commitments as at December 31, 2005 for leasehold improvements and for the
      development of software amounted to $313. The capital commitments as at December
      31, 2004 were $31 for the purchase and commissioning of software.




**22.**  **Restricted
      Share Award Plan**




On
      February 4, 2000, the Company established a restricted share award plan for
      the
      benefit of its chairman and chief executive officer in recognition of services
      to the Company. In conjunction with the restricted share award plan, the Former
      Parent Company assigned 5,334,944 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 666,870 of these shares is subject to an
      employment agreement with one of the Company’s United States
      subsidiar-




-71-


ies
      and
      entitlement to such shares vested immediately. The chairman and chief executive
      officer’s entitlement to the remaining 4,668,074 shares is subject to
      employment, non-compete and vesting terms under an employment agreement with
      one
      of the Company’s United States subsidiaries. The 4,668,074 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.




**23.**  **Equity
      Compensation Plans**




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




On
      February 4, 2000, in conjunction with the establishment of the Trust and the
      Share Exchange, the Former Parent Company assigned 3,334,340 common shares
      of
      the Company at a historical cost of less than $1, representing a 10% equity
      interest in the Company, for the establishment of share option plans and/or
      share award plans, known as ECP I, ECP II and ECP III. Subsequently, share
      option plans and/or share award plans, known as ECP IV, ECP V, ECP VI and ECP
      VII were established.




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




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




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




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




-72-


amount
      of
      compensation awarded by an amount determined by the plan committee prior to
      the
      Share Exchange.




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




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




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




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




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




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




The
      Equity Compensation Plan committee approved the awards of common shares under
      ECP IV and ECP V on January 23, 2001. The Equity Compensation Plan
      committee approved additional awards of common shares under ECP IV on
      April 1, 2001, July 1, 2001 and August 29, 2001 and under ECP V on August
      29, 2001, January 1, 2002, January 2, 2004 and on January 2,
      2005.




The
      non-cash compensation expenses associated with the above awards in accordance
      with APB No. 25 and SFAS No. 123, under ECP IV and ECP V of approximately $3,024
      and $2,311, respectively, are recognized over the five year vesting term from
      the respective award dates.




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




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




The
      Equity Compensation Plan committee approved ECP VI on March 13, 2001 and
      made awards of common shares under plan on various dates during the year 2001,
      2002, on July 28, 2004 and on April 1, 2005.




The
      non-cash compensation expenses associated with the awards in accordance with
      APB
      No. 25 and SFAS No. 123, under ECP VI totaling to approximately $1,093, are
      recognized over the five year vesting term from the respective award
      dates.




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




The
      Equity Compensation Plan committee approved the awards of common shares under
      ECP VII on January 1, 2002 and made further awards on March 31, 2003,
      on June 19, 2003, on January 2, 2004 and on January 3, 2005. The non-cash
      compensation expenses associated with the above awards in accordance




-73-


with
      APB
      No. 25 and SFAS No. 123, under ECP VII of approximately $8,376 are
      recognized **** over
      the
      six years vesting term from the respective award dates.




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




The
      Company expensed $1,419, $2,117 and $1,875 in non-cash compensation costs
      associated with the awards under the above ECP plans in the years ended December
      31, 2003, 2004 and 2005, respectively.




**ECP
                  II**
              
              **ECP
                  III**
              
              **ECP
                  IV**
              
              **ECPV**
              
              **ECP
                  VI**
              
              **ECP
                  VII****Purchase
                  Plan**
              
              **Gift
                  Plan**
              
              **Grant
                  Plan**
              
              **Grant
                  Plan**
              
              **Grant
                  Plan**
              
              **Grant
                  Plan**
              
              **Grant
                  Plan**Plan
                  Inception
              
              **March,**
                **2000**
              
              **March,**
                **2000**
              
              **March,**
                **2000**
              
              **January,**
                **2001**
              
              **January,**
                **2001**
              
              **March,**
                **2001**
              
              **January,**
                **2002**Number
                  of Shares:At
                  December 31, 2000
              
              107,662
              
              267,645
              
              
              136,894
              
              
              —
              
              
              —
              
              
              —
              
              
              —Original
                  restricted shares granted in year 2001
              
              —
              
              —
              
              
              —
              
              
              695,254
              
              
              403,293
              
              
              104,218
              
              
              —Shares
                  forfeited to beneficial trustee
              
              —
              
              (32,568
              )
              
              (26,407
              )
              
              (116,913
              )
              
              (121,787
              )
              
              —
              
              
              —Balance
                  at December 31, 2001
              
              107,662
              
              235,077
              
              
              110,487
              
              
              578,341
              
              
              281,506
              
              
              104,218
              
              
              —Original
                  restricted shares granted in year 2002
              
              —
              
              —
              
              
              —
              
              
              —
              
              
              39,930
              
              
              13,310
              
              
              178,951Shares
                  forfeited to beneficial trustee
              
              —
              
              (13,158
              )
              
              (3,034
              )
              
              (51,537
              )
              
              (37,801
              )
              
              —
              
              
              (12,237
              )Balance
                  at December 31, 2002
              
              107,662
              
              221,919
              
              
              107,453
              
              
              526,804
              
              
              283,635
              
              
              117,528
              
              
              166,714Original
                  restricted shares granted in year 2003
              
              —
              
              —
              
              
              —
              
              
              —
              
              
              —
              
              
              —
              
              
              382,432Shares
                  forfeited to beneficial trustee
              
              —
              
              (1,742
              )
              
              —
              
              
              (16,367
              )
              
              (4,792
              )
              
              —
              
              
              (15,044
              )Balance
                  at December 31, 2003
              
              107,662
              
              220,177
              
              
              107,453
              
              
              510,437
              
              
              278,843
              
              
              117,528
              
              
              534,102Original
                  restricted shares granted in year 2004
              
              —
              
              —
              
              
              —
              
              
              —
              
              
              39,930
              
              
              12,100
              
              
              389,833Shares
                  forfeited to beneficial trustee
              
              —
              
              —
              
              
              —
              
              
              (30,937
              )
              
              (5,724
              )
              
              —
              
              
              (37,825
              )Balance
                  at December 31, 2004
              
              107,662
              
              220,177
              
              
              107,453
              
              
              479,500
              
              
              313,049
              
              
              129,628
              
              
              886,110Original
                  restricted shares granted in year 2005
              
              —
              
              —
              
              
              —
              
              
              —
              
              
              14,520
              
              
              22,000
              
              
              369,137Shares
                  forfeited to beneficial trustee
              
              —
              
              —
              
              
              —
              
              
              (12,382
              )
              
              (1,065
              )
              
              —
              
              
              (55,003
              )Balance
                  at December 31, 2005
              
              107,662
              
              220,177
              
              
              107,453
              
              
              467,118
              
              
              326,504
              
              
              151,628
              
              
              1,200,245Grant
                  Price Per Share
              
              $18.04
              $
              NIL
              
              $
              NIL
              
              $
              NIL
              
              $
              NIL
              
              $
              NIL
              
              $
              NILWeighted
                  average fair value of the shares granted
              
              $1.88
              $
              19.91
              
              $
              19.91
              
              $
              6.51
              
              $
              6.40
              
              $
              5.11
              
              $
              5.83











-74-





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




**24.**  **Directors
      Purchase Plan**




A
      2000
      Non-Employee Directors Share Option Plan was approved on October 26, 2000 by
      the
      shareholders of the Company. Each eligible Director was entitled to an option
      to
      purchase up to 20,000 common shares at a price established at year
      end.




The
      option was exercisable before the end of each February following the year end
      at
      which the option price was established. The non-employee Directors have the
      right to decline all or part of the award, which is
      non-transferable.




For
      grants attributable to the 2001 year, the option price was fifteen percent
      less
      than the average closing price of the shares for the last five trading days
      of
      the previous calendar year. The award vested over four years with one quarter
      of
      the shares vesting each year. Full payment was required upon exercising the
      option. Upon resignation of an eligible Director, all unvested shares would
      be
      forfeited and the option price received for the forfeited unvested shares would
      be refunded. Only one Director accepted the offer on February 10, 2001 for
      the
      26,620 shares granted under the option. The $164 received as proceeds of this
      plan was included in additional paid-in capital. On February 28, 2002, 2003,
      2004 and 2005 the Company issued to the Director the 6,655, 6,655, 6,655 and
      6,050 common shares, respectively, that vested on those dates.




On
      November 1, 2001, the terms of the plan for prospective grants were amended
      to
      require only 15% of the exercise price to be paid upon exercise date and that
      the resignation of a director would no longer result in a forfeiture of the
      subscribed shares. The plan entitles the directors to a grant of options of
      a
      price established at the prior year end. The ownership of the awards will
      transfer after four years. Optionees must pay 15% of the option price, which
      is
      the average closing price of the shares for the last five trading days of year
      2001, at the time of exercising the option. The balance of 85% must be paid
      on
      or before the end of the holding period. The resignation of a Director following
      his or her exercise of the Grant of Options and payment of the Option Price
      shall not cause a forfeiture of the subscribed shares. All the eligible
      non-employee Directors accepted the offer before February 28, 2002. The $50
      received towards the 15% of the option price was included in additional paid
      in
      capital.




On
      February 27, 2002, the terms of the plan for prospective grants were amended
      to
      require only 10% of the exercise price to be paid upon exercise date. The plan
      entitles the directors to a grant of options at a price established at the
      prior
      year end. The ownership of the awards will transfer after four years. Optionees
      must pay 10% of the option price, which is the average closing price of the
      shares for the last five trading days of year 2002, at the time of exercising
      the option. The balance of 90% must be paid on or before the end of the holding
      period. The resignation of a Director following his or her exercise of the
      grant
      of options and payment of the option price shall not cause a forfeiture of
      the
      subscribed shares. Three eligible directors accepted the offer before February
      28, 2003. The $30 received towards the 10% of the option price was included
      in
      the additional paid in capital.




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




Directors
      purchasing the shares under the plan pay 10% of the purchase price, which is
      the
      average closing price of the shares for the last five trading days of year
      2003,
      on or before February 28, 2004. The balance of 90% is paid by February 28,
      2008
      and the shares will be issued thereafter. The resignation of a Director
      following his or her purchase of the shares and payment of the 10% initial
      installment shall not cause a for-




-75-


feiture
      of the purchased shares. Six directors opted to purchase 26,620 shares each
      and
      one director opted to purchase part of the 26,620 shares. The amount of $92
      received towards the 10% of the purchase price was included in the additional
      paid in capital.




As
      per
      the terms of the Directors Purchase Plan, Directors purchasing the shares under
      the plan in year 2005, pay 10% of the purchase price which is the average
      closing price of the shares for the last five trading days of the year 2004,
      on
      or before February 28, 2005. The balance of 90% is paid by February 28, 2009
      and
      the shares will be issued thereafter. The resignation of a Director following
      his or her purchase of the shares and payment of the 10% initial installment
      shall not cause a forfeiture of the subscribed shares. Five directors opted
      to
      purchase 24,200 shares each. The amount of $118 received towards the 10% of
      the
      purchase price was included in the additional paid in capital.




As
      per
      the terms of the Directors Purchase Plan, Directors purchasing the shares under
      the plan in year 2006, will pay 10% of the purchase price which is the average
      closing price of the shares for the last five trading days of the year 2005,
      on
      or before February 28, 2006. The balance of 90% will be paid by February 28,
      2010 and the shares will be issued thereafter. Failing to pay the 90% balance
      of
      the purchase price before the end of the holding period results in the 10%
      deposit being forfeited and any and all rights under the purchase right and
      to
      the issuance of shares will automatically lapse and expire and the shares will
      not be issued. The resignation of a Director following his or her purchase
      of
      the shares and payment of the 10% initial installment shall not cause a
      forfeiture of the unissued shares, provided that the balance of the purchase
      price is paid in full on or before the due date thereof. Four directors opted
      to
      purchase 22,000 shares each. The amount of $77 received towards the 10% of
      the
      purchase price will be included in the additional paid in capital.




**25.**  **Credit
      Facilities**




The
      Company holds a Documentary Credit facility with the Hongkong and Shanghai
      Banking Corporation Limited, for providing documentary credits to the Company’s
      suppliers. This facility has a maximum limit of $577. As at December 31, 2005,
      the unutilized amount under this facility was approximately $348. Hongkong
      and
      Shanghai Banking Corporation Limited has also provided guarantees on behalf
      of
      the Company to the Company’s suppliers. As at December 31, 2005, such guarantees
      amounted to $3.




**26.**  **Other
      Commitments**




The
      Company has entered into a number of licence agreements during the year 2004
      for
      its exhibition events amounting to $29,730 in payments over five (5) years.
      The
      agreements are cancelable under Force Majeure conditions, and with the consent
      of the other party but may be subject to a payment penalty. As of December
      31,
      2005 the amount paid under these agreements was $4,981. The amount paid will
      be
      expensed when the related events are held.




The
      Company also entered into several agreements for the event specific promotion
      of
      exhibition events amounting to $3,978 in payments over four years. The amount
      paid under these agreements as of December 31, 2005 was $1,454.




In
      August
      2005, one of the Company’s subsidiaries, eMedia Asia Limited (“eMedia”) entered
      into an agreement with Penton Media Inc, (“Penton”) to publish and distribute,
      in certain Asian territories, local language editions of Penton’s “Electronic
      Design” publication, relating to the electronic design industry. The first such
      edition to be launched is a simplified Chinese edition in mainland China
      entitled “Electronic Design-China”, the online website of which was launched in
      January 2006, and the first monthly issue of which is scheduled to be launched
      in March 2006. Under the agreement eMedia pays Penton forty per cent of the
      net
      after-tax profits of the business and also an annual content license fee for
      usage of Penton’s editorial material. There was no revenue generated from this
      publication during the year 2005.




-76-







**27.**  **Bonus
      Shares**




On
      March
      1, 2005, the Company announced a one for ten bonus share issue on the Company’s
      outstanding common shares. Shareholders of record on March 4, 2005 received
      one
      additional common share for every ten common shares held, of face value of
      $0.01
      each. The bonus share issue was distributed on April 1, 2005. In addition,
      the
      Company has reclassified $29 and $29 from additional paid in capital to common
      share capital as of December 31, 2004 and 2005, respectively for the bonus
      share
      issue.




**28.**  **Reclassification**




Certain
      prior-year amounts have been reclassified to conform to the current-year
      presentation, such as the following:




(i)
            Effective
                from the year 2005, the Company is presenting the promotion costs
                incurred
                for promoting its technical conferences, exhibition and seminars
                to buyer
                community and the printing and mailing costs for its marketing inserts
                business under community costs in the income statement. Accordingly
                such
                promotion costs and printing and mailing costs for prior years have
                been
                reclassified to community costs from general and administration costs
                to
                conform to the current-year presentation.




(ii)
            Certain
                prior-year items in the consolidated statements of cash flows have
                been
                reclassified to conform to the current year
                presentation.




**29.**  **Post
      Balance Sheet Event**




On
      March
      6, 2006, the Company announced a one for ten bonus share issue on the Company’s
      outstanding common shares. Shareholders of record on March 15, 2006 will receive
      one additional common share for every ten common shares held, of face value
      of
      $0.01 each. The bonus share issue will be distributed on April 17, 2006. 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
      $32 and $35 from additional paid in capital to common share capital as of
      December 31, 2004 and 2005, respectively.




**30.**  **Event
      subsequent to the date of the Report of Independent Auditors
      (unaudited)**




HC
      International, Inc. (“HC International”) is a company listed on the Growth
      Enterprise Market of The Stock Exchange of Hong Kong Limited. On May 24, 2006,
      Trade Media Holdings Limited (“TMH”), a wholly-owned subsidiary of the Company,
      IDG Technology Venture Investment, Inc. (“IDGVC”) and International Data Group,
      Inc. (“IDG”) entered into a conditional sale and purchase agreement (the “Sale
      and Purchase Agreement”) pursuant to which IDGVC has conditionally agreed to
      transfer 47,858,000 shares or 10% of the issued share capital of HC
      International, being part of its shareholding interests in HC International,
      to
      TMH at a consideration of approximately $9,873 or approximately $0.2063 per
      share, of HC International (the “HC Share(s)”), which is subject to adjustment
      to approximately $13,860 or approximately $0.2896 per HC Share (the “HC Share
      Transfer”), if and when HC International achieves a certain benchmark with
      reference to the HC International group’s performance during the Option Period
      (as defined below) or upon completion of the sale and purchase of the Option
      HC
      Shares (as defined below). IDG, being the sole shareholder of IDGVC, has agreed
      to guarantee the due and punctual discharge by IDGVC of its obligations under
      the Sale and Purchase Agreement. Completion of the HC Share Transfer is subject
      to the fulfilment of the conditions as set out in the Sale and Purchase
      Agreement, which include obtaining all relevant consents, governmental and
      regulatory approvals (if any) and a confirmation from the Hong Kong Securities
      and Futures Commission (the “SFC”) that no mandatory offer obligation under Rule
      26 of the Hong Kong Code on Takeovers and Mergers (the “Code”) will be triggered
      as a result of the transactions




-77-


contemplated
      under the Sale and Purchase Agreement. Completion is expected to take place
      by
      the end of June 2006. Upon completion of the HC Share Transfer, the Company
      will
      own, together with 5,916,000 HC Shares (which represent approximately 1.24%
      of
      the issued share capital of HC International as at May 24, 2006) currently
      owned
      by the Company, an approximate 11.24% equity interest in HC International.
      It is
      the intention of HC International to invite Merle Hinrichs, the Chairman and
      Chief Executive officer of the Company who is also a director of TMH, to join
      HC
      International’s board as a non-executive director upon completion of the HC
      Share Transfer.




TMH
      also
      entered into a call options deed (the “HC Options Deed”) with IDGVC, Guo
      Fansheng (“Guo”) and others which include certain members of the senior
      management of HC International (the “Option Grantors”), pursuant to which each
      of the aforesaid Option Grantors has agreed, subject to completion of the Sale
      and Purchase Agreement, to grant to TMH, (i) a right (the “HC Options”)
      exercisable during the 12-month period from the date of the completion of the
      Sale and Purchase Agreement (the “Option Period”) to purchase all, but not in
      part only, of the167,722,814 HC Shares owned by the respective parties
      (representing approximately 35.05% of the entire issued share capital of HC
      International) and any HC Shares that may be issued by HC International to
      certain directors of HC International if the options granted in accordance
      with
      the share option schemes of HC International (amounting to an aggregate of
      4,185,320 Option HC Shares) are exercised, which together amount to a maximum
      of
      approximately 35.61% of the entire issued share capital of HC International
      (the
“Option HC Share(s)”) at an exercise price of approximately $0.2896 per Option
      HC Share; and (ii) an undertaking to accept any offer for the Option HC Shares
      at a price not less than approximately $0.2896 per Option HC Share, during
      the
      Option Period.




Huicong
      Construction Co., Ltd. (“Huicong Construction”), in which Guo has an 80% equity
      interest, entered into a call option deed (the “Beijing Huicong Option Deed” and
      together with the HC Options Deed, the “Option Deeds”) with TMH, pursuant to
      which Huicong Construction has agreed, subject to completion of the Sale and
      Purchase Agreement, to grant to TMH a right (the “Beijing Huicong Option” and
      together with the HC Options, the “Options”) exercisable during the Option
      Period, to purchase (or to nominate a subsidiary of TMH to purchase) from
      Huicong Construction its entire 18% equity interest (“Beijing Huicong Equity
      Interest”) in Beijing Huicong International Information Co., Ltd. (“Beijing
      Huicong”), a 82% indirect subsidiary of HC International, at an aggregate
      exercise price of approximately $31,916.




The
      HC
      Options and the Beijing Huicong Option are inter-conditional. The sale and
      purchase of the Beijing Huicong Equity Interest is subject to confirmation
      from
      the SFC. If the SFC’s confirmation is not forthcoming, the sale and purchase of
      the Beijing Huicong Equity Interest will not be completed but TMH may proceed
      with the completion of the sale and purchase of the Option HC Shares.




Pursuant
      to the terms of the Beijing Huicong Option Deed and subject to the completion
      of
      the sale and purchase of the Beijing Huicong Equity Interest, Huicong
      Construction will also be required to transfer or assign its licenses and
      related contracts in relation to the provision of internet information and
      content services in the People’s Republic of China to a TMH-nominated company,
      but pending such transfer or assignment, Huicong Construction has agreed to
      continue to provide services in relation to the internet content provider
      license to Beijing Huicong in the same manner and on the same terms as currently
      agreed.




The
      exercise and completion of the HC Options by TMH, if materialized, will result
      in a change in control of HC International (as the aggregate shareholding of
      TMH
      and the Company in HC International will increase from approximately 11.24%
      to a
      maximum of approximately 46.75%) and will trigger an obligation on the part
      of
      TMH to make a general offer in compliance with the SFC regulations to acquire
      all the issued HC Shares (other than those already owned by TMH or parties
      acting in concert with it).







-78-


**ITEM
      9.**   **THE
      OFFER AND LISTING**




**Price
      history of stock**




The
      following table sets forth the high and low per share closing prices for our
      common shares for the periods indicated, as adjusted for the one for ten bonus
      share issues announced on February 16, 2004 and on March 1, 2005.




**Period**
            
            **High**
            
            **Low**Year
                2001
            
            $
            8.29
            
            $
            2.21Year
                2002
            
            $
            4.10
            
            $
            2.10Year
                2003
            
            $
            8.17
            
            $
            2.99Year
                2004
            
            $
            13.63
            
            $
            4.74Year
              2005
            
            $
            18.68
            
            $
            5.42First
                Quarter 2004
            
            
            13.63
            
            
            5.46Second
                Quarter 2004
            
            
            10.39
            
            
            6.44Third
                Quarter 2004
            
            
            7.78
            
            
            4.74Fourth
              Quarter 2004
            
            
            10.85
            
            
            4.99First
                Quarter 2005
            
            
            18.68
            
            
            8.18Second
                Quarter 2005
            
            
            10.31
            
            
            5.42Third
                Quarter 2005
            
            
            8.72
            
            
            6.35Fourth
                Quarter 2005
            
            
            8.97
            
            
            6.13First
              Quarter 2006
            
            
            10.46
            
            
            8.42October 2005
            
            
            7.77
            
            
            6.13November
                2005
            
            
            8.67
            
            
            6.33December 2005
            
            
            8.97
            
            
            7.93January 2006
            
            
            9.68
            
            
            8.42February
                2006
            
            
            10.08
            
            
            8.88March 2006
            
            
            10.46
            
            
            9.73April
                2006
            
            
            11.62
            
            
            10.67





**Markets**




Our
      shares are listed and traded under the symbol “GSOL” on the Nasdaq National
      Market.




**ITEM
      10.**  **ADDITIONAL
      INFORMATION**




**Memorandum
      and Articles of Association**




**Description
      of shareholder rights attaching to our common shares**




The
      following discussion of our common shares, and the laws governing the rights
      of
      our shareholders, is based upon the advice of Appleby Spurling Hunter, our
      Bermuda counsel.




Our
      authorized share capital consists of 50,000,000 common shares, par value $0.01
      per share. A bonus share distribution of one share for every ten shares was
      issued to all of our shareholders of record on March 15, 2006 and distributed
      on
      or about April 17, 2006. As of April 17, 2006, we had 38,428,310 common shares
      issued and outstanding.




·
            Holders
                of common shares have no preemptive, redemption, conversion or sinking
                fund rights.




-79-







·
            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.




·
            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.




·
            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.




·
            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




·
            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:




·
            the
                chairman of the meeting;




·
            at
                least three shareholders present in person or by
                proxy;




-80-







·
            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




·
            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 dividends as a private company as a means to distribute earnings to
      shareholders. Beginning in October 1999, we have focused on the implementation
      of our growth plans, and we have retained earnings in furtherance of such plans.
      Currently, we do not intend to pay dividends for the foreseeable future in
      order
      to focus on our growth plans.




**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
      shares 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.




**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:




-81-







·
            with
                the consent in writing of the holders of not less than seventy-five
                percent of the issued common shares of that class;
                or




·
            with
                the sanction of a resolution passed at a separate general meeting
                of the
                holders of such common shares, voting in proxy or present, at which
                a
                quorum is present.




The
      bye-laws provide that a quorum for such a meeting shall be two persons present
      in person or by proxy representing a majority of the shares of the relevant
      class. The bye-laws specify that the creation or issue of shares ranking on
      parity with existing shares will not, subject to any statement to the contrary
      in the terms of issue of those shares or rights attached to those shares, vary
      the special rights attached to existing shares.




**Transfer
      of Common Shares**




Subject
      to the “Transfer Restrictions” section below, a shareholder may transfer title
      to all or any of his shares by completing an instrument of transfer in the
      usual
      common form or in such other form as the board of directors may
      approve.




**Transfer
      Restrictions**




The
      board
      of directors may in its absolute discretion and without assigning any reason
      refuse to register the transfer of any share that is not fully
      paid.




The
      board
      of directors may refuse to register an instrument of transfer of a share unless
      it:




·
            is
                duly stamped, if required by law, and lodged with
                us;




·
            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;




·
            has
                obtained, where applicable, permission of the Bermuda Monetary Authority;
                and




·
            is
                in respect of one class of shares.




A
      “blanket” authorization has been obtained from the Bermuda Monetary Authority
      for all transfers of our common shares between persons who are not resident
      in
      Bermuda for exchange control purposes, provided our common shares remain listed
      on an “appointed stock exchange” (which includes listing on the Nasdaq National
      Market).




**Transmission
      of Shares**




In
      the
      event of the death of a shareholder, the survivor or survivors, where the
      deceased shareholder was a joint holder, or the legal personal representative
      of
      such shareholder, including executors and administrators, shall be the only
      persons recognized by us as having any title to the shareholder
      shares.




**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, directors individually do not have exerciseable borrowing rights,
      unless the bye-laws provide otherwise. Our bye-laws do not provide for borrowing
      rights or credit limits for individual directors. The board of




-82-


directors
      may approve borrowings at their meetings, and between meetings the executive
      committee of the board may approve borrowings.




**Rights
      in Liquidation**




Under
      Bermuda law, in the event of liquidation, dissolution or winding-up of a
      company, after satisfaction in full of all claims of creditors and subject
      to
      the preferential rights accorded to any series of preferred stock, the proceeds
      of such liquidation, dissolution or winding-up are distributed among the holders
      of shares in accordance with a company’s bye-laws.




Under
      our
      bye-laws, if we are wound up, the liquidator may, with the sanction of a
      resolution from us and any sanction required by the Companies Act, divide
      amongst the shareholders in specie or kind the whole or part of our assets,
      whether they shall consist of property of the same kind or not and may for
      such
      purposes set such values as he deems fair upon any property to be divided as
      set
      out above and may determine how such division shall be carried out as between
      the shareholders.




**Meetings
      of Shareholders**




Under
      Bermuda law, a company is required to convene at least one general meeting
      per
      calendar year. The directors of a company, notwithstanding anything in its
      bye-laws, shall, on the requisition of the shareholders holding at the date
      of
      the deposit of the requisition not less than one-tenth of the paid-up capital
      of
      the company carrying the right of vote, duly convene a special general
      meeting.




The
      bye-laws provide that the board of directors may convene a special general
      meeting whenever in their judgment such a meeting is necessary. Unless the
      bye-laws of a company specify otherwise, Bermuda law requires that shareholders
      be given at least five days’ notice of a meeting of the company. Our bye-laws
      extend this period to provide that at least 21 days’ written notice of a
      general meeting must be given to those shareholders entitled to receive such
      notice. The accidental omission to give notice to or non-receipt of a notice
      of
      a meeting by any person does not invalidate the proceedings of a
      meeting.




Under
      Bermuda law the number of shareholders constituting a quorum at any general
      meeting of shareholders may not be less than two individuals. Our bye-laws
      add
      to this quorum requirement to provide that no business can be transacted at
      a
      general meeting unless a quorum of at least two shareholders representing a
      majority of the issued shares of the company are present in person or by proxy
      and entitled to vote. A shareholder present at a general meeting or a meeting
      of
      a class of shareholders in person or by proxy shall be deemed to have received
      appropriate notice of the meeting.




Under
      our
      bye-laws, notice to any shareholders may be delivered either personally, by
      electronic means or by sending it through the post, by airmail where applicable,
      in a pre-paid letter addressed to the shareholder at his address as appearing
      in
      the share register or by delivering it to, or leaving it at such registered
      address or, in the case of delivery by electronic means, by delivering it to
      the
      shareholder at such address as may be provided to the company by the shareholder
      for such purpose. A notice of a general meeting is deemed to be duly given
      to
      the shareholder if it is sent to him by cable, telex, telecopier or electronic
      means.




**Access
      to Books and Records and Dissemination of Information**




Under
      Bermuda law, members of the general public have the right to inspect the public
      documents of a company available at the office of the Bermuda Registrar of
      Companies. These documents include the memorandum of association and any
      alteration to the memorandum of association.




Our
      shareholders and directors have the additional right to inspect our minute
      books
      and our audited financial statements, which must be presented at an annual
      general meeting.




Our
      bye-laws provide that our register of shareholders is required to be open for
      inspection during normal business hours by shareholders without charge and
      to
      members of the general public on the payment of a fee. A company is




-83-


required
      to maintain its share register in Bermuda but may, subject to the provisions
      of
      the Companies Act, establish a branch register outside of Bermuda. We have
      established a branch register with our transfer agent, Mellon Investor Services,
      LLC, at 85 Challenger Road, Ridgefield Park, NJ 07660, USA.




Under
      Bermuda law, a company is required to keep at its registered office a register
      of its directors and officers that is open for inspection for not less than
      two
      hours in each day by members of the public without charge. Our bye-laws extend
      this obligation to provide that the register of directors and officers be
      available for inspection by the public during normal business hours. Bermuda
      law
      does not, however, provide a general right for shareholders to inspect or obtain
      copies of any other corporate records.




**Election
      or Removal of Directors**




The
      bye-laws provide that the number of directors will be such number not less
      than
      two, as our shareholders by resolution may from time to time determine. A
      director will serve until his successor is appointed or his prior removal in
      the
      manner provided by the Companies Act or the bye-laws. Our bye-laws provide
      that
      at each annual general meeting one-third of the directors will retire from
      office on a rotational basis based on length of time served. A director is
      not
      required to hold shares in a company to qualify to join the board, and once
      appointed may sit on the board regardless of age, unless the bye-laws provide
      otherwise. Our bye-laws do not require qualifying shares to join the board
      and
      do not set age limits for directors who serve on the board. All directors must
      provide written acceptance of their appointment within thirty days of their
      appointment.




The
      board
      has the power at any time and from time to time to appoint any individual to
      be
      a director so as to fill a casual vacancy. The board may approve the appointment
      of alternate directors.




We
      may,
      in a special general meeting called for this purpose, remove a director,
      provided notice of such meeting is served upon the director concerned not less
      than fourteen days before the meeting and he shall be entitled to be heard
      at
      that meeting.




The
      office of a director will be vacated in the event of any of the
      following:




·
            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;




·
            if
                he becomes of unsound mind or a patient for any purpose of any statute
                or
                applicable law relating to mental
                health;




·
            if
                he becomes bankrupt under the law of any country or compounds with
                his
                creditors;




·
            if
                he is prohibited by law from being a director;
                or




·
            if
                he ceases to be a director by virtue of the Companies Act or is removed
                from office pursuant to the
                bye-laws.




**Amendment
      of Memorandum of Association and Bye-Laws**




Bermuda
      law provides that the memorandum of association of a company may be amended
      by
      resolution of the board subject to approval by a resolution passed at a general
      meeting of which due notice has been given. An amendment to a memorandum of
      association does not require the consent of the Minister of Finance save for
      specific circumstances, for example, the adopting of any objects which
      constitute restricted business activities under the Companies Act.




Under
      Bermuda law, the holders of:




·
            an
                aggregate of not less than twenty percent in par value of a company’s
                issued share capital or any class thereof,
                or




-84-







·
            not
                less in the aggregate than twenty percent of the company’s debentures
                entitled to object to alterations to its memorandum of
                association,




have
      the
      right to apply to the Supreme Court of Bermuda for an annulment of any amendment
      of the memorandum of association. Where such an application is made, the
      amendment becomes effective only to the extent that it is confirmed by the
      Bermuda Supreme Court. An application for an annulment of an amendment of the
      memorandum of association must be made within twenty-one days after the date
      on
      which the resolution altering the memorandum of association is passed and may
      be
      made on behalf of the persons entitled to make the application by one or more
      of
      their number as they may appoint in writing for the purpose. No such application
      may be made by persons voting in favor of the amendment or any persons who
      have
      given to the company a statement in writing duly signed that he, having had
      notice, consents to the alteration.




Our
      bye-laws provide that they may be amended in the manner provided for in the
      Companies Act. The Companies Act provides that the directors may amend the
      bye-laws, provided that any such amendment shall be operative only to the extent
      approved by the shareholders.




**Transactions
      with Interested Shareholders**




Our
      bye-laws prohibit us from engaging in a business combination with any interested
      shareholder unless the business combination is approved by two-thirds of the
      holders of our voting shares (other than shares held by that interested
      shareholder), or by a simple majority if the business combination is approved
      by
      a majority of continuing directors or if certain prescribed conditions are
      met
      assuring that we will receive fair market value in exchange for such business
      combination. In this context, a “business combination” includes mergers, asset
      sales and other material transactions resulting in a benefit to the interested
      shareholder or the adoption of a plan for our liquidation or dissolution; a
      “continuing director” is a member of our board of directors that is not an
      affiliate or associate of an interested shareholder and was a member of our
      board prior to such person becoming an interested shareholder; and an
“interested shareholder” is any person (other than us or any of our
      subsidiaries, any employee benefit or other similar plan or any of our
      shareholders that received our shares in connection with our share exchange
      in
      2000 prior to the listing of our shares on the Nasdaq National Market) that
      owns
      or has announced its intention to own, or with respect to any of our affiliates
      or associates, within the prior two years did own, at least 15% of our voting
      shares.




**Appraisal
      Rights and Shareholder Suits**




*Amalgamation*




The
      Companies Act provides that, subject to the terms of a company’s bye-laws, the
      amalgamation of a Bermuda company with another company requires the amalgamation
      agreement to be approved by the board of directors and at a meeting of the
      shareholders by seventy-five percent of the members present and entitled to
      vote
      at that meeting in respect of which the quorum shall be two persons holding
      or
      representing at least one-third of the issued shares of the company or class,
      as
      the case may be.




Our
      bye-laws alter the majority vote required and provide that any resolution
      submitted for the consideration of shareholders at any general meeting to
      approve a proposed amalgamation with another company requires the approval
      of
      two-thirds of the votes of disinterested shareholders cast at such
      meeting.




Under
      Bermuda law, in the event of an amalgamation of a Bermuda company, a shareholder
      who did not vote in favor of the amalgamation and who is not satisfied that
      fair
      value has been offered for such shareholder’s shares, may apply to a Bermuda
      court within one month of notice of the meeting of shareholders to appraise
      the
      fair value of those shares.




*Class
      Actions and Derivative Actions*




Class
      actions and derivative actions are generally not available to shareholders
      under
      Bermuda law. Under Bermuda law, a shareholder may commence an action in the
      name
      of a company to remedy a wrong done to the company where the act complained
      of
      is alleged to be beyond the corporate power of the company, or is illegal or
      would re-




-85-


sult
      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 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 Spurling Hunter in
      Bermuda located at Canon’s Court, 22 Victoria Street, Hamilton HM 12
      Bermuda.




**Untraced
      Shareholders**




We
      are
      entitled to sell the common shares of a person entitled to such common shares
      provided such person goes untraced for a period of 12 years. We shall be
      held to account to the rightful holder of such common shares for an amount
      equal
      to the proceeds of sale. Any dividend or distribution out of contributed surplus
      unclaimed for a period of six years from the date of declaration of that
      dividend or distribution shall be forfeited and shall revert to us and the
      payment by the board of directors of any unclaimed dividend, distribution,
      interest or other sum payable on or in respect of the common share into a
      separate account shall not constitute us a trustee in respect
      thereof.




**Personal
      Liability of Directors and Indemnity**




The
      Companies Act requires every officer, including directors, of a company in
      exercising powers and discharging duties, to act honestly in good faith with
      a
      view to the best interests of the company, and to exercise the care, diligence
      and skill that a reasonably prudent person would exercise in comparable
      circumstances. The Companies Act further provides that any provision whether
      in
      the bye-laws of a company or in any contract between the company and any officer
      or any person employed by the company as auditor exempting such officer or
      person from, or indemnifying him against, any liability which by virtue of
      any
      rule of law would otherwise attach to him, in respect of any fraud or dishonesty
      of which he may be guilty in relation to the company, shall be
      void.




Every
      director, officer, resident representative and committee member shall be
      indemnified out of our funds against all liabilities, loss, damage or expense,
      including liabilities under contract, tort and statute or any applicable foreign




-86-


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.




**Material
      Contracts**




We
      believe that there are only the following material contracts
      outstanding.




During
      the first quarter of 2004, we entered into a number of license agreements for
      our exhibition events amounting to approximately $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 December 31, 2005, the amount paid under
      these agreements was approximately $5.0 million.




In
      August
      2005, one of the Company’s subsidiaries, eMedia Asia Limited (“eMedia”), entered
      into an agreement with Penton Media Inc. (“Penton”) to produce, publish and
      distribute, in certain Asian territories, local language editions of Penton’s
“Electronic Design” publication, relating to the electronic design industry. The
      first such edition launched pursuant to the agreement is a simplified Chinese
      edition in mainland China entitled *Electronic
      Design - China* ,
      the
      online website of which was launched in January 2006, and the first print
      monthly issue of which was launched in March 2006. Under the agreement, eMedia
      pays Penton forty per cent of the net after-tax profits of the business. eMedia
      also entered into an agreement with Penton, under which eMedia is allowed to
      use
      and reproduce editorial content from Penton’s electronics publications,
      including *Electronic
      Design, EE Product News* and *Microwaves
      & RF* ,
      in
      consideration for which an annual content license fee is payable by eMedia
      to
      Penton.




HC
      International, Inc. (“HC International”) is a company listed on the Growth
      Enterprise Market of The Stock Exchange of Hong Kong Limited. On May 24, 2006,
      Trade Media Holdings Limited (“TMH”), a wholly-owned subsidiary of the Company,
      IDG Technology Venture Investment, Inc. (“IDGVC”) and International Data Group,
      Inc. (“IDG”) entered into a conditional sale and purchase agreement (the “Sale
      and Purchase Agreement”) pursuant to which IDGVC has conditionally agreed to
      transfer 10% of the issued share capital of HC International, being part of
      its
      shareholding interests in HC International, to TMH at a consideration of
      approximately US$0.2063 per share, of HC International (the “HC Share(s)”),
      which is subject to adjustment to approximately US$0.2896 per HC Share (the
“HC
      Share Transfer”), if and when HC International achieves a certain benchmark with
      reference to the HC International group’s performance during the Option Period
      (as defined below) or upon completion of the sale and purchase of the Option
      HC
      Shares (as defined below). IDG, being the sole shareholder of IDGVC, has agreed
      to guarantee the due and punctual discharge by IDGVC of its obligations under
      the Sale and Purchase Agreement. Completion of the HC Share Transfer is subject
      to the fulfilment of the conditions as set out in the Sale and Purchase
      Agreement, which include obtaining all relevant consents, governmental and
      regulatory approvals (if any) and a confirmation from the Hong Kong Securities
      and Futures Commission (the “SFC”) that no mandatory offer obligation under Rule
      26 of the Hong Kong Code on Takeovers and Mergers (the “Code”) will be triggered
      as a result of the transactions contemplated under the Sale and Purchase
      Agreement. Completion is expected to take place by the end of June 2006. Upon
      completion of the HC Share Transfer, TMH will own, together with 5,916,000
      HC
      Shares (which represent approximately 1.24% of the issued share capital of
      HC
      International as at May 24, 2006) currently owned by the Company, an approximate
      11.24% equity interest in HC International. It is the intention of HC
      International to invite Merle Hinrichs, also a director of TMH, to join HC
      International’s board as a non-executive director upon completion of the HC
      Share Transfer.




TMH
      also
      entered into a call options deed (the “HC Options Deed”) with IDGVC, Guo
      Fansheng (“Guo”) and others which include certain members of the senior
      management of HC International (the “Option Grantors”), pursuant to which each
      of the aforesaid Option Grantors has agreed, subject to completion of the Sale
      and Purchase Agreement, to grant to TMH, (i) a right (the “HC Options”)
      exercisable during the 12-month period from the date of the completion of the
      Sale and Purchase Agreement (the “Option Period”) to purchase all, but not in
      part only, of the167,722,814 HC Shares owned by the respective parties
      (representing approximately 35.05% of the entire issued share capital of HC
      International) and any HC Shares that may be issued by HC International to
      certain directors of HC International if the options granted in accordance
      with
      the share option schemes of HC International (amounting to an aggregate of
      4,185,320 Option HC Shares) are exercised, which together amount to a maximum
      of
      approximately 35.61% of the entire issued share capital of HC International
      (the
“Option HC Share(s)”) at an exercise price




-87-


of
      approximately US$0.2896 per Option HC Share; and (ii) an undertaking to accept
      any offer for the Option HC Shares at a price not less than approximately
      US$0.2896 per Option HC Share, during the Option Period.




Huicong
      Construction Co., Ltd. (“Huicong Construction”), in which Guo has an 80% equity
      interest, entered into a call option deed (the “Beijing Huicong Option Deed” and
      together with the HC Options Deed, the “Option Deeds”) with TMH, pursuant to
      which Huicong Construction has agreed, subject to completion of the Sale and
      Purchase Agreement, to grant to TMH a right (the “Beijing Huicong Option” and
      together with the HC Options, the “Options”) exercisable during the Option
      Period, to purchase (or to nominate a subsidiary of TMH to purchase) from
      Huicong Construction its entire 18% equity interest (“Beijing Huicong Equity
      Interest”) in Beijing Huicong International Information Co., Ltd. (“Beijing
      Huicong”), a 82% indirect subsidiary of HC International, at an aggregate
      exercise price of approximately US$31,916,015.90.




The
      HC
      Options and the Beijing Huicong Option are inter-conditional. The sale and
      purchase of the Beijing Huicong Equity Interest is subject to confirmation
      from
      the SFC. If the SFC’s confirmation is not forthcoming, the sale and purchase of
      the Beijing Huicong Equity Interest will not be completed but TMH may proceed
      with the completion of the sale and purchase of the Option HC
      Shares.




Pursuant
      to the terms of the Beijing Huicong Option Deed and subject to the completion
      of
      the sale and purchase of the Beijing Huicong Equity Interest, Huicong
      Construction will also be required to transfer or assign its licenses and
      related contracts in relation to the provision of internet information and
      content services in the People’s Republic of China to a TMH-nominated company,
      but pending such transfer or assignment, Huicong Construction has agreed to
      continue to provide services in relation to the internet content provider
      license to Beijing Huicong in the same manner and on the same terms as currently
      agreed.




The
      exercise and completion of the HC Options by TMH, if materialized, will result
      in a change in control of HC International (as the aggregate shareholding of
      TMH
      and the Company in HC International will increase from approximately 11.24%
      to a
      maximum of approximately 46.75%) and will trigger an obligation on the part
      of
      TMH to make a general offer in compliance with Rule 26 of the Code to acquire
      all the issued HC Shares (other than those already owned by TMH or parties
      acting in concert with it).




We
      do not
      believe any of our other contracts to be material to the operation of our
      company, taken as a whole.




**Exchange
      Controls**




**Bermuda
      Law**




We
      have
      been designated as a non-resident under the Exchange Control Act of 1972 by
      the
      Bermuda Monetary Authority. This designation will allow us to engage in
      transactions in currencies other than the Bermuda dollar.




The
      Registrar of Companies (Bermuda) has neither approved nor disapproved of the
      securities to which this document relates, nor passed on the accuracy or
      adequacy of this document and accepts no responsibility for the financial
      soundness of any proposals or the correctness of any statements made or opinions
      expressed with regard to such securities. Approvals or permissions received
      from
      the Bermuda Monetary Authority do not constitute a guarantee by the Bermuda
      Monetary Authority as to our performance or our creditworthiness. Accordingly,
      in giving such approvals or permissions, the Bermuda Monetary Authority will
      not
      be liable for our performance or default or for the correctness of any opinions
      or statements expressed in this document.




The
      transfer of common shares between persons regarded as resident in Bermuda for
      exchange control purposes and the issue of common shares to such persons may
      be
      effected without specific consent under the Exchange Control Act and regulations
      thereunder. Issues and transfers of common shares to any person regarded as
      non-resident in Bermuda for exchange control purposes require specific prior
      approval from the Bermuda Monetary Authority under the Exchange Control
      Act.




There
      are
      no limitations on the rights of persons regarded as non-resident of Bermuda
      for
      foreign exchange control purposes owning our shares. Because we have been
      designated as a non-resident for Bermuda exchange control




-88-


purposes,
      there are no restrictions on our ability to transfer funds, other than funds
      denominated in Bermuda dollars, in and out of Bermuda or to pay dividends to
      non-Bermuda residents who are holders of our shares, other than in respect
      of
      local Bermuda currency.




Under
      Bermuda law, share certificates are only issued in the names of corporations,
      partnerships or individuals. In the case of an applicant acting in a special
      capacity, for example an executor or a trustee, certificates may, at the request
      of the applicant, record the capacity in which the applicant is
      acting.




Notwithstanding
      the recording of any such special capacity, we are not bound to investigate
      or
      incur any responsibility in respect of the proper administration of any such
      estate or trust.




We
      will
      take no notice of any trust applicable to any of our common shares whether
      or
      not we had notice of such trust.




As
      an
“exempted company,” we are exempt from Bermuda laws which restrict the
      percentage of share capital that may be held by non-Bermudians. However, as
      an
      exempted company we may not participate in designated business transactions,
      including:




·
            the
                acquisition or holding of land in Bermuda (except that required for
                our
                business and held by way of lease or tenancy agreement for a term
                not
                exceeding 50 years or, with the consent of the Minister granted in
                his
                discretion, land held by way of lease or tenancy for a term of not
                more
                than 21 years in order to provide accommodation or recreational
                facilities for our officers and
                employees);




·
            the
                taking of mortgages on land in Bermuda to secure an amount in excess
                of
                $50,000 without the consent of the Minister of Finance of
                Bermuda;




·
            the
                acquisition of bonds or debentures secured on land in Bermuda, unless
                they
                are issued by the Bermuda Government or a public authority;
                or




·
            the
                carrying on of business of any kind in Bermuda, except in furtherance
                of
                our business carried on outside Bermuda or under a license granted
                by the
                Minister of Finance of Bermuda.




**Taxation**




**Bermuda
      Taxation**




We
      have
      received from the Minister of Finance a written undertaking under the Exempted
      Undertakings Tax Protection Act, 1996 (as amended) of Bermuda, to the effect
      that in the event of there being enacted in Bermuda any legislation imposing
      tax
      computed on profits or income, or computed on any capital asset, gain or
      appreciation, or any tax in the nature of estate duty or inheritance tax, then
      the imposition of any such tax shall not be applicable to us or to any of our
      operations or to our shares, debentures or other obligations until
      March 28, 2016. These assurances are subject to the proviso that they are
      not construed so as to prevent the application of any tax or duty to such
      persons as are ordinarily resident in Bermuda or to prevent the imposition
      of
      property taxes on any company owning real property or leasehold interests in
      Bermuda.




Currently
      there is no Bermuda withholding tax on dividends that may be payable by us
      in
      respect to the holders of our common shares. No income, withholding or other
      taxes or stamp duty or other duties are imposed upon the issue, transfer or
      sale
      of the shares or on any payment thereunder. There is no income tax treaty
      between Bermuda and the United States.




-89-







**Documents
      On Display**




**Where
      You May Find More Information**




We
      are
      required to comply with the reporting requirements of the Securities Exchange
      Act of 1934, as amended, applicable to a foreign private issuer. We will file
      annually a Form 20-F no later than six months after the close of our fiscal
      year, which is December 31. As a foreign private issuer, we are exempt from
      the rules under the Exchange Act prescribing the furnishing and content of
      proxy
      statements, and our officers, directors and principal shareholders are exempt
      from the reporting and short-swing profit recovery provisions contained in
      Section 16 of the Exchange Act. We will furnish our shareholders with
      annual reports, which will include a review of operations and annual audited
      consolidated financial statements prepared in conformity with U.S. GAAP. We
      intend, although we are not obligated to do so, to furnish our shareholders
      with
      quarterly reports by mail with the assistance of a corporate services provider,
      which will include unaudited interim financial information prepared in
      conformity with U.S. GAAP for each of the three quarters of each fiscal year
      following the end of each such quarter. We may discontinue providing quarterly
      reports at any time without prior notice to our shareholders.




Our
      reports and other information, when so filed, may be inspected and copied at
      the
      public reference facilities maintained by the Securities and Exchange Commission
      at Judiciary Plaza, 450 Fifth Street, N.W., Room 1024, Washington, D.C. 20549.
      Copies of such material may be obtained from the Public Reference Section of
      the
      Securities and Exchange Commission, 450 Fifth Street, N.W., Washington, D.C.
      20549 at prescribed rates.




These
      reports and other information may also be inspected at the offices of the Nasdaq
      National Market, 1735 K Street, N.W., Washington, D.C. 20006.




**ITEM
      11.**  **QUANTITATIVE
      AND QUALITATIVE 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 revenues 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. We believe this risk is mitigated because
      historically a majority (ranging between 55% and 65%) of our revenue is
      denominated in U.S. dollars or is received in the Hong Kong currency, which
      is
      currently pegged to the U.S. dollar and the Chinese currency, which is
      informally pegged to the U.S. dollar. To the extent significant currency
      fluctuations occur in the New Taiwan dollar, and Chinese Renminbi or other
      Asian
      currencies relative to the U.S. dollar, or if the Hong Kong dollar is no longer
      pegged to the U.S. dollar, our profits would be affected.




As
      of
      December 31, 2005, we have not engaged in foreign currency hedging
      activities.




**ITEM
      12.**  **DESCRIPTION
      OF SECURITIES OTHER THAN EQUITY SECURITIES**


-
      (Not applicable)




**PART
      II**




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




-90-







**ITEM
      13.**  **DEFAULTS,
      DIVIDEND ARREARAGES AND DELINQUENCIES**


-
      (Not applicable)




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


**- (Not applicable)**




**ITEM
      15.**  **CONTROLS
      AND PROCEDURES**




We
      maintain a set of disclosure controls and procedures designed to ensure that
      information required to be disclosed by the Company in report that it files
      or
      submits under the U.S. Securities Exchange Act of 1934, as amended, is recorded,
      processed, summarized and reported within the time periods specified in
      Securities and Exchange Commission rules and forms. There are inherent
      limitations to the effectiveness of any system of disclosure controls and
      procedures, including the possibility of human error and the circumvention
      or
      overriding of the controls and procedures. Accordingly, even effective
      disclosure controls and procedures can only provide reasonable assurance of
      achieving their control objectives. Within the 90-day period prior to the filing
      of this report, an evaluation was carried out under the supervision and with
      the
      participation of the Company’s management, including the Chief Executive Officer
      (“CEO”) and Chief Financial Officer (“CFO”), of the effectiveness of our
      disclosure controls and procedures. Based on that evaluation, the CEO and CFO
      have concluded that our disclosure controls and procedures, as of December
      31,
      2005, were effective.




Subsequent
      to the date of their evaluation, there have been no significant changes in
      our
      internal controls or in other factors that could significantly affect these
      controls.




**ITEM
      16A.**  **AUDIT
      COMMITTEE FINANCIAL EXPERT**




Our
      audit
      committee financial expert is Roderick Chalmers, an independent
      director.




**ITEM
      16B.**  **CODE
      OF ETHICS**




We
      have
      adopted a Code of Ethics that applies to our chief executive officer, chief
      financial officer, chief accounting officer or controller and other persons
      performing similar functions. Our Code of Ethics is available on our website
      at
      www.corporate.globalsources.com.




During
      2005, the Company did not grant any waiver, including any implicit waiver,
      from
      any provision of the Code of Ethics to the chief executive officer, chief
      financial officer, chief accounting officer or controller or other person
      performing similar functions.




**ITEM
      16C.**  **PRINCIPAL
      ACCOUNTANT FEES AND SERVICES**




The
      following table sets forth the aggregate audit fees, audit-related fees, tax
      fees of our principal accountants and all other fees billed for products and
      services provided by our principal accountants for each of the fiscal years
      2004
      and 2005:




**Year
                ended**
              **December 31,****2005**
            
            **2004**Audit
                fees
            
            $
            378,919
            
            $
            226,716Audit-related
                fees
            
            
            —
            
            
            —Total
            
            $
            378,919
            
            $
            226,716Tax
                fees
            
            
            1,800
            
            
            1,500All
                other fees
            
            
            118,956
            
            
            158,595Total
                fees
            
            $
            499,675
            
            $
            386,811





-91-





Audit
      fees include fees associated with the review of the Company’s annual financial
      statements and services that are normally provided by the accountant in
      connection with statutory and regulatory filings or engagements for those fiscal
      years.




Tax
      fees
      for year 2004 for tax compliance, tax advice and tax planning consisted of
      preparation of tax returns and filing fees for a subsidiary. For year 2005,
      such
      fees consisted of preparation of tax returns and review of tax provision for
      a
      subsidiary.




All
      other
      fees for year 2004 consisted mainly of cyber process certification for the
      Company’s management’s assertions on the computation of the number of Community
      membership, outsourced information technology security management services,
      due
      diligence for a proposed investment and review of tax status. For year 2005,
      such fees consisted mainly of cyber process certification for the Company’s
      management’s assertions on the computation of the number of community
      membership, provision of information technology security assessment services
      and
      review of tax status.




**Audit
      Committee’s pre-approval policies and procedures**




Our
      Audit
      Committee nominates and engages our independent auditors to audit our financial
      statements. Our Audit Committee also requires management to obtain the Audit
      Committee’s approval on a case-by-case basis before engaging our independent
      auditors to provide any audit or permitted non-audit services to us or our
      subsidiaries.




**ITEM
      16D.**  **EXEMPTIONS
      FROM THE LISTING STANDARDS FOR AUDIT COMMITTEES**


**- (Not applicable)**




**ITEM
      16E.**  **PURCHASES
      OF EQUITY SECURITIES BY THE ISSUER AND AFFILIATED
      PURCHASERS**


**- (Not applicable)**




**PART
      III**




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




**ITEM
      17.**  **FINANCIAL
      STATEMENTS**


**- (Not applicable)**




**ITEM
      18.**  **FINANCIAL
      STATEMENTS**




As
      provided in Item 8, the Company has presented financial statements in accordance
      with U.S. accounting standards in lieu of Item 18.




**ITEM
      19.**  **EXHIBITS**




**EXHIBIT
      INDEX**




**Exhibit
                No.**
            **Description**1.1
            Memorandum
                of Association of the Company. *1.2
            Bye-laws
                of the Company. *1.3
            Amendments
                to the Bye-Laws of Global Sources Ltd., as approved at the May 6,
                2002
                Annual General Meeting of Shareholders. ++2.1
            Specimen
                Certificate. *4.2
            Form
                of executive officer employment agreement. *4.3
            Employment
                Agreement dated November 1, 1999, by and between Trade Media Holdings
                Limited and Merle Hinrichs. *4.4
            Amendment
                to Employment Agreement dated January 19, 2000, between Trade Media
                Holdings Limited and Merle Hinrichs.
                *


-92-





4.5
            Employment
                Agreement dated as of January 29, 2000, by and between LER
                Corporation and Merle Hinrichs. *4.6
            Form
                of Restricted Stock Award and Agreement, dated as of January 29,
                2000, by and between LER Corporation and Merle Hinrichs.
                *4.7
            Amendment
                No.1 to Restricted Stock Award and Agreement dated as of February
                29,
                2000, by and between LER Corporation and Merle Hinrichs.
                *4.8
            Form
                of The Global Sources Employee Equity Compensation Plan No. I.
                *4.9
            Form
                of The Global Sources Employee Equity Compensation Plan No. II.
                *4.10
            Form
                of The Global Sources Employee Equity Compensation Plan No. III.
                *4.18
            Form
                of The Global Sources Employee Equity Compensation Plan No. IV.
                **4.19
            Form
                of The Global Sources Employee Equity Compensation Plan No. V.
                **4.20
            Form
                of The Global Sources Employee Equity Compensation Plan No. VI.
                ***4.21
            Form
                of The Global Sources Employee Equity Compensation Plan No. VII.
                *****4.22
            Global
                Sources’ Code of Ethics (approved and adopted by the Board of Directors on
                March 7, 2003). ###4.23
            Form
                of The Global Sources Employee Equity Compensation Plan No. V (Amended).
                *****4.24
            Placement
                Agency Agreement dated March 17, 2005, between the Company and W.R.
                Hambrecht & Co. LLC. ####4.25
            Form
                of Purchase Agreement between the Company and certain purchasers
                of the
                common shares. ####4.26
            Shenzhen
                International Chamber of Commerce Tower Subscription Agreement dated
                July
                5, 2004 (English translation).++++4.27
            Real
                Estate Sales Contract of Shenzhen (Presale) dated August 31, 2004
                (English
                translation).++++4.28
            Supplemental
                Agreement to the Contract on Purchasing Shenzhen International Commercial
                Chamber Center Premises dated August 31, 2004 (English
                translation).++++4.29
            Summary
                Table of Property Units and Payment Amounts.++++4.30
            Supplementary
                Agreement Concerning Alteration of Payment Method dated December
                3, 2004
                (English translation).++++4.31
            Sale
                and Purchase Agreement, dated May 24. 2006, by and between IDG
                Technology Venture Investment, Inc., Trade Media Holdings Limited
                and
                International Data Group, Inc. ~4.32
            Call
                Option Deed Relating to Shares in HC International, Inc., dated
                May 24, 2006, between Trade Media Holdings Limited and other parties
                thereto. ~4.33
            Call
                Option Deed Relating to Equity Interest in Beijing Huicong International
                Information Co., Ltd., dated May 24, 2006, between Trade Media
                Holdings Limited and HC Construction Co., Ltd.
                ~8.1
            Subsidiaries
                of Global Sources Ltd.12.1
            Certification
                of the Chief Executive Officer pursuant to Section 302 of the
                Sarbanes-Oxley Act of 2002.12.2
            Certification
                of the Chief Financial Officer pursuant to Section 302 of the
                Sarbanes-Oxley Act of 2002.13.1
            Certification
                by the Chief Executive Officer pursuant to 18 U.S.C. Section 1350,
                as
                adopted pursuant to Section 906 of the Sarbanes - Oxley Act of
                2002.13.2
            Certification
                by the Chief Financial Officer pursuant to 18 U.S.C. Section 1350,
                as
                adopted pursuant to Section 906 of the Sarbanes-Oxley Act of
                2002.14.1
            Consent
                of Independent Accountants for incorporation of their report filed
                with
                Form 6-K into the Company’s previously filed Registration Statements File
                No. 333-59058 and 333-62132. ****14.2
            Changes
                in Registrant’s Certifying Accountant. +++14.3
            Letter
                to the SEC from the Company pursuant to SEC Release No. 33-8070,
                dated
                April 9, 2002. ****14.4
            Consent
                of Independent Accountants for incorporation of their report filed
                under
                Form 20-F into the Company’s previously filed Registration Statements File
                No. 333-104426, 333-59058 and 333-114411.14.5
            Press
                release dated February 16, 2004 to announce the bonus share issue
                by
                Global Sources Ltd. ##14.6
            Press
                release dated March 1, 2005 to announce the bonus share issue by
                Global
                Sources Ltd. #####14.7
            Press
                release dated March 6, 2006 to announce the bonus share issue by
                Global
                Sources Ltd. ######


___________________


*
            Incorporated
                by reference to Form 20-F Annual Report of Global Sources Ltd. filed
                with
                the Securities and Exchange Commission on June 30,
                2000.




**
            Incorporated
                by reference to Form 20-F Annual Report of Global Sources Ltd. filed
                with
                the Securities and Exchange Commission on April 5,
                2001.




***
            Incorporated
                by reference to Form S-8 Registration Statement filed with the Securities
                and Exchange Commission on June 1,
                2001.




****
            Incorporated
                by reference to Form 6-K filed with the Securities and Exchange Commission
                on April 25, 2002.






-93-




~
              Confidential
                  treatment requested (the confidential portions of such exhibits
                  have been
                  omitted and filed separately with the Securities and Exchange
                  Commission)




*****
            Incorporated
                by reference to Form S-8 Registration Statement filed with the Securities
                and Exchange Commission on April 10,
                2003.




+
            Incorporated
                by reference to Form 20-F Annual Report of Global Sources Ltd. filed
                with
                the Securities and Exchange Commission on April 30,
                2002.




++
            Incorporated
                by reference to Form 6-K filed with the Securities and Exchange Commission
                on May 6, 2002.




+++
            Incorporated
                by reference to Form 6-K filed with the Securities and Exchange Commission
                on August 13, 2002.




++++
            Incorporated
                by reference to Form 20-F Annual Report of Global Sources Ltd. filed
                with
                the Securities and Exchange Commission on May 13,
                2005.




#
            Incorporated
                by reference to Form 20-F Annual Report of Global Sources Ltd. filed
                with
                the Securities and Exchange Commission on May 05,
                2003.




##
            Incorporated
                by reference to Form 6-K filed with the Securities and Exchange Commission
                on February 18, 2004.




###
            Incorporated
                by reference to Form 20-F Annual Report of Global Sources Ltd. filed
                with
                the Securities and Exchange Commission on May 4,
                2004.




####
            Incorporated
                by reference to Form 6-K filed with the Securities and Exchange Commission
                on March 21, 2005.




#####
            Incorporated
                by reference to Form 6-K filed with the Securities and Exchange Commission
                on March 8, 2005.




######
            Incorporated
                by reference to Form 6-K filed with the Securities and Exchange Commission
                on March 7, 2006









-94-


SIGNATURE




The
      registrant hereby certifies that it meets all of the requirements for filing
      on
      Form 20-F and that it has duly caused and authorized the undersigned to sign
      this annual report on its behalf.






GLOBAL
      SOURCES LTD.


By: /s/
      EDDIE HENG


Eddie Heng, Director and Chief Financial Officer




Date: 
      June 12, 2006








-95-