Global Sources LTD /bermuda 6-K Global Sources LTD

EXHIBIT 2

GLOBAL SOURCES LTD. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(In U.S. Dollars Thousands, Except Number of Shares and Per Share Data)

					At			At
					December 31			December 31
					2003			2002
					(Unaudited)
ASSETS
Current Assets:
	Cash and cash equivalents				$	26,227		$	11,009
	Available-for-sale securities					35,140			26,199
	Accounts receivable, net					4,507			4,169
	Receivables from sales representatives					3,883			2,932
	Inventory of paper					703			545
	Prepaid expenses and other current assets					1,883			1,147
			Total Current Assets			72,343			46,001
Property and equipment, net						7,870			14,110
Long term investments						100			100
Bonds held to maturity, at amortized cost						992			1,358
Other assets						1,236			1,081
			Total Assets		$	82,541		$	62,650
LIABILITIES AND SHAREHOLDERS’ EQUITY
Current Liabilities:
	Accounts payable				$	4,432		$	4,284
	Deferred income and customer prepayments					27,454			18,259
	Accrued liabilities					5,803			5,361
	Income taxes payable					804			368
			Total Current Liabilities			38,493			28,272
Liabilities for incentive and bonus plans						682			1,025
Amount due to parent company (Note 1)						—			11,404
Amount due to a shareholder (Note 1)						11,404			—
Minority interest						3,684			2,823
Deferred tax liability						298			604
			Total Liabilities			54,561			44,128
Shareholders’ equity:
		Ordinary shares, US$0.01 par value; 50,000,000 shares authorized; 26,313,949 (2002: 26,308,949) shares issued and outstanding				263			263
		Additional paid in capital				81,951			80,486
		Retained deficit				(50,346	)		(57,680	)
		Less : Unearned compensation				(4,563	)		(4,547	)
				Accumulated other comprehensive income		675			—
			Total shareholders’ equity			27,980			18,522
			Total liabilities and shareholders’ equity		$	82,541		$	62,650

Note: 1. Hung Lay Si Co. Ltd. ceased to be our parent company from December 2, 2003.

GLOBAL SOURCES LTD. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
(In U.S. Dollars Thousands, Except Number of Shares and Per Share Data)

		Three months ended						Year ended
		December 31						December 31
		2003			2002			2003			2002
		(Unaudited)			(Unaudited)			(Unaudited)
Revenues:
	Online services	$	13,067		$	12,607		$	51,367		$	51,268
	Other media services		10,459			8,878			36,318			33,132
	Exhibitions		1,965			565			3,327			2,455
	Miscellaneous		148			154			657			631
			25,639			22,204			91,669			87,486
Operating Expenses:
	Sales		8,286			7,010			30,113			28,659
	Event production		602			349			930			933
	Community		3,428			3,117			12,331			12,481
	General and administrative		7,641			7,503			28,682			28,885
	Online services development		1,072			1,293			4,960			5,378
	Non-cash compensation expense (Note 2)		206			565			1,419			2,564
	Amortization of intangibles/Software development cost		920			1,025			4,453			3,740
Total Operating Expenses			22,155			20,862			82,888			82,640
Income from Operations			3,484			1,342			8,781			4,846
	Interest income		49			209			122			439
	Loss on sale of available-for-sale securities		(40	)		—			(40	)		—
	Foreign exchange gains (losses), net		(102	)		(7	)		—			50
Income before Income Taxes			3,391			1,544			8,863			5,335
Income Tax Provision			(343	)		(123	)		(668	)		(720	)
Net Income before minority interest		$	3,048		$	1,421		$	8,195		$	4,615
Minority interest		$	(392	)	$	(140	)	$	(861	)	$	(308	)
Net Income		$	2,656		$	1,281		$	7,334		$	4,307
Retained deficit brought forward								$	(57,680	)	$	(61,987	)
Retained deficit carried forward									(50,346	)		(57,680	)
Basic net income per share		$	0.10		$	0.05		$	0.28		$	0.16
Shares used in basic net income per share Calculations			26,313,949			26,308,949			26,313,154			26,308,154
Diluted net income per share		$	0.10		$	0.05		$	0.28		$	0.16
Shares used in diluted net income per share Calculations			26,379,692			26,308,949			26,348,020			26,309,493

Note: 2. Reflects the non-cash compensation expenses associated with the employee equity compensation plans. Non-cash compensation represents the following categories of expenses:

	Three months ended December 31				Year ended December 31
	2003		2002		2003		2002
	(Unaudited)		(Unaudited)		(Unaudited)
Sales	$	39	$	229	$	323	$	623
Community		18		21		96		238
General and administrative		83		218		691		1,179
Online services development		66		97		309		524
	$	206	$	565	$	1,419	$	2,564

GLOBAL SOURCES LTD. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In U.S. Dollars Thousands, Except Number of Shares and Per Share Data)

			Year ended December 31
			2003			2002
			(Unaudited)
Cash flows from operating activities:
	Net income		$	7,334		$	4,307
	Adjustments to reconcile net income to net cash provided by operating activities
	Depreciation and amortization			8,509			8,989
	Profit on sale of property and equipment			(7	)		(1	)
	Accretion of U.S. Treasury strips zero % coupons			(74	)		(99	)
	Loss on sale of available-for-sale securities			40			—
	Bad debt expense			202			670
	Non-cash compensation expense			1,419			2,564
	Income attributable to minority shareholder			861			308
	Property and equipment written off			12			153
				18,296			16,891
	Changes in assets and liabilities:
	Accounts receivables			(540	)		871
	Receivables from sales representatives			(951	)		(2,223	)
	Receivables from related party sales representatives			—			2,900
	Inventory of paper			(158	)		311
	Prepaid expenses and other current assets			(742	)		(25	)
	Long term assets			(155	)		118
	Accounts payable			148			659
	Accrued liabilities and liabilities for incentive and bonus plans			99			(175	)
	Deferred income and customer prepayments			9,195			1,137
	Tax liability			131			198
		Net cash provided by operating activities		25,323			20,662
Cash flows from investing activities:
	Purchase of property and equipment			(2,307	)		(4,193	)
	Proceeds from sales of property and equipment			32			3
	Proceeds from matured bonds			440			450
	Purchase of available-for-sale securities			(19,300	)		(26,199	)
	Proceeds from sale of available-for-sale securities			11,000			—
		Net cash used for investing activities		(10,135	)		(29,939	)
Cash flows from financing activities:
	Amount received towards directors stock option plan			30			50
		Net cash generated from financing activities		30			50
Net increase/(decrease) in cash and cash equivalents				15,218			(9,227	)
Cash and cash equivalents, beginning of the year				11,009			20,236
Cash and cash equivalents, end of the year				26,227			11,009
Supplemental cash flow disclosures:
	Income tax paid		$	537		$	522