Delta Galil Industries Ltd. 2018 Periodic Report February 19 2019 Delta Galil Industries Ltd. 2018 Periodic Report Table of Contents: 1. Chapter A – Description of the Corporation’s Business 2. Chapter B – Board of Directors' Report on the State of Corporate Affairs 3. Chapter C – Financial Statements 4. Chapter D – Additional Information Regarding the Corporation Delta Galil Industries Ltd. Chapter A Description of the Corporation's Business As of December 31 2018 TABLE OF CONTENTS Page Chapter A – Description of the Corporation’s Business ...................................................................... 2 1. The Corporation’s Activity and Description of the Development of its Business ......................... 2 2. The Corporation’s Operating segment ........................................................................................... 5 3. Investments in the Corporation’s Equity and Transactions in its Shares ....................................... 6 4. Distribution of Dividends ............................................................................................................... 6 Chapter B – Other Information ............................................................................................................. 7 5. Financial Information Regarding the Corporation’s Operating segments ...................................... 7 6. General Environment and Impact of External Factors on the Corporation’s Activity ................... 7 Chapter C – Description of the Corporation's Business by Operating Segment ............................... 8 Delta USA and Global Upper Market Operating segments 7. General Information ...................................................................................................................... 8 8. Customers .................................................................................................................................... 10 9. Marketing and Distribution ......................................................................................................... 11 10. Backlog ........................................................................................................................................ 11 11. Competition .................................................................................................................................. 12 12. Production Capabilities ................................................................................................................ 13 13. Intangible Assets .......................................................................................................................... 13 14. Raw Materials and Suppliers ........................................................................................................ 14 15. Working Capital ........................................................................................................................... 16 16. Restrictions and Supervision of the Corporation’s Activity ......................................................... 16 Delta Israel, Schiesser and Delta Premium Brands Operating segments 17. General Information ..................................................................................................................... 18 18. Customers ..................................................................................................................................... 21 19. Marketing and Distribution ......................................................................................................... 22 20. Backlog ........................................................................................................................................ 24 21. Competition .................................................................................................................................. 24 22. Manufacturing Capabilities .......................................................................................................... 25 23. Intangible Assets .......................................................................................................................... 25 24. Raw Materials and Suppliers ........................................................................................................ 26 25. Working Capital .......................................................................................................................... 26 26. Restrictions and Supervision of the Corporation’s Activity ......................................................... 27 Chapter D – Additional Information at the Corporate Level ................................................................ 27. General Information on Operating Segments ............................................................................... 29 28. Company’s Products .................................................................................................................... 29 29. Seasonality ................................................................................................................................... 29 30. Fixed Assets, Real Estate and Facilities ....................................................................................... 30 31. Research and Development .......................................................................................................... 35 32. Human Capital ............................................................................................................................. 35 33. Working Capital ........................................................................................................................... 39 34. Financing ...................................................................................................................................... 39 35. Taxation ....................................................................................................................................... 40 36. Goals and Business Strategy ........................................................................................................ 40 37. Projected Developments in the Coming Year .............................................................................. 42 38. Financial Data on Geographic Regions ........................................................................................ 43 39. Discussion of Risk Factors ........................................................................................................... 43 Introduction The Company, Delta Galil Industries Ltd., hereby submits a report describing the corporation's business as of December 31st 2018, which reviews the description of the corporation and the development of its business, as they occurred in 2018 (“the Reported Period”). The report was prepared in accordance with the Securities Regulations (Periodic and Immediate Reports), 1970. The materiality of the data included in this periodic report, including the description of material transactions, has been assessed from the Company’s point of view, while in some cases, additional descriptive information is given in order to provide a comprehensive picture of the matter being described. Glossary For the sake of convenience, in this periodic report, the following abbreviations shall be assigned the meaning listed alongside them: “The Company” or “Delta” Delta Galil Industries Ltd. “The Group” or “the Delta Group” Delta Galil Industries Ltd. and its subsidiaries “Delta USA” Delta Galil USA Inc. “Schiesser” Schiesser Group "Eminence" Eminence Group “Dollar” US dollar 1 Description of the Corporation’s Business Chapter A – Description of the Corporation’s Business 1. The Corporation’s Activity and Description of the Development of its Business The following is information on the corporation’s business, as of February 19th 2019. 1.1 The Company was incorporated in Israel in 1975 as a private company in accordance with the Companies Order. In 1982 the Company went public on the Tel Aviv Stock Exchange Ltd. On March 25th 1999, the Company issued American Depositary Shares (“ADS”) in such manner that each ADS represents a single ordinary Company share of 1 NIS par value and starting 2008 Company ADS may be traded on the U.S. OTC trading arena, or on the Tel Aviv Stock Exchange Ltd. (subject to their conversion to regular Company shares). 1.2 The Group is engaged in the development, design, production, marketing and sales of underwear, socks, children’s wear, leisurewear and activewear. In addition, following the purchase of the V.F. Corporation's Contemporary Brand Coalition Division, the Company also engages in development, design, marketing, distribution and sales of branded denim products for men and women, outerwear apparel and accessories. 1.3 During the reported period, the Company acquired the Eminence Group for € 123.3 million ($ 144 million) net. Eminence Group operates in the field of intimate apparel for men, women and children under the Eminence, Athena and Liabel brands. The Group's headquarters and development, design and logistics centers are located in France. Eminence holds several subsidiaries throughout Europe (France, Italy, Spain, Belgium and Romania). For further details regarding the acquisition of Eminence, see Note 1.3.5 in the Directors' Report in Part B of this periodic report and Note 6 to the Financial Statements in Part C of this periodic report. 1.4 In December 2018, the Company entered into an agreement for the grant of a loan of $ 13.8 million to Bogart Lingerie Limited and