Eds Morgan Joseph

CONSUMER/RETAIL
Jeffrey Blaeser
212-218-3739
jblaeser@morganjoseph.com
Heather Hou
212-218-3713
hhou@morganjoseph.com
Initiating Coverage
April 28, 2010

Key Metrics Exceed Company LTD
EDS - NASDAQ $8.91
Pricing Date 04/27/2010 Rating: Buy
Price Target $13.00
52-Week Range $13.69-$7.60 Exceed: Off And Running - Initiating Coverage with a
Shares Outstanding (mm) 22.9
Buy Rating and $13 PT
Market Capitalization ($mm) $204.0
3-Mo Average Daily Volume 48,132
Institutional Ownership 8%
Investment Highlights:
Debt/Total Capital 4.8% ■
High growth, niche market position, and expanding market share.
ROE 21.6% Exceed maintains an approximate 6% domestic (China) market share
Book Value/Share $7.34 within the domestic (Chinese) sportswear industry. Its 3 year RMB
Price/Book 1.2x CAGR for sales and net income growth, from FY06 to FY09, was 45%
Dividend Yield 0.0% and 54%, respectively. We expect robust sales and net income CAGR
LTM EBITDA Margin 14.40% to continue at about 22% and 31%, respectively, over the next 2 years.
■
China's economy sports strong recent growth rates. Whereas the rest
EPS($) FY: December of the world's growth appears to have stalled, China's domestic
Prior Curr. Prior Curr.
consumer retail sales expanded 12% annually (between 1997 and
2009A 2010E 2010E 2011E 2011E
2007), with disposable income and consumer spending of urban
1Q-Mar 0.30 -- 0.39E -- --
households in China up 10% and 11%, respectively, during that same
2Q-Jun 0.42 -- 0.47E -- --
period.
3Q-Sep 0.56 -- 0.59E -- --
4Q-Dec 0.31 -- 0.29E -- --
■
20% future CAGR estimated for sportswear market. Outside of its
FY 1.59 -- 1.73E -- 1.91E well-publicized billion plus population, the government's focus on GDP
P/E 5.6x 5.2x 4.7x growth, expanding per capita individual incomes, and population shifts
from rural communities to urban settings could all help fuel a projected
Revenue($mm) sportswear CAGR of about 20% from 2008 to 2012.
Prior Curr. Prior Curr.
2009A 2010E 2010E 2011E 2011E
■
Store growth strong, 19% per year expansion estimated. Exceed has
1Q-Mar 57.2 -- 74.3E -- -- grown its retail distribution channel from 1,483 units in 2006 to 3,694
2Q-Jun 62.4 -- 79.4E -- --
at 2009 year end. Anticipated annualized store growth is just north of
3Q-Sep 133.1 -- 150.8E -- --
800 units, with the number of locations likely to exceed 5,000 in 2011,
4Q-Dec 51.6 -- 64.4E -- --
suggesting a CAGR of 19%.
FY 304.2 -- 368.9E -- 454.2E ■
Cost plus cost structure should lead to higher gross margins. Up
from 26% in FY06, Exceed's gross margin was 30% in FY09. Exceed's
1 Year Price History for EDS
cost plus pricing model, within which costs are based upon total costs
14
plus a pre-determined profit margin for Exceed, should allow for
12 further gross margin gains going forward. Considering its peer
10
manufacturers are generating margins near 50%, material upside, over
8
Q1 Q2 Q3 Q1 Q2
6
time, could evolve.
2010
■
Attractive terms with distributors limiting risk exposure. Exceed
does not accept returns, requires prompt payment (between 60 to 180
Created by BlueMatrix
days), and receives roughly 80% of its order flow prior to building its
Company Description: Exceed Company Ltd. inventory.
(http://www.xdlong.cn/en/ ) engages in the design, development, and ■
Recent sales fair activities suggest strong 2010 sales growth. At the
wholesale of footwear, apparel, and accessories for sports and company's two most recent sales fairs, orders increased by more than
leisurewear consumers in China. The company's principal products
40% Y/Y in September 2009 and 18% Y/Y in February 2010. Results
include running, leisure, basketball, skateboarding, and canvas
footwear; apparel, which primarily includes sports tops, pants, jackets,
from sales fairs typically account for more than 90% of future products
track suits, and coats; and accessories, comprised of bags, socks, hats, sold, which should boost 2010 top-line expansion.
and caps. ■
Strong growth projections at a compelling price; target multiple
below peer average. Our $13 price target assumes an 8x multiple to
our FTM EPS estimate of $1.73, which is a material discount to the
current average peer multiple of 28x.
The Disclosure section may be found on pages 26 - 27 of this report.

The Valuation section may be found on page 26 of this report.
Exceed Company LTD April 28, 2010
Investment Thesis
Exceed demonstrating solid growth and performance—could be just the beginning.
We believe Exceed’s growth prospects should remain strong as the company is expected
to continue its robust store expansion program while returning some of the proceeds back
into product development, national advertising, and marketing. Since its initial
incorporation on September 26th, 2001, Exceed (formerly Windrace) has expanded its
distribution/retail presence to over 3,694 units with an estimated (source Zou Marketing)
6%, or a top 5 domestic position, of the domestic (China) branded sportswear market.
From 2006 to 2009, the company’s compound annual growth rates (CAGR) for sales and
net income were 45% and 54%, respectively, while gross margins expanded 383 basis
points (bps) within that time frame. Although recent growth rates may not prove
sustainable, we believe current economic conditions in China (projected sportswear
CAGR of 20% between 2008 to 2012), the continuation of Exceed’s robust
distribution/retailer expansion program (projected 19% annual distributor/retail
expansion in 2010 and 2011), material upside to current gross margins (current gross
margins of 30% roughly 2,000bps below those of larger peers), expanding resources for
brand development and marketing (budget projected to remain at roughly 7% of sales,
which should indicate further expansion, in dollars, as sales are projected to grow) and
favorable, in our opinion, terms (i.e. no refunds, 80% inventories built to order, 90 to 180
day payment terms) with its distributors, should allow for double digit sales and net
income Y/Y comparisons over the next few years.
Further supporting our bullish stance on the company is what we perceive to be an
attractive valuation by comparable peer standards and a solid balance sheet. Currently
carrying a 5.6x trailing 12-month (TTM) price to earnings (P/E) ratio, the shares are
trading at a multiple well below comparable Chinese and International branded
sportswear companies. For example, the blended average TTM P/E multiple for China-
based branded Sportswear companies is roughly 26x with non-Chinese-based branded
sportswear companies currently trading at about 29x. Furthermore, the current P/E, based
on our forward 12-month (FTM) EPS estimate of $1.73, is 5.2x, which reflects a material
discount to its larger peers. On a FTM enterprise value to EBITDA (EV/EBITDA) basis,
the company’s 3.7x multiple also compares favorably to similar peer values north of 10x.
Exceed maintains no long-term debt, and short-term borrowings (roughly $9mm) remain
well below its current cash position of $38mm. In 2008, the company generated modest
positive free cash flow results (roughly $4mm). In 2009, free cash flow was ($23mm);
however, this included a large increase in late-year receivables that we expect to be
turned into cash shortly, with solid positive free cash flow returning in FY10.
While the company’s relatively small size, in both market capitalization and sales,
coupled with a somewhat limited public reporting track record, could keep its near-term
valuation multiples below those of its peers, we would expect, should the company
perform in-line with our expectations, that gap to close over time, which could provide
upside potential to our $13 price target. Our $13 price target represents an 8x P/E
multiple to our forward 12-month (FTM) EPS estimate of $1.73, a material discount to its
larger peers.
Source: Company website
2 MORGAN JOSEPH & CO. INC.

Investment Positives
Potential Double Whammy: Strong Projected Chinese GDP & Sportswear Growth.
The rapid growth of the sportswear industry appears to be driven by two deep-seated
dynamics: China’s continued robust GDP growth and the growing importance of sports
and fitness within China’s population. More than 30 years of reform have led to rising
living standards and purchasing power. According to the World Bank database, China’s
real GDP growth was 12.9%, 9.6%, and 8.7% in 2007, 2008, and 2009, respectively.
Going forward, expectations are for China’s real GDP to expand at 9.5% and 8.7% in
2010 and 2011, respectively. The OECD Economic Outlook survey found that, of the 22
Asian economies surveyed, China had the highest annual average growth of GDP per
capita, at 9.2% between 1990 and 2006. Based off of expanding household consumption
figures, the country’s robust economic development has begun to flow to consumers, in
our opinion. According to the China Statistical Yearbook 2008, rural and urban
household consumption expenditures in RMB expanded at a CAGR of 6.4% and 7.3%,
respectively, between 1997 and 2007. Furthermore, on a 3-year and 1-year basis, the
CAGR for both rural and urban consumption expenditures has expanded to north of 10%.
Table 1: Rural/Urban Chinese Household Consumption Expenditures in RMB
In RMB 1997 2002 2004 2006 2007

Rural 1,722 2,062 2,301 2,847 3,210
Urban 5,823 7,387 8,679 10,423 11,777
10 YR CAGR 5 Yr CAGR 3 Yr CAGR 1 YR Growth

6.4% 9.3% 11.7% 12.8%
7.3% 9.8% 10.7% 13.0%
Source: China Statistical Yearbook 2008
The significance of these numbers could be magnified when looking more closely at the
rapid urbanization within China. Currently, approximately 45% of the total Chinese
population, or roughly 590mm people, now reside in urban areas. This percentage was
only 36% in 2001 and 26% in 1990. By 2035, according to the CIA World Fact Book,
August 2008, 70% of the Chinese population could reside in urban cities.
Although cities in Shanghai, Shenzhen, Guangzhou, and South China coastal line cities,
have all been hit by the global economic downturn, China’s inland areas were less
impacted. With increasing urbanization taken place in the second and third tier cities, the
spending power of these cities has begun to prove to be a significant impetus. Migration
into the city by the rural population has been a force in the consumer market and could
continue as a positive trend. The Party’s Central Economic Conference emphasized
focusing on strengthening the development of small and medium cities and small towns.
This appears to have brought developmental opportunities for these relatively smaller
territories. Medium and small cities with a lower cost of living are now attracting more
people and enterprises to locate and settle down there. Public service bottlenecks,
overcrowded traffic, high living and business costs and soaring home prices in tier one
cities are overwhelming and significant deterrents to rural commuters, who then turn to
second and third tier cities instead. We expect Exceed to focus its expansion on these
second and third tier cities and potentially benefit from rapid urbanization of China.
Furthermore, considering the consumer base is not as affluent as those in the first tier
cities, Exceed’s lower cost option could become an attractive price point for the

population, somewhat shielding the company from more powerful competitors such as
Nike, which we believe provides too costly of an option for these particular markets.
There are about 600 second-tier cities and 2,800 third-tier cities in China. Assuming
1,500 retail centers in shopping malls nationwide, 5 to 8 locations in each regional city,
and 1 location in each county, national retail locations could exceed 8,500 in the second-
tier and third-tier cities. Even this estimate may prove conservative as Li Ning, with an
estimated 21% market share, opened 7,249 retail outlets in 2009 and expects 10,000
outlets by 2013, with a large percentage of its growth targeting similar second-tier and
third-tier locations.
Narrowing our focus even further, the Chinese sportswear industry has been rapidly
expanding and is expected to grow at a projected 20% CAGR between 2008 and 2012.
We believe the rapid growth of the sportswear industry is supported by deep-seated
dynamics including China’s continued expected growth in GDP, more than 30 years of
reform improving living standards and purchasing power, and the growing importance of
sports and fitness within the Chinese culture. So far, the Chinese sports market is still in
its infancy. In the rural areas, new demands emerge for middle and lower scale sporting
goods. As outdoor sports and tourism activities gradually increase, sportswear product
sales should expand in kind, with outdoor sports products becoming the fastest-growing
segment. By 2010, China's sports industry, as a proportion of gross domestic product, is
expected to be only 0.3%, still much lower than the typical level of developed
countries—so the market potential is still very attractive, in our view.

Table 2: Projected Market Size of Sportswear from 2008 to 2012 (RMB bn)
103
2008 to 2012 Projected CAGR = 20.4%
86
71
59
49
2008 2009 2010 2011 2012
Source: General Administration of Sport in China, ZOU Marketing
Real income growth and property value increases should lead to higher consumption
power and increasing demand for retail products. Urban income growth reaccelerated,
starting in 2H09, which should drive an upturn in sales in 2010 and beyond. Although
inflation concerns have intensified somewhat in 2010, we believe the rise in real wages
(according to data released by the government) coupled with improvement in labor
market conditions should continue to support a healthy retail consumption level. After a
rush of lending during the first few weeks of 2010, the government took measures to
contain massive liquidity levels, and loan growth slowed to 27.2% y/y in February.
However, consumption did not slow in early 2010. Retail sales grew 15% during the first
two months of 2010, in real terms, compared to a year ago.
Going Where The Money Is: Expanding Brand and Retail Presence
Exceed distributes its products primarily through its Xidelong retail stores. The Xidelong
stores sell Exceed’s products exclusively and do not carry or sell other brands. Exceed
does not own or operate the retail units; however, it sells through a number of distributors
and/or third-party operators. As of December 31, 2009, all Xidelong retail stores (of
which there were 3,694 units) were owned and operated by 22 distributors. Of those
3,694 stores, 1,000 were operated directly by distributors, with the remaining 2,694
operated indirectly through third-party operators. Since 2006, Exceed has expanded its
retail store presence at a 3-year CAGR of 36%. With roughly 800 units expected to be
added annually in 2010 and 2011, respectively, Exceed appears positioned for roughly
20% annualized new unit expansion.

Source: Xinzhou, Shangxi News
Exceed targets second and third-tier cities, particularly in the Southwestern, Northeastern,
and Northwestern regions of China. A similar strategy appears to have been successfully
established by Exceed’s largest domestic competitor, Li Ning, which, as of December 31,
2009, had 7,249 retail stores in China with roughly 76% located in second and third-tier
cities. Even with nearly twice the retail sales channel of Exceed, Li Ning expects to have
roughly 10,000 Li Ning stores open by 2013 year end. We do not believe it is uncommon
to have a series of competing sports footwear and leisurewear retailers right next to each
other within a specific location; therefore, we think the size and projected growth of Li
Ning suggests potentially material, long term store growth opportunities for Exceed.
Table 3: Solid and Consistent Annualized Retail Store Growth
6,000
5,000
4,000
3,000
2,000
1,000
0
2006 2007 2008 2009E 2010E 2011E
Source: Company reports and Morgan Joseph estimates
According to ZOU Marketing, Exceed boasts one of the strongest sports branding sales
distribution networks in both the Southwestern region and Northwestern region of China.
In addition to building upon strength within these territories, we expect Exceed to expand
its coverage within unpenetrated and underpenetrated regions such as Beijing and
Guangdong, as well as other provincial capitals and major cities.

Table 4: Geographic Retail Store Presence
Distributors 2006 2007 2008 2009 2010E 2011E

Northern Region 47 169 327 411
Northeastern Region 120 243 336 359
Northwestern Region 272 409 498 515
Eastern Region 320 453 586 678
Southern Region 152 267 373 438
Southwestern Region 572 978 1157 1293
Toal 1483 2519 3277 3694 4394 5194
CAGR Growth - 2008 70% 49% 36% 31% 28%
Y/Y Growth 70% 30% 13% 19% 18%
Outside of 4Q08 and the first six months of FY09, which appear to have been negatively
impacted by the global economic slowdown, Exceed’s year over year (Y/Y) sales growth
has slightly outpaced that of its Y/Y comparable store growth. We believe that, as a store
hits maturity, a distributor will often add another store within that same territory to
account for potentially improved product demand. For that reason, we continue to expect
sales growth to slightly exceed that of store expansion as some cannibalization of sales
could occur.
Table 5: Reported and Estimated Sales and Store Growth (In RMB)
89%
70%
40%
30%
21% 23%
19% 18%
13% 14%
2007 2008 2009 2010E 2011E
St or e Sales
Sale Price Cost Plus Pricing Model Suggests Further Gross Margin Expansion
A product’s price at retail is determined by Exceed and is based upon a variety of factors,
including the costs of raw materials and production, market conditions, and competitor
price points. We also believe the retail price point encompasses a built-in profit margin
for Exceed, which should allow the company to pass on product cost risks while
forecasting modest gross margin expansion year over year. This cost plus pricing model
should allow the company to continue to expand gross margins in both challenging and
positive economic conditions. This thesis appears to be supported by recent annual gross
margin expansion (from 20% in 2005 to 37% in 2009) during positive conditions and
ongoing expansion amidst a challenging 1H09, which saw gross margins expand over
200bps Y/Y despite a roughly 20% decline in comparable sales.

Table 6: Recent Sales Growth and Gross Margin Trends (In RMB)
2006 2007 1H2008 2008 1H2009

Sales Growth 128.0% 88.5% 80.3% 40.4% -19.7%
Gross Margins 25.7% 26.0% 26.9% 27.3% 29.0%
Near term, we expect modest gross margin expansion, roughly 100bps per year, to
continue; however, based upon comparable peer domestic gross margins, material upside
could develop over time. We believe a large determinant of potential margin growth
could be the brand’s strength, increased investments (in dollars) on marketing, and
comparable peer manufacturer margins. Considering that the delta between Exceed’s
gross margins and some of its larger competitors is north of 2,000bps, and that expected
marketing spend should grow along with sales, we think the gross margin improvement
should prove sustainable for both the near and longer term. Opportunities for gross
margin expansion outside of price point increases include improved sales leverage and
lower dependency upon outsourced manufacturing. In 2007, 2008, and 2009, Exceed
outsourced the manufacturing of 6.4mm, 7.0mm, and 9.7mm pairs of footwear, with
those pairs representing 37.1%, 47.8%, and 43.7%, respectively, of the company’s total
footwear sales. The 2009 decrease reflects increased production capacity, which should
enhance the company’s control over production while also providing additional cost-
saving opportunities.
One piece of compensation, in our opinion, for the built-in profit margin is virtually free,
to the retailers, marketing. Exceed spends approximately 7% of its annual sales for
marketing and promotional activities to build and support the Xidelong brand. We expect
that percentage to remain relatively constant as a percentage of sales and should the
company’s revenues expand, so too should its marketing/promotional budget and brand
awareness. The company’s marketing spend in 2006, 2007, 2008, and 2009 was roughly
$7mm, $14mm, $20mm, and $24mm, respectively, and should, based upon our sales
estimates, expand north of $28mm in 2010.
Recent examples of increased marketing leverage for Exceed include its effective TV
advertising on China Central Television (CCTV), the largest state television broadcaster
in mainland China and also the country's most powerful and authoritative television
program producer, whose network is usually the best place for advertisers to win
consumer trust of their products, in our opinion. Recently, it snapped up a sponsorship
opportunity with the popular “Inter Cities” program aired on CCTV-1 peak time. The
show features sports competition among second and third-tier cities, which are paired to
compete in a fun sports confrontation. This should give the company national marketing
exposure. Through the sponsorship of “Sports World”—a program featured on CCTV
Olympic Games channel running from January to September 2008—it also successfully
promoted Windrace’s brand, which is associated with the Olympic Games in China.

Attractive Terms with Retailers Limit Risk/Provide Upside Growth Opportunities

The contractual terms the company has with its distributors appear extremely favorable to
Exceed and limit the manufacturer’s exposure to unsold inventories, refunds, credit risk,
gross margin deterioration, and unproductive distribution channels.
♦ Inventories essentially made to order – Exceed organizes three sales fairs each
year for distributors to place orders for its products. The fairs usually fall in
March (autumn collection), June (winter collection), and September
(spring/summer collection). Orders placed at these fairs determine the majority
of Exceed’s production and inventory build schedule. This organized approach
allows Exceed to effectively manage its raw material and workforce
expenditures. The sponsored sales fairs typically generate, or account for,
approximately 80% to 90% of the company’s annual revenues, with the
distributors/retailers essentially locked into a majority of the pre-orders. We
believe this places a majority of the credit and inventory build risk on the
distributors and away from Exceed. Distributors may adjust purchases upward
or downward by 10% to 15%, but are responsible for the majority of inventory
made or supplied. Whereas many U.S. manufacturers were stuck with obsolete
and dated inventories in late 2008, Exceed appears to be somewhat shielded
from similar risks as it essentially manufactures only what has already been
ordered. During Exceed’s September 2009 sales fair, for which the majority of
deliveries are made in 2010, orders increased by more than 40% compared to the
same fair in 2008. During the February 2010 sales fair, orders increased by more
than 18.2% compared to the February 2009 sales fair.
♦ No returns – Exceed does not have a formal policy with its distributors for
returns. The only returns accepted by the company are for defective products;
however, instead of returning the product, the retailers typically sell the
merchandise at a discount to the end customer. In order to limit any potential
impact to the brand’s price points or brand image, distributors must obtain prior
written consent from Exceed before discounting, and no compensation is
typically returned to the retailer from the manufacturer. Furthermore, assuming
prior written consent for out-of-season inventory sales is given, the distributors
bear the costs of any sales discounts and Exceed is not required to provide
credits or subsidies for said clearance.
♦ Payment and credit terms – The payment terms for distributors to Exceed are
typically 30% of the contract price upon delivery with the remaining 70% due
60 to 120 days thereafter. Prior to 2009, the 70% due was roughly 60 days.
Considering the distributor selection process includes suitability criteria such as
relevant experience in the management and operation of sportswear retail stores,
its creditworthiness, its ability to develop and operate a network of retail stores,
its ability to meet company sales targets, and the fact that the distributors only
source from Exceed, its receivables collection history is strong, with no bad debt
provisions made during 2006, 2007, or 2008. As of December 31, 2009, 99% of
the company’s accounts receivables were current in nature.
♦ Sale price and cost plus pricing model – The product’s price at retail is
determined by Exceed and is based upon a variety of factors, including the costs
of raw materials and production, market conditions, and competitor price points.
We also believe the retail price point encompasses a built-in profit margin for
Exceed, which should allow the company to pass on product cost risks while
forecasting modest gross margin expansion year over year. We believe this cost
plus pricing model should allow the company to continue to expand gross
margins in both challenging and strong economic markets and is supported by

recent annual gross margin expansion from 20% in 2005 to 27% in 2008.
Despite a roughly 20% decline in Y/Y revenues, 1H09 gross margins expanded
200bps Y/Y to 29% with FY09 gross margins (sales up 14% Y/Y) improving
slightly to 30%. As compensation for the built-in profit margin to Exceed,
Exceed spends approximately 7% of its annual sales on marketing and
promotional activities to build and support the Xidelong brand. We expect that
percentage to remain relatively constant as a percentage of sales and should the
company’s revenues expand, so too should its marketing/promotional budget
and brand awareness.
♦ Distribution and product exclusivity – Distributors have the exclusive rights,

within its geographical location, to sell its products under the Xidelong brand,
and cannot sell competing brands within its locations.
♦ Geographic exclusivity – Distributors may open up multiple retail outlets, but

only within a defined geographical area.
♦ Sales targets/right of termination – Should distributors fail to meet previously

agreed upon sales targets for two consecutive years, Exceed has the option of
terminating its agreement.
Tax Exempt in 2009 – 50% Reduction in 2010, 2011, and 2012

Exceed’s profits are affected by the income tax that it pays and any preferential tax
treatment that it is able to receive. As a foreign-invested enterprise engaged in the
manufacturing business, Exceed is entitled to the preferential tax treatments provided
under the Foreign Enterprise Income Tax Law. Accordingly, Exceed is subject to an
enterprise income tax rate of 27% but it is fully exempted from the enterprise income tax
during its first two profitable years, followed by a 50% tax reduction for the next three
years. Such tax treatment had a significant positive impact on its profit after taxation for
2006 and 2007. Exceed started generating profits during the year ended December 31,
2008, and was exempt from tax in 2008 and 2009. It is expected to receive a 50%
corporate income tax reduction for the years ended December 31, 2010, 2011, and 2012.
Research/Development and Key Relationships

In 2006, 2007, 2008, and 2009, Exceed spent roughly RMB 5.5mm (0.8% of revenues),
RMB 12.8mm (1.0% of revenues), RMB 17.6mm ($2.5mm or 1.0% of revenues), and
RMB 25.0mm (1.2% of revenues), respectively, on research and development. While
Exceed aims to be at the lower end of the retail pricing spectrum, the company continues
to invest in research and development, marketing, and brand awareness and strives to be
known as a producer of quality and comfortable sportswear and leisurewear. Its
promotional slogans include “The Foot Knows Comfort” and “Run Freely” and it was
awarded the “Most Popular Sportswear Brand in the PRC as Voted by Consumers” in
2005 by Sohu.com Inc. The company spends approximately 1% and 7% of its annual
revenues on research and development, and marketing and promotion, respectively.
Exclusive Partnership with the China Institute of Sports Science – Exceed maintains an
exclusive partnership with The China Institute of Sports Science (CISS). CISS was
established by The General Administration of Sport of China, a PRC government agency,
in 1958, as China’s first governmental agency designed to research sports science. The
CISS has six research centers that focus on four main areas that include developing
Chinese athletes, monitoring/developing public fitness levels, studying sports sociology,
and improving sports equipment. On October 20, 2006, Exceed entered into an exclusive
five year technology cooperation agreement with the CISS to assist with the research and
development of Exceed’s sports footwear and apparel products. Exceed pays the CISS an

annual fee of RMB 0.5mm for the first right of refusal to CISS’s technology
advancements. The most recent benefit received by Exceed from the CISS was the use of
foot measurement equipment that helped analyze various foot-shape data collected by
Exceed, which was used in the design and development of footwear insoles and soles.
Exclusive Partnership with The Hefei Institute of Intelligent Machines (The Chinese
Academy of Sciences) – The Hefei Institute of Intelligent Machines (HIIM) was founded
in 1979 and has developed a team of over 50 scientists and technical staff and roughly
200 postgraduate students studying for their doctor and masters degrees, which focuses
on the fields of biomimetic sensing and artificial intelligence. The HIIM has developed
biomimetic sensing robotics and micro/nano sensors, and it has produced special sensor
control systems that integrate optics, micro/nano technology, and various sensing systems
that measure strength, tactile sense, and vision. While Exceed’s two-year agreement with
HIIM expired in May 2009, we believe the two entities are in discussions to extend the
agreement that provided Exceed with the exclusive right to use the HIIM intelligence.
Some benefits developed through its relationship with HIIM include a testing system for
foot pressure distribution that analyzes the contact surface between the foot and support
surface in footwear.
Investment Risks
Failure to build upon the Xidelong brand or deterioration of said brand image could
negatively impact sales. Exceed spends approximately 7% of its total revenues on
marketing its brand. We expect this percentage to remain relatively constant with
projected revenue gains resulting in an expanded effort (on dollars spent) on brand image
and development. Should the Xidelong brand image deteriorate or fail to develop in
newly established territories, the company’s revenues could be negatively impacted.
Exceed’s sales could be impacted by seasonality, weather, and other factors.

Historically, Windrace’s second-half revenues typically exceed those of the first half.
Exceed operates within a highly competitive environment. The sports and leisure
footwear, apparel, and accessory market is highly competitive, which includes
competitors that have greater financial, distribution, and management resources than that
of Exceed.
Exceed’s growth prospects could be linked to overall economic conditions in China.

Exceed’s growth prospects are somewhat dependent upon the current and future
economic conditions in the Peoples Republic of China. Should economic growth in China
deteriorate, or even moderate, Exceed may fall short of current growth expectations.
Political, economic, and social policies of the PRC government and PRC laws and
regulations could affect Windrace’s business and results of operations and may
result in its inability to sustain growth. The economy of the PRC differs from the
economies of most developed countries in a number of respects, including; its structure,
level of government involvement, level of development, level of capital reinvestment,
control of foreign exchange, and allocation of resources.
Valuation
Our $13 PT is derived from an 8x P/E multiple, which reflects a material discount to
its peer group average. Exceed’s shares are presently trading at a TTM P/E multiple of
5x. Our $13 price target reflects an 8x multiple to our FTM EPS estimate of $1.73. This
multiple represents a material discount to those of comparable peers, which average
around 28x TTM EPS, and to our long term mid-teens EPS growth expectations for
Exceed. Based upon its relatively limited reporting track record, we believe a near-term

discount is warranted; however, should the company demonstrate top- and bottom-line
growth as expected, the discount could begin to shrink, adding further upside to its
current multiple.
Our target P/E multiple assumes 28.5mm shares outstanding versus our current
calculation of 22.9mm. The increased share count factors in 5.6mm added shares
associated with earn-out targets achieved in 2009. If the company achieves earnings of
$49.5mm in 2010, 4.3mm shares should be issued. We have assumed Exceeds achieves
earn out targets. Considering our estimates and price target multiple reflect the company
hitting the first target, we believe our projections appropriately reflect the potential share
dilution. Furthermore, should the company achieve the earn-out targets in both 2010 and
2011, it would reflect 3-year net income CAGR of 17%, more than offsetting anticipated
future share dilution. Additionally, there were, as of December 2009, 10.9mm warrants
outstanding, which entitle the registered holder to purchase one ordinary share at a price
of $5.25 per share.
Table 7: Exceed Peer Valuations (In $mm)

$Price Mkt Cap EV/LTM
Company Name Ticker Exchange 4/27/2010 ($mm) 2009 2010E 2009 P/E 2010E P/E EBITDA
Li Ning Co. Ltd. 2331.HK HKSE 3.94 4,135 $0.13 $0.16 30.3x 24.6x 17.9x
China Dongxiang (Group) 3818.HK HKSE 0.68 3,868 $0.04 $0.04 17.1x 17.1x 14.8x
ANTA Sports 2020.HK HKSE 1.80 4,483 $0.07 $0.08 25.7x 22.5x 19.4x
XTEP Intl Holdings 1368.HK HKSE 0.78 1,705 $0.04 $0.05 19.6x 15.7x 12.5x
Average Chinese Sportswear: 23.2x 20.0x 16.1x
Nike Inc. NKE NYSE 76.74 37,273 $3.03 $3.85 25.3x 19.9x 12.8x
Adidas AG ADS Frankfurt 58.42 12,222 $1.70 $2.13 34.4x 27.4x 11.9x
Puma AG PUM Frankfurt 337.01 5,083 $11.85 $15.44 28.4x 21.8x 20.8x
Average Chinese Sportswear 1.80 3,548 $0.07 $0.08 25.7x 20.0x 16.1x
Average International Sportswear 157.39 18,193 $5.53 $7.14 28.5x 23.0x 15.2x
Average Worldwide Sportswear 68.48 9,824 $2.41 $3.11 28.4x 21.3x 15.7x
Exceed Company Ltd. EDS NASDAQ 8.91 204 $1.59 $1.73 5.6x 5.2x 4.1x
Source: Company reports, Bloomberg, First Call, and Morgan Joseph estimates
Company Background
Exceed Company Ltd. was incorporated on April 21, 2009, as a wholly-owned subsidiary
of 2020 ChinaCap Acquirco, Inc., a blank check company formed in Delaware for the
purpose of acquiring, through merger, stock exchange, asset acquisition or other similar
business combination, an operation business that either: (1) was located in China; (2) had
its principal operations located in China; or, (3) in 2020’s view, would benefit from
establishing operations in China. On October 20, 2009, 2020 merged into Exceed and, on
October 21, 2009, acquired all of the outstanding securities of Windrace from its
shareholders, resulting in Windrace becoming a wholly-owned subsidiary of Exceed.
Exceed is one of the leading Chinese sports and leisurewear companies with an estimated
market share of 6%. Exceed is one of the top five domestic branded sports and
leisurewear manufacturers in China, according to ZOU Marketing, behind known foreign
staples such as Nike Inc. (NKE – $76.74 – NYSE; NR), domestic brand Li Ning, Anta,
and ERKE. Targeting second- and third-tier cities in China and consumers between the
ages of 15 and 35, Windrace has seen its retail distribution channel expand from 1,483
locations in 2006 to 3,694 as of 2009 year end, and revenues grow from $37mm to
$304mm during the same period.

Product Lines
Exceed designs, develops and wholesales footwear, apparel, and accessories under the
Xidelong brand name and “ “logo. The company’s three principal categories
include footwear, apparel, and accessories.
♦ Footwear (roughly 53% of total sales): running, leisure, basketball,

skateboarding, canvas, tennis, and outdoor
Within footwear, running, leisure, skateboarding, basketball, canvas, tennis, and outdoor
accounted for 14%, 13%, 4%, 13%, 1%, 5%, and 3% of total revenues, respectively.

Table 8: Exceed Revenue Breakdown By Product Line
14.1%
13.2% 12.7%
5.0%
4.2%
3.2%
0.6%
ng
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is
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al
e
va
ur
nn
tb
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i
ni
rd
is
ke
an
un
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oa
Le
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O
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eb
Ba
at
Sk
Source: Company reports
♦ Apparel (roughly 45.7% of total sales): sports tops, pants, jackets, track suits,
and coats
♦ Accessories (roughly 1.3% of total sales): bags, socks, hats and caps
We believe Exceed differentiates itself by offering a quality product at a comparably

lower price point than its peers. We think this insulates Exceed somewhat from its peers,
both domestic and international, while positioning the brand to potentially be the first
choice for the lower, yet expanding, income-based population.

Table 9: Exceed Average Retail Product Price Point Range

2006 in RMB 2007 in RMB 2008 in RMB 2009 in RMB
Footwear 98 to 328 85 to 338 109 to 346 129 to 354
Apparel 44 to 205 36 to 499 41 to 500 68 to 418
Accessories 5 to 188 6 to 159 6 to 219 13 to 168
2006 in $'S 2007 in $'S 2008 in $'S 2009 in $'S

Footwear 14 to 48 12 to 49 16 to 51 19 to 52
Apparel 6 to 30 5 to 73 6 to 73 10 to 61
Accessories 1 to 28 1 to 23 1 to 32 2 to 25
Distribution Channels
Windrace sells its products primarily through Xidelong retail stores. The stores sell
exclusively Xidelong products and do not carry competing brands or products. Currently,
the 3,694 locations are operated through 22 distributors who own and operate directly or
delegate through third parties. As of December 31, 2009, 2,694 Xidelong stores were
operated by third parties with 1,000 operated directly by distributors. Xidelong’s retail
store base has expanded from 1,483, as of December 31, 2006, to 3,694, as of December
31, 2009, which represents a CAGR of 35.6%. Current plans are for annual store
locations to expand to roughly 5,300 by 2011 year end, which would represent
approximately 17% CAGR growth from 2008 to 2011.
Manufacturing
In 2008, Exceed outsourced the manufacturing of all apparel and accessory products and
nearly 50% of its footwear merchandise; however, during 2009, the outsourcing of
footwear declined to 39% while all apparel and accessory manufacturing remained
outsourced. During 2009, footwear manufacturing was produced by three contract
manufacturers while all apparel and accessory products were produced by more than 20
companies. While the Y/Y decline in outsourced footwear manufacturing can likely be
tied to lower sales and production needs associated with the economic global slowdown
(Exceed generally outsources production of its lowest-priced footwear when production
capacity is at or near capacity), the higher percentage of internally produced footwear
was likely a reflection of increased in-house production capabilities. With a current
estimated capacity of 9mm pairs manufactured annually, planned capital expenditures of
RMB 70mm in 2010 and RMB 50mm in 2011 are expected to increase Exceed’s annual
manufacturing capacity to approximately 19mm pairs by 2010. Also potentially
increasing Y/Y 2010 capital expenditures, could be an expanded production facility, with
an aggregate gross floor area of approximately 30,000 square meters, and a new office
building. The increased capacity could shorten lead times while potentially lowering
production costs as fewer third-party payments would be made.
Competition
Li Ning Company Limited (SEHK – 2331 - $3.94; NR): Li Ning Company Limited is
principally engaged in the brand development, design, manufacturing, sale and
distribution of sport-related footwear, apparel, equipment, and accessories in China. The
company has established a supply chain management system, and a distribution and retail
network in China primarily through outsourcing of manufacturing operations and
distribution via franchised agents. The company also directly manages retail stores for the
Li-Ning brand. In addition to its core Li-Ning brand, Li Ning Company Limited
distributes sports products under its Z-DO brand via hypermarket channel. On July 21,
2008, the company acquired a 57.5% equity interest in Shanghai Double Happiness Co.,
Ltd. (Double Happiness), a company, which, together with its subsidiaries, is principally

engaged in the manufacturing, research, and development, marketing, and sale of sports
equipment in China. In 2009, Li Ning Co. Ltd. generated revenues of $1,226mm, up 25%
from $979mm in 2008.
China Dongxiang (Group) Company Limited (SEHK – 3818 - $0.68; NR): China
Dongxiang (Group) Co., Ltd., along with its subsidiaries, is engaged in the development,
design, and sales of branded sportswear in China. Since 30 May 2006, China Dongxiang
has owned all rights to the internationally recognized Kappa Brand in the PRC and
Macau. In April, 2008 it announced the acquisition of Phenix Co., Ltd. ("Phenix"), which
mainly owned and managed KAPPA and PHENIX brands in Japan. As a result China
Dongxiang is enriching its regional brand portfolio and extending product types to help
develop the China ski and outdoor fashion markets. The Company's aim is also to further
enhance its current R&D techniques and ability to integrate Japan PHENIX's strong
design and R&D capacity as well as relevant talents. Ultimately they want to provide a
solid platform for KAPPA and other brands' long-term development in China. In 2009,
Dongxiang generated revenues of $580mm, up 19% from $487mm in 2008.
ANTA Sports Products Limited (SEHK – 2020 - $1.80; NR): ANTA Sports Products
Limited, together with its subsidiaries, engages in the design, development, manufacture,
trading, distribution, and marketing of sporting goods in the PRC. Targeting Chinese
consumers aged 14-29, it has established strong brand equity in the student body and
middle-to-low income groups. ANTA generated revenues of $858.7mm, up 27% from
$676.3mm in 2008.
XTEP International Holdings Limited (SEHK – 1368 - $0.78; NR): XTEP

International Holdings Limited is a fashion sportswear company in the People’s Republic
of China. The company is engaged in the design, development, manufacture and
marketing of sportswear, including footwear, apparel, and accessory products. The
company’s products are sold under the Xtep brand, Koling brand, and the Disney Sport
brand, which is licensed by The Walt Disney Company (Shanghai) Limited for the
company in the People’s Republic of China. During the year ended December 31, 2008,
the retail network of the Xtep, Disney Sport, and Koling brands operated by the
company’s distributors and third-party retailers covered 31 provinces, autonomous
regions, and municipalities in the People’s Republic of China. In 2009, XTEP generated
annual revenues of $517mm, up 23% from $420mm in 2008.
China Hongxing Sports Limited (SGX – BR9 - $0.10; NR): China Hongxing Sports
Limited is a Singapore-based branded sports gear company. The company is engaged in
the design, manufacture, and sale of a range of sports footwear, as well as a range of
sports apparel and sports accessories. The company's products are sold under its Erke
brand name. Its products are distributed and sold via a retail sales network spanning
approximately 3,824 points of sale across the People's Republic of China. The
manufacture of sports apparel and sports accessories is outsourced to selected contract
manufacturers. During the year ended December 31, 2008, the company sold 19.5mm
pairs of sports footwear, 11.6mm pieces of sports apparel, and 6.7mm pieces of sports
accessories. In 2008, the company opened 354 mid-sized stores and generated annual
sales of $369mm.

Financials
Income Statement
1Q10E: We expect 1Q10 sales to increase Y/Y 30% to $74mm with Y/Y
distribution/retail outlets expanding to roughly 3,800 units. Strong sales fair order flow
coupled with easier Y/Y comparisons and added store growth should benefit top line
growth. Gross margins should continue to trend in line with the previous three quarters at
roughly 31%, which would reflect a 300bps Y/Y improvement. We believe net income
should improve materially Y/Y from $6.8mm to $11.2mm, with EPS at $0.39.
FY2010E: We expect FY10 sales to expand Y/Y 21% to $369mm with distribution/retail
outlets expanding Y/Y by 700 units to 4,394. Gross margins are projected to expand
140bps to 30.9% while operating costs expanding slightly above top line growth due to
increased estimated growth investments. Despite our projected diluted share count
increase of 5.6mm and an increased estimated tax rate (to 14% from 2%), EPS should
expand 9% Y/Y to $1.73 with net income growing an estimated 36% Y/Y to $49.3mm.
FY2011E: We expect FY11 sales to expand Y/Y 23% to $454mm with Y/Y
distribution/retail outlets expanding by 800 units to 5,194. Gross margins should expand
100bps to 31.9% with operating costs continuing to expand, versus sales, on higher
investment spending. EPS are expected to expand 10% Y/Y to $1.91 despite the addition
of roughly 4.3mm shares as we expect the company to hit its FY10 net income earn out
target of $64mm. Net income is projected to expand 27% Y/Y.
Balance Sheet and Cash Flow

Exceed’s balance sheet remains solid, in our opinion, with cash ($38mm) exceeding debt
(short-term debt $9mm; long-term debt $0.0) by roughly $30mm. In 2008, the company
generated modest positive free cash flow results (roughly $4mm in 2008 but saw 2009
free cash flow turn to a negative $23mm in 2009. We believe the negative 2009 free cash
flow is a result of increased late year sales and increased receivables. We expect said
receivables to be converted to cash and provide positive 2010 free cash flow of $57mm in
2010.
Management
Mr. Lin Shuipan: Director, Chairman of the Board and Chief Executive Officer.
Mr. Lin Shuipan, 42, is the founder, executive Director, chairman of the board, and chief
executive officer of Exceed. He is responsible for the overall corporate strategies,
planning, and business development of Windrace. Mr. Lin has over 16 years experience
in the sportswear industry. From 1993 to 1997, he was the technical engineer and factory
manager of Huatingkou Footwear Manufacturing Factory in Chendai Town, Jinjiang.
From 1997 to 2000, he was the general manager of Jiuzhou Footwear Business Company
Limited in Chendai Town, Jinjiang. In 2001, Mr. Lin founded XDLong Fujian and was
its vice-chairman from 2001 to September 2007 and has been its chairman since
September 2007. He has been the general manager of XDLong Fujian since its
establishment. Mr. Lin has also been the chairman and general manager of XDLong
China since its establishment in April 2004. In 2003, he was named as one of the 100
Outstanding Persons in China’s Economy. In 2003, he was appointed as a representative
of the 14th Jinjiang People’s Congress and the executive director of Jinjiang Chendai
Chamber of Commerce. In 2004, Mr. Lin was appointed as vice president of Jinjiang
Footwear Manufacturing Association. In 2005, he was appointed as a member of the
standing committee of Quanzhou Foreign Invested Enterprises Association and, in 2007,
as vice president of Jinjiang Youth Chamber of Commerce. In 2006, he was appointed as
a representative of the 14th Quanzhou People’s Congress. He was also appointed as a

representative of the 14th and 15th Jinjiang People’s Congress in 2003 and 2006,
respectively.
Mr. Qian Zhen Li: Deputy General Manager. Mr. Qian, 41, is the deputy general
manager of Windrace. He joined Windrace in February 2009 and is primarily responsible
for its production management and quality control. Mr. Qian has nearly 20 years
experience in the footwear manufacturing industry. From 1990 to 1999, he served as the
head of quality control for Fuzhou Qing Lu Footwear Co., Ltd. primarily responsible for
its production management and quality control. From 2000 to 2002, he served as the
factory manager for Pu Tain Jia Yu Hua Footwear Co., Ltd. and was primarily
responsible for its strategic planning of production and quality control. From 2002 to
2005, he served as the general manager of Quanzhou Ju Xing Footwear Co., Ltd.,
primarily responsible for its business strategy, planning, and development. From 2006 to
2008, he served as the president of the production department for GuiRenNiao (China)
Co., Ltd., primarily responsible for its production management and quality control of the
footwear business.
Mr. Terence Wong: Chief Financial Officer, effective May 1, 2010. Mr. Wong has
over 18 years of experience in accounting, auditing, and finance. Immediately prior to
joining Exceed, Mr. Wong was the chief financial officer of China Dongxiang (Group)
Co., Ltd., a leading China sportswear brand operator listed on the Hong Kong Stock
Exchange. Mr. Wong has also held various senior positions including chief financial
officer of a sino-foreign joint venture in Beijing, senior finance manager of China
Netcom Group Corporation (Hong Kong) Limited, which was a company listed on the
Hong Kong Stock Exchange, and audit manager of an international accounting firm. Mr.
Wong obtained a bachelor’s degree in business administration from the Chinese
University of Hong Kong and a master’s degree in business administration from the
Australian Graduate School of Management. He is also a fellow member of the
Association of Chartered Certified Accountants and an associate member of the Hong
Kong Institute of Certified Public Accountants. Mr. Wong will replace Ms. Tai Yau Ting,
who will continue her employment with Exceed in a new capacity as Vice President of
Finance and Company Secretary of the Board of Directors.
Mr. Yu Shulong: Deputy Financial Officer. Mr. Yu Shulong, aged 47, is the deputy
financial officer. Mr. Yu joined Exceed in August 2009. From 1983 to 1993, he worked
for Anhui Sugong County Salt Co. Ltd. and was responsible for accounting, finance and
distribution related matters. From 1993 to 2005, he worked as the financial manager for
Fujian Fengzhu Group Co. Ltd. From 2006 to 2009, he worked as the chief financial
officer for Fujian Jinjiang San Li Motor Co. Ltd. Mr. Yu obtained a diploma in finance
and accounting from Anhui Anqing Commercial College.
Mr. Ding Dongdong: Vice President of Windrace. Mr. Ding Dongdong, 28, is a vice
president of Exceed. He is primarily responsible for the design, research, and
development of its footwear and apparel. Mr. Ding joined Windrace in September 2001.
He was the development manager of the apparel department of XDLong Fujian from
2002 to 2003, and was promoted to the position of manager in 2003. He is responsible for
data collection, apparel design, processing and production, quality control, and after-sales
of the apparel department. Mr. Ding obtained a diploma in apparel design from the
Guangdong Apparel Institute in July 2002. Mr. Ding is the brother-in-law of Mr. Lin
Shuipan, an executive Director.
Ms. Liu Ming: Vice President of Windrace. Ms. Liu Ming, 43, is a vice president of
Exceed. She is also the assistant to the chairman. She joined Windrace in January 2008
and is primarily responsible for the sales of its products, and development of the
Xidelong sales distribution network, as well as its apparel business. Furthermore, she is
responsible for the overall administrative management of Exceed. Ms. Liu obtained an

Executive Masters of Business Administration (EMBA) from Qinghua University

Continuous Learning Institution in April 2003. From 1998 to 2000, she worked as the
marketing manager and chief of the general office for Jinjiang Aile Holiday Hotel. From
2001 to 2007, she worked as the vice general manager and the general manager of the
Xi’an Branch of Guirenniao (Fujian) Sports Products Limited.
Ms. Tai Yau Ting, 30: Vice President of Finance and Company Secretary of the
Board of Directors. Ms. Tai joined Windrace in February 2008 and is primarily
responsible for its financial management, internal controls, and risk management. Ms. Tai
graduated from the University of Toronto with a bachelor’s degree in applied science in
2002 and a master’s degree in applied science in 2004. Ms. Tai has been a member of the
American Institute of Certified Public Accountants since August 2007 and a member of
CPA Australia since April 2009. Prior to joining Windrace, she worked for Ernst &
Young and has more than four years of auditing, accounting, and financing experience.

Exceed Company Ltd

($'s in Millions, Except Per Share Data)
FY Q1 Q2 Q3 Q4 FY Q1E Q2E Q3E Q4E FYE FY

2008 Mar-09 Jun-09 Oct-09 Dec-09 2009 Mar-10 Jun-10 Oct-10 Dec-10 2010 2011
Revenues $263.1 $57.2 $62.4 $133.1 $51.6 $304.2 $74.3 $79.4 $150.8 $64.4 $368.9 $454.2
% Increase 53.8% -17.3% -19.9% 70.1% 36.4% 15.6% 29.8% 27.3% 13.3% 25.0% 21.3% 23.1%
Cost of Goods Sold 191.2 41.4 43.5 93.6 35.9 214.5 51.4 54.6 104.4 44.3 254.8 309.3
As % Sales 72.7% 72.2% 69.8% 70.4% 69.7% 70.5% 69.3% 68.8% 69.3% 68.7% 69.1% 68.1%
% Increase 51.1% -18.7% -23.2% 66.2% 31.3% 12.1% 24.4% 25.5% 11.5% 23.2% 18.8% 21.4%
Gross Profit $71.8 $15.9 $18.8 $39.4 $15.6 $89.8 $22.8 $24.8 $46.4 $20.2 $114.2 $145.0
Margin 27.3% 27.8% 30.2% 29.6% 30.3% 29.5% 30.8% 31.2% 30.8% 31.3% 30.9% 31.9%
% Increase 61.6% -13.4% -11.1% 80.2% 49.7% 25.0% 43.8% 31.6% 17.6% 29.1% 27.2% 27.0%
Selling and distribution costs 32.6 5.9 5.0 21.4 7.0 39.3 7.7 6.2 23.5 8.4 45.8 57.6
As % Sales 12.4% 10.4% 8.0% 16.0% 13.6% 12.9% 10.4% 7.8% 15.6% 13.1% 12.4% 12.7%
% Increase #DIV/0! -12.2% -24.2% 67.9% 6.0% 20.3% 30.3% 25.0% 10.0% 20.0% 16.8% 25.7%
Administrative expenses 4.2 1.1 1.8 2.0 1.5 6.5 1.2 2.0 2.1 1.6 7.0 8.9
As % Sales 1.6% 2.0% 2.9% 1.5% 3.0% 2.1% 1.7% 2.5% 1.4% 2.5% 1.9% 2.0%
% Increase #DIV/0! 11.4% 55.4% 99.4% 52.0% 54.4% 8.7% 9.6% 5.2% 4.4% 6.9% 28.0%
Research and development expenses 2.6 0.8 1.1 1.3 0.5 3.7 0.9 1.2 1.3 0.6 4.0 5.7
As % Sales 1.0% 1.4% 1.8% 1.0% 0.9% 1.2% 1.2% 1.5% 0.9% 0.9% 1.1% 1.3%
% Increase #DIV/0! 48.7% 64.2% 91.5% -29.9% 43.2% 9.8% 5.7% 3.5% 24.1% 8.2% 44.5%
Operating Expense 39.4 7.9 7.9 24.6 9.0 49.4 9.8 9.4 26.9 10.6 56.7 72.2
As % Sales 15.0% 13.8% 12.6% 18.5% 17.5% 16.2% 13.3% 11.8% 17.9% 16.5% 15.4% 15.9%
Operating Profit $32.4 $8.0 $10.9 $14.8 $6.6 $40.3 $13.0 $15.4 $19.4 $9.6 $57.4 $72.7
Margin 12.3% 14.0% 17.6% 11.1% 12.8% 13.3% 17.5% 19.4% 12.9% 14.8% 15.6% 16.0%
% Increase -27.0% -20.1% -14.3% 97.5% 208.8% 24.4% 62.1% 40.9% 31.4% 45.0% 42.3% 26.7%
Finance Costs 3.4 1.2 1.3 1.7 0.1 4.3 0.1 0.1 0.1 0.1 0.5 0.5
Other Income (Expense) -4.4 0.0 0.0 0.0 0.8 0.9 0.0 0.0 0.0 0.0 0.0 0.0
Pretax Profit 24.7 6.8 9.7 13.1 7.3 36.9 12.9 15.3 19.3 9.4 57.0 72.3
Margin 9.4% 11.8% 15.5% 9.9% 14.1% 12.1% 17.4% 19.3% 12.8% 14.7% 15.4% 15.9%
% Increase 7.6% -32.0% -19.0% 98.7% -287.9% 49.4% 90.1% 58.2% 47.0% 30.0% 54.5% 26.9%
Taxes(benefit) 0.3 0.0 0.1 0.3 0.2 0.6 1.7 2.1 2.6 1.3 7.7 9.8
Rate 1.3% 0.0% 0.9% 2.2% 2.4% 1.5% 13.5% 13.5% 13.5% 13.5% 13.5% 13.5%
Net Income--Oper. $24.4 $6.8 $9.6 $12.8 $7.1 $36.3 $11.2 $13.3 $16.7 $8.2 $49.3 $62.5
Margin 9.3% 11.8% 15.4% 9.6% 13.8% 11.9% 15.0% 16.7% 11.1% 12.7% 13.4% 13.8%
% Increase 21.4% -31.7% -19.4% 100.1% -281.6% 49.1% 64.4% 38.0% 30.1% 15.2% 35.7% 26.9%
EPS--Operations $1.43 $0.30 $0.42 $0.56 $0.31 $1.59 $0.39 $0.47 $0.59 $0.29 $1.73 $1.91
% Increase 21.3% -49.3% -40.1% 48.6% NA 10.8% 32.3% 11.1% 4.7% -7.3% 9.2% 10.3%
Shares Out. Diluted 17.0 22.9 22.9 22.9 22.9 22.9 28.5 28.5 28.5 28.5 28.5 32.8

Exceed Company Ltd.

(RMB in Millions, Except Per Share Data)
FY Q1 Q2 Q3E Q4E FY Q1E Q2E Q3E Q4E FYE FY

2008 Mar-09 Jun-09 Oct-09 Dec-09 2009 Mar-10 Jun-10 Oct-10 Dec-10 2010 2011
Revenues 1820.3 391.0 425.9 909.0 352.1 2078.0 507.4 542.3 1029.9 440.2 2519.7 3102.5
% Increase 40.4% -18.4% -20.9% 67.9% 34.6% 14.2% 29.8% 27.3% 13.3% 25.0% 21.3% 23.1%
Cost of Goods Sold 1323.3 282.5 297.3 639.6 245.5 1464.9 351.3 373.1 713.2 302.4 1740.1 2112.4
As % Sales 72.7% 72.2% 69.8% 70.4% 69.7% 70.5% 69.3% 68.8% 69.3% 68.7% 69.1% 68.1%
% Increase 37.9% -19.8% -24.1% 64.1% 29.6% 10.7% 24.4% 25.5% 11.5% 23.2% 18.8% 21.4%
Gross Profit 497.0 108.5 128.6 269.3 106.7 613.1 156.0 169.2 316.7 137.8 779.7 990.1
Margin 27.3% 27.8% 30.2% 29.6% 30.3% 29.5% 30.8% 31.2% 30.8% 31.3% 30.9% 31.9%
% Increase 47.5% -14.5% -12.2% 77.9% 47.7% 23.4% 43.8% 31.6% 17.6% 29.1% 27.2% 27.0%
Selling and distribution costs 225.8 40.5 33.9 145.9 47.9 268.1 52.8 42.3 160.5 57.5 313.0 393.4
As % Sales 12.4% 10.4% 8.0% 16.0% 13.6% 12.9% 10.4% 7.8% 15.6% 13.1% 12.4% 12.7%
% Increase 64.7% -13.3% -25.2% 65.8% 4.7% 18.8% 30.3% 25.0% 10.0% 20.0% 16.8% 25.7%
Administrative expenses 29.2 7.8 12.4 13.8 10.5 44.5 8.5 13.6 14.5 11.0 47.6 60.9
As % Sales 1.6% 2.0% 2.9% 1.5% 3.0% 2.1% 1.7% 2.5% 1.4% 2.5% 1.9% 2.0%
% Increase -2.6% 9.9% 53.3% 96.9% 50.0% 52.4% 8.7% 9.6% 5.2% 4.4% 6.9% 28.0%
Research and development expenses 17.6 5.5 7.6 8.7 3.2 25.0 6.0 8.0 9.0 4.0 27.0 39.0
As % Sales 1.0% 1.4% 1.8% 1.0% 0.9% 1.2% 1.2% 1.5% 0.9% 0.9% 1.1% 1.3%
% Increase 38.1% 46.7% 62.1% 89.1% -30.8% 41.4% 9.8% 5.7% 3.5% 24.1% 8.2% 44.5%
Operating Expense 272.6 53.8 53.8 168.4 61.7 337.6 67.3 63.9 184.0 72.5 387.6 493.3
As % Sales 15.0% 13.8% 12.6% 18.5% 17.5% 16.2% 13.3% 11.8% 17.9% 16.5% 15.4% 15.9%
Operating Profit 224.4 54.7 74.8 101.0 45.0 275.5 88.7 105.3 132.7 65.3 392.1 496.8
Margin 12.3% 14.0% 17.6% 11.1% 12.8% 13.3% 17.5% 19.4% 12.9% 14.8% 15.6% 16.0%
% Increase 42.9% -21.1% -15.4% 94.9% NM 22.8% 62.1% 40.9% 31.4% 45.0% 42.3% 26.7%
Finance Costs 23.5 8.5 8.7 11.5 0.8 29.6 0.8 0.8 0.8 0.8 3.2 3.2
Other Income (Expense) -30.2 0.1 0.2 0.2 5.4 5.9 0.1 0.2 0.0 0.0 0.3 0.3
Pretax Profit 170.7 46.3 66.2 89.7 49.6 251.8 88.1 104.7 131.9 64.5 389.2 493.9
Margin 9.4% 11.8% 15.5% 9.9% 14.1% 12.1% 17.4% 19.3% 12.8% 14.7% 15.4% 15.9%
% Increase 9.0% -32.9% -20.0% 96.2% NM 47.5% 90.1% 58.2% 47.0% 30.0% 54.5% 26.9%
Taxes(benefit) 2.2 0.0 0.6 2.0 1.2 3.8 11.9 14.1 17.8 8.7 52.5 93.2
Rate 1.3% 0.0% 0.9% 2.2% 2.4% 1.5% 13.5% 13.5% 13.5% 13.5% 13.5% 18.9%
Net Income--Oper. 168.5 46.3 65.6 87.7 48.4 248.1 76.2 90.6 114.1 55.8 336.6 427.2
Margin 9.3% 11.8% 15.4% 9.6% 13.8% 11.9% 15.0% 16.7% 11.1% 12.7% 13.4% 13.8%
% Increase 25.0% -32.6% -20.4% 97.5% NM 47.2% 64.4% 38.0% 30.1% 15.2% 35.7% 26.9%
EPS--Operations 9.91 2.02 2.87 3.83 2.11 10.83 2.68 3.18 4.01 1.96 11.83 13.04
% Increase 24.9% -49.9% -40.9% 46.7% NM 9.3% 32.3% 11.1% 4.7% -7.3% 9.2% 10.3%
Shares Out. Diluted 17.0 22.9 22.9 22.9 22.9 22.9 28.5 28.5 28.5 28.5 28.5 32.8

Exceed Balance Sheet

($'s in millions, except per-share data)
FY2008 FY2009 FY2010E FY2011E

Dec-08 Dec-09 Dec-10 Dec-11
Assets
Cash & equivalent 17.4 38.4 86.7 126.5
Pledged bank deposits 0.3 2.2 0.0 0.0
Accounts receivable 41.9 121.9 73.8 90.8
Inventories, net 12.4 8.2 16.6 20.4
Prepaid expenses/other current assets 0.0 0.0 0.0 0.0
Deferred income taxes 0.0 0.0 0.0 0.0
Other Current Assets 0.0 0.0 0.0 0.0
Total Current Assets 72.1 170.7 177.1 237.8
Property, plant and equipment, net 41.4 39.9 39.9 39.9

Prepaid land lease payments 4.4 4.3 4.3 4.3
Total Assets 117.8 214.9 221.3 282.0
Liabilities & Shareholders' Equity

Accounts payable 28.3 37.8 44.3 54.5
Due to a director 0.1 0.2 0.2 0.2
Due to a shareholder 0.0 0.0 0.0 0.0
Interest-bearing bank borrowings 2.9 8.5 0.0 0.0
Tax Payable 0.0 0.2 0.2 0.2
Preferred shares 39.4 0.0 0.0 0.0
Total Current Liabilities 70.8 46.8 44.7 54.9
Long-Term Debt 0.0 0.0 0.0 0.0

Noncurrent lease obligations 0.0 0.0 0.0 0.0
Noncurrent deferred tax liability 0.0 0.0 0.0 0.0
Other noncurrent liabilities 0.0 0.0 0.0 0.0
Total Liabilities 70.8 46.8 44.7 54.9
Total Equity 47.1 168.1 176.6 227.1
Total Liabilities & Equity 117.8 214.9 221.3 282.0
Shares Out. Diluted 17.0 22.9 28.5 32.8
Ratio Analysis Dec-08 Dec-09 Dec-10 Dec-11
Book Value per Share 2.77 7.34 6.2 6.9

Working Capital 1.3 123.9 132.4 182.9
Current Ratio 1.0 3.7 4.0 4.3
Total Debt to Capitalization 5.8% 4.8% 0.0% 0.0%
Total Debt to Equity 6.1% 5.1% 0.0% 0.0%
Return on Average Equity (ROAE) 51.7% 21.6% 45.5% 40.4%
Return on Average Assets (ROAA) 20.7% 20.4% 31.2% 29.9%

Exceed Balance Sheet

(RMB in millions, except per-share data)
FY2008 FY2009 FY2010E FY2011E

Dec-08 Dec-09 Dec-10 Dec-11
Assets
Cash & equivalent 120.1 262.2 592.4 864.1
Pledged bank deposits 2.3 15.0 0.0 0.0
Accounts receivable 290.2 832.6 503.9 620.5
Inventories, net 86.1 56.0 113.4 139.6
Prepaid expenses/other current assets 0.0 0.0 0.0 0.0
Deferred income taxes 0.0 0.0 0.0 0.0
Other Current Assets 0.0 0.1 0.0 0.0
Total Current Assets 498.6 1165.9 1209.7 1624.2
Property, plant and equipment, net 286.6 272.6 272.6 272.6

Prepaid land lease payments 30.1 29.3 29.3 29.3
Total Assets 815.4 1467.8 1511.6 1926.1
Liabilities & Shareholders' Equity

Accounts payable 196.0 258.4 302.4 372.3
Due to a director 0.9 1.7 1.7 1.7
Due to a shareholder 0.0 0.0 0.0 0.0
Interest-bearing bank borrowings 20.0 58.0 0.0 0.0
Tax Payable 0.3 1.3 1.3 1.3
Preferred shares 272.4 0.0 0.0 0.0
Total Current Liabilities 489.5 319.4 305.3 375.3
Long-Term Debt 0.0 0.0 0.0 0.0

Noncurrent lease obligations 0.0 0.0 0.0 0.0
Noncurrent deferred tax liability 0.0 0.0 0.0 0.0
Other noncurrent liabilities 0.0 0.0 0.0 0.0
Total Liabilities 489.5 319.4 305.3 375.3
Total Equity 325.8 1148.4 1206.3 1550.8
Total Liabilities & Equity 815.4 1467.8 1511.6 1926.1
Shares Out. Diluted 17.0 22.9 28.5 32.8
Ratio Analysis Dec-08 Dec-09 Dec-10 Dec-11
Book Value per Share 19.16 50.16 42.4 47.3

Working Capital 9.1 846.5 904.4 1248.9
Current Ratio 1.0 3.7 4.0 4.3
Total Debt to Capitalization 5.8% 4.8% 0.0% 0.0%
Total Debt to Equity 6.1% 5.1% 0.0% 0.0%
Return on Average Equity (ROAE) 51.7% 21.6% 27.9% 27.5%
Return on Average Assets (ROAA) 20.7% 16.9% 22.3% 22.2%

Exceed Cash Flow Model

($'s in millions, except per share data)
FY FY FYE FYE
2008 2009 2010 2011
Cash Flow From Operations:
Profit before tax: 24.7 36.9 57.0 72.3
Adjustments to reconcile net income: 0.0 0.0 0.0 0.0
Interest income (0.1) (0.1) 0.0 0.0
Finance costs 3.4 4.3 0.5 0.5
Over-provision for aborted IPO expenses 0.0 (0.8) 0.0 0.0
Share of loss of a jointly-controlled entity 0.0 0.0 0.0 0.0
Forfeiture of deposit for the proposed land purchase transaction 0.0 0.0 0.0 0.0
Loss on write-off of items of property, plant and equipment 0.0 0.0 0.0 0.0
Loss on disposal of items of property, plant and equipment 0.0 0.0 0.0 0.0
Depreciation of property, plant and equipment 2.2 2.4 2.5 2.6
Amortization of prepaid land lease payments 0.1 0.1 0.1 0.1
(Increase)/decrease in inventories (5.2) 4.4 (8.4) (3.8)
Increase in trade receivables (20.7) (77.3) 48.1 (17.1)
(Increase)/decrease in prepayments, deposits and other receivables (0.4) (1.4) 0.0 0.0
(Increase)/decrease in pledged bank deposits 2.4 (1.9) 0.0 0.0
Increase in trade and bills payables 0.6 9.9 (2.2) 11.5
Increase/(decrease) in deposits received, other payables and accruals 0.3 1.4 0.2 0.1
Interest paid (0.2) (0.5) 0.0 0.0
PRC taxes paid (0.7) (0.4) 0.0 0.0
Cash from Operating Activities (CFO) 6.4 (22.8) 97.8 66.1
Cash flow from Investing Activities:
Capital expenditures (2.5) (0.3) (41.0) (26.4)

Payments from disposal of assets 0.0 0.0 0.0 0.0
Additions to prepaid land lease payments 0.0 0.0 0.0 0.0
Increase in investment in subsidiary 0.0 0.0 0.0 0.0
Interest received 0.1 0.1 0.0 0.0
Cash from Investing Activities (CFI) (2.4) (0.2) (41.0) (26.4)
Cash flows from Financing activities:
Cash received from 2020 upon recapitalization 0.0 50.2 0.0 0.0
Purchase of unit option 0.0 (2.5) 0.0 0.0
New bank loans 2.9 13.3 0.0 0.0
Repayment of bank loans (4.0) (7.7) (8.5) 0.0
(Decrease)/increase in amount due to a director (11.7) 0.1 0.0 0.0
Exchange realignment 0.0 0.4 0.0 0.0
Increase in amount due to a shareholder 0.0 (0.0) 0.0 0.0
Capital contributions from equity holders of the Company 4.1 0.0 0.0 0.0
Proceeds from issue of ordinary shares 0.0 30.0 0.0 0.0
Proceeds from issue of preferred shares 12.3 (39.9) 0.0 0.0
Cash From Financing Activities (CFF) 3.5 43.9 (8.5) 0.0
Net Increase (Decrease) in Cash 7.5 20.9 48.3 39.8

Cash at Beginning of Quarter/Year 9.8 17.6 38.4 86.7
Effect of foreign exchange rate changes 0.1 (0.1) 0.0 0.0
Cash at End of Quarter/Year 17.4 38.4 86.7 126.5

Exceed Cash Flow Model

(RMB in millions, except per share data)
FY FY FYE FYE
2008 2009 2010 2011
Cash Flow From Operations:
Profit before tax: 170.7 251.8 389.2 493.9
Adjustments to reconcile net income:
Interest income (0.8) (0.7) 0.3 0.0
Finance costs 23.5 29.6 3.2 3.2
Over-provision for aborted IPO expenses 0.0 (5.1) 0.0 0.0
Share of loss of a jointly-controlled entity 0.0 0.0 0.0 0.0
Forfeiture of deposit for the proposed land purchase transaction 0.0 0.0 0.0 0.0
Loss on write-off of items of property, plant and equipment 0.1 0.0 0.0 0.0
Loss on disposal of items of property, plant and equipment 0.0 0.2 0.0 0.0
Depreciation of property, plant and equipment 15.3 16.2 17.2 17.5
Amortization of prepaid land lease payments 0.7 0.8 0.8 0.8
(Increase)/decrease in inventories (35.8) 30.1 (57.4) (26.2)
Increase in trade receivables (143.1) (528.0) 328.6 (116.5)
(Increase)/decrease in prepayments, deposits and other receivables (2.7) (9.3) 0.0 0.0
(Increase)/decrease in pledged bank deposits 16.7 (12.7) 0.0 0.0
Increase in trade and bills payables 4.3 68.0 (15.0) 78.4
Increase/(decrease) in deposits received, other payables and accruals 1.9 9.5 1.3 0.7
Interest paid (1.7) (3.2) 0.0 0.0
PRC taxes paid (5.1) (2.7) 0.0 0.0
Cash from Operating Activities (CFO) 44.0 (155.7) 668.2 451.7
Cash flow from Investing Activities:
Capital expenditures (17.3) (2.3) (280.0) (180.0)

Payments from disposal of assets 0.0 0.0 0.0 0.0
Additions to prepaid land lease payments 0.0 0.0 0.0 0.0
Increase in investment in subsidiary 0.0 0.0 0.0 0.0
Interest received 0.8 0.7 0.0 0.0
Cash from Investing Activities (CFI) (16.5) (1.6) (280.0) (180.0)
Cash flows from Financing activities:
Cash received from 2020 upon recapitalization 0.0 343.2 0.0 0.0
Purchase of unit option 0.0 (17.1) 0.0 0.0
New bank loans 20.0 90.5 0.0 0.0
Repayment of bank loans (28.0) (52.5) (58.0) 0.0
(Decrease)/increase in amount due to a director (81.1) 0.8 0.0 0.0
Exchange realignment 0.0 2.5 0.0 0.0
Increase in amount due to a shareholder 0.0 (0.1) 0.0 0.0
Capital contributions from equity holders of the Company 28.4 0.0 0.0 0.0
Proceeds from issue of ordinary shares 0.0 205.0 0.0 0.0
Proceeds from issue of preferred shares 85.1 (272.4) 0.0 0.0
Cash From Financing Activities (CFF) 24.5 299.9 (58.0) 0.0
Net Increase (Decrease) in Cash 51.9 142.6 330.2 271.7

Cash at Beginning of Quarter/Year 67.7 120.1 262.2 592.4
Effect of foreign exchange rate changes 0.4 (0.4) 0.0 0.0
Cash at End of Quarter/Year 120.1 262.2 592.4 864.1

Required Disclosures
Rating and Price Target History for: Exceed Company LTD (EDS) as of 04-27-2010
14
12
10
4
Q1 Q2 Q3 Q1 Q2 Q3 Q1 Q2 Q3 Q1 Q2
2008 2009 2010
Created by BlueMatrix
Price Target
Our price target is $13.
Valuation Methodology
Our $13 price target is based off of an 8x FTM P/E multiple.
Risk Factors
■ Failure to build upon Xidelong brand or deterioration of said brand image could negatively impact sales.
■ Exceed's sales could be impacted by seasonality, weather, and other factors.
■ Exceed operates within a highly competitive environment.
■ Exceed's growth prospects could be linked to overall economic conditions in China.
I, Jeffrey Blaeser, the author of this research report, certify that the views expressed in this report accurately reflect my personal views
about the subject securities and issuers, and no part of my compensation was, is, or will be directly or indirectly tied to the specific
recommendations or views contained in this research report.
I, Heather Hou, the author of this research report, certify that the views expressed in this report accurately reflect my personal views
about the subject securities and issuers, and no part of my compensation was, is, or will be directly or indirectly tied to the specific
recommendations or views contained in this research report.
Research analyst compensation is dependent, in part, upon investment banking revenues received by Morgan Joseph & Co. Inc.
Morgan Joseph & Co. Inc. intends to seek or expects to receive compensation for investment banking services from the subject
company within the next three months.
Morgan Joseph & Co. Inc. has received compensation for investment banking services from Exceed Company Ltd. within the past 12
months.

Investment Banking
Services/Past 12 Mos.
Rating Percent Percent
BUY [B] 63.80 18.52
HOLD [H] 33.10 11.90
SELL [S] 3.10 0.00
Meaning of Ratings
A) A Buy rating is assigned when we do not believe the stock price adequately reflects a company's prospects over 12-18 months.
B) A Hold rating is assigned when we believe the stock price adequately reflects a company's prospects over 12-18 months.
C) A Sell rating is assigned when we believe the stock price more than adequately reflects a company's prospects over 12-18 months.
Other Disclosures
The information contained herein is based upon sources believed to be reliable but is not guaranteed by us and is not considered to be
all inclusive. It is not to be construed as an offer or the solicitation of an offer to sell or buy the securities mentioned herein. Morgan
Joseph & Co. Inc., its affiliates, shareholders, officers, staff, and/or members of their families, may have a position in the securities
mentioned herein, and, before or after your receipt of this report, may make or recommend purchases and/or sales for their own
accounts or for the accounts of other customers of the Firm from time to time in the open market or otherwise. Opinions expressed are
our present opinions only and are subject to change without notice. Morgan Joseph & Co. Inc. is under no obligation to provide updates
to the opinions or information provided herein. Additional information is available upon request.
© Copyright 2010 by Morgan Joseph & Co. Inc.

Morgan Joseph & Co. Inc.
600 Fifth Avenue, 19th Fl
New York, NY 10020
Tel. 212.218.3700
Fax. 212.218.3789
Sales and Trading

New York Pittsford
Tel. 212.218.3767 Tel. 877.237.6542
Fax. 212.218.3705 Fax. 585.899.6029

Eds Morgan Joseph

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CONSUMER/RETAIL

April 28, 2010

The Disclosure section may be found on pages 26 - 27 of this report.

Source: Company website

2 MORGAN JOSEPH & CO. INC.

Table 1: Rural/Urban Chinese Household Consumption Expenditures in RMB

In RMB 1997 2002 2004 2006 2007

10 YR CAGR 5 Yr CAGR 3 Yr CAGR 1 YR Growth

3 MORGAN JOSEPH & CO. INC.

Source: Company website

Source: Company website

4 MORGAN JOSEPH & CO. INC.

2008 2009 2010 2011 2012

Source: General Administration of Sport in China, ZOU Marketing

5 MORGAN JOSEPH & CO. INC.

Source: Xinzhou, Shangxi News

Table 3: Solid and Consistent Annualized Retail Store Growth

Source: Company reports and Morgan Joseph estimates

6 MORGAN JOSEPH & CO. INC.

Table 4: Geographic Retail Store Presence

Distributors 2006 2007 2008 2009 2010E 2011E

Source: Company reports and Morgan Joseph estimates

2007 2008 2009 2010E 2011E

Source: Company reports and Morgan Joseph estimates

7 MORGAN JOSEPH & CO. INC.

2006 2007 1H2008 2008 1H2009

Source: Company website

8 MORGAN JOSEPH & CO. INC.

Attractive Terms with Retailers Limit Risk/Provide Upside Growth Opportunities

9 MORGAN JOSEPH & CO. INC.

♦ Distribution and product exclusivity – Distributors have the exclusive rights,

♦ Geographic exclusivity – Distributors may open up multiple retail outlets, but

♦ Sales targets/right of termination – Should distributors fail to meet previously

Tax Exempt in 2009 – 50% Reduction in 2010, 2011, and 2012

Research/Development and Key Relationships

10 MORGAN JOSEPH & CO. INC.

Exceed’s sales could be impacted by seasonality, weather, and other factors.

Exceed’s growth prospects could be linked to overall economic conditions in China.

11 MORGAN JOSEPH & CO. INC.

Table 7: Exceed Peer Valuations (In $mm)

Average Chinese Sportswear: 23.2x 20.0x 16.1x

12 MORGAN JOSEPH & CO. INC.

♦ Footwear (roughly 53% of total sales): running, leisure, basketball,

Source: Xinzhou, Shangxi News

13 MORGAN JOSEPH & CO. INC.

Table 8: Exceed Revenue Breakdown By Product Line

Source: Xinzhou, Shangxi News

We believe Exceed differentiates itself by offering a quality product at a comparably

14 MORGAN JOSEPH & CO. INC.

Table 9: Exceed Average Retail Product Price Point Range

2006 in $'S 2007 in $'S 2008 in $'S 2009 in $'S

15 MORGAN JOSEPH & CO. INC.

XTEP International Holdings Limited (SEHK – 1368 - $0.78; NR): XTEP

16 MORGAN JOSEPH & CO. INC.

Balance Sheet and Cash Flow

17 MORGAN JOSEPH & CO. INC.

18 MORGAN JOSEPH & CO. INC.

Executive Masters of Business Administration (EMBA) from Qinghua University

19 MORGAN JOSEPH & CO. INC.

Exceed Company Ltd

FY Q1 Q2 Q3 Q4 FY Q1E Q2E Q3E Q4E FYE FY

Source: Company reports and Morgan Joseph estimates

20 MORGAN JOSEPH & CO. INC.