INDUSTRY OVERVIEW SOURCES OF INFORMATION

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1 Certain information and statistics that appears in this Industry Overview and elsewhere in this document relating to the global apparel manufacturing industry is derived from the industry report prepared by Euromonitor which was commissioned by us and is prepared primarily as a market research tool. The information extracted from the Euromonitor Report should not be considered as a basis for investments in the [REDACTED] or as the opinion of Euromonitor as to the value of any security or the advisability of investing in the Company. The Directors believe that the sources of information and statistics are appropriate sources for such information and statistics and have taken reasonable care in extracting and reproducing such information and statistics. The Directors have no reason to believe that such information and statistics is false or misleading or that any material fact has been omitted that would render such information and statistics false or misleading in any material respect. The information and statistics extracted from the Euromonitor Report has not been independently verified by the Company, the Joint Sponsors, [REDACTED], the Underwriters or any other party involved in the [REDACTED] or their respective directors, officers, employees, advisers, agents. *GL *GL SOURCES OF INFORMATION In connection with the [REDACTED], we have commissioned Euromonitor, an independent third party, to conduct an analysis of the global apparel retail industry and manufacturing industry from The report we commissioned has been prepared by Euromonitor independent of our influence. We paid Euromonitor a fee of approximately US$130,000 for the preparation of the report. Established in 1972, Euromonitor is a global research organization with over 800 analysts in over 80 countries worldwide engaging in strategy research for both consumer and industrial markets. In compiling and preparing the Euromonitor Report, Euromonitor used the following methodologies to collect multiple sources, validate the data and information collected, and cross-check each respondent s information and views against those of others: (i) secondary research, which involved reviewing published sources including national statistics and official sources, specialist trade press and associations, company reports including audited financial statements where available, independent research reports, and data based on Euromonitor s own research database; (ii) primary research, which involved interviews with a sample of leading industry participants and industry experts for latest data and insights on future trends and to verify and cross-check the consistency of data and research estimates; (iii) derived projected data from historical data analysis plotted against macroeconomic data with reference to specific industry-related drivers; and (iv) reviewed and cross-checked all sources and independent analysis to build all final estimates including the size, drivers and future trends of the apparel manufacturing and retail market and to prepare the final report. Forecasting Bases and Assumptions Euromonitor based the Euromonitor Report on assumptions including 1) the economy of selected geographies is expected to maintain steady growth over the forecast period; 2) the social, economic, and political environment of selected geographies is expected to remain stable in the forecast period; 3) there will be no external shock, such as financial crisis or raw material shortage that affects the demand and supply of apparel manufacturing and retailing in selected geographies during the forecast period; and 4) key market drivers discussed in the report are expected to boost the development of the apparel manufacturing and retail markets in selected geographies. The research results may be affected by the accuracy of these assumptions and the choice of these parameters. The market research was completed in April 2017 and all statistics in the Euromonitor Report are based on information available at the time of reporting. Euromonitor s forecast data comes from analysis of historic development of the market, the economic environment and underlying market drivers, and is cross-checked against established industry data and trade interviews with industry experts. OVERVIEW OF THE GLOBAL APPAREL RETAIL MARKET The global apparel retail market can be segmented into nine product categories in general including top wear, sportswear and outdoor apparel, bottom wear, underwear, denim jeans, sweater, jackets and coats, loungewear, and other apparel: 73

2 Top wear: all garments for the upper body exclusive of jackets and coats and sweater. Major products include shirts, blouses, T-shirts, polo shirts, tank tops and sweatshirts; Sportswear and outdoor apparel: includes clothing usually worn for sports and outdoor activities; Bottom wear: garments that are worn on the lower part of the body including shorts, trousers and skirts, excluding jeans; Underwear: includes all items worn next to the skin and under other clothes, mostly including briefs, boxers, bras and lingerie sets; Denim jeans: includes pants made of denim, comprising of all lengths; Sweater: knitted garments that cover the upper body or below, traditionally made from wool or cashmere but can now be made of cotton and synthetic fibers; major products include pullovers and cardigans; Jackets and coats: sleeved garments for the upper body that worn as an outer layer of clothing. Jackets are usually hip or waist length whereas coats can be calf-length; Loungewear: includes all clothes designed to be worn indoors/in bed including pyjama separates and sets, and robes; and Other apparel: mainly includes baby and toddler wear, dresses, suits, swimwear, accessories and hosiery. Market Size and Growth of the Global Apparel Retail Market From 2012 to 2016, the retail sales value of the global apparel retail market increased steadily at a CAGR of 3.9%, reaching a total size of US$1,323.1 billion. It is expected that the global apparel retail market will experience a faster growth at a CAGR of 4.6% from 2016 to 2021, reaching an estimated retail sales value of US$1,659.5 billion by 2021, mainly driven by consumption trade-up as well as an increase in average selling price especially in developing countries. The following chart sets forth actual and estimated total retail sales value of the global apparel retail market and breakdown of major apparel product categories for the periods indicated. The Company s product portfolio covers all the key categories including top wear, sportswear and outdoor apparel, bottom wear, underwear, denim jeans, sweater, jackets and coats and loungewear. Global Apparel Retail Market Size By Retail Sales Value E US$ billion 3,000 CAGR: 3.9% CAGR: 4.6% 1,500 1, , , , , , , , , , E 2018E 2019E 2020E 2021E Source: Euromonitor Passport Data, Apparel and Footwear edition 74

3 Global Apparel Retail Market by Product Segment by Retail Sales Value Market Share by Retail Sales Value Retail Sales Value (US$ billion) CAGR E E Top Wear % % 4.6% Sportswear and Outdoor Apparel % % 6.0% Bottom Wear % % 3.8% Underwear 4 8.5% % 5.3% Denim Jeans 5 7.6% % 5.3% Sweater 6 6.4% % 4.5% Jackets and Coats 7 6.1% % 3.2% Loungewear 8 2.3% % 4.8% Other Apparel 26.4% % 4.3% Total Market 100.0% 1, , , % 4.6% Product Categories Covered by the Company Source: Euromonitor estimates from desk research and trade interviews Regional Breakdowns The leading regional apparel retail markets in the world include the United States, China and Japan, as well as the European countries, which together accounted for 73.2% of the global market in terms of apparel retail sales value. These markets are the major sales markets of the Company: The United States: The United States has the largest apparel retail market in the world, generating US$273.7 billion retail sales. The overall U.S. market has grown at a CAGR of 2.1% from 2012 to 2016, and is expected to continue to grow at a CAGR of 3.2% from 2016 to 2021, reaching apparel retail sales of US$320.1 billion by Sportswear and outdoor apparel is the largest category in the U.S. apparel market with a retail sales of US$70.9 billion and is expected to grow steadily at a CAGR of 5.1% from 2016, reaching retail sales of US$91.1 billion by Other categories, including denim jeans, underwear, sweater, and loungewear, are expected to maintain stable growth at a CAGR of approximately 3.0% to 4.0% from 2016 to It is expected that innovative apparel products will create stronger demand while the continued development of internet retailing and omni-channel distribution will also drive market growth; China: China has the largest apparel retail market in Asia and the second largest in the world, generating US$273.5 billion in apparel retail sales. The apparel retail market in China has expanded rapidly at a CAGR of 6.1% from 2012 to 2016, and is expected to reach an estimated market size of US$340.7 billion by 2021 at a CAGR of 4.5%. Sportswear and outdoor apparel, underwear and loungewear recorded retail sales of US$14.3 billion, US$30.7 billion and US$11.5 billion, and are expected to post strong growth at a CAGR of 9.0%, 6.1% and 5.8% from 2016 to 2021, reaching market sizes of US$21.9 billion, US$41.3 billion and US$15.2 billion by 2021, respectively. The apparel retail market in China is mainly driven by increasing customer demand attributable to rising disposable income and sustained urbanization, increasing demand for fashionable and high quality apparels due to growing middle class and consumption upgrade, as well as fast development of categories such as sportswear and outdoor apparel due to growing health awareness; Japan: Although the apparel retail market in Japan has been rather stagnant over the last five years, it is still a key market in the world with reputable fashion brands that are internationally well-known. In 2016, the total retail sales in Japan amounted to US$69.2 billion, and the market is expected to stay relatively flat with an expected market size of US$68.8 billion by The sales of sportswear and outdoor apparel recorded retail sales 75

4 value of US$8.2 billion, and is expected to continue to post steady growth from 2016 to 2021 at a CAGR of 4.0%, reaching retail sales value of US$10.0 billion by This is mainly driven by higher consumer consciousness of healthy lifestyle, especially among senior citizens; Europe: Affected by the stagnant economy, the European apparel retail market has stayed relatively flat in size from US$338.1 billion in 2012 to US$352.1 billion and will see moderate rebound with a CAGR of 2.9% and reach an expected market size of US$406.5 billion by 2021, with all major product categories posting positive growth. In particular, denim jeans and sportswear and outdoor apparel are expected to grow at a CAGR of 4.0% and 4.0% during the same period and are expected to achieve retail sales value of US$30.0 billion and US$51.5 billion by 2021, respectively. Market growth will be driven by further development of online shopping, increasing demand for sportswear and outdoor apparel underpinned by a higher degree of participation in sporting activities and athleisure trends, and greater demand for casual wear to replace formal wear. Major Brand Apparel Companies in the Global Apparel Retail Market The Company has strategic relationships with leading players in the global apparel retail market. Seven out of the global top 10 leading Brand Apparel Companies are the Company s customers. On a regional basis, the Company serves four, seven and seven out of the top 10 leading Brand Apparel Companies in Asia Pacific, the United States and Europe, respectively. The following table sets forth the major Brand Apparel Companies and their market share (1) in the global apparel retail market and the respective countries or regions. Leading Brand Apparel Companies in the World Leading Brand Apparel Companies Market Share 1 H&M 1.5% 2 Inditex 1.4% 3 Nike 1.2% 4 Gap 1.1% 5 Fast Retailing 1.0% 6 adidas 1.0% 7 PVH 0.9% 8 VF 0.7% 9 Hanesbrands 0.6% 10 Levi s 0.6% Leading Brand Apparel Companies in Asia Pacific Leading Brand Apparel Companies Market Share 1 Fast Retailing 2.7% 2 Bestseller 1.1% 3 adidas 0.9% 4 Heilan Home 0.8% 5 Shimamura 0.8% 6 Nike 0.8% 7 Inditex 0.7% 8 World Co Ltd 0.5% 9 H&M 0.5% 10 Semir Group 0.5% Leading Brand Apparel Companies in the United States Leading Brand Apparel Companies Market Share 1 Gap 4.0% 2 Wal-Mart 3.5% 3 Nike 2.7% 4 Hanesbrands 2.5% 5 L Brands 2.3% 6 PVH 2.1% 7 VF 2.1% 8 Under Armour 1.7% 9 Target 1.7% 10 Forever % Leading Brand Apparel Companies in Europe Leading Brand Apparel Companies Market Share 1 H&M 3.7% 2 Inditex 3.3% 3 Associated British Foods (Primark) 1.6% 4 Cofra Group (C&A) 1.6% 5 adidas 1.1% 6 Marks & Spencer 1.1% 7 Wal-Mart 1.0% 8 NEXT 0.8% 9 Nike 0.8% 10 PVH 0.8% Source of the four ranking tables above: Euromonitor Passport Data, Apparel and Footwear edition 1. by apparel retail sales value; excludes footwear, home textiles and personal accessories 76

5 Growth Drivers and Trends in Global Apparel Retail Market The following trends have emerged as key themes for today s apparel retail market: Fast changing consumer preferences for fashionable apparel products: Fast development of information technology and globalization are leading the entire world towards becoming one market. Shoppers can learn latest global fashion trends faster and easier. Moreover, the growing influence of social media is also accelerating the changes of consumer preference of apparel products. In order to compete successfully, Brand Apparel Companies will need to react quickly to changing fashion trend and consumer demands and regularly introduce new and improved apparel products that appeal to consumers; Continued growth of sportswear and outdoor apparel bolstered by growing health awareness and rising athleisure trend: Consumers have become more conscious of the benefits of a healthy lifestyle and participate in sporting activities on a regular basis, leading to rapid growth of the sportswear and outdoor apparel retail market in recent years. Moreover, Brand Apparel Companies have introduced athleisure wear which combine casual apparel design with the functionality of sportswear and outdoor apparel, and have gained wide popularity among consumers; Development of non-stored based retail channels: Online shopping has become a new theme around the world, with internet retailing posting significant growth in apparel sales in the past few years. To cater for changing consumer behavior, an increasing number of Brand Apparel Companies are investing in internet and mobile platforms in order to capture greater customer traffic. Brand Apparel Companies with a limited number of physical stores are able to achieve greater coverage through online retail efforts; and Sustainability: Around the globe, consumers are becoming more environmentally conscious and expect ecologically unobjectionable fabrics, reduced emission of pollutants, greater social commitment and fair treatment of employees in apparel production facilities. In many countries, regulators are requiring companies to create more sustainable products, such as by prohibiting certain harmful dyestuffs. This has vast implications for Brand Apparel Companies across the whole value chain to be adapted to make and market more sustainable products. Brand Apparel Companies that sell products marketed as sustainable and environmentally friendly have attracted strong interest from consumers. OVERVIEW OF THE APPAREL MANUFACTURING INDUSTRY IN ASIA Asia is the largest apparel production base in the world. In the 1970s, apparel manufacturing began to move from developed countries into Asia, in particular China, and the industry has grown rapidly driven by convenient access to labor as well as raw materials. In recent years, Brand Apparel Companies have gradually shifted their manufacturing orders to emerging apparel manufacturing hubs in Asia, namely Vietnam, Cambodia and Bangladesh, due to the lower labor costs and preferential trade agreements in these countries. Market Size and Growth of the Apparel Manufacturing Industry in Asia The Apparel Manufacturing Industry typically comprises two distinctive elements, namely, manufacturing for own branded operations and contracted manufacturing for third parties. The operations of certain apparel manufacturing companies include both elements as these operate their own brands as well as manufacture for third party Brand Apparel Companies. For the purpose of this document, the Apparel Manufacturing Industry excludes the apparel manufacturing companies which only manufactures for their own branded operations, as well as the own branded operations part for certain apparel manufacturing companies whose operations include both elements. The above defined Apparel Manufacturing Industry in Asia reached a total size of US$269.3 billion in terms of production value. The major product categories of the Company include lifestyle wear, denim jeans, intimate, sweater, and sportswear and outdoor apparel. The production value of these product categories accounted for over 40% of the Asian Apparel Manufacturing Industry. 77

6 For data shown in the Industry Overview, lifestyle wear refers to all casual knitted tops made by cutting of knitted fabric and assembled by sewing process, including but not limited to t-shirts, polo shirts, blouses, tank tops, etc; intimate refers to women s underwear including bras and briefs. The following table sets forth the production value and volume of major apparel products for the periods indicated. US$ million Value Lifestyle Wear... 23,546 29,493 37, % 5.1% Denim Jeans... 20,543 23,813 28, % 3.7% Intimate... 11,450 16,441 24, % 8.3% Sweater... 14,054 16,301 18, % 2.6% Sportswear and Outdoor Apparel. 19,109 24,959 31, % 4.8% Source: Euromonitor estimates from desk research and trade interviews China, Vietnam, Bangladesh and Cambodia are the key apparel manufacturing countries in Asia. China According to Euromonitor, China is the biggest player in the global Apparel Manufacturing Industry, accounting for more than 60% of the apparel production volume in Asia, and more than 30% of the total apparel production volume in the world. Apparel in China are reputable for delivering high value-add products, and are supported by well-developed infrastructure across China. With long-term and in-depth cooperation relationship with Brand Apparel Companies and experience accumulated over the years, Chinese apparel are shifting their business model from focusing on production to more value-add services such as providing designs to the Brand Apparel Companies. After rapid growth over the past three decades, China s economy has entered into a new normal stage with steady and moderate GDP growth. The minimum wage level has been increasing over the past five years. For example, the monthly minimum wage in Guangdong Province of China, our key production base, increased from US$206.3 per month in 2012 to US$287.1 per month, at a CAGR of 8.6%. The similar increasing trend is also witnessed in other key apparel clusters in China, including Zhejiang, Shandong and Jiangsu. Apparel products exported from China are duty free to ASEAN countries, Australia, New Zealand and Korea, as well as possible duty free benefits to Japan pursuant to the Regional Comprehensive Economic Partnership ( RCEP ). According to Euromonitor, from 2012 to 2016, the production volumes of lifestyle wear and denim jeans increased steadily in China. Intimate and sportswear and outdoor apparel saw higher growth compared to other categories during the same period. It is expected that the production volume of all key categories will continue to grow steadily over the next few years, with production value increasing at an even higher rate. The following tables set forth the production value and volume of major apparel product categories in China for the periods indicated. US$ million Value Lifestyle Wear... 12,813 15,164 18, % 4.2% Denim Jeans... 15,362 17,248 18, % 1.8% Intimate... 8,962 12,916 18, % 8.0% Sweater... 9,119 10,333 11, % 1.7% Sportswear and Outdoor Apparel. 14,100 18,227 22, % 4.6% 78

7 Million pieces Volume Lifestyle Wear... 3,253 3,420 3, % 2.2% Denim Jeans... 1,887 2,073 2, % 1.2% Intimate... 3,464 4,026 4, % 2.0% Sweater... 1,486 1,496 1, % 1.2% Sportswear and Outdoor Apparel. 3,500 3,999 4, % 2.4% Source: Euromonitor estimates from desk research and trade interviews China boasts advantages over other apparel manufacturing countries: Advanced production and processing technologies with long experience; Sophisticated services, especially value-add R&D services; Convenient access to raw materials ensures production efficiency and speedy fulfillment; and Advanced infrastructure and affiliated facilities cater to the social responsibility requirements of international Brand Apparel Companies. The Apparel Manufacturing Industry in China is facing challenges such as rising labor costs and more stringent environmental protection regulations. However, bolstered by continued technological enhancements and rich experience in supply chain and logistics management, it is expected that China will remain as a key manufacturing hub for international Brand Apparel Companies. Vietnam In recent years, Vietnam has emerged as a strategic location for apparel. The trend to relocate textile and garment production to developing Southeast Asian countries such as Vietnam opened up the opportunity to attract more capital, technology and talent to develop the local textile and garment industry. Vietnam has seen steady GDP growth at mid-to-high single digit over the last few years. The minimum wage level has been increasing over the last few years, growing from US$96.0 per month in 2012 to US$159.2 per month. Apparel products exported from Vietnam are duty free to Japan pursuant to the Japan-Vietnam Economic Partnership Agreement and duty free to China pursuant to the ASEAN-China Free Trade Area Framework Agreement, and will be duty free to the European Union pursuant to the EU-Vietnam Free Trade Agreement. As a member country of ASEAN countries, apparel products originated from Vietnam are also duty free to other ASEAN countries, Australia, New Zealand, Russia and Korea. According to Euromonitor, from 2012 to 2016, production volumes of all major product categories including denim jeans, sweater, lifestyle wear, intimate as well as sportswear and outdoor apparel have all increased, and will continue to post strong growth at high single digit in the next few years, with the exception of sweater which will see moderated growth. The production value of those product categories have also grown at rates higher than the production volume during the same period, with the exception of denim jeans, and will continue to grow with the increasing production volumes, albeit at a slower rate in the future. 79

8 The following tables set forth the production value and volume of major apparel product categories in Vietnam s for the periods indicated. US$ million Value Lifestyle Wear... 2,612 3,916 5, % 7.0% Denim Jeans , % 7.4% Intimate % 7.0% Sweater... 1,079 1,496 1, % 4.7% Sportswear and Outdoor Apparel. 1,508 2,199 2, % 6.4% Million pieces Volume Lifestyle Wear , % 6.0% Denim Jeans % 6.2% Intimate % 5.6% Sweater % 4.2% Sportswear and Outdoor Apparel % 5.4% Source: Euromonitor estimates from desk research and trade interviews As a newly emerged key apparel manufacturing country, Vietnam has the following advantages: Growing skilled labor force but relatively low labor costs; and Manufacturers are usually well organized, experienced with exports, and compliant with operational management and social standards. Bangladesh As a result of increasing labor costs in China and other neighboring countries, the Apparel Manufacturing Industry has seen good growth in Bangladesh, primarily due to inexpensive and readily accessible labor, favorable government policies and preferential trade agreements. Bangladesh currently stands as the second largest player after China in terms of share in global apparel exports. Over the past five years, Bangladesh has maintained yearly real GDP growth over 6%. The country s labor force has been also slowly increasing starting from an employment rate of 67.6% in 2012 to 68.0%. At the same time, wage rates in Bangladesh s Apparel Manufacturing Industry have been increasing, from US$38.1 per month in 2012 to US$68.3 per month. Apparel products exported from Bangladesh are duty free as a Least Developed Country ( LDC ) to Canada, the European Union, Japan and China, and are duty free to Singapore, Australia, New Zealand, Russia and Korea. According to Euromonitor, from 2012 to 2016, the production volumes of denim jeans, intimate and sportswear and outdoor apparel have increased substantially, while the production volumes of sweater and lifestyle wear have also recorded strong growth. Historically production unit price value has been upward sticky, indicating it is unlikely to increase significantly despite rising input costs, primarily due to Bangladesh not having been able to develop capacity for high value-add services including product design. 80

9 The following tables set forth the production value and volume of major apparel product categories in Bangladesh for the periods indicated. US$ million Value Lifestyle Wear... 3,783 4,992 6, % 6.5% Denim Jeans... 1,288 2,040 4, % 15.7% Intimate , % 20.5% Sweater... 1,981 2,559 3, % 5.5% Sportswear and Outdoor Apparel % 9.9% Million pieces Volume Lifestyle Wear... 1,886 2,498 3, % 6.4% Denim Jeans % 15.5% Intimate % 20.0% Sweater % 5.4% Sportswear and Outdoor Apparel % 9.9% Source: Euromonitor estimates from desk research and trade interviews Cambodia Bangladesh has the following advantages as an apparel manufacturing hub based in Asia: Competitive labor costs; Large trainable workforce a sizeable apparel manufacturing workforce are female employees who have better loyalty and are more stable; and Preferential Market Access Agreements As an LDC, apparel products from Bangladesh enjoys duty free preferences to major markets including EU markets, Japan, Canada, Australia, New Zealand under the Generalized System of Preferences (GSP) Scheme. As a result of the Multi-Fibre Arrangement from 1974 to 2004, which imposed quotas on apparel exports from many developing countries, the Apparel Manufacturing Industry started to develop in Cambodia, which has also subsequently developed and diversified its export market through trade liberalization by participating in free trade agreements. Despite the strong growth, most Cambodian apparel factories engage only in cut-make-trim activities and depend on fabrics and accessories imported from other countries. The Apparel Manufacturing Industry is facing increasing competition as the U.S. dollar further appreciates and the Cambodian economy becomes heavily dollarized. Competition is also coming from low-wage countries such as Myanmar. Cambodia s GDP grew at a CAGR of 9.0% from 2012 to Monthly minimum wage has been steadily rising from US$61.0 per month in 2012 to US$140.0 per month for workers in the apparel industry due to constant pressure from labor unions and human rights organizations. Apparel products exported from Cambodia are, duty free to China pursuant to the ASEAN-China Free Trade Area Framework Agreement, and duty free to ASEAN countries, Australia, New Zealand, Russia and Korea. 81

10 According to Euromonitor, from 2012 to 2016, Cambodia witnessed growth in its production of lifestyle wear, denim jeans, intimate as well as sportswear and outdoor apparel, while the production volume of sweater has declined. The same trend is expected to be observed over the next few years, with steady growth in production volume and in-line growth in production value for most product categories except sweater. The following tables set forth the production value and volume of major apparel product categories in Cambodia for the periods indicated. US$ million Value Lifestyle Wear ,188 1, % 4.2% Denim Jeans % 2.4% Intimate % 4.5% Sweater (4.8%) (0.7%) Sportswear and Outdoor Apparel % 4.5% Million pieces Volume Lifestyle Wear % 3.6% Denim Jeans % 2.3% Intimate % 3.7% Sweater (4.6%) (0.9%) Sportswear and Outdoor Apparel % 3.8% Source: Euromonitor estimates from desk research and trade interviews Cambodia has the following advantages as an apparel manufacturing hub based in Asia: Competitive labor costs; Being a member country of ASEAN and also as an LDC, apparel products from Cambodia are duty free to China pursuant to the ASEAN-China Free Trade Area, duty free to other ASEAN member countries and have duty free preferences granted by major markets including EU, Japan, Canada, Australia, New Zealand, Korea; and Liberal government policy on business ownership and capital flow Key Drivers and Trends in Apparel Manufacturing Industry in Asia According to Euromonitor, the key growth drivers of Apparel Manufacturing Industry in Asia include the following: Economic development and government support: Rapid and stable economic development in Asia is favorable for the development of the Apparel Manufacturing Industry, which is still a pillar industry in many Asian countries as well as the key driver for economic development. Benefiting from the favorable policies and greater emphasis on the Apparel Manufacturing Industry in these countries, abundant future opportunities for apparel are created; Enhancement of technology in the manufacturing process and supply chain management: The manufacturing industry in Asia, especially in China, is going through a stage of upgrading, with apparel investing more in advanced equipment and new 82

11 technology in order to improve production efficiency and provide high value-add products. With improvement in supply chain management, apparel based in Asia will be able to win orders from both domestic and overseas markets, thereby ensuring the stable growth of the apparel manufacturing in Asia; Abundant labor force with relatively low cost: South and Southeast Asian countries are densely populated with large numbers of laborers available, at a much lower cost compared with the developed economies. As a result, an increasing number of global apparel corporations are shifting their manufacturing bases to these countries or cooperating with local apparel ; and Favorable trade policies: Being important apparel manufacturing hubs in the world, South and Southeast Asian countries have generally established and concluded favorable international trade policies with regions heavily investing in retail apparel such as Europe and the U.S. Thus, as export competitiveness of Southeast Asian countries has increased, new opportunities are also created for to establish bases in these countries. Barriers to Entry into the Apparel Manufacturing Market According to Euromonitor, there are significant barriers to entry for apparel manufacturing companies, including the following: High initial investment costs: Establishing a factory requires a great amount of investment, especially in premises, equipment and R&D. Moreover, a highly skilled labor force is required to run a technology-driven manufacturing base. In addition, apparel are also required to comply with Brand Apparel Companies various policies on sustainability, thus need to invest in relevant infrastructure and technologies to meet the requirements; Long-standing relationships with customers: Successfully running a business in the Apparel Manufacturing Industry is underpinned by long-term relationships with Brand Apparel Companies. The established players have spent decades building long-standing relationships with clients, and accumulated deep knowledge to meet demand of those clients; and Convenient access to the raw material and sophisticated supply network: The existing in Asia have been benefiting from convenient access to raw materials and sophisticated supply network that has been established. It takes a great deal of resources for new entrants to develop a sophisticated and seamless supply network, which is essential for to ensure timely delivery. Consolidation Trend in Apparel Manufacturing Industry in Asia According to Euromonitor, the apparel OEM manufacturing market is highly fragmented in Asia. There are over ten thousands of scaled apparel located in different countries across Asia. As of 2016, the market share in terms of sales value of the top 10 leading apparel in Asia increased by approximately 1% compared to 10 years ago, which implies consolidation within the Apparel Manufacturing Industry. It is expected that the industry will undergo further consolidation in the future, as many middle-sized and small would be eliminated from the market when facing the rapid growth of operational costs and increasing requirements from Brand Apparel Companies, while large companies will benefit from scaled production. In addition, Brand Apparel Companies are consolidating their supplier base and tend to collaborate with large who can respond quickly with flexible production capability. 83

12 Due to the aforementioned significant entry barriers into the Apparel Manufacturing Industry, it is expected that existing leading players such as the Company will continue to experience growth, bolstered by the continuing expansion of the Apparel Manufacturing Industry in Asia as well as the squeeze-out of small players due to consolidation. COMPETITIVE LANDSCAPE The Apparel Manufacturing Industry is highly fragmented, with a large number of players of various scale of operations. In 2016, we were the industry s No. 1 company in terms of production volume with a market share of approximately 0.4% and No. 2 company in terms of production value with a market share of approximately 0.3% in the global Apparel Manufacturing Industry; we were also the No. 1 company in terms of production volume with a market share of approximately 0.6% and No. 2 company in terms of production value with a market share of approximately 0.7% in the Asia Apparel Manufacturing Industry. The following table sets forth the top 5 leading apparel in the global and Asia Apparel Manufacturing Industry and their respective market share. Leading Global Apparel Manufacturers volume (million pieces) volume globally 1 Our Company % 2 Company A % 3 Company B % 4 Company C % 5 Company D % value (US$ million) in 2016 value globally 1 Company A 2, % 2 Our Company 1, % 3 Company B 1, % 4 Company C % 5 Company D % * Companies mentioned in the above tables with the same annotations might not refer to the same companies. Leading Apparel Manufacturers in Asia volume (million pieces) volume in Asia 1 Our Company % 2 Company A % 3 Company B % 4 Company C % 5 Company D % value (US$ million) value in Asia 1 Company A 2, % 2 Our Company 1, % 3 Company B % 4 Company C % 5 Company D % * Companies mentioned in the above tables with the same annotations might not refer to the same companies. We enjoy a leading position among denim jeans in the Asia Apparel Manufacturing Industry, being the No. 1 company, in terms of production volume and production value, in this particular category. We also have strong competitiveness in lifestyle wear, being the No. 2 company and No. 3 company in terms of production volume and production value. We were the No. 2 company, in terms of production volume and production value in intimate, and also the No. 3 company and No. 4 company, in terms of production volume and production value, in the sweater segment. 84

13 Leading Lifestyle Wear Manufacturers in Asia volume (million pieces) volume in Asia 1 Company A % 2 Our Company % 3 Company B % 4 Company C % 5 Company D % value (US$ million) value in Asia 1 Company A % 2 Company B % 3 Our Company % 4 Company C % 5 Company D % * Companies mentioned in the above tables with the same annotations might not refer to the same companies. Leading Denim Jeans Manufacturers in Asia volume (million pieces) volume in Asia 1 Our Company % 2 Company A % 3 Company B % 4 Company C % 5 Company D % value (US$ million) value in Asia 1 Our Company % 2 Company A % 3 Company B % 4 Company C % 5 Company D % * Companies mentioned in the above tables with the same annotations might not refer to the same companies. Leading Intimate Manufacturers in Asia volume (Million Pieces) volume in Asia 1 Company A % 2 Our Company % 3 Company B % 4 Company C % 5 Company D % value (US$ million) value in Asia 1 Company A % 2 Our Company % 3 Company B % 4 Company C % 5 Company D % * Companies mentioned in the above tables with the same annotations might not refer to the same companies. Leading Sweater Manufacturers in Asia volume (Million Pieces) volume in Asia 1 Company A % 2 Company B % 3 Our Company % 4 Company C % 5 Company D % value (US$ million) value in Asia 1 Company A % 2 Company B % 3 Company C % 4 Our Company % 5 Company D % * Companies mentioned in the above tables with the same annotations might not refer to the same companies. Source of the apparel manufacturing ranking tables above: Euromonitor estimates from desk research and trade interviews Note: While audited data is available for select companies, they typically are not product / service specific. Euromonitor has estimated the market shares by considering both open sources and trade interview feedbacks. 85

14 RAW MATERIAL ANALYSIS The major raw materials used in the production of our apparel products include fabric and yarn both primarily made of cotton, polyester and acrylic, which are mainly sourced from China by our suppliers. The fluctuation of cost of raw material directly affects our cost structure and product pricing. The following chart sets forth historical prices of major raw materials for apparel products for the periods indicated. 20,000 Pricing Index of Cotton (1), Polyester (2) and Acrylic (3) Price (RMB/Tonne) 15,000 10,000 5, Pricing index of cotton Pricing Index of Polyester Pricing Index of Acrylic Notes: (1) Refers to the price of a standard type cotton with base quality of Grade 3 in China, average length of 28 mm and main micronaire (2) Refers to the price of polyester staple fiber recorded from Shanghai International Cotton Exchange (3) Refers to the price of acrylic staple fibers of 1.5*38 mm recorded from China Textile Raw Material Website The price of cotton has been decreasing continuously from RMB18,869 (US$2,995) per tonne 2012 to RMB13,301 (US$2,015) per tonne 2016, primarily due to oversupply of cotton as a result of the increase of cotton planting effectiveness as well as the high stock of cotton in China. In the future, the cotton price is expected to recover slowly due to continuous inventory depletion and recovering demand in the global market. The price of polyester fell from RMB11,213 (US$1,780) per tonne 2012 to RMB6,630 (US$1,005) per tonne 2016 at a CAGR of -12.3%. This is mainly caused by depression of the oil price in the upstream industry and a reduction in market demand. The polyester price is also expected to gradually rise in the future, supported by an increase in oil price and market demand for apparel products. The price of acrylic fell from RMB18,775 (US$2,980) per ton in 2012 to RMB12,606 (US$1,910) per ton at a CAGR of -9.5% in the past five years. This is mostly affected by continuous declining in the price of acrylonitrile, a basic raw material of acrylic. EXCHANGE RATE ANALYSIS The following chart sets forth the historical exchange rates of the Company s major currencies against the US dollar for the periods indicated. 86

15 The Renminbi appreciated slightly from 2012 to mid-2015, but experienced devaluation against the US dollar since then. The strong devaluation trend has been continuing and the exchange rate of RMB against USD registered at by the end of March RMB/USD RMB/USD Source: People s Bank of China From 2012 to the first half of 2015, the central bank of Vietnam maintained a stable monetary policy, which helped control inflation and stabilize the macro-economy. However, since the last half of 2015, there has been a greater impact on Vietnam, especially currency exchange rates, by international markets. On December 31st 2015, the State Bank of Vietnam (SBV) issued Decision No. 2780, which adopts a more market-based methodology in setting a daily reference rate of VND versus US dollar, instead of announcing a fixed exchange rate, as previously. As a result, the exchange rate of the VND against the USD has risen from VND20,828 per US$1 in January 2012 to VND22,276 per US$1 in March VND/USD 22, ,000.0 VND/USD 21, , , , Source: State Bank of Vietnam See Financial Information Factors Affecting Our Financial Condition and Results of Operations Macro-economic Factors and Conditions for details of analysis of the impact of currency exchange rate fluctuations on our business. 87