An effort by the Chinese government to assist its flagging textile industry has triggered a strong
reaction from US manufacturers who fear it could contribute to a surge in imports after all quotas
on Chinese imports expire December 31.

When textile and apparel exports fell during the first quarter of this year by 11 percent to
$82 billion, the Chinese government decided to increase its export tax rebates for textiles and
apparel from 14 percent to 17 percent. That action was taken after what Premier Wen Jiabao cited as
a “serious and unprecedented situation due to economic changes at home and abroad.”

Reacting to the tax rebate announcement, Cass Johnson, president of the National Council of
Textile Organizations, said: “By dramatically increasing subsidies just prior to the phase-out of
quotas, China has thrown down a gauntlet that the US government and the US Congress cannot ignore.”
Johnson said the new tax breaks coupled with two similar increases amounts to an increase of 55
percent since July 2008. He charged that Chinese exporters have seen subsidies from the central
government increase from $19 billion to $29 billion.

Johnson called on the incoming Obama administration to “act swiftly against China” by
self-initiating trade remedy cases if Chinese imports surge once quotas are removed. He noted that
last month, President-elect Barack Obama committed to a textile monitoring program directed at
illegal trade activities. He also urged the new administration to consider taking complaints of
illegal textile trade to the World Trade Organization.

In addition, he urged Congress to enact legislation addressing what the textile industry and
others believe is a major subsidy resulting from currency manipulation in order to gain an
advantage in international trade.

Johnson said the current  trade deficit with China (January through September) has risen
to $195.4 billion from $187.6 billion in 2007.

November 25, 2008

According to recent reports from the Bremen Cotton Exchange and Plexus Cotton Ltd., the production
of extra-fine cotton was price-responsive in most recent years. In reaction to the sharp decline in
extra fine cotton prices in 2004-05, world extra-fine cotton production fell by 22 percent to
570,000 metric tons in 2005-06. After extra-fine cotton prices and premiums increased significantly
in 2005-06, production jumped by 31 percent to an estimated 749,000 metric tons in 2006-07. The
increase in supply of extra-fine cotton pressured prices down in 2006-07, and area declined in
2007-08. However, the average yield increased significantly, and as a result, production remained
stable in 2007-08.



Price Decline

Prices declined further in 2007-08: the season average Cotlook quote for American Pima (FE)
was $1.15 per pound, 2 cents lower than in 2006-07. Given the decline in extra-fine cotton prices
and premiums in 2007-08, as well as strong competition with grains and higher prices for irrigation
water in the United States, world production of extra-fine cotton is expected to drop by 38 percent
to 464,000 metric tons in 2008-09. Upland cotton production is forecast down by 6 percent, and
therefore the share of extra-fine cotton in world production should decrease from 3 percent to 2
percent.

Cotton quotations in New York had further moved downwards and dipped below the 40-cent mark.
However, therewith the quotations had moved far away from the prices for physical cottons.
According to merchants´ reports, the demand from the spinning mills was still reserved and limited.
The most asked Central Asian cottons moved quite high price-wise.



Lower Production Of Extra-Fine Types

Production is expected to decline in 2008-09 in every extra-fine producing country except
India. In Egypt, production is forecast down 43 percent to 126,000 metric tons, the lowest since at
least 1900-01, due to lower prices received in 2007-08 and competition from food crops. Egyptian
extra-long staple production is expected to decline by 42 percent to 24,000 metric tons, while
long-staple production is expected to decline by 44 percent to 102,000 metric tons. US Pima
production is also expected to decrease by 47 percent to 98,000 metric tons, due to limited
irrigation water and competition from alternative crops. Production in Xinjiang, China, is expected
to decline by 41 percent to 90,000 metric tons, due to lower extra-fine cotton prices received in
2007-08. Production declines are also expected in Sudan, Israel, Peru and Central Asia.

Ending stocks in producing countries are projected to fall by 43 percent to 172,000 metric
tons in 2008-09. The extra-fine cotton stocks-to-use ratio in producing countries is expected to
decline from 37 percent in 2007-08 to 26 percent in 2008-09. The expected drop in extra-fine cotton
supplies is driving prices up. The Cotlook quote for American Pima averaged $1.47 per pound during
the first three months of 2008-09 — the highest since 1995-96, when the Cotlook quote for American
Pima averaged $1.57 per pound during the first three months and $1.70 per pound during the season.
Between August and October 2008, the Cotlook quote for American Pima was on average more than
double the Cotlook A Index.

Exports

Similar to what happened in 2005-06, exports and mill use of extra-fine cotton in producing
countries are expected to decline in 2008-09 in response to the drop in supplies. Export shipments
of extra-fine cotton are forecast at 286,000 metric tons, down by more than 100,000 metric tons
from 2007-08 and close to the shipment levels achieved in 2005-06 and 2006-07.

The fall in exports will be driven by a drop in US exports, from 181,000 metric tons to
109,000 metric tons. Mill use of extra-fine cotton in producing countries is forecast at 425,000
metric tons, down by 12 percent from last season and close to the 2005-06 consumption level of
422,000 metric tons. In particular, consumption in Egypt is expected to fall by 37 percent to
68,000 metric tons. Total mill use in Egypt, including upland and extra-fine cotton, is projected
down by 15,000 metric tons to 190,000 metric tons in 2008-09; therefore, Egyptian imports of upland
cotton will need to increase.

The latest US export sales report showed a relatively strong 203,100 running bales of net new
sales, with shipments at 240,900 running bales. For the season, total commitments of 7.3 million
statistical bales are actually 400,000 bales ahead of last year, although if one looks at the
amount of cotton shipped so far, things don’t look quite as good. Until last week, just 3.7 million
bales had been exported, some 300,000 bales less than a year ago. And in order to reach the current
USDA projection of 13 million statistical bales, one should have to export another 9.3 million
bales between now and the end of July, which seems to be a monumental task in the current
environment.

Devaluation

The cotton market is suffering through its steepest decline in history, having lost around 65
percent of its value since making a synthetic high of around $1.09 in early March. Cotton has
prominent company, though, as pretty much everything except the government bond market continues to
collapse. The stock market, as measured by the S&P 500 index, is down 53 percent from its high
in October 2007, and the CRB index has lost 51 percent since early July this year.

The problem is global, as nearly US$30 trillion of paper wealth have been destroyed in stock
markets worldwide since May 2008, when global market capitalization measured US$57.5 trillion. On
top of that, investors and homeowners have suffered additional wealth destruction from collapsing
real-estate markets.



November 25, 2008

Greenville-based wool yarn spinner Kentwool has introduced WINDspun, a top-of-the-line wool yarn,
described as “the smoothest, most luxurious wool yarn ever produced in the company’s history.”

The new yarn will be produced at the company’s upstate South Carolina manufacturing
facility, which is equipped with very specialized production machinery and is the only facility in
the Western Hemisphere to have received Usterized® quality certification for its quality management
system. WINDspun will be used in apparel marketed by top global brands.

“WINDspun is one of the most exciting developments in our corporate history,” said Mark
Kent, president and CEO, Kentwool. “It is a revolutionary product brand that mirrors our commitment
to innovation, and to our customers — who deserve the best.”

Through an ongoing research and education partnership with Clemson, S.C.-based Clemson
University and its School of Materials Science and Engineering, Kentwool has been developing new
products and processes, which, according to Kent, are “already generating real results and [are]
capable of producing game-changing technologies in our industry.”

The company recently pledged $500,000 over five years to support Clemson’s Advanced
Fiber-based Materials Center of Economic Excellence (See “
Advanced-Fiber
Center Of Economic Excellence To Be Established At Clemson,” Nov. 11, 2008). The gift will
endow the university’s Kentwool distinguished Professorship of Natural Fibers and the Kentwool
Educational Endowment.

November 25, 2008

Winston-Salem, N.C.-based innerwear, outerwear and hosiery apparel manufacturer and marketer
Hanesbrands Inc. will reduce its management and corporate workforce by approximately  210
people in an effort to cut costs and cope with the current economic climate.

About half of the positions to be eliminated are involved with supply chain management,
while the other half are related to customer management, marketing, human resources, finance and
information technology. About 155 of the impacted positions are located in Winston-Salem, with the
others spread among other Hanesbrands sites in the United States and abroad.

Hanesbrands also will close its China Grove, N.C., yarn production facility by the end of
December, eliminating 185 jobs at that location. The company cited declining demand for ring-spun
yarn used in certain of its sock, T-shirt and underwear products.

November 25, 2008