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 1934OR[ X
      ]
              Annual
      Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of
      1934 For the fiscal year ended December 31, 2008.OR[    ]
              Transition
      Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of
      1934OR[    ]
              Shell
      Company Report Pursuant to Section 13 or 15(d) of the Securities Exchange
      Act of 1934Date
      of event requiring this shell company report........................For the transition
      periodfrom
      ....................................... 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 registeredCommon
      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:
  44,543,330
common shares, $0.01 par value, outstanding as of April 30, 2009.
  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 has submitted electronically and posted on
its corporate Web site, if any, every Interactive Date File required to be
submitted and posted pursuant to Rule 405 of Regulation S-T (232.405 of this
chapter) during the preceding 12 months (or for such shorter period that the
registrant was required to submit and post such files).
 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 basis of accounting the registrant has used to prepare the
financial statements included in this filing:
  U.S.
      GAAP
              x
              
              International
      Financial Reporting Standards as issued by the International
      Accounting Standards Board
              
              
              Other
 
 If
“Other” has been checked in response to the previous questions, indicate by
check mark with financial statement item the registrant has elected to
follow.
  Item
      17
                    
                    
                    Item
      18
 
  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
I
  ITEM
      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
                20ITEM
      4A.
                UNRESOLVED
      STAFF COMMENTS
                35ITEM
      5.
                OPERATING
      AND FINANCIAL REVIEW AND PROSPECTS
                35ITEM
      6.
                DIRECTORS,
      SENIOR MANAGEMENT AND EMPLOYEES
                51ITEM
      7.
                MAJOR
      SHAREHOLDERS AND RELATED PARTY TRANSACTIONS
                60ITEM
      8.
                FINANCIAL
      INFORMATION
                62ITEM
      9.
                THE
      OFFER AND LISTING
                98ITEM
      10.
                ADDITIONAL
      INFORMATION
                98ITEM
      11.
                QUANTITATIVE
      AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
                108ITEM
      12.
                DESCRIPTION
      OF SECURITIES OTHER THAN EQUITY SECURITIES
                109
  PART
II
  ITEM
      13.
                DEFAULTS,
      DIVIDEND ARREARAGES AND DELINQUENCIES
                109ITEM
      14.
                MATERIAL
      MODIFICATIONS TO THE RIGHTS OF SECURITY HOLDERS AND USE OF
      PROCEEDS
                109ITEM
      15.
                CONTROLS
      AND PROCEDURES
                109ITEM
      15T.
                CONTROLS
      AND PROCEDURES
                111ITEM
      16A.
                AUDIT
      COMMITTEE FINANCIAL EXPERT
                111ITEM
      16B.
                CODE
      OF ETHICS
                111ITEM
      16C.
                PRINCIPAL
      ACCOUNTANT FEES AND SERVICES
                111ITEM
      16D.
                EXEMPTIONS
      FROM THE LISTING STANDARDS FOR AUDIT COMMITTEES
                112ITEM
      16E.
                PURCHASES
      OF EQUITY SECURITIES BY THE ISSUER AND AFFILIATED
    PURCHASERS
                112ITEM
      16F.
                CHANGE
      IN REGISTRANT'S CERTIFYING ACCOUNTANT
                112ITEM
      16G.
                CORPORATE
      GOVERNANCE
                112
 
  PART
III
  ITEM
      17.
                FINANCIAL
      STATEMENTS
                113ITEM
      18.
                FINANCIAL
      STATEMENTS
                113ITEM
      19.
                EXHIBITS
                113
 
  1
  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, 2006, 2007 and 2008 and selected
consolidated balance sheet data as of December 31, 2007 and 2008 are
derived from, and qualified by reference to, our audited consolidated financial
statements included elsewhere in this document. The consolidated statements of
income data for each of the years ended December 31, 2004 and 2005 and
selected consolidated balance sheet data as of December 31, 2004, 2005 and
2006 are derived from our audited financial statements not included in this
document.
   2
    Year
      Ended December 31,2004
                
                
                2005
                
                
                2006
                
                
                2007
                
                
                2008(In
      U.S. Dollars Thousands, Except Per Share Data)Income
      Statement Data:Revenue:Online
      and other media
      services
                
                $
                92,325
                
                
                $
                97,062
                
                
                $
                113,097
                
                
                $
                125,818
                
                
                $
                142,129Exhibitions
                
                
                13,010
                
                
                
                14,300
                
                
                
                42,122
                
                
                
                51,608
                
                
                
                58,179Miscellaneous
                
                
                511
                
                
                
                832
                
                
                
                1,262
                
                
                
                4,633
                
                
                
                6,584Total
      revenue
                
                
                105,846
                
                
                
                112,194
                
                
                
                156,481
                
                
                
                182,059
                
                
                
                206,892Operating
      expenses:Sales
      (Note
      1)
                
                
                30,582
                
                
                
                34,415
                
                
                
                50,380
                
                
                
                61,773
                
                
                
                73,625Event
      production
                
                
                3,774
                
                
                
                3,920
                
                
                
                18,414
                
                
                
                20,155
                
                
                
                21,493Community
      (Note
      1)
                
                
                17,983
                
                
                
                20,726
                
                
                
                24,885
                
                
                
                27,086
                
                
                
                30,488General
      and administrative (Note
      1)
                
                
                31,395
                
                
                
                34,666
                
                
                
                38,945
                
                
                
                44,167
                
                
                
                47,525Online
      services development
      (Note1)
                
                
                4,564
                
                
                
                4,235
                
                
                
                4,499
                
                
                
                5,703
                
                
                
                5,992Amortization
      of software costs and intangibles
                
                
                1,480
                
                
                
                1,335
                
                
                
                1,250
                
                
                
                193
                
                
                
                193Total
      operating
      expenses
                
                
                89,778
                
                
                
                99,297
                
                
                
                138,373
                
                
                
                159,077
                
                
                
                179,316Income
      from
      operations
                
                $
                16,068
                
                
                $
                12,897
                
                
                $
                18,108
                
                
                $
                22,982
                
                
                $
                27,576Interest
      and dividend
      income
                
                
                219
                
                
                
                1,624
                
                
                
                5,571
                
                
                
                6,595
                
                
                
                2,884Gain
      on sale of available-for-sale securities
                
                
                1,120
                
                
                
                977
                
                
                
                309
                
                
                
                2,937
                
                
                
                —Gain on sale of shares to non-controlling shareholder and interest income
      thereon
                
                
                —
                
                
                
                —
                
                
                
                7,906
                
                
                
                —
                
                
                
                —Loss
      on investment,
      net
                
                
                —
                
                
                
                —
                
                
                
                (743
                )
                
                
                (1,846
                )
                
                
                (939
                )Impairment
      of goodwill and intangible assets
                
                
                —
                
                
                
                —
                
                
                
                —
                
                
                
                (3,101
                )
                
                
                —Foreign
      exchange gains (losses), net
                
                
                240
                
                
                
                (80
                )
                
                
                (714
                )
                
                
                (1,213
                )
                
                
                (657
                )Income
      before income
      taxes
                
                
                17,647
                
                
                
                15,418
                
                
                
                30,437
                
                
                
                26,354
                
                
                
                28,864Income
      tax
      expense
                
                
                (651
                )
                
                
                (759
                )
                
                
                (899
                )
                
                
                (328
                )
                
                
                (677
                )Net
      income before non-controlling interest
                
                $
                16,996
                
                
                $
                14,659
                
                
                $
                29,538
                
                
                $
                26,026
                
                
                $
                28,187Non-controlling
      interest
                
                
                (1,227
                )
                
                
                (1,281
                )
                
                
                (1,909
                )
                
                
                (2,027
                )
                
                
                (1,757
                )Net
      income before cumulative effect of change in accounting
      principle
                
                $
                15,769
                
                
                $
                13,378
                
                
                $
                27,629
                
                
                $
                23,999
                
                
                $
                26,430Cumulative
      effect of change in accounting principle
                
                
                —
                
                
                
                —
                
                
                
                251
                
                
                
                —
                
                
                
                —Net
      income
                
                $
                15,769
                
                
                $
                13,378
                
                
                $
                27,880
                
                
                $
                23,999
                
                
                $
                26,430Basic
      net income per share before cumulative effect of change in accounting
      principle
                
                $
                0.34
                
                
                $
                0.27
                
                
                $
                0.54
                
                
                $
                0.47
                
                
                $
                0.51Cumulative
      effect of change in accounting principle
                
                
                —
                
                
                
                —
                
                
                $
                0.01
                
                
                
                —
                
                
                
                —Basic
      net income per
      share
                
                $
                0.34
                
                
                $
                0.27
                
                
                $
                0.55
                
                
                $
                0.47
                
                
                $
                0.51Diluted
      net income per share before cumulative effect of change in accounting
      principle
                
                $
                0.34
                
                
                $
                0.27
                
                
                $
                0.54
                
                
                $
                0.46
                
                
                $
                0.51Cumulative
      effect of change in accounting principle
                
                
                —
                
                
                
                —
                
                
                
                —
                
                
                
                —
                
                
                
                —Diluted
      net income per
      share
                
                $
                0.34
                
                
                $
                0.27
                
                
                $
                0.54
                
                
                $
                0.46
                
                
                $
                0.51Cash
      dividends declared per
      share
                
                
                —
                
                
                
                —
                
                
                
                —
                
                
                
                —
                
                
                
                —Shares
      used in basic net income per share
                  calculations(Note2)
                
                
                46,632
                
                
                
                50,046
                
                
                
                51,132
                
                
                
                51,218
                
                
                
                51,352Shares
      used in diluted net income per share
                  calculations(Note2)
                
                
                46,673
                
                
                
                50,089
                
                
                
                51,173
                
                
                
                51,681
                
                
                
                52,230
 
  3
  
 December
      31,2004
                
                
                2005
                
                
                2006
                
                
                2007
                
                
                2008(In
      U.S. Dollars Thousands)Balance
      Sheet Data:Cash
      and cash
      equivalents
                
                $
                41,195
                
                
                $
                112,153
                
                
                $
                135,093
                
                
                $
                197,825
                
                
                $
                70,225Available-for-sales
      securities
                
                
                10,172
                
                
                
                6,150
                
                
                
                20,702
                
                
                
                —
                
                
                
                60,786Total
      assets
                
                
                92,525
                
                
                
                171,680
                
                
                
                220,889
                
                
                
                271,808
                
                
                
                245,098Net
      assets
                
                
                50,433
                
                
                
                105,432
                
                
                
                136,564
                
                
                
                169,633
                
                
                
                146,143Long-term
      debt, less current portion
                
                
                2,214
                
                
                
                1,091
                
                
                
                2,307
                
                
                
                5,217
                
                
                
                3,362Total
      shareholders’
      equity
                
                
                45,523
                
                
                
                99,241
                
                
                
                133,651
                
                
                
                164,693
                
                
                
                141,920
 __________________
 
  (Note
      1)
              Non-cash
      compensation expenses (credit) associated with the employee equity
      compensation plans and Directors Purchase Plan included under various
      categories of expenses are approximately as follows: sales expenses:
      $(2,054) (2007: $4,286, 2006: $1,790, 2005: $505, 2004: $626), community:
      $173 (2007: $269, 2006: $145, 2005: $103, 2004: $93), general and
      administrative: $742 (2007: $2,874, 2006: $1,950, 2005: $1,025,
      2004:  $1,066), and online services development expenses: $237
      (2007: $347, 2006: $181, 2005: $315, 2004:
$332)
  (Note
      2)
              On
      December 20, 2007, 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 767 common shares upon
      distribution of the bonus shares on February 1, 2008. On February 12,
      2009, 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 31 of our consolidated financial statements
      appearing elsewhere in this annual report. Fractional shares were rounded
      up resulting in an additional 1,653 common shares upon distribution of the
      bonus shares on March 31, 2009.
  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.
  Current
and future economic uncertainty, slowdowns, or recessions have reduced and may
continue to reduce demand and spending for business-to-business marketing
services. As a result we may incur losses and cannot provide any assurance that
we will remain profitable and continue to achieve positive cash flow from
operations.
  The
revenue and profitability of our business depends significantly on the overall
demand for business-to-business media services. We believe that the demand for
these services of ours is subject to potentially negative impacts by a number of
factors, including the large recent decline in global trade and the fact that
most economies in the world are currently undergoing a period of severe economic
recession.
  As a
result of the current global market conditions, we may incur operating losses
and net losses in the future, and we may not be able to achieve positive cash
flow from operations. We have a significant fixed operating expense, which may
be difficult to adjust in response to unanticipated fluctuations in revenues. In
addition, global trade may not recover to the levels of recent
years.
 
 The
mainland China market is key to our current and future success and political
instability in this market could seriously harm our business and reduce our
revenue.
  Our
customers in mainland China accounted for approximately 60% of our total
revenues in 2007 and approximately 66% of our total revenues in 2008. Our
dependence on revenue from the mainland China market is significant, and adverse
political, legal or economic changes in mainland China may harm our business and
cause our revenues to decline.
   4
  
  The
Chinese government has instituted a policy of economic reform which has included
encouraging foreign trade and investment, and greater economic decentralization.
However, the Chinese government may discontinue or change these policies, or
these policies may not be successful. Moreover, despite progress in developing
its legal system, mainland China does not have a comprehensive and highly
developed system of laws, particularly as it relates to foreign investment
activities and foreign trade. Enforcement of existing and future laws,
regulations and contracts is uncertain, and implementation and interpretation of
these laws and regulations may be inconsistent. As the Chinese legal system
develops, new laws and regulations, changes to existing laws and regulations,
and the interpretation or enforcement of laws and regulations may adversely
affect business operations in and revenue from mainland China. While Hong Kong
has had a long history of promoting foreign investment, its incorporation into
China means that the uncertainty related to mainland China and its policies may
now also affect Hong Kong.
  International
trade, and especially imports from the Greater China region (which includes
mainland China, Hong Kong and Taiwan), is subject to political, legal and
economic instability, which may inhibit our ability to be
successful.
  The
international markets in which we operate are subject to risks,
including:
  ·
              fluctuations
      in regional and/or global economic
conditions;
  ·
              fluctuations
      in the availability of trade
finance;
  ·
              governments
      could increase trade protection measures including tariffs, quotas, import
      duties or taxes, thereby significantly reducing demand for imported
      goods;
  ·
              political
      instability;
  ·
              the
      threat of terrorist attacks;
  ·
              conflicting
      and/or changing legal and regulatory
  requirements;
  ·
              restrictions
      placed on the operations of companies with a foreign
    status;
  ·
              significant
      changes in tax laws and regulations (or the interpretation, practice or
      policies in respect thereof by tax authorities), tax rates and tax
      reporting requirements;
  ·
              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 2008,
we derived approximately 90% of our revenues from customers in the Greater China
region. We expect that a majority of our future revenues will continue to be
generated from customers in this region. At the time of the Asian economic
crisis of 1997 and 1998, our revenues and operating results were adversely
affected, and both our sales and revenues declined. The reduction in trade
between Greater China and the world has caused and may continue to cause our
business to be harmed and our revenues to decrease.
   5
  
  Our
industry is intensely competitive, evolving and subject to rapid change, where
if we are unable to compete effectively we will lose current customers and fail
to attract new customers and our business may not be successful, thereby
adversely affecting our financial condition.
  Our
industry is intensely competitive. Barriers to entry are minimal, and
competitors are able to launch new websites and other media at a low cost. We
constantly face threats from competition, including from non-traditional
competitors and new forms of media. Some competitors have reduced prices and
this competition may require us to reduce prices and result in reduced margins
and/or lower market share, either of which may harm our business and financial
condition. We compete for our share of customers’ marketing and advertising
budgets with other online marketplaces, trade publications and trade shows.
Competitors vary in size, geographic scope, industries served and breadth of the
products and services offered. We may encounter competition from companies which
offer more comprehensive content, services, functionality and/or lower prices.
The marketing and pricing decisions of our competitors strongly influence our
business and therefore affect our financial condition. 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
inability to sustain and/or increase our average revenue per customer could
adversely affect our operating results and financial condition.
  We sell
our online, trade show and magazine products separately and in various
combinations. During the last year, we have experienced a decline in revenue per
unit of service and a decline in average revenue per customer. If we are unable
to maintain and/or increase historic pricing levels for advertising on our
websites and in our trade journals and for booths at our trade shows, our
revenues could be adversely affected. Also, if we are unable to maintain average
revenue per customer and/or make up for any decline in average revenue per
customer by increasing our total number of customers, our business and financial
condition could suffer.
  If
our current and potential customers are not willing to renew and adopt our
services, we may not attract and retain a critical mass of customers and our
business may not be successful and our financial condition could be adversely
affected.
  Our
services will be attractive to suppliers only if buyers use our services to
identify suppliers and purchase their products. The content, products and
suppliers currently available through our various media, or made available by
suppliers, may not be sufficient to attract and retain buyers as users of our
services. If buyers and suppliers do not accept our media and services, or if we
are unable to attract and retain a critical mass of buyers and suppliers for our
media and services, our business will suffer and our revenues may
decrease.
  None of
the suppliers that currently pay to use our services are under any long-term
contractual obligation to continue using our services. Generally, their
advertising contracts with us for our online and print media are for 6 to 12
months in duration, while most booth contracts are for China Sourcing Fairs that
will be held within the next 12 months. 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 and financial condition could be adversely
affected.
   6
  
  Current
and future outbreaks of H1N1, avian influenza, Severe Acute Respiratory Syndrome
(“SARS”) or other widespread public health problems could adversely affect our
business and financial condition.
  In the
event of future outbreaks of H1N1, avian influenza, SARS or other widespread
public health problems, some ways in which our business and financial condition
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.
  Various
factors outlined below could adversely affect our ability to operate our China
Sourcing Fair trade show business successfully and we can give no assurances
that this business will be successful or that our financial condition will not
be adversely impacted.
  In 2008,
our China Sourcing Fairs contributed substantially to our success. The first
China Sourcing Fair was held in Shanghai in 2003, the first of our series of
China Sourcing Fairs in Hong Kong was launched in April 2006, the first of our
series of China Sourcing Fairs in Dubai was launched in June 2007, a new series
of China Sourcing Fairs in mainland China focusing on serving mainland China’s
domestic market was launched in December 2007, and a new series of China
Sourcing Fairs in Mumbai was launched in November 2008. Our China Sourcing Fairs
are relatively new business initiatives and we are uncertain as to our ability
to attract and retain the quality and quantity of exhibitors and buyers that
would enable these trade shows to be successful.
  In
addition, there are substantial and long-established trade shows in Hong Kong
and southern mainland China, which compete with our China Sourcing Fairs in Hong
Kong, and which now have access to expanded venue space. Because of these
expanded venues, there may be pressure on our pricing and we may not be able to
attract the desired quantity and quality of exhibitors and buyers.
  Also,
because of the uncertainties associated with launching and operating new trade
shows and the competition, we may not achieve our desired sales objectives.
Furthermore, in an effort to operate our trade show business, additional
personnel were hired and additional capital expended. We may be unable to
effectively execute the operations, which would jeopardize our ability to be
successful in the trade show business and adversely affect our financial
condition.
  Our China
Sourcing Fairs business also requires us to make substantial non-refundable
deposits and progress payments to secure venue dates far in advance of our
conducting the trade show. In addition, the date and location can greatly impact
the profitability. The market for desirable dates and locations is highly
competitive. If we cannot secure desirable dates and locations for our trade
shows, their profitability and future prospects would suffer, and our financial
condition and results of operations would be materially and adversely
affected.
  In
addition, while we expect that a significant portion of our future revenues will
be derived from our trade show business (in particular, our China Sourcing Fair
business), several other factors could negatively affect our financial
performance in this business, including:
  ·
              the
      spread of H1N1, avian influenza, SARS and other similar
      epidemics;
   7
  
  ·
              political
      instability and the threat of terrorist
attacks;
  ·
              conflicting
      and/or changing legal and regulatory
  requirements;
  ·
              natural
      catastrophes, labor strikes and transportation
  shutdowns;
  ·
              decrease
      in demand for booth space;
  ·
              particularly
      in mainland China, we may not always be able to obtain the required trade
      show licenses, which may limit the number of trade shows we are able to
      hold;
  ·
              competing
      trade shows;
  ·
              our
      sales representative companies’ inability to effectively
      expand  their staff and
  infrastructure;
  ·
              inability
      to renew our venue contracts on favorable terms or at desired times;
      and
  ·
              a
      possible slowdown in product demand from outlet
  markets.
  In view
of the various risks outlined above, we can give no assurances that our
operation of the trade show business will be instrumental to our success or that
our financial condition will not be adversely affected.
  We
may not provide guidance on our revenues and profitability.
 
 The
current global economic conditions have been and may continue to be
unpredictable and as such it is difficult for us to predict our business,
financial position and results of operations. We have since suspended giving
guidance on our revenues and profitability. As a result we may not be able to
attract and/or retain independent analyst coverage and this could adversely
affect investors willing to invest in our shares and our share price may
drop.
 
 The
loss of one or more of our executive officers or key employees, either to a
competitor or otherwise, could harm our business and financial
condition.
  Our
executive officers and key employees are critical to our business and financial
condition. Our executive officers and key personnel may not remain with us and
their loss may negatively impact our operations, and may jeopardize the success
and viability of our business and financial condition. 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
may not be able to attract, hire and retain qualified personnel
cost-effectively, which could impact the quality of our content and services and
the effectiveness and efficiency of our management, resulting in increased costs
and jeopardizing the success and viability of our business and financial
condition.
  Our
success depends on our ability to attract, hire and retain at commercially
reasonable rates, qualified technical, sales support management, marketing,
customer support, financial and accounting, legal and other managerial
personnel. The competition for personnel in the industries in which we operate
is intense. Our personnel may terminate their employment at any time for any
reason. Loss of personnel may also result in increased costs for replacement
hiring and training. If we fail to attract and hire new personnel or retain and
motivate our current personnel, we may not be able to operate our businesses
effectively or efficiently, serve our customers properly or maintain the quality
of our content and services, in which case our financial condition could be
adversely affected.
  We
rely on independent sales representative companies for the sales and marketing
of our products and services and the loss of any significant sales
representative company or employees of a sales representative company,
or if the sales representative company cannot manage its employees as
anticipated, it would harm our business and revenues.
   8
   We have
agreements with various sales representative companies that employ sales
representatives. Seven sales representative companies in mainland China are
responsible for approximately 64% of our total revenues for the year ended
December 31, 2008. Generally, either we or the sales representative companies
may terminate the service agreement between them and us upon short notice. It is
possible that we may not retain some of our sales representative companies, or
they may not retain some of their sales personnel (due to competition from other
companies in hiring and retaining sales personnel) or be able to replace them
with equally qualified personnel. Furthermore, if a sales representative company
terminates its agreement with us, some of our customers with a direct
relationship with that sales representative company or its personnel may
terminate their relationship with us. Although these sales representative
companies and their employees are independent from us, there can be no assurance
that our reputation and our business, and our financial condition will not be
harmed by their acts or omissions. If sufficient numbers of employees are not
recruited, properly trained, integrated, motivated, retained and managed by
these sales representative companies, or if they perform poorly, or if our
relationship with these sales representative companies fail or deteriorate, our
business and financial condition may be harmed.
  Our
lengthy sales and implementation cycle could cause delays in concluding sales
contracts with customers, thereby adversely affecting our business objectives
and success, and therefore our financial condition.
  The
period between our initial contact with a potential customer and the purchase of
our products and services is often long and unpredictable and may have delays
associated with the lengthy budgeting and approval processes of our customers.
This lengthy sales and implementation cycle may affect our ability to estimate
our revenue in future quarters and could cause delays in the conclusion of sales
contracts with customers, thereby adversely affecting our business objectives
and success, and therefore our financial condition.
  Our
China Global Sources Online website, which we recently launched to facilitate
trade in mainland China’s domestic market, is generating very little revenue and
may not ever be profitable.
  We
launched our China Global Sources Online website in November of 2007 to
facilitate trade in mainland China’s domestic market. Our China Global Sources
Online website is distinct and separate from our export marketing website,
English Global Sources Online. We have generated very little revenue since our
launch and may not ever achieve profitability. We may not have sufficient access
to capital to develop and market the China Global Sources Online website and we
give no assurances that our operation of this business will contribute to our
financial success. We cannot be sure that the China Global Sources Online
website will be successful and its failure could have a materially adverse
effect on our future success.
  We
depend upon Internet search engines and other online marketing channels to
attract a significant portion of the users who visit our websites, and if we
were listed less prominently in Internet search result listings, or if we are
unable to rely on our other online marketing channels as a cost-effective means
of driving visitors to our websites, our business operating results and
financial condition could be harmed.
  We derive
a significant portion of our website traffic from users who search for content
through Internet search engines, such as Google, Baidu and Yahoo! A critical
factor in attracting users to our websites is whether we are prominently
displayed in such Internet search results.
  Search
result listings are determined and displayed in accordance with a set of
formulas or algorithms developed by the particular Internet search engine. The
algorithms determine the order of the listing of results in response to the
user's Internet search. From time to time, search engines revise these
algorithms. In some instances, these modifications may cause our websites to be
listed less prominently in unpaid search results, which will result in decreased
traffic from search engine users to our websites. Our websites may also become
listed less prominently in unpaid search results for other reasons, such as
search engine technical difficulties, search engine technical changes and
changes we make to our websites. In addition, search engines have deemed the
practices of some companies to be inconsistent with search engine guidelines and
have decided not to list their websites in search result listings at all. If we
are listed less prominently or not at all
   9
  in search
result listings for any reason, the traffic to our websites will likely decline,
which could harm our operating results. If we decide to attempt to replace this
traffic, we may be required to increase our marketing expenditures, which also
could harm our operating results and financial condition.
  We also
rely on other online marketing channels (such as “pay per click” marketing) as
an important means of driving visitors to our websites. However, the cost of
such online marketing channels can change very frequently (often daily), and it
is unclear whether such online marketing channels will remain cost-effective for
us. If we are unable to rely on such online marketing channels as a
cost-effective means of driving visitors to our websites, our business operating
results and financial condition could be harmed; or if we continue to rely on
such marketing channels despite their increased costs, our marketing
expenditures will increase, which also could harm our operating results and
financial condition.
  Exports
from mainland China are key to our current and future success and uncompetitive
cost conditions in this market, or a potential backlash against mainland
Chinese-made products arising from consumer standard concerns, could reduce our
revenue and seriously harm our business.
  Mainland
China is the largest supplier of consumer products to the world. Our actual and
potential customers are mainly suppliers who are based in mainland China. Should
mainland China manufacturers’ production costs go up substantially (for example,
due to the further appreciation of the Chinese Renminbi (“RMB”), wage and
product input price inflation, reduced export rebates and new environment or
labor regulations), products from mainland China may become less competitive on
price. If products from mainland China become less competitive on price, it
would likely have a negative impact on the demand in mainland China for our
various export-focused media and marketing services.
  In recent
years, there have been several highly publicized incidents involving products
made in mainland China not meeting consumer standards in overseas markets. If
this continues or worsens, there may be a strong backlash against products made
in mainland China and our business and financial condition may consequently
suffer.
  If
our sales representatives are unable to manage the challenging economic and
competitive environment and/or if we are unable to implement appropriate
controls and procedures to manage our business, our competitiveness and/or
business success may be harmed, thereby adversely affecting our financial
condition.
  Our
success will depend in part upon the ability of our sales representatives to
manage the difficult economic and competitive environment. If sales
representative team members perform poorly, or if their training and management
is unsuccessful, or if our relationships with existing sales representative team
members fail, our business and financial condition may be harmed. To manage 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 these issues successfully, our competitiveness and/or business and
financial success may be harmed.
  We
may not be successful in identifying, consummating and/or effectively
integrating acquisitions, joint ventures and alliances to expand our business,
in which event our financial condition could be adversely affected.
  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, competitiveness and/or business
success, and therefore our financial condition, may be harmed.
  If we do
identify and consummate an acquisition, joint venture or alliance, there is
still a risk that we may not be able to integrate any new businesses, products
or technologies into our existing business and operations. Alternatively, even
if we are successful in integrating any new businesses, products or technologies
into our existing business, we may not achieve expected results, or we may not
realize other expected benefits. In such circumstances, our financial condition
could be adversely affected.
   10
  
  The
costs associated with potential acquisitions or strategic partnerships could
dilute your investment or adversely affect our operating results and financial
condition.
  In order
to finance acquisitions, investments or strategic partnerships, we may use
equity securities, debt, cash, or a combination of the foregoing. Any issuance
of equity securities or securities convertible into equity may result in
substantial dilution to our existing stockholders, reduce the market price of
our common stock, or both. Any debt financing is likely to have financial and
other covenants based on our performance or results, and there could be an
adverse impact on us if we do not achievethe covenanted
performance or results. In addition, the related increases in expenses could
adversely affect our results of operations and financial condition.
  We
may not innovate at a successful pace, which could harm our operating results
and financial condition.
  Our
industry is rapidly adopting new technologies and standards to create and
satisfy the demands of users and advertisers. It is critical that we continue to
innovate by anticipating and adapting to these changes to ensure that our
content-delivery platforms and services remain effective and interesting to our
users, advertisers and partners. In addition, we may discover that we must make
significant expenditures to achieve these goals. If we fail to accomplish these
goals, we may lose users and the advertisers that seek to reach those users,
which could harm our operating results and financial condition.
  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 opportunities, in which event, our financial condition could be
adversely affected.
  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 opportunities. In such circumstances, our growth potential,
competitiveness and/or business success, and consequently our financial
condition, may be harmed.
  We
may be subject to legal liability for publishing or distributing content over
the Internet or in our trade publications or at our trade shows.
  We may be
subject to legal claims relating to the content on Global Sources Online or our
other websites, or the downloading and distribution of such content, as well as
legal claims arising out of the products or companies featured in our trade
publications and at our tradeshows. Claims could involve matters such as libel
and defamation, negligent misstatements, patent, trademark, copyright and design
infringement, fraud, invasion of privacy or other legal theories based on the
nature, creation or distribution of our content (for example, the use of
hypertext links to other websites operated by third parties). Media companies
have been sued in the past, sometimes successfully, based on the content
published or made available by them. Like many companies in our industry, we
have received notices of claims based on content made available on our website.
In addition, some of the content provided on Global Sources Online is
manually entered from data compiled by other parties, including governmental and
commercial sources, and this data may have errors, or we may introduce errors
when entering such data. If our content is improperly used or if we supply
incorrect information, our users or third parties may take legal action against
us. In addition, we may violate usage restrictions placed on text or data that
is supplied to us by third parties. Regardless of the merit of such claims or
legal actions, they could divert management time and attention away from our
business, result in significant costs to investigate and defend, and damage our
reputation (which could result in client cancellations or overall decreased
demand for our products and services), thereby harming our business, financial
condition and operating results. In addition, if we are not successful in
defending against such claims or legal actions, we may be liable to pay
substantial damages. Our insurance may not cover claims or legal actions of this
type, or may not provide sufficient coverage.
  We
may be subject to legal liability for the verification services that we offer to
buyers and suppliers.
  We offer
verification services (by ourselves and/or through third parties whom we engage)
to buyers in respect of certain of our supplier customers, and to suppliers in
respect of their buyers. The verification services which we offer to buyers in
respect of suppliers include: verification of a supplier’s company and business
details; supplier credit profiles and credit reports; and supplier capability
assessment and product inspection
reports. The verification services which we offer to suppliers in respect of
buyers include: buyer trade profile reports and company background and contact
information. We may be subject to legal claims and actions for any inaccurate,
erroneous, incomplete or misleading information provided in connection with such
verification services. While we may have liability disclaimers associated with
such verification services, such liability disclaimers may nevertheless be
insufficient to deter a complainant from attempting to raise a claim or to
institute legal action against us, or may be held by a court to be invalid or
unenforceable. As for those verification services which are not provided
directly by us but by third parties engaged by us, a complainant may
nevertheless attempt to hold us responsible for such third parties. Regardless
of the merit of any such claims or legal actions, they could divert management
time and attention away from our business, result in significant costs to
investigate and defend, and damage our reputation (which could result in client
cancellations or overall decreased demand for our products and services),
thereby harming our business, financial condition and operating results. In
addition, if we are not successful in defending against such claims or legal
actions, we may be liable to pay substantial damages. Our insurance may not
cover claims or legal actions of this type, or may not provide sufficient
coverage.
   11
  
  Our
intellectual property protection is limited, and others may infringe upon it,
which may reduce our ability to compete and may divert our
resources.
  Our
success and ability to compete are dependent in part upon our proprietary
technology, content and information databases, the goodwill associated with our
trademarks, and other intellectual property rights. We have relied on a
combination of copyright, trade secret and trademark laws and non-disclosure and
other contractual restrictions to protect ourselves. However, our efforts to
protect our intellectual property rights may not be adequate. Although we have
filed (and continue to file) applications for and have obtained registration of
many of our key trademarks in various jurisdictions, we may not always be able
to obtain successful registrations. Our competitors may independently develop
similar technology or duplicate our software and services. If others are able to
develop or use technology and/or content we have developed, our competitive
position may be negatively affected.
  We have
in the past co-developed, and may in the future co-develop, some of our
intellectual property with independent third parties. In these instances, we
take all action that we believe is necessary and advisable to protect and to
gain ownership of all co-developed intellectual property. However, if such third
parties were to introduce similar or competing online products and services that
achieve market acceptance, the success of our online services and our business,
financial condition, prospects and operating results may be harmed.
  We cannot
determine whether future patent, copyright, service mark or trademark
applications, if any, will be granted. No certainty exists as to whether our
current intellectual property or any future intellectual property that we may
develop will be challenged, invalidated or circumvented or will provide us with
any competitive advantages.
  Litigation
may be necessary to enforce our intellectual property rights, protect trade
secrets, determine the validity and scope of the proprietary rights of others,
or defend against claims of infringement or invalidity.  Intellectual
property laws provide limited protection. Moreover, the laws of some foreign
countries do not offer the same level of protection for intellectual property as
the laws of the United States. Such laws may not always be sufficient to prevent
others from copying or otherwise obtaining and using our content, technologies,
or trade marks. In addition, policing our intellectual property rights worldwide
is a difficult task, and we may be unable to detect unauthorized use of our
intellectual property or to identify infringers. Litigation may result in
substantial costs and diversion of resources, regardless of its outcome, which
may limit our ability to develop new services and compete for
customers.
  If
third parties claim that we are infringing upon their intellectual property
rights, our ability to use technologies and products may be limited, and we may
incur substantial costs to resolve these claims.
  Litigation
regarding intellectual property rights is common in the Internet and software
industries. Defending against these claims could be expensive and divert our
attention from operating our business. We expect third-party infringement claims
involving Internet technologies and software products and services to increase.
If we become liable to third parties for infringing their intellectual property
rights, we could be required to pay substantial damage awards and be forced to
develop non-infringing technology, obtain a license with costly royalties or
cease using the products and services that contain the infringing technology or
content.
We may be unable to develop non-infringing technology or content or to obtain a
license on commercially reasonable terms, or at all. All of this could therefore
have a material adverse effect on our business, results of operations and
financial condition.
   12
    We may
not have, in all cases, conducted formal or comprehensive investigations or
evaluations to confirm that our content and trade marks do not or will not
infringe upon the intellectual property rights of third parties. As a result, we
cannot be certain that we do not or will not infringe upon the intellectual
property rights of third parties. If we are found to have infringed a third
party’s intellectual property rights, the value of our brands and our business
reputation could be impaired, and our business and financial condition could
suffer.
  Evolving
regulation of the Internet and commercial e-mail may affect us
adversely.
  As
Internet commerce continues to evolve, increasing legislation and regulation by
governments and agencies become more likely. We use e-mail as a significant
means of communicating with our existing and potential customers and users. We
also provide “@globalsources.com” e-mail addresses to our clients, for their
use. The laws and regulations governing the use of e-mail for marketing purposes
continue to evolve, and the growth and development of the market for commerce
over the Internet may lead to the adoption of additional legislation and/or
changes to existing laws. Existing, new or additional legal prohibitions on the
transmission of unsolicited commercial e-mail (commonly known as “spam”),
coupled with aggressive enforcement, could reduce our ability to promote our
services in a cost-efficient manner and our ability to facilitate communications
between suppliers and buyers and, as a result, adversely affect our business and
financial condition.
  In
addition to legal restrictions on the use of e-mail, Internet service providers,
various operators of Internet mailbox services, anti-spam organizations and
others typically attempt to block the transmission of unsolicited e-mail and are
increasing the number and volume of unsolicited e-mails they are blocking. With
this increasing vigilance also comes an increased rate of “false positives”,
i.e. legitimate e-mails being wrongly identified as “spam”. If an Internet or
other service provider or software program identifies e-mail from us (or from
our clients to whom we have provided “@globalsources.com” e-mail addresses) as
“spam”, we could be placed on a restricted list that would block our e-mails to
our actual or potential customers or users who maintain e-mail accounts with
these Internet service or other providers or who use these software programs or
our e-mails could be routed to bulk folders and ignored. If we are unable to
communicate by e-mail with our actual or potential customers or users as a
result of legislation, blockage of our e-mails, routing of our e-mails to bulk
folders, or otherwise, our business, operating results and financial condition
could be harmed.
  In
addition, taxation of products and services provided over the Internet or other
charges imposed by government agencies or by private organizations for accessing
the Internet may also be imposed. Any regulation imposing greater fees for
Internet use or restricting information exchange over the Internet could result
in a decline in the use of the Internet and the viability of Internet-based
services, which could harm our business, operating results and financial
condition.
  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 and financial
condition by increasing our costs and administrative burdens. It may take years
to determine whether and how existing laws apply to the Internet.
  Changes
in regulations could adversely affect our business results of operations and
financial condition.
  It is
possible that new laws and regulations or new interpretations of existing laws
and regulations in the United States, the European Union, mainland China and
elsewhere will be adopted covering issues affecting our business,
including:
  ·
              privacy,
      data security and use of personally identifiable
    information;
  ·
              copyrights,
      trademarks and domain names; and
   13
  
  ·
              marketing
      practices, such as e-mail or direct
marketing.
  Increased
government regulation, or the application of existing laws to online activities,
could:
  ·
              decrease
      the growth rate of our business;
  ·
              reduce
      our revenues;
  ·
              increase
      our operating expenses; or
  ·
              expose
      us to significant liabilities.
  Furthermore,
the relationship between regulations governing domain names and laws protecting
trademarks and similar proprietary rights is still evolving. Therefore, we might
be unable to prevent third parties from acquiring domain names that infringe or
otherwise decrease the value of our trademarks and other proprietary rights. Any
impairment in the value of these important assets could cause our stock price to
decline. We cannot be sure what effect any future material non-compliance by us
with these laws and regulations or any material changes in these laws and
regulations could have on our business, operating results and financial
condition.
  Changes
in laws and standards relating to data collection and use practices and the
privacy of Internet users and other individuals could impair our efforts to
maintain and grow our audience and thereby decrease our advertising
revenue.
  We
collect information from our users who register for services or respond to
surveys. Subject to each user's permission (or right to decline), we may use
this information to inform our users of products and services that may be of
interest to them. We may also share this information with our advertising
clients for those who have granted us permission to share their information with
third parties. Governments in various jurisdictions, including the United
States, the European Union and Canada, have adopted or proposed limitations on
the collection, distribution and use of personal information of Internet users.
In addition, growing public concern about privacy, data security and the
collection, distribution and use of personal information has led to
self-regulation of these practices by the Internet advertising and direct
marketing industry, and to increased governmental regulation. Because many of
the proposed laws or regulations are in their early stages, we cannot yet
determine the impact these regulations may have on our business and financial
condition over time. Although, to date, our efforts to comply with applicable
laws and regulations have not hurt our business and financial condition,
additional or more burdensome laws or regulations, including consumer privacy
and data security laws, could be enacted or applied to us or our customers. Such
laws or regulations could impair our ability to collect user information that
helps us to provide more targeted advertising to our users, thereby impairing
our ability to maintain and grow our audience and maximize advertising revenue
from our advertising clients.
   We
own substantial commercial real estate in mainland China with associated legal
ownership risks, given the fact that the interpretation of mainland China laws
and regulations involves uncertainty.
  The
mainland China legal system is based on written statutes, and prior court
decisions can only be used as a reference. For some time now, the mainland China
government has been promulgating laws and regulations in relation to economic
matters such as foreign investment, corporate organization and governance,
commerce, taxation and trade, with a view to developing a comprehensive system
of commercial law, including laws relating to property ownership and
development. However, due to the fact that these laws and regulations have not
been fully developed, and because of the limited volume of published cases and
the non-binding nature of prior court decisions, interpretation of mainland
China laws and regulations involves a degree of uncertainty. Some of these laws
may be changed without being immediately published or may be amended with
retroactive effect.  In addition, any litigation in mainland China may
be protracted and result in substantial costs and diversion of resources and
management attention. All these uncertainties may cause difficulties in the
enforcement of our land use rights, entitlements under its permits, and other
statutory and contractual rights and interests relating to the substantial
commercial real estate which we own in mainland China.
  14
   
 The
value of our commercial properties in mainland China and Hong Kong may fall
below the carrying value, requiring us to recognize an impairment
charge.
 
 We own
commercial property in Shenzhen’s new commercial business district, which is
equivalent in standard to “Grade A” private office premises in Hong Kong (“Grade
A” private office premises in Hong Kong are defined by the Hong Kong Rating and
Valuation Department, and generally understood by the Hong Kong property market,
to mean premises situated in buildings designed for commercial purposes which
are modern with high quality finishes; have a flexible layout; have large floor
plates; have spacious, well decorated lobbies and circulation areas; have
effective central air-conditioning; have good lift services zoned for passengers
and goods deliveries; have professional management; and have parking facilities
normally available). We also own commercial property in Hong Kong. The total
purchase cost of these properties was approximately US$76 million, and their
total market value was approximately US$99 million as at December 31, 2008.
However, real estate markets are cyclical and valuation year-on-year is
uncertain, given global- and country-specific demand and supply drivers. As a
result, we may not be able to recover the carrying value of our properties,
which may require us to recognize an impairment charge in future
earnings.
 
 Apart
from the U.S. treasury bills which we hold, a significant portion of our cash
and cash equivalents are held as cash deposits with various banks. In the event
of an insolvency of such banks, we may not be able to recover our cash from them
in full or in part or there may be prolonged delays in such
recovery.
 
 In some
of the jurisdictions of the banks with whom we place our cash, for example, Hong
Kong and Singapore, cash deposits with banks there are guaranteed by the
respective governments in the event of an insolvency of such banks, as an
economic stabilization and confidence boosting measure by such governments in
response to the current global banking and financial crisis. However, these
government guarantees typically have defined expiration dates after which they
would no longer apply, and there is a risk that they could be revoked or
terminated or their scope and terms could be revised. Moreover, in the event of
an actual bank insolvency, there is also a risk that the government concerned
may fail or be unable to fulfill its guarantee commitments in part or at all.
Hence, we may not be able to rely on such government guarantees to recover our
cash deposits with a guaranteed bank, in the event of its insolvency, whether in
full or in part, and whether in a timely manner or at all.
 
 Foreign
exchange rate fluctuations may have a material impact on our operating results,
revenues and profits.
  Because
we operate internationally, foreign exchange rate fluctuations may have a
material impact on our results of operations. To the extent significant currency
fluctuations occur in Asian currencies, our revenues and profits may be
affected, relative to the U.S. Dollar.
  During
2008, the RMB appreciated versus the U.S. Dollar and other currencies. If the
RMB appreciates further, our current and potential supplier customers may become
less competitive with suppliers from other regions, leading to less demand for
our advertising services. Although we bill in RMB and have expenses in RMB in
mainland China, if the RMB appreciates further, it could have an adverse effect
on our financial condition.
  Currently,
we do not hedge our exposure to foreign currency fluctuations.
  Our
quarterly operating results may have seasonal fluctuations, and we may fail to
meet analyst, investor and shareholder expectations.
  We
typically experience seasonal quarter-to-quarter fluctuations in our revenue.
Buyer’s usage of our media and services is typically relatively slower during
the summer and year-end vacation and holiday periods.  Additionally,
our online and trade publication advertising revenue is seasonal and tends to be
highest in the fourth quarter of each calendar year. Currently, most of our
largest trade shows are expected to be held in April and October of each year.
The net result of the above seasonality is that second and fourth quarter
revenues are likely to be substantially higher than the first and third quarter
revenues. In 2008, approximately 31% of our revenue was generated during the
second quarter and approximately 31% during the fourth quarter. The first
quarter accounted for approximately 20% of revenue in 2008 and the third quarter
accounted for approximately 18% of revenue in 2008. 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.
   15
    Our
share prices may fluctuate in response to a number of events and
factors.
  Our share
price may fluctuate in response to a number of events and factors such as
quarterly variations in operating results; announcements of new services or
pricing options by us or our competitors; changes in financial estimates and
recommendations by securities analysts; failure to meet our financial guidance
and/or the financial forecasts of analysts; the operating and share price
performance of other companies that investors may deem comparable; news reports
relating to trends in the Internet and information technology industry;
announcements by us or our competitors of significant acquisitions, strategic
partnerships, joint ventures or capital commitments; or changes in laws in the
countries in which we operate.
  There
is a limited public market for our shares and the trading volume for our shares
is low which may limit your ability to sell your shares or purchase more
shares.
  Our
common shares have been traded in the public market for a limited time and this
market may not be sustained.  As a result of the April 2000 share
exchange, 1,189,949 of our common shares were listed on the Nasdaq National
Market (“Nasdaq”). As of April 30, 2009 we had approximately 966 shareholders,
and approximately 15,067,841 outstanding common shares that were tradable on the
Nasdaq.
 
 However,
because of the small number of shareholders and the small number of publicly
tradable shares, we cannot be sure that an active trading market will develop or
be sustained or that you will be able to sell or buy common shares when you want
to. As a result, it may be difficult to make purchases or sales of our common
shares in the market at any particular time or in any significant quantity. If
our shareholders sell our common shares in the public market, the market price
of our common shares may fall. In addition, such sales may create the perception
by the public of difficulties or problems with our products and services or
management. As a result, these sales may make it more difficult for us to sell
equity or equity related securities in the future at a time or price that is
appropriate.
  Future
sales of our common shares could depress the price of the common
shares.
  Future
sales of common shares by us or our existing shareholders could adversely affect
the prevailing market price of the common shares. As of April 30, 2009, we had
44,543,330 common shares outstanding, out of which at least 30,290,251 common
shares outstanding are beneficially owned by people who may be deemed
“affiliates”, as defined by Rule 405 of the Act. Of these 30,290,251 shares,
29,459,806 shares 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;
   16
  
  ·
              requiring
      the approval of 100% of shareholders for shareholder action by written
      consent;
  ·
              establishing
      advance notice requirements for submitting nominations for election to the
      board of directors and for proposing matters that may be acted upon by
      shareholders at a general meeting;
and
  ·
              restricting
      business combinations with interested shareholders that have not been
      approved by at least two-thirds of the holders of our voting shares (other
      than the interested shareholder) or by a majority of the continuing
      directors or if certain prescribed conditions are met assuming that we
      will receive fair market value in exchange for such business
      combination.  In this context, a “business combination” includes
      mergers, asset sales and other material transactions resulting in a
      benefit to the interested shareholder or the adoption of a plan for our
      liquidation or dissolution; a “continuing director” is a member of our
      board of directors that is not an affiliate or associate of an interested
      shareholder and was a member of our board prior to such person becoming an
      interested shareholder; and an “interested shareholder” is any person
      (other than us or any of our subsidiaries, any employee benefit or other
      similar plan or any of our shareholders who owned shares prior to the
      listing of our shares on Nasdaq) that owns or has announced its intention
      to own, or with respect to any of our affiliates or associates, within the
      prior two years did own, at least 15% of our voting
  shares.
  Merle
A. Hinrichs, our Chairman and Chief Executive Officer, is also our major
shareholder and he may take actions that conflict with your
interest.
  As of
April 30, 2009, Merle A. Hinrichs beneficially owned approximately 47.0% of our
common shares, as well as being our Chairman and Chief Executive Officer.
Accordingly, Mr. Hinrichs has substantial voting influence over the election of
our directors, the appointment of new management and the opposition of 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 and substantial voting influence 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 major 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 and financial
condition.
  We are
likely to continue to derive the majority of our Internet-based marketplace
revenues from the Asia-Pacific region. The quality of some of the
telecommunications and Internet infrastructure and telephone line availability
in mainland China and in some Asia-Pacific countries is unreliable. This may
contribute to lower than expected adoption of many of our services and may cause
usage growth and revenues to fall below expectations. In addition, access fees
in some Asia-Pacific countries may contribute to low usage and may adversely
affect our growth and revenues potential.
  The
failure of our computer systems, network and communications hardware and
software could materially and adversely affect our business results of operation
and financial condition.
  Our
business depends on the high availability, good performance and strong security
of our computer systems, network, and associated hardware and software. Any
system interruptions, poor performance or security breaches impacting on Global Sources Online or any
of our online sites may drive buyers and other registered users away and reduce
the attractiveness of these sites to advertisers, and therefore adversely affect
our business, financial condition and operating results.
  We host
our key customer-facing computer systems with major Internet Service Providers
(ISPs) in Hong Kong.  Interruptions to these ISPs’ and/or their
partners’ hosting services could result from natural disasters as well as
catastrophic hardware failures, software problems, extended power loss,
telecommunications failure and
similar events. While these ISPs may have their own disaster recovery
capabilities and/or be able to provide us with disaster recovery facilities on
request in such circumstances, nevertheless, if there is any failure, inability
or delay on their part in providing such disaster recovery facilities as
committed, serious and prolonged disruptions to our systems and services could
result.
   17
    Although
we support the integrity of our security with IDS (Intrusion Detection Systems),
anti-virus and other tools as a precaution against hackings, denial-of-service
and other cyber intrusions, such security systems and programs are not
completely foolproof or error-free, and new updates to deal with the latest
viruses or security threats may not yet be available or may not yet have been
implemented. Hence, security breaches could still occur, and we cannot give any
assurances that we will always be able to prevent individuals from gaining
unauthorized access to our servers. Any such unauthorized access to our database
servers, including abuse by our employees, could result in the theft of
confidential customer or user information contained in our database servers. If
such confidential information is compromised, we could lose customers or become
subject to liability or litigation and our reputation could be harmed, any of
which could materially and adversely affect our business, results of operations
and financial condition.
  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 and financial condition.
  We rely
on outside parties for some information, licenses, product delivery,
telecommunications and technology products and services. We rely on
relationships and/or contractual agreements with software developers and
providers, systems integrators and other technology or telecommunications firms
to support, enhance and develop our products and services.
  Although
we have contracts with technology providers to enhance, expand, manage and
maintain our computer and communications equipment and software, these service
providers may not provide acceptable services. Services provided by third
parties include providing application licenses, hosting our Global Sources Online servers
and database, maintaining our communications and managing the network and data
centers which we rely on for the provision of our services. These relationships
may not continue or may not be available on the same commercial terms in the
future, which could cause customer dissatisfaction and/or a delay in the launch
of new software or services.
  We
license some components of our technology from third parties. These licenses may
not be available to us on the same commercial terms in the future. The loss of
these licenses could delay the release or enhancement of our services until
equivalent technology could be licensed, developed or otherwise obtained. Any
such delay could have a material adverse effect on our business and financial
condition. 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, thereby adversely affecting our financial
condition.
  We have
no direct control over the accuracy, timeliness or effectiveness of the
information, products and services or performances of these outside parties. As
a result of outside party actions, we may fail to provide accurate, complete and
current information about customers and their products in a timely manner and to
deliver information to buyers and/or other registered users in a satisfactory
manner.
  If
we release new services, catalog tools or software that contain defects, we may
need to suspend further sales and services until we fix the defects, and our
reputation could be harmed.
  Our
services depend on software that is complex and that may contain unknown and
undetected defects, errors or performance problems. We may not discover defects,
errors or performance problems that affect our new or current services or
enhancements until after they are deployed. These defects, errors or performance
problems could force us to suspend sales and services or cause service
interruptions which could damage our reputation or increase our service costs,
cause us to lose revenues, delay market acceptance or divert our development
resources, any of which could severely harm our business and financial
condition.
  Customer
concerns regarding Internet security may deter use of our online products and
services.
  Widely
publicized security breaches involving the Internet or online services
generally, or our failure to prevent security breaches, may cause our current
and potential customers not to use our products and services and
adversely affect our revenues. We may be required to incur additional costs to
protect against security breaches or to alleviate problems caused by these
breaches. Our business and financial success depends on our customers’
confidence in the security of our products and services.
   18
    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 and financial condition. The
acquisition and maintenance of Internet domain names generally are regulated by
governmental agencies. The regulation of Internet domain names in the United
States and in foreign countries is subject to change. As a result, we may not be
able to acquire or maintain relevant Internet domain names. Furthermore, the
relationship between regulations governing such addresses and laws protecting
proprietary rights is unclear.
  Because
we are governed by Bermuda law rather than the laws of the United States and our
assets are outside of the United States, our shareholders may have more
difficulty protecting their rights because of differences in the laws of the
jurisdictions.
  We are
incorporated 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 is 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, that there
is some uncertainty 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
may not pay cash dividends in the foreseeable future.
  We may
not pay cash dividends in the foreseeable future. This may reduce the demand for
our shares.
 
 We
are a “foreign private issuer,” and have disclosure obligations that are
different than those of other U.S. domestic reporting companies, so you should
not expect to receive information about us in the same amount and/or at the same
time as information received from, or provided by, other U.S. domestic reporting
companies.
  We are a
foreign private issuer and, as a result, we are not subject to certain of the
requirements imposed upon U.S. domestic issuers by the Securities and Exchange
Commission (“SEC”). For example, we are not required to issue quarterly reports
or proxy statements. We are allowed six months to file our annual report with
the SEC instead of approximately three, and we are not required to disclose
certain detailed information regarding executive compensation that is required
from U.S. domestic issuers. Further, our directors and executive officers are
not required to report equity holdings under Section 16 of the Securities
Act. As a foreign private issuer, we are also exempt from the requirements of
Regulation FD (Fair Disclosure) which, generally, are meant to ensure that
select groups of investors are not privy to specific information about an issuer
before other investors. We are, however, still subject to the anti-fraud and
anti-manipulation rules of the SEC, such as Rule 10b-5.
  Since
many of the disclosure obligations required of us as a foreign private issuer
are different than those required by other U.S. domestic reporting companies,
our shareholders, potential shareholders and the investing public in general,
should not expect to receive information about us in the same amount and/or at
the same time as information received from, or provided by, other U.S. domestic
reporting companies.
 
 We are
liable for violations of the rules and regulations of the SEC which do apply to
us as a foreign private issuer. Violations of these rules could affect our
business, results of operations and financial condition.
  19
  
 
 While we believe that we currently
have adequate internal control procedures in place, we are still exposed to
potential risks from legislation requiring companies to evaluate controls under
Section 404 of the Sarbanes-Oxley Act of 2002.
 
 Under the
supervision and with the participation of our management, we have evaluated our
internal controls systems in order to allow management to report on, and our
registered independent public accounting firm to attest to, our internal
controls, as required by Section 404 of the Sarbanes-Oxley Act. We have
performed the system and process evaluation and testing required in an effort to
comply with the management certification and auditor attestation requirements of
Section 404. As a result, we have incurred additional expenses and a diversion
of management’s time. If we are not able to continue to meet the requirements of
Section 404 in a timely manner or with adequate compliance, we might be subject
to sanctions or investigation by regulatory authorities such as the SEC or by
NASDAQ. Any such action could adversely affect our financial results and the
market price of our shares.
 
 Should
our directors or officers incur personal liabilities in connection with the
performance of their duties, such liabilities could be substantial. Our
insurance coverage for such directors’ or officers’ liabilities may be
inadequate, and we may have to indemnify them (if and to the extent applicable
and permissible) out of our own funds.
 
 Our
insurance coverage for the potential personal liabilities of our directors and
officers is limited and may not be sufficient to cover the scope or extent of
such liabilities. In such event, our directors and officers may have to rely in
whole or in part on indemnities from out of our funds (see “Personal Liability
of Directors and Indemnity” under Item 10 for a description of the personal
liabilities of our directors and the indemnities by us which may be available to
our directors and officers). If and to the extent such indemnities are
applicable and permissible, they could be substantial.
 
  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 using online media,
print media and face-to-face events, meeting the marketing and sourcing needs of
our supplier and buyer communities.
  The core
business uses English-language media to facilitate trade from Greater China
(which includes mainland China, Hong Kong and Taiwan) to the world. The other
business segment utilizes Chinese-language media to enable companies to sell to,
and within Greater China.
  Today we
have several publications, their associated websites plus events and conferences
that provide information to electronic engineers and executives at manufacturing
companies in Greater China and throughout Asia.
  Realizing
the importance of the Internet, we became one of the first providers of
business-to-business online services by launching Asian Sources Online in 1995.
In 1999, we changed the name of Asian Sources Online to Global Sources
Online.
  We
originally were incorporated under the laws of Hong Kong in 1970. In
April 2000, we completed a share exchange with a publicly traded company
based in Bermuda, and our shareholders became the majority shareholders of the
Bermuda corporation. As a result of the share exchange, we became incorporated
under the laws of Bermuda and changed our name to Global
Sources Ltd.
  Our
capital expenditures during the year ended December 31, 2008, 2007 and 2006
amounted to $51.5 million, $11.3 million and $4.9 million respectively. For
2008, such expenditure was incurred mainly for purchase of office premises in
mainland China and Hong Kong, computers, software, leasehold improvements,
office furniture and software development. For 2007, such expenditure was
incurred mainly on computers, software, leasehold improvements, office furniture
and software development. For 2006, such expenditure was
incurred mainly on office premises, computers, software, leasehold improvements,
office furniture and software development. Our capital expenditures were
financed using cash generated from our operations. The net book value of capital
assets disposed during the year ended December 31, 2008, 2007 and 2006 amounted
to $0.06 million, $0.3 million and $0.002 million respectively.
  20
    Our
primary operating offices are located in Shenzhen, China; Hong Kong, China; and
Singapore. Our registered office is located at Canon’s Court, 22 Victoria
Street, Hamilton, HM 12, Bermuda, and our telephone number at that address is
(441) 295-2244. Our website address is http://www.globalsources.com. Information
contained on our website or available through our website is not incorporated by
referenceinto this
document and should not be considered a part of this document.
  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 Greater China
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 38 years we have been in the same
primary business of helping buyers worldwide find products and suppliers in Asia
(with a particular focus on Greater China).
  Buyers
rely on our media to stay current with available purchasing opportunities.
Suppliers use our media to find new buyers and markets for their products. We
believe we offer the most extensive range of media and export marketing services
in the industries we serve. Suppliers using our three primary channels – online
marketplaces, print magazines and trade shows – 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, one of China’s largest import
and export sectors.
  We serve
an independently certified buyer community of over 803,000 active members (as of
the end of March 2009) in more than 200 countries and territories. This
community has more than tripled in size from 209,000 at the end of 2000. During
the twelve months ended March 31, 2009, buyers sent more than 67 million sales
leads, or requests for information (RFIs), to the more than 190,000 suppliers
listed on Global Sources
Online, up from 2.4 million for the year 2000.
  We are
diversified in terms of products and services offered, industries served and our
customer base. We have powerful and valuable assets including: the Global
Sources brand; leading products and market positions; a long history and
extensive presence in Greater China; and substantial online leadership and
expertise. We believe that all of these provide a strong platform for success
and that we are well-positioned in the industry segments within which we
operate.
  The
following table sets forth our revenue by category for the last three fiscal
years:
  Year
      Ended December 31,2006
                
                
                2007
                
                
                2008(In
      U.S. Dollars Thousands)Revenue:Online
      and other media
      services
                
                $
                113,097
                
                
                $
                125,818
                
                
                $
                142,129Exhibitions
      - trade shows and seminars
                
                
                42,122
                
                
                
                51,608
                
                
                
                58,179Miscellaneous
                
                
                1,262
                
                
                
                4,633
                
                
                
                6,584$
                156,481
                
                
                $
                182,059
                
                
                $
                206,892
 
   21
  
  The
following table represents our revenue by geographical area for the last three
fiscal years:
  Year
      Ended December 31,2006
                
                
                2007
                
                
                2008(In
      U.S. Dollars Thousands)Revenue:Asia
                
                $
                146,315
                
                
                $
                171,621
                
                
                $
                196,123United
      States
                
                
                7,610
                
                
                
                8,596
                
                
                
                9,152Europe
                
                
                1,571
                
                
                
                242
                
                
                
                459Others
                
                
                985
                
                
                
                1,600
                
                
                
                1,158Consolidated
                
                $
                156,481
                
                
                $
                182,059
                
                
                $
                206,892
 
 We
currently generate the majority of our revenue from suppliers in Asia, with
China being our largest market at 70% of total revenue during fourth quarter of
2008. Our revenue is derived from two primary sources:
  Online
and other media; and Exhibitions – trade shows and seminars. Online and other
media services consists of following two primary revenue streams:
  ·
              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 - Our China Sourcing Fairs 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 Greater China
  Global
trade has declined significantly since the fall of 2008, concurrent with the
financial crises and the global recession. However, 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, including Greater China
in particular, has been a significant contributor to the growth of global
trade.
  Greater
China is the world’s largest merchandise exporter. China, especially, has become
a significant exporter and importer. Also, China has become the world’s largest
manufacturing country.
  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 World Trade
Organization 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 Hong Kong, 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.
   22
    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 Greater China, creative services for
advertising 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 supplier’s 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
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 booths. In international trade, this is something that cannot be
accomplished by online or print media.
  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 supplier’s booth at a trade
show.
  Many
suppliers want to reach their customers and prospects in multiple ways: online,
in print and in person at trade shows. Suppliers use 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.
   23
  
  Our
Offerings
  Our
primary business relates to connecting buyers worldwide with suppliers in Asia
(with a particular focus on Greater China) and other emerging markets. However,
we also offer a range of media that facilitate selling to Asia (with a
particular focus on Greater China), and we have recently launched online and
trade show media for the domestic B2B market in China.
  We
provide a broad set of 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 Greater
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 have the most suitable capabilities and/or who 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.
  Buyers
can reach a large potential supply base on Global Sources Online by
searching among, and/or making inquiries to, approximately 196,000 suppliers.
Suppliers are categorized as verified or unverified according to the products
they can supply. In listing suppliers for a specific product, we give prominence
to those verified suppliers who pay to maintain a marketing website with
us.
  Trade
Shows
  Our
largest shows are in Hong Kong. We currently have six China Sourcing Fairs
scheduled for 2009 in Hong Kong, with each to be held in the spring and fall. A
new seventh show will launch in fall 2009 in Hong Kong. The shows bring buyers
from around the world to meet face-to-face with suppliers. Our China Sourcing Fairs include
Electronics & Components,
Fashion Accessories, Gifts & Premiums, Home
Products, Baby &
Children’s Products, Underwear & Swimwear and Security Products. We
have also added various smaller versions of many of these shows in recent years
in India, Dubai and Shanghai.
  Trade
Publications
  We
publish thirteen monthly publications that are circulated to buyers worldwide.
Our trade publications come in print and digital formats and 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 offer samples of our trade magazines free-of-charge to
qualified buyers.
   24
  
  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 China Sourcing Reports for
sale and published more than 50 of these reports in 2008. 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
Supplier 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 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
19 online and 5 print media, the International IC show and several other
conferences and events.
  Media
for Buyers in China
  In the
fourth quarter of 2007 we launched an online marketplace and two trade shows for
this market. China Global
Sources Online was beta-launched at the end of November 2007 offering its
services free of charge to qualified advertisers on our English language site.
In April 2008, we began charging for this service. Two shows were launched in
December 2007 in Shanghai: Baby & Children’s
Products and Fashion
Accessories. In January 2010, the shows are scheduled to move forward one
month and will be held, in Shanghai, along with a new show called Gifts &
Premiums.
  Mission
and Business Strategy
 
 Mission
 
 Global
Sources’ mission is to connect global buyers and suppliers by providing the
right information, at the right time, in the right format.
 
 Our key
business objective is to be the preferred provider of content, services, and
integrated marketing solutions that enable our customers to achieve a
competitive advantage.
 
 Business
Strategy
 
 We have a
large market opportunity primarily focused on China’s exports and domestic B2B
market. Our business strategy to achieve our objectives is to serve our markets
with online, print and trade show media that address our customers’ needs at all
stages of the buying process.
 
 The
Global Sources business strategy is built around the following four key
foundations.
  25
  
 
 1.
              Market
      Penetration
 
 Our
existing markets offer significant opportunities. For example, for Global Sources Online, our
export-focused online business, we anticipate continued good performance. We
believe it offers the premier search experience in our industry and a leading
supplier verification services.
 
 2.
              New
      Product Development
 
 We
continue developing our China
Sourcing Fairs. In 2008, we launched new China Sourcing Fairs in
Dubai, China and India. In 2009, we are scheduled to have 30 shows overall,
compared to 27 in 2008. We are focused on specialization and have established
unique market positions for categories including Security Products, Fashion Accessories, Baby &
Children’s Products, and Underwear & Swimwear.
 
 
 3.
              Expansion
      into China’s Domestic B2B Market
 
 We intend
to continue developing existing products and launch new products and services
for China’s domestic market. This is a significant medium-term business
opportunity where we intend to leverage our brands, content, sales
representatives, expertise and community. For example, in 2008 we began to
monetize our new site China
Global Sources Onlineat www.globalsources.com.cn.
 
 4.
              Acquisitions
      and/or Alliances
 
 We intend
to support our strategy by looking for acquisitions and/or alliances designed to
drive growth and accelerate achievement of our goals. We plan to seek
complementary businesses, technologies or products that will help us maintain or
achieve market leading positions in particular niche markets.
 
 Products
& Services
  Media
for Buyers Worldwide
  Online
Services
  Global Sources Online, our
primary online service, is comprised of the following industry sector
marketplaces:
  Auto
      Parts & Accessories
              Gifts
      & PremiumsBaby
      & Children’s Products
              Hardware
      & DIYComputer
      Products
              Home
      ProductsElectronic
      Components
              MachineryElectronics
              Security
      ProductsFashion
      Accessories
              Sports
      & LeisureGarments
      & Textiles
              Telecom
      Products
 
  Trade
Publications
  We
publish the following industry-specific trade magazines monthly:
  Global
      Sources Auto Parts & Accessories
              Global
      Sources Gifts & PremiumsGlobal
      Sources Baby & Children’s Products
              Global
      Sources Hardware & DIYGlobal
      Sources Computer Products
              Global
      Sources Home ProductsGlobal
      Sources Electronic Components
              Global
      Sources Security ProductsGlobal
      Sources Electronics
              Global
      Sources Sports & LeisureGlobal
      Sources Fashion Accessories
              Global
      Sources Telecom ProductsGlobal
      Sources Garments & Textiles
 
   26
   
 Trade
Shows & Exhibitions
  Hong
Kong
  
 Trade Show / Exhibition
                DescriptionChina
      Sourcing Fair: Electronics & Components
                ·
                Primary
      product categories include: consumer electronics; digital entertainment;
      in-car electronics; computer & networking; telecom & wireless
      products; WiFi & VoIP products; GPS products; health & personal
      care electronics; iPod accessories; electronic components; interconnection
      technology; opto-electronics and power supplies.·
                Spring
      and fall 2009 events in Hong Kong.China
      Sourcing Fair: Gifts & Premiums
                ·
                Primary
      product categories include: Christmas & seasonal products; electronic
      premiums, watches & clocks; general gifts; gift boxes; photo frames;
      promotional & travel mugs; promotional bags, caps & garments;
      promotional keychains, badges & pins; stationery & paper and
      trinkets & jewelry boxes.·
                Launched
      in spring 2009.·
                Spring
      and fall 2009 events in Hong Kong.China
      Sourcing Fair: Home Products
                ·
                Primary
      product categories include: kitchenware; glassware & tableware;
      ceramics & porcelain; household products; storage; laundry &
      cleaning products; bathroom products; health & personal care products;
      arts & crafts; home décor; oil paintings & wall decorations; home
      textiles; garden & outdoor; table lamps & decorative lighting;
      furniture & furnishings and sports & leisure.·
                Launched
      in spring 2009.·
                Spring
      and fall 2009 events in Hong Kong.China
      Sourcing Fair: Fashion Accessories
                ·
                Primary
      product categories include:  casual & fashion bags; evening
      bags; hats & caps; fashion belts; fashion jewelry; hair accessories;
      ties, scarves & shawls; socks; knitted accessories; casual &
      fashion footwear; umbrellas; gloves & mittens; sunglasses and travel
      bags & luggage.·
                Spring
      and fall 2009 events in Hong Kong.China
      Sourcing Fair: Underwear & Swimwear
                ·
                Primary
      product categories include:  underwear; swimwear, beachwear
      & accessories; sleepwear and fabrics; lace &
      trimmings.·
                Spring
      and fall 2009 events in Hong Kong.China
      Sourcing Fair: Baby & Children’s Products
                ·
                Primary
      product categories include: baby & children’s garments; beddings;
      furniture; safety products; care & bath products; feeding products;
      travel products; footwear; fashion accessories; bags; toys, games &
      puzzles; masks & costumes and outdoor play
  equipment.·
                Spring
      and fall 2009 events in Hong Kong.China
      Sourcing Fair: Security Products
                ·
                Primary
      product categories include: CCTV and digital surveillance; home security;
      access controls and alarms
      
 27
   Trade Show / Exhibition
                  Description·
                  Will
      launch in fall 2009 in Hong KongIndia
      Sourcing Fair: Home Products
                  ·
                  Primary
      product categories include: metalware; glassware; kitchenware; home décor;
      coir products; steel & plastics; home textiles; arts & crafts;
      leather products and bamboo & cane handicrafts.·
                  Spring
      and fall 2009 in Hong Kong, and June 2009 in
  Dubai
 
 Media
for Asian Engineers and Executives
 Online
Services
 
 Website
                DescriptionEE
      Times – Asia Online Network
                ·
                Provides
      industry news, new product information and technical features covering new
      technology and its application to engineers in China, Taiwan, South Korea,
      India and countries in the Association of Southeast Asian Nations;
      websites in traditional and simplified Chinese, English and Korean; 6
      application specific websites for Chinese engineers; and 2 design channels
      for India-based engineers.Electronic
      Design – China Online
                ·
                Provides
      China’s design engineers with access to detailed solutions, methodologies
      and white papers.Electronics
      Supply & Manufacturing – China Online
                ·
                Provides
      managers in China's electronics industry daily news updates, new product
      rollouts, new manufacturing strategies, and the latest technology and
      supplier reviews.Webinars
                ·
                Various
      webinars are offered throughout the year to provide corporate,
      engineering, procurement and manufacturing management with access to new
      manufacturing strategies, technology and supplier news.
 
 28
 
 Website
                  DescriptionChief
      Executive China Online
                  ·
                  The
      default management portal for China executives in simplified Chinese, with
      channels focus on leadership, strategy and management.Elegant
      Living Online
                  ·
                  The
      number one leisure vertical for China executives, offering information on
      how to strike a balance between work and daily life.
 
 Trade
Shows
 
 Trade Shows
                  DescriptionThe
      14th
      Annual International IC-China Conference & Exhibition
      (IIC-China)
                  ·
                  China’s
      largest system design event showcasing new IC technologies and the latest
      application methodology.·
                  Spring
      2009 events in China’s key technology hubs Shenzhen, Beijing, Shanghai and
      Xi'an attracted 36,046 visitors.·
                  Fall
      2009 shows in September will bring new technologies to emerging technology
      hubs of Wuhan, Dongguan and
Chengdu.
 
 Magazines
 
 Magazine
                  DescriptionEE
      Times - Asia
                  ·
                  Editions
      published monthly in simplified and traditional Chinese and Korean;
      provides engineering managers and design engineers in China, Taiwan and
      South Korea 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 in China with the latest in
      emerging technology and ”how-to” methodologies.Electronics
      Supply & Manufacturing - China
                  ·
                  Published
      monthly in simplified Chinese; provides corporate, engineering and
      procurement management in China with strategic business and technology
      information.Global
      Sources Chief Executive China
                  ·
                  A
      leading relevant management “how-to” guide for China senior executives;
      monthly bound-in “Elegant Living” lifestyle section as supplement.
      Published monthly in simplified Chinese.
 29
  Media
for Buyers in China
 
 Online
Services
 
 China Global Sources Online,
(www.globalsources.com.cn) is
designed to facilitate China domestic trade and assist overseas firms intent on
selling into China. It includes the following vertical
marketplaces:
 
 
 Auto
      Parts & Accessories
                Gifts
      & PremiumsBaby
      & Children’s Products
                Hardware
      & DIYComputer
      Products
                Home
      ProductsElectronic
      Components
                MachineryElectronics
                Security
      ProductsFashion
      Accessories
                Sports
      & LeisureGarments
      & Textiles
                Telecom
      Products
 
 
 Trade
Shows and Exhibitions
 
 Mainland
China
  Trade Shows / Exhibitions
                    DescriptionChina
      Sourcing Fair: Baby & Children’s Products
                    ·
                    Highly
      targeted exhibitions, offering international & mainland China buyers
      the widest selection of quality products from international and Greater
      China suppliers.·
                    Scheduled
      for January 2010 in Shanghai.China
      Sourcing Fair: Fashion Accessories
                    ·
                    Highly
      targeted exhibitions, offering international & mainland China buyers
      the widest selection of quality products from international and Greater
      China suppliers.·
                    Scheduled
      for January 2010 in Shanghai..China
      Sourcing Fair: Gifts & Premiums
                    ·
                    Highly
      targeted exhibitions, offering international & mainland China buyers
      the widest selection of quality products from international and Greater
      China suppliers.·
                    Scheduled
      for January 2010 in Shanghai.
 
 Dubai
& Mumbai
 
 Trade Shows / Exhibitions
                    DescriptionChina
      Sourcing Fairs in Dubai  for
                      Electronics
                    ·
                    Highly
      targeted exhibitions, offering importers and volume buyers in the Middle
      East, North Africa, India and Europe the widest selection of quality
      products from Greater China suppliers.Fashion
    Accessories
                    ·
                    Held
      annually in Dubai in June.Gifts &
    Premiums
                    ·
                    The
      2009 shows will be one of the largest-ever with over 1,100
      booths.Home ProductsChina
      Sourcing Fairs in Mumbai for
                      Electronics &
      Components
                    ·
                    Highly
      targeted exhibitions serving importers and volume buyers in India and
      surrounding markets who seek high-quality products from competitive
      Greater China suppliers.Hardware & Building
      Materials
                    ·
                    Held
      annually in Mumbai, India in November.Auto Parts &
      Accessories
                    ·
                    The
      events are being managed by Pico Event Management under license from
      Global Sources.
 
  30
  
 Customers
  We
provide services to a broad range of international buyers and suppliers in
various industry sectors.
  Suppliers
  During
2008, 16,514 suppliers paid us for marketing or advertising services and there
were 16,913 suppliers who paid us for marketing or advertising services for the
period from April 1, 2008 to March 31, 2009. Approximately 90% of these
suppliers were located in Greater China. No individual supplier customer
represented more than 1% of our revenue during 2008.
 
 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 800,000
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
attended a China Sourcing Fair tradeshow organized by us or who have made an
inquiry through the Global
Sources Online website within the 12 month period ended March 31, 2008 or
registered and double opted-in to receive product alert e-mails as of March 31,
2008 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 team
member sales organization consists of approximately 2,656 independent
representatives in approximately 69 cities worldwide, with 44 of these locations
in Greater China. We have a staff of 33 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, Shanghai,
Shenzhen, Hong Kong and Taipei. Our seven sales representative organizations in
China accounted for approximately 66% of our total revenue in 2008.
  Our
marketing strategy leverages our database of approximately 190,000 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.
   31
  
  Content
Development
  Our
content development group, comprised of 505 team members as of December 31,
2008, 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 printed and digital 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 (now known as TechInsights), 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.
  We formed
a license-based partnership with a third party to operate a regional online
marketing service in South Africa. This enables suppliers within South Africa to
promote their products and services to buyers located primarily outside of South
Africa.
  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. A description of the agreements between eMedia and
Penton is set out in Note 26 of our consolidated financial statements appearing
elsewhere in this annual report.
  Technology
and Systems
  We use a
combination of commercial software and internally developed systems to operate
our websites and services.
  We have
invested $11.7 million for years 2007 and 2008 combined in online services
development.
  As of
December 31, 2008, we had 159 team members engaged in technology development,
maintenance, software customization and data center operations.
  As of
December 31, 2008, our online marketplace services are run on the Oracle DBMS
release 10g. The catalog application that supports Global Sources Online’s core
functions uses a Java platform.
  Our
servers are hosted by AT&T iDC in Hong Kong. We have dual redundant 100Mbps
link connection directly to AT&T’s IX backbone, while AT&T’s IX
maintains in excess of 3.1G bps link to the United States and direct links to
most countries in Asia. We use Overland 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, 2008 our external network had 100% 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.
   32
  
  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, transaction software and
services providers, and electronic sourcing application and/or service
providers. We may be at a competitive disadvantage to companies that have
greater financial resources, that have more advanced technology, that have
greater experience or that offer lower cost solutions than ours. In addition,
some buyers and suppliers may have developed in-house solutions for the online
sourcing and marketing of goods and may be unwilling to use ours.
  Intellectual
Property
  Our
primary product and supplier content, in addition to our in-house produced
editorial content, is held under common law copyright. We actively protect this
intellectual property by several means, including the use of digital watermark
technology on the images on our website, which enables us to identify
unauthorized use on other websites.
  We have
also developed several proprietary technology applications.  In the
future, we may apply for patents for these technology applications, where
appropriate. However, we may not be successful in obtaining the patents for
which we applied. Even if we are issued a patent, it is possible that others may
be able to challenge such a patent or that no competitive advantage will be
gained from such patent.
  Our
intellectual property is very important to our business. We rely on a
combination of contractual provisions, employee and third-party nondisclosure
agreements, and copyright, trademark, service mark, trade secret and patent
laws, to establish and protect the proprietary rights of our brands, software,
content and services.
  We have
registrations for either or both of our “Global Sources” and “China Sourcing
Fairs” trademarks in Australia, the European Union, Hong Kong, India, Indonesia,
Israel, Mexico, mainland China, Singapore, South Africa, South Korea,
Switzerland, Taiwan, Turkey, the United Arab Emirates and the United States, and
we have applications for either or both these trademarks pending registration in
various countries or regions, including India, Indonesia, mainland China, the
Philippines, Taiwan, Thailand, the United Arab Emirates and the United
States.
  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, various legislative and regulatory proposals are frequently 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, regulation of online content (or the provision of internet content),
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.
  33
    Regulation
of Communications Facilities
  To some
extent, the rapid growth of the Internet has been due to the relative lack of
government intervention in the marketplace in respect of, or due to the relative
inadequate development or uncertainty of laws and regulations governing,
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 or may petition the relevant authorities to regulate
ISPs in a manner similar to long distance telephone carriers and to impose
access fees on such providers. Some ISPs are seeking to have broadband Internet
access over cable systems regulated in much the same manner as telephone
services, which could slow the deployment of broadband Internet access services.
Because of these proceedings or others, new laws or regulations could be
enacted, which could burden the companies that provide the infrastructure on
which the Internet is based, thereby slowing the rapid expansion of the medium
and its availability to new users.
 
  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, 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 aggregate approximately 104,327 square feet of executive and
administrative offices in China, Hong Kong, the Philippines, Singapore, Dubai
and Taiwan. Our aggregate base rental and building management fee payments for
the year ended December 31, 2008 were approximately $1.45 million.
During the first quarter of 2007, we entered into a letter of intent, followed
by a purchase agreement, to purchase approximately 1,939.38 square meters of
office space in a commercial building known as “Excellence Times Square” in
Shenzhen, China, at a purchase price of approximately $7.0 million, out of which
a down-payment of approximately $0.09 million was made in the first quarter of
2007, with the total remaining balance of approximately $6.91 million paid in
April 2007. Delivery of the office space to us was completed in April
2007.
  In May
2008, we entered into a letter of intent to purchase approximately 6,364.50
square meters (gross) of office space in a commercial building known as Shenzhen
International Chamber of Commerce Tower in Shenzhen at a price of approximately
$34.4 million, and paid a deposit of approximately $0.2 million. Subsequently,
in July 2008, we entered into the final property purchase agreements, and paid
an additional deposit of approximately $17 million. Our payment of the balance
of the total purchase price, in an amount of approximately $17.2 million, and
delivery of the property to us, was completed in the third quarter of
2008.
  In June
2008, we entered into a formal sale and purchase agreement to purchase
approximately 22,874 square feet (gross) of office space, together with 6 car
parking spaces, in a commercial building known as Southmark in Hong Kong, for a
total purchase price of approximately $11.9 million, and have paid a total
deposit of approximately $1.8 million. Completion of the property purchase and
payment of the balance of the purchase price, in an amount of approximately
$10.1 million, occurred in the third quarter of 2008.
   34
  
  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 B2B media company and a primary facilitator of two-way trade with
Greater China. The core business is facilitating trade from Greater China to the
world, using a wide range of English-language media. The other key business
segment facilitates trade from the world to Greater China using Chinese-language
media. We provide sourcing information to volume buyers and integrated marketing
services to suppliers. Our mission is to facilitate global trade between buyers
and suppliers by providing the right information, at the right time, in the
right format. Although our range of media has grown, for more than 38 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
in the industries we serve through our three primary channels – online
marketplaces, magazines and trade shows.
  We were
originally incorporated under the laws of Hong Kong in 1970. In 1971, we
launched Asian Sources,
a trade magazine to serve global buyers importing products in volume from Asia.
Realizing the importance of the Internet, we became one of the first providers
of business to business online services by launching Asian Sources Online in 1995.
In 1999, we changed the name of Asian Sources Onlineto Global Sources
Online.
 
 In April
2000, we completed a share exchange with a publicly traded company based in
Bermuda, and our shareholders became the majority shareholders of the Bermuda
corporation. As a result of the share exchange, we became incorporated under the
laws of Bermuda and changed our name to Global Sources Ltd.
 
 Revenue
 
 We derive
revenue from two principal sources.
 
 Online
and other media services; and Exhibitions-trade shows and seminars.
 
 Online
and other media services consists of following two primary revenue
streams:
 
 Online Services — Our primary
service is creating and hosting marketing websites that present suppliers’
product and company information in a consistent and easily searchable manner on
Global Sources Online.
We also derive revenue from banner advertising fees.
 
 Other Media Services — We
publish trade magazines, which consist primarily of product advertisements from
suppliers and our independent editorial reports and product surveys. Suppliers
pay for advertising in our trade
magazines to promote their products and companies. We also derive revenue from
buyers that subscribe to our trade publications and sourcing research
reports.
  35
   
 We
recognize revenue from our Online and Other Media Services ratably over the
period in which the advertisement is displayed.
 
 Exhibitions – trade shows and
seminars - Our China Sourcing Fairs offer international buyers direct
access to manufacturers from China and elsewhere in Asia. The first China
Sourcing Fair was held during the fourth quarter of 2003. Subsequently, we held
several China Sourcing Fairs events in the second and fourth quarters of 2004 to
2008. In addition, in 2007 we launched new China Sourcing Fairs events in Dubai
and Shanghai and in 2008 we launched new China Sourcing Fairs events in India.
Future China Sourcing Fairs are scheduled to be held mainly in the second
quarter and fourth quarter of each financial year. International IC China
Conferences and Exhibitions were held in March 2008 in the current year and
these same exhibitions were held in March 2007 last year. We derive revenue
primarily from exhibit space rentals, but also from advertising and sponsorship
fees in show guides and other locations in and around our event venues. We also
receive fees from attendees to attend our technical conferences held during the
events. We recognize exhibitor services revenue at the conclusion of the related
events. As a result, second quarter and fourth quarter revenue is expected to be
higher than the first and third quarter revenue.
 
 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 advertising fees in our published trade magazines and
websites, sale of trade magazines and reports, fees from licensing our trade and
service marks, organizing exhibitions and business seminars, commission income
from consignment sales and from direct sale of products.
  Revenue
from advertising in trade magazines and websites, net of discounts, is
recognized ratably over the period in which the advertisement is displayed.
Advertising contracts generally do not exceed one year. 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. 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.
  We
receive royalties from licensing our trade and service marks. Royalties from
license arrangements are earned ratably over the period in which the
advertisement is displayed by the licensee.
  We derive
income from direct product sales. Under the direct product sales business model,
the revenue is recorded when the right of return has expired after the delivery
of the goods to the buyer and the corresponding cost of products purchased is
recorded under sales costs. The amount of shipping costs invoiced to the buyers
is reported under revenue.
  We derive
commission income on the re-sale of products on consignment basis. The
commission income which is the sales proceeds, net of the cost of the purchased
products payable to the consigner and the associated direct transaction costs 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 sales commissions for exhibitions, circulation
expenses, and direct event production costs.
   36
  
  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 Statement of Financial Accounting Standards
(“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 are recognized as an expense
during the event months in the year in which the 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:
   37
  
  Year
      Ended December 31,2006
                
                
                2007
                
                
                2008Income
      statement data:Revenue:Online
      and other media
      services
                
                
                72
                %
                
                
                69
                %
                
                
                69
                %Exhibitions
                
                
                27
                
                
                
                28
                
                
                
                28Miscellaneous
                
                
                1
                
                
                
                3
                
                
                
                3Total
      revenue
                
                
                100
                
                
                
                100
                
                
                
                100Operating
      expenses:Sales
                
                
                32
                
                
                
                34
                
                
                
                36Event
      production
                
                
                11
                
                
                
                11
                
                
                
                10Community
                
                
                16
                
                
                
                15
                
                
                
                15General
      and
      administrative
                
                
                25
                
                
                
                24
                
                
                
                23Online
      services
      development
                
                
                3
                
                
                
                3
                
                
                
                3Amortization
      of software
      costs
                
                
                1
                
                
                
                -
                
                
                
                -Total
      operating
      expenses
                
                
                88
                %
                
                
                87
                %
                
                
                87
                %Income
      from
      operations
                
                
                12
                %
                
                
                13
                %
                
                
                13
                %Net
      income
                
                
                18
                %
                
                
                13
                %
                
                
                13
                %
 
  The
following table represents our revenue by geographical areas as a percentage of
total revenue:
  Year
      Ended December 31,2006
                
                
                2007
                
                
                2008Asia
                
                
                93
                %
                
                
                94
                %
                
                
                95
                %United
      States
                
                
                5
                
                
                
                5
                
                
                
                4Europe
                
                
                1
                
                
                
                0
                
                
                
                0Others
                
                
                1
                
                
                
                1
                
                
                
                1Total
      revenue
                
                
                100
                %
                
                
                100
                %
                
                
                100
                %
 
 Fiscal
Year 2008 Compared to Fiscal Year 2007
 
 Revenue
 
 Total
revenue grew to $206.9 million during the year ended December 31, 2008 from
$182.1 million during the year ended December 31, 2007, a growth of 14% driven
primarily by the growth in our Online and Other Media Services revenue. Our
Online and Other Media Services revenue grew by $16.3 million or 13% to $142.1
million during the year ended December 31, 2008, as compared with $125.8 million
during the year ended December 31, 2007 due to a 25% growth in our China market
and the growth in our Taiwan and United States markets, partially off-set by a
decline in our other markets during the year ended December 31, 2008. Included
in our Asia market is our China market, which represented 65% of Online and
Other Media Services revenue during the year ended December 31, 2008 compared to
59% during the year ended December 31, 2007. Our Exhibitions revenue grew from
$51.6 million during the year ended December 31, 2007 to $58.2 million during
the year ended December 31, 2008, a growth of 13%, due mainly to growth in
revenue of our China Sourcing Fairs held in Hong Kong and Dubai during the
second quarter of 2008 and in Hong Kong, India and China during the fourth
quarter of 2008 and the growth in our International IC China Conferences and
Exhibitions held in the first quarter of 2008. Our Exhibitions revenue from
China grew by 19% during the year ended December 31, 2008 compared to year ended
December 31, 2007. Included in our Asia market is our China market, which
represented 69% of Exhibitions revenue during the year ended December 31, 2008
compared to 65% during the year ended December 31, 2007.
 
 We have
made substantial progress in developing our customer base in China, our largest
market. Total revenue from China grew by 24% during the year ended December 31,
2008 compared to the year ended December 31, 2007. The decline in consumer
demand in United States and Europe is resulting in a decline of
exports from mainland China to these markets. Such a decline in export business
in mainland China may adversely affect our revenue.
  38
   
 Operating
Expenses
  Sales
 
 We
utilize independent sales representatives employed by independent sales
representative organizations in various countries and territories to promote our
products and services. Under these arrangements, the sales representative
organizations are entitled to commissions as well as marketing fees. For online
and other media services, the commission expense is recognized when the
associated revenue is recognized or when the associated accounts receivable are
paid, whichever is earlier. For exhibitions, the commission expense is
recognized when the associated revenue is recognized upon conclusion of the
event. Sales costs consist of operating costs for our sales departments and the
commissions, marketing fees 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 $61.8 million during the year ended December 31, 2007 to
$73.6 million during the year ended December 31, 2008, an increase of 19% due
mainly to increase in sales commission resulting from an increase in revenue and
an increase in sales marketing fees for new initiatives off-set partially by a
reduction in non-cash compensation expense relating to share awards to sales
team members under our equity compensation plans (Please see paragraph on
“Non-Cash Compensation Expense in this Item 5”).
 
 Event
Production
 
 Event
production costs consist of the costs incurred for hosting the exhibition or
trade show and seminar events. The event production costs include venue rental
charges, booth construction costs, travel costs incurred for the event hosting
and other event organizing costs. The event production costs are deferred and
recognized as an expense when the related event occurs.
 
 Event
production costs increased by 6% from $20.2 million during the year ended
December 31, 2007 to $21.5 million during the year ended December 31, 2008,
primarily due to an increase in the number of booths sold in our China Sourcing
Fairs exhibition events in Dubai and Hong Kong and our China Sourcing Fairs
exhibition events held for first time in India and an increase in the number of
our International IC China Conferences and Exhibitions in 2008 compared to
2007.
 
 Community
 
 Community
costs consist of the costs incurred for servicing our buyer community and for
marketing our products and services to the global buyer community. Community
costs also include costs relating to our trade magazine publishing business and
marketing inserts business, specifically printing, paper, bulk circulation,
magazine subscription promotions, promotions for our on-line services, customer
services costs and the event specific promotions costs incurred for promoting
the China Sourcing Fairs events and the technical conferences, exhibitions and
seminars to the buyer community. The event specific promotion costs incurred for
events are expensed during the event months in the year in which the expenses
are incurred.
 
 Community
costs increased from $27.1 million during the year ended December 31, 2007 to
$30.5 million during the year ended December 31, 2008, an increase of 13%. This
increase was due mainly to an increase in bulk circulation costs, paper costs,
magazine subscription promotion costs, payroll costs, fees paid to third parties
and promotion costs for our exhibition events.
 
 General
and Administrative
 
 General
and administrative costs consist mainly of corporate staff compensation,
information technology support services, content management services, marketing
costs, office rental, depreciation, communication and travel
costs.
  39
  
 
 General
and administrative costs increased from $44.2 million during the year ended
December 31, 2007 to $47.5 million during the year ended December 31, 2008, an
increase of 7%, due mainly to the increases in fees paid to third parties,
content management services costs, information technology services costs,
marketing costs and depreciation costs off-set partially by a reduction in
non-cash compensation expense relating to share awards (Please see paragraph on
“Non-Cash Compensation Expense in this Item 5”).
 
 Online
Services Development
 
 Online
services development costs consist mainly of payroll, office rental and
depreciation costs relating to the updating and maintenance of Global Sources
Online.
 
 Online
services development costs to fund the updating and maintenance of our online
services increased by 5% from $5.7 million during the year ended December 31,
2007 to $6.0 million during the year ended December 31, 2008 due mainly to
increases in computer equipment and software maintenance costs and internet
communications costs and fees paid to third parties.
 
 Non-Cash
Compensation Expense
 
 We have
issued share awards under several equity compensation plans to both employees
and consultants, who are non-employees. We also recognize non-cash compensation
expenses relating to the shares purchased by our directors under Directors
Purchase Plan.
 
 The total
non-cash compensation credit, resulting from the equity compensation plans and
the Directors Purchase Plan recorded by us and included under the respective
categories of expenses during the year ended December 31, 2008 was $0.9 million
compared to an expense of $7.8 million recorded during the year ended December
31, 2007.  The reduction is due mainly to re-measurement of equity
compensation expense relating to non-employee share awards based on our
prevailing share price and the completion of vesting of some of the past share
awards, off-set partially by the new share awards during the year ended December
31, 2008.
 
 The
corresponding amounts for the non-cash compensation credit/expenses are
charged/credited to shareholders’ equity.
 
 As of
December 31, 2008 there was approximately $8.3 million of unrecognized non-cash
compensation cost associated with the awards under the above equity compensation
plans, which is expected to be recognized over the next six years.
 
 Amortization
of software costs
 
 Amortization
of software costs was $0.2 million during both the year ended December 31, 2008
and the year ended December 31, 2007.
 
 Income
from Operations
 
 The total
income from operations during the year ended December 31, 2008 was $27.6 million
as compared to $23.0 million during the year ended December 31, 2007. The growth
in total income from operations resulted mainly from growth in revenue, off-set
partially by increases in sales costs, event production costs, community costs,
general and administrative costs and online services development costs. Income
from operations for online and other media services grew from $22.3 million
during the year ended December 31, 2007 to $25.0 million during the year ended
December 31, 2008, a growth of 12%. The growth resulted mainly from growth in
online and other media services revenue, off-set partially by increases in sales
costs, community costs, general and administrative costs and online services
development costs. Income from operations for exhibition services grew to $1.8
million during the year ended December 31, 2008 from a loss of $0.2 million
during the year ended December 31, 2007. The growth resulted mainly from growth
in exhibitions revenue, off-set partially by increases in sales costs, event
production costs, community costs, general and administrative
costs.
  40
  
 
 
 Interest
and dividend income
 
 We
recorded interest income of $2.9 million arising mainly from U.S. Treasury
securities compared to interest income of $6.6 million during the year ended
December 31, 2007. The decline in interest income was mainly due to lower yield
on U.S. Treasury securities.
 
 Impairment
loss on investment and available-for-sale securities, net
 
 During
year ended December 31, 2008, we recorded an impairment charge of approximately
$0.9 million on our investment in available-for-sale securities as management
determined that the impairment was other than temporary. During the year ended
December 31, 2007, we recorded an impairment charge of approximately $2.3
million on our investment in HC International, Inc and received a $0.5 million
payment pursuant to the indemnification obligations of the vendor under the
purchase agreement for the HC International investment. The net impairment loss
of $1.8 million reflected on the consolidated statement of income represents the
impairment loss, net of the $0.5 million received. There was no such impairment
charge relating to investment in HC International for the year ended December
31, 2008 as we sold all our investment in HC International, Inc during the
fourth quarter of 2007.
 
 Income
Taxes
 
 We and
certain other subsidiaries of the group operate in the Cayman Islands and other
jurisdictions where there are no taxes imposed on companies. Certain of our
subsidiaries operate in Hong Kong SAR, Singapore, China and certain other
jurisdictions and are subject to income taxes in their respective
jurisdictions.
 
 We
reported a tax provision of $0.7 million during the year ended December 31, 2008
and $0.3 million during the year ended December 31, 2007. The lower tax expense
during 2007 was explained in paragraph ‘Income Taxes’ under Section ‘Fiscal Year
2007 compared to Fiscal Year 2006’ in this Item 5.
 
 Net
Income
 
 Net
income was $26.4 million during the year ended December 31, 2008, compared to a
net income of $24.0 million during the year ended December 31, 2007. The growth
in net income resulted mainly from growth in revenue and a reductions in foreign
exchange loss, impairment loss on available-for sale securities, impairment
charges on goodwill and intangible assets and in the share of profits
attributable to a non-controlling shareholder, off-set partially by increases in
sales costs, event production costs, community costs, general and administrative
costs, online services development costs and decline in the interest income and
decline in gain on sale of available for sale securities .
 
 Fiscal
Year 2007 Compared to Fiscal Year 2006
 
 Revenue
 
 Total
revenue grew to $182.1 million during the year ended December 31, 2007 from
$156.5 million during the year ended December 31, 2006, a growth of 16% driven
primarily by the growth in our China Sourcing Fairs exhibitions revenue and our
online and other media services revenue. Our Online and Other Media Services
revenue grew by $12.7 million or 11% to $125.8 million during the year ended
December 31, 2007, as compared with $113.1 million during the year ended
December 31, 2006 due to a 23% growth in our China market and the growth in our
Hong Kong, Korea, Thailand and U.S. markets, off-set by a decline in some of our
other markets during the year ended December 31, 2007. China represented 59% of
Online and Other Media Services revenue during the year ended December 31, 2007
compared to 53% during the year ended December 31, 2006. Our Exhibitions revenue
grew from $42.1 million during the year ended December 31, 2006 to $51.6 million
during the year ended December 31, 2007, a growth of 23%, due mainly to growth
in revenue of our China Sourcing Fairs during the year 2007 held in Hong Kong,
Dubai and Shanghai. Our exhibitions revenue from China grew by 46% during the
year ended December 31, 2007 compared to year ended December 31, 2006. China
represented 65% of Exhibitions revenue during the year ended December 31, 2007
compared to 55% during the year ended December 31, 2006.
  41
  
 
 We have
made substantial progress in developing our customer base in China, our largest
market. Total revenue from China grew by 31% during the year ended December 31,
2007 compared to year ended December 31, 2006 due to growth in our China
Sourcing Fairs exhibitions, International IC China Conferences and Exhibitions
and Online and Other Media Services revenue. We expect revenue from China as a
percentage of total revenue to continue to grow and overall revenue from China
to continue to grow.
 
 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 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 $50.4 million during the year ended December 31, 2006 to
$61.8 million during the year ended December 31, 2007, an increase of 23% due
mainly to increase in sales commission resulting from an increase in revenue,
increase in sales marketing fees for new initiatives and increase in non-cash
compensation expense relating to share awards to sales team members under our
equity compensation plans.
 
 Event
Production
 
 Event
production costs consist of the costs incurred for hosting the exhibition or
trade show and seminar events. The event production costs include venue rental
charges, booth construction costs, travel costs incurred for the event hosting
and other event organizing costs. The event production costs are deferred and
recognized as an expense when the related event occurs.
 
 Event
production costs increased by 10% from $18.4 million during the year ended
December 31, 2006 to $20.2 million during the year ended December 31, 2007,
primarily due to increase in number of exhibitions held and booths sold in
2007.
 
 Community
 
 Community
costs consist of the costs incurred for servicing our buyer community and for
marketing our products and services to the global buyer community. Community
costs also include costs relating to our trade magazine publishing business and
marketing inserts business, specifically printing, paper, bulk circulation,
magazine subscription promotions, promotions for our on-line services, customer
services costs and the event specific promotions costs incurred for promoting
the China Sourcing Fairs events and the technical conferences, exhibitions and
seminars to the buyer community. The event specific promotion costs incurred for
events are expensed during the event months in the year in which the expenses
are incurred.
 
 Community
costs increased from $24.9 million during the year ended December 31, 2006 to
$27.1 million during the year ended December 31, 2007, an increase of 9%. This
increase was due mainly to increase in bulk circulation costs, paper costs,
printing charges, magazine subscription promotion costs, travel costs, fees paid
to third parties, increase in our participation in third party trade shows to
promote our products and services to buyer community, and an increase in
promotion costs for our exhibition events.
 
 General
and Administrative
 
 General
and administrative costs consist mainly of corporate staff compensation,
information technology support services, content management services, marketing
costs, office rental, depreciation, communication and travel costs.
 
 General
and administrative costs increased from $38.9 million during the year ended
December 31, 2006 to $44.2 million during the year ended December 31, 2007, an
increase of 14%, due mainly to the increases in fees paid to third parties,
content management services costs, information technology services costs,
payroll costs, travel costs, depreciation costs and increase in non-cash
compensation expense relating to share awards to team members under
our  equity compensation plans.
  42
  
 Online
Services Development
 
 Online
services development costs consist mainly of payroll, office rental and
depreciation costs relating to the updating and maintenance of Global Sources
Online.
 
 Online
services development costs to fund the updating and maintenance of our online
services increased by 27% from $4.5 million during the year ended December 31,
2006 to $5.7 million during the year ended December 31, 2007 due mainly to
increases in depreciation costs and internet communications costs, and fees paid
to third parties.
 
 Non-Cash
Compensation Expense
 
 We have
issued share awards under several equity compensation plans to both employees
and team members. We also recognize non-cash compensation expenses relating to
the shares purchased by our directors under the Directors Purchase
Plan.
 
 Effective
January 1, 2006, the Company adopted the provisions of SFAS No. 123(R),
“Share-Based Payment”, using the modified prospective application transition
method, which requires application of SFAS No. 123(R) for new awards granted
after the adoption of SFAS No. 123(R) and for any portion of awards granted
prior to the date of adoption that have not vested as of the date of adoption of
SFAS No. 123(R).
  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.
  For
equity instruments issued to non-employees, the Company uses the measurement
guidance of 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.
  The
Company recognizes the compensation costs associated with share awards with
graded vesting to employees on a straight-line basis over the requisite service
period for the entire award.
  The
Company recognizes the compensation costs associated with share awards to
non-employees on an accelerated attribution basis over the requisite service
period.
 Under
SFAS No. 123(R), the Company is required to adjust its compensation cost for
pre-vesting forfeitures, i.e. an award that is forfeited prior to vesting. As
the share grants to the employees include service conditions, the fair value of
the awards is not adjusted subsequent to the grant date. At each reporting date,
the Company would estimate the quantity of share grants expected to vest and
record the compensation cost for the share grants that are expected to
vest.
 
 For the
shares purchased by the directors under Directors Purchase Plan, the Company has
utilized an option-pricing model for determination of the grant date fair value
and the recording of compensation cost associated with the shares purchased by
the Directors under the plan.
  The total
non-cash compensation expense, resulting from the equity compensation plans and
the Directors Purchase Plan recorded by us and included under the respective
categories of expenses during the year ended December 31, 2007 was $7.8 million
compared to $4.1 million recorded during the year ended December 31, 2006. The
increase is due mainly to re-measurement of equity compensation expense based on
our prevailing share price and new share awards during the year 2007, off-set
partially by completed vesting of some of the past share awards.
 
 The
corresponding amounts for the non-cash compensation expenses are credited to
shareholders’ equity.
  43
  
 
 As of
December 31, 2007 there was approximately $11.7 million of unrecognized non-cash
compensation cost associated with the awards under the above equity compensation
plans, which is expected to be recognized over the next six years.
 
 Amortization
of Software Costs and intangibles
 
 Amortization
of software costs and intangibles was $0.2 million during the year ended
December 31, 2007 compared to $1.3 million during year ended December 31,
2006.
 
 Income
from Operations
 
 The total
income from operations during the year ended December 31, 2007 was $23.0 million
as compared to $18.1 million during the year ended December 31, 2006. The growth
in total income from operations resulted mainly from growth in revenue and a
decline in amortization of software costs off-set partially by increases in
sales costs, event production costs, community costs, general and administrative
costs and online services development costs. Income from operations for online
and other media services grew from $21.9 million during the year ended December
31, 2006 to $22.3 million during the year ended December 31, 2007, a growth of
2%. The growth resulted mainly from growth in online and other media services
revenue and decline in amortization of software costs and intangibles, off-set
partially by increases in sales costs, community costs, general and
administrative costs and online services development costs.
 
 Interest and Dividend Income
and Gain on Sale of
Available-for-sale Securities
 
 We
recorded interest income of $6.6 million arising mainly from U.S. Treasury
securities and a gain of $2.9 million arising from the sale of
available-for-sale securities including $2.4 million gain from sale of HC
International shares during the year ended December 31, 2007 compared to a gain
of $0.3 million and an interest and dividend income of $5.6 million during the
year ended December 31, 2006.
 
 Loss
on Investment, Net
 
 During
2007, we recorded an impairment charge of approximately $2.3 million on our
investment in HC International, Inc and received $0.5 million pursuant to the
indemnification obligations of the vendor under the purchase agreement for the
HC International investment. The $1.8 million represents the impairment loss,
net of the $0.5 million received. Please see “Liquidity and Capital Resources”
section in this Item 5.
 
 Impairment
of Goodwill and Intangible Assets
 
 During
2007, we recorded an impairment charge of approximately $3.1 million on the
goodwill and intangible assets acquired by us in our business acquisition of
Blue Bamboo China Ventures. Please see “Liquidity and Capital Resources”
section.
 
 Income
Taxes
 
 We and
certain other 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, Singapore, China and certain other jurisdictions and
are subject to income taxes in their respective jurisdictions.
 
 We
reported a tax provision of $0.3 million during the year ended December 31, 2007
compared to a tax provision of $0.9 million during the year ended December 31,
2006. The reduction in tax expense resulted primarily from the recognition of
deferred tax asset for the expected future tax benefit of expenses incurred by
one of our subsidiaries, which are not yet deductible for tax purposes and a
reduction in tax expense for two of our subsidiaries due to reduction in their
income, as we outsourced most of operations previously carried out by these
subsidiaries.
  44
  
 
 Cumulative
Effect of Change in Accounting Principle
 
 During
2006, we have recorded a credit to expenses of $0.3 million which resulted from
the cumulative effect of change in accounting principle, upon adoption of SFAS
No.123(R), which was effective on January 1, 2006. There was no such credit to
expenses during the year 2007.
 
 Net
Income
 
 Net
income was $24.0 million during the year ended December 31, 2007, compared to
$27.9 million during the year ended December 31, 2006. The decline in net income
resulted from increases in sales costs, event production costs, community costs,
general and administrative costs, online services development costs, net loss on
investment, impairment of goodwill and intangible assets, foreign exchange
losses and share of income attributable to a non-controlling interest holder
during the year 2007 due to profitable performance of a subsidiary off-set
partially by growth in revenue, decline in amortization of software costs,
increase in interest and dividend income, increase in gain on sale of available
for sale securities and a reduction in tax provision.
 
 Liquidity
and Capital Resources
 
 We
financed our activities for the year ended December 31, 2008 using cash
generated from our operations.
 
 Net cash
generated from operating activities was $37.9 million during the year ended
December 31, 2008, compared to $60.6 million cash generated from operating
activities during the year ended December 31, 2007. The primary source of cash
from operating activities was collections from our customers received through
our independent sales representative organizations.
 
 Advance
payments received from customers were $76.7 million as of December 31, 2008,
compared to $83.1 million as at December 31, 2007. A majority of our customers
in China pay us in advance for our Online and other media services business. The
majority of our Exhibitions business collections are advance payments. The
decline in advance payments received from customers resulted from the current
economic turmoil and weak global economy.
 
 Receivables
from sales representative organizations declined from $12.3 million as of
December 31, 2007 to $5.6 million as of December 31, 2008, which improved our
liquidity. The receivables from sales representative organizations may decline
in the near future as the collections are transferred to our bank account. In
the long term, if our China business and our exhibition business grows as the
economic climate improves, the receivables from sales representative
organizations may increase. All the authorized signatories to the collection
depository bank accounts maintained by our sales representatives in China are
our employees, a majority of whom are our senior management staff.
 
 We
continuously monitor collections from our customers and maintain an adequate
allowance for doubtful accounts. While credit losses have historically been
within our expectations and the allowances established, if bad debts
significantly exceed our provisions, additional allowances may be required in
the future.
 
 Net cash
used in investing activities was $113.1 million during the year ended December
31, 2008, resulting from the $51.5 million cash used for capital expenditures
mainly for purchase of office premises in China and Hong Kong, computers,
software, office furniture, leasehold improvements and software development, net
purchase of available-for-sale securities for $61.7 million off-set partially by
$0.1 million proceeds from matured bonds. Net cash provided by investing
activities was $1.6 million during the year ended December 31, 2007, resulting
from the net sale of available-for-sale securities for $15.8 million, $0.2
million proceeds from matured bonds off-set partially by $11.3 million cash used
for capital expenditures mainly for purchase of office premises in China,
computers, software, office furniture, leasehold improvements and software
development and $3.1 million cash used for acquiring the business of Blue
Bamboo.
 
 Capital
expenditures during the three months period ended March 31, 2009 amounted to
$0.8 million and were incurred mainly for computers, software, office furniture
and leasehold improvements. 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, 2008 and the three months ended March 31,
2009 amounted to $0.06 million and $0.001 million,
respectively.
  45
   
 We invest
our excess cash in U.S. Treasury securities and available-for-sale securities to
generate income from interest received as well as capital gains, while the funds
are held to support our business.
 
 Generally,
we hold securities with specified maturity dates such as U.S. Treasury Bills
until their maturity but the securities managed by high quality institutions
that do not have fixed maturity dates are generally sold at the end of each
quarter and proceeds reinvested in similar securities at the beginning of the
following quarter. During the year ended December 31, 2008, we purchased $61.7
million of available-for-sale securities, which are mainly U.S. Treasury Bills
with original maturity of more than three months using the proceeds from the
matured U.S. Treasury Bills received during the fourth quarter of 2008. We do
not engage in buying and selling of securities with the objective of generating
profits on short-term differences in price.
 
 Net cash
used in financing activities was $51.6 million during the year ended December
31, 2008, resulting from $50.0 million used for repurchase of common shares by
tender offer to all shareholders of the Company, $2.0 million repayment of
capital to non-controlling shareholder upon capital reduction in a subsidiary,
$0.5 million payment of dividend to non-controlling shareholder by a subsidiary,
off-set partially by $0.9 million received from directors for the shares
subscribed by them in the Directors Purchase Plan. Net cash provided by
financing activities was $0.4 million during the year ended December 31, 2007,
which represents the amount received from directors for the shares subscribed by
them in the Directors Purchase Plan.
 
 We hold a
Documentary Credit facility with the Hongkong and Shanghai Banking Corporation
Limited, for providing documentary credits to our suppliers. This facility has a
maximum limit of approximately $0.6 million. As of December 31, 2008, the
unutilized amount under this facility was approximately $0.5 million. Hongkong
and Shanghai Banking Corporation Limited has also provided a guarantee on our
behalf to our suppliers. As of December 31, 2008, such guarantee amounted to
$0.003 million.
 
 We
recorded a valuation allowance for the deferred tax assets of $6.7 million as of
December 31, 2008 as it was more likely than not that they would not be
realized. These deferred tax assets resulted from the net operating losses in
some of our subsidiaries.
 
 During
the first quarter of 2004, we entered into a number of license agreements for
our exhibition events amounting to $29.7 million in payments over five years.
The agreements are cancelable under Force Majeure conditions, and with the
consent of the other party but may be subject to a payment penalty. As of
December 31, 2008, we have fully paid the $29.7 million under these agreements.
During the first quarter of 2007, we entered into a number of venue license
agreements for our exhibition events amounting to $44.4 million in payments over
five and a half years. The agreements are cancelable under Force Majeure
conditions, or upon notice and payment of cancellation charges to the other
party. The amounts paid will be expensed when the related events are held. As of
December 31, 2008, we have paid approximately $5.3 million under these
agreements.
 
 In the
past, we entered into several agreements for the event specific promotion of our
exhibition events amounting to $4.0 million, in payments over five years. The
outstanding balance as of December 31, 2008, under these agreements was nil. In
2008, we entered into promotion agreements for the event specific promotion of
our exhibition events amounting to $3.5 million. As of December 31, 2008, we
have paid $1.3 million under these agreements.
 
 On
December 20, 2007, we announced a one-for-ten bonus share issue on our
outstanding common shares. Shareholders of record on January 1, 2008 received
one additional common share for every ten common shares held, of face value of
$0.01 each. The bonus share issue was distributed on or about February 1, 2008.
We have accounted for the bonus share issue as stock split and reclassified
$0.042 million from additional paid in capital to common share capital as of
both December 31, 2008 and December 31, 2007, in connection with the bonus share
issue.
 
 On
February 12, 2009, we announced a one-for-ten bonus share issue on our
outstanding common shares. Shareholders of record on February 27, 2009 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 March 31, 2009. We have accounted for the bonus share issue as a stock
split and retrospectively reclassified $0.047 million from additional paid in
capital to common share capital as of December 31, 2008 and $0.046 million from
additional paid in capital to common share capital as of December 31, 2007, in
connection with the bonus share issue.
  46
   
 On
February 4, 2008, our board of directors authorized a program to buyback up to
$50 million of common shares. We may, from time to time, as business conditions
warrant, purchase shares in the open market or through private transactions. The
buyback program does not obligate us to buyback any specific number of shares
and may be suspended or terminated at any time at management’s discretion. The
timing and amount of any buyback of shares will be determined by management
based on its evaluation of market conditions and other factors. As of December
31, 2008, we have not bought back any of our shares under this
program.
 
 In
addition to the above, our Board of Directors, at their meetings held on
November 10 and 11, 2008, approved the purchase by the Company, by tender offer,
which is available for all shareholders to participate, of 6.25 million of our
issued and outstanding common shares at a total purchase price of $50.0 million
or $8.00 per share. We announced on November 12, 2008 a tender offer, available
for all shareholders to participate, to repurchase 6.25 million of our common
shares, or approximately 13.4% of our total issued and outstanding shares at
that time, at a purchase price of $8.00 per share in cash or up to $ 50.0
million. The tender offer commenced on November 21, 2008 and expired on December
19, 2008. Our Company's common shares that were properly tendered and not
properly withdrawn were greater than the number of shares that the Company
offered to purchase, which therefore required a pro-ration process. The
pro-ration process was concluded by December 26, 2008 and the Company accepted
15.97764% of the shares properly tendered and not properly withdrawn by each
shareholder. The Company issued payment of $8.00 per share for all pro-rata
shares that were properly tendered and not properly withdrawn. The repurchase
was completed by December 31, 2008 and we paid total $50.0 million in purchase
consideration to the selling shareholders. We are holding the repurchased shares
as treasury shares, which are disclosed as such on our balance sheet as of
December 31, 2008.
 
 In May
2008, we entered into a letter of intent to purchase approximately 6,364.50
square meters (gross) of office space in a commercial building known as Shenzhen
International Chamber of Commerce Tower in Shenzhen at a price of approximately
$34.8 million, and paid a deposit of approximately $0.2
million.  Subsequently, in July 2008, we entered into the final
property purchase agreements, and paid an additional deposit of approximately
$17.2 million. In September 2008, we made payment of the balance of the total
purchase price, in an amount of approximately $17.4 million, completed the
purchase and received the title to the property.
 
 On June
18, 2008, we entered into a formal sale and purchase agreement to purchase
approximately 22,874 square feet (gross) of office space, together with 6 car
parking spaces, in a commercial building known as Southmark in Hong Kong, for a
total purchase price of approximately $11.9 million, and paid a total deposit of
approximately $1.8 million in the second quarter of 2008. In August 2008, we
made payment on the balance of the purchase price, in an amount of approximately
$10.1 million, and received possession of the property.
 
 In June
2008, approval of the board of directors and the shareholders of eMedia Asia
Ltd. were obtained for distribution of the excess cash in eMedia Asia Ltd. to
shareholders of eMedia Asia Ltd., by way of a one-for-one issue of new shares
(as share dividends) and then a purchase back by eMedia Asia Ltd. of those share
dividends and a consequent reduction of its share capital.
 
 Pursuant
thereto, eMedia Asia Ltd. completed the issuance of 1,000 shares to its
shareholders as share dividends in June 2008, and the subsequent purchase of
those 1,000 shares (at a price of $5,000 per share) and the reduction of its
share capital through the cancellation of those 1,000 purchased shares in July
2008.
 
 Upon the
completion of the aforesaid capital reduction, in July 2008, we recorded the
$1.995 million payable to the non-controlling shareholder pursuant to the above
transaction as a reduction of the non-controlling interest liability. The
distribution of the total amount of $5.0 million to its shareholders by way of a
share purchase dividend was completed in July 2008.
  47
  
 
 We have
no bank debt as at December 31, 2008.
 
 
 The
following table summarizes our contractual obligations as of December 31,
2008:
 
 Payments due by period (in U.S. Dollars
      Thousands)Total
                
                
                Less
      than
                    1
      year
                
                
                1-3
                    years
                
                
                3-5
      years
                
                
                More
      than
                    5
      yearsContractual
      ObligationsOperating
      leases
                
                $
                1,673
                
                
                $
                916
                
                
                $
                757
                
                
                
                -
                
                
                
                -Purchase
      obligations...............................
                
                
                3,455
                
                
                
                3,392
                
                
                
                63
                
                
                
                -
                
                
                
                -Deferred
      income and customer prepayments
      –         long
      term
                
                
                3,044
                
                
                
                -
                
                
                
                3,031
                
                
                
                13
                
                
                
                -Total
                
                $
                8,172
                
                
                $
                4,308
                
                
                $
                3,851
                
                
                $
                13
                
                
                
                -
   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.
 
 Off-Balance
Sheet Arrangements
 
 We do not
have any off-balance sheet arrangements that have a material effect or are
reasonably likely to have a material future effect on our financial condition,
changes in financial condition, revenues and expenses, results of operations,
liquidity, capital expenditures, or capital resources.
 
 Recent
Accounting Pronouncements
 
 In
September 2006, the Financial Accounting Standards Board (“FASB”) issued SFAS
No. 157, “Fair Value Measurements” (“SFAS No. 157”). This Standard defines fair
value, establishes a framework for measuring fair value in accordance with
generally accepted accounting principles and expands disclosures about fair
value measurements. SFAS No. 157 is effective for fiscal years beginning after
November 15, 2007. As required under SFAS No. 157, the statement shall be
applied prospectively as of the beginning of the fiscal year in which this
Statement is initially applied, except that the Statement shall be applied
retrospectively to certain financial instruments as of the beginning of the
fiscal year in which this Statement is initially applied (a limited form of
retrospective application). However in February 2008, the FASB issued FASB Staff
Position (“FSP”) FAS 157-2, which delays the effective date of SFAS No. 157 for
all nonfinancial assets and nonfinancial liabilities, except those that are
recognized or disclosed at fair values in the financial statements on a
recurring basis. This FSP partially defers the effective date of SFAS No. 157 to
fiscal years beginning after November 15, 2008. We adopted SFAS No. 157 with
effect from January 1, 2008, except as it applies to those nonfinancial assets
and nonfinancial liabilities as noted in FSP FAS 157-2. The adoption of this
accounting standard did not have any material impact on our consolidated
financial statements.
 
 In
February 2007, the FASB issued SFAS No. 159, “The Fair Value Option for
Financial Assets and Financial Liabilities – including an amendment of FASB
Statement No. 115.” SFAS No. 159 permits entities to choose to measure many
financial instruments and certain other items at fair value. Unrealized gains
and losses on items for which the fair value option has been elected will be
recognized in earnings at each subsequent reporting date. SFAS No. 159 is
effective for fiscal year beginning after November 15, 2007. We adopted SFAS No.
159 with effect from January 1, 2008 and the adoption of this accounting
standard did not have any material impact on our consolidated financial
statements.
 
 In March
2008, the FASB issued SFAS No. 161,“Disclosures About Derivative
Instruments and Hedging Activities – an amendment of FASB Statement No. 133”.
SFAS No. 161 expands quarterly disclosure requirements in SFAS No. 133 about an
entity’s derivative instruments and hedging activities. SFAS No. 161 is
effective for fiscal years beginning after November 15, 2008. We adopted SFAS
No. 161 with effect from January
1, 2009 and the adoption of SFAS No. 161 does not have a material impact on our
consolidated financial statements.
  48
   
 In May
2008, the FASB issued SFAS No. 162, “The Hierarchy of Generally Accepted
Accounting Principles (SFAS No. 162)”. SFAS No. 162 identifies the sources of
accounting principles and the framework for selecting the principles used in the
preparation of financial statements. SFAS No. 162 is effective 60 days following
the SEC’s approval of the Public Company Accounting Oversight Board amendments
to AU Section 411, “The Meaning of Present Fairly in Conformity with Generally
Accepted Accounting Principles”. The implementation of this standard is not
expected to have a material impact on our consolidated financial
statements.
 
 In
October 2008, the FASB issued FSP FAS 157-3, Determining the Fair Value of a
Financial Asset When the Market for That Asset Is Not Active (“FSP FAS 157-3”),
to help constituents measure fair value in markets that are not active. FSP FAS
157-3 is consistent with the joint press release the FASB issued with the SEC on
September 30, 2008, which provides general clarification guidance on determining
fair value under SFAS No. 157 when markets are inactive. FSP FAS 157-3 was
effective upon issuance, including prior periods for which financial statements
had not been issued. The adoption of FSP 157-3 did not have a material impact on
our consolidated financial statements.
 
 In
December 2008, the FASB issued FSP FAS No. 140-4 and FIN 46R-8 Disclosures by
Public Entities (Enterprises) about Transfers of Financial Assets and Interests
in Variable Interest Entities (“FSP FAS 140-4 and FIN 46R-8”). FSP FAS 140-4 and
FIN 46R-8 require additional disclosures about transfers of financial assets and
involvement with variable interest entities. The requirements apply to
transferors, sponsors, servicers, primary beneficiaries and holders of
significant variable interests in a variable interest entity or qualifying
special purpose entity. FSP FAS 140-4 and FIN 46R-8 is effective for financial
statements issued for reporting periods ending after December 15, 2008. FSP FAS
140-4 and FIN 46R-8 affect only disclosures and therefore did not have a
material impact on our consolidated financial statements.
 
 In April
2008, the FASB issued FSP 142-3, “Determination of the Useful Life of Intangible
Assets” (“FSP FAS 142-3”). FSP FAS 142-3 amends the factors that should be
considered in developing renewal or extension assumptions used to determine the
useful life of a recognized intangible asset under SFAS No. 142, “Goodwill and
Other Intangible Assets”. FSP 142-3 is effective for fiscal years beginning
after December 15, 2008. We adopted FSP 142-3 with effect from January 1, 2009
and the adoption of this FSP does not have a material impact on our consolidated
financial statements.
 
 In June
2008, the FASB issued EITF 03-6-1, “Determining Whether Instruments Granted in
Share-Based Payment Transactions Are Participating Securities” (“FSP EITF
03-6-1”). FSP EITF 03-6-1 clarified that all outstanding unvested share-based
payment awards that contain rights to nonforfeitable dividends participate in
undistributed earnings with common shareholders. Awards of this nature are
considered participating securities and the two-class method of computing basic
and diluted earnings per share must be applied. FSP EITF 03-6-1 is effective for
fiscal years beginning after December 15, 2008. We adopted FSP EITF 03-6-1 with
effect from January 1, 2009 and the adoption of this FSP does not have any
material impact on our consolidated financial statements.
 
 In
December 2007, the FASB issued SFAS No. 141(R), “Business
Combinations”, to replace SFAS No. 141, “Business Combinations” (“SFAS No.
141”).  SFAS No. 141(R) requires use of the acquisition method of
accounting, defines the acquirer, establishes the acquisition date and broadens
the scope to all transactions and other events in which one entity obtains
control over one or more other businesses. SFAS No. 141(R) is
effective for business combinations for which the acquisition date is on or
after the beginning of the first annual reporting period beginning on or after
December 15, 2008.  We adopted SFAS No. 141(R) with effect
from January 1, 2009. There was no impact upon adoption, and its effects on
future periods will depend on the nature and significance of business
combinations subject to this statement.
 
 In
November 2008, the FASB ratified EITF Issue 08-7, “Accounting For Defensive
Intangible Assets” (“EITF 08-7”). A defensive intangible asset is an asset
acquired in a business combination or in an asset acquisition that an entity
does not intend to actively use. According to the guidance, defensive intangible
assets are considered to be a separate unit of account and valued based on their
highest and best use from the perspective of an external market participant. We
adopted EITF Issue 08-7 on January 1, 2009. There was no impact on
our consolidated financial statements upon adoption, and its effects on future
periods will depend on the nature and significance of the business combinations
subject to this statement.
  49
   
 In April
2009, the FASB issued FSP FAS 141(R)-1, “Accounting for Assets Acquired and
Liabilities Assumed in a Business Combination That Arise from Contingencies”
(“FSP FAS 141(R)-1”). This FSP requires that assets acquired and liabilities
assumed in a business combination that arise from contingencies be recognized at
fair value if fair value can be reasonably estimated. If fair value cannot be
reasonably estimated, the asset or liability would generally be recognized in
accordance with SFAS No. 5, “Accounting for Contingencies” and FASB
Interpretation No. 14, “Reasonable Estimation of the Amount of a Loss”. Further,
the FASB removed the subsequent accounting guidance for assets and liabilities
arising from contingencies from SFAS No. 141(R). The requirements of this FSP
carry forward without significant revision the guidance on contingencies of SFAS
No. 141, which was superseded by SFAS No. 141(R). The FSP also eliminates the
requirement to disclose an estimate of the range of possible outcomes of
recognized contingencies at the acquisition date. For unrecognized
contingencies, the FASB requires that entities include only the disclosures
required by SFAS No. 5. This FSP was adopted effective January 1, 2009. There
was no impact on our consolidated financial statements upon adoption, and its
effects on future periods will depend on the nature and significance of business
combinations subject to this statement.
 
 In
December 2007, the FASB issued SFAS No. 160, “Accounting and Reporting of
Non-controlling Interest in Consolidated Financial Statements - an amendment of
ARB No. 51”.SFAS No.
160 establishes accounting and reporting requirements for ownership interests in
subsidiaries held by parties other than parent, the amount of consolidated net
income attributable to the parent and to the non-controlling interest. SFAS No.
160 is effective for fiscal year beginning after December 15, 2008. We adopted
SFAS No. 160 with effect from January 1, 2009 via retrospective application of
the presentation and disclosure requirements. Noncontrolling interest of $4.2
million at December 31, 2008 was reclassified from Liabilities section to the
Shareholders’ Equity section in the Consolidated Balance Sheets as of January 1,
2009. Noncontrolling interest amounts of $1.1 million and $0.6 million, net of
tax, for the three months ended March 31, 2008 and March 31, 2009, respectively,
are presented separately in the Consolidated Statements of Income and included
in the net income.
 
 In April
2009, the FASB issued FSP FAS 157-4, “Determining Fair Value When the Volume and
Level of Activity or Liability Have Significantly Decreased and Identifying
Transactions That Are Not Orderly”.Based on the guidance, if
an entity determines that the level of activity for an asset or liability has
significantly decreased and that a transaction is not orderly, further analysis
of transactions or quoted prices is needed, and a significant adjustment to the
transaction or quoted prices may be necessary to estimate fair value in
accordance with SFAS No. 157 “Fair Value Measurements”. This FSP is to be
applied prospectively and is effective for interim and annual periods ending
after June 15, 2009 with early adoption permitted for periods ending after March
15, 2009. We will adopt this FSP for the quarter ending June 30, 2009. The
adoption of this FSP is not expected to have any material impact on our
consolidated financial statements.
 
 In April
2009, the FASB issued FSP FAS 115-2 and FAS 124-2, “Recognition and Presentation
of Other- Than-Temporary Impairments”. The guidance applies to investments in
debt securities for which other-than-temporary impairments may be recorded. If
an entity’s management asserts that it does not have the intent to sell a debt
security and it is more likely than not that it will not have to sell the
security before recovery of its cost basis, then an entity may separate
other-than-temporary impairments into two components: 1) the amount related to
credit losses (recorded in earnings), and 2) all other amounts (recorded in
other comprehensive income). This FSP is to be applied prospectively and is
effective for interim and annual periods ending after June 15, 2009 with early
adoption permitted for periods ending after March 15, 2009. We will adopt this
FSP for the quarter ending June 30, 2009. The adoption of this FSP is not
expected to have any material impact on our consolidated financial
statements.
 
 In April
2009, the FASB issued FSP FAS 107-1 and APB 28-1, “Interim Disclosures about
Fair Value of Financial Instruments”.  The FSP amends SFAS No. 107
“Disclosures about Fair Value of Financial Instruments” to require an entity to
provide disclosures about fair value of financial instruments in interim
financial information. This FSP is to be applied prospectively and is effective
for interim and annual periods ending after June 15, 2009 with early adoption
permitted for periods ending after March 15, 2009. The adoption of this FSP is
not expected to have any material impact on our consolidated financial
statements.
  50
  
 
 In May
2009, the FASB issued SFAS No. 165, “Subsequent Events”, which provides guidance
on management’s assessment of subsequent events. SFAS No. 165 establishes the
principles and requirements for subsequent events. In particular, SFAS No. 165
sets forth (a) the period after the balance sheet date during which management
of a reporting entity shall evaluate events or transactions that may occur for
potential recognition or disclosure in the financial statements, (b) the
circumstances under which an entity shall recognize events or transactions
occurring after the balance sheet date in its financial statements, and (c) the
disclosures that that an entity shall make about events or transactions that
occurred after the balance sheet date SFAS No. 165 is effective prospectively
for interim or annual financial periods ending after June 15, 2009. The adoption
of this accounting standard is not expected to be a material impact on our
consolidated financial statements.
 
 
 Non-GAAP
Measures
  In our
press releases on our quarterly financials, we provide non-GAAP financial
measures and GAAP to non-GAAP reconciliation tables to supplement our financial
information presented in accordance with U.S. GAAP.
 
 The
non−GAAP financial measures that we use in our press releases on our quarterly
financial information are the following:
 
 “Non-GAAP Net Income”
is defined as GAAP net income excluding non-cash stock based compensation
expense or credit, gains or losses on acquisitions and investments, and/or
impairment charges.
 
 “Non-GAAP diluted net income
per share” is defined as non-GAAP net income divided by the weighted
average of diluted common shares outstanding.
 
 We
believe that non-GAAP metrics are useful measures of operations.
 
 Readers
should not place undue reliance on non−GAAP financial measures or regard them as
a substitute for the nearest U.S. GAAP measures. Further, these non−GAAP
financial measures may not be comparable to similarly titled measures used by
other companies.
 
  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
                      PositionMerle
      A.
      Hinrichs
                      67
                      Director,
      Chairman and Chief Executive OfficerEddie
      Heng Teng
      Hua
                      58
                      Director
      and Chief Financial OfficerDavid
      Gillan
                      45
                      Deputy
      Chief Financial OfficerJ.
      Craig
      Pepples
                      48
                      Chief
      Operating OfficerBill
      Georgiou
                      64
                      Chief
      Information OfficerSarah
      Benecke
                      52
                      DirectorRoderick
      Chalmers
                      61
                      DirectorDavid
      F.
      Jones
                      44
                      DirectorJames
      Watkins
                      63
                      DirectorRobert
      Lees
                      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 the Thunderbird School of
Global Management (“Thunderbird”). Mr. Hinrichs is a 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. He is
also an investment Promotion Ambassador with Invest Hong Kong. His term as
director expires in 2012.
   51
    Mr. Henghas 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. He is
scheduled to retire as Chief Financial Officer on June 30, 2009. His term as
director expires in 2010.
  Mr. Gillan has been the
Deputy Chief Financial Officer since 2008. Prior to this, he was based in
Shanghai as China Managing Director and CEO for the Dennis Family Corporation
Pty. Ltd., a private Australian real estate investment and development fund.
From 2000 to 2003, he was Finance Director, Tax & Treasury and Director of
Project Development for the Intercontinental Hotels Group – Asia Pacific. He has
over 15 years of senior management experience in Asia, predominantly in China
where he has held various senior finance roles with public and private firms. He
began his finance career with Arthur Andersen in Canada and holds an MBA in
International Management, Marketing and Finance from the University of
Saskatchewan, Canada and a BBA in Finance from the University of Prince Edward
Island, Canada. He is scheduled to assume the role of Chief Financial Officer,
after Mr. Heng’s retirement as Chief Financial Officer on June 30,
2009.
  Mr. Peppleshas been our
Chief Operating Officer since June 1999 and is responsible for our worldwide
operations, including interactive media, corporate marketing, community
development, client services and human resources. Mr. Pepples joined Trade Media
in October 1986 in an editorial capacity, managed Trade Media’s sales in
mainland China from 1989 to 1992, and served as country manager for mainland
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 in January 2001. Since 1989, he has held
senior management positions in IT and related business fields with major
corporations in Australia, Hong Kong and Singapore. He has directed the
development and implementation of major business systems and e-commerce
applications (B2C, B2B), managed data center and network infrastructure, and
negotiated outsourcing contracts and hardware and software acquisitions. He has
also played a leading role in the commercialization of new technologies and
adoption of best practices in IT management. For nearly 15 years, he has
developed specialist expertise in supply chain web enablement and systems. He
received his B.Ec. (Honours degree) and M.B.A. from the University of
Adelaide.
  Ms. Beneckehas been a
director since April 2000, and, since 1993, has been a director of Trade
Media. 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. Since 2003, her
consulting work has been focused on the launch, development and expansion of the
“China Sourcing Fairs” in Shanghai, Hong Kong, Mumbai and Dubai.She graduated
with a B.A. from the University of New South Wales, Australia. Her term as
director expires in 2010.
  Mr. Chalmershas been a
director since October 2000. He has been the Chairman of the Board of Directors
of the Bank of Valletta plc, Malta 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. 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), Middlesea Valletta Life Assurance
Co Limited (Malta), Simonds Farsons Cisk Limited (Malta) and of Middlesea
Insurance plc (Malta). His term as director expires in 2012.
   52
    Mr.
Joneshas
been a director since April 2000.Mr. Jones joined CHAMP Private
Equity, a leading Australian buyout firm, in 2002 where he is currently Managing
Director. He has spent the last fifteen years in the private equity industry,
and was previously in management consulting, investment banking and general
management. In 1999, he founded and until 2002 led the development of UBS
Capital’s Australian and New Zealand business. Prior to that, he spent four
years with Macquarie Direct Investment, a venture capital firm in Sydney,
Australia, and one year at BancBoston Capital in Boston, Massachusetts. Mr.
Jones began his career as a consultant with McKinsey & Company in Australia
and New Zealand. He left McKinsey to take the role of general manager of
Butterfields Cheese Factors, of the King Island Dairies group. He is a director
of Centric Wealth Limited and The Beacon Foundation. He was previously Chairman
of the Australian Venture Capital Association Limited and a director of various
listed and unlisted companies in Australia. Mr. Jones holds a Bachelor of
Engineering (First Class Hons.) from the University of Melbourne and a Master of
Business Administration from Harvard Business School. His term as director
expires in 2011.
 
 Mr. Watkins was appointed as
a casual director (see “Election or Removal of Directors” under Item 10 for a
description of a “casual director”) on February 28, 2005, and was 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 Schroders plc in 1996 to
1997 and of Trafalgar House plc from 1994 to 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., Advanced
Semiconductor Manufacturing Corporation Ltd., IL&FS India Realty Fund II
LLC, Asia Satellite Telecommunications Holdings Ltd. and Hongkong Land Holdings
Ltd. and is a member of the audit committees of Jardine Cycle & Carriage
Ltd., MCL Land Ltd. and Asia Satellite Telecommunications Holdings 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 2011.
  Mr. Leeswas appointed as a
casual director on July 30, 2007, and was elected as a director at the Annual
General Meeting on June 11, 2008. Mr. Lees is a senior executive and global
expert and has nearly 30 years of experience working with decision-makers in
business and government at the most senior levels across the Asia-Pacific
region. He is a senior advisor to the University of Cincinnati. Mr. Lees served
for many years as secretary general and then president and chief executive
officer of the Pacific Basin Economic Council, the Asia-Pacific region’s oldest
business organization. He serves as a director of the Japan America Society and
Chinese Chamber of Commerce in Cincinnati and the Dr. Sun Yat Sen Hawaii
Foundation in Honolulu. Mr. Lees holds a bachelor’s degree from the University
of Cincinnati and an MBA from The Thunderbird School of Global Management. He
also completed studies at the Institute of International Studies and Training in
Japan. His term as director expires in 2011.
  Compensation
  For the
year ended December 31, 2008, we and our subsidiaries provided our ten
directors and executive officers as a group aggregate remuneration, pension
contributions, allowances and other benefits of approximately $5,712,782
including the non-cash compensation of $2,904,835 associated with the share
award and equity compensation plans. Of that amount, $55,000 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. As of December 31, 2008, there are no future payments to be made under
the long-term discretionary bonus plan.
  In 2008,
we and our subsidiaries incurred $28,949 in costs to provide pension, retirement
or similar benefits to our respective officers and directors pursuant to our
retirement plan and pension plan.
   53
  
  Employment
Agreements
  We have
employment agreements with Merle A. Hinrichs under which he serves as our
chairman and chief executive officer. 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 on the basis of one-third of the board retiring by rotation at each
annual general meeting of shareholders. Each director holds office until his or
her term expires as aforesaid, and he or she is then subject to re-election as a
director at the respective annual general meeting for a further term which will
subsequently expire on the same basis. Executive officers serve at the
discretion of the board of directors. Our executive officers have, on average,
17 years of service with us. One executive director and four non-executive
directors receive a cash fee of $15,000 per year, plus an additional $4,000 for
each board meeting attended. Non-executive directors who are members of the
audit committee also receive a cash fee of $5,000 per year.
  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 one meeting in the fiscal year ended December 31,
2008.
  We have
an executive sessions committee, consisting of the independent directors. The
executive sessions committee held one meeting in the fiscal year ended December
31, 2008.
   54
  
  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 (as well as all other employees). 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
Nasdaq.
  Employees
  As of
December 31, 2008, we had 452 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
                            
                            
                            TotalContent
      Development
                            
                            
                            63
                            
                            
                            
                            442
                            
                            
                            
                            505Corporate
      Human Resources & Administration
                            
                            
                            48
                            
                            
                            
                            61
                            
                            
                            
                            109Corporate
      Marketing
                            
                            
                            8
                            
                            
                            
                            32
                            
                            
                            
                            40Community
      Development
                            
                            
                            80
                            
                            
                            
                            91
                            
                            
                            
                            171Sales
                            
                            
                            33
                            
                            
                            
                            2,656
                            
                            
                            
                            2,689Information
      System Department (include CIO office)
                            
                            
                            82
                            
                            
                            
                            77
                            
                            
                            
                            159Corporate
      Accounts
                            
                            
                            82
                            
                            
                            
                            69
                            
                            
                            
                            151Office
      of the CEO,
      COO
                            
                            
                            8
                            
                            
                            
                            0
                            
                            
                            
                            8Legal
      and Group
      Secretarial
                            
                            
                            6
                            
                            
                            
                            4
                            
                            
                            
                            10Conference
      & Trade Show Services + China Edu
                            
                            
                            42
                            
                            
                            
                            66
                            
                            
                            
                            108Total
                            
                            
                            452
                            
                            
                            
                            3,498
                            
                            
                            
                            3,950
 
 Share
Ownership
  Information
on the ownership of our Common Shares is given under Item 7, Major
Shareholders and Related Party Transactions.
  Equity
Compensation Plans
  On
December 30, 1999, we established The Global Sources Employee Equity
Compensation Trust (the “Trust”) for the purpose of administering monies and
other assets contributed to the Trust for the establishment of equity
compensation and other benefit plans, including the Equity Compensation Plans
Numbers I to VII described below. The Trust is administered by Appleby Services
(Bermuda) Ltd. (previously known as “Harrington Trust Limited” and then as
“Appleby Trust (Bermuda) Ltd.) (the “Trustee”). 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 30, 2009, the Trustee holds
1,559,407 of our common shares, consisting of common shares held in the Trust,
as well as already vested common shares under the plans which are held in trust
by the Trustee for various grantees who have elected to utilize the trust
services of the Trustee for such purpose.  The Trustee 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.
  Pursuant
to a Declaration of Trust dated November 28, 2006 by the Trustee, “The Global
Sources Equity Compensation Trust 2007” (“2007 Trust”) was established. The 2007
Trust is administered by Appleby Services (Bermuda) Ltd. (the “2007 Trustee”) as
trustee. The purpose of the 2007 Trust is to administer shares contributed by us
to the 2007 Trust from time to time in connection with providing equity
compensation benefits under The Global Sources Equity Compensation (2007) Master
Plan described below (“ECP 2007 Master
Plan”). In the year 2008, a total of 2,165 shares vested and were issued under
the ECP 2007 Master Plan. As of April 30, 2009, the 2007 Trustee does not hold
any of our common shares in the 2007 Trust, but the 2007 Trusteeholds
5,502 already vested common shares under the ECP 2007 Master Plan which are held
in trust by the 2007 Trustee for various grantees who have elected to utilize
the trust services of the 2007 Trustee for such purpose. In exercising its
powers under the 2007 Trust, the 2007 Trustee may be directed by a plan
committee to be constituted and appointed by us. The plan committee (“ECP 2007
Plan Committee”) was constituted and appointed by the Board of Directors on
February 15, 2007.
   55
    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.
  56
    The
non-cash compensation expense associated with the awards under ECP II and ECP
III of approximately $2,567,000 and $2,148,000, respectively, were recognized
ratably over the three year vesting term of the respective awards.
  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 or continued services and
vesting terms.
  The
Equity Compensation Plan committee first approved the awards of common shares
under ECP IV in January 2001 and approved additional awards of common shares
under ECP IV on various dates during the year 2001. The Equity Compensation Plan
committee first approved the awards of common shares under ECP V in January 2001
and approved additional awards of common shares under ECP V on various
subsequent dates.
  The
non-cash compensation expenses associated with the above awards under ECP IV and
ECP V of approximately $2,981,000 and $3,275,000, respectively, are recognized
over the five year vesting term of the respective awards.
  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 ECP VI on March 13, 2001 and
first approved the awards of common shares under ECP VI in May 2001. The Equity
Compensation Plan Committee approved additional awards of common shares under
ECP VI on various subsequent dates.
  The
non-cash compensation expenses associated with the above awards under ECP VI of
approximately $1,269,000 are recognized over the five year vesting term of the
respective awards.
  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.
   57
  
  The
Equity Compensation Plan committee first approved the awards of common shares
under ECP VII in January 2002 and approved additional awards of common
shares under ECP VII on various subsequent dates. The non-cash compensation
expenses associated with the above awards under ECP VII of approximately
$12,523,000 are recognized over the six year vesting term of the respective
awards.
  The
Global Sources Equity Compensation (2007) Master Plan
  The ECP
2007 Master Plan was approved by our shareholders on May 8, 2006. The ECP 2007
Master Plan commenced with effect on January 1, 2007 and, unless terminated
earlier by our Board of Directors, will expire on December 31, 2012. Our and our
subsidiaries’ employees, directors and consultants and our and our subsidiaries’
independent contractors’ employees, directors and consultants (“Team Members”),
are eligible to be awarded grants of our common shares under the ECP 2007 Master
Plan. The grantees and the number of shares to be awarded, and the vesting rules
and other terms and conditions, are to be as determined by the ECP 2007 Plan
Committee, who are authorized under the ECP 2007 Master Plan to issue
supplementary or subsidiary documents to set out and evidence such vesting rules
and other terms and conditions. The total number of shares to be issued under
the ECP 2007 Master Plan is subject to a limit of 3,000,000 common
shares.
  On
November 7, 2006, we filed a Form S-8 Registration Statement under the
Securities Act of 1933, with the U.S. Securities and Exchange Commission, for up
to 3,000,000 common shares to be issued under the ECP 2007 Master
Plan.
  On March
6, 2007, the Plan Committee approved and issued “The Global Sources Share Grant
Award Plan” as a supplementary or subsidiary document to the ECP 2007 Master
Plan. Under the plan, the ECP 2007 Plan Committee is to determine who amongst
eligible Team Members will be granted awards of shares and the number of shares
to be awarded to them, and to determine the vesting schedule for such awards.
The plan commenced with effect on March 6, 2007, and will terminate upon the
expiration or termination of the ECP 2007 Master Plan, or upon the liquidation
of the Company, or upon termination by the ECP 2007 Plan Committee, whichever is
the earliest to occur. The ECP 2007 Plan Committee approved awards of common
shares under the plan on various dates. The non-cash compensation expenses as of
December 31, 2008, associated with the above awards under the plan of
approximately $8,086,000 are recognized over the six year vesting term of the
award.
  On March
6, 2007, the Plan Committee approved and issued “The Global Sources Retention
Share Grant Plan” as a supplementary or subsidiary document to the ECP 2007
Master Plan. Persons eligible to receive grants under the plan are persons who
have been Team Members for at least five years, who retire “in good standing”
(as determined by the ECP 2007 Plan Committee), and who would otherwise have
their unvested  shares (under any applicable equity compensation
plans) forfeited upon retirement. The ECP 2007 Plan Committee is to determine
who amongst eligible persons will be granted awards of common shares. The number
of common shares to be awarded to such grantees are calculated according to a
formula defined in the plan, and will vest in equal installments over a period
of five years after retirement, subject to certain non-compete terms and the
grantees remaining “in good standing”. The plan commenced with effect on March
6, 2007, and will terminate upon the expiration or termination of the ECP 2007
Master Plan, or upon the liquidation of the Company, or upon termination by the
ECP 2007 Plan Committee, whichever is the earliest to occur. The ECP 2007 Plan
Committee approved awards of common shares under the plan on various dates. The
non-cash compensation expenses as of December 31, 2008, associated with the
above awards under the plan of approximately $277,000 are recognized over the
five year vesting term of the award.
  On April
24, 2009, the Plan Committee approved and issued “The Global Sources Directors
Share Grant Award Plan” as a supplementary or subsidiary document to the ECP
2007 Master Plan. Persons eligible to receive grants under the plan are
directors of the Company. Under the plan, the ECP 2007 Plan Committee is to
determine who amongst the directors of the Company will be granted awards of
shares and the number of shares to be awarded to them. Any shares awarded will
not vest immediately, but only at the end of four years after such effective
date as may be specified by the Plan Committee (or in accordance with such other
vesting schedule as may be determined by the Plan Committee). The plan commenced
with effect on April 24, 2009, and will terminate upon the expiration or
termination of the ECP 2007 Master Plan, or upon the liquidation of the Company,
or upon termination by the ECP 2007 Plan Committee, whichever is the earliest to
occur. On June 26, 2009, the ECP 2007 Plan Committee approved an award totalling
21,000 common shares under The Global Sources Directors Share Grant Award Plan
(comprising 3,000 common shares each) to the seven directors of the
Company.
  58
  
  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.
  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 the exercise date and
that the resignation of a director following his or her exercise of the grant of
options and payment of the option price would no longer result in a forfeiture
of the subscribed shares. The exercise price is the average closing price of the
shares for the last five trading days of the previous calendar year. The balance
of 85% must be paid on or before the end of the holding period, which is four
years. The ownership of the awards will transfer after four years.
  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
balance of 90% must be paid on or before the end of the holding
period.
  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 the 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 the previous
calendar year, on or before 28th day of
February of the relevant year, with the balance of 90% payable by the end of the
four year period from that day and the shares will be issued thereafter. The
resignation of a Director following his or her purchase of the shares and
payment of the 10% initial installment shall not cause a forfeiture of the
purchased shares, however, failure to pay the 90% balance of the purchase price
before the end of the holding period will result in the 10% deposit being
forfeited and all rights under the purchase plan and the issuance of shares to
automatically lapse and expire and the shares will not be issued.
  At the
Board of Directors’ meeting on 4 and 5 November 2005, the Board of Directors
adopted the “Directors Purchase Plan (as of 5 November 2005)”, which
consolidated earlier forms of the Directors Purchase Plan and previous
shareholders’ and Board of Directors’ approvals and resolutions pertaining
thereto.
  On
November 7, 2006, the Company filed a Form S-8 Registration Statement under the
Securities Act of 1933, with the U.S. Securities and Exchange Commission, for up
to 530,000 common shares to be issued under the Directors Purchase Plan (as of
November 5, 2005).
  By a
written resolution of our Board of Directors dated April 24, 2009, our Directors
confirmed that they had all agreed that no purchase rights under the Directors
Purchase Plan (as of 5 November 2005) would be granted and/or exercisable in the
calendar years 2009 and 2010.
 
 At our
annual general meeting held on June 24, 2009, our shareholders approved the
adoption of the “Directors Purchase Plan (updated effective as of January 1,
2009)”, which updated the Directors Purchase Plan (as of 5 November 2005), so as
to provide that if an eligible director passes away and at the time of his or
her death has not paid the entire purchase price of previously exercised
purchase rights, then the remaining balance of the purchase price must be paid
by his or her estate within 6 months of his or her death; otherwise, the
previously exercised purchase rights would automatically expire and lapse, no
shares will be issued, and any deposits previously paid with respect to the
exercised purchase rights would be refunded to the estate. In addition,
the Directors Purchase Plan (updated effective as of January 1, 2009) also
clarifies that any amendments or updates made to the plan may be made applicable
retroactively with the approval or consent of affected purchase rights holders
or eligible directors under the plan.
 
 59
   
 The
Directors Purchase Plan (updated effective as of January 1, 2009) is scheduled
to terminate on August 4, 2010, unless it is terminated earlier by our Board of
Directors.
  All the
monies received under the Director Purchase Plan are credited to additional paid
in capital upon receipt. Upon issuance of shares under the plan, the par value
of the issued shares is transferred from additional paid in capital to common
share 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 30, 2009.
  Hung Lay
Si Co. Ltd. is a company organized under the laws of the Cayman Islands. It
is wholly owned by the Quan Gung 1986 Trust (the “1986 Trust”), a trust formed
under the laws of the Island of Jersey. The trustee of the 1986 Trust is Hill
Street Trustees Limited, an Island of Jersey limited liability company whose
shares are wholly owned by the partners of the Mourant Group, which is a firm
based in the Island of Jersey that provides trust administrative
services.  The partners of the Mourant Group are: A. R. Binnington, D.
J. Birtwistle, G. R. P. Corbin, N. C. Davies, E. C. Devenport, S. J. V. Felton,
S. M. Gould, T. J. Herbert, R. A. Hickling, I. C. James, B. H. Lacey, W.
Lambert, M. E. Millar, J. H. Rainer, J. A. Richomme, G. A. Rigby, J. D. Rigby,
B. C. Robins, J. F. Ruane, J. P. Speck, A. J. R. Syvret, J. C. Walker, N. J.
Weston, J. Hill, M. Williams, F. de Laat and J. Hernandez.  Hill
Street Trustees Limited is the sole beneficial owner of the Hung Lay Si Co. Ltd.
shares under applicable U.S. SEC rules and regulations.
  Prior to
November 27, 2003, the 1986 Trust (through Hung Lay Si Co. Ltd.)
beneficially owned approximately 61% of our common shares, and may be deemed to
be the beneficial owner of certain of our common shares as of April 30, 2009
(see below). Counsel to Hill Street Trustees Limited has informed us that, by
virtue of the terms of the 1986 Trust and the laws of the Island of Jersey, Hill
Street Trustees Limited cannot make disclosure of the names of the beneficiaries
and settlor of the 1986 Trust in breach of the obligations placed on it and in
accordance with its duties of confidentiality. Accordingly, the identity of the
beneficiaries or settlors of the 1986 Trust may never be known.
  On
November 27, 2003, Merle A. Hinrichs acquired 24,212,163 of our common shares,
after adjustment to reflect the share split resulting from our bonus share
distributions of one share for every ten shares held as of March 1, 2004,
as of March 4, 2005, as of March 15, 2006, as of March 16, 2007, as of January
1, 2008, and as of February 27, 2009, representing approximately 54.4% of our
outstanding common shares as of April 30, 2009, from Hung Lay Si Co. Ltd. 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 the said common shares as well as an additional 7,100,812 common shares
(after adjustment to reflect the share split resulting from our said bonus share
distributions) owned by Mr. Hinrichs,  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 1986 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 from Hung Lay
Si Co. Ltd. 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. Hung Lay Si
Co. Ltd. may also be deemed, under SEC rules, to be a beneficial owner of the
shares in which it has a right of first refusal and a security
interest.
   60
  
  Pursuant
to a share purchase agreement and an agreement, each dated as of October 5,
2008, as amended by a letter agreement dated as of November 11, 2008, Mr.
Hinrichs (i) agreed to sell 400,000 of our common shares at a price of $8.00 per
share to Hung Lay Si Co. Ltd. for a cash consideration of $3.2 million and (ii)
agreed to transfer 5,600,000 of our common shares at an agreed value of $8.00
per share to Hung Lay Si Co. Ltd. as partial repayment of the consideration for
the previous share purchase referred to in the foregoing paragraph. Copies of
the agreements were filed by Mr. Hinrichs with the SEC on Schedule 13D/A on
November 18, 2008, and jointly by the 1986 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 transactions. The transactions were completed in
November 2008.
  As a
result, and after the purchase by us of 3,589,589 of our common shares from Mr.
Hinrichs pursuant to the tender offer consummated in December 2008, and after
our bonus share distribution of one share for every ten shares held as of
February 27, 2009, Mr. Hinrichs owns 20,951,524 of our common shares,
representing approximately 47.0% of our outstanding common shares as of April
30, 2009. For a further description of the tender offer referred to above, see
“Purchase by a Company of its Own Common Shares” under Item 10.
  Pursuant
to the same tender offer referred to above, Hung Lay Si Co. Ltd. tendered
1,529,832 common shares which were accepted for payment. In addition to the
8,849,507 common shares owned by it, Hung Lay Si Co. Ltd. may be deemed to be
the beneficial owner of 20,764,421 common shares owned by Mr. Hinrichs as at
April 30, 2009 in which it has a right of first refusal and a security interest.
Hill Street Trustees Limited has shared dispositive power with respect to those
20,764,421 common shares as well, as it has the authority to vote and dispose of
the shares of Hung Lay Si Co. Ltd. owned by the 1986 Trust.
  Common
      Shares Beneficially OwnedName
      of Beneficial Owner
                
                Shares
                
                
                Percentage
      **Merle
      A.
      Hinrichs
                
                
                20,951,524
                
                
                
                47.0
                %Hung
      Lay Si Co.
      Ltd
                
                
                8,849,507
                
                
                
                19.9
                %Eddie
      Heng Teng
      Hua
                
                
                *
                
                
                
                *David
      Gillan
                
                
                *
                
                
                
                *J.
      Craig
      Pepples
                
                
                *
                
                
                
                *Bill
      Georgiou
                
                
                *
                
                
                
                *Sarah
      Benecke
                
                
                *
                
                
                
                *David
      F.
      Jones
                
                
                *
                
                
                
                *Roderick
      Chalmers
                
                
                *
                
                
                
                *James
      Watkins
                
                
                *
                
                
                
                *Robert
      Lees
                
                
                *
                
                
                
                *All
      officers and directors as a group (10 persons)
                
                
                21,440,744
                
                
                
                48.1
                %
 ________________________
  *           Indicates
beneficial ownership of less than 1%.
  **
              The
      percentage figures are calculated based on our total outstanding common
      shares (and do not take into account that portion of our total issued
      common shares which are held as treasury
  shares).
  As at
April 30, 2009, we believe that 12,680,037 of our shares or approximately 28.5%
were beneficially owned by U.S. holders and there were 697 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 47.0% of our common shares as at April 30, 2009, 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
  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% per annum, 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 of December
31, 2006, 2007 and 2008. 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.
   61
   We lease
approximately 82,099 square feet of our office facilities from companies
controlled by a wholly-owned subsidiary of Hung Lay Si Co. Ltd. under cancelable
and non-cancelable operating leases and incur building maintenance services fees
to our affiliated companies. We incurred rental, building services expenses and
reimbursement of membership fees for use of club memberships of $1,053,257
during the year ended December 31, 2008. We also 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,
2008 was $50,000.
  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
  
  GLOBAL SOURCES LTD. AND
SUBSIDIARIES
  Index
to the Consolidated Financial Statements
 December
31, 2008
  
  PageReport
      of Independent Registered Public Accountants
                
                63
      - 64Consolidated
      Balance Sheets
                
                65Consolidated
      Statements of Income
                
                66Consolidated
      Statements of Cash Flows
                
                67Consolidated
      Statements of Shareholders’ Equity
                
                68Notes
      to the Consolidated Financial Statements
                
                69
      - 97
 
 
   62
  REPORT
OF INDEPENDENT REGISTERED PUBLIC ACCOUNTANTS
  To the
Board of Directors and Shareholders of
  Global
Sources Ltd.
  We have
audited the accompanying consolidated balance sheet of Global Sources Ltd. (a
company incorporated under the laws of Bermuda) (the “Company”) and its
subsidiaries as of December 31, 2007, and the related consolidated statements of
income, shareholders’ equity and cash flows for each of the two years in the
period ended December 31, 2007. These financial statements are the
responsibility of the Company’s management. Our
responsibility is to express an opinion on these financial statements based on
our audits.
  We
conducted our audits in accordance with the standards of the Public Company
Accounting Oversight Board (United States). Those standards require that we plan
and perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit 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, as well as evaluating the overall financial
statement presentation.  We believe that our audits provide a reasonable
basis for our opinion.
 
 In our
opinion, the 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, 2007, and the consolidated results of
their operations and cash flows for each of the two years in the period ended
December 31, 2007, in conformity with U.S. generally accepted accounting
principles.
  As
discussed in Note 14 to the consolidated financial statements, on January 1,
2007, the Company adopted Financial Accounting Standards Board Interpretation
No. 48, “Accounting for Uncertainty in Income Taxes”. As described in Notes
2(v) and 2(x), effective January 1, 2006, the Company adopted Statement of
Financial Accounting Standards No. 123(R) (revised 2004), Share-Based Payment,
which requires the Company to recognize expense related to the fair value of
share-based compensation awards. Also, as described in Note 2(y), effective
September 30, 2006, the Company adopted Securities and Exchange Commission Staff
Accounting Bulletin (“SAB”) No. 108, Considering the Effects of Prior Year
Misstatements when Quantifying Misstatements in the Current Year Financial
Statements. In accordance with the transition provisions of SAB No. 108, the
Company recorded a cumulative decrease to retained earnings as of January 1,
2006 for correction of prior period errors in recording equity-based
compensation charges.
  /s/  ERNST
& YOUNG
  Singapore
 April 17,
2008
 
 
 
 
 
 
  63
  REPORT
OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
  To the
Board of Directors and Shareholders
  
  In our
opinion, the accompanying consolidated balance sheet and the related
consolidated statement of income, shareholders’ equity and cash flows, present
fairly, in all material respects, the financial position of Global Sources Ltd
and its subsidiariesat December 31, 2008,
and the results of their operations and their cash flows for the year ended
December 31, 2008in conformity with
accounting principles generally accepted in the United States of
America.  Also in our opinion, the Company maintained, in all material
respects, effective internal control over financial reporting as of December 31,
2008, based on criteria established in Internal Control - Integrated
Framework issued by the Committee of Sponsoring Organizations of the
Treadway Commission (COSO). The Company's management is responsible for these
financial statements, for maintaining effective internal control over financial
reporting and for its assessment of the effectiveness of internal control over
financial reporting, included in the accompanying Report of Managementon Internal Control over
Financial Reporting.  Our responsibility is to express an opinion on
these financial statements and on the Company's internal control over financial
reporting based on our integrated audit.  We conducted our audit 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 and whether effective internal control over
financial reporting was maintained in all material respects.  Our
audit of the financial statements included 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.  Our audit of
internal control over financial reporting included obtaining an understanding of
internal control over financial reporting, assessing the risk that a material
weakness exists, and testing and evaluating the design and operating
effectiveness of internal control based on the assessed risk.  Our
audit also included performing such other procedures as we considered necessary
in the circumstances. We believe that our audit provides a reasonable basis for
our opinion.
 
 A
company’s internal control over financial reporting is a process designed to
provide reasonable assurance regarding the reliability of financial reporting
and the preparation of financial statements for external purposes in accordance
with generally accepted accounting principles.  A company’s internal
control over financial reporting includes those policies and procedures that
(i) pertain to the maintenance of records that, in reasonable detail,
accurately and fairly reflect the transactions and dispositions of the assets of
the company; (ii) provide reasonable assurance that transactions are
recorded as necessary to permit preparation of financial statements in
accordance with generally accepted accounting principles, and that receipts and
expenditures of the company are being made only in accordance with
authorizations of management and directors of the company; and
(iii) provide reasonable assurance regarding prevention or timely detection
of unauthorized acquisition, use, or disposition of the company’s assets that
could have a material effect on the financial statements.
 
 Because
of its inherent limitations, internal control over financial reporting may not
prevent or detect misstatements.  Also, projections of any evaluation
of effectiveness to future periods are subject to the risk that controls may
become inadequate because of changes in conditions, or that the degree of
compliance with the policies or procedures may deteriorate.
 
 /s/
PricewaterhouseCoopers LLP
 
 Singapore
 21 April
2009
 
 
 
 
 
  64
  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
      312007
                      
                      
                      2008ASSETSCurrent
      Assets:Cash and cash
      equivalents
                      
                      $
                      197,825
                      
                      
                      $
                      70,225Available-for-sale
      securities
                      
                      
                      -
                      
                      
                      
                      60,786Accounts
      receivable, net
                      
                      
                      6,665
                      
                      
                      
                      6,025Receivables
      from sales representatives
                      
                      
                      12,303
                      
                      
                      
                      5,574Inventory
                      
                      
                      1,108
                      
                      
                      
                      1,306Prepaid
      expenses and other current assets
                      
                      
                      15,333
                      
                      
                      
                      16,513Deferred
      tax assets
                      
                      
                      46
                      
                      
                      
                      28Total
      Current Assets
                      
                      
                      233,280
                      
                      
                      
                      160,457Property
      and equipment, net
                      
                      
                      35,352
                      
                      
                      
                      82,657Long
      term investments
                      
                      
                      100
                      
                      
                      
                      100Bonds
      held to maturity, at amortized cost
                      
                      
                      99
                      
                      
                      
                      -Deferred
      tax assets – long term
                      
                      
                      196
                      
                      
                      
                      323Other
      long term assets
                      
                      
                      2,781
                      
                      
                      
                      1,561Total
      Assets
                      
                      $
                      271,808
                      
                      
                      $
                      245,098LIABILITIES AND SHAREHOLDERS’
      EQUITYCurrent
      Liabilities:Accounts
      payable
                      
                      $
                      5,577
                      
                      
                      $
                      10,117Deferred
      income and customer prepayments
                      
                      
                      78,141
                      
                      
                      
                      73,636Accrued
      liabilities
                      
                      
                      12,546
                      
                      
                      
                      11,579Income
      taxes payable
                      
                      
                      694
                      
                      
                      
                      261Total
      Current Liabilities
                      
                      
                      96,958
                      
                      
                      
                      95,593Deferred
      income and customer prepayments – long term
                      
                      
                      4,934
                      
                      
                      
                      3,044Deferred
      tax liability
                      
                      
                      283
                      
                      
                      
                      318Total
      Liabilities
                      
                      
                      102,175
                      
                      
                      
                      98,955Non-controlling
      interest
                      
                      
                      4,940
                      
                      
                      
                      4,223Shareholders’
      Equity:Common
      shares, US$0.01 par value; 75,000,000 shares authorized;51,376,335
      (2007: 51,230,953) shares issued and 44,501,335 (2007: 51,230,953) shares
      outstanding
                      
                      
                      512
                      
                      
                      
                      514Additional
      paid in capital
                      
                      
                      133,941
                      
                      
                      
                      133,922Treasury
      shares, at cost – 6,875,000 (2007: nil) shares
                      
                      
                      -
                      
                      
                      
                      (50,000
                      )Retained
      earnings
                      
                      
                      28,829
                      
                      
                      
                      55,259Accumulated
      other comprehensive income
                      
                      
                      1,411
                      
                      
                      
                      2,225Total
      Shareholders’ Equity
                      
                      
                      164,693
                      
                      
                      
                      141,920Total Liabilities and
      Shareholders’ Equity
                      
                      $
                      271,808
                      
                      
                      $
                      245,098
 
 The
accompanying notes are an integral part of these financial
statements.
   65
  
  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 31,2006
                
                
                2007
                
                
                2008Revenue:Online and other media
      services
                
                $
                113,097
                
                
                $
                125,818
                
                
                $
                142,129Exhibitions
                
                
                42,122
                
                
                
                51,608
                
                
                
                58,179Miscellaneous
                
                
                1,262
                
                
                
                4,633
                
                
                
                6,584156,481
                
                
                
                182,059
                
                
                
                206,892Operating
      Expenses:Sales
                
                
                50,380
                
                
                
                61,773
                
                
                
                73,625Event
      production
                
                
                18,414
                
                
                
                20,155
                
                
                
                21,493Community
                
                
                24,885
                
                
                
                27,086
                
                
                
                30,488General and
      administrative
                
                
                38,945
                
                
                
                44,167
                
                
                
                47,525Online services
      development
                
                
                4,499
                
                
                
                5,703
                
                
                
                5,992Amortization of software costs
      and intangibles
                
                
                1,250
                
                
                
                193
                
                
                
                193Total
      Operating
      Expenses
                
                
                138,373
                
                
                
                159,077
                
                
                
                179,316Income
      from
      Operations
                
                
                18,108
                
                
                
                22,982
                
                
                
                27,576Interest and dividend
      income
                
                
                5,571
                
                
                
                6,595
                
                
                
                2,884Gain on sale of
      available-for-sale securities
                
                
                309
                
                
                
                2,937
                
                
                
                -Gain on sale of shares to
      non-controlling shareholder and interest income thereon
                
                
                7,906
                
                
                
                -
                
                
                
                -Impairment
      loss on investment and available-for-sale securities, net
                
                
                (743
                )
                
                
                (1,846
                )
                
                
                (939
                )Impairment
      of goodwill and intangible assets
                
                
                -
                
                
                
                (3,101
                )
                
                
                -Foreign exchange losses,
      net
                
                
                (714
                )
                
                
                (1,213
                )
                
                
                (657
                )Income
      before Income
      Taxes
                
                
                30,437
                
                
                
                26,354
                
                
                
                28,864Income
      Tax
      Expense
                
                
                (899
                )
                
                
                (328
                )
                
                
                (677
                )Net
      Income before Non-controlling Interest
                
                $
                29,538
                
                
                $
                26,026
                
                
                $
                28,187Non-controlling
      interest
                
                
                (1,909
                )
                
                
                (2,027
                )
                
                
                (1,757
                )Net
      Income before cumulative effect of change in
                  accounting
      principle
                
                $
                27,629
                
                
                $
                23,999
                
                
                $
                26,430Cumulative effect of change in
      accounting principle
                
                
                251
                
                
                
                -
                
                
                
                -Net
      Income
                
                $
                27,880
                
                
                $
                23,999
                
                
                $
                26,430Basic
      net income per share before cumulative effect of change in accounting
      principle
                
                $
                0.54
                
                
                $
                0.47
                
                
                $
                0.51Cumulative
      effect of change in accounting principle
                
                $
                0.01
                
                
                $
                -
                
                
                $
                -Basic
      net income per share
                
                $
                0.55
                
                
                $
                0.47
                
                
                $
                0.51Shares
      used in basic net income per share calculations (Note 2(u))
                
                
                51,132,481
                
                
                
                51,218,263
                
                
                
                51,351,941Diluted
      net income per share before cumulative effect of change in accounting
      principle
                
                $
                0.54
                
                
                $
                0.46
                
                
                $
                0.51Cumulative
      effect of change in accounting principle
                
                $
                -
                
                
                $
                -
                
                
                $
                -Diluted
      net income per share
                
                $
                0.54
                
                
                $
                0.46
                
                
                $
                0.51Shares
      used in diluted net income per share calculations (Note 2(u))
                
                
                51,172,795
                
                
                
                51,681,335
                
                
                
                52,230,293
 
 Note:  a.
              Non-cash
      compensation (credit) expenses associated with the Employee Equity
      Compensation Plans and Directors Purchase Plan included under various
      categories of operating expenses are approximately as follows: sales:
      $(2,054) (2007:  $4,286, 2006:  $1,790), community:
      $173 (2007:  $269, 2006:  $145), general and
      administrative: $742 (2007:  $2,874, 2006:  $1,950),
      and online services development expenses: $237 (2007:  $347,
      2006:  $181).
  The
accompanying notes are an integral part of these financial
statements.
  66
  GLOBAL
SOURCES LTD. AND SUBSIDIARIES
 CONSOLIDATED
STATEMENTS OF CASH FLOWS
  (In
U.S. Dollars Thousands)
  Year
      Ended December 31,2006
                
                
                2007
                
                
                2008Cash
      flows from operating activities:Net
      income
                
                $
                27,880
                
                
                $
                23,999
                
                
                $
                26,430Adjustments
      to reconcile net income to net cash provided by
                  operating
      activities:Depreciation and
      amortization
                
                
                4,678
                
                
                
                4,710
                
                
                
                5,594Profit on sale of
      equipment
                
                
                (30
                )
                
                
                (3
                )
                
                
                -Accretion of U.S. Treasury
      strips zero %
      coupon
                
                
                (26
                )
                
                
                (15
                )
                
                
                (3
                )Impairment
      of available-for-sale securities, goodwill and intangible
      assets
                
                
                -
                
                
                
                5,402
                
                
                
                939Unrealized
      interest income on available-for-sale securities
                
                
                -
                
                
                
                -
                
                
                
                (6
                )Provision for doubtful
      debts
                
                
                216
                
                
                
                444
                
                
                
                276Non-cash compensation expense
      (credit)
                
                
                4,066
                
                
                
                7,776
                
                
                
                (902
                )Gain on sale of shares to
      non-controlling shareholder and interest income thereon
                
                
                (7,906
                )
                
                
                -
                
                
                
                -Cumulative effect of change in
      accounting
      principle
                
                
                (251
                )
                
                
                -
                
                
                
                -Income attributable to
      non-controlling
      shareholder
                
                
                1,909
                
                
                
                2,027
                
                
                
                1,757Equipment
      written off
                
                
                2
                
                
                
                266
                
                
                
                55Exchange
      rate realignment
                
                
                -
                
                
                
                730
                
                
                
                207Accounts
      receivables
                
                
                (1,139
                )
                
                
                (641
                )
                
                
                364Receivables from sales
      representatives
                
                
                (7,579
                )
                
                
                935
                
                
                
                6,730Inventory
                
                
                (23
                )
                
                
                (219
                )
                
                
                (198
                )Prepaid expenses and other
      current
      assets
                
                
                (3,589
                )
                
                
                (1,158
                )
                
                
                (1,182
                )Other long term
      assets
                
                
                419
                
                
                
                (1,219
                )
                
                
                1,220Accounts
      payable
                
                
                1,320
                
                
                
                (1,236
                )
                
                
                4,542Accrued
      liabilities
                
                
                5,578
                
                
                
                17
                
                
                
                (971
                )Deferred income and customer
      prepayments
                
                
                10,866
                
                
                
                19,237
                
                
                
                (6,396
                )Tax
      liabilities
                
                
                313
                
                
                
                (419
                )
                
                
                (508
                )Net cash provided by operating
      activities
                
                
                36,704
                
                
                
                60,633
                
                
                
                37,948Cash
      flows from investing activities:Purchase of property and
      equipment
                
                
                (4,876
                )
                
                
                (11,291
                )
                
                
                (51,482
                )Proceeds from sale of
      equipment
                
                
                30
                
                
                
                3
                
                
                
                -Proceeds from matured
      bonds
                
                
                200
                
                
                
                205
                
                
                
                102Business
      acquisition
                
                
                -
                
                
                
                (3,136
                )
                
                
                -Purchase
      of available-for-sale
      securities
                
                
                (263,463
                )
                
                
                -
                
                
                
                (61,719
                )Proceeds from sale of
      available-for-sale
      securities
                
                
                251,267
                
                
                
                15,834
                
                
                
                -Net proceeds from sale of
      shares to non-controlling shareholder, interest received thereon and
      repurchase of share dividends from non-controlling
    shareholder
                
                
                2,719
                
                
                
                -
                
                
                
                -Net cash (used in) generated
      from investing activities
                
                
                (14,123
                )
                
                
                1,615
                
                
                
                (113,099
                )Cash
      flows from financing activities:Amount received towards
      directors purchase
      plan
                
                
                359
                
                
                
                422
                
                
                
                885Payment
      of dividend to non-controlling shareholder by a subsidiary
                
                
                -
                
                
                
                -
                
                
                
                (479
                )Repurchase
      of common shares, held as treasury
      shares
                
                
                -
                
                
                
                -
                
                
                
                (50,000
                )Repayment
      of capital to non-controlling shareholder upon capital reduction in a
      subsidiary
                
                
                -
                
                
                
                -
                
                
                
                (1,995
                )Net cash generated from (used
      in) financing activities
                
                
                359
                
                
                
                422
                
                
                
                (51,589
                )Effect
      of exchange rate changes on cash and cash equivalents
                
                
                -
                
                
                
                62
                
                
                
                (860
                )Net
      increase (decrease) in cash and cash
      equivalents
                
                
                22,940
                
                
                
                62,670
                
                
                
                (126,740
                )Cash
      and cash equivalents, beginning of the
      year
                
                
                112,153
                
                
                
                135,093
                
                
                
                197,825Cash
      and cash equivalents, end of the
      year
                
                $
                135,093
                
                
                $
                197,825
                
                
                $
                70,225Supplemental
      cash flow disclosures:Income tax
      paid
                
                $
                586
                
                
                $
                747
                
                
                $
                1,184
 
 The
accompanying notes are an integral part of these financial
statements.
  67
  GLOBAL
SOURCES LTD. AND SUBSIDIARIES
 CONSOLIDATED
STATEMENTS OF SHAREHOLDERS’ EQUITY
 (In
U.S. Dollars Thousands, Except Number of Shares)
  Common
      sharesNumber
      of shares
                                                                                                                                      
                                                                                                                                      
                                                                                                                                      Amounts
                                                                                                                                      
                                                                                                                                      
                                                                                                                                      Treasury
      shares
                                                                                                                                      
                                                                                                                                      
                                                                                                                                      Additional
                                                                                                                                        paid
      in
                                                                                                                                        capital
                                                                                                                                      
                                                                                                                                      
                                                                                                                                      Retained
      earnings
                                                                                                                                        (deficit)
                                                                                                                                      
                                                                                                                                      
                                                                                                                                      Compre-hensive
      Income
                                                                                                                                      
                                                                                                                                      
                                                                                                                                      Unearned
                                                                                                                                        compensa-tion
                                                                                                                                      
                                                                                                                                      
                                                                                                                                      Accumul-ated
      other compre-hensiveincome
                                                                                                                                      
                                                                                                                                      
                                                                                                                                      Total
                                                                                                                                        sharehold-ers’
      equityBalance
      at December 31, 2005
                                                                                                                                      
                                                                                                                                      
                                                                                                                                      51,033,965
                                                                                                                                      
                                                                                                                                      
                                                                                                                                      $
                                                                                                                                      510
                                                                                                                                      
                                                                                                                                      
                                                                                                                                      $
                                                                                                                                      -
                                                                                                                                      
                                                                                                                                      
                                                                                                                                      $
                                                                                                                                      127,620
                                                                                                                                      
                                                                                                                                      
                                                                                                                                      $
                                                                                                                                      (21,199
                                                                                                                                      )
                                                                                                                                      
                                                                                                                                      
                                                                                                                                      
                                                                                                                                      
                                                                                                                                      $
                                                                                                                                      (7,900
                                                                                                                                      )
                                                                                                                                      
                                                                                                                                      $
                                                                                                                                      210
                                                                                                                                      
                                                                                                                                      
                                                                                                                                      $
                                                                                                                                      99,241Transition
      adjustment on adoption of SAB108 (Note 2 (y))
                                                                                                                                      
                                                                                                                                      
                                                                                                                                      -
                                                                                                                                      
                                                                                                                                      
                                                                                                                                      
                                                                                                                                      -
                                                                                                                                      
                                                                                                                                      
                                                                                                                                      
                                                                                                                                      -
                                                                                                                                      
                                                                                                                                      
                                                                                                                                      
                                                                                                                                      1,851
                                                                                                                                      
                                                                                                                                      
                                                                                                                                      
                                                                                                                                      (1,851
                                                                                                                                      )
                                                                                                                                      
                                                                                                                                      
                                                                                                                                      
                                                                                                                                      
                                                                                                                                      
                                                                                                                                      -
                                                                                                                                      
                                                                                                                                      
                                                                                                                                      
                                                                                                                                      -
                                                                                                                                      
                                                                                                                                      
                                                                                                                                      
                                                                                                                                      -Balance
      at January 1, 2006 (adjusted)
                                                                                                                                      
                                                                                                                                      
                                                                                                                                      51,033,965
                                                                                                                                      
                                                                                                                                      
                                                                                                                                      $
                                                                                                                                      510
                                                                                                                                      
                                                                                                                                      
                                                                                                                                      $
                                                                                                                                      -
                                                                                                                                      
                                                                                                                                      
                                                                                                                                      $
                                                                                                                                      129,471
                                                                                                                                      
                                                                                                                                      
                                                                                                                                      $
                                                                                                                                      (23,050
                                                                                                                                      )
                                                                                                                                      
                                                                                                                                      
                                                                                                                                      
                                                                                                                                      
                                                                                                                                      $
                                                                                                                                      (7,900
                                                                                                                                      )
                                                                                                                                      
                                                                                                                                      $
                                                                                                                                      210
                                                                                                                                      
                                                                                                                                      
                                                                                                                                      $
                                                                                                                                      99,241Net
      income before cumulative effect of change in accounting principle recorded
      upon adoption of SFAS No. 123(R)
                                                                                                                                      
                                                                                                                                      
                                                                                                                                      -
                                                                                                                                      
                                                                                                                                      
                                                                                                                                      
                                                                                                                                      -
                                                                                                                                      
                                                                                                                                      
                                                                                                                                      
                                                                                                                                      -
                                                                                                                                      
                                                                                                                                      
                                                                                                                                      
                                                                                                                                      -
                                                                                                                                      
                                                                                                                                      
                                                                                                                                      
                                                                                                                                      27,629
                                                                                                                                      
                                                                                                                                      
                                                                                                                                      
                                                                                                                                      
                                                                                                                                      
                                                                                                                                      
                                                                                                                                      -
                                                                                                                                      
                                                                                                                                      
                                                                                                                                      
                                                                                                                                      -
                                                                                                                                      
                                                                                                                                      
                                                                                                                                      
                                                                                                                                      -Cumulative
      effect of change in accounting principle recorded upon adoption of SFAS
      No. 123(R) (Note 2 (x))
                                                                                                                                      
                                                                                                                                      
                                                                                                                                      -
                                                                                                                                      
                                                                                                                                      
                                                                                                                                      
                                                                                                                                      -
                                                                                                                                      
                                                                                                                                      
                                                                                                                                      
                                                                                                                                      -
                                                                                                                                      
                                                                                                                                      
                                                                                                                                      
                                                                                                                                      -
                                                                                                                                      
                                                                                                                                      
                                                                                                                                      
                                                                                                                                      251
                                                                                                                                      
                                                                                                                                      
                                                                                                                                      
                                                                                                                                      
                                                                                                                                      
                                                                                                                                      
                                                                                                                                      -
                                                                                                                                      
                                                                                                                                      
                                                                                                                                      
                                                                                                                                      -
                                                                                                                                      
                                                                                                                                      
                                                                                                                                      
                                                                                                                                      -Net
      income
                                                                                                                                      
                                                                                                                                      
                                                                                                                                      -
                                                                                                                                      
                                                                                                                                      
                                                                                                                                      
                                                                                                                                      -
                                                                                                                                      
                                                                                                                                      
                                                                                                                                      
                                                                                                                                      -
                                                                                                                                      
                                                                                                                                      
                                                                                                                                      
                                                                                                                                      -
                                                                                                                                      
                                                                                                                                      
                                                                                                                                      
                                                                                                                                      27,880
                                                                                                                                      
                                                                                                                                      
                                                                                                                                      $
                                                                                                                                      27,880
                                                                                                                                      
                                                                                                                                      
                                                                                                                                      
                                                                                                                                      -
                                                                                                                                      
                                                                                                                                      
                                                                                                                                      
                                                                                                                                      -
                                                                                                                                      
                                                                                                                                      
                                                                                                                                      $
                                                                                                                                      27,880Non-cash
      compensation expense
                                                                                                                                      
                                                                                                                                      
                                                                                                                                      -
                                                                                                                                      
                                                                                                                                      
                                                                                                                                      
                                                                                                                                      -
                                                                                                                                      
                                                                                                                                      
                                                                                                                                      
                                                                                                                                      -
                                                                                                                                      
                                                                                                                                      
                                                                                                                                      
                                                                                                                                      4,066
                                                                                                                                      
                                                                                                                                      
                                                                                                                                      
                                                                                                                                      -
                                                                                                                                      
                                                                                                                                      
                                                                                                                                      
                                                                                                                                      
                                                                                                                                      
                                                                                                                                      
                                                                                                                                      
                                                                                                                                      -
                                                                                                                                      
                                                                                                                                      
                                                                                                                                      
                                                                                                                                      -
                                                                                                                                      
                                                                                                                                      
                                                                                                                                      $
                                                                                                                                      4,066Unearned
      compensation
                                                                                                                                      
                                                                                                                                      
                                                                                                                                      -
                                                                                                                                      
                                                                                                                                      
                                                                                                                                      
                                                                                                                                      -
                                                                                                                                      
                                                                                                                                      
                                                                                                                                      
                                                                                                                                      -
                                                                                                                                      
                                                                                                                                      
                                                                                                                                      
                                                                                                                                      (7,900
                                                                                                                                      )
                                                                                                                                      
                                                                                                                                      
                                                                                                                                      -
                                                                                                                                      
                                                                                                                                      
                                                                                                                                      
                                                                                                                                      
                                                                                                                                      
                                                                                                                                      
                                                                                                                                      
                                                                                                                                      7,900
                                                                                                                                      
                                                                                                                                      
                                                                                                                                      
                                                                                                                                      -
                                                                                                                                      
                                                                                                                                      
                                                                                                                                      
                                                                                                                                      -Reclassification
      adjustment for gains, net of losses included in net income, net of income
      tax of $nil
                                                                                                                                      
                                                                                                                                      
                                                                                                                                      -
                                                                                                                                      
                                                                                                                                      
                                                                                                                                      
                                                                                                                                      -
                                                                                                                                      
                                                                                                                                      
                                                                                                                                      
                                                                                                                                      -
                                                                                                                                      
                                                                                                                                      
                                                                                                                                      
                                                                                                                                      -
                                                                                                                                      
                                                                                                                                      
                                                                                                                                      
                                                                                                                                      -
                                                                                                                                      
                                                                                                                                      
                                                                                                                                      $
                                                                                                                                      (309
                                                                                                                                      )
                                                                                                                                      
                                                                                                                                      
                                                                                                                                      -
                                                                                                                                      
                                                                                                                                      
                                                                                                                                      
                                                                                                                                      (309
                                                                                                                                      )
                                                                                                                                      
                                                                                                                                      $
                                                                                                                                      (309
                                                                                                                                      )Unrealized
      gain on available-for-sale securities, net of income tax of
      $nil
                                                                                                                                      
                                                                                                                                      
                                                                                                                                      -
                                                                                                                                      
                                                                                                                                      
                                                                                                                                      
                                                                                                                                      -
                                                                                                                                      
                                                                                                                                      
                                                                                                                                      
                                                                                                                                      -
                                                                                                                                      
                                                                                                                                      
                                                                                                                                      
                                                                                                                                      -
                                                                                                                                      
                                                                                                                                      
                                                                                                                                      
                                                                                                                                      -
                                                                                                                                      
                                                                                                                                      
                                                                                                                                      $
                                                                                                                                      2,665
                                                                                                                                      
                                                                                                                                      
                                                                                                                                      
                                                                                                                                      -
                                                                                                                                      
                                                                                                                                      
                                                                                                                                      
                                                                                                                                      2,665
                                                                                                                                      
                                                                                                                                      
                                                                                                                                      $
                                                                                                                                      2,665Comprehensive
      income
                                                                                                                                      
                                                                                                                                      
                                                                                                                                      
                                                                                                                                      
                                                                                                                                      
                                                                                                                                      
                                                                                                                                      
                                                                                                                                      
                                                                                                                                      
                                                                                                                                      
                                                                                                                                      
                                                                                                                                      
                                                                                                                                      
                                                                                                                                      
                                                                                                                                      
                                                                                                                                      
                                                                                                                                      
                                                                                                                                      
                                                                                                                                      
                                                                                                                                      
                                                                                                                                      
                                                                                                                                      $
                                                                                                                                      30,236Amount
      received towards directors -      purchase
      plan and issuance of shares under the plan
                                                                                                                                      
                                                                                                                                      
                                                                                                                                      117,128
                                                                                                                                      
                                                                                                                                      
                                                                                                                                      
                                                                                                                                      1
                                                                                                                                      
                                                                                                                                      
                                                                                                                                      
                                                                                                                                      -
                                                                                                                                      
                                                                                                                                      
                                                                                                                                      
                                                                                                                                      358
                                                                                                                                      
                                                                                                                                      
                                                                                                                                      
                                                                                                                                      -
                                                                                                                                      
                                                                                                                                      
                                                                                                                                      
                                                                                                                                      
                                                                                                                                      
                                                                                                                                      
                                                                                                                                      
                                                                                                                                      -
                                                                                                                                      
                                                                                                                                      
                                                                                                                                      
                                                                                                                                      -
                                                                                                                                      
                                                                                                                                      
                                                                                                                                      $
                                                                                                                                      359Cumulative
      effect of change in accounting principle recorded upon adoption of SFAS
      No. 123(R) (Note 2(x))
                                                                                                                                      
                                                                                                                                      
                                                                                                                                      -
                                                                                                                                      
                                                                                                                                      
                                                                                                                                      
                                                                                                                                      -
                                                                                                                                      
                                                                                                                                      
                                                                                                                                      
                                                                                                                                      -
                                                                                                                                      
                                                                                                                                      
                                                                                                                                      
                                                                                                                                      (251
                                                                                                                                      )
                                                                                                                                      
                                                                                                                                      
                                                                                                                                      -
                                                                                                                                      
                                                                                                                                      
                                                                                                                                      
                                                                                                                                      
                                                                                                                                      
                                                                                                                                      
                                                                                                                                      
                                                                                                                                      -
                                                                                                                                      
                                                                                                                                      
                                                                                                                                      
                                                                                                                                      -
                                                                                                                                      
                                                                                                                                      
                                                                                                                                      $
                                                                                                                                      (251
                                                                                                                                      )Balance
      at December 31, 2006
                                                                                                                                      
                                                                                                                                      
                                                                                                                                      51,151,093
                                                                                                                                      
                                                                                                                                      
                                                                                                                                      $
                                                                                                                                      511
                                                                                                                                      
                                                                                                                                      
                                                                                                                                      $
                                                                                                                                      -
                                                                                                                                      
                                                                                                                                      
                                                                                                                                      $
                                                                                                                                      125,744
                                                                                                                                      
                                                                                                                                      
                                                                                                                                      $
                                                                                                                                      4,830
                                                                                                                                      
                                                                                                                                      
                                                                                                                                      
                                                                                                                                      
                                                                                                                                      
                                                                                                                                      
                                                                                                                                      $
                                                                                                                                      -
                                                                                                                                      
                                                                                                                                      
                                                                                                                                      $
                                                                                                                                      2,566
                                                                                                                                      
                                                                                                                                      
                                                                                                                                      $
                                                                                                                                      133,651Net
      income
                                                                                                                                      
                                                                                                                                      
                                                                                                                                      -
                                                                                                                                      
                                                                                                                                      
                                                                                                                                      
                                                                                                                                      -
                                                                                                                                      
                                                                                                                                      
                                                                                                                                      
                                                                                                                                      -
                                                                                                                                      
                                                                                                                                      
                                                                                                                                      
                                                                                                                                      -
                                                                                                                                      
                                                                                                                                      
                                                                                                                                      
                                                                                                                                      23,999
                                                                                                                                      
                                                                                                                                      
                                                                                                                                      $
                                                                                                                                      23,999
                                                                                                                                      
                                                                                                                                      
                                                                                                                                      
                                                                                                                                      -
                                                                                                                                      
                                                                                                                                      
                                                                                                                                      
                                                                                                                                      -
                                                                                                                                      
                                                                                                                                      
                                                                                                                                      $
                                                                                                                                      23,999Non-cash
      compensation expense
                                                                                                                                      
                                                                                                                                      
                                                                                                                                      -
                                                                                                                                      
                                                                                                                                      
                                                                                                                                      
                                                                                                                                      -
                                                                                                                                      
                                                                                                                                      
                                                                                                                                      
                                                                                                                                      -
                                                                                                                                      
                                                                                                                                      
                                                                                                                                      
                                                                                                                                      7,776
                                                                                                                                      
                                                                                                                                      
                                                                                                                                      
                                                                                                                                      -
                                                                                                                                      
                                                                                                                                      
                                                                                                                                      
                                                                                                                                      
                                                                                                                                      
                                                                                                                                      
                                                                                                                                      
                                                                                                                                      -
                                                                                                                                      
                                                                                                                                      
                                                                                                                                      
                                                                                                                                      -
                                                                                                                                      
                                                                                                                                      
                                                                                                                                      $
                                                                                                                                      7,776Translation
      differences
                                                                                                                                      
                                                                                                                                      
                                                                                                                                      -
                                                                                                                                      
                                                                                                                                      
                                                                                                                                      
                                                                                                                                      -
                                                                                                                                      
                                                                                                                                      
                                                                                                                                      
                                                                                                                                      -
                                                                                                                                      
                                                                                                                                      
                                                                                                                                      
                                                                                                                                      -
                                                                                                                                      
                                                                                                                                      
                                                                                                                                      
                                                                                                                                      -
                                                                                                                                      
                                                                                                                                      
                                                                                                                                      $
                                                                                                                                      1,411
                                                                                                                                      
                                                                                                                                      
                                                                                                                                      
                                                                                                                                      -
                                                                                                                                      
                                                                                                                                      
                                                                                                                                      
                                                                                                                                      1,411
                                                                                                                                      
                                                                                                                                      
                                                                                                                                      $
                                                                                                                                      1,411Reclassification
      adjustment for gains, net of losses included in net income, net of income
      tax of $nil
                                                                                                                                      
                                                                                                                                      
                                                                                                                                      -
                                                                                                                                      
                                                                                                                                      
                                                                                                                                      
                                                                                                                                      -
                                                                                                                                      
                                                                                                                                      
                                                                                                                                      
                                                                                                                                      -
                                                                                                                                      
                                                                                                                                      
                                                                                                                                      
                                                                                                                                      -
                                                                                                                                      
                                                                                                                                      
                                                                                                                                      
                                                                                                                                      -
                                                                                                                                      
                                                                                                                                      
                                                                                                                                      $
                                                                                                                                      (2,566
                                                                                                                                      )
                                                                                                                                      
                                                                                                                                      
                                                                                                                                      -
                                                                                                                                      
                                                                                                                                      
                                                                                                                                      
                                                                                                                                      (2,566
                                                                                                                                      )
                                                                                                                                      
                                                                                                                                      $
                                                                                                                                      (2,566
                                                                                                                                      )Comprehensive
      income
                                                                                                                                      
                                                                                                                                      
                                                                                                                                      
                                                                                                                                      
                                                                                                                                      
                                                                                                                                      
                                                                                                                                      
                                                                                                                                      
                                                                                                                                      
                                                                                                                                      
                                                                                                                                      
                                                                                                                                      
                                                                                                                                      
                                                                                                                                      
                                                                                                                                      
                                                                                                                                      
                                                                                                                                      
                                                                                                                                      
                                                                                                                                      
                                                                                                                                      
                                                                                                                                      
                                                                                                                                      $
                                                                                                                                      22,844Amount
      received towards directors –    purchase plan and
      issuance of shares  under the plan
                                                                                                                                      
                                                                                                                                      
                                                                                                                                      79,860
                                                                                                                                      
                                                                                                                                      
                                                                                                                                      
                                                                                                                                      1
                                                                                                                                      
                                                                                                                                      
                                                                                                                                      
                                                                                                                                      -
                                                                                                                                      
                                                                                                                                      
                                                                                                                                      
                                                                                                                                      421
                                                                                                                                      
                                                                                                                                      
                                                                                                                                      
                                                                                                                                      -
                                                                                                                                      
                                                                                                                                      
                                                                                                                                      
                                                                                                                                      
                                                                                                                                      
                                                                                                                                      
                                                                                                                                      
                                                                                                                                      -
                                                                                                                                      
                                                                                                                                      
                                                                                                                                      
                                                                                                                                      -
                                                                                                                                      
                                                                                                                                      
                                                                                                                                      $
                                                                                                                                      422Balance
      at December 31, 2007
                                                                                                                                      
                                                                                                                                      
                                                                                                                                      51,230,953
                                                                                                                                      
                                                                                                                                      
                                                                                                                                      $
                                                                                                                                      512
                                                                                                                                      
                                                                                                                                      
                                                                                                                                      $
                                                                                                                                      -
                                                                                                                                      
                                                                                                                                      
                                                                                                                                      $
                                                                                                                                      133,941
                                                                                                                                      
                                                                                                                                      
                                                                                                                                      $
                                                                                                                                      28,829
                                                                                                                                      
                                                                                                                                      
                                                                                                                                      
                                                                                                                                      
                                                                                                                                      
                                                                                                                                      
                                                                                                                                      $
                                                                                                                                      -
                                                                                                                                      
                                                                                                                                      
                                                                                                                                      $
                                                                                                                                      1,411
                                                                                                                                      
                                                                                                                                      
                                                                                                                                      $
                                                                                                                                      164,693Net
      income
                                                                                                                                      
                                                                                                                                      
                                                                                                                                      
                                                                                                                                      
                                                                                                                                      
                                                                                                                                      
                                                                                                                                      -
                                                                                                                                      
                                                                                                                                      
                                                                                                                                      
                                                                                                                                      -
                                                                                                                                      
                                                                                                                                      
                                                                                                                                      
                                                                                                                                      -
                                                                                                                                      
                                                                                                                                      
                                                                                                                                      
                                                                                                                                      26,430
                                                                                                                                      
                                                                                                                                      
                                                                                                                                      $
                                                                                                                                      26,430
                                                                                                                                      
                                                                                                                                      
                                                                                                                                      
                                                                                                                                      -
                                                                                                                                      
                                                                                                                                      
                                                                                                                                      
                                                                                                                                      -
                                                                                                                                      
                                                                                                                                      
                                                                                                                                      $
                                                                                                                                      26,430Non-cash
      compensation credit
                                                                                                                                      
                                                                                                                                      
                                                                                                                                      -
                                                                                                                                      
                                                                                                                                      
                                                                                                                                      
                                                                                                                                      -
                                                                                                                                      
                                                                                                                                      
                                                                                                                                      
                                                                                                                                      -
                                                                                                                                      
                                                                                                                                      
                                                                                                                                      
                                                                                                                                      (902
                                                                                                                                      )
                                                                                                                                      
                                                                                                                                      
                                                                                                                                      -
                                                                                                                                      
                                                                                                                                      
                                                                                                                                      
                                                                                                                                      
                                                                                                                                      
                                                                                                                                      
                                                                                                                                      
                                                                                                                                      -
                                                                                                                                      
                                                                                                                                      
                                                                                                                                      
                                                                                                                                      -
                                                                                                                                      
                                                                                                                                      
                                                                                                                                      $
                                                                                                                                      (902
                                                                                                                                      )Translation
      differences
                                                                                                                                      
                                                                                                                                      
                                                                                                                                      -
                                                                                                                                      
                                                                                                                                      
                                                                                                                                      
                                                                                                                                      -
                                                                                                                                      
                                                                                                                                      
                                                                                                                                      
                                                                                                                                      -
                                                                                                                                      
                                                                                                                                      
                                                                                                                                      
                                                                                                                                      -
                                                                                                                                      
                                                                                                                                      
                                                                                                                                      
                                                                                                                                      -
                                                                                                                                      
                                                                                                                                      
                                                                                                                                      $
                                                                                                                                      814
                                                                                                                                      
                                                                                                                                      
                                                                                                                                      
                                                                                                                                      -
                                                                                                                                      
                                                                                                                                      
                                                                                                                                      
                                                                                                                                      814
                                                                                                                                      
                                                                                                                                      
                                                                                                                                      $
                                                                                                                                      814Comprehensive
      income
                                                                                                                                      
                                                                                                                                      
                                                                                                                                      
                                                                                                                                      
                                                                                                                                      
                                                                                                                                      
                                                                                                                                      
                                                                                                                                      
                                                                                                                                      
                                                                                                                                      
                                                                                                                                      
                                                                                                                                      
                                                                                                                                      
                                                                                                                                      
                                                                                                                                      
                                                                                                                                      
                                                                                                                                      
                                                                                                                                      
                                                                                                                                      
                                                                                                                                      
                                                                                                                                      
                                                                                                                                      $
                                                                                                                                      27,244Amount
      received towards directors -      purchase
      plan and issuance of share under the plan
                                                                                                                                      
                                                                                                                                      
                                                                                                                                      143,000
                                                                                                                                      
                                                                                                                                      
                                                                                                                                      
                                                                                                                                      2
                                                                                                                                      
                                                                                                                                      
                                                                                                                                      
                                                                                                                                      -
                                                                                                                                      
                                                                                                                                      
                                                                                                                                      
                                                                                                                                      883
                                                                                                                                      
                                                                                                                                      
                                                                                                                                      
                                                                                                                                      -
                                                                                                                                      
                                                                                                                                      
                                                                                                                                      
                                                                                                                                      
                                                                                                                                      
                                                                                                                                      
                                                                                                                                      
                                                                                                                                      -
                                                                                                                                      
                                                                                                                                      
                                                                                                                                      
                                                                                                                                      -
                                                                                                                                      
                                                                                                                                      
                                                                                                                                      $
                                                                                                                                      885Repurchase
      of common shares held in treasury
                                                                                                                                      
                                                                                                                                      
                                                                                                                                      (6,875,000
                                                                                                                                      )
                                                                                                                                      
                                                                                                                                      
                                                                                                                                      -
                                                                                                                                      
                                                                                                                                      
                                                                                                                                      
                                                                                                                                      (50,000
                                                                                                                                      )
                                                                                                                                      
                                                                                                                                      
                                                                                                                                      -
                                                                                                                                      
                                                                                                                                      
                                                                                                                                      
                                                                                                                                      -
                                                                                                                                      
                                                                                                                                      
                                                                                                                                      
                                                                                                                                      
                                                                                                                                      
                                                                                                                                      
                                                                                                                                      
                                                                                                                                      -
                                                                                                                                      
                                                                                                                                      
                                                                                                                                      
                                                                                                                                      -
                                                                                                                                      
                                                                                                                                      
                                                                                                                                      $
                                                                                                                                      (50,000
                                                                                                                                      )Shares
      issued under Global Sources Retention Share Grant Plan
                                                                                                                                      
                                                                                                                                      
                                                                                                                                      2,382
                                                                                                                                      
                                                                                                                                      
                                                                                                                                      
                                                                                                                                      -
                                                                                                                                      
                                                                                                                                      
                                                                                                                                      
                                                                                                                                      -
                                                                                                                                      
                                                                                                                                      
                                                                                                                                      
                                                                                                                                      -
                                                                                                                                      
                                                                                                                                      
                                                                                                                                      
                                                                                                                                      -
                                                                                                                                      
                                                                                                                                      
                                                                                                                                      
                                                                                                                                      
                                                                                                                                      
                                                                                                                                      
                                                                                                                                      
                                                                                                                                      -
                                                                                                                                      
                                                                                                                                      
                                                                                                                                      
                                                                                                                                      -
                                                                                                                                      
                                                                                                                                      
                                                                                                                                      $
                                                                                                                                      -Balance
      at December 31, 2008
                                                                                                                                      
                                                                                                                                      
                                                                                                                                      44,501,335
                                                                                                                                      
                                                                                                                                      
                                                                                                                                      $
                                                                                                                                      514
                                                                                                                                      
                                                                                                                                      
                                                                                                                                      $
                                                                                                                                      (50,000
                                                                                                                                      )
                                                                                                                                      
                                                                                                                                      $
                                                                                                                                      133,922
                                                                                                                                      
                                                                                                                                      
                                                                                                                                      $
                                                                                                                                      55,259
                                                                                                                                      
                                                                                                                                      
                                                                                                                                      
                                                                                                                                      
                                                                                                                                      
                                                                                                                                      
                                                                                                                                      $
                                                                                                                                      -
                                                                                                                                      
                                                                                                                                      
                                                                                                                                      $
                                                                                                                                      2,225
                                                                                                                                      
                                                                                                                                      
                                                                                                                                      $
                                                                                                                                      141,920
 
 The
accompanying notes are an integral part of these financial
statements.
  68
   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.  Complementing this service are various trade magazines. The
Company launched China Sourcing Fairs exhibitions in 2003. These exhibitions
offer international buyers direct access to China and other Asian manufacturers.
The Company’s businesses are conducted primarily through Trade Media Limited,
its wholly owned subsidiary, which was incorporated in October 1984 under the
laws of Cayman Islands.  Through certain other wholly owned
subsidiaries, the Company also organizes China Sourcing Fairs exhibitions,
conferences and exhibitions on technology related issues, licenses Asian Sources
/ Global Sources Online and catalog services, re-sells products that are
purchased on consignment basis and engages in direct sale of products that are
purchased.
  2. 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 (“U.S. GAAP”) 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.
 (b) Use
of Estimates
  The
preparation of financial statements in conformity with 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 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.
   69
  GLOBAL
SOURCES LTD. AND SUBSIDIARIES
 NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
  (In
U.S. Dollars Thousands, Except Number of Shares and Per Share
Data)
  (d)
              Available-for-sale
      Securities (continued)
  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-sale
securities, in accordance with Statement of Financial Accounting Standards
(“SFAS”) No. 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
  Inventory
is stated at the lower of cost or market value. Cost is determined on the
first-in, first-out basis. Cost includes the purchase cost and the delivery
costs incurred in bringing the inventory to the warehouse.
  (f)              
 Property and Equipment
  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.
  Depreciation
on property and equipment is calculated to depreciate their cost on a
straight-line basis over their estimated useful lives as follows:
  Building
                        Over
      the remaining lease period
                          or
      50 years whichever is shorterFixtures,
      fittings and office equipment
                        5
      yearsLeasehold
      improvements
                        5
      yearsMotor
      vehicles
                        5
      yearsComputer
      equipment and software
                        3
      yearsSoftware
      development costs
                        3
      yearsReusable
      trade show booths
                        2
      years
 Depreciation
of assets acquired under capital leases is included in depreciation expense. No
depreciation was recognized for capital work in
progress.
 
 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”. 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.
   70
  
 GLOBAL
SOURCES LTD. AND SUBSIDIARIES
 NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
  (In
U.S. Dollars Thousands, Except Number of Shares and Per Share
Data)
 
  (f)
              Property
      and Equipment (continued)
  The
Company expensed $7, $75 and $31 during the years ended December 31, 2006, 2007
and 2008, respectively, for the costs incurred prior to the establishment of the
technological feasibility with respect to the development of
products.
  (g)           Intangible
Assets
  Intangible
assets other than goodwill are carried at cost less accumulated amortization.
Intangible assets are generally amortized on a straight-line basis over the
useful lives of the respective assets. The Company reviews identifiable
amortizable intangible assets to be held and used for impairment whenever events
or changes in circumstances indicate that the carrying value of the assets may
not be recoverable. Determination of recoverability is based on the lowest level
of identifiable estimated undiscounted cash flows resulting from use of the
asset and its eventual disposition. Measurement of any impairment loss is based
on the excess of the carrying value of the asset over its fair
value.
  Goodwill
is carried at cost. Goodwill is not amortized but is subject to an annual test
for impairment at the reporting unit level and between annual tests in certain
circumstances. The performance of the test involves a two-step process. The
first step of the impairment test involves comparing the fair value of the
Company’s reporting unit with the reporting unit’s carrying amount, including
goodwill. The Company generally determines the fair value of its reporting unit
using the expected present value of future cash flows. If the carrying amount of
a reporting unit exceeds the reporting unit’s fair value, the Company performs
the second step of the goodwill impairment test to determine the amount of
impairment loss, if any.
  (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 non-controlling investors are recorded as non-controlling
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.
  The
Company’s policy is to regularly review the carrying values of the non-quoted
long term 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.
  (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.
   71
  GLOBAL
SOURCES LTD. AND SUBSIDIARIES
 NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
  (In
U.S. Dollars Thousands, Except Number of Shares and Per Share
Data)
  
   (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 and from direct sale of
products.
  Revenues
from advertising in trade magazines and websites, net of discounts, are
recognized ratably over the period in which the advertisement is displayed.
Advertising contracts generally do not exceed one year. 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. 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.
 
 The
Company receives royalties from licensing its trade and service marks. Royalties
from license arrangements are earned ratably over the period in which the
advertisement is displayed by the licensee.
  The
Company derives income from its direct product sales. Under the direct product
sales business model, the revenue is recorded when the right of return has
expired after the delivery of the goods to the buyer and the corresponding cost
of products purchased is recorded under sales costs. The amount of shipping
costs invoiced to the buyers is reported under revenue.
  The
Company also derives commission income on the re-sale of products on consignment
basis. Under the Consignment Sales business model, the commission income which
is the sales proceeds, net of the cost of the purchased products payable to the
consigner and the associated direct transaction costs, is recognized upon
conclusion of the sale to the buyer.
  The
Company presents the sales taxes imposed on revenue generating transactions on
gross basis, i.e included in revenue and costs. During the year ended December
31, 2006, 2007 and 2008 such taxes recorded were $1,172, $1,924 and $2,191,
respectively.
  (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. For
online and other media services the commission expense is recognized when the
associated revenue is recognized or when the associated accounts receivable are
paid, whichever is earlier. For exhibitions, the commission expense is
recognized when the associated revenue is recognized, upon conclusion of the
event.
  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.
   72
   GLOBAL
SOURCES LTD. AND SUBSIDIARIES
 NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
  (In
U.S. Dollars Thousands, Except Number of Shares and Per Share
Data)
 
  (l)           Advertising
Expenses and Magazine Mailing Costs
  The event
specific advertising and promotion costs incurred for events to be held in
future financial years are expensed in the year in which the expenses are
incurred. Other advertising and promotion expenses are expensed as incurred. The
Company recorded advertising and promotion expenses of $7,483, $ 7,331 and
$8,974 during the years ended December 31, 2006, 2007 and 2008,
respectively.
  The
mailing costs incurred for sending the trade magazines and reports to the
readers are included under community costs. The Company recorded mailing costs
of $3,535, $ 3,783 and $4,048 during the years ended December 31, 2006, 2007 and
2008, 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.
  In cases
where the option to renew is exercised before the original lease agreement
expires and the new agreement is signed to extend the lease beyond the expiry
date of the original agreement, the remaining rental expense as per the original
agreement and the total rental as per the new agreement are added up and the
resulting total rental expense is apportioned on a straight-line basis over the
lease term.
  (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 in which the performance
bonus relates. The liabilities for bonus plan, included under accrued
liabilities, as at December 31, 2007 and 2008 were $102 and $nil,
respectively.
  (o)
              Retirement
      Contributions
  The
Company operates a number of retirement contribution plans. Contributions are
based on a percentage of each eligible employee’s salary and are expensed as the
related salaries are incurred.
  (p)
              Income
      Taxes
  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 realized.
  (q)
              Non-controlling
      Interest
  As of
December 31, 2008, the Company’s wholly-owned subsidiary, Trade Media Holdings
Limited (“TMH”) holds a 60.1% controlling equity interest in eMedia Asia Ltd (a
Barbados corporation) and the remaining 39.9% is held by UBM Asia B.V. (“UBM
Asia”).
   73
   GLOBAL
SOURCES LTD. AND SUBSIDIARIES
 NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
  (In
U.S. Dollars Thousands, Except Number of Shares and Per Share
Data)
  (q)
                Non-controlling
      Interest (continued)
 
 During
2006, the Company recognized a gain on the sale of shares to non-controlling
shareholder and interest income thereon of $7,906 for the sale of 19.9% of its
equity interest in eMedia Asia Ltd. to UBM Asia.
  In June
2008, approval of the board of directors and the shareholders of eMedia Asia
Ltd. were obtained for distribution of the excess cash in eMedia Asia Ltd. to
shareholders of eMedia Asia Ltd., by way of a one-for-one issue of new shares
(as share dividends) and then a purchase back by eMedia Asia Limited of those
share dividends and a consequent reduction of its share capital.
 
 Pursuant
thereto, eMedia Asia Ltd. completed the issuance of 1,000 shares to its
shareholders as share dividends and the subsequent purchase of those 1,000
shares (at a price of $5,000 per share) and distribution of the total amount of
$5,000 to its shareholders by way of a share purchase dividend and the reduction
of its share capital through the cancellation of those 1,000 purchased
shares.
 
 The
Company consolidated the results of eMedia Asia Ltd. in its consolidated
financial statements. The non-controlling interest of $4,940 and $4,223 as at
December 31, 2007 and 2008, respectively, reflects UBM Asia’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 reported 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 translation differences are recorded
under accumulated other comprehensive income. The Company recorded translation
differences of $814 and $1,411 during the year ended December 31, 2008 and 2007
respectively, under accumulated other comprehensive income. The aggregate amount
of foreign currency transaction gains and losses recorded by the Company were
net losses of $714, $1,213, and $657 during the year ended December 31, 2006,
2007 and 2008, respectively.
  (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.
   74
   GLOBAL
SOURCES LTD. AND SUBSIDIARIES
 NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
  (In
U.S. Dollars Thousands, Except Number of Shares and Per Share
Data)
 
  (t)
              Comprehensive
      Income
  SFAS No.
130, “Reporting Comprehensive Income,” establishes standards for reporting
comprehensive income and its components in financial statements. Comprehensive
income is defined as the change in equity of a company during a period from
transactions and other events and circumstances excluding transactions resulting
from investment by owners and distribution to owners.
  (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 31,2006
                                                                                                                                                  
                                                                                                                                                  
                                                                                                                                                  2007
                                                                                                                                                  
                                                                                                                                                  
                                                                                                                                                  2008Net
      income before cumulative effect of change in accounting
      principle
                                                                                                                                                  
                                                                                                                                                  $
                                                                                                                                                  27,629
                                                                                                                                                  
                                                                                                                                                  
                                                                                                                                                  $
                                                                                                                                                  23,999
                                                                                                                                                  
                                                                                                                                                  
                                                                                                                                                  $
                                                                                                                                                  26,430Cumulative
      effect of change in accounting principle (Note 2(x))
                                                                                                                                                  
                                                                                                                                                  
                                                                                                                                                  251
                                                                                                                                                  
                                                                                                                                                  
                                                                                                                                                  
                                                                                                                                                  -
                                                                                                                                                  
                                                                                                                                                  
                                                                                                                                                  
                                                                                                                                                  -Net
      income
                                                                                                                                                  
                                                                                                                                                  $
                                                                                                                                                  27,880
                                                                                                                                                  
                                                                                                                                                  
                                                                                                                                                  $
                                                                                                                                                  23,999
                                                                                                                                                  
                                                                                                                                                  
                                                                                                                                                  $
                                                                                                                                                  26,430Basic
      net income per share before cumulative effect of change in accounting
      principle
                                                                                                                                                  
                                                                                                                                                  $
                                                                                                                                                  0.54
                                                                                                                                                  
                                                                                                                                                  
                                                                                                                                                  $
                                                                                                                                                  0.47
                                                                                                                                                  
                                                                                                                                                  
                                                                                                                                                  $
                                                                                                                                                  0.51Cumulative
      effect of change in accounting principle
                                                                                                                                                  
                                                                                                                                                  $
                                                                                                                                                  0.01
                                                                                                                                                  
                                                                                                                                                  
                                                                                                                                                  $
                                                                                                                                                  -
                                                                                                                                                  
                                                                                                                                                  
                                                                                                                                                  $
                                                                                                                                                  -Basic
      net income per share.
                                                                                                                                                  
                                                                                                                                                  $
                                                                                                                                                  0.55
                                                                                                                                                  
                                                                                                                                                  
                                                                                                                                                  $
                                                                                                                                                  0.47
                                                                                                                                                  
                                                                                                                                                  
                                                                                                                                                  $
                                                                                                                                                  0.51Diluted
      net income per share before cumulative effect of change in accounting
      principle
                                                                                                                                                  
                                                                                                                                                  $
                                                                                                                                                  0.54
                                                                                                                                                  
                                                                                                                                                  
                                                                                                                                                  $
                                                                                                                                                  0.46
                                                                                                                                                  
                                                                                                                                                  
                                                                                                                                                  $
                                                                                                                                                  0.51Cumulative
      effect of change in accounting principle *
                                                                                                                                                  
                                                                                                                                                  $
                                                                                                                                                  -
                                                                                                                                                  
                                                                                                                                                  
                                                                                                                                                  $
                                                                                                                                                  -
                                                                                                                                                  
                                                                                                                                                  
                                                                                                                                                  $
                                                                                                                                                  -Diluted
      net income per share
                                                                                                                                                  
                                                                                                                                                  $
                                                                                                                                                  0.54
                                                                                                                                                  
                                                                                                                                                  
                                                                                                                                                  $
                                                                                                                                                  0.46
                                                                                                                                                  
                                                                                                                                                  
                                                                                                                                                  $
                                                                                                                                                  0.51Weighted
      average common shares used in basic net income per share
      calculations
                                                                                                                                                  
                                                                                                                                                  
                                                                                                                                                  51,132,481
                                                                                                                                                  
                                                                                                                                                  
                                                                                                                                                  
                                                                                                                                                  51,218,263
                                                                                                                                                  
                                                                                                                                                  
                                                                                                                                                  
                                                                                                                                                  51,351,941Effect
      of dilutive shares
                                                                                                                                                  
                                                                                                                                                  
                                                                                                                                                  40,314
                                                                                                                                                  
                                                                                                                                                  
                                                                                                                                                  
                                                                                                                                                  463,072
                                                                                                                                                  
                                                                                                                                                  
                                                                                                                                                  
                                                                                                                                                  878,352Weighted
      average common shares used in diluted net income per share
      calculations
                                                                                                                                                  
                                                                                                                                                  
                                                                                                                                                  51,172,795
                                                                                                                                                  
                                                                                                                                                  
                                                                                                                                                  
                                                                                                                                                  51,681,335
                                                                                                                                                  
                                                                                                                                                  
                                                                                                                                                  
                                                                                                                                                  52,230,293Antidilutive
      share subscriptions
                                                                                                                                                  
                                                                                                                                                  
                                                                                                                                                  100,000
                                                                                                                                                  
                                                                                                                                                  
                                                                                                                                                  
                                                                                                                                                  -
                                                                                                                                                  
                                                                                                                                                  
                                                                                                                                                  
                                                                                                                                                  110,000
 * - less
than $0.01 per share for year ended December 31, 2006.
 
 Antidilutive
share subscriptions had exercise prices greater than the average market price
during the year.
  (v)           Stock
Based Compensation
  Effective
January 1, 2006, the Company adopted the provisions of SFAS No. 123(R),
“Share-Based Payment”, using the modified prospective application transition
method, which requires application of SFAS No. 123(R) for new awards granted
after the adoption of SFAS No. 123(R) and for any portion of awards granted
prior to the date of adoption that have not vested as of the date of adoption of
SFAS No. 123(R).
   75
  GLOBAL
SOURCES LTD. AND SUBSIDIARIES
 NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
  (In
U.S. Dollars Thousands, Except Number of Shares and Per Share
Data)
  (v)           Stock
Based Compensation (continued)
  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.
  For
equity instruments issued to non-employees, the Company uses the measurement
guidance of 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.
  The
Company recognizes the compensation costs associated with share awards with
graded vesting to employees on a straight-line basis over the requisite service
period for the entire award.
  The
Company recognizes the compensation costs associated with share awards to
non-employees on an accelerated attribution basis over the requisite service
period.
 
 Under
SFAS No. 123(R), the Company is required to adjust its compensation cost for
pre-vesting forfeitures, i.e. an award that is forfeited prior to vesting. As
the share grants to the employees include service conditions, the fair value of
the awards is not adjusted subsequent to the grant date. At each reporting date,
the Company would estimate the quantity of share grants expected to vest and
record the compensation cost for the share grants that are expected to
vest.
 
 For the
shares purchased by the directors under Directors Purchase Plan, the Company has
utilized an option-pricing model for determination of the grant date fair value
and the recording of compensation cost associated with the shares purchased by
the Directors under the plan.
  (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)           Change
in Accounting Principle
  The
Company adopted SFAS No. 123 (R), “Share-Based Payment”, effective January 1,
2006. Under SFAS No. 123 (R) the Company is required to adjust its compensation
cost for pre-vesting forfeitures i.e. an award that is forfeited prior to
vesting. Accordingly, the Company changed its accounting principle with effect
from January 1, 2006, with respect to the accounting for
forfeitures.
  Under the
new accounting principle, at each reporting date, the Company estimates the
quantity of share grants expected to vest and record the compensation cost for
the share grants that are expected to vest.
  This
      change in accounting principle does not have any income tax
      impact.
  (y)
              Transition
      adjustment on adoption of SAB 108
  In
      September 2006, the Securities and Exchange Commission (“SEC”) issued
      Staff Accounting Bulletin No. 108, Considering the Effects of Prior
      Year Misstatements when Quantifying Misstatements in Current Year
      Financial Statements,  (“SAB 108”) which provides guidance
      on how uncorrected errors in
previous
   76
  GLOBAL
SOURCES LTD. AND SUBSIDIARIES
 NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
  (In
U.S. Dollars Thousands, Except Number of Shares and Per Share
Data)
  (y)
              Transition
      adjustment on adoption of SAB 108
(continued)
  years
should be considered when quantifying errors in current-year financial
statements. SAB 108 is effective for fiscal years ending after
November 15, 2006. In 2006, the Company has corrected unadjusted
differences (which are not material to each of the individual years in which
they occurred) pertaining to the years 2000 to 2005 in the non-cash compensation
expenses relating to share awards under its Employee Equity Compensation Plans.
These differences arose from the incorrect application of attribution method and
in the classification of share awards between employees and non-employees.
Accordingly, in 2006, the Company has recorded the prior years’ cumulative
non-cash compensation expense of $1,851 against the Company’s opening retained
earnings for the year ended December 31, 2006 and the corresponding credit is
taken to additional paid in capital in accordance with SAB 108. There is no
income tax impact resulting from this adjustment.
 
 (z)           Recent
Accounting Pronouncements
 
 In
September 2006, the Financial Accounting Standards Board (“FASB”) issued SFAS
No. 157, “Fair Value Measurements” (“SFAS No. 157”). This Standard defines fair
value, establishes a framework for measuring fair value in accordance with
generally accepted accounting principles and expands disclosures about fair
value measurements. SFAS No. 157 is effective for fiscal years beginning after
November 15, 2007. As required under SFAS No. 157, the statement shall be
applied prospectively as of the beginning of the fiscal year in which this
Statement is initially applied, except that the Statement shall be applied
retrospectively to certain financial instruments as of the beginning of the
fiscal year in which this Statement is initially applied (a limited form of
retrospective application). However in February 2008, the FASB issued FSP FAS
157-2, which delays the effective date of SFAS No. 157 for all non-financial
assets and non-financial liabilities, except those that are recognized or
disclosed at fair values in the financial statements on a recurring basis. This
FSP partially defers the effective date of SFAS No. 157 to fiscal years
beginning after November 15, 2008. The Company adopted SFAS No. 157 with effect
from January 1, 2008, except as it applies to those non-financial assets and
non-financial liabilities as noted in FSP FAS 157-2. The adoption of this
accounting standard did not have any material impact on the Company’s
consolidated financial statements.
 
 In
February 2007, the FASB issued SFAS No. 159, “The Fair Value Option for
Financial Assets and Financial Liabilities – including an amendment of FASB
Statement No. 115.” SFAS No. 159 permits entities to choose to measure many
financial instruments and certain other items at fair value. Unrealized gains
and losses on items for which the fair value option has been elected will be
recognized in earnings at each subsequent reporting date. SFAS No. 159 is
effective for fiscal year beginning after November 15, 2007. The Company adopted
SFAS No. 159 with effect from January 1, 2008 and the adoption of this
accounting standard did not have any material impact on the Company’s
consolidated financial statements. As of December 31, 2008, the Company did not
elect such option for its financial instruments and liabilities.
 
 In
December 2007, the FASB issued SFAS No. 141(R), Business Combinations,
to replace SFAS No. 141, Business Combinations.  SFAS No.
141(R) requires use of the acquisition method of accounting, defines the
acquirer, establishes the acquisition date and broadens the scope to all
transactions and other events in which one entity obtains control over one or
more other businesses. SFAS No. 141(R) is effective for business
combinations for which the acquisition date is on or after the beginning of the
first annual reporting period beginning on or after December 15,
2008.  The Company adopted SFAS No. 141(R) with effect from
January 1, 2009. The impact of adopting SFAS No. 141(R) will impact
the accounting for business combinations on a prospective basis beginning the
first quarter of 2009.
 
  77
  GLOBAL
SOURCES LTD. AND SUBSIDIARIES
 NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
  (In
U.S. Dollars Thousands, Except Number of Shares and Per Share
Data)
 
 (z)           Recent
Accounting Pronouncements (continued)
 
 In
December 2007, the FASB issued SFAS No. 160, “Accounting and Reporting of
Non-controlling Interest in Consolidated Financial Statements - an amendment of
ARB No.51”. SFAS No. 160 establishes accounting and reporting requirements for
ownership interests in subsidiaries held by parties other than parent, the
amount of consolidated net income attributable to the parent and to the
non-controlling interest. SFAS No. 160 is effective for fiscal year beginning
after December 15, 2008. The Company adopted SFAS No. 160 with effect from
January 1, 2009. SFAS No. 160 requires changes in classification and
presentation of minority interests in the consolidated balance sheets,
statements of income, and statements of stockholders’ equity.
 
 In March
2008, the FASB issued SFAS No. 161, “Disclosures about Derivative Instruments
and Hedging Activities – an amendment of FASB Statement No. 133 (“SFAS No.
161”). SFAS No. 161 expands quarterly disclosure requirements in SFAS No. 133
about an entity’s derivative instruments and hedging activities. SFAS No. 161 is
effective for fiscal years beginning after November 15, 2008. The Company
adopted SFAS No. 161 with effect from January 1, 2009 and the adoption of SFAS
No. 161 is not expected to have a material impact on the Company’s consolidated
financial statements.
 
 In April
2008, the FASB issued FSP FAS 142-3, “Determination of the Useful Life of
Intangible Assets, (FSP FAS 142-3)”. FSP FAS 142-3 amends the factors that
should be considered in developing renewal or extension assumptions used to
determine the useful life of a recognized intangible asset under SFAS No. 142,
“Goodwill and Other Intangible Assets”. FSP FAS 142-3 is effective for fiscal
years beginning after December 15, 2008. The Company adopted FSP FAS 142-3 with
effect from January 1, 2009 and the adoption of this FSP is not expected to have
a material impact on the Company’s consolidated financial
statements.
 
 In May
2008, the FASB issued SFAS No. 162, “The Hierarchy of Generally Accepted
Accounting Principles (SFAS No. 162)”. SFAS No. 162 identifies the sources of
accounting principles and the framework for selecting the principles used in the
preparation of financial statements. SFAS No. 162 is effective 60 days following
the SEC’s approval of the Public Company Accounting Oversight Board amendments
to AU Section 411, “The Meaning of Present Fairly in Conformity with Generally
Accepted Accounting Principles”. The implementation of this standard is not
expected to have a material impact on the Company’s consolidated financial
statements.
 
 In June
2008, the FASB issued FSP EITF 03-6-1, “Determining Whether Instruments Granted
in Share-Based Payment Transactions Are Participating Securities (FSP EITF
03-6-1)”. FSP EITF 03-6-1 clarified that all outstanding unvested share-based
payment awards that contain rights to non-forfeitable dividends participate in
undistributed earnings with common shareholders. Awards of this nature are
considered participating securities and the two-class method of computing basic
and diluted earnings per share must be applied. FSP EITF 03-6-1 is effective for
fiscal years beginning after December 15, 2008. The Company adopted FSP EITF
03-6-1 with effect from January 1, 2009 and the adoption of this FSP does not
have any material impact on the Company’s consolidated financial
statements.
 
 In
October 2008, the FASB issued FSP FAS 157-3, Determining the Fair Value of a
Financial Asset When the Market for That Asset Is Not Active (“FSP FAS 157-3”),
to help constituents measure fair value in markets that are not active. FSP FAS
157-3 is consistent with the joint press release the FASB issued with the
Securities and Exchange Commission (“SEC”) on September 30, 2008, which provides
general clarification guidance on determining fair value under SFAS No. 157 when
markets are inactive. FSP FAS 157-3 was effective upon issuance, including prior
periods for which financial statements had not been issued. The adoption of FSP
157-3 did not have a material impact on the Company’s consolidated financial
statements.
  78
  GLOBAL
SOURCES LTD. AND SUBSIDIARIES
 NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
  (In
U.S. Dollars Thousands, Except Number of Shares and Per Share
Data)
 
 (z)           Recent
Accounting Pronouncements (continued)
 
 In
November 2008, the FASB ratified the consensus reached by the EITF on Issue EITF
No. 08-6, “Equity Method Investment Accounting Considerations” (“EITF 08-6”),
which clarifies the accounting for certain transactions and impairment
considerations involving equity method investments. The prospective provisions
of EITF 08-6 were effective for the Company on January 1, 2009. The adoption of
EITF 08-6 is not expected to have a material impact on the Company’s
consolidated financial position, cash flows, or results of
operations.
 
 In
December 2008, the FASB issued FSP FAS 140-4 and FIN 46R-8 “Disclosures by
Public Entities (Enterprises) about Transfers of Financial Assets and Interests
in Variable Interest Entities” (“FSP FAS 140-4 and FIN 46R-8”). FSP FAS 140-4
and FIN 46R-8 require additional disclosures about transfers of financial assets
and involvement with variable interest entities. The requirements apply to
transferors, sponsors, servicers, primary beneficiaries and holders of
significant variable interests in a variable interest entity or qualifying
special purpose entity. FSP FAS 140-4 and FIN 46R-8 is effective for financial
statements issued for reporting periods ending after December 15, 2008. FSP FAS
140-4 and FIN 46R-8 affect only disclosures and therefore did not have a
material impact on the Company’s consolidated financial statements.
 
 3.           Available-for-sale
Securities
  At
      December 31,2007
                                                  
                                                  
                                                  2008Cost
                                                  
                                                  
                                                  Unrealized
      holding gain
                                                  
                                                  
                                                  Fair
                                                    value
                                                  
                                                  
                                                  Cost
                                                  
                                                  
                                                  Unrealized
      holding gain
                                                  
                                                  
                                                  Fair
                                                    valueDebt
      securities issued by U.S. Treasury
                                                  
                                                  $
                                                  -
                                                  
                                                  
                                                  $
                                                  -
                                                  
                                                  
                                                  $
                                                  -
                                                  
                                                  
                                                  $
                                                  55,258
                                                  
                                                  
                                                  $
                                                  -
                                                  
                                                  
                                                  $
                                                  55,258Other
      securities
                                                  
                                                  
                                                  -
                                                  
                                                  
                                                  
                                                  -
                                                  
                                                  
                                                  
                                                  -
                                                  
                                                  
                                                  
                                                  5,528
                                                  
                                                  
                                                  
                                                  -
                                                  
                                                  
                                                  
                                                  5,528$
                                                  -
                                                  
                                                  
                                                  $
                                                  -
                                                  
                                                  
                                                  $
                                                  -
                                                  
                                                  
                                                  $
                                                  60,786
                                                  
                                                  
                                                  $
                                                  -
                                                  
                                                  
                                                  $
                                                  60,786
 The debt
securities issued by U.S. Treasury will mature within one year from December 31,
2008. The gross realized gains and losses from the sale of available-for-sale
securities were as follows:
  Year
      Ended December 31,2006
                
                
                2007
                
                
                2008Gross
      realized
      gains
                
                $
                309
                
                
                $
                3,392
                
                
                $
                -Gross
      realized
      losses
                
                
                -
                
                
                
                (2,301
                )
                
                
                -$
                309
                
                
                $
                1,091
                
                
                $
                -
 
  The
Company recorded dividend income derived from the available-for-sale securities
of $1,893, $nil and $nil during the year ended December 31, 2006, 2007 and 2008,
respectively. The Company recorded interest income derived form
available-for-sale securities of $nil, $nil and $6 during the year ended
December 31, 2006, 2007 and 2008, respectively.
  During
the year ended December 31, 2008 the Company recorded an impairment loss of $939
on available-for-sale securities which was determined to be other than
temporary.
   79
   GLOBAL
SOURCES LTD. AND SUBSIDIARIES
 NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
  (In
U.S. Dollars Thousands, Except Number of Shares and Per Share
Data)
 
  4.           Fair
Value Measurements
   Effective
January 1, 2008, the Company adopted SFAS 157, and in October 2008, the
Company adopted FSP FAS 157-3, except as it applies to the non-financial assets
and non-financial liabilities subject to FSP FAS 157-2. SFAS No. 157 establishes
a framework for measuring fair value and expands disclosures about fair value
measurements by establishing a fair value hierarchy that prioritizes the inputs
to valuation techniques used to measure fair value. The hierarchy gives the
highest priority to unadjusted quoted prices in active markets for identical
assets or liabilities (Level 1 measurements) and lowest priority to unobservable
inputs (Level 3 measurements). The three levels of the fair value hierarchy
under SFAS 157 are described below:
 
  Level 1
              -
              Observable
      inputs that reflect quoted prices (unadjusted) for identical assets or
      liabilities in active markets.
  Level 2
              -
              Inputs
      reflect quoted prices for identical assets or liabilities in markets that
      are not active; quoted prices for similar assets or liabilities in active
      markets; inputs other than quoted prices that are observable for the asset
      or the liability; or inputs that are derived principally from or
      corroborated by observable market data by correlation or other
      means.
 
 Level 3
              -
              Unobservable
      inputs reflecting the Company’s own assumptions incorporated in valuation
      techniques used to determine fair value. These assumptions are required to
      be consistent with market participant assumptions that are reasonably
      available.
  In
accordance with SFAS No. 157, the Company measures its cash equivalents and
available-for-sale securities at fair value. The Company’s cash equivalents and
available-for-sale securities are classified within Level 1. This is because
Company’s cash equivalents and available-for-sale securities are valued using
quoted market prices.
  Assets
measured at fair value on a recurring basis are summarized below:
  Description
      of
                          the
      assets
                        
                        Balance
      as at
                          December
      31, 2008
                        
                        
                        Fair
      value
                          Measurements
                          at
      reporting
                          date
      using
                          Level
      1 inputsCash
      equivalents
                        Debt
      securities issued by U.S. Treasury
                        
                        $
                        37,777
                        
                        
                        $
                        37,777Available-for-sale
      securities
                        Debt
      securities issued by U.S. Treasury
                        
                        
                        55,258
                        
                        
                        
                        55,258Available-for-sale
      securities
                        Other
      securities
                        
                        
                        5,528
                        
                        
                        
                        5,528Total
      assets
                        
                        $
                        98,563
                        
                        
                        $
                        98,563
 
  5.           Current
Assets
  At
      December 31,2007
                
                
                2008Accounts
      receivable:Gross
      trade
      receivables
                
                $
                7,399
                
                
                $
                6,790Less:  Allowance
      for doubtful
      debts
                
                
                (734
                )
                
                
                (765
                )$
                6,665
                
                
                $
                6,025
  80
    GLOBAL
SOURCES LTD. AND SUBSIDIARIES
 NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
  (In
U.S. Dollars Thousands, Except Number of Shares and Per Share
Data)
 5.
              Current
      Assets (continued)
  
  Year
      Ended December 31,2006
                                          
                                          
                                          
                                          2007
                                          
                                          
                                          
                                          2008Balance
      at the beginning of the year
                                          
                                          $
                                          652
                                          
                                          
                                          $
                                          680
                                          
                                          
                                          $
                                          734Provision
      during the
      year
                                          
                                          
                                          216
                                          
                                          
                                          
                                          444
                                          
                                          
                                          
                                          276Write-off
      during the
      year
                                          
                                          
                                          (188
                                          )
                                          
                                          
                                          (390
                                          )
                                          
                                          
                                          (245
                                          )Balance
      at the end of the
      year
                                          
                                          $
                                          680
                                          
                                          
                                          $
                                          734
                                          
                                          
                                          $
                                          765
 
 At
      December 31,2007
                
                
                2008Prepaid
      expenses and other current assets:Unsecured
      employee loans and other
      debtors
                
                $
                42
                
                
                $
                96Prepaid
      expenses
                
                
                838
                
                
                
                943Deferred
      expenses – short
      term
                
                
                11,664
                
                
                
                12,896Other
      current
      assets
                
                
                2,789
                
                
                
                2,578$
                15,333
                
                
                $
                16,513
 
  6.           Property
and Equipment, net
  At
      December 31,2007
                
                
                2008Building
                
                $
                27,012
                
                
                $
                75,830Capital
      work-in-progress
                
                
                501
                
                
                
                49Leasehold
      improvements
                
                
                10,147
                
                
                
                11,202Motor
      vehicles
                
                
                176
                
                
                
                176Computer
      equipment, software, fixtures, fittings and office
    equipment
                
                
                22,877
                
                
                
                25,525Reusable
      trade show
      booths
                
                
                228
                
                
                
                296Software
      development
      costs
                
                
                3,893
                
                
                
                4,194Property
      and equipment, at
      cost
                
                
                64,834
                
                
                
                117,272Less:  Accumulated
      depreciation
                
                
                (29,482
                )
                
                
                (34,615
                )$
                35,352
                
                
                $
                82,657
 
  Depreciation
expense for the years ended December 31, 2006, 2007 and 2008 was $3,428, $4,517
and $5,401 respectively and the amortization of software costs for the years
ended December 31, 2006, 2007 and 2008 was $1,250, $158 and $193 respectively.
The accumulated amortization of software costs as of December 31, 2007 and 2008
was $3,724 and $3,928 respectively.
  During
2004, the Company entered into an agreement to purchase approximately 9,000
square meters of office space in a commercial building in Shenzhen,
China.  The building is situated on a leasehold land.  The
lease period of the land is 50 years, commencing from year 2002.  At
the end of the lease period, the building together with land will revert to the
local government authority. The construction was completed and the property was
put in use during the year 2005. Depreciation of the property commenced during
the year 2005. This building which is under capital lease is depreciated on a
straight-line basis over the remaining lease
term. The depreciation expense on the said building amounted to $414, $414 and
$414 during the years ended December 31, 2006, 2007 and 2008,
respectively.
   81
   GLOBAL
SOURCES LTD. AND SUBSIDIARIES
 NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
  (In
U.S. Dollars Thousands, Except Number of Shares and Per Share
Data)
   6.            
Property and Equipment, net (continued)
  During
2007, the Company purchased approximately 1,939.38 square meters of office space
in a commercial building in Shenzhen, China. The building is situated on a
leasehold land. The lease period of the land is 50 years, commencing from year
2002. At the end of the lease period the building together with the land will
revert to the local government authority. The delivery of the office space to
the Company was completed in 2007. The depreciation on this property commenced
during 2007. The building, which is under capital lease is depreciated on a
straight-line basis over the remaining lease term. The depreciation expense on
the said building amounted to $123 and $177 during the years ended December 31,
2007 and 2008, respectively.
 
 In 2008,
the Company purchased approximately 6,364.50 square meters of office space in a
commercial building in Shenzhen, China. The building is situated on a leasehold
land.  The lease period of the land is 50 years, commencing from year
2002.  At the end of the lease period, the building together with land
will revert to the local government authority. Depreciation of the property
commenced during the year 2008. 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 $274 during the year
ended December 31, 2008.
 
 In 2008,
the Company purchased approximately 22,874 square feet of office space, together
with 6 car parking spaces, in a commercial building in Hong Kong S.A.R.. The
lease period of the land is 55 years, commencing from year 1991. Depreciation of
the property commenced during the year 2008, and is being depreciated on a
straight-line basis over the remaining lease term. The depreciation expenses on
the said building amounted to $132 during the year ended December 31,
2008.
 
 7.           Long-term
Investments and Bonds Held to Maturity
  (i) As at
December 31, 2008, the Company holds equity instruments carried at $100 in a
privately held unaffiliated electronic commerce company for business and
strategic purposes. The investment is accounted for under the cost method since
the ownership is less than 20% and the Company does not have the ability to
exercise significant influence over the investee. The investment is shown under
long term investments in the consolidated balance sheets.
  The
Company’s policy is to regularly review the carrying values of the non-quoted
investments and to identify and provide for when circumstances indicate
impairment other than a temporary decline in the carrying values of such assets
has occurred.
  The net
carrying value of the long term investment as at December 31, 2007 and 2008 was
$100.  The Company will continue to evaluate this investment for
impairment.
  (ii) U.S.
Treasury STRIPS zero % coupon
 
 At
      December 31,2007
                
                
                2008The
      amortized cost classified by date of contractual maturity is as
      follows:Due
      within one
      year
                
                $
                99
                
                
                $
                -Due
      after one year through five
      years
                
                
                -
                
                
                
                -$
                99
                
                
                $
                -
 
   82
    GLOBAL
SOURCES LTD. AND SUBSIDIARIES
 NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
  (In
U.S. Dollars Thousands, Except Number of Shares and Per Share
Data)
 7.           Long-term
Investments and Bonds Held to Maturity (continued)
  (ii)
              U.S.
      Treasury strips zero % coupon
(continued)
 
 At
      December 31,2007
                
                
                2008The
      fair value based on the market price, classified by  date of
      contractual maturity is as follows:Due
      within one year
                
                $
                100
                
                
                $
                -Due
      after one year through five years
                
                
                -
                
                
                
                -$
                100
                
                
                $
                -
 
 
 At
      December 31,2007
                
                
                2008Gross
      unrealized holding
      gains
                
                $
                1
                
                
                $
                -
 
 Proceeds
from the matured U.S. Treasury STRIPS zero % coupons during the years ended
December 31, 2006, 2007 and 2008 were $200, $205 and $102
respectively.
 
 8.
              Other Long Term
      Assets
  At
      December 31,2007
                
                
                2008Employee
      housing
      loans
                
                $
                154
                
                
                $
                102Club
      memberships
                
                
                272
                
                
                
                272Deferred
      expenses – exhibitions – long term
                
                
                1,090
                
                
                
                900Rental,
      utility and other
      deposits
                
                
                1,265
                
                
                
                287$
                2,781
                
                
                $
                1,561
 
 9.
              Current
      Liabilities
  At
      December 31,2007
                
                
                2008Deferred
      income and customer prepayments:Advertising
                
                $
                43,896
                
                
                $
                43,487Exhibitions,
      subscription and
      others
                
                
                34,245
                
                
                
                30,149$
                78,141
                
                
                $
                73,636
 
 At
      December 31,2007
                
                
                2008Accrued
      liabilities:Salaries,
      wages and
      commissions
                
                $
                1,940
                
                
                $
                1,770Retirement
      contribution
      accruals
                
                
                769
                
                
                
                791Liabilities
      for incentive and bonus plans – current portion
                
                
                1,474
                
                
                
                1,370Printing,
      paper and bulk mailing
      costs
                
                
                1,167
                
                
                
                526Sales
      commissions and fees to third parties
                
                
                3,867
                
                
                
                4,780Others
                
                
                3,329
                
                
                
                2,342$
                12,546
                
                
                $
                11,579
 
   83
    GLOBAL
SOURCES LTD. AND SUBSIDIARIES
 NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
  (In
U.S. Dollars Thousands, Except Number of Shares and Per Share
Data)
 10.           Deferred
Income and Customer Prepayments – Long Term
  At
      December 31,2007
                  
                  
                  2008Exhibitions
                  
                  $
                  4,934
                  
                  
                  $
                  3,044
 
  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% per annum,
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 instalments over the period of the lease,
typically less than or equal to twelve months. Loans due from employees for
purchase of residences were $154 and $102 as of December 31, 2007 and 2008,
respectively.  Loans due from employees for lease of residences were
$39 and $39 as of December 31, 2007 and 2008, respectively. There were no loans
due from the Company’s directors and executive officers as at December 31, 2007
and 2008. Other temporary advances to staff, which are generally repayable
within twelve months, were $3 and $57 as of December 31, 2007 and 2008,
respectively.
  The
Company leases certain office facilities from the subsidiaries of a major
shareholder of the Company under cancelable and non-cancelable operating leases.
Some of these operating leases include both rental and building maintenance
services. During the year ended December 31, 2008 the Company incurred rental
and building maintenance services expenses of $1,023 with respect to these
leases. In addition, the Company has also paid $30 to a subsidiary of a major
shareholder of the Company for the reimbursement of membership fees for use of
club memberships.
  The
Company also receives investment consultancy services from the subsidiaries of a
major shareholder of the Company. During the year ended December 31, 2008 the
Company incurred such investment consultancy services expenses of
$50.
  12.           Liabilities
for Incentive and Bonus Plans
  Before
the commencement of the Equity Compensation Plans (Note 23), 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, 2006, 2007 and 2008. 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. All liabilities under these discretionary bonus awards
have been fully paid and the outstanding balance payable as of December 31, 2008
relating to these awards is $nil.
  13.           Retirement
Contribution Plans
  The
Company operates a number of retirement contribution plans. Employees working in
a jurisdiction where there is no statutory provision for retirement
contributions are covered by the Company’s plans.
   84
  GLOBAL
SOURCES LTD. AND SUBSIDIARIES
 NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
  (In
U.S. Dollars Thousands, Except Number of Shares and Per Share
Data)
  13.
              Retirement
      Contribution Plans (continued)
  One of
these plans is separately administered by an independent trustee and the plan
assets are held independent of the Company.
  
  The
Company incurred costs of $1,051, $1,190 and $1,266 with respect to the
retirement plans in the years ended December 31, 2006, 2007 and 2008,
respectively.
  14.           Income
Taxes
  The
Company and some 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”). Some of the Company’s subsidiaries operate in
Hong Kong SAR, Singapore, the People’s Republic of China and certain other
jurisdictions and are subject to income taxes in their respective jurisdictions.
The Company is also subject to withholding taxes for revenues earned in certain
other countries.
  Income
before income taxes consists of:
  Year
      Ended December 31,2006
                
                
                2007
                
                
                2008Cayman
      Islands
                
                $
                27,494
                
                
                $
                19,579
                
                
                $
                24,984Foreign
                
                
                2,943
                
                
                
                6,775
                
                
                
                3,880$
                30,437
                
                
                $
                26,354
                
                
                $
                28,864
 
 The
      provision for income taxes consists
of:
 
 Year
      Ended December 31,2006
                
                
                2007
                
                
                2008Current
      tax expense:Cayman Islands
                
                $
                -
                
                
                $
                -
                
                
                $
                -Foreign
                
                
                932
                
                
                
                690
                
                
                
                751Deferred
      tax expense:Cayman Islands
                
                
                -
                
                
                
                -
                
                
                
                -Foreign
                
                
                (33
                )
                
                
                (362
                )
                
                
                (74
                )Total
      provision
                
                $
                899
                
                
                $
                328
                
                
                $
                677
 
 
 The
provision for income taxes for the years ended December 31, 2006, 2007 and 2008
differed from the amount computed by applying the statutory income tax rate of
0% as follows:
  
 Year
      Ended December 31,2006
                
                
                2007
                
                
                2008Income
      taxes at statutory rate
                
                $
                -
                
                
                $
                -
                
                
                $
                -Foreign
      income and revenues taxed at higher rates
                
                
                899
                
                
                
                369
                
                
                
                670Impact
      of change in enacted tax rates
                
                
                -
                
                
                
                (41
                )
                
                
                7Total
                
                $
                899
                
                
                $
                328
                
                
                $
                677Effective
      tax rate
                
                
                2.95
                %
                
                
                1.24
                %
                
                
                2.35
                %
   
 85
 
   GLOBAL
SOURCES LTD. AND SUBSIDIARIES
 NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
  (In
U.S. Dollars Thousands, Except Number of Shares and Per Share
Data)
 14.
              Income
      Taxes (continued)
 
 Deferred
tax assets consist of the following:
  Year
      Ended December 31,2007
                
                
                2008Non Current
                
                
                Current
                
                
                Non Current
                
                
                CurrentDeductible
      temporary differences
                
                $
                196
                
                
                $
                46
                
                
                $
                220
                
                
                $
                28Net
      operating loss carry forwards
                
                $
                6,144
                
                
                $
                36
                
                
                $
                6,821
                
                
                $
                31Less:  valuation
      allowance
                
                $
                (6,144
                )
                
                $
                (36
                )
                
                $
                (6,718
                )
                
                $
                (31
                )Deferred
      tax
      assets
                
                $
                196
                
                
                $
                46
                
                
                $
                323
                
                
                $
                28
 
  The
Company recorded a valuation allowance for the deferred tax assets relating to
net operating loss carried forward due to the uncertainty as to their ultimate
realization. The net change in valuation allowance for the years ended December
31, 2006, 2007 and 2008 was a decrease (increase) of approximately $1,410,
$(219) and $(569) respectively, resulting primarily from net operating losses
incurred, expiry of operating losses carry forward and profits made by some of
the subsidiaries during the respective years.
  As of
December 31, 2008 and 2007, a United States subsidiary had net operating loss
carried forward of approximately $16,788 and $16,861 respectively. These losses,
which expire in year 2020, can be utilized to reduce future taxable income of
the subsidiary subject to compliance with the taxation legislation and
regulations in the relevant jurisdiction.
  The
Company’s subsidiary in Dubai, United Arab Emirates has been granted a fifty
year tax holiday in Dubai since it is located in a Free Trade Zone, which may be
subject to further renewal upon expiry of the initial fifty-year period in 2057.
The Company did not utilize the tax holiday as of December 31, 2007 and
2008.
  The
Company recognized a deferred tax liability of $283 and $318 as at December 31,
2007 and 2008, respectively, which primarily arose from the temporary
differences between the financial reporting and the tax bases of property and
equipment in two of the Company’s subsidiaries.
  The
Company adopted the provisions of FASB Interpretation No. 48, “Accounting for
Uncertainty in Income Taxes” (“FIN 48”) on January 1, 2007.
  Under FIN
48, the impact of an uncertain income tax position on the income tax return must
be recognized at the largest amount that is more-likely-than-not to be sustained
upon audit by the relevant taxing authority. An uncertain income tax position
will not be recognized if it has less than a 50% likelihood of being sustained.
Additionally, FIN 48 provides guidance on derecognition, classification,
interest and penalties, accounting in interim periods, disclosure and
transition.The
total amount of unrecognized tax benefits as of January 1, 2007, December 31,
2007 and December 31, 2008 were not material.
  The
Company did not recognize an increase in the liability for unrecognized tax
benefits and no retained earnings adjustment was recorded as of January 1,
2007.
 
 The
Company’s subsidiaries are subject to taxation in Hong Kong, the People’s
Republic of China, Singapore and other jurisdictions. There are no ongoing
examinations by taxing authorities as of December 31, 2008. These subsidiaries’
tax returns mainly for years 2007 and 2008 remain open in various local tax
jurisdictions.
  86
   GLOBAL
SOURCES LTD. AND SUBSIDIARIES
 NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
  (In
U.S. Dollars Thousands, Except Number of Shares and Per Share
Data)
 
 
 14.
              Income
      Taxes (continued)
  The
Company’s policy is to recognize interest and/or penalties related to uncertain
tax positions in income tax expense. To the extent accrued interest and
penalties do not ultimately become payable, amounts accrued will be reduced and
reflected as a reduction of the overall income tax provision in the period that
such determination is made. During the year ended December 31, 2008, the Company
did not record any interest or penalty relating to uncertain tax
positions.
 
 15.           Share
Capital
  During
2006 the Company increased its authorized share capital from 50,000,000 common
shares of $0.01 par value to 75,000,000 common shares of $0.01 par value. On
February 28, 2007 and 2008, the Company issued 79,860 and 143,000 common shares,
respectively, under the Directors Purchase Plan.
  On
February 4, 2008, the board of directors of the Company authorized a program to
buyback up to $50,000 worth of common shares. The Company may, from time to
time, as business conditions warrant, purchase shares in the open market or
through private transactions. The buyback program does not obligate the Company
to buyback any specific number of shares and may be suspended or terminated at
any time at management’s discretion. The timing and amount of any buyback of
shares will be determined by management based on its evaluation of market
conditions and other factors. As of December 31, 2008, the Company has not
bought back any of its shares under this program.
  In
addition to the above, the board of directors, at their meeting held on 10 and
11 November 2008, approved the repurchase by the Company, by tender offer, which
is available for all shareholders to participate, of 6,875,000 issued and
outstanding common shares (including the one-for-ten bonus shares announced on
February 12, 2009) at a total purchase price of $50,000 or $8.00 per share.
Consequently, the Company announced on November 12, 2008 a tender offer,
available for all shareholders to participate, to repurchase 6,875,000 of the
Company’s common shares at a purchase price of $8.00 per share in cash or up to
$50,000. The tender offer commenced on November 21, 2008 and expired on December
19, 2008. The Company's common shares that were properly tendered and not
properly withdrawn were greater than the number of shares that the Company
offered to purchase. Therefore pro-ration was necessary. The pro-ration process
was concluded by December 26, 2008 and the Company accepted 15.97764% of the
shares properly tendered and not properly withdrawn by each shareholder. The
Company issued payment of $8.00 per share for all pro-rata shares that were
properly tendered and not properly withdrawn. The repurchase was completed by
December 31, 2008 and the Company paid in total $50,000 in purchase
consideration to the selling shareholders. The Company is holding the
repurchased shares as treasury shares.
  The
authorized share capital of the Company as at December 31, 2007 and 2008 is
75,000,000 common shares of $0.01 par value. As at December 31, 2007 and 2008,
the Company has 51,230,953 and 51,376,335 common shares issued and 51,230,953
and 44,501,335 common shares outstanding, respectively.
  16.           Fair
Value of Financial Instruments
  The
carrying amounts of the Company’s cash equivalents, accounts receivable,
receivables from sales representatives, unsecured employee loans and other
debtors, accounts payable and accrued liabilities approximate fair value due to
their short maturities. The fair value of cash equivalents was discussed in Note
4. The fair value of available-for-sale securities is disclosed in Note 3 and
Note 4. The carrying amount and market value of long term investments are
discussed in Note 7.
   87
  GLOBAL
SOURCES LTD. AND SUBSIDIARIES
 NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
  (In
U.S. Dollars Thousands, Except Number of Shares and Per Share
Data)
  
  17.           Concentration
of Credit Risk and Other Risks
  Financial
instruments, which potentially subject the Company to concentration of credit
risk, consist primarily of investments in checking and money market accounts,
debt securities issued by U.S. Treasury, available-for-sale securities, accounts
receivable and receivables from sales representatives. The Company maintains
checking, money market accounts, debt securities issued by U.S. Treasury 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. The Company generally collects in advance from customers in
markets with higher credit risk. 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, 2006, 2007 and 2008. No
customer accounted for more than 10% of the accounts receivable as of December
31, 2007 and 2008.
  In 2008,
the Company derived 69% of its revenue from online and other media services. The
Company expects that a majority of its future revenue will continue to be
generated from online and other media services. Market competition from other
service providers could negatively impact revenue.
  In 2008,
the Company derived approximately 95% of its revenue from customers in Asia. The
Company expects that a majority of its future revenue will continue to be
generated from customers in this region. Future political or economic
instability in Asia could negatively impact the business.
  18.           Operating
Leases
  The
Company leases office facilities under cancelable and non-cancelable operating
leases generally with an option to renew upon expiry of the lease term. During
the years ended December 31, 2006, 2007 and 2008, the Company’s operating lease
rental and building management services expenses were $1,185, $1,305 and $1,451
respectively.  The estimated future minimum lease rental payments
under non-cancelable operating leases as of December 31, 2008 are as
follows:
  Year
      Ending December 31,
                
                Operating
      Leases2009
                
                $
                9162010
      onwards
                
                
                757$
                1,673
 
 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 31,2006
                
                
                2007
                
                
                2008Revenue:Online
      and other media services (Note (a))
                
                $
                113,097
                
                
                $
                125,818
                
                
                $
                142,129Exhibitions
                
                
                42,122
                
                
                
                51,608
                
                
                
                58,179Miscellaneous
                
                
                1,262
                
                
                
                4,633
                
                
                
                6,584Consolidated
                
                $
                156,481
                
                
                $
                182,059
                
                
                $
                206,892
 
  88
   GLOBAL
SOURCES LTD. AND SUBSIDIARIES
 NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
  (In
U.S. Dollars Thousands, Except Number of Shares and Per Share
Data)
 
 19.
              Segment
      and Geographic Information
(continued)
  (a)
              Segment
      Information (continued)
 
 Miscellaneous
revenue consists mainly of technical services fee income, rental income,
commission income from consignment sales and for 2007 and 2008 also includes
revenue from resale of products purchased.
  Revenue
from barter transactions was $1,268, $1,617 and $2,846 during the years ended
December 31, 2006, 2007 and 2008, respectively. Similarly the expenses from
barter transactions were $1,365, $1,320 and $2,505 during the years ended
December 31, 2006, 2007 and 2008, respectively.
  Year
      Ended December 31,2006
                
                
                2007
                
                
                2008Income/(loss)
      from operations:Online
      and other media services
                
                $
                21,936
                
                
                $
                22,341
                
                
                $
                25,033Exhibitions
                
                
                (3,752
                )
                
                
                (193
                )
                
                
                1,802Miscellaneous
                
                
                (76
                )
                
                
                834
                
                
                
                741Consolidated
                
                $
                18,108
                
                
                $
                22,982
                
                
                $
                27,576
 
 At
      December 31,2007
                
                
                2008Identifiable
      Assets:Online
      and other media
      services
                
                $
                180,499
                
                
                $
                160,993Exhibitions
                
                
                84,762
                
                
                
                76,986Miscellaneous
                
                
                6,547
                
                
                
                7,119Consolidated
                
                $
                271,808
                
                
                $
                245,098
 
  Note:               (a)       Online
and other media services consist of:
  Year
      Ended December 31,2006
                
                
                2007
                
                
                2008Online
      services
                
                $
                64,396
                
                
                $
                75,919
                
                
                $
                94,481Print
      services
                
                
                48,701
                
                
                
                49,899
                
                
                
                47,648$
                113,097
                
                
                $
                125,818
                
                
                $
                142,129
 
  (b)           Foreign
Operations
  Year
      Ended December 31,2006
                
                
                2007
                
                
                2008Revenue:Asia
                
                $
                146,315
                
                
                $
                171,621
                
                
                $
                196,123United
      States
                
                
                7,610
                
                
                
                8,596
                
                
                
                9,152Europe
                
                
                1,571
                
                
                
                242
                
                
                
                459Others
                
                
                985
                
                
                
                1,600
                
                
                
                1,158Consolidated
                
                $
                156,481
                
                
                $
                182,059
                
                
                $
                206,892
 
   89
   GLOBAL
SOURCES LTD. AND SUBSIDIARIES
 NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
  (In
U.S. Dollars Thousands, Except Number of Shares and Per Share
Data)
 
  19.
              Segment
      and Geographic Information
(continued)
  (b)           Foreign
Operations (continued)
  At
      December 31,2007
                
                
                2008Long-Lived
      Assets:Asia
                
                $
                38,429
                
                
                $
                84,641Consolidated
                
                $
                38,429
                
                
                $
                84,641
 
  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 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, 2008 for the leasehold improvements and purchase
of software amounted to $499. The capital commitments as at December 31, 2007
for the purchase of computers and for the development of software was
$350.
  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 his
services to the Company. In conjunction with the restricted share award plan,
the former parent company assigned 7,100,812 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 887,605 of these shares is
subject to an employment agreement with one of the Company’s United States
subsidiaries and entitlement to such shares vested immediately. The chairman and
chief executive officer’s entitlement to the remaining 6,213,207 shares is
subject to employment, non-compete and vesting terms under an employment
agreement with one of the Company’s United States subsidiaries. The 6,213,207
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.
   90
   GLOBAL
SOURCES LTD. AND SUBSIDIARIES
 NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
  (In
U.S. Dollars Thousands, Except Number of Shares and Per Share
Data)
 
  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, including the Equity
Compensation Plans Numbers I to VII described below.  The Trust is
administered by Appleby Services (Bermuda) Ltd (previously known as “Harrington
Trust Limited” and then as “Appleby Trust (Bermuda) Ltd.”) (the
“Trustee”).  The 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 4,034,552 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.
  Pursuant
to a Declaration of Trust dated November 28, 2006 by the Trustee, “The Global
Sources Equity Compensation Trust 2007” (“2007 Trust”) was established. The 2007
Trust is administered by the Trustee as trustee. The purpose of the 2007 Trust
is to administer shares contributed by the Company to the 2007 Trust from time
to time in connection with providing equity compensation benefits under The
Global Sources Equity Compensation (2007) Master Plan described below (“ECP 2007
Master Plan”). In the year 2008, a total of 2,165 shares vested and were issued
under the ECP 2007 Master Plan. As of December 31, 2008, no shares were held by
the Trustee under the 2007 Trust. In exercising its powers under the Trust, the
Trustee may be directed by a plan committee to be constituted and appointed by
the Company.  The plan committee (“ECP 2007 Plan Committee”) was
constituted and appointed by the Board of Directors on February 15,
2007.
  The
Equity Compensation Plan committee approved and made several share awards /
options under the plans ECP I, ECP II, ECP III and ECP IV. All the share awards
/ options under these plans have fully vested. The non-cash compensation
expenses associated with these awards have been recognized over the vesting
terms of the awards from their respective award dates.
  Eligible
employees, directors and consultants under ECP V are awarded grants of shares,
the numbers of which are determined by the plan committee.
  Entitlement
of the employees and directors to these common shares is subject to employment
and vesting terms. Entitlement of consultants to these common shares is subject
to continued services provided by the consultants and vesting
terms.
  The
Equity Compensation Plan committee approved the awards of common shares under
ECP V on January 23, 2001. The Equity Compensation Plan committee
subsequently approved additional awards of common shares under ECP V on various
dates.
  The
non-cash compensation expenses associated with the above awards in accordance
with SFAS No. 123(R), under ECP V of approximately $3,275, respectively, are
recognized over the five year vesting term from the respective award
dates.
  Eligible
employees, directors and consultants under ECP VI are awarded one-time grants of
Global Sources Ltd. common shares, the numbers of which are determined by the
plan committee.
   91
   GLOBAL
SOURCES LTD. AND SUBSIDIARIES
 NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
  (In
U.S. Dollars Thousands, Except Number of Shares and Per Share
Data)
 
  23.           Equity
Compensation Plans (continued)
  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 the plan on various dates subsequently. The
non-cash compensation expenses associated with the awards in accordance with
SFAS No. 123(R), under ECP VI totaling approximately $1,269 are recognized over
the five year vesting term from the respective award dates.
  Eligible
employees, directors and consultants under ECP VII are awarded grants of Global
Sources Ltd. common shares, the numbers of which are determined by the plan
committee periodically. Entitlement of the employees and directors to these
common shares is subject to employment and vesting terms. Entitlement of
consultants to these common shares is subject to continued services provided by
the consultants and vesting terms.
  The
Equity Compensation Plan committee approved the awards of common shares under
ECP VII on January 1, 2002 and made further awards on various dates
subsequently. The non-cash compensation expenses associated with the above
awards in accordance with SFAS No. 123(R), under ECP VII of approximately
$12,523 are recognizedover the six years
vesting term from the respective award dates.
  The ECP
2007 Master Plan was approved by the Company’s shareholders on May 8, 2006. The
ECP 2007 Master Plan commenced with effect on January 1, 2007 and, unless
terminated earlier by the Company’s Board of Directors, will expire on December
31, 2012. The employees, directors and consultants of the Company are eligible
to be awarded grants of the Company’s common shares under the ECP 2007 Master
Plan. The grantees and the number of shares to be awarded, and the vesting rules
and other terms and conditions, are to be as determined by the ECP 2007 Plan
Committee, who are authorized under the ECP 2007 Master Plan to issue
supplementary or subsidiary documents to set out and evidence such vesting rules
and other terms and conditions. The total number of shares to be issued under
the ECP 2007 Master Plan is subject to a limit of 3,000,000 common
shares.
  On
November 7, 2006, the Company filed a Form S-8 Registration Statement under the
Securities Act of 1933, with the U.S. Securities and Exchange Commission, for up
to 3,000,000 common shares to be issued under the ECP 2007 Master
Plan.
  On March
6, 2007, the Plan Committee approved and issued “The Global Sources Share Grant
Award Plan” as a supplementary or subsidiary document to the ECP 2007 Master
Plan. Under the plan, the ECP 2007 Plan Committee is to determine who will be
granted awards of shares and the number of shares to be awarded to them, and to
determine the vesting schedule for such awards. The plan commenced with effect
on March 6, 2007, and will terminate upon the expiration or termination of the
ECP 2007 Master Plan, or upon the liquidation of the Company, or upon
termination by the ECP 2007 Plan Committee, whichever is the earliest to occur.
The ECP 2007 Plan Committee approved awards of common shares under the plan
during 2007 and 2008. The non-cash compensation expenses associated with the
awards of approximately $8,086 are recognized over the six year vesting term of
the award.
  On March
6, 2007, the Plan Committee approved and issued “The Global Sources Retention
Share Grant Plan” as a supplementary or subsidiary document to the ECP 2007
Master Plan. Persons eligible to receive grants under the plan are persons who
have been the employees, directors or consultants for at least five years, who
retire “in good standing” (as determined by the ECP 2007 Plan Committee), and
who would otherwise have their unvested shares (under any applicable equity
compensation plans) forfeited upon retirement. The ECP 2007 Plan Committee is to
determine who amongst eligible persons will be granted awards of common shares.
The number of common shares to be awarded to such grantees is calculated
ac-
   92
     GLOBAL
SOURCES LTD. AND SUBSIDIARIES
 NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
  (In
U.S. Dollars Thousands, Except Number of Shares and Per Share
Data)




23.      Equity
Compensation Plans (continued)
 cording
to a formula defined in the plan, and will vest in equal installments over a
period of five years after retirement, subject to certain non-compete terms and
the grantees remaining “in good standing”. The plan commenced with effect on
March 6, 2007, and will terminate upon the expiration or termination of the ECP
2007 Master Plan, or upon the liquidation of the Company, or upon termination by
the ECP 2007 Plan Committee, whichever is the earliest to occur.
  The ECP
2007 Plan Committee approved awards of common shares under the plan during 2007
and 2008. The non-cash compensation expenses associated with the awards of
approximately $277 are recognized over the five year vesting term of the
award.
  The
Company expensed $4,000, and $7,753, and credited $(952), in non-cash
compensation costs associated with the awards under the above ECP plans in the
years ended December 31, 2006, 2007 and 2008, respectively. As of December 31,
2008, there was $8,308 of unrecognized non-cash compensation cost associated
with the awards under the above ECP plans, which is expected to be recognized
over the next six years.
 The
Company’s non-vested shares as of December 31, 2008 and changes during the year
ended December 31, 2008 were as follows:
 
 ECP
      V
                                                        Grant
      Plan
                                                      
                                                      
                                                      ECP
      VI
                                                        Grant
      Plan
                                                      
                                                      
                                                      ECP
      VII
                                                        Grant
      Plan
                                                      
                                                      
                                                      The
      Global Sources Share Grant Award Plan
                                                      
                                                      
                                                      The
      Global Sources Retention Share Grant PlanNumber
      of
                                                        shares
                                                      
                                                      
                                                      Weighted
      average grant date fair value
                                                      
                                                      
                                                      Number
      of
                                                        shares
                                                      
                                                      
                                                      Weighted
      average grant date fair value
                                                      
                                                      
                                                      Number
      of
                                                        shares
                                                      
                                                      
                                                      Weighted
      average grant date fair value
                                                      
                                                      
                                                      Number
      of
                                                        shares
                                                      
                                                      
                                                      Weighted
      average grant date fair value
                                                      
                                                      
                                                      Number
      of
                                                        shares
                                                      
                                                      
                                                      Weighted
      average grant date fair valueNon-vested
      at January 1, 2008
                                                      
                                                      
                                                      33,443
                                                      
                                                      
                                                      $
                                                      14.67
                                                      
                                                      
                                                      
                                                      24,011
                                                      
                                                      
                                                      $
                                                      6.56
                                                      
                                                      
                                                      
                                                      1,520,211
                                                      
                                                      
                                                      $
                                                      5.67
                                                      
                                                      
                                                      
                                                      429,310
                                                      
                                                      
                                                      $
                                                      12.87
                                                      
                                                      
                                                      
                                                      8,635
                                                      
                                                      
                                                      $
                                                      19.23Granted
                                                      
                                                      
                                                      8,800
                                                      
                                                      
                                                      $
                                                      6.17
                                                      
                                                      
                                                      
                                                      -
                                                      
                                                      
                                                      
                                                      -
                                                      
                                                      
                                                      
                                                      -
                                                      
                                                      
                                                      
                                                      -
                                                      
                                                      
                                                      
                                                      468,703
                                                      
                                                      
                                                      $
                                                      11.85
                                                      
                                                      
                                                      
                                                      44,729
                                                      
                                                      
                                                      $
                                                      10.33Vested
                                                      
                                                      
                                                      (20,969
                                                      )
                                                      
                                                      $
                                                      14.71
                                                      
                                                      
                                                      
                                                      (9,077
                                                      )
                                                      
                                                      $
                                                      6.37
                                                      
                                                      
                                                      
                                                      (335,139
                                                      )
                                                      
                                                      $
                                                      4.54
                                                      
                                                      
                                                      
                                                      -
                                                      
                                                      
                                                      
                                                      -
                                                      
                                                      
                                                      
                                                      (2,382
                                                      )
                                                      
                                                      $
                                                      19.51Forfeited
                                                      
                                                      
                                                      (10,078
                                                      )
                                                      
                                                      $
                                                      14.74
                                                      
                                                      
                                                      
                                                      -
                                                      
                                                      
                                                      
                                                      -
                                                      
                                                      
                                                      
                                                      (27,971
                                                      )
                                                      
                                                      $
                                                      6.21
                                                      
                                                      
                                                      
                                                      (51,442
                                                      )
                                                      
                                                      $
                                                      12.04
                                                      
                                                      
                                                      
                                                      -
                                                      
                                                      
                                                      
                                                      -Non-vested
      at December 31, 2008
                                                      
                                                      
                                                      11,196
                                                      
                                                      
                                                      $
                                                      7.85
                                                      
                                                      
                                                      
                                                      14,934
                                                      
                                                      
                                                      $
                                                      6.68
                                                      
                                                      
                                                      
                                                      1,157,101
                                                      
                                                      
                                                      $
                                                      5.98
                                                      
                                                      
                                                      
                                                      846,571
                                                      
                                                      
                                                      $
                                                      12.31
                                                      
                                                      
                                                      
                                                      50,982
                                                      
                                                      
                                                      $
                                                      11.41
  The total
fair value of shares vested during the years ended December 31, 2006, 2007 and
2008 were as follows:
  
 Year
      ended
                    December
      31,
                
                ECP
      IV
                    Grant
      Plan
                
                
                ECP
      V
                    Grant
      Plan
                
                
                ECP
      VI
                    Grant
      Plan
                
                
                ECP
      VII
                    Grant
      Plan
                
                
                The
      Global Sources Retention Share Grant Plan
                
                
                Total2006
                
                $
                1,024
                
                
                $
                586
                
                
                $
                324
                
                
                $
                946
                
                
                $
                -
                
                
                $
                2,8802007
                
                $
                -
                
                
                $
                436
                
                
                $
                167
                
                
                $
                3,030
                
                
                $
                -
                
                
                $
                3,6332008
                
                $
                -
                
                
                $
                284
                
                
                $
                124
                
                
                $
                8,581
                
                
                $
                24
                
                
                $
                9,013
 
  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.
   93
  GLOBAL
SOURCES LTD. AND SUBSIDIARIES
 NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
  (In
U.S. Dollars Thousands, Except Number of Shares and Per Share
Data)
  24.          Directors
Purchase Plan (continued)
  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 the
previous calendar year, on or before 28th day of
February of the year, with the balance of 90% payable by the end of the four
year period from that day and the shares will be issued
thereafter.  The resignation of a Director following his or her
purchase of the shares and payment of the 10% initial installment shall not
cause a forfeiture of the purchased shares, however, failure to pay the 90%
balance of the purchase price before the end of the holding period will result
in the 10% deposit being forfeited and all rights under the purchase plan and
the issuance of shares to automatically lapse and expire and the shares will not
be issued.
  On
November 7, 2006 the Company filed a Form S-8 Registration Statement under the
Securities Act of 1933, with the U.S. Securities and Exchange Commission, for up
to 530,000 common shares to be issued under the Directors Purchase Plan (as of
November 5, 2005).
  All the
monies received under the Director Purchase Plan are credited to additional paid
in capital upon receipt. Upon issuance of shares under the plan, the par value
of the issued shares is transferred from additional paid in capital to common
share capital.
  A summary
of share option activity under Directors Purchase Plan during the year ended
December 31, 2008 was as follows:
  Number
      of
                    shares
                
                
                Weighted
      average exercise priceOutstanding
      at January 1, 2008
                
                
                -
                
                
                
                -Granted
                
                
                140,000
                
                
                $
                28.40Exercised
                
                
                20,000
                
                
                $
                28.40Forfeited
                
                
                -
                
                
                
                -Expired
                
                
                120,000
                
                
                $
                28.40Outstanding
      at December 31, 2008
                
                
                -
                
                
                
                -Exercisable
      at December 31, 2008
                
                
                -
                
                
                
                -
 
  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, 2008, the unutilized amount under this facility was approximately
$504.  Hongkong and Shanghai Banking Corporation Limited has also
provided guarantees on behalf of the Company to the Company’s
suppliers.  As at December 31, 2008, such guarantees amounted to
$3.
  26.           Other
Commitments
  The
Company has entered into a number of license agreements during the year 2004 for
its exhibition events amounting to $29,730 including fee increases for year 2008
and 2009, 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,
2008 the amount of $29,730 under these
agreements has been fully paid.  The amount paid was expensed when the
related events were held. Subsequently, in March 2007, the Company entered into
a number of venue license agreements for its exhibition events amounting to
$44,396 in payments over five and a half years. The agreements are cancelable
under Force Majeure conditions, or upon notice and payment of cancellation
charges to the other party. The amounts paid will be expensed when the related
events are held. As of December 31, 2008, approximately $5,283 was paid under
these agreements.
   94
   GLOBAL
SOURCES LTD. AND SUBSIDIARIES
 NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
  (In
U.S. Dollars Thousands, Except Number of Shares and Per Share
Data)
   26.          Other
Commitments (continued)
  The
Company also entered into several agreements for the event specific promotion of
exhibition events amounting to $4,033 in payments over five
years.  The amounts under these agreements have been fully paid as of
December 31, 2008.
  In 2008,
the Company entered into several agreements for the event specific promotion of
exhibition events amounting to $3,489 in payments over two years. The amount
paid under these agreements as of December 31, 2008 was $1,285.
  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 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.
  27.         
Bonus Shares
  On
December 20, 2007, the Company announced a one for ten bonus share issue on the
Company’s outstanding common shares.  Shareholders of record on
January 1, 2008 received one additional common share for every ten common shares
held, of face value of $0.01 each.  The bonus share issue was
distributed on February 1, 2008. The Company has accounted for the bonus share
issue as a stock split and reclassified $42 and $42 from additional paid in
capital to common share capital as of December 31, 2007 and 2008,
respectively.
  28.         
Shares of HC International, Inc.
  HC
International Inc. (“HC International”) is a company listed on the Growth
Enterprise Market of The Stock Exchange of Hong Kong Limited. In the year 2006,
Trade Media Holdings Limited (“TMHL”), a wholly-owned subsidiary of the Company,
entered into an agreement (“Sale and Purchase Agreement”) with IDG Technology
Venture Investment, Inc. (“IDGVC”) for, and completed, the purchase from IDGVC
of 47,858,000 HC International shares (representing an approximate 9.77% equity
interest in HC International as of September 30, 2007), at a consideration of
approximately $9,875. In the last quarter of 2007, the Company announced, via a
press release dated December 10, 2007, that the Company and TMHL had entered
into an agreement with IDG Technology Venture Investment III, L.P. (“IDGTVI
III”) to sell all its and TMHL’s equity interests in HC International (amounting
to 62,652,000 HC International shares) to IDGTVI III, at a sale consideration of
approximately $0.1968 per HC International share. The sale was subsequently
completed on December 18, 2007, as announced in the Company’s press release
dated December 18, 2007.
 
 As the
fair value of this investment as of June 30, 2007 is less than the cost, the
Company’s management evaluated the investment in HC International as of June 30,
2007 for impairment and concluded that the impairment
was other-than-temporary impairment. As per the Company’s accounting policy,
declines in value judged to be other-than-temporary on available-for-sale
securities are included in the statement of income. Accordingly the unrealized
loss of approximately $2,301 on the HC International investment was recorded in
the income statement as of June 30, 2007.
  95
  GLOBAL
SOURCES LTD. AND SUBSIDIARIES
 NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
  (In
U.S. Dollars Thousands, Except Number of Shares and Per Share
Data)
 
 28.
              Shares
      of HC International, Inc.
(continued)
 
  Pursuant
to IDGVC’s indemnification obligations under the Sale and Purchase Agreement,
TMHL received approximately $455 from IDGVC during the second quarter ended June
30, 2007. This amount was recorded in the income statement for the year ended
December 31, 2007.
 
 The
approximate amount of $1,846, being the net amount of the approximately $2,301
impairment loss and the approximately $455 receipt mentioned above, is reflected
under the item “Impairment loss on investment and available-for-sale securities,
net” in the income statement for the year ended December 31, 2007.
 
 For the
sale by the Company and TMHL of all the 62,652,000 HC International shares held
by it and TMHL to IDGTVI III during the fourth quarter of 2007, as described
above, the Company recorded a gain of approximately $2,361, which is included
under “Gain on sale of available-for-sale securities” in the income statement
for the year ended December 31, 2007.
  29.          Business
Acquisition
 
 On August
16, 2007, Trade Media Holdings Limited (“TMHL”), a wholly owned subsidiary of
the Company and Blue Bamboo China Ventures (“BBCV”) an exempted company
incorporated in Cayman Islands entered into a Sales and Purchase Agreement
(“S&P”), in which TMHL will purchase certain intellectual property rights
and other related intangible assets (the “Acquired Assets”) from BBCV. The
S&P was duly completed on September 12, 2007. BBCV is an online media
company that built a network of four websites that provide information about
home renovation, overseas study, weddings and parenting to urban Chinese
consumers. This acquisition was made in line with the Company’s strategy to
expand its domestic China initiatives.
 
 The
Company recorded this transaction as a business acquisition in accordance with
SFAS No.141. The total purchase consideration was $3,136, of which approximately
$1,364 was paid to BBCV on the completion date, approximately $1,636 was placed
in an escrow account with an appointed escrow agent and the balance $136 was the
direct transaction costs. The escrow amount will be released to BBCV within one
year of the completion date, subject to terms and conditions stipulated in the
S&P.
 
 The
allocation of purchase consideration to the assets acquired based on their fair
values was as follows:
 
 AmountWebsite
      intangibles
                    
                    $
                    588Goodwill
                    
                    $
                    2,548Total
                    
                    $
                    3,136
 
 The
intangible assets have a useful life of five years. The Company recorded $35
amortization costs on the website intangible assets in its income statement for
the year ended December 31, 2007. The goodwill was assigned to the Blue Bamboo
reporting unit.
  96
   GLOBAL
SOURCES LTD. AND SUBSIDIARIES
 NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
  (In
U.S. Dollars Thousands, Except Number of Shares and Per Share
Data)
 
 
 29.
              Business
      Acquisition (continued)
 
 Subsequent
to the acquisition, the Company realigned its business strategy to focus on the
development of its other Global Sources domestic B2B China initiatives such as
Elegant Living Online and Electronic Supply & Manufacturing – China Online
and has terminated its plans to launch Blue Bamboo websites.
 
 Due to
this change in business strategy, the Company no longer has any plans to launch
the newly acquired business. Hence, the Company performed an impairment
assessment of the Blue Bamboo website intangibles and goodwill and determined
that the carrying values of website intangibles of $553 and goodwill of $2,548
were fully impaired and recorded an impairment charge of $3,101 in its financial
statements for the year ended December 31, 2007. This impairment charge of
$3,101 is assigned to online and other media services segment.
 
 30.         
Reclassification
 
 Certain
prior year amounts have been reclassified to conform to the current year
presentation.
 
 31.         
Post Balance Sheet Events
 
 On
February 12, 2009, the Company announced a one for ten bonus share issue on the
Company’s outstanding common shares. Shareholders of record on February 27, 2009
received one additional common share for every ten common shares held, of face
value of $0.01 each. The bonus shares have been distributed on or about March
31, 2009. The Company has accounted for the bonus share issue as a stock split
and retrospectively reclassified $46 and $47 from additional paid in capital to
common share capital as of December 31, 2007 and 2008, respectively. The
computations of basic and diluted net income per share have been adjusted
retrospectively for all periods presented based on new number of shares. 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.
 
   97
  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, March 1, 2005, March 6, 2006, March
5, 2007, December 20, 2007 and on February 12, 2009.
  Period
                
                High
                
                
                LowYear
      2004
                
                $
                10.44
                
                
                $
                3.63Year
      2005
                
                $
                14.17
                
                
                $
                4.11Year
      2006
                
                $
                13.53
                
                
                $
                6.38Year
      2007
                
                $
                32.14
                
                
                $
                11.49Year
      2008
                
                $
                26.67
                
                
                $
                4.18First
      Quarter 2007
                
                $
                15.70
                
                
                $
                11.51Second
      Quarter 2007
                
                $
                19.00
                
                
                $
                11.49Third
      Quarter 2007
                
                $
                20.53
                
                
                $
                12.59Fourth
      Quarter 2007
                
                $
                32.14
                
                
                $
                17.47First
      Quarter 2008
                
                $
                26.68
                
                
                $
                9.55Second
      Quarter 2008
                
                $
                15.35
                
                
                $
                10.76Third
      Quarter 2008
                
                $
                14.55
                
                
                $
                8.64Fourth
      Quarter 2008
                
                $
                9.22
                
                
                $
                4.18First
      Quarter 2009
                
                $
                5.45
                
                
                $
                3.30December
      2008
                
                $
                7.01
                
                
                $
                4.64January
      2009
                
                $
                5.45
                
                
                $
                3.77February
      2009
                
                $
                4.95
                
                
                $
                4.06March
      2009
                
                $
                4.76
                
                
                $
                3.30April
      2009
                
                $
                5.14
                
                
                $
                3.67May
      2009
                
                $
                7.09
                
                
                $
                4.35
 
 Markets
  Our
shares are listed and traded under the symbol “GSOL” on Nasdaq.
  ITEM
      10.
              ADDITIONAL
      INFORMATION
  Memorandum
and Bye-Laws
  The
following statements are brief descriptions of our common shares, and the more
important rights and privileges of our shareholders conferred by the laws of
Bermuda and our Memorandum of Association and Bye-Laws, and is based upon the
advice of Appleby, our Bermuda counsel, but are qualified in its entirety by
reference to our Memorandum of Association and Bye-Laws and the laws of
Bermuda.
  Description
of shareholder rights attaching to our common shares
  The
Company is registered with the Bermuda Registrar of Companies with registration
number 27310. It has the usual objects and powers of a Bermuda exempt company,
found in its Memorandum of Association, empowering it to, among other things,
deal in goods of all kinds, and to acquire, hold and dispose of all forms of
real property outside Bermuda, and personal property worldwide, including
intellectual property. Our authorized share capital consists of 75,000,000
common shares, par value $0.01 per share. A bonus share distribution of one
share for every ten
   98
  shares
was issued to all of our shareholders of record on February 27, 2009 and
distributed on or about March 31, 2009.  As of April 30, 2009, we had
a total of 51,418,330 common shares issued, comprising 44,543,330 common shares
outstanding and 6,875,000 common shares held as treasury shares.
  ·
              Holders
      of common shares have no preemptive, redemption, conversion or sinking
      fund rights.
  ·
              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 our 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
  Save
where a greater majority is required by the Companies Act 1981 of Bermuda (as
amended) (the “Companies
Act”) or our Bye-Laws, 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. Subject to any rights or
restrictions attached
to any class of shares, 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.
   99
   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 our Bye-Laws by:
  ·
              the
      chairman of the meeting;
  ·
              at
      least three shareholders present in person or represented by
      proxy;
  ·
              any
      shareholder or shareholders present in person or represented 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
its 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 or partly in one way and partly the other. 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 if it appears to the board of directors to be justified by the
position of the Company and will depend on our future operations and earnings,
capital requirements, surplus and general financial conditions, as our board of
directors may deem relevant.
  We have
not paid any cash dividends on our common shares since October 1999. Previously,
we paid cash dividends as a private company as a means to distribute earnings to
shareholders. Beginning in October 1999, we have focused on the implementation
of our growth plans, and we have retained earnings in furtherance of such plans.
Our board of directors reviews its options for the use of cash on a regular
basis, including whether or not to pay any cash dividends.
  Purchase
by a Company of its Own Common Shares
  We may
purchase our own common shares out of the capital paid up on the common shares
in question or out of funds that would otherwise be available for dividend or
distribution or out of the proceeds of a fresh issue of common shares made for
the purposes of the purchase. We may not purchase our shares if, on the date on
which the purchase is to be effected, there are reasonable grounds for believing
that the Company is, or after the purchase would be, unable to pay its
liabilities as they become due, or as a result, our issued share capital would
be reduced below the minimum capital specified in our memorandum of
association.
   100
  
  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. However, pursuant to recent changes to the Companies
Act, effective December 29, 2006, a company may purchase its own shares, to be
held as treasury shares, if authorized to do so by its memorandum of association
or Bye-laws. A proposed resolution for the amendment of our Bye-Laws, to
authorize us to purchase our own shares, to be held as treasury shares, was put
forth to our shareholders for approval at our Annual General Meeting, held on
June 18, 2007 (Hong Kong time). The resolution was approved by our shareholders,
so we are now able to acquire our own shares and hold them as treasury shares,
subject always of course to the provisions of the Companies Act, to our
Bye-Laws, to the securities laws of the United States and to the rules of
Nasdaq. On February 4, 2008, we announced via a press release that our board of
directors has authorized a program to repurchase up to $50 million of our common
shares in the open market or through private transactions, from time to time, as
business conditions warrant, but on the basis that we are not obligated to
repurchase any specific number of shares and that the program may be suspended
or terminated at any time at our management’s discretion. The timing and amount
of the repurchase of shares (if any) will be determined by our management, based
on its evaluation of market conditions and other factors. As of April 30, 2009,
no repurchases of our common shares have been made under this
program.
  Our board
of directors, at their meetings held on November 10 and 11, 2008, approved the
tender offer by us for 6.25 million of our common shares, or approximately 13.4%
of our total common shares then outstanding, at a total purchase price of $50.0
million or $8.00 per share. The tender offer commenced on November 21, 2008 and
expired on December 19, 2008. Our common shares that were properly tendered and
not properly withdrawn were greater than the number of shares that we offered to
purchase, which therefore required a pro-ration process. The pro-ration process
was concluded on December 26, 2008 and we accepted 15.97764% of the shares
properly tendered and not properly withdrawn by each shareholder. We are holding
the repurchased shares as treasury shares, which are disclosed as such on our
balance sheet as of December 31, 2008.
  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:
  ·
              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.
  Our
Bye-Laws provide that a quorum for such a meeting shall be two persons present
in person or by proxy representing a majority of the shares of the relevant
class. The Bye-Laws specify that the creation or issue of shares ranking on
parity with existing shares will not, subject to any statement to the contrary
in the terms of issue of those shares or rights attached to those shares, vary
the special rights attached to existing shares.
  Change
of Control
  Our
Bye-Laws have two provisions that could delay a change of control. The first is
the classified board, which means that only a portion of the directors come up
for election every year, thus delaying a change in the composition of the Board.
The second is the "Business Combinations" Bye-law (Bye-laws 155-163), which
requires the approval of
sixty-six and two-thirds percent (66 2⁄3%) of shareholders voting at a general
meeting, over and above any other approvals required by our Bye-Laws to permit
certain mergers, amalgamations or similar transaction to go
forward.
   101
   Transfer
of Common Shares
  Subject
to the Companies Act and 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 only one class of
shares.
  A
“blanket” authorization has been obtained from the Bermuda Monetary Authority
for all transfers of our common shares between persons who are not resident in
Bermuda for exchange control purposes, provided our common shares remain listed
on an “appointed stock exchange” (which includes listing on
Nasdaq).
  Transmission
of Shares
  In the
event of the death of a shareholder, the survivor or survivors, where the
deceased shareholder was a joint holder, or the legal personal representative of
such shareholder, including executors and administrators, shall be the only
persons recognized by us as having any title to the shareholder
shares.
  Disclosure
of Interests
  Our
Bye-Laws provide that a director who has at least a five percent interest,
directly or indirectly, in an entity that is interested in a contract or
proposed contract or arrangement with us, shall declare the nature of such
interest at the first opportunity at a meeting of the board of directors, or by
writing to the board of directors. If the director has complied with the
relevant sections of the Companies Act and our Bye-Laws with regard to the
disclosure of his interest, the director may vote at a meeting of the board of
directors or a committee thereof on a contract, transaction or arrangement in
which that director is interested and he will be taken into account in
ascertaining whether a quorum is present.
  Under
Bermuda law, the Company may not make loans to its directors unless approved by
a majority of the shareholders holding 90% of the voting rights.
  Rights
in Liquidation
  Under
Bermuda law, in the event of liquidation, dissolution or winding-up of a
company, after satisfaction in full of all claims of creditors and subject to
the preferential rights accorded to any series of preferred stock, the proceeds
of such liquidation, dissolution or winding-up are distributed among the holders
of shares in accordance with a company’s bye-laws.
   102
  
  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 shareholders’
meeting as an Annual 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,
proceed duly to convene a special general meeting.
  Under the
Companies Act, 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 longer period 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, telecopy or electronic
means. Any such notice shall be deemed to have been served twenty-four hours
after its dispatch.
  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 a company’s certificate of incorporation, its
memorandum of association (including its objects and powers) and any alteration
to the memorandum of association and address of registered office and resident
representative.
  Our
shareholders and directors have the additional right to inspect our Bye-Laws,
our minute books and our audited financial statements, which, unless agreed by
all shareholders and directors, must be presented at an annual general meeting.
For the avoidance of doubt, with respect to the aforesaid inspection of our
minute books, our shareholders only have the right under our Bye-Laws to inspect
minutes of shareholder meetings.
  Our
Bye-Laws provide that our register of shareholders is required to be open for
inspection during normal business hours by shareholders without charge and to
members of the general public on the payment of a fee. A company is required to
maintain its share register in Bermuda but may, subject to the provisions of the
Companies Act, establish one or more branch register outside of Bermuda. We have
established a branch register with our transfer agent, Computershare Investor
Services, LLC, 655 Montgomery Street, Suite 830, San Francisco, CA 94111,
U.S.A.
  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.
  103
    Election
or Removal of Directors
  Our
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 of a Bermuda company will serve until his successor is appointed or his
prior removal in the manner provided by the Companies Act or the Bye-laws of a
Bermuda company. Our Bye-Laws provide that at each annual general meeting
one-third of the directors will retire from office on a rotational basis based
on length of time served. A director is not required to hold shares in a company
to qualify to join the board, and once appointed may sit on the board regardless
of age, unless the bye-laws provide otherwise. Our Bye-Laws do not require
qualifying shares to join the board and do not set age limits for directors who
serve on the board. All directors must provide written acceptance of their
appointment within thirty days of their appointment.
  The board
has the power at any time and from time to time to appoint any individual to be
a director so as to fill a casual vacancy. As set forth in our Bye-Laws, a
casual director so appointed shall hold office only until the next following
annual general meeting, and if not reappointed at such annual general meeting,
shall vacate office.The
board may approve the appointment of alternate directors.
  We may,
in a special general meeting called for this purpose, remove a director,
provided notice of such meeting is served upon the director concerned not less
than fourteen days before the meeting and he shall be entitled to be heard at
that meeting.
  The
office of a director will be vacated in the event of any of the
following:
  ·
              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, and our board of directors
      resolves that his office is
vacated;
  ·
              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;
  ·
              if
      he ceases to be a director by virtue of the Companies Act or our Bye-Laws,
      or is removed from office pursuant to our
  Bye-Laws;
  ·
              if
      he (or his alternate director, if any) is absent  from more than
      three consecutive board of directors’ meetings without the permission of
      the board of directors and the board of directors resolves that his office
      be vacated; or
  ·
              if
      he is requested to resign in writing by not less than three quarters of
      the other directors.
  Amendment
of Memorandum of Association and Bye-Laws
  Bermuda
law provides that the memorandum of association of a company may be amended by a
resolution passed at a general meeting of the shareholders of which due notice
has been given. An amendment to a memorandum of association does not require the
consent of the Minister of Finance save for specific circumstances, for example,
the adopting of any objects which constitute restricted business activities
under the Companies Act.
  Under
Bermuda law, the holders of an aggregate of no less than 20% in par value of a
company’s issued share capital or any class of issued share capital have the
right to apply to the Bermuda Court for an annulment of any amendment of the
memorandum of association adopted by shareholders at any general meeting, other
than an amendment
that alters or reduces a company’s share capital as provided in the Companies
Act. Where an application is made, the amendment becomes effective only to the
extent that it is confirmed by the Bermuda Court. An application for the
annulment of an amendment of the memorandum of association must be made within
21 days after the date on which the resolution altering the company’s memorandum
of association is passed and may be made on behalf of the person entitled to
make the application by one or more of their number as they may appoint in
writing for the purpose. No application may be made by persons voting in favor
of the amendment.
   104
    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 any affiliate or associate of such interested shareholder), or by
a simple majority if the business combination is approved by a majority of
continuing directors or if certain prescribed conditions are met assuring that
we will receive fair market value in exchange for such business combination. In
this context, a “business combination” includes mergers, asset sales and other
material transactions resulting in a benefit to the interested shareholder or
the adoption of a plan for our liquidation or dissolution; a “continuing
director” is a member of our board of directors that is not an affiliate or
associate of an interested shareholder and was a member of our board prior to
such person becoming an interested shareholder; and an “interested shareholder”
is any person (other than us or any of our subsidiaries, any employee benefit or
other similar plan or any of our shareholders that received our shares in
connection with our share exchange in 2000 prior to the listing of our shares on
Nasdaq) that owns or has announced its intention to own, or with respect to any
of our affiliates or associates, within the prior two years did own, at least
15% of our voting shares.
  Appraisal
Rights and Shareholder Suits
  Amalgamation
  The
Companies Act provides that, subject to the terms of a company’s Bye-laws, the
amalgamation of a Bermuda company with another company requires the amalgamation
agreement to be approved by the board of directors and at a meeting of the
shareholders by seventy-five percent of the members present and entitled to vote
at that meeting in respect of which the quorum shall be two persons holding or
representing at least one-third of the issued shares of the company or class, as
the case may be.
  Our
Bye-Laws alter the majority vote required and provide that any resolution
submitted for the consideration of shareholders at any general meeting to
approve a proposed amalgamation with another company requires the approval of
two-thirds of the votes of disinterested shareholders cast at such
meeting.
  Under
Bermuda law, in the event of an amalgamation of a Bermuda company, a shareholder
who did not vote in favor of the amalgamation and who is not satisfied that fair
value has been offered for such shareholder’s shares, may apply to a Bermuda
court within one month of notice of the meeting of shareholders to appraise the
fair value of those shares.
  Class
Actions and Derivative Actions
  Class
actions and derivative actions are generally not available to shareholders under
Bermuda law. Under Bermuda law, a shareholder may commence an action in the name
of a company to remedy a wrong done to the company where the act complained of
is alleged to be beyond the corporate power of the company, or is illegal or
would result in the violation of the company’s memorandum of association or
bye-laws. Furthermore, consideration would be given by a Bermuda court to acts
that are alleged to constitute a fraud against the minority shareholders or, for
instance, where an act requires the approval of a greater percentage of the
company’s shareholders than those who actually approved it.
   105
  
  When the
affairs of a company are being conducted in a manner which is oppressive or
prejudicial to the interests of some part of the shareholders, one or more
shareholders may apply to a Bermuda court, which may make such order as it sees
fit, including an order regulating the conduct of the company’s affairs in the
future or ordering the purchase of the shares of any shareholders, by other
shareholders or by the company.
  Capitalization
of Profits and Reserves
  Under our
Bye-Laws, the board of directors may resolve to capitalize all or any part of
any amount for the time being standing to the credit of any reserve or fund
which is available for distribution or to the credit of our share premium
account; and accordingly make that amount available for distribution among the
shareholders who would be entitled to it if distributed by way of a dividend in
the same proportions and on the footing that the same may be paid not in cash
but be applied either in or towards:
  ·
              paying
      up amounts unpaid on any of our shares held by the shareholders;
      or
  ·
              payment
      up in full of our unissued shares, debentures, or other obligations to be
      allotted and credited as fully paid amongst such
    shareholders.
  As a
proviso to the foregoing, the share premium account may be applied only in
paying up unissued shares to be issued to shareholders credited as fully paid,
and provided, further,
that any sum standing to the credit of a share premium account may only be
applied in crediting as fully paid shares of the same class as that from which
the relevant share premium was derived.
  Registrar
or Transfer Agent
  Our
transfer agent and branch registrar is Computershare Investor Services, LLC. In
addition to a register held by Computershare Investor Services, LLC, a register
of holders of the shares is maintained by Appleby in Bermuda located at Canon’s
Court, 22 Victoria Street, Hamilton HM 12 Bermuda.
  Personal
Liability of Directors and Indemnity
  The
Companies Act requires every officer, including directors, of a company in
exercising powers and discharging duties, to act honestly in good faith with a
view to the best interests of the company, and to exercise the care, diligence
and skill that a reasonably prudent person would exercise in comparable
circumstances. The Companies Act further provides that any provision whether in
the Bye-laws of a company or in any contract between the company and any officer
or any person employed by the company as auditor exempting such officer or
person from, or indemnifying him against, any liability which by virtue of any
rule of law would otherwise attach to him, in respect of any fraud or dishonesty
of which he may be guilty in relation to the company, shall be
void.
  Every
director, officer, resident representative and committee member shall be
indemnified out of our funds against all liabilities, loss, damage or expense,
including liabilities under contract, tort and statute or any applicable foreign
law or regulation and all reasonable legal and other costs and expenses properly
payable, incurred or suffered by him as director, officer, resident
representative or committee member; provided that the indemnity contained in the
bye-laws will not extend to any matter which would render it void under the
Companies Act as discussed above.
  Our
Bye-Laws also contain provisions for the advancement of funds to our directors,
officers and other indemnified persons for expenses incurred in defending legal
proceedings against them arising from the course of their duties. At our Annual
General Meeting on June 11, 2008, our shareholders approved amendments to our
Bye-Laws to provide more specifically that if any fraud or dishonesty on the
part of the director, officer or other indemnified person concerned is
proved, any such funds advanced to him or her must be repaid. These amendments
conformed our Bye-Laws with changes to the Companies Act.
   106
  
  Material
Contracts
  During
the first quarter of 2007, a subsidiary of the Company entered into a number of
venue license agreements for our exhibition events amounting to approximately
$44.396 million in payments over five and a half years. The agreements are
cancellable under force majeure conditions, or upon notice and payment of
cancellation charges to the other party. As of December 31, 2008, approximately
$5.283 million was paid under the terms of these agreements.
  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 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, subject to the Companies Act, we are generally not
      permitted to participate in most business transactions and activities of
      any kind or type conducted from within Bermuda, including those which
      involve land in Bermuda, except in furtherance of our business carried on
      outside Bermuda or under a license granted by the Minister of Finance of
      Bermuda.
   107
  
  Taxation
  Bermuda
Taxation
  This
summary is based on laws, regulations, treaty provisions and interpretations now
in effect and available as of the date of this Form 20-F. The laws, regulations,
treaty provisions and interpretations, however, may change at any time, and any
change could be retroactive to the date of issuance of our common shares. These
laws, regulations and treaty provisions are also subject to various
interpretations, and the relevant tax authorities or the courts could later
disagree with the explanations or conclusions set out below.
  We have
received from the Minister of Finance a written undertaking under the Exempted
Undertakings Tax Protection Act, 1966 (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 reciprocal income tax
treaty affecting us exists between Bermuda and the United States.
  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 may,
although we are not obligated to do so, furnish our shareholders with quarterly
reports by mail with the assistance of a corporate services provider, which may
include unaudited interim financial information. 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. Our contracts with
customers are denominated and priced in foreign currencies. The conversion of
these contract proceeds to U.S. Dollars
   108
  could
result in losses and reflects the foreign exchange risk assumed by us between
contract signing and the conversion of cash into U.S. Dollars.
  The
following table summarizes our foreign currency Accounts Receivable and provides
the information in U.S. Dollar equivalent:
  As
      of December 31, 2008 (in U.S. Dollars Thousands)
                                      
                                      
                                      As
      of December 31, 2007 (in U.S. Dollars Thousands)Expected
      maturity dates
                                      
                                      
                                      
                                      
                                      
                                      
                                      
                                      
                                      Expected
      maturity datesCurrency
                                      
                                      Within 1 year
                                      
                                      
                                      Thereafter
                                      
                                      
                                      Total
                                      
                                      
                                      Fair value
                                      
                                      
                                      2008
                                      
                                      
                                      Thereafter
                                      
                                      
                                      Total
                                      
                                      
                                      Fair valueHKD
                                      
                                      
                                      1,301
                                      
                                      
                                      
                                      -
                                      
                                      
                                      
                                      1,301
                                      
                                      
                                      
                                      1,301
                                      
                                      
                                      
                                      1,549
                                      
                                      
                                      
                                      -
                                      
                                      
                                      
                                      1,549
                                      
                                      
                                      
                                      1,549CNY
                                      
                                      
                                      2,678
                                      
                                      
                                      
                                      -
                                      
                                      
                                      
                                      2,678
                                      
                                      
                                      
                                      2,678
                                      
                                      
                                      
                                      2,918
                                      
                                      
                                      
                                      -
                                      
                                      
                                      
                                      2,918
                                      
                                      
                                      
                                      2,918TWD
                                      
                                      
                                      561
                                      
                                      
                                      
                                      -
                                      
                                      
                                      
                                      561
                                      
                                      
                                      
                                      561
                                      
                                      
                                      
                                      774
                                      
                                      
                                      
                                      -
                                      
                                      
                                      
                                      774
                                      
                                      
                                      
                                      774JPY
                                      
                                      
                                      191
                                      
                                      
                                      
                                      -
                                      
                                      
                                      
                                      191
                                      
                                      
                                      
                                      191
                                      
                                      
                                      
                                      160
                                      
                                      
                                      
                                      -
                                      
                                      
                                      
                                      160
                                      
                                      
                                      
                                      1604,731
                                      
                                      
                                      
                                      -
                                      
                                      
                                      
                                      4,731
                                      
                                      
                                      
                                      4,731
                                      
                                      
                                      
                                      5,401
                                      
                                      
                                      
                                      -
                                      
                                      
                                      
                                      5,401
                                      
                                      
                                      
                                      5,401
 
  We
believe this risk is mitigated because historically a majority (ranging between
98% to 99%) of our revenue is denominated in U.S. Dollars or is received in the
Hong Kong Dollar, which is currently pegged to the U.S. Dollar, the Chinese
Renminbi which historically remained relatively stable but strengthened during
the past two years against the U.S. Dollar and the New Taiwan Dollar which is
relatively stable against U.S. Dollar. Correspondingly, a majority
(approximately 60% to 80%) of our expenses are denominated in Asian currencies.
To the extent significant currency fluctuations occur in the New Taiwan Dollar,
the Chinese Renminbi or other Asian currencies, or if the Hong Kong Dollar is no
longer pegged to the U.S. Dollar, our revenue and expenses will fluctuate and
our profits will be affected.
  As of
December 31, 2008, we have not engaged in foreign currency hedging
activities.
  In the
year ended December 31, 2008 and the year ended December 31, 2007, we derived
more than 90% of our revenue from customers in the Asia-Pacific region. We
expect that a majority of our future revenue will continue to be generated from
customers in this region. Future political or economic instability in the
Asia-Pacific region could negatively impact our business.
  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.
  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
   Evaluation
of Disclosure Controls and Procedures
   As
required by Rules 13a-15 (e) and 15d-15 (e) under the Exchange Act, management,
with the participation of our Chief Executive Officer and Chief Financial
Officer, has evaluated the effectiveness of our disclosure controls and
procedures as of the end of the period covered by this report. Disclosure
controls and procedures refer to controls and other procedures designed to
ensure that information required to be disclosed in the reports we file or
submit under the
Exchange Act is recorded, processed, summarized and reported, within the time
periods specified in the rules and forms of the SEC. Disclosure controls and
procedures include, without limitation, controls and procedures designed to
ensure that information required to be disclosed by us in our reports that we
file or submit under the Securities Exchange Act of 1934 is accumulated and
communicated to management, including our Chief Executive Officer and Chief
Financial Officer, as appropriate to allow timely decisions regarding our
required disclosure.
  109
     Based on
the foregoing, our Chief Executive Officer and Chief Financial Officer have
concluded that, as of December 31, 2008, the end of the period covered by this
report, our disclosure controls and procedures were effective.
   Report
of Management on Internal Control over Financial Reporting
  Management
is responsible for establishing and maintaining adequate internal control over
financial reporting as such term is defined in Rule 13a-15(f) under the Exchange
Act.
   Internal
control over financial reporting refers to a process designed by, or under the
supervision of, our Chief Executive Officer and Chief Financial Officer and
effected by our Board of Directors, Management and other personnel, to provide
reasonable assurance regarding the reliability of financial reporting and the
preparation of financial statements for external purposes in accordance with
generally accepted accounting principles and includes those policies and
procedures that:
   -
              pertain
      to the maintenance of records that in reasonable detail accurately and
      fairly reflect the transactions and dispositions of our
      assets;
   -
              provide
      reasonable assurance that transactions are recorded as necessary to permit
      preparation of financial statements in accordance with generally accepted
      accounting principles, and that our receipts and expenditures are being
      made only in accordance with authorizations of our management and members
      of our board of directors; and
   -
              provide
      reasonable assurance regarding prevention or timely detection of
      unauthorized acquisition, use, or disposition of our assets that could
      have a material effect on our financial
  statements.
  Because
of its inherent limitations, internal control over financial reporting may not
prevent or detect misstatements. Also, projections of any evaluation of
effectiveness to future periods are subject to the risk that controls may become
inadequate because of changes in conditions, or that the degree of compliance
with the policies or procedures may deteriorate.
   Management
evaluated the effectiveness of our internal control over financial reporting as
of December 31, 2008 using the framework set forth in the report of the Treadway
Commission’s Committee of Sponsoring Organizations (“COSO”), “Internal Control —
Integrated Framework.”
   Based on
the foregoing management has concluded that our internal control over financial
reporting was effective as of December 31, 2008. Our independent registered
public accounting firm, PricewaterhouseCoopers LLP, has issued an audit report
on our internal control over financial reporting, which is included
herein.
   
   110
   
  
  Changes
to Internal Controls
  Management
has evaluated, with the participation of our Chief Executive Officer and Chief
Financial Officer, whether any changes in our internal control over financial
reporting that occurred during our last fiscal year have materially affected, or
are reasonably likely to materially affect, our internal control over financial
reporting. Based on the evaluation we conducted, management has concluded that
no such changes have occurred.
  ITEM
      15T.
              CONTROLS
      AND PROCEDURES
  -
      (Not applicable)
  ITEM
      16A.
              AUDIT
      COMMITTEE FINANCIAL EXPERT
  Our audit
committee financial expert is Roderick Chalmers, an independent director. Our
other two audit committee members are David F. Jones and James Watkins, who are
also independent directors.
  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
2008, 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
  Ernst
& Young served as our independent registered public accounting firm for the
financial year ended December 31, 2007, for which audited financial statements
appear in this annual report on Form 20-F.
  PricewaterhouseCoopers
LLP served as our independent registered public accounting firm from August
2008.
  The
following table shows the aggregate audit fees, audit-related fees, tax fees and
all other fees for the services provided by Ernst & Young for 2007 and
PricewaterhouseCoopers LLP for 2008:
  Year
      ended
                    December 31,2008
                
                
                2007Audit
      fees
                
                $
                694,830
                
                
                $
                1,211,218Audit-related
      fees
                
                
                -
                
                
                
                -Total
                
                $
                694,830
                
                
                $
                1,
      211,218Tax
      fees
                
                
                75,989
                
                
                
                2,000All
      other
      fees
                
                
                -
                
                
                
                192,291Total
      fees
                
                $
                770,819
                
                
                $
                1,405,509
 
 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 2007 for tax compliance, tax advice and tax planning consisted of
review of tax returns and review of tax provision for a subsidiary. For year
2008, such fees consisted of review of tax returns for four subsidiaries of the
Company, filing of quarterly VAT returns for a subsidiary and permissible tax
consulting and tax compliance advice.
   111
  
  All other
fees for year 2007 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)
  ITEM
      16F.
              CHANGE
      IN REGISTRANT’S CERTIFYING
ACCOUNTANT
  As
disclosed in the Company’s Form 6-K filed on August 22, 2008, we engaged
PricewaterhouseCoopers LLP (“PwC”) to serve as our new independent registered
public accountants in connection with the audit of its financial statements for
the financial year ended December 31, 2008.  The removal of our
previous independent registered public accountants, Ernst & Young LLP
(“E&Y”), and the engagement of PwC was recommended by our Audit Committee to
the Board of Directors on July 14, 2008, based on a more competitive fee quote
having been received from PwC, as compared with E&Y’s fee
quote.  The Board of Directors at their meeting on July 14, 2008
agreed with the Audit Committee’s recommendation, and decided to convene a
special general meeting of the shareholders to consider and approve the proposed
change.  At the special general meeting of the shareholders held on
August 22, 2008, our shareholders approved the removal of E&Y as our
independent registered public accountants, effective August 22, 2008, and the
appointment of PwC as our new independent registered public accountants for the
financial year ending December 31, 2008, effective August 22, 2008 until our
next annual general meeting.
 
 During
the Company’s financial years ended December 31, 2007 and 2006 and in the
subsequent interim periods prior to the removal of E&Y with effect on August
22, 2008, neither the Company nor any of its subsidiaries consulted with PwC
concerning (i) the application of accounting principles to a specific completed
or contemplated transaction, or the type of audit opinion that might be rendered
on our financial statements and no written or oral advice was provided by PwC
that was an important factor considered by the Company in reaching a decision as
to any accounting, auditing or financial reporting issue, or (ii) any matter
that was either the subject of a disagreement or event, as set forth in Item
304(a)(1)(iv) of Regulation S-K.
 
 E&Y’s
reports on the Company’s financial statements for the financial years ended
December 31, 2007 and 2006 did not contain an adverse opinion or a disclaimer of
opinion, and were not qualified or modified as to uncertainty, audit scope or
accounting principles.  During the two most recent financial years
ended December 31, 2007 and 2006, and in the subsequent interim period through
August 22, 2008, there were (i) no disagreements between the Company and E&Y
on any matter of accounting principles or practices, financial statement
disclosure or auditing scope or procedure, which disagreement, if not resolved
to the satisfaction of E&Y, would have caused E&Y to make reference to
the subject matter of the disagreement in its reports on the consolidated
financial statements for such years, and (ii) no “reportable events” as that
term is defined in Item 304(a)(1)(v) of Regulation S-K.
  ITEM
      16G.
              CORPORATE
      GOVERNANCE – (Not applicable)
   112
  
  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.
                  Description1.1
                  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. *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.
~
  113
  
 Exhibit
      No.
                  Description4.32
                  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. ~4.34
                  The
      Global Sources Ltd. Directors Purchase Plan (as of 5 November 2005).
      +++++4.35
                  The
      Global Sources Equity Compensation (2007) Master Plan.
    +++++4.36
                  The
      Global Sources Share Grant Award Plan. ++++++4.37
                  The
      Global Sources Retention Share Grant Plan. ++++++4.38
                  Sale
      and Purchase Agreement, dated December 10, 2007, by and between Global
      Sources Ltd., Trade Media Holdings Limited and IDG Technology Venture
      Investment III, L.P. +++++++4.39
                  The
      Global Sources Directors Share Grant Award Plan.4.40
                  Directors
      Purchase Plan (updated effective as of January 1, 2009)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, 333-138474, 333-114411 and
      333-154960.14.5
                  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. ######14.8
                  Press
      release dated March 5, 2007 to announce the bonus share issue by Global
      Sources Ltd. #######14.9
                  Press
      release dated December 20, 2007 to announce the bonus share issue by
      Global Sources Ltd. ########14.10
                  Press
      release dated February 4, 2008 to announce share buyback program
      #########14.11
                  Press
      release dated February 12, 2009 to announce the bonus share issue by
      Global Sources Ltd. ##########14.12
                  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, 333-138474, 333-114411 and
      333-154960.14.13
                  Letter
      to Securities and Exchange Commission from the Company’s previous
      Independent Registered Public
Accountants.
 
 
 ___________________
 
 *
              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.
   114
  
  ****
              Incorporated
      by reference to Form 6-K filed with the Securities and Exchange Commission
      on April 25, 2002.
  ~
              Incorporated
      by reference to Form 20-F Annual Report of Global Sources Ltd. filed with
      the Securities and Exchange Commission on June 12, 2006 and 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 S-8 Registration Statement filed with the Securities
      and Exchange Commission on November 7,
2006.
  ++++++
              Incorporated
      by reference to form 20-F Annual report of Global Sources Ltd. filed with
      the Securities and Exchange Commission on June 28,
  2007.
  +++++++
              Incorporated
      by reference to form 20-F Annual report of Global Sources Ltd. filed with
      the Securities and Exchange Commission on June 25,
  2008.
  #
              Incorporated
      by reference to Form 20-F Annual Report of Global Sources Ltd. filed with
      the Securities and Exchange Commission on May 5,
  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.
  #######
              Incorporated
      by reference to Form 6-K filed with the Securities and Exchange Commission
      on March 7, 2007.
  ########
              Incorporated
      by reference to Form 6-K filed with the Securities and Exchange Commission
      on December 21, 2007.
   115
  
  #########
              Incorporated
      by reference to Form 6-K filed with the Securities and Exchange Commission
      on February 5, 2008.
  ##########
              Incorporated
      by reference to Form 6-K filed with the Securities and Exchange Commission
      on February 12, 2008.
  
   116
  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 26, 2009