Melissa Miller

Alright Shoes Company

Social and Environmental Report

1

Contents

OUR COMPANY ............................................................................................................. 2

FINANCIAL HIGHLIGHTS ............................................................................................... 3

INTERNET SEGMENT – NORTH AMERICA .................................................................. 4

WHOLESALE SEGMENT – NORTH AMERICA ............................................................. 5

FINANCIAL OVERVIEW ................................................................................................. 6

CASH FLOW STATEMENT ............................................................................................ 7

ALRIGHT SHOES EMPLOYEE’S ................................................................................... 8

DIVERSITY IN ACTION .................................................................................................. 9

COMMUNITY RELATIONS ........................................................................................... 10

HEALTH AND WELLNESS PROGRAMS ..................................................................... 11

DISASTER RELIEF PROGRAM ................................................................................... 12

RECYCLE AND REUSE ............................................................................................... 13

THE INDEPENDENT AUDITOR’S REPORT ................................................................ 14

2

Our Company

Dear Stakeholders:

At Alright Shoes Company we strive to deliver the best quality

shoes to our customers at an affordable price. Through our work,

we want to ensure that our customers are enjoy our products. We

want to have strong businesses connections with our partners and

the environment we share for the future. We started with an idea

of making shoes and now serve four different regions around the

world. Over the past year, we have made substantial progress

with our social responsibility and sustainability initiatives.

We are currently produces footwear at 2 plants. The company has

a 2 million-pair plant in North America and a newer 4 million-pair

plant in Asia. With the help of our management team, the

company produces more footwear models, new features, and stylish new designs to

keep up with the latest fashion trends. The company markets its brand of athletic

footwear to footwear retailers worldwide and to individuals buying online at the

company’s website.

In addition, the company strives to enhance its sales volume and standing in the

marketplace. We use concepts such as sales, advertising, mail-in rebates, contracting

with celebrities to endorse its brand, convincing footwear retailer’s dealers to carry its

brand, providing merchandising and promotional support to retailers, good delivery

times on shipments to retailers, and promoting online purchases at its website. Athletic

shoes have become the everyday footwear of choice for children, teenagers, and

adults. Athletic footwear has become an everyday shoe for most people who spend a lot

of time on their feet and to older people with foot problems.

In this report, we share recent achievements to build upon for the future, areas that

need greater attention, and the tangible goals we are working towards to improve the

lives of those who work at and with Alright Shoes Inc., and the communities in which we

do business. I invite you to read through our report, and learn, in more detail, about our

social and environmental responsibility efforts.

Sincerely,

Melissa Miller

Chairwomen, President and Chief Executive Office

3

Financial Highlights

Year 16

$74.49Year 17

$75.91Year 18

$93.36

Year 16 • 545.17

Year 17 • 573.78

Year 18• 667.39

Year 16

$60.78

Year 17

$63.94

Year 18

$121.05

Year 18 $7.76

Year 17 $5.43

year 16 $5.05

Net Profits

Net Revenues

Earnings per Share

Stock Price

Year 16 saw a 2% decrease in

net revenue, 3% decrease in net

profit, 3% decrease in earnings

per share, and a staggering 20%

rise in stock price.

Recent administrative decisions

and corporate refocusing has led

to steady, albeit small gains in the

following year, but a meteoric rise

in revenue at $667.39 million in

Year 18, up from $573.78 million

in the previous year.

This rise in revenue has led to

increasing profits at $93.36 million,

up from $75.11 million (a 24%

increase) as well as a near

doubling of our stock price from

$63.94 per share to $121.05 per

share.

Year 15 and 16 saw relatively

small, but decreasing

fluctuations in net revenue, net

profit, stock price and earnings

per share.

4

Internet Segment – North America

Market Snapshot

When comparing our internet

segment in Year 2017 to

year 2018, our company had

a significant increase in

internet sales.

In year 17 we offered

our shoes at $67.95

per pair and in year 18

we dropped the price

by 7% which gives us

a new price of $62.95.

We doubled the

amount of shoes that

we sold in year a8. In

year 17 we sold only

243 pairs of shoes

and when we

decreased the price

we sold 412 pairs of

shoes in year 18.

Another aspect to why

our sales increased in

year 18 was due to

our celebrity

endorsements. We

had no celebrities

marketing our brand in

year 17, but in year 18

we were able to sign

four celebrity contracts

to help increase our

profits.

Our market share

increased from 12.8%

to 19.4% within the

North America market.

Year 17

Price per Pair

$67.95

S/Q Rating

7

Free Shipping

No

Advertising Cost

16,000

Celebrity Appeal

0

Year 18

Price per Pair

$62.95

S/Q Rating

6

Free Shipping

No

Advertising Cost

16,000

Celebrity Appeal

300

5

Wholesale Segment – North America

Market Snapshot

Looking at our wholesale

segment, our prices stayed

mostly the same through

year 17 and year 18.

In our wholesale

market we started with

selling our pair of

shoes at $46.25 in

year 17 and in year 18

we increased our price

to 45.79. This is a

decrease of only 1%.

The S/Q rating was at

7 stars in year 17 and

only dropped by one

star in year 18 to 6

stars.

In year 17 we started

off with a high rebate

offer of $6 dollars and

reduced that amount

to $4 dollars in year

18. The rebates

helped the company

produce sales.

Our retail stores sold

2,909 pairs of shoes

in year 17 and in year

18 we sold 3,286

pairs of shoes. This

number increased

due to having

celebrity

endorsements.

Year 17

Retail Stores

4,107

Retail Demand

2,844

Market Share 21.0%

Pairs sold

2,909

Price $46.25

Year 18

Retail Stores

4,301

Retail Demand

3,226

Maarket Share

23.2%

Pairs Sold

3,286

Price $45.79

6

Financial Overview

Revenues North America Europe - Africa Asia - Pacific

Latin America Overall

Internet $30,055.00 $31,806.00 $24,876.00 $27,210.00 $113,947.00

Wholesale $160,531.00 $161,970.00 $124,940.00 $131,208.00 $578,649.00

Private-Label $0.00 $0.00 $0.00 $0.00 $0.00

Gross Revenues from Footwear Sales

$190,586.00 $193,776.00 $149,418.00 $158,418.00 $692,596.00

± Exchange Rate Adjustments

$0.00 $5,474.00 -$3,206.00 -$27,473.00 -$25,205.00

Net Revenues from Footwear Sales

$190,586.00 $199,250.00 $146,610.00 $130,945.00 $667,391.00

Operating Cost ---

Cost of Pairs Sold $101,367.00 $102,168.00 $77,068.00 $81,998.00 $362,301.00

Warehouse Expenses $11,617.00 $11,778.00 $10,518.00 $10,502.00 $44,415.00

Marketing Expenses $32,616.00 $30,313.00 $22,794.00 $22,752.00 $108,475.00

Administrative Expenses $3,981.00 $3,902.00 $3,637.00 $3,611.00 $15,131.00

Operating Profit (Loss) $41,005.00 $51,089.00 $32,593.00 $12,082.00 $136,769.00

ASSETS

Cash On Hand $132,533.00

Accounts Receivable $166,848.00

Footwear Inventories $20,745.00

Total Current Assets $320,159.00

Net Plant Investment $366,305.00

Construction Work in Progress $0.00

Total Fixed Assets $366,305.00

Total Assets $686,464.00

Shareholder Equity Beginning Balance Change in Y18

Common Stock $13,825.00 -$1,800.00 $12,025.00

Additional Capital $142,952.00 -$130,518.00 $12,407.00

Retained Earnings $500,641.00 $90,349.00 $590,990.00

Total Shareholder Equity $657,391.00 -$41,969.00 $315,422.00

Return on Average Equity for Year 18 14.70%

LIABILITIES

Accounts Payable $25,542.00 Overdraft Loan Payable $0.00 1-Year Bank Loan Payable $0.00 Current Portion of Long-Term Loans $6,500.00 Total Current Liabilities $32,042.00 Long-Term Bank Loans Outstanding $39,000.00

Total Liabilities $71,042.00

7

Cash Flow Statement

Cash Flow Statement

Beginning Cash Balance $130,421.00

Cash Receipts from Sales $643,986.00

Inflows Bank Loans $0.00

Year 1 $0.00

Year 5 $0.00

Year 10 $0.00

Stock Issues $0.00

Sale of Existing Plant Capacity $0.00

Loan to Cover Overdrafts $0.00

Interest on Y17 Cash Balance $2,608.00

Total Cash Available from All Sources $777,015.00

Payments to Materials Suppliers $106,118.00

Production Expenses $164,376.00

Distribution and Warehouse Expenses $62,505.00

Marketing and Administrative Expenses $123,605.00

5-Year Loans $0.00

10-Year Loans $6,500.00

Interest Payments on —————

Overdraft Loan $0.00

Bank Loans $3,276.00

Stock Repurchases $132,318.00

Income Tax Payments $40,010.00

Dividend Payments to Shareholders $3,006.00

Charitable Contributions $2,735.00

Total Cash Outlays $644,449.00

Net Cash Balance $132,566.00

8

Alright Shoes Employee’s

Our employees are our greatest asset to the company. When we take care out of

employee, they take care of our customers. We appreciate and recognize our

employees for their contribution, both big and small, because it drives us to work harder

and make an even greater impact in our jobs and in our communities.

GIVING RECOGNITION:

All Associates are encouraged to take the time to celebrate success and recognize

greatness across the organization when they see it, using our four pillars:

• Great Job … you made a difference today

• Great Dedication … for all you do, thank you

• Great Results … consistently delivers excellence

• Great Moments … it’s time to celebrate

We are committed to

recognizing greatness

at all levels of the

organization with a

balance of instant

recognition, general

appreciation, broader

achievements and

important personal life

events. We want to

empower our

employees frequently

and make sure they feel

appreciated,

recognized, and most

importantly cared for.

Put customers first Act with integrity

Build great teams Drive Results

Core Values

9

Diversity in Action

Here at Alight Shoe Company we made sure to incorporate a workforce diversity

program each year with our employees. Incorporating this program has helped us

achieve and maintain workforce diversity concerning sex, age, ethnicity, and other

aspects. Another program that we have at our company is ethics training and

enforcement. This helps us understand the code of ethics along with enforcing it. It

touches all areas of our company. We expect our employees, our advertising and in-

store presentations, and the companies with which we do business to mirror the diverse

multicultural marketplace we serve. We want everyone to understand each other and

work together.

ANNUAL ETHICS TRAINING We engage in annual training for employees on Ethical

Standards and Responsibilities. Annual ethics training is refreshed every year to include

emerging issues and topics for a more engaging learning experience while remaining

consistent with prior trainings. Industry research indicates there is a strong correlation

between engagement and an ethical culture. Our annual training is designed to drive

engagement, develop understanding and enhance our culture. Understanding our

responsibilities to ourselves, each other, our consumers, our investors, our business

partners and our communities is our foundation as we deliver great results.

ENGAGEMENT SURVEY Employees are the foundation of our business. The

employee Engagement Survey is a great way we gain feedback from employees across

the company on a variety of topics including engagement, communication,

development, recognition, involvement and more. This feedback not only provides

insight to shape a better employee work experience and environment, but, it helps us

understand better results across the company. As we move forward and focus on

building great teams, employee engagement remains a priority.

10

Community Relations

We believe in giving back to the communities that we serve. We focus on donating our

money, resources, talent and time. Through our community giving and volunteer

program, we support children, men and women. We help with education and

environmental initiatives nationwide. We see giving back as a way of looking forward to

the future. We want the next generation to have more opportunities and be healthy for

the future.

SHOE GIVING PROGRAM We have been dedicated to helping those in need around

the world. We had a vision for this program ever since we started. Since 2013, we

started to give a pair of shoes to those in need. For every shoe sold, a pair goes to

someone else who needs it desperately. We want to give back to those in need and we

believe this program will create a strong connection between our customers and those

who we donate too.

We have been committed to giving back to the community in a way that makes an

impact on others. We encourages our employees to show their community support by

participating in various volunteer activities. This would benefit everyone of all ages to

make an impact on someone’s life.

Since 2010, More than:

20,000 Events

235,000 Employee Volunteers

1.5 Million Hours Volunteered

$5 million in shoes donated

In 2015, more than:

28,000 Events

165,000 Employee Volunteers

400,000 Hours Volunteered

$8 million shoes donated

11

Health and Wellness Programs

When want our employees at their best, they are more likely to create a great

experience for our customers and contribute to strong business results. Our Wellness

Centers is provided to our employees to help them and their families maintain and

improve their health.

Our Wellness Centers are designed to treat patients’ total well-being. Employees and

their family members can visit the on-site wellness centers for everything from

preventive exams, treatment of routine illnesses, lab services and personalized weight-

management coaching to chronic condition management support.

Other services include:

• Pediatric care

• Physical therapy

• Immunizations and allergy care

• Health risk assessments

• Diagnostic X-ray services

• Health coaching

Our Wellness Centers are staffed by physicians, nurse practitioners, medical assistants,

physical therapists and registered nurses. We want our employees and their family

members to receive compassionate, individualized care for their specific needs in a

setting that’s warm and caring. We want our employees with us in the long run and for

us to provide these type of benefits help us reduce turnover rates.

10

4.6

6

2.53.5

5.8

4.5

20

2

4

6

8

10

12

2008 2009 2010 2011 2012 2013 2014 2015

Employee Turnover RatesNumber left /100

Turnover

12

Disaster Relief Program

When a major disaster occurs, we are committed to easing the suffering for our

employees and customers in the communities we serve. By making charitable

donations and we help deliver much-needed emergency assistance throughout affected

areas.

During 2013, we supported relief efforts for disasters in all different areas around the

world. In addition to financial contributions, we also encourage our employees to

volunteer in cleanup efforts. Our company contributed 2% of its operating profits to

charities such as American Red Cross. This involves us making pre-tax donations.

2,253

2,192

2,735

YEAR 16

YEAR 17

YEAR 18

Charity Donations

Donations Per Year

13

Recycle and Reuse

At Alright Shoes we like to continually innovate new ways to save money, time, and the

environment. One new idea that we have created is recycling your old Alright Shoes.

We have designated stores to take old shoes that people no long wear. We began this

program because we wanted to leave a smaller footprint. There has been a significant

amount of shoes ending up in a landfill and we want to reduce that amount.

More than 1.5 million pairs of worn-out shoes are collected for recycling each year in

addition to thousands of tons of pre-consumer manufacturing scrap material that is also

recycled. Since the program began, we've collected more than 28 million pairs of used

athletic shoes.

We take the old shoes that no one wants anymore and recycle them into something

new like tracks, playgrounds or materials for new Alright Shoes products. If your shoes

still have life in them, we want you to donate them.

With this new innovation we are excited to start a new trend among other company’s

and reduce the amount of waste that is put into landfills. Here at Alright Shoes we strive

to recycle anything and everything we can.

14

The Independent Auditor’s Report

To the Board of Governors of CFA Institute:

We have audited the accompanying financial statements of Alright Shoe Company which

comprise the consolidated statements of financial position, and the related consolidated

statements of activities and consolidated cash flows for the years then ended.

Management's Responsibility for Financial Statements

Management is responsible for the preparation and fair presentation these financial

statements in accordance with accounting principles generally accepted in the United States

of America; this includes the design, implementation, and maintenance of internal control

relevant to the preparation and fair presentation of financial statements that are free from

material misstatement, whether due to fraud or error.

Auditor's Responsibility

Our responsibility is to express an opinion on these financial statements based on our

audits. We conducted our audits in accordance with auditing standards generally accepted

in the United States of America. Those standards require that we plan and perform the audit

to obtain reasonable assurance about whether the consolidated financial statements are

free from material misstatement.

An audit involves performing procedures to obtain audit evidence about the amounts and

disclosures in the financial statements. The procedures selected depend on our judgment,

including the assessment of the risks of material misstatement of the financial statements,

whether due to fraud or error. In making those risk assessments, we consider internal

control relevant to the Company's preparation and fair presentation of the financial

statements in order to design audit procedures that are appropriate in the circumstances,

but not for the purpose of expressing an opinion on the effectiveness of the Company's

internal control. An audit also includes evaluating the appropriateness of accounting policies

used and the reasonableness of significant accounting estimates made by management, as

well as evaluating the overall presentation of the financial statements. We believe that the

audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit

opinion.

Opinion

In our opinion, the financial statements referred to above present fairly, in all material

respects, the financial position of CFA Institute and the results of their operations and their

cash flows for the years then ended in accordance with accounting principles generally

accepted in the United States of America.

31 December 2018

Joseph P. Allen

15

Corporate Contact Information

Alright Shoes, Inc.

100 Huntington Ave STE 400

Boston, MA 02116

Phone: 617-867-7463

Email: www.alrightshoes.com