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
	June 30			December 31
	2006			2005
	(Unaudited)
ASSETS
Current Assets:
Cash and cash equivalents	$	96,553		$	94,321
Available-for-sale securities (Note 1)		41,019			23,982
Accounts receivable, net		5,866			5,545
Receivables from sales representatives		8,647			5,659
Inventory of paper		1,021			866
Prepaid expenses and other current assets		11,566			10,585
Total Current Assets		164,672			140,958
Property and equipment, net		27,775			28,178
Long term investments		100			100
Bonds held to maturity, at amortized cost		477			463
Other assets		2,638			1,981
Total Assets	$	195,662		$	171,680
LIABILITIES AND SHAREHOLDERS’ EQUITY
Current Liabilities:
Accounts payable	$	7,456		$	5,484
Deferred income and customer prepayments		58,774			52,624
Accrued liabilities		10,182			6,644
Income taxes payable		629			405
Total Current Liabilities		77,041			65,157
Liabilities for incentive and bonus plans		307			307
Deferred income and customer prepayments — long term		392			348
Deferred tax liability		409			436
Total Liabilities		78,149			66,248
Minority interest		7,324			6,191
Shareholders’ equity:
Common shares, US$0.01 par value; 75,000,000 shares authorized; 38,428,310 (2005: 38,340,310) shares issued and outstanding		384			383
Additional paid in capital (Note 2)		121,309			127,747
Retained deficit		(12,764	)		(21,199	)
Less : Unearned compensation (Note 2)		—			(7,900	)
Accumulated other comprehensive income (Note 1)		1,260			210
Total Shareholders’ Equity		110,189			99,241
Total Liabilities and Shareholders’ Equity	$	195,662		$	171,680

Note: 1. The company recorded the $12.2 million being approximately 11.24% equity interest in HC International at fair value based on the closing share price of HCI, as at 30 June 2006, of $0.2265 per share, as available-for-sale securities in the financial statements as at June 30, 2006. The unrealized market gain has been credited to accumulated other comprehensive income, shown under shareholders’ equity.

Note: 2. The Company adopted SFAS No. 123(R), “Share Based Payment” with effect from January 1, 2006. The unearned compensation costs associated with the Employee Compensation Plans at the beginning of the year 2006 were reversed as perSFAS No. 123(R).

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						Six months ended
	June 30						June 30
	2006			2005			2006			2005
	(Unaudited)			(Unaudited)			(Unaudited)			(Unaudited)
Revenue:
Online and other media services (Note 3)	$	28,078		$	24,033		$	54,168		$	46,669
Exhibitions		16,367			7,558			20,079			7,558
Miscellaneous		381			144			610			275
		44,826			31,735			74,857			54,502
Operating Expenses:
Sales		14,159			8,589			23,871			16,305
Event production		8,497			1,792			9,116			1,792
Community		7,535			5,900			12,177			9,641
General and administrative		9,538			8,939			18,388			16,470
Online services development		1,028			988			2,023			1,972
Non-cash compensation expense (Note 4)		538			282			1,104			811
Amortization of software cost		305			414			607			710
Total Operating Expenses		41,600			26,904			67,286			47,701
Income from Operations		3,226			4,831			7,571			6,801
Interest and dividend income		1,318			338			2,348			389
Gain on sale of available-for-sale securities		227			269			300			308
Foreign exchange gains (losses), net		(201	)		35			(228	)		179
Income before Income Taxes		4,570			5,473			9,991			7,677
Income Tax Provision		(220	)		(195	)		(423	)		(317	)
Net Income before Minority Interest	$	4,350		$	5,278		$	9,568		$	7,360
Minority interest	$	(322	)	$	(755	)	$	(1,133	)	$	(837	)
Net Income	$	4,028		$	4,523		$	8,435		$	6,523
Retained deficit brought forward							$	(21,199	)	$	(34,577	)
Retained deficit carried forward							$	(12,764	)	$	(28,054	)
Basic net income per share	$	0.10		$	0.13		$	0.22		$	0.18
Shares used in basic net income per share calculations		38,428,310			38,340,310			38,400,111			36,843,344
Diluted net income per share	$	0.10		$	0.12		$	0.22		$	0.18
Shares used in diluted net income per share calculations		38,515,672			38,415,667			38,475,801			36,944,975

Note: 3. Online and other media services consists of:

	Three months ended June 30				Six months ended June 30
	2006		2005		2006		2005
	(Unaudited)		(Unaudited)		(Unaudited)		(Unaudited)
Online services	$	15,685	$	13,336	$	30,779	$	26,429
Print services		12,393		10,697		23,389		20,240
	$	28,078	$	24,033	$	54,168	$	46,669

Note: 4. Reflects the non-cash compensation expenses associated with the employee equity compensation plans and Directors Purchase Plan. Non-cash compensation includes ($236) (2005: $NIL) being the cumulative effect of change in accounting principle, resulting from the adoption of SFAS 123(R) with effect from January 1, 2006, and represents the following categories of expenses:

	Three months ended June 30				Six months ended June 30
	2006		2005		2006		2005
	(Unaudited)		(Unaudited)		(Unaudited)		(Unaudited
Sales	$	186	$	34	$	294	$	182
Community		21		25		41		54
General and administrative		292		114		697		369
Online services development		39		109		72		206
	$	538	$	282	$	1,104	$	811

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

	Six months ended June 30
	2006			2005
	(Unaudited)			(Unaudited)
Cash flows from operating activities:
Net income	$	8,435		$	6,523
Adjustments to reconcile net income to net cash provided by operating activities
Depreciation and amortization		2,191			1,927
Accretion of U.S. Treasury strips zero % coupons		(14	)		(19	)
Profit on sale of equipment		(32	)		(8	)
Equipment written off		1			26
Unrealised dividend income on available-for-sale securities		(280	)		—
Unrealised interest income available-for-sale securities		(36	)		(12	)
Bad debt expense		130			—
Non-cash compensation expense		1,104			811
Income attributable to minority shareholder		1,133			837
		12,632			10,085
Changes in assets and liabilities:
Accounts receivables		(451	)		357
Receivables from sales representatives		(2,988	)		(3,430	)
Inventory of paper		(155	)		(7	)
Prepaid expenses and other current assets		(701	)		(2,857	)
Long term assets		(657	)		505
Accounts payable		1,972			900
Accrued liabilities and liabilities for incentive and bonus plans		3,538			(103	)
Deferred income and customer prepayments		6,194			7,642
Tax liability		197			69
Net cash provided by operating activities		19,581			13,161
Cash flows from investing activities:
Purchase of property and equipment		(1,789	)		(1,652	)
Sale of equipment		32			8
Purchase of available-for-sale securities		(226,509	)		(170,549	)
Sale of available-for-sale securities		210,558			129,080
Net cash used in investing activities		(17,708	)		(43,113	)
Cash flows from financing activities:
Proceeds from the issue of common shares, net of share issue expenses		—			38,303
Amount received towards directors purchase plan		359			118
Net cash generated from financing activities		359			38,421
Net increase in cash and cash equivalents		2,232			8,469
Cash and cash equivalents, beginning of the period		94,321			41,195
Cash and cash equivalents, end of the period	$	96,553		$	49,664
Supplemental cash flow disclosures:
Income tax paid	$	226		$	248