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                                 UNITED STATES
                       SECURITIES AND EXCHANGE COMMISSION

                             WASHINGTON, D.C. 20549
                            ------------------------

                                 FORM 10-K/405
                                ---------------

(MARK ONE)

  /X/    ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
         EXCHANGE ACT OF 1934

          FOR THE FISCAL YEAR ENDED APRIL 30, 1999 OR

  / /    TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES
         EXCHANGE ACT OF 1934

          FOR THE TRANSITION PERIOD FROM             TO

                          COMMISSION FILE NO. 0-26608
                            ------------------------

                               CUTTER & BUCK INC.

             (Exact name of registrant as specified in its charter)

                 WASHINGTON                            91-1474587
      (State or other jurisdiction of               (I.R.S. Employer
       incorporation or organization)              Identification No.)

                          2701 FIRST AVENUE, SUITE 500
                           SEATTLE, WASHINGTON 98121
          (Address of principal executive offices, including zip code)

                                 (206) 622-4191
              (Registrant's telephone number, including area code)

      Securities registered under Section 12(b) of the Exchange Act: None

         Securities registered under Section 12(g) of the Exchange Act:

                              Title of Each Class
                            ------------------------

                           Common Stock, No Par Value
                            ------------------------

    Indicate by check mark whether the registrant: (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes /X/  No / /

    Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K / /

    The aggregate market value as of June 17, 1999 of the voting stock held by
non-affiliates of the registrant was approximately $156,146,141. As of such
date, there were 8,312,236 shares outstanding of the Registrants Common Stock,
no par value per share.

    Documents incorporated by reference:

(1) Portions of the registrant's definitive 1999 Proxy Statement to be filed
    with the Securities and Exchange Commission are incorporated by reference
    into Part III hereof.

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                                     PART I
                                ITEM 1. BUSINESS

OVERVIEW

    We design and market distinctive upscale sportswear and outerwear under the
Cutter & Buck brand. We sell our products primarily through golf pro shops and
resorts, corporate sales accounts and better specialty stores. Our goal is to
become one of the most recognized and respected brands of sportswear and
outerwear in the world. Our products feature distinctive, comfortable designs
and rich detailing and predominantly utilize natural fiber textiles. We
merchandise our products as lifestyle collections targeted to men and women who
seek classic American styles inspired by golf and our Pacific Northwest
heritage. In addition to the growing national interest in the game of golf, we
benefit from the trend toward casual dress in the workplace. We have grown net
sales from $13.4 million in fiscal 1995 to $107.3 million in fiscal 1999 and net
income from $239,000 in fiscal 1995 to $8.0 million in fiscal 1999.

COMPANY STRENGTHS

    We believe that the following strengths have contributed to our success and
provide us with a competitive advantage:

    - DISTINCTIVE, QUALITY PRODUCTS Our garments feature comfort, high-quality
      materials and manufacturing and original Cutter & Buck designs. We use
      fine-gauge combed cotton, virgin wools and performance microfibers, with
      unique trims, distinctive colors and special fabric finishes. Each season,
      we source new fabrications from our worldwide sourcing partners and
      introduce new collections unique to our industry.

    - UPSCALE BRAND IDENTITY Cutter & Buck is a nationally recognized premium
      lifestyle brand, built on quality products and strong imagery. Our
      marketing themes revolve around golf, tennis, fly fishing and other
      sporting pursuits appealing to many of our target customers. We reinforce
      our upscale brand image at the store level with specialized fixturing that
      presents our lines as distinctive collections.

    - SELECTIVE DISTRIBUTION STRATEGY To protect the integrity of the Cutter &
      Buck brand and ensure a high level of customer service, we predominantly
      distribute our products through golf pro shops and resorts, corporate
      sales accounts and better specialty stores, including our company-owned
      retail store in Seattle, Washington. We believe that these channels
      complement one another, since they target a similar consumer base and use
      similar merchandising and pricing practices that generally feature Cutter
      & Buck as a leading premium apparel brand.

    - DEDICATED SALES FORCE As our account base and sales have grown, so has the
      size and exclusivity of our sales force. As of June 15, 1999, we employ
      112 salespeople who present seasonal collections to buyers, design
      in-store fixturing and merchandising with store owners and service
      accounts year round. We believe that our business is relationship-driven
      and having our own sales force enables us to grow in partnership with our
      accounts.

    - STRONG OPERATIONAL SKILLS One of our competitive strengths is our ability
      to manage a highly complex business. We create new collections twice a
      year, source hundreds of individual products annually from a total of 35
      factories in 13 different countries and sell to approximately 7,500
      accounts worldwide. Our management team comprises apparel industry
      veterans in design, merchandising, manufacturing, marketing, sales and
      distribution. Our infrastructure has been carefully developed to meet the
      needs of customers in every market we serve.

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GROWTH STRATEGY

    We intend to enhance our reputation as a leading, premium sportswear and
outerwear brand in the men's and women's casual apparel market and to continue
our strong and profitable sales growth in all of our selected distribution
channels. Key elements of our growth strategy include:

    - GOLF PRO SHOPS AND RESORTS We sell products to approximately 3,800 of the
      estimated 15,000 golf pro shops in the United States. We intend to
      continue our strategy of selectively growing the number of accounts we
      serve by focusing on the approximately 5,200 golf courses that sell high
      quality apparel and that have greens fees which are $30 per round or
      higher. We also intend to grow our average order size per account as our
      fixturing program extends to more shops, our women's line and other
      product extensions become a larger part of our sales and our brand
      recognition increases. With over 400 new golf courses being built every
      year in the United States, we believe our core channel of distribution is
      growing.

    - CORPORATE ACCOUNTS Many corporations around the world choose Cutter & Buck
      for their sportswear needs due to our strong brand recognition in golf pro
      shops and resorts and in better specialty stores. These needs include
      apparel for company outings, special awards and other non-traditional
      marketing programs. Corporate sales represent the fastest growing area of
      our business, and we intend to grow this segment by broadening our target
      base of companies directly and through third party relationships with
      promotional products companies. We service our corporate accounts with a
      dedicated sales force, in-house embroidery expertise and a substantial
      investment in our CLASSICS inventory to facilitate responsiveness to
      customer requests.

    - BETTER SPECIALTY STORES We currently sell our products to approximately
      750 of the 3,500 better speciality store accounts that we believe are
      suitable Cutter & Buck customers. We believe our penetration of this
      channel is well below the brand's long-term potential. Due to our careful
      distribution strategy, our products are desired by specialty stores
      seeking to differentiate themselves from broadline department stores. To
      service these customers, we have hired additional sales representatives
      and have recently opened showrooms in apparel centers in Dallas, San
      Antonio and Atlanta and expanded our New York showroom. We believe that we
      will become an increasingly important resource to these stores as our
      brand awareness grows and our women's line gains acceptance.

    - INTERNATIONAL MARKETS International markets are receptive to American
      lifestyle apparel brands. We believe we can emulate the success of our
      domestic distribution strategy in Europe and in other foreign markets. We
      service most of our international markets through distributors and
      licensees. However, we have set up wholly-owned subsidiaries in Europe in
      recognition of the potential of the European market and to better control
      the growth of our distinctive U.S. lifestyle brand in this region.

    - RETAIL We opened our flagship store in October 1998 in Seattle,
      Washington. The 3,300 square foot store offers a compelling assortment of
      our products to the upscale casual wear consumer in a relaxed, friendly
      environment. The store showcases our men's, women's and footwear
      collections as well as tournament-licensed Cutter & Buck merchandise from
      the U. S. Open, PGA Championship and Ryder Cup. We believe that there are
      opportunities for Cutter & Buck stores in a number of metropolitan markets
      in the United States. Accordingly, we will seek to open a limited number
      of additional stores in fiscal 2000 and beyond. While providing another
      channel of distribution, our stores will also showcase the Cutter & Buck
      brand to a wider audience.

    - WOMEN'S WEAR AND NEW PRODUCT EXTENSIONS We introduced our women's wear
      line in summer 1998. We believe that we can make women's wear an important
      part of our growth strategy in all of our distribution channels. For fall
      1999, we offered 290 women's FASHION style/colorways.

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      In our fall 2000 line to be released in July 1999, we will offer 621
      women's FASHION style/ colorways. To support this effort, we employ a
      separate women's merchandise and design team and have established an
      exclusive sales force to sell our women's apparel products to specialty
      retail stores. In June 1999, we shipped our first men's and women's golf
      shoes to golf pro shops and resorts. We believe that this category and
      others, such as casual footwear, weekend luggage, small leather goods and
      headwear represent product extensions that could augment our Cutter & Buck
      lifestyle brand and lead to additional revenues within our existing
      distribution channels.

    Successful implementation of our business strategy requires us to manage our
growth. To manage growth effectively, we will need to continue to implement
changes in certain aspects of our business, enhance our information systems and
operations to respond to increased demand, attract and retain qualified
personnel, and develop, train and manage an increasing number of
management-level and other employees. Growth could place an increasing strain on
our management, financial, product design, marketing, distribution and other
resources, and we could experience operating difficulties. If we fail to manage
our growth effectively, our business, financial condition or operating results
could be materially harmed.

MARKET

    According to industry estimates, net sales of apparel at retail were $177
billion in 1998, with $54.3 billion and $92.6 billion spent on men's and women's
apparel, respectively. Sportswear represents a growing portion of consumers'
wardrobes as a result of a trend toward greater acceptance of relaxed standards
of dress in the workplace. For example, we estimate that sales in our segment of
the men's apparel market grew 14.5% from 1996 to 1998 while the overall men's
apparel market increased 10.0% in the same period.

    Our target consumers are sports-minded professional men and women who like
casual, high-quality and distinctively styled apparel that reflects an active
lifestyle. Since we believe that many of these busy professionals prefer to
spend their limited free time pursuing sports and recreational activities, we
have developed our distribution strategy to ensure that our products are
available in these locations, as well as selected traditional retail outlets.

PRODUCTS

    We design industry-leading products in-house which feature high-quality
materials, such as fine-gauge combed cotton, virgin wools and performance
microfibers and are finished with unique trims, special fabric finishes and
washes and extra needlework. They are manufactured in factories selected for
their ability to ensure quality in the production process.

    Our designs incorporate distinctive, clear colors and are merchandised as
color- and design-coordinated collections rather than isolated categories. We
offer two collections a year, spring and fall, composed of a FASHION line and a
complementary CLASSICS line. CLASSICS are predominantly solid-color garments
with multi-season appeal. We rely on the styling, detailing, color and quality
of our fabrics to distinguish our CLASSICS products from competitive products.
We generally price our CLASSICS at levels lower than our FASHION line, which
permits our customers to offer Cutter & Buck products at a range of price
points. Higher per-item volumes for CLASSICS products allow us to achieve
production efficiencies and lower costs. CLASSICS products are sold throughout
the year through all of our distribution channels. CLASSICS products represent a
majority of sales through the corporate channel.

    Our FASHION products incorporate the latest innovations in color, fabric and
styling and tend to remain in the line for only one season. We develop
proprietary fabrications, artwork for our complex prints and distinctive trim
components in cooperation with experienced sources worldwide. FASHION products
currently represent a majority of sales in both the golf and specialty channels.

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    We present each season's collections to our customers in several groups of
distinct, coordinated merchandise. These groups are available for delivery to
customers during sequential time periods, typically from May to October for fall
collections and from November to April for spring collections.
Customer-initiated product reorders can often extend the delivery period for a
season by up to three months. The product mix changes seasonally, including, for
example, more sweater styles in fall collections and more short-sleeve shirts in
spring collections. Our ability to offer merchandise collections is a strategic
advantage since our customers generally prefer to purchase compatible
assortments rather than assembling coordinated merchandise from various brands
that do not share common colors and themes.

    A substantial percentage of our products that are shipped to the golf
distribution channel are embroidered with golf club names or logos. Sales to the
corporate channel also involve embroidery of corporate logos. In all cases, the
Cutter & Buck logo is also featured on the garment. We have established an
in-house embroidery operation to reduce costs, shorten delivery time and enhance
quality control of our embroidered products.

PRODUCT DEVELOPMENT AND SOURCING

    Updated traditional sportswear and outerwear for men and women is an
established and growing category within the apparel field. Changes of color,
fabric and body shapes in this category tend to be gradual, thereby allowing our
product development team to evolve, rather than re-invent, the product lines
each season. This provides stability in the design environment and consistency
in our product offerings.

    Our experienced product development team, comprising various executive
officers and our design staff, determines product strategy, color and fabric
selection and assortment of styles for each season's collections, which is
accomplished through a series of meetings occurring over a three- to four-month
period. Due to the length of our production and sales cycles, we generally
strive to complete the design process and place orders for product samples at
least 10 to 14 months prior to the first delivery of products to our customers.

    The design staff is responsible for creating innovative products for our two
seasonal collections. During the design process, our manufacturing sources
develop new seasonal textiles in association with the design team. This enables
us to source a wide variety of textile and printed artwork designs, many of
which we acquire for our exclusive use. Our partnerships with our key suppliers
have enhanced our ability to develop distinctive and innovative apparel.
Currently, we source our production through factories in Asia, North and South
America and in Turkey and do not have formal long-term contracts with any of our
suppliers or agents.

    Our in-house embroidery operation substantially reduces our reliance on
independent embroiderers. This operation reduces costs, shortens delivery time
and enhances quality control of our embroidered products. We currently contract
with eight independent domestic embroiderers during peak embroidery production
and shipping periods. Our in-house embroidery manufacturing operation handled
approximately 87% of the embroidered logo requirements of our golf pro shop and
corporate customers in fiscal 1999.

    We could experience difficulty satisfying our production requirements if any
of our significant suppliers or manufacturers were to have an interruption of
business or were unable or unwilling to meet our production needs. We could also
experience delays in shifting production to other manufacturers or agents
because of the complex fabrication, unique trims and extensive detailing of our
products.

    We have experienced production delays in the past, and production delays may
occur in the future. Delays in shipments, inconsistent garment quality and other
factors beyond our control could materially

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harm our relationships with our customers, our reputation in the industry and
our business, financial condition or operating results.

    Our operations are also affected by economic, political, governmental and
labor conditions in the countries where our products are manufactured. Changes
in economic policies or political conditions in those countries could result in
disruption of trade, new or additional currency or exchange controls or the
imposition of other restrictions and could increase the prices we pay for our
products. Foreign and domestic suppliers of our garments are subject to
increased scrutiny and public sensitivity to ensure their compliance with
applicable laws, including laws affecting working conditions and pay. Recent
lawsuits have targeted both suppliers and companies that purchase goods from
foreign and domestic suppliers for manufacturers' failure to comply with those
laws. We are a defendant in two related cases involving production of our
products in Saipan. An adverse judgment in either of these cases or similar
cases that may be brought in the future, or changes in economic or political
conditions adverse to our interests, could harm our business, financial
condition or operating results.

    Fashion trends can change rapidly, and our business is particularly
sensitive to such changes because we typically design and arrange for the
manufacture of our apparel substantially in advance of sales of our products to
consumers. With the introduction of our women's line in January 1998, we have
added a consumer base that is typically more sensitive to changes in fashion. We
cannot assure you that we will accurately anticipate shifts in fashion trends,
or in the popularity of golf, and adjust our merchandise mix to appeal to
changing consumer tastes in apparel in a timely manner. If we misjudge the
market for our products or are unsuccessful in responding to changes in fashion
trends or in market demand, we could experience insufficient or excess inventory
levels, missed market opportunities or higher markdowns, any of which could
substantially harm our business or our brand image. As our women's line becomes
a greater part of our business as a whole, fashion obsolescence becomes an even
greater risk for us.

DISTRIBUTION AND SALES

    Our products are distributed in the United States primarily through three
channels: golf pro shops and resorts, corporate sales accounts and better
specialty stores. Each of these channels sells CLASSICS and FASHION products
from our seasonal collections. We believe that these channels are complementary,
since they have compatible merchandising and pricing practices and broaden the
awareness and reach of the Cutter & Buck brand among our target consumers, many
of whom tend to shop in more than one channel. For example, many of our
corporate sales leads come through corporate executives who have purchased our
products at golf pro shops and resorts.

    DOMESTIC  We sell to golf pro shops and resorts primarily through an
exclusive sales force. At the end of fiscal 1999, our exclusive golf sales force
was composed of 36 Cutter & Buck field sales representatives. We also employed
28 sales representatives who sell to major corporations, either directly or
through promotional products companies, and four additional sales
representatives who sell to better specialty stores, college bookstores and the
big and tall market. Each sales representative is responsible for serving
targeted accounts in a specific geographical territory through merchandise
consultation and training, and for meeting specific account growth and
average-order-size goals. Sales representatives present our collections each
season at national and regional trade shows and at customers' stores through
pictorial workbooks, looseleaf promotional materials and full sample lines. In
addition to their other responsibilities, these sales representatives implement
our merchandise fixturing program with suitable golf pro shops, resorts and
specialty stores.

    INTERNATIONAL  We have subsidiaries in the Netherlands, Germany and the
United Kingdom for the purpose of marketing and selling our products in Europe.
In addition, we have two to five year renewable contracts with international
distributors to sell our products in Australia, New Zealand, the Philippines,
Greece, Cyprus, the United Arab Emirates, Saudi Arabia, Bahrain, Qatar, Kuwait
and

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Oman. These distributors purchase our products at reduced cost for resale to
their respective retail customers. The products offered for distribution in
these territories are identical to the products offered in the United States and
these distributors often use our marketing technique of offering the products in
collections.

    We also have licensees that have contracted for the right to manufacture and
market Cutter & Buck designs in specified international markets, including Hong
Kong, China and Canada. Cutter & Buck license agreements generally provide for
three-year terms and provide for royalties as a percentage of net sales. Most
agreements contain annual royalty minimums, and all agreements give us final
control over product design and quality. These licensing arrangements enable us
to broaden the geographic distribution and type of products bearing the Cutter &
Buck name in a cost-effective manner.

DISTRIBUTION CENTER

    We established our in-house distribution center in May 1996, prior to which
we relied upon third party contract warehouse services. This change in operating
strategy was designed to improve efficiency, shorten order cycle time and
provide greater flexibility. Our distribution services are currently conducted
out of three separate facilities located in Seattle, Washington. Our existing
operations rely upon primarily manual systems and procedures. In order to manage
our planned growth and enhance the effectiveness of our distribution service, we
are planning to consolidate all of our current operations into a new facility in
the greater Seattle area. This relocation is planned for a seasonally slow
period in December 1999 to minimize disruption. The construction contracts
include penalties should the contractors fail to meet their completion
schedules. In conjunction with the move, we are installing a warehouse
management system and bar-code tracking software. With the implementation of
this system, our goal is to realize improved effectiveness in such areas as
inventory management, order fulfillment and cost control. We also believe that
the benefits of our investment in the new distribution center facility and
warehouse management system will enable us to provide better customer service
and support planned growth.

    In addition to the possibility of experiencing construction delays,
technological difficulties and business disruption, we could lose employees as a
result of the relocation of our distribution facilities and experience delays in
product shipments. Any significant delay could require us to postpone the move
and the installment and implementation until after the end of our current fiscal
year so as not to interfere with planned product shipments in the fourth quarter
of fiscal 2000. Our inability to timely consolidate the embroidery and
distribution operations at our facilities and to implement the warehouse
management system could increase our expenses and harm our business, financial
condition or operating results.

RETAIL OPERATIONS

    We opened our flagship store in October 1998 in Seattle, Washington and plan
to open a limited number of additional stores in selected urban areas across the
country. The Seattle store showcases the men's, women's and footwear collections
as well as tournament-licensed Cutter & Buck merchandise from the U.S. Open, PGA
Championship and Ryder Cup. We believe the store's environment evokes the casual
sporting atmosphere of an upscale golf clubhouse, complete with historic photos
and antique sporting equipment. Collections of business casual dress for men,
upscale weekend wear for women and golf wear for both are displayed on tables
and in wall units in the 3,300 square foot store. We believe that the store
offers a compelling assortment of our products to the upscale casual wear
consumer in a relaxed, friendly environment.

    Our stores will provide opportunities for introducing the Cutter & Buck
brand to a wider audience not previously familiar with our full range of
products due to the relatively small size of most golf pro shops and specialty
stores. We believe that there are opportunities for Cutter & Buck stores in a

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number of large urban areas across the United States. Accordingly, we will seek
to open a limited number of additional stores in fiscal 2000 and beyond. We are
currently examining locations for additional stores throughout the United
States. We will seek store locations within premier malls and shopping centers
and also in close proximity to other upscale retailers who serve our target
customers. We anticipate our typical retail location will be approximately 4,000
square feet and will contain the same merchandise mix as our Seattle store.

    There are many risks associated with our entry into retailing, including our
ability to find suitable locations for our stores on reasonable rental terms,
our ability to manage our relationships with specialty retailers who currently
sell our products, competition from other retailers, potential premises
liability and the risks associated with our entry into long-term leases. We have
limited experience in managing retail operations and will need to augment our
management team as appropriate. We will also need to substantially increase our
number of employees, which will result in an increased burden on our human
resources function and increased exposure to employment-related legal
liabilities. Our inability to successfully implement our retail strategy could
harm our business, financial condition or operating results.

MARKETING AND MERCHANDISING

    We portray our brand image of an American sporting lifestyle by creating
seasonal merchandise collections that are theme- and color-related. Themes we
commonly use in marketing are golf, tennis, fly fishing and other sporting
activities which reinforce our image. We believe that, by featuring these sports
and leisure activities, our products will appeal not only to participants, but
also to those who identify with this type of lifestyle. Our name or logo is
generally featured prominently on our products and displays to reinforce the
Cutter & Buck brand in the mind of the consumer.

    We currently advertise in national and regional trade magazines and produce
photographic renditions of our new product lines for national distribution to
existing wholesale customers. We also produce a catalog of our CLASSICS products
to be viewed by wholesale customers for in-stock reordering purposes. In
addition, we have an Internet home page on the World Wide Web at
http://www.cutterbuck.com, where we provide information and pictures of our
products and respond to inquiries from customers and consumers. We believe that
we can accelerate brand recognition through increased expenditures of targeted
magazine advertising and point-of-sale promotions, and we are planning increased
investment in direct consumer marketing campaigns, including print
advertisements in regional and national general interest publications.

    Our merchandise is sold and shipped to customers in collection groups in
order to reinforce the overall conceptual strength of our product offerings. Our
distinctive in-store fixturing program showcases these collections and enhances
our brand image at the point of sale. The fixtures are designed to display
assorted elements of our collections and allow the consumer to easily assemble
and purchase coordinated outfits of shirts, pants, shorts, sweaters, sweatshirts
and outerwear. We also offer customers display mannequins, logo signage and
antique sporting props in order to complement the fixturing and create an
environment that enhances the Cutter & Buck brand image. In fiscal 1998, we
initiated our first concept shop partnership, an extension of our fixturing
program, which we offer to our higher-end, potentially best-performing golf pro
shops and resort customers on a very selective basis. As of April 30, 1999, we
had 26 concept shops. We expect to open an additional 32 concept shops by the
end of fiscal 2000. In a concept shop partnership, we team with customers that
meet a higher minimum order requirement who provide the square footage and
certain construction costs while we provide shop design, custom made display
cabinets and high quality fixtures to create a shop within a shop environment
dedicated exclusively to Cutter & Buck merchandise.

    To address the special needs of pro shops, tournament organizers and
corporate customers we have developed an in-house embroidery service and also
work with independent embroiderers to embroider the customer's name or logo on
our garments. The customary placement of the Cutter & Buck logo on

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the sleeve, cuff, or on the back of the garment allows us to accommodate more
easily the desire of pro shops, tournaments and corporations to have their name
or logo embroidered on the garment's left chest.

INFORMATION SYSTEMS

    In addition to the computer-aided design system used by the product
development team, we have a fully integrated, real-time management information
system that is specifically designed for the wholesale apparel industry. The
system includes important features such as manufacturing resource requirements
planning, production scheduling, detailed product tracking, standard costs
system planning and control, and detailed perpetual inventory systems. As
original purchases are tracked through various factory production phases by our
production personnel, sales are tracked by the Vice President of Merchandise and
Design in order to compare purchases against availability, thereby allowing us
to react quickly to changes and trends. We also have a remote-order entry system
for our sales force, on which they can daily monitor and reserve inventory of
every style. Customer service personnel receive this information daily and have
access to real-time inventory availability.

    This comprehensive information system serves users in each of our operating
areas, and is also accessed by personal computers to create costing models,
specification sheets and embroidery layout sheets. The manufacturing module
integrates with the general ledger accounting and financial module. Our
information system also provides detailed product gross margin information that
assists us in managing product profitability. The system runs on IBM's RISC 6000
hardware with an AIX operating system, which allows for the fast processing of
critical information, and has the capability of serving a much greater number of
users as we grow. During fiscal 1999, we installed a multi-currency version of
the same real-time management systems at our wholly-owned subsidiary located in
the Netherlands. During fiscal 2000, we plan to implement a relational database
component to our management information system to allow us to create specialized
management reports.

    In fiscal 2000, we plan to install a warehouse management system
specifically designed for the apparel industry. This system provides a wide
variety of modular applications that can be added as the needs of our
distribution center operations evolve. We plan to install the following system
components:

    - A radio frequency hardware server to support bar coding to track the
      real-time movement of inventory from receiving, order picking embroidery
      production, order packing and order shipment,

    - A cycle counting inventory management module,

    - An automated customer return authorization and receiving control system,
      and

    - Automated tools to support our distribution center employee productivity
      and accuracy. This system was designed for and runs on an IBM AS/400
      platform.

    In addition, in fiscal 2000, we plan to install an integrated retail
management and point of sale system. The purpose of this investment is to
provide daily information to control our planned investment in the testing of
additional Cutter & Buck owned retail stores. In order to meet Cutter & Buck's
retail management needs, we will be investing in a system that addresses sales
tracking and management, profitability, inventory management, merchandising and
financial controls and reporting.

    Beginning in the year 2000, the date fields coded in some software products
and computer systems will need to accept four digit entries in order to
distinguish 21st century dates from 20th century dates. We may face exposure and
risk if the systems on which we depend to conduct our operations are not year
2000 compliant. We expect to complete both our internal and external year 2000
compliance assessment by October 1999. We do not believe that the cost of
preparing for year 2000 compliance will exceed $100,000 although we could face
additional expenses to fix any year 2000 problems if our estimates are
incorrect. In addition, utility companies, third party service providers and
others outside

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our control may not be year 2000 compliant. This could result in a systematic
failure beyond our control. Finally, our suppliers may face difficulties due to
the non-compliance of their systems or those of their third party providers.
This could result in our inability to obtain our products in a timely manner. If
we encounter difficulties obtaining our products, our business, financial
condition or operating results could be materially harmed.

ORDER BOOKING CYCLE AND BACKLOG

    We receive our orders for a season over a 10-month period beginning when
samples are first shown to customers and continuing into the season. We begin to
take orders for our fall collections in January, generally for delivery between
May and October and for our spring collection in July, generally for delivery
between November and April. Our domestic backlog, which consists of open,
unfilled customer orders from the golf and specialty store distribution
channels, was approximately $22.1 million as of April 30, 1999. We expect to
fill between 90% and 95% of those orders. For various reasons endemic to the
apparel industry, including occasional sold out inventory positions, credit
issues and other customer-related issues, we typically do not expect to ship all
of our backlog. Backlog is generally shipped within nine months.

COMPETITION

    The sportswear segment of the apparel industry is highly competitive.
Although our primary distribution channel, golf pro shops, is highly fragmented,
with no single brand representing more than 10% of the market, we encounter
substantial competition from Ashworth, Izod Club and Polo/Ralph Lauren. In
addition, we face substantial competition in our other channels, other similar
apparel companies and distributors of promotional products and apparel and,
specifically in the corporate distribution channel, from Gear for Sport. We
believe that our ability to compete effectively is based primarily on product
differentiation, product quality, production flexibility and distribution
capabilities, all of which enhance our brand. Many of our competitors are
significantly larger and more diversified than we are and have substantially
greater resources available for developing and marketing their products. In
addition, our competitors may be able to enter the emerging e-commerce
marketplace more quickly or more efficiently than us. We cannot assure you that
we will be able to maintain our growth rate or to increase our market share in
our distribution channels at the expense of existing competitors and other
apparel manufacturers choosing to enter those markets.

TRADEMARKS

    Cutter & Buck and the Cutter & Buck pennant logo are our trademarks and are
registered for use on apparel and other products in over 30 countries, including
the United States. We also have applied for registration in a number of other
countries. Our name and logo are regarded as valuable assets and critical to
marketing our products. Leading brands in the apparel industry have historically
been subject to competition from imitators that infringe the trademarks and
trade dress of the brand. Although we have not been materially harmed from
infringement of our trademarks or trade dress, we have experienced some
instances of such infringement and have taken actions to protect our rights.

EMPLOYEES

    As of April 30, 1999 we had 429 full time and 64 part time employees, of
whom 37 were primarily engaged in administration and finance, 87 in sales, 12 in
production, 17 in design, 25 in customer service, 4 in marketing, 18 in
embroidery development, 15 in retail, 161 in embroidery operations and 117 in
distribution. None of our employees is a member of a union. We consider our
relations with our employees to be excellent.

    At our wholly-owned subsidiaries we employed 23 employees as of April 30,
1999, six of whom were in finance and administration, seven in sales, five in
customer service and five in operations.

                                       10
<PAGE>
                               ITEM 2. PROPERTIES

    We lease our principal executive offices, which are located in Seattle,
Washington, under a lease that covers 20,558 square feet and expires in October
2001. We also lease for our warehousing and embroidery operation in Seattle,
Washington approximately 58,920 square feet of space under a lease that expires
April 2001 and an additional 15,000 square feet under a lease that expires in
December 1999. We have entered into a lease of 170,500 square feet for a new
distribution center and embroidery production facility in Renton, Washington,
the term of which will commence in November 1999 and expire in November 2006.
Our lease of retail store space in Lake Oswego, Oregon, a suburb of Portland,
covers 2,925 square feet and expires September 1999. We lease additional office
space and use contract warehouse facilities for our European distribution. We
lease approximately 923 square feet of space for a showroom in Dallas, Texas
under a lease that expires May 2000 as well as approximately 2,963 square feet
of space for a showroom in New York, New York under a lease that expires April
2003. We also lease a small apartment in New York, New York. The Company opened
its first retail store in Seattle, Washington, under a lease of 3,346 square
feet at Pacific Place, which will expire in October 2003.

                                       11
<PAGE>
                           ITEM 3. LEGAL PROCEEDINGS

    We have been named as a defendant in two lawsuits related to our sourcing of
garments manufactured in Saipan. The first, Does v. The Gap, Inc., et al., was
filed in Federal District Court in Los Angeles on behalf of an alleged class of
garment factory workers located in Saipan, and generally alleges that the
defendants have conspired to control unlawful "sweatshop" conditions
constituting peonage and involuntary servitude. The plaintiffs in this action
generally seek an order enjoining defendants from continuing to manufacture
garments under the alleged "sweatshop" conditions, establishment of a monitoring
program and imposition of an asset freeze or constructive trust, and punitive as
well as treble, special and compensatory damages in unspecified amounts. The
second, UNITE v. The Gap, Inc., et al., was filed in Superior Court in San
Francisco, California, by a union and three public interest groups, and
generally alleges that the defendants engaged in various unlawful business acts
and practices. The plaintiffs in this action generally seek an order restraining
the defendants from engaging in the allegedly unfair business acts and
practices, requiring a corrective advertising campaign or monitoring program,
imposition of an asset freeze or constructive trust, payment of restitution and
disgorgement of profits from engaging in the allegedly unlawful business acts
and practices in unspecified amounts. In the federal action, all of the
defendants including Cutter & Buck have filed motions to transfer the venue of
that case to Saipan. That motion is noted for consideration on July 12, 1999.
The retailer or buyer defendants including Cutter & Buck have responded to
written interrogatories concerning witnesses and documents that relate to the
Saipan garment business. The retailer or buyer defendants including Cutter &
Buck also have submitted a motion to dismiss all of the causes of action in the
federal action, other than the claim for false imprisonment, on the grounds that
the allegations of the complaint fail to state a claim upon which relief can be
granted. In addition, the defendants in the state action including Cutter & Buck
have filed a demurrer (motion to dismiss the claims asserted in that lawsuit).
The hearing on that motion is scheduled for August 6, 1999. Although we intend
to vigorously defend ourself, these lawsuits are subject to many uncertainties
and we are not able to make a determination of the ultimate exposure with
respect to these matters. As a result, there can be no assurance that these
lawsuits will not materially harm our business, financial condition or operating
results.

    We are also a party to routine litigation incidental to our business.
Management believes the ultimate resolution of these routine matters will not
materially harm our business, financial condition or operating results.

                                       12
<PAGE>
          ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

    Not Applicable.

                                       13
<PAGE>
                                    PART II
 ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS.

    Our common stock is traded on the Nasdaq National Market under the symbol
"CBUK." The following table sets forth, for the periods indicated, the high and
low closing sale prices of the common stock as reported on the Nasdaq National
Market.

<TABLE>
<CAPTION>
                                                                            --------------------
                                                                                 HIGH        LOW
                                                                            ---------  ---------
<S>                                                                         <C>        <C>
FISCAL 1998
  First Quarter - May 1, 1997 through July 31.............................  $   12.25  $    7.67
  Second Quarter - Aug. 1 through Oct. 31.................................      14.33      11.25
  Third Quarter - Nov. 1 through Jan. 31..................................      13.88      11.50
  Fourth Quarter - Feb. 1 through Apr. 30, 1998...........................      18.67      12.79
FISCAL 1999
  First Quarter - May 1, 1998 through July 31.............................  $   20.83  $   13.79
  Second Quarter - Aug. 1 through Oct. 31.................................      19.00      12.50
  Third Quarter - Nov. 1 through Jan. 31..................................      24.83      16.75
  Fourth Quarter - Feb. 1 through Apr. 30, 1999...........................      22.79      16.33
FISCAL 2000
  First Quarter (through June 17, 1999)...................................  $   21.33  $   16.71
</TABLE>

    The last reported sale price of the common stock on the Nasdaq National
Market on June 17, 1999 was $20.625 per share. As of that date, there were
approximately 184 shareholders of record of the common stock.

    We have never declared or paid any cash dividend on our common stock. We
currently intend to retain any future earnings for funding growth and,
therefore, do not expect to pay any cash dividends in the foreseeable future.

    Our common stock has experienced, and is likely to experience in the future,
significant price and volume fluctuations which could adversely affect the
market price of our common stock without regard to our operating performance. In
addition, we believe that factors such as quarterly fluctuations in our
financial results, announcements by other designers and marketers of men's and
women's sportswear, and changes in the overall economy or the condition of the
financial markets could cause the price of our common stock to fluctuate
substantially.

                                       14
<PAGE>
                        ITEM 6. SELECTED FINANCIAL DATA

    The tables that follow present portions of our consolidated financial
statements and are not complete. You should read the following selected
financial information in conjunction with our consolidated financial statements
and related notes thereto and "Management's Discussion and Analysis of Financial
Condition and Results of Operations" included elsewhere in this report. The
consolidated statements of income data for each of the three years in the period
ended April 30, 1999 and the consolidated balance sheets data as of April 30,
1998 and 1999 are derived from our audited consolidated financial statements
which are included elsewhere in this report. The consolidated statements of
income data for each of the two years in the period ended April 30, 1996 and the
consolidated balance sheets data as of April 30, 1995, 1996 and 1997 are derived
from audited consolidated financial statements that are not included in this
prospectus. Historical results are not necessarily an indication of future
results.

<TABLE>
<CAPTION>
                                                      -----------------------------------------------------
                                                                   FISCAL YEAR ENDED APRIL 30,
                                                      -----------------------------------------------------
                                                           1995       1996       1997       1998       1999
                                                      ---------  ---------  ---------  ---------  ---------
<S>                                                   <C>        <C>        <C>        <C>        <C>
IN THOUSANDS, EXCEPT PER SHARE DATA
CONSOLIDATED STATEMENTS OF INCOME DATA:
Net sales...........................................  $  13,435  $  21,645  $  46,593  $  70,104  $ 107,286
Cost of sales.......................................      8,760     13,664     28,054     40,642     61,058
                                                      ---------  ---------  ---------  ---------  ---------
Gross profit........................................      4,675      7,981     18,539     29,462     46,228
Operating expenses:
  Design and production.............................        747      1,045      1,256      2,120      2,915
  Selling and shipping..............................      2,446      3,858      8,774     13,129     22,333
  General and administrative........................      1,364      2,042      3,513      5,710      8,471
                                                      ---------  ---------  ---------  ---------  ---------
    Total operating expenses........................      4,557      6,945     13,543     20,959     33,719
                                                      ---------  ---------  ---------  ---------  ---------
Operating income....................................        118      1,036      4,996      8,503     12,509
Other income (expense):
  Factor commission and interest expense, net of
    interest income.................................       (376)      (237)      (197)      (135)      (393)
  License and royalty income, net of other
    expense.........................................        497        457        409        212        400
                                                      ---------  ---------  ---------  ---------  ---------
    Total other income..............................        121        220        212         77          7
                                                      ---------  ---------  ---------  ---------  ---------
Income before income taxes..........................        239      1,256      5,208      8,580     12,516
Income taxes........................................         --        260      1,610      2,920      4,508
                                                      ---------  ---------  ---------  ---------  ---------
Net income..........................................  $     239  $     996  $   3,598  $   5,660  $   8,008
                                                      ---------  ---------  ---------  ---------  ---------
                                                      ---------  ---------  ---------  ---------  ---------
Basic earnings per share............................       0.09       0.21       0.55       0.72       0.98
Diluted earnings per share..........................       0.08       0.19       0.51       0.68       0.94
Shares used in computation of:
  Basic earnings per share..........................      2,670      4,848      6,581      7,852      8,212
  Diluted earnings per share........................      3,051      5,215      7,004      8,294      8,562
</TABLE>

<TABLE>
<CAPTION>
                                                              -----------------------------------------------------
                                                                                    APRIL 30,
                                                              -----------------------------------------------------
                                                                   1995       1996       1997       1998       1999
                                                              ---------  ---------  ---------  ---------  ---------
<S>                                                           <C>        <C>        <C>        <C>        <C>
IN THOUSANDS
CONSOLIDATED BALANCE SHEETS DATA:
Cash........................................................  $     499  $   2,010  $   7,442  $   7,590  $   4,760
Working capital.............................................      3,209     12,488     29,811     34,391     44,911
Total assets................................................      5,693     17,170     38,960     48,144     80,589
Short-term debt(1)..........................................         24        114        141        681     12,305
Long-term debt..............................................         98         --        523        627      5,907
Total shareholders' equity..................................      3,566     14,023     32,187     38,621     48,908
</TABLE>

(1) As of April 30, 1999, includes borrowings of $9,500 under our revolving line
    of credit.

                                       15
<PAGE>
                ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
                 FINANCIAL CONDITION AND RESULTS OF OPERATIONS

    YOU SHOULD READ THIS SECTION TOGETHER WITH "SELECTED FINANCIAL DATA" AND OUR
CONSOLIDATED FINANCIAL STATEMENTS AND RELATED NOTES THERETO INCLUDED ELSEWHERE
IN THIS REPORT. IN ADDITION TO THE HISTORICAL INFORMATION CONTAINED HERE, THIS
REPORT CONTAINS FORWARD-LOOKING STATEMENTS THAT INVOLVE RISKS AND UNCERTAINTIES.
FORWARD-LOOKING STATEMENTS TYPICALLY ARE IDENTIFIED BY THE USE OF SUCH TERMS AS
"MAY," "WILL," "EXPECT," "BELIEVE," "ANTICIPATE," "ESTIMATE," "PLAN" AND SIMILAR
WORDS, ALTHOUGH SOME FORWARD-LOOKING STATEMENTS ARE EXPRESSED DIFFERENTLY. YOU
SHOULD BE AWARE THAT OUR ACTUAL GROWTH AND RESULTS COULD DIFFER MATERIALLY FROM
THOSE CONTAINED IN THE FORWARD-LOOKING STATEMENTS DUE TO A NUMBER OF FACTORS,
WHICH INCLUDE, AMONG OTHERS, THE FOLLOWING:

    - VOLATILITY OF THE APPAREL INDUSTRY;

    - UNEXPECTED CHANGES IN FASHION TRENDS;

    - PRIOR SEASON INVENTORIES;

    - COMPETITION;

    - DEPENDENCE ON KEY PERSONNEL;

    - RELIANCE ON CONTRACTORS AND FOREIGN SOURCING;

    - IMPORT RESTRICTIONS; AND

    - OTHER FACTORS REFERENCED IN THIS REPORT.

ALL REFERENCES TO FISCAL YEARS ARE REFERENCES TO OUR FISCAL YEAR ENDED APRIL 30.

OVERVIEW

    Cutter & Buck is a lifestyle brand with broad demographic appeal, targeted
to men and women who seek updated classic American styles inspired by golf and
our Pacific Northwest heritage. We sell our distinctive sportswear and outerwear
products primarily through golf pro shops and resorts, corporate sales accounts
and better specialty stores. In fiscal 1999, net sales to golf pro shops and
resorts represented 53.6% of our net sales, corporate accounts represented 30.5%
of our net sales, specialty retail represented 10.0% of our net sales and other
distribution channels, including company-owned retail, represented 5.9% of our
net sales.

    We have grown sales in our three primary channels of distribution over the
last five years through an increase in the number of accounts and an increase in
the average annual net sales per account. The increase in the number of accounts
is primarily due to the growth in the size of our direct sales force. We have
increased average annual net sales per account by offering more product styles
and increasing the average annual net sales per style. We believe the increased
purchasing levels by our customers also reflect strong cooperative working
relationships in the area of fixturing and merchandising our coordinated product
line, and growing consumer recognition of our brand. We recognize our revenue at
the time the product is shipped to the account, and there is no right to return
other than for defective products.

    As our sales volume has increased, we have continued to invest in management
and systems, to strengthen our sales and marketing effort and to negotiate
improved cost arrangements with our suppliers through economies of scale. We
have also expanded our customer support, embroidery services and distribution
center operations. While these actions have resulted in an increase in operating
expenses as a percentage of net sales for the most recent fiscal year, we have
also continued to experience improvements in gross margin.

    The Company introduced a women's line of apparel in summer 1998. We sell our
women's line through our existing channels of distribution and expect to make
women's wear an increasingly

                                       16
<PAGE>
important part of our business in each of our distribution channels. We opened
our flagship store in October 1998 in Seattle, Washington and will seek to open
a limited number of additional stores in selected metropolitan markets during
fiscal 2000 and beyond.

RESULTS OF OPERATIONS

    The following table sets forth, for the fiscal years indicated, certain
consolidated statements of income data expressed as a percentage of net sales:

<TABLE>
<CAPTION>
                                                                  -------------------------------
                                                                    FISCAL YEAR ENDED APRIL 30,
                                                                  -------------------------------
                                                                       1997       1998       1999
                                                                  ---------  ---------  ---------
<S>                                                               <C>        <C>        <C>
CONSOLIDATED STATEMENTS OF INCOME DATA:
Net sales.......................................................      100.0%     100.0%     100.0%
Cost of sales...................................................       60.2       58.0       56.9
                                                                  ---------  ---------  ---------
Gross profit....................................................       39.8       42.0       43.1
Operating expenses:
  Design and production.........................................        2.7        3.0        2.7
  Selling and shipping..........................................       18.8       18.7       20.8
  General and administrative....................................        7.6        8.2        7.9
                                                                  ---------  ---------  ---------
    Total operating expenses....................................       29.1       29.9       31.4
                                                                  ---------  ---------  ---------
Operating income................................................       10.7       12.1       11.7
Other income (expense):
  Factor commission and interest expense, net of interest
    income......................................................       (0.4)      (0.2)      (0.4)
  License and royalty income, net of other expense..............        0.9        0.3        0.4
                                                                  ---------  ---------  ---------
    Total other income..........................................        0.5        0.1        0.0
                                                                  ---------  ---------  ---------
Income before income taxes......................................       11.2       12.2       11.7
Income taxes....................................................       (3.5)      (4.1)      (4.2)
                                                                  ---------  ---------  ---------
Net income......................................................        7.7%       8.1%       7.5%
                                                                  ---------  ---------  ---------
                                                                  ---------  ---------  ---------
</TABLE>

YEAR ENDED APRIL 30, 1999 COMPARED TO THE YEAR ENDED APRIL 30, 1998

    NET SALES  During fiscal 1999, total net sales increased $37.2 million, or
53.1%, to $107.3 million. The detail of net sales by distribution channel is as
follows:

<TABLE>
<CAPTION>
                                                              ----------------------------------------------
                                                               FISCAL YEAR ENDED
                                                                   APRIL 30,
                                                              --------------------    INCREASE      PERCENT
                                                                   1998       1999  (DECREASE)       CHANGE
                                                              ---------  ---------  -----------  -----------
<S>                                                           <C>        <C>        <C>          <C>
IN MILLIONS, EXCEPT PERCENT CHANGE
Golf........................................................  $    36.4  $    57.5   $    21.1         58.0%
Corporate...................................................       17.2       32.7        15.5         90.1
Specialty stores............................................        9.3       10.8         1.5         16.1
Other.......................................................        7.2        6.3        (0.9)       (12.5)
                                                              ---------  ---------       -----
                                                              $    70.1  $   107.3   $    37.2         53.1%
                                                              ---------  ---------       -----
                                                              ---------  ---------       -----
</TABLE>

    The $21.1 million increase in net sales to the golf distribution channel in
fiscal 1999 represented approximately 56.7% of the total increase in net sales
for the year. This growth in net sales to the golf distribution channel is
primarily attributable to an increase in the number of golf pro shops purchasing
Cutter & Buck products, an increase in the average annual net sales per golf pro
shop and increasing brand awareness. Approximately 3,800 golf pro shops
purchased our products in fiscal 1999 compared to approximately 3,000 golf pro
shops in fiscal 1998. We believe that the golf distribution channel comprises
approximately 15,000 U.S. golf pro shops of which we are presently targeting
approximately the top 5,200. The increase in the number of our golf pro shop
customers is primarily due to the

                                       17
<PAGE>
growth in the size of our golf pro shop sales force that exclusively sell Cutter
& Buck products. The increase in average annual net sales per golf pro shop for
fiscal 1999 compared to fiscal 1998 is the result of offering more product
styles, including women's styles, in-store fixturing programs and increased
brand recognition among consumers. Net sales through our European subsidiaries,
which are included in the golf distribution channel figures, increased $1.9
million, or approximately 41.3%, to $6.5 million in fiscal 1999.

    Net sales through the corporate distribution channel increased $15.5
million, or approximately 90.1%, to $32.7 million in fiscal 1999 from $17.2
million in fiscal 1998. The increase in fiscal 1999 represented approximately
41.7% of the total increase in net sales for the year. This increase is
primarily attributable to the increased size and effectiveness of our exclusive
sales force, the increase in our styles and inventory levels of our CLASSICS
products, improved relationships with a greater number of promotional products
companies that resell Cutter & Buck apparel to large corporate accounts and our
growing brand strength.

    Specialty store sales increased $1.5 million or approximately 16.1% to $10.8
million in fiscal 1999 representing approximately 10.1% of our net sales in
fiscal 1999, a decrease from 13.3% in fiscal 1998. Sales to other distribution
channels, including liquidation, company-owned retail and international
distributors, declined from $7.2 million or 10.3% of net sales in fiscal 1998 to
$6.3 million or 5.9% of net sales in fiscal 1999. We anticipate continued sales
growth in each of our three primary distribution channels in fiscal 2000, with
the corporate sales channel expected to achieve the largest increase in net
sales.

    Net sales per channel comprise gross sales per channel less product returns
per channel less a charge for price adjustments, allowances and non-physical
credits allocated per channel proportional to sales volume each month.

    COST OF SALES  In fiscal 1999, our cost of sales was 56.9% of net sales,
compared to 58.0% in fiscal 1998. The decrease during fiscal 1999 was primarily
due to economies of scale. Higher production volumes have given us increased
negotiating leverage to purchase product at lower unit costs and the ability to
expand our international sourcing. The reduction in the cost of sales percentage
resulting from economies of scale was partially offset by costs resulting from
expansion of our in-house embroidery capacity during the first half of fiscal
1999.

    DESIGN AND PRODUCTION EXPENSES  Design and production expenses increased by
$0.8 million, or 37.5%, to $2.9 million in fiscal 1999 from $2.1 million in
fiscal 1998 and decreased as a percentage of net sales to 2.7% in 1999 from 3.0%
in 1998. The dollar increase in these expenses was primarily attributable to
increased management and staffing costs associated with the addition of a
women's line and the golf shoe product extension, increased embroidery design
costs for the golf and corporate distribution channels and increased expenses
associated with our efforts to further diversify and monitor production
sourcing. These increases were more than offset by the benefits of economies of
scale which resulted in an overall reduction in design and production costs as a
percentage of sales in fiscal 1999 compared to fiscal 1998.

    SELLING AND SHIPPING EXPENSES  Selling and shipping expenses increased by
$9.2 million, or 70.1%, to $22.3 million in fiscal 1999 from $13.1 million in
fiscal 1998, and increased as a percentage of net sales to 20.8% in fiscal 1999
from 18.7% in fiscal 1998. The increase was primarily attributable to increased
salaries and commissions, management and marketing expenses and additional
direct overhead costs of the warehouse operation associated with increased sales
volumes and higher levels of inventory. The store level operating expenses
associated with the new company-owned retail store in Seattle, Washington also
contributed to increased selling and handling expenses during fiscal 1999.

    We increased the size of our sales force for the corporate distribution
channel to 28 sales representatives at the end of fiscal 1999 from 27 at the end
of fiscal 1998. We also strengthened our

                                       18
<PAGE>
domestic golf sales force by increasing the percentage of employee
representatives selling Cutter & Buck products exclusively as opposed to
independent, multi-line sales representatives. In fiscal 1999, we increased the
percentage of exclusive representatives within the golf sales force to 86% from
73% in fiscal 1998. The number of sales representatives in the golf distribution
channel increased to 36 at the end of fiscal 1999 from 33 at the end of fiscal
1998. In fiscal 1999 we also added a total of four sales managers to our
corporate and golf distribution channels. During fiscal 1999, we had three
regional sales representatives working in the specialty store channel and one
sales representative exclusively dedicated to the big and tall market. Due to
the addition of a women's line and the increase in our sales force for our golf
and corporate channels, we have increased the number of samples produced for use
by our sales force and in our corporate showrooms. At April 30, 1999 we had
capitalized $1.7 million of cost of samples that relate primarily to the Fall
1999 and Spring 2000 lines. The cost of these samples will be amortized as
selling expenses during the six months of each selling season. Selling seasons
begin on May 1 and November 1 of each year.

    During fiscal 1999, we purchased and installed $1.7 million of in-store and
concept shop fixturing to enhance collection merchandising in approximately 380
of our customers' locations, reaching a total of approximately 1,060 golf pro
shops and specialty stores by the end of fiscal 1999. In fiscal 1998, we
purchased and installed $1.2 million of in-store fixturing. We expect to
purchase and install an additional $1.3 million of in-store fixturing and
concept shops in fiscal 2000. Customer eligibility for the fixturing program is
based on minimum order commitments for Cutter & Buck products. The investment in
these fixtures is amortized as a marketing expense over a three year period.

    GENERAL AND ADMINISTRATIVE EXPENSES  General and administrative expenses
increased by $2.8 million, or 48.4%, to $8.5 million in fiscal 1999 from $5.7
million in fiscal 1998, and decreased as a percentage of net sales to 7.9% in
fiscal 1999 from 8.2% in fiscal 1998. The dollar increase during fiscal 1999 was
primarily due to increased management, staffing and facilities in support of our
growth. The increased general and administrative expenses in fiscal 1999 also
reflected increased investments in systems, technical support and professional
fees required by expanded operations and planned future growth. Since these
expenses grew at a slower rate than the growth in sales, general and
administrative expenses decreased as a percentage of net sales.

    OPERATING INCOME  As a result of the above items, operating income increased
by $4.0 million, or 47.1%, to $12.5 million in fiscal 1999 from $8.5 million in
fiscal year 1998, and decreased as a percentage of net sales to 11.7% in fiscal
1999 from 12.1% in fiscal 1998.

    FACTOR COMMISSION AND INTEREST EXPENSE, NET OF INTEREST INCOME  Factor
commission and interest expense, net of interest income, increased by
approximately $0.3 million to $0.4 million in fiscal 1999 from $0.1 million in
fiscal 1998, and increased as a percentage of net sales to 0.4% in fiscal 1999
from 0.2% in fiscal 1998. The increase is primarily due to interest expense
resulting from increased borrowing under bank lines of credit. Factoring during
fiscal 1999 was limited to the big and tall business and to our European
operation. We expect to discontinue factoring our big and tall business during
fiscal 2000.

    LICENSE AND ROYALTY INCOME, NET OF OTHER EXPENSE  License and royalty
income, net of other expense, increased by $0.2 million, or 88.7%, to $0.4
million, representing 0.4% of net sales in fiscal 1999, from $0.2 million and
0.3% of net sales in fiscal 1998. This category also includes gains and losses
from foreign currency transactions which resulted in a net transaction gain of
$19,000 in fiscal 1999 compared to a net transaction loss of $75,000 in fiscal
1998. The increase in license and royalty income in fiscal 1999 was primarily
attributable to contractual increases in minimum royalties with licensees.

    INCOME TAXES  We recorded $4.5 million of income tax expense in fiscal 1999.
Income taxes for fiscal 1999 are at an effective rate of 36% compared to 34% for
fiscal 1998.

                                       19
<PAGE>
YEAR ENDED APRIL 30, 1998 COMPARED TO THE YEAR ENDED APRIL 30, 1997

    NET SALES  During fiscal 1998, net sales increased by $23.5 million, or
50.4%, to $70.1 million. The detail of net sales by distribution channel is as
follows:

<TABLE>
<CAPTION>
                                                               ----------------------------------------------
                                                                FISCAL YEAR ENDED
                                                                    APRIL 30,
                                                               --------------------    INCREASE      PERCENT
                                                                    1997       1998  (DECREASE)       CHANGE
                                                               ---------  ---------  -----------  -----------
<S>                                                            <C>        <C>        <C>          <C>
IN MILLIONS, EXCEPT PERCENT CHANGE
Golf.........................................................  $    27.7  $    36.4   $     8.7         31.4%
Corporate....................................................        9.2       17.2         8.0         87.0
Specialty stores.............................................        5.7        9.3         3.6         63.2
Other........................................................        4.0        7.2         3.2         80.0
                                                               ---------  ---------       -----
                                                               $    46.6  $    70.1   $    23.5         50.4%
                                                               ---------  ---------       -----
                                                               ---------  ---------       -----
</TABLE>

    The expansion of sales to the golf distribution channel had a significant
impact on our overall net sales growth and made up approximately 37.0% of the
total increase in net sales for the year. Net sales through our European
subsidiaries that are included in the golf distribution channel increased $1.8
million, or approximately 64.3%, to $4.6 million in fiscal 1998. Sales through
the corporate distribution channel also contributed significantly to our overall
net sales growth, making up approximately 34.0% of the total increase in net
sales for fiscal 1998. The growth in the corporate distribution channel in
fiscal 1998 was primarily due to the increased size of the sales force dedicated
to this distribution channel. Specialty store sales represented approximately
13.3% of total net sales in fiscal 1998 compared to 12.2% in fiscal 1997. Our
sales to other distribution channels were 10.3% of net sales in 1998, up from
8.6% of net sales in 1997.

    COST OF SALES  In fiscal 1998, cost of sales was 58.0% of net sales,
compared to 60.2% in fiscal 1997. The decrease during fiscal 1998 was primarily
due to economies of scale. Higher production volumes have given us increased
negotiating leverage to purchase products at lower unit costs and the ability to
expand our international sourcing. Gross profit margin improvement in fiscal
1998 also reflected cost of sales reductions due to the utilization of an
in-house embroidery operation, which decreased unit costs of embroidery
production, and due to reduced expediting costs associated with a more effective
production scheduling. In 1998, the off-price liquidation market for apparel
experienced an oversupply while at the same time the number of large companies
dealing in liquidation apparel decreased. The combination of these factors
reduced the expected wholesale selling price of our out-of-season fashion
merchandise. The increase in inventory during fiscal year 1998 was concentrated
in the higher-risk single-season FASHION category rather than the more
predictable multi-season CLASSICS category. As a result we increased our
inventory reserve by approximately $0.4 million in fiscal 1998.

    DESIGN AND PRODUCTION EXPENSES  Design and production expenses increased by
$0.9 million, or 68.8%, to $2.1 million in fiscal 1998 from $1.3 million in
fiscal 1997 and increased as a percentage of net sales to 3.0% in fiscal 1998
from 2.7% in fiscal 1997. The dollar increase in these expenses is primarily
attributable to increased management and staffing costs associated with
expansion of the Cutter & Buck product line and increased embroidery design
costs for the golf distribution and corporate distribution channels. The
increase in design and production costs as a percentage of net sales in fiscal
1998 compared to fiscal 1997 is primarily attributable to an increased
investment in management, staffing and systems to support the addition of a
women's line as well as increased expenses associated with efforts to further
diversify our production sourcing.

    SELLING AND SHIPPING EXPENSES  Selling and shipping expenses increased by
$4.4 million, or 49.6%, to $13.1 million in fiscal 1998 from $8.8 million in
fiscal 1997, representing 18.7% of net sales in fiscal 1998 compared to 18.8% in
fiscal 1997. The dollar amount increase was primarily attributable to increased
salaries and commissions, management and marketing expenses and additional
direct

                                       20
<PAGE>
overhead costs of the warehouse operation associated with increased sales
volumes and higher levels of inventory.

    We increased the size of our sales force for the corporate channel to 27
sales representatives at the end of fiscal 1998 from 19 at the end of fiscal
1997. We also strengthened our domestic golf sales force by increasing the
percentage of employee representatives selling Cutter & Buck products
exclusively as opposed to independent, multi-line sales representatives. In
fiscal 1998, we increased the percentage of exclusive representatives within the
golf sales force to 73% from 63% in fiscal 1997. The number of sales
representatives in the golf distribution channel increased to 33 at the end of
fiscal 1998 from 32 at the end of fiscal 1997. At the beginning of fiscal 1998,
we reorganized our sales force for the specialty store channel. As of the end of
fiscal 1998, we had three regional sales representatives working in this channel
and one sales representative exclusively dedicated to the big and tall market,
all under the direction of a national sales manager for the specialty store
channel.

    During fiscal 1998, we purchased and installed $1.2 million of in-store
fixturing to enhance collection merchandising in 218 of our customers'
locations, reaching a total of 680 golf pro shops and specialty stores by the
end of fiscal 1998.

    GENERAL AND ADMINISTRATIVE EXPENSES  General and administrative expenses
increased by $2.2 million, or 62.5%, to $5.7 million in fiscal 1998 from $3.5
million in fiscal 1997 and increased as a percentage of net sales to 8.2% in
fiscal 1998 from 7.6% in fiscal 1997. The dollar amount increase during fiscal
1998 was primarily due to increased management, staffing and facilities in
support of our growth. The increased general and administrative expenses in
fiscal 1998 also reflected increased investment in systems and in professional
fees required by expanded operations and expected future growth. Finally, due to
the increase in accounts receivable balances as of April 30, 1998 as well as
amounts greater than 120 days, we reported an increased provision for bad debt
expense of $465,000 during fiscal 1998 as compared to the fiscal 1997 amount.
These additional investments and costs resulted in a moderate increase in
general and administrative expenses as a percentage of net sales for fiscal
1998.

    OPERATING INCOME  As a result of the above items, operating income increased
by $3.5 million, or 70.2%, to $8.5 million in fiscal 1998 from $5.0 million in
fiscal 1997 and increased as a percentage of net sales to 12.1% in fiscal 1998
from 10.7% in fiscal 1997.

    FACTOR COMMISSION AND INTEREST EXPENSE, NET OF INTEREST INCOME  Factor
commissions and interest expense, net of interest income decreased by $0.1
million, or 31.5%, to $0.1 million in fiscal 1998 from $0.2 million in fiscal
1997, and decreased as a percentage of net sales to 0.2% in fiscal 1998 from
0.4% of net sales in fiscal 1997. The reduction in the dollar amount is
primarily due to interest earned on invested cash and limiting factoring
services in the United States to the specialty store channel.

    LICENSE AND ROYALTY INCOME, NET OF OTHER EXPENSE  License and royalty
income, net of other expense decreased by $0.2 million, or 48.2%, to $0.2
million, representing 0.3% of net sales in fiscal 1998, from $0.4 million and
0.9% of net sales in fiscal 1997. The decline in license and royalty income in
fiscal 1998 reflects our decision to directly market big and tall merchandise
and terminate our license for this category in June 1997 and our shift towards
direct international sales and exclusive distributor relationships and away from
licensing relationships. This category also includes gains and losses from
foreign currency transactions which resulted in net exchange losses of $75,000
in fiscal 1998 and $4,000 in fiscal 1997.

    INCOME TAXES  We recorded $2.9 million of income tax expense in fiscal 1998
and $1.6 million in fiscal 1997. Income taxes for fiscal 1998 are at an
effective rate of 34%. In fiscal 1997, income taxes were lower than the
statutory rates primarily due to the utilization of net operating loss
carryforwards, the benefit of which had been previously reserved.

                                       21
<PAGE>
QUARTERLY RESULTS AND SEASONALITY

    Historically, we have generally experienced our lowest level of net sales in
the first and third quarters of our fiscal year, ending July 31 and January 31,
respectively. Correspondingly, our highest level of net sales are achieved in
the second and fourth quarters, ending October 31 and April 30, respectively.
This seasonality has resulted primarily from the timing of shipments to golf pro
shops and better specialty stores in the second and fourth quarters. We
recognize our revenue at the time the product is shipped to our customers. Other
factors contributing to the variability of our quarterly results include
seasonal fluctuations in consumer demand, the timing and amount of orders from
key customers, the timing and magnitude of sales of seasonal remainder
merchandise and availability of product. This pattern of sales creates seasonal
profitability and working capital financing and liquidity issues, as we
generally must finance higher levels of inventory during the first and third
quarters when net sales are lowest. As a result, our operating results may fall
below market analysts' expectations in some future quarters, which could
materially harm the market price of our common stock.

    The following tables set forth certain unaudited financial data, including
percentages of net sales, for the eight quarters ended April 30, 1999.

<TABLE>
<CAPTION>
                         ----------------------------------------------------------------------------------------------
                                   FISCAL 1998 QUARTER ENDED                       FISCAL 1999 QUARTER ENDED
                         ----------------------------------------------  ----------------------------------------------
                          JULY 31,  OCTOBER 31,  JANUARY 31,  APRIL 30,   JULY 31,  OCTOBER 31,  JANUARY 31,  APRIL 30,
IN THOUSANDS                  1997        1997         1998        1998       1998        1998         1999        1999
                         ---------  -----------  -----------  ---------  ---------  -----------  -----------  ---------
<S>                      <C>        <C>          <C>          <C>        <C>        <C>          <C>          <C>
CONSOLIDATED STATEMENTS
  OF INCOME DATA:
Net sales..............  $  12,378   $  17,349    $  14,151   $  26,226  $  17,763   $  25,993    $  23,148   $  40,382
Cost of sales..........      7,418      10,204        8,199      14,821     10,151      15,054       13,256      22,597
                         ---------  -----------  -----------  ---------  ---------  -----------  -----------  ---------
Gross profit...........      4,960       7,145        5,952      11,405      7,612      10,939        9,892      17,785
Operating expense:
  Design and
    production.........        418         605          583         514        602         859          706         748
  Selling and
    shipping...........      2,685       3,196        2,945       4,303      4,024       5,296        5,398       7,615
  General and
    administrative.....      1,139       1,558        1,435       1,578      1,826       2,238        2,276       2,131
                         ---------  -----------  -----------  ---------  ---------  -----------  -----------  ---------
      Total operating
        expenses.......      4,242       5,359        4,963       6,395      6,452       8,393        8,380      10,494
                         ---------  -----------  -----------  ---------  ---------  -----------  -----------  ---------
Operating income.......        718       1,786          989       5,010      1,160       2,546        1,512       7,291
Other income (expense):
  Factor commission and
    interest expense,
    net of interest
    income.............        (11)        (41)         (42)        (41)         0         (46)         (84)       (263)
  License and royalty
    income, net of
    other expense......         13          15           76         108         81          94           91         134
                         ---------  -----------  -----------  ---------  ---------  -----------  -----------  ---------
      Total other
        income
        (expense)......          2         (26)          34          67         81          48            7        (129)
                         ---------  -----------  -----------  ---------  ---------  -----------  -----------  ---------
Income before income
  taxes................        720       1,760        1,023       5,077      1,241       2,594        1,519       7,162
Income taxes...........       (245)       (600)        (350)     (1,725)      (447)       (930)        (550)     (2,581)
                         ---------  -----------  -----------  ---------  ---------  -----------  -----------  ---------
Net income.............  $     475   $   1,160    $     673   $   3,352  $     794   $   1,664    $     969   $   4,581
                         ---------  -----------  -----------  ---------  ---------  -----------  -----------  ---------
                         ---------  -----------  -----------  ---------  ---------  -----------  -----------  ---------
</TABLE>

                                       22
<PAGE>

<TABLE>
<CAPTION>
                         ----------------------------------------------------------------------------------------------
                                   FISCAL 1998 QUARTER ENDED                       FISCAL 1999 QUARTER ENDED
                         ----------------------------------------------  ----------------------------------------------
                          JULY 31,  OCTOBER 31,  JANUARY 31,  APRIL 30,   JULY 31,  OCTOBER 31,  JANUARY 31,  APRIL 30,
                              1997        1997         1998        1998       1998        1998         1999        1999
                         ---------  -----------  -----------  ---------  ---------  -----------  -----------  ---------
<S>                      <C>        <C>          <C>          <C>        <C>        <C>          <C>          <C>
AS A PERCENTAGE OF NET
  SALES
CONSOLIDATED STATEMENTS
  OF INCOME DATA:
Net sales..............      100.0%      100.0%       100.0%      100.0%     100.0%      100.0%       100.0%      100.0%
Cost of sales..........       59.9        58.8         57.9        56.5       57.1        57.9         57.3        56.0
                         ---------  -----------  -----------  ---------  ---------  -----------  -----------  ---------
Gross profit...........       40.1        41.2         42.1        43.5       42.9        42.1         42.7        44.0
Operating expenses:
  Design and
    production.........        3.4         3.5          4.1         2.0        3.4         3.3          3.0         1.8
  Selling and
    shipping...........       21.7        18.4         20.8        16.4       22.7        20.4         23.3        18.8
  General and
    administrative.....        9.2         9.0         10.2         6.0       10.3         8.6          9.8         5.3
                         ---------  -----------  -----------  ---------  ---------  -----------  -----------  ---------
      Total operating
        expenses.......       34.3        30.9         35.1        24.4       36.4        32.3         36.1        25.9
                         ---------  -----------  -----------  ---------  ---------  -----------  -----------  ---------
Operating income.......        5.8        10.3          7.0        19.1        6.5         9.8          6.6        18.1
Other income (expense):
  Factor commission and
    interest expense,
    net of interest
    income.............       (0.1)       (0.2)        (0.3)       (0.1)       0.0        (0.2)        (0.4)       (0.7)
  License and royalty
    income, net of
    other expense......        0.1         0.1          0.5         0.4        0.5         0.4          0.4         0.3
                         ---------  -----------  -----------  ---------  ---------  -----------  -----------  ---------
      Total other
        income
        (expense)......        0.0        (0.1)         0.2         0.3        0.5         0.2          0.0        (0.4)
                         ---------  -----------  -----------  ---------  ---------  -----------  -----------  ---------
Income before income
  taxes................        5.8        10.2          7.2        19.4        7.0        10.0          6.6        17.7
Income taxes...........       (2.0)       (3.5)        (2.4)       (6.6)      (2.5)       (3.6)        (2.4)       (6.4)
                         ---------  -----------  -----------  ---------  ---------  -----------  -----------  ---------
Net income.............        3.8%        6.7%         4.8%       12.8%       4.5%        6.4%         4.2%       11.3%
                         ---------  -----------  -----------  ---------  ---------  -----------  -----------  ---------
                         ---------  -----------  -----------  ---------  ---------  -----------  -----------  ---------
</TABLE>

LIQUIDITY AND CAPITAL RESOURCES

    Our primary need for funds is to finance working capital and to fund
increased investment in our in-store fixturing program and other capital
expenditures. Increased working capital requirements during the three years
ended April 30, 1999 related to increasing accounts receivable and inventory
levels associated with growth in sales volume. To date, working capital has been
funded primarily by profitable operations and by a combination of increased
accounts payable, accounts receivable financing through a factor, bank
borrowing, the private sale of preferred stock and the public sale of common
stock.

    Net cash used in operating activities in fiscal 1999 was $14.7 million. This
resulted primarily from increases in inventory and accounts receivable of $15.5
million and $12.6 million, respectively, which were partially offset by
profitable operations, depreciation and amortization, increases in accounts
payable and accrued liabilities and income taxes payable totaling $16.2 million.
During fiscal 1999, we purposely increased our inventory levels of CLASSICS
merchandise to support the growing on-demand requirements of the corporate
distribution channel and reorder requirements of the golf distribution channel.
Growth of CLASSICS inventory during fiscal 1999 accounted for approximately
$10.8 million, or 70.0%, of the total inventory increase of $15.5 million. We
expect to continue to build inventory levels

                                       23
<PAGE>
through December 1999 as part of our year 2000 contingency plans before
beginning to work levels down during the last four months of fiscal 2000. We had
net cash provided by operations in fiscal 1998 of $2.1 million which was
achieved primarily by profitable operations, depreciation and amortization,
increases in accounts payable and accrued liabilities and income taxes payable
which were partially offset by an increase in accounts receivable. Inventory
growth during fiscal 1998 was just 6.1% while sales increased by 50.5%.

    Net cash used in investing activities was $6.7 million in fiscal 1999 and
was substantially the result of an increased investment in furniture and
equipment of $6.6 million. In fiscal 1999, net cash provided by financing
activities was $18.6 million, resulting primarily from borrowings from banks
totaling $17.0 million and the issuance of common stock in connection with the
exercise of outstanding options and purchases pursuant to the employee stock
purchase plan resulting in proceeds to us of $1.8 million.

    We made capital expenditures and lease purchases of $7.2 million, $3.1
million and $2.5 million in fiscal 1999, 1998 and 1997, respectively. In fiscal
1999, expenditures for capital assets included $1.7 million for in-store
fixtures, $1.2 million for warehouse and embroidery equipment, $1.9 million for
computer hardware and software, $0.6 million for equipment and leasehold
improvements associated with a company-owned retail specialty store, $0.8
million for leasehold improvements and a total of $1.0 million for other
furniture and equipment. In fiscal 1998, expenditures for capital assets
included $1.2 million for in-store fixtures, $0.5 million for warehouse and
embroidery equipment, $0.7 million for upgrades to computer hardware and
software, $0.4 million for leasehold improvements and a total of $0.3 million
for other furniture and equipment. In fiscal 1997, expenditures for capital
assets included $1.0 million for in-store fixtures, $0.9 million for warehouse
and embroidery equipment and a total of $0.6 million for other furniture and
equipment.

    Capital expenditures of $10.0 million are planned for fiscal 2000, including
amounts for in-store fixtures and concept shops; other marketing programs
including fixturing for a merchandise tent to support the golf tournament
business, a trade show booth and showroom improvements; a warehouse management
system, related equipment and leasehold improvements for a new distribution
center; equipment and leasehold improvements associated with company-owned
retail specialty stores; computer hardware, software, and furniture and office
equipment; and embroidery equipment.

    We are a party to a loan agreement with Washington Mutual Bank d/b/a Western
Bank for a $40 million line of credit. Western Bank has included Bank of America
National Trust and Savings Association d/b/a Seafirst Bank in the arrangement as
a co-lender. The revolving line of credit is to be used for general corporate
purposes, without limitation, repayment of any other advances, reimbursement of
draws under letters of credit, equipment and leasehold improvements and other
corporate purposes and provides for a $25 million sublimit for direct advances.
Interest on borrowings is charged and payable monthly at either a floating rate
or the LIBOR rate plus 2%, each as defined in the loan agreement, at our
election. The line of credit is collateralized by a security interest in our
inventory, accounts receivable, furniture and equipment, contract rights, money
and other property, rents and profit including insurance proceeds, books,
records, trade secrets and other formulae and general intangibles. The loan
agreement contains certain restrictive covenants covering minimum working
capital and tangible net worth, as well as a maximum debt to equity ratio and a
limitation on capital expenditures.

    Under our factoring agreement with Republic Business Credit Corporation,
Republic acts as the sole factor in the United States for our accounts
receivable. The factoring agreement provides that we can sell qualified accounts
receivable to Republic and Republic will pay us an amount equal to the gross
amount of our accounts receivable from customers reduced by certain offsets,
including, among other things, discounts and returns and a .95% commission
payable to Republic. Western Bank and Republic have entered into an
intercreditor agreement allocating between them priority as to our assets in
which both financial institutions have a security interest. The intercreditor
agreement between Western Bank and Republic prohibits us from taking advances
under the factoring agreement. Subject

                                       24
<PAGE>
to its credit review procedures, Republic may decline to accept the credit risk
on certain accounts receivable. The factoring agreement continues in force from
year to year and may be terminated by Republic on any anniversary of its
effective date (April 7) or by us at any time, provided that in each case the
terminating party gives 60 days prior written notice.

    Our Dutch subsidiary, Cutter & Buck (Europe) B.V., is a party to a loan
agreement with Cooperatieve Rabobank "Huizen" B.A., or Rabobank, for a $3.4
million line of credit. The line of credit with Rabobank is to be used for
international letters of credit and working capital advances. Interest on
borrowings is charged and payable quarterly at a variable rate (4.45% at April
30, 1999). The line of credit is secured by our subsidiaries' inventory in
Europe, an irrevocable standby letter of credit issued by Western Bank of $3.8
million and subordination of $2.7 million of intercompany debt.

    Commencing in fiscal 1997, we have directly managed the accounts receivable
credit and collection functions associated with our sales to the golf, corporate
and international distribution channels and have used Republic's accounts
receivable management exclusively for a portion of our sales to the specialty
store channel. We expect to terminate our factoring relationship with Republic
during fiscal 2000 and plan to continue to primarily use the Western Bank line
of credit to fund our anticipated working capital needs.

    As of April 30, 1999, we had working capital lines of credit of
approximately $43.4 million and had outstanding loans in the amount of $12.1
million against the Western Bank and Rabobank lines of credit. In addition, we
had open letters of credit in the aggregate amount of $19.3 million at April 30,
1999.

    We believe that cash on hand and cash generated from operations, as well as
the ability to borrow under bank lines of credit will be sufficient to meet our
cash requirements in fiscal 2000. However, our capital needs will depend on many
factors, including our growth rate, the need to finance increased production and
inventory levels, the success of our various sales and marketing programs and
various other factors. Depending upon our growth and working capital needs, we
may require additional financing in the future through debt or equity offerings,
which may or may not be available or may be dilutive. Our ability to obtain
additional financing will depend on our operations, financial condition and
business prospects, as well as conditions then prevailing in the relevant
capital markets.

    We extend credit to our customers based on an assessment of their financial
circumstances, generally without requiring collateral. Our business is seasonal
and we offer customers discounts for placing pre-season orders and extended
payment terms for taking delivery before the peak shipping season. These
extended payment terms increase our exposure to the risk of uncollectible
receivables. Some of our customers have experienced financial difficulties in
the past, and future financial difficulties of customers could materially harm
our business.

EURO TRANSITION

    We currently have sales in all of the participating countries of the
European Economic and Monetary Union, or EMU, which have adopted the Euro as a
currency. We expect some of the non-participating European Union countries where
we have sales, such as the United Kingdom, to eventually join the EMU. Currently
the Euro is used solely for non-cash transactions. We were Euro compliant within
our accounting and business systems by December 1998 and expect to be compliant
within our other business operations prior to the introduction of the Euro bills
and coins in 2002. Currently, most of our customers have not requested dual
billing; however, we have put procedures and systems into place to perform dual
billing. We do not currently expect to experience any significant operational
disruptions or to incur any significant costs related to the phased introduction
of the Euro, including any currency risk, which could materially harm our
liquidity or capital resources.

                                       25
<PAGE>
FOREIGN CURRENCY EXCHANGE RISK

    From time to time, we use derivative financial instruments to reduce our
exposure to changes in foreign exchange rates in connection with the operations
of our European subsidiaries. While these instruments are subject to risk of
loss from changes in exchange rates, those losses would generally be offset by
gains on the related exposure. We do not use derivative financial instruments
for speculative or trading purposes. We reduce the risks associated with changes
in foreign currency rates by entering into forward contracts and purchase
options to hedge accounts receivable denominated in non-Euro currencies and to
hedge expected payments for product purchases not denominated in Euro. Gains and
losses on contracts which hedge specific foreign currency denominated
commitments are recognized in the period in which the transaction is completed.
In fiscal 1999 we incurred a net foreign exchange transaction gain of $19,000
compared to a net transaction loss of $75,000 during fiscal 1998.

    The fair value of foreign exchange forward contracts is based on quoted
market prices. At April 30, 1999 we held forward contracts to deliver
approximately $714,000 in foreign currencies with maturities of up to 120 days.
At April 30, 1999 the fair value of the forward contracts exceeded the cost by
approximately $41,000. To the extent we have assets and liabilities denominated
in foreign currencies that are not hedged, we are subject to foreign currency
transaction gains and losses.

YEAR 2000

    We recognize the need to ensure that our systems, applications and hardware
will recognize and process transactions for the year 2000 and beyond. We have
developed and are implementing a company-wide plan which includes identifying
all significant issues related to the impact of year 2000 on our internal
systems, testing these systems and addressing deficiencies before October 31,
1999. We expect to successfully implement the systems and programming changes
necessary to address year 2000 issues with respect to our internal systems and
believe that the total cost of such actions will not exceed $100,000. We
estimate we are approximately 90% complete with this effort and all costs
incurred to date have been expensed. Due to the nature of our business, our
operations generally do not include significant systems relying on embedded
technology such as microcontrollers which are difficult to evaluate and repair.

    We have a fully integrated, real-time management information system
specifically designed for the apparel industry. The system runs on IBM's RISC
6000 hardware with an AIX operating system. We have received assurances from the
vendors for these systems that they are year 2000 compliant. We are completing
testing programs for both systems to verify compliance and will complete this
testing by the end of June 1999. In the event these systems fail the testing
program, our existing information technology staff will arrange for the
assistance of outside professionals to remedy the deficiencies. Although we are
not presently aware of any material operational issues or costs associated with
preparing our internal systems for the year 2000, there can be no assurance that
there will not be a delay in, or increased costs associated with, the
implementation of the necessary systems and changes to address all year 2000
issues.

    We are in the process of identifying and working with our significant
suppliers, customers and financial institutions to ensure that those parties
have appropriate plans to remedy year 2000 issues when their systems may affect
our systems or otherwise impact operations. We have received assurances from the
majority of our significant suppliers, but cannot definitively determine that
all major suppliers will reach a year 2000-ready status that will ensure no
disruption of business. Although we have no reason to conclude that any specific
supplier represents a risk, the most reasonably likely worst-case scenario would
entail production disruption due to the inability of a number of our suppliers
to obtain raw materials or components, or encounter transportation or
communications problems affecting delivery of products to us. We are unable to
quantify such a scenario, but it could potentially materially harm our results
of our operations, liquidity or financial position. Our contingency plans for
suppliers and systems, which are still being developed, include increasing
inventory levels before January 1, 2000.

                                       26
<PAGE>
      ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

INTEREST RATE RISK

    The Company is subject to the risk of fluctuating interest rates in the
normal course of business, primarily as a result of its short-term borrowings.
The Company's short-term debt bears interest at variable rates. The variable
rates may fluctuate over time based on economic changes in the environment, and
the Company could be subject to increased interest payments if market interest
rates fluctuate. The Company does not expect any change in the interest rates to
have a material adverse effect on the Company's results of operations. The
Company does not use derivative financial instruments to manage interest rate
risk.

FOREIGN CURRENCY RISK

    The Company operates subsidiaries in the United Kingdom and the Netherlands.
The Company's business and financial condition is, therefore, sensitive to
currency exchange rates or any other restrictions imposed on their currencies.
The Company employs foreign exchange hedging strategies for certain currencies
to help mitigate the effect of currency fluctuations. The Company does not enter
into derivatives for trading purposes. To date, the foreign currency exchange
rates have not significantly impacted the Company's profitability.

                                       27
<PAGE>
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

                               CUTTER & BUCK INC.

                   INDEX TO CONSOLIDATED FINANCIAL STATEMENTS

<TABLE>
<CAPTION>
                                                                                                                PAGE
                                                                                                                -----
<S>                                                                                                          <C>
Report of Ernst & Young LLP, Independent Auditors..........................................................          29

Consolidated Balance Sheets................................................................................          30

Consolidated Statements of Income..........................................................................          31

Consolidated Statements of Shareholders' Equity............................................................          32

Consolidated Statements of Cash Flows......................................................................          33

Notes to Consolidated Financial Statements.................................................................          34
</TABLE>

                                       28
<PAGE>
               REPORT OF ERNST & YOUNG LLP, INDEPENDENT AUDITORS

The Board of Directors and Shareholders
Cutter & Buck Inc.

    We have audited the accompanying consolidated balance sheets of Cutter &
Buck Inc. as of April 30, 1999 and 1998, and the related consolidated statements
of income, shareholders' equity, and cash flows for each of the three years in
the period ended April 30, 1999. Our audits also included the financial
statement schedule listed in the Index at Item 14(a). These financial statements
and schedule are the responsibility of the Company's management. Our
responsibility is to express an opinion of these financial statements and
schedule based on our audits.

    We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.

    In our opinion, the financial statements referred to above present fairly,
in all material reports, the consolidated financial position of Cutter & Buck
Inc. at April 30, 1999 and 1998, and the consolidated results of their
operations and their cash flows for each of the three years in the period ended
April 30, 1999, in conformity with generally accepted accounting principles.
Also, in our opinion, the related financial statement schedule, when considered
in relation to the basic financial statements taken as a whole, presents fairly
in all material respects the information set forth therein.

                                          ERNST & YOUNG LLP

Seattle, Washington
June 15, 1999

                                       29
<PAGE>
                               CUTTER & BUCK INC.

                          CONSOLIDATED BALANCE SHEETS

<TABLE>
<CAPTION>
                                                                                  ------------------------
                                                                                         APRIL 30,
                                                                                  ------------------------
                                                                                         1998         1999
                                                                                  -----------  -----------
<S>                                                                               <C>          <C>
ASSETS
Current assets:
  Cash..........................................................................  $ 7,589,731  $ 4,760,259
  Accounts receivable, net of allowances for doubtful accounts and returns of
    $1,187,813 in 1998 and $1,726,191 in 1999...................................   20,216,721   32,518,666
  Inventories...................................................................   13,247,892   28,620,774
  Deferred income taxes.........................................................      730,850    1,496,945
  Prepaid expenses and other current assets.....................................    1,502,634    3,288,538
                                                                                  -----------  -----------
    Total current assets........................................................   43,287,828   70,685,182
Furniture and equipment, net....................................................    4,568,515    9,478,174
Deferred income taxes...........................................................       51,695      127,715
Other assets....................................................................      236,329      297,708
                                                                                  -----------  -----------
    Total assets................................................................  $48,144,367  $80,588,779
                                                                                  -----------  -----------
                                                                                  -----------  -----------

LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
  Short-term borrowings.........................................................  $   486,913  $12,084,704
  Accounts payable..............................................................    5,110,405    6,807,324
  Accrued liabilities...........................................................    1,606,994    3,635,341
  Income taxes payable..........................................................    1,498,720    3,025,968
  Current portion of capital lease obligations..................................      194,040      220,546
                                                                                  -----------  -----------
    Total current liabilities...................................................    8,897,072   25,773,883
Capital lease obligations.......................................................      626,682      907,260
Long-term debt..................................................................           --    5,000,000
Commitments
Shareholders' equity:
  Preferred stock, no par value, 6,000,000 shares authorized; none issued and
    outstanding.................................................................           --           --
  Common stock, no par value: 25,000,000 shares authorized; 7,876,194 issued and
    outstanding in 1998 and 8,312,236 in 1999...................................   30,577,648   32,998,010
  Deferred compensation.........................................................           --     (107,340)
  Retained earnings.............................................................    8,168,003   16,175,865
  Accumulated other comprehensive loss..........................................     (125,038)    (158,899)
                                                                                  -----------  -----------
    Total shareholders' equity..................................................   38,620,613   48,907,636
                                                                                  -----------  -----------
    Total liabilities and shareholders' equity..................................  $48,144,367  $80,588,779
                                                                                  -----------  -----------
                                                                                  -----------  -----------
</TABLE>

                            See accompanying notes.

                                       30
<PAGE>
                               CUTTER & BUCK INC.

                       CONSOLIDATED STATEMENTS OF INCOME

<TABLE>
<CAPTION>
                                                                                  --------------------------------------
                                                                                           YEAR ENDED APRIL 30,
                                                                                  --------------------------------------
                                                                                         1997         1998          1999
                                                                                  -----------  -----------  ------------
<S>                                                                               <C>          <C>          <C>
Net sales.......................................................................  $46,592,758  $70,104,015  $107,285,920
Cost of sales...................................................................   28,053,845   40,642,031    61,057,635
                                                                                  -----------  -----------  ------------
Gross profit....................................................................   18,538,913   29,461,984    46,228,285

Operating expenses:
  Design and production.........................................................    1,256,247    2,119,831     2,914,613
  Selling and shipping..........................................................    8,773,380   13,128,725    22,333,870
  General and administrative....................................................    3,512,824    5,710,430     8,471,133
                                                                                  -----------  -----------  ------------
    Total operating expenses....................................................   13,542,451   20,958,986    33,719,616
                                                                                  -----------  -----------  ------------
Operating income................................................................    4,996,462    8,502,998    12,508,669

Other income (expense):
  Factor commission and interest expense, net of interest income of $212,968 in
    1997, $359,565 in 1998 and $245,314 in 1999.................................     (196,973)    (134,579)     (393,291)
  License and royalty income, net of other expense..............................      408,728      211,649       400,284
                                                                                  -----------  -----------  ------------
    Total other income..........................................................      211,755       77,070         6,993
                                                                                  -----------  -----------  ------------
Income before income taxes......................................................    5,208,217    8,580,068    12,515,662
                                                                                  -----------  -----------  ------------

Income taxes....................................................................    1,610,600    2,920,000     4,507,800
                                                                                  -----------  -----------  ------------
Net income......................................................................  $ 3,597,617  $ 5,660,068  $  8,007,862
                                                                                  -----------  -----------  ------------
                                                                                  -----------  -----------  ------------
Basic earnings per share........................................................  $      0.55  $      0.72  $       0.98
                                                                                  -----------  -----------  ------------
Diluted earnings per share......................................................  $      0.51  $      0.68  $       0.94
                                                                                  -----------  -----------  ------------
</TABLE>

                            See accompanying notes.

                                       31
<PAGE>
                               CUTTER & BUCK INC.

                CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
<TABLE>
<CAPTION>
                                                       --------------------------------------------------------------------
                                                                                         NOTE
                                                             COMMON STOCK          RECEIVABLE
                                                       -------------------------         FROM       DEFERRED       RETAINED
                                                            SHARES        AMOUNT  SHAREHOLDER   COMPENSATION       EARNINGS
                                                       -----------  ------------  ------------  --------------  -----------
<S>                                                    <C>          <C>           <C>           <C>             <C>
Balance, April 30, 1996..............................    5,500,074  $ 15,156,702   $  (44,520)            --    $(1,089,682)
Sale of common stock, net of offering expenses of
  $1,434,356.........................................    2,181,460    14,563,021           --             --             --
Stock issued under employee stock purchase plan......        4,194        12,549           --             --             --
Exercise of stock options............................        8,718        18,519           --             --             --
Exercise of stock warrants...........................       40,150            --           --             --             --
Repayment of note receivable.........................           --            --       44,520             --             --
Net income...........................................           --            --           --             --      3,597,617
Foreign currency translation.........................           --            --           --             --             --
Comprehensive income.................................
                                                       -----------  ------------  ------------  --------------  -----------
Balance, April 30, 1997..............................    7,734,596    29,750,791           --             --      2,507,935
Stock issued under employee stock purchase plan......        8,806        68,464           --             --             --
Exercise of stock options............................      132,792       359,908           --             --             --
Tax benefit on exercise of stock options.............           --       398,485           --             --             --
Net income...........................................           --            --           --             --      5,660,068
Foreign currency translation.........................           --            --           --             --             --
Comprehensive income.................................
                                                       -----------  ------------  ------------  --------------  -----------
Balance, April 30, 1998..............................    7,876,194    30,577,648           --             --      8,168,003
Stock issued under employee stock purchase plan......       11,221       149,233           --             --             --
Exercise of stock options............................      296,245       950,116           --             --             --
Exercise of stock warrants...........................      118,378       662,920           --             --             --
Deferred compensation relating to restricted stock
  grants.............................................       10,198       171,744           --       (171,744)            --
Amortization of deferred compensation................           --            --           --         64,404             --
Tax benefit on exercise of stock options.............           --       486,349           --             --             --
Net income...........................................           --            --           --             --      8,007,862
Foreign currency translation.........................           --            --           --             --             --
Comprehensive income.................................
                                                       -----------  ------------  ------------  --------------  -----------
Balance, April 30, 1999..............................    8,312,236  $ 32,998,010   $       --     $ (107,340)   $16,175,865
                                                       -----------  ------------  ------------  --------------  -----------
                                                       -----------  ------------  ------------  --------------  -----------

<CAPTION>

                                                         ACCUMULATED
                                                               OTHER
                                                       COMPREHENSIVE
                                                                LOSS           TOTAL
                                                       ---------------  ------------
<S>                                                    <C>              <C>
Balance, April 30, 1996..............................    $        --    $ 14,022,500
Sale of common stock, net of offering expenses of
  $1,434,356.........................................             --      14,563,021
Stock issued under employee stock purchase plan......             --          12,549
Exercise of stock options............................             --          18,519
Exercise of stock warrants...........................             --              --
Repayment of note receivable.........................             --          44,520
Net income...........................................             --       3,597,617
Foreign currency translation.........................        (71,417)        (71,417)
                                                                        ------------
Comprehensive income.................................                      3,526,200
                                                       ---------------  ------------
Balance, April 30, 1997..............................        (71,417)     32,187,309
Stock issued under employee stock purchase plan......             --          68,464
Exercise of stock options............................             --         359,908
Tax benefit on exercise of stock options.............             --         398,485
Net income...........................................             --       5,660,068
Foreign currency translation.........................        (53,621)        (53,621)
                                                                        ------------
Comprehensive income.................................                      5,606,447
                                                       ---------------  ------------
Balance, April 30, 1998..............................       (125,038)     38,620,613
Stock issued under employee stock purchase plan......             --         149,233
Exercise of stock options............................             --         950,116
Exercise of stock warrants...........................             --         662,920
Deferred compensation relating to restricted stock
  grants.............................................             --              --
Amortization of deferred compensation................             --          64,404
Tax benefit on exercise of stock options.............             --         486,349
Net income...........................................             --       8,007,862
Foreign currency translation.........................        (33,861)        (33,861)
                                                                        ------------
Comprehensive income.................................                      7,974,001
                                                       ---------------  ------------
Balance, April 30, 1999..............................    $  (158,899)   $ 48,907,636
                                                       ---------------  ------------
                                                       ---------------  ------------
</TABLE>

                            See accompanying notes.

                                       32
<PAGE>
                               CUTTER & BUCK INC.

                     CONSOLIDATED STATEMENTS OF CASH FLOWS

<TABLE>
<CAPTION>
                                                        -----------------------------------
                                                               YEAR ENDED APRIL 30,
                                                        -----------------------------------
                                                              1997        1998         1999
                                                        ----------  ----------  -----------
<S>                                                     <C>         <C>         <C>
Operating activities:
Net income............................................  $3,597,617  $5,660,068  $ 8,007,862
Adjustments to reconcile net income to net cash
  provided by (used in) operating activities:
  Depreciation and amortization.......................   1,057,348   1,385,616    2,306,276
  Deferred income taxes...............................    (104,000)   (498,545)    (842,115)
  Amortization of deferred compensation...............          --          --       64,404
  Changes in assets and liabilities:
    Receivables, net..................................  (7,329,046) (5,986,276) (12,639,245)
    Inventories.......................................  (7,795,977)   (758,482) (15,547,970)
    Prepaid expenses and other current assets.........    (328,011)   (188,265)  (1,870,703)
    Accounts payable and accrued liabilities..........   2,588,827   1,495,273    3,823,477
    Income taxes payable..............................     487,632   1,009,573    2,013,597
                                                        ----------  ----------  -----------
Net cash provided by (used in) operating activities...  (7,825,610)  2,118,962  (14,684,417)

Investing activities:
Purchase of furniture and equipment...................  (1,716,583) (2,746,776)  (6,624,987)
Decrease (increase) in trademarks, patents and
  marketing rights....................................      83,671     (97,107)     (62,518)
                                                        ----------  ----------  -----------
Net cash used in investing activities.................  (1,632,912) (2,843,883)  (6,687,505)

Financing activities:
Net proceeds (repayments) from short term
  borrowings..........................................    (114,119)    486,913   11,953,708
Proceeds from long term debt..........................                            5,000,000
Principal payments under capital lease obligations....    (125,432)   (177,392)    (261,766)
Net increase in advances from factor..................     562,551     188,663      185,619
Proceeds from note receivable from shareholder........      44,520          --           --
Issuance of common stock..............................  14,594,089     428,372    1,762,269
                                                        ----------  ----------  -----------
Net cash provided by financing activities.............  14,961,609     926,556   18,639,830
Effects of foreign exchange rate changes on cash......     (71,417)    (53,621)     (97,380)
                                                        ----------  ----------  -----------
Net increase (decrease) in cash.......................   5,431,670     148,014   (2,829,472)

Cash, beginning of year...............................   2,010,047   7,441,717    7,589,731
                                                        ----------  ----------  -----------
Cash, end of year.....................................  $7,441,717  $7,589,731  $ 4,760,259
                                                        ----------  ----------  -----------
                                                        ----------  ----------  -----------

Supplemental information:
Cash paid during the year for interest................  $  176,191  $  199,187  $   308,277
                                                        ----------  ----------  -----------
                                                        ----------  ----------  -----------
Cash paid during the year for income taxes............  $  991,500  $2,409,500  $ 3,245,000
                                                        ----------  ----------  -----------
                                                        ----------  ----------  -----------

Noncash financing and investing activities:
  Equipment acquired with capital leases..............  $  788,524  $  335,022  $   568,850
                                                        ----------  ----------  -----------
                                                        ----------  ----------  -----------
  Deferred compensation for issuance of restricted
    stock.............................................  $       --  $       --  $   171,744
                                                        ----------  ----------  -----------
                                                        ----------  ----------  -----------
</TABLE>

                            See accompanying notes.

                                       33
<PAGE>
                               CUTTER & BUCK INC.

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 1. DESCRIPTION OF THE BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING
POLICIES

    DESCRIPTION OF THE BUSINESS  Cutter & Buck Inc. (the "Company") designs,
sources and markets men's and women's sportswear and outerwear apparel. The
Company's trade customers are principally golf pro shops and resorts, corporate
sales accounts and better specialty stores.

    In 1996, the Company formed two wholly owned subsidiaries, Cutter & Buck
(UK) Ltd. and Cutter & Buck (Europe) B.V., for the purpose of direct marketing,
sales and distribution of Cutter & Buck sportswear and outerwear in Europe. In
1999, the Company formed another wholly owned subsidiary, Cutter & Buck GmbH to
perform the same function.

    PRINCIPLES OF CONSOLIDATION  The accompanying consolidated financial
statements include the accounts of the Company and its wholly owned subsidiaries
from the date of formation. All significant intercompany accounts and
transactions have been eliminated.

    INVENTORIES  Inventories, which are predominantly finished goods, are valued
at the lower of cost or market, with cost determined under the first-in,
first-out method. A detailed analysis of inventory is performed on a quarterly
basis to identify unsold out-of-season fashion merchandise. The net realizable
value of the out-of-season merchandise is estimated based upon disposition plans
and historical experience. A valuation allowance is established to reduce the
carrying amount of out-of-season merchandise to its net realizable value.

    SAMPLES  The Company capitalizes the costs of merchandise samples that
relate to goods to be sold in future selling seasons. These samples are
amortized on a straight-line basis over the respective selling seasons of six
months. The amortization of samples is charged to selling expenses over the
revenue-generating period.

    FURNITURE AND EQUIPMENT  Furniture and equipment is carried at cost.
Depreciation is provided on a straight-line basis over estimated useful lives of
five years. Furniture and equipment acquired under capital leases is amortized
on a straight-line basis over the lesser of the lease term or the estimated
economic useful life of the asset. Store fixtures are depreciated on a
straight-line basis over three years.

    ADVERTISING  Advertising costs are expensed as incurred. Advertising expense
was $800,000, $1,256,000 and $2,507,000 for the years ended April 30, 1997, 1998
and 1999 respectively.

    INCOME TAXES  The Company accounts for income taxes using the liability
method, whereby deferred tax assets and liabilities are determined based on
differences between financial reporting and tax bases of assets and liabilities
measured using enacted tax rates and laws that will be in effect when the
differences are expected to reverse.

    FAIR VALUE OF FINANCIAL INSTRUMENTS  The fair value of the Company's capital
lease obligations and long-term debt is estimated based on the current rates
offered to the Company for debt of the same remaining maturities. The carrying
amount of these financial instruments at April 30, 1998 and 1999 approximated
fair value.

    CONCENTRATIONS OF CREDIT RISK  The Company sells its products to approved
customers on an open account basis, subject to established credit limits, cash
in advance or cash on delivery terms. The Company is subject to credit risk on
the majority of its receivables. These receivables are geographically disbursed
throughout the United States, Europe and selected foreign countries where formal
distributor agreements exist.

                                       34
<PAGE>
                               CUTTER & BUCK INC.

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

NOTE 1. DESCRIPTION OF THE BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING
POLICIES (CONTINUED)
    REVENUE RECOGNITION  Revenue is recognized at the time the product is
shipped to the customer. There is no right to return for customers, other than
for defective products. Allowances for these estimated sales returns are
provided when the related revenue is recorded.

    FOREIGN CURRENCY TRANSLATION  Assets and liabilities denominated in foreign
currencies are translated to U.S. dollars at the exchange rate on the balance
sheet date. Revenues, costs and expenses are translated at the average rates of
exchange prevailing during the year. Translation adjustments resulting from this
process are a component of comprehensive income.

    STOCK-BASED COMPENSATION  The Company has elected to apply the
disclosure-only provisions of Statement of Financial Accounting Standards
("SFAS") No. 123, "Accounting for Stock-Based Compensation". Accordingly, the
Company has elected to continue to account for stock-based compensation using
the intrinsic value method prescribed in Accounting Principles Board Opinion No.
25, "Accounting for Stock Issued to Employees," and related interpretations.
Compensation expense for stock options is measured as the excess, if any, of the
market price of the Company's common stock at the date of grant over the stock
option exercise price. Under the Company's plans, stock options are generally
granted at fair market value.

    EARNINGS PER SHARE  Basic earnings per share is based on the weighted
average number of common shares outstanding. Diluted earnings per share is based
on the weighted average number of common shares and equivalents outstanding.
Common share equivalents included in the computation represent shares issuable
upon assumed exercise of outstanding stock options and warrants except when the
effect of their inclusion would be antidilutive.

    COMPREHENSIVE INCOME  On May 1, 1998, the Company adopted SFAS No. 130,
"Reporting Comprehensive Income." SFAS No. 130 established new rules for the
reporting and display of comprehensive income or loss and its components.
Statement 130 also requires presentation of accumulated other comprehensive
income or loss separately in shareholders' equity. The adoption of this
Statement had no impact on the Company's net income or shareholders' equity.
Statement 130 requires unrealized gains or losses on the Company's foreign
currency translation adjustments to be included in comprehensive income.

    SEGMENT AND GEOGRAPHIC INFORMATION  On May 1, 1998, the Company adopted SFAS
No. 131, "Disclosures about Segments of an Enterprise and Related Information."
SFAS 131 established interim and annual reporting standards for an enterprise's
operating segments and related disclosures about its products, services,
geographic areas and major customers. The Company has one reportable segment,
the design, sourcing and marketing of sportswear and outerwear apparel. The
information for this segment is the information used by the Company's chief
operating decision-maker to evaluate operating performance. International sales
represented approximately 6.0%, 6.5% and 6.1% of net sales for the years ended
April 30, 1997, 1998 and 1999 respectively. No foreign country or geographic
area accounted for more than 10% of net sales in any of the periods presented.
Long-term assets of international operations represent approximately 7.4%, 13.0%
and 14.6% of the Company's long-term assets for fiscal 1997, 1998 and 1999,
respectively.

    USE OF ESTIMATES  The preparation of financial statements in conformity with
generally accepted accounting principles requires management to make estimates
and assumptions that affect the amounts

                                       35
<PAGE>
                               CUTTER & BUCK INC.

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

NOTE 1. DESCRIPTION OF THE BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING
POLICIES (CONTINUED)
reported in the financial statements and accompanying notes. Actual results
could differ from those estimates.

    RECLASSIFICATIONS  Certain amounts from the prior year financial statements
have been reclassified to conform to the current year presentation.

    DERIVATIVES AND HEDGING

    The Company from time to time, uses derivative financial instruments to
reduce its exposure to changes in foreign exchange rates in connection with the
operations of its European subsidiary. While these instruments are subject to
risk of loss from changes in exchange rates, those losses would generally be
offset by gains on the related exposure. The Company does not use derivative
financial instruments for speculative or trading purposes. The Company reduces
the risks associated with changes in foreign currency rates by entering into
forward contracts and purchase options to hedge accounts receivable denominated
in non-euro currencies and to hedge expected payments for product purchases not
denominated in euro. Gains and losses on contracts which hedge specific foreign
currency denominated commitments are recognized in the period in which the
transaction is completed.

    The fair value of foreign exchange forward contracts is based on quoted
market prices. At April 30, 1998 and 1999 the Company held forward contracts to
deliver $217,841 and $714,416, respectively in foreign currencies with
maturities of up to 120 days. The fair value of forward exchange contracts
approximated cost at April 30, 1998. At April 30, 1999 the fair value of the
forward contracts exceeded the cost by $41,315. To the extent the Company has
assets and liabilities denominated in foreign currencies that are not hedged,
the Company is subject to foreign currency transaction gains and losses.

NEW ACCOUNTING PRONOUNCEMENTS

In June 1998, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards (SFAS) No. 133, "Accounting for Derivative
Instruments and Hedging Activities." SFAS 133 requires an entity to recognize
all derivatives as either assets or liabilities in the statement of financial
position and measure those instruments at fair value. The Company plans to adopt
SFAS 133 on May 1, 2001, as required. The Company limits its use of derivative
financial instruments to the management of foreign currency risks. The Company
is currently evaluating the impact of SFAS 133 on its financial statements.

NOTE 2. PREPAID EXPENSES AND OTHER CURRENT ASSETS

    Prepaid expenses and other current assets consisted of the following:

<TABLE>
<CAPTION>
                                                                                  ----------------------
                                                                                        APRIL 30,
                                                                                  ----------------------
                                                                                        1998        1999
                                                                                  ----------  ----------
<S>                                                                               <C>         <C>
Prepaid expenses................................................................  $1,082,914  $1,580,557
Samples.........................................................................     419,720   1,707,981
                                                                                  ----------  ----------
                                                                                  $1,502,634  $3,288,538
                                                                                  ----------  ----------
                                                                                  ----------  ----------
</TABLE>

                                       36
<PAGE>
                               CUTTER & BUCK INC.

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

NOTE 3. ACCOUNTS RECEIVABLE

    Pursuant to the terms of factoring agreements, the Company assigns a portion
of its qualifying accounts receivable to factors on a preapproved, nonrecourse
or recourse basis. The factors' charges totaled $160,643, $194,945, $162,401 for
the years ended April 30, 1997, 1998 and 1999 and include a commission on net
sales and interest on advances at prime, plus 1 1/2% (9.25% at April 30, 1999).
The Company is permitted to receive advances from the European factor against
uncollected amounts factored. Accounts receivable consisted of the following:

<TABLE>
<CAPTION>
                                                                                  ------------------------
                                                                                         APRIL 30,
                                                                                  ------------------------
                                                                                         1998         1999
                                                                                  -----------  -----------
<S>                                                                               <C>          <C>
Unmatured receivables
  Nonrecourse...................................................................  $ 2,622,705  $ 1,341,146
  With recourse.................................................................    1,945,238    2,431,260
Matured receivables.............................................................      290,112      203,545
Advances........................................................................     (751,214)    (936,833)
                                                                                  -----------  -----------
  Due from factor...............................................................    4,106,841    3,039,118
Nonfactored receivables.........................................................   17,297,693   31,205,739
Allowance for doubtful accounts and reserve for sales returns and allowance.....   (1,187,813)  (1,726,191)
                                                                                  -----------  -----------
                                                                                  $20,216,721  $32,518,666
                                                                                  -----------  -----------
                                                                                  -----------  -----------
</TABLE>

NOTE 4. FURNITURE AND EQUIPMENT

    Furniture and equipment consisted of the following:

<TABLE>
<CAPTION>
                                                                     ----------------------
                                                                           APRIL 30,
                                                                     ----------------------
                                                                           1998        1999
                                                                     ----------  ----------
<S>                                                                  <C>         <C>
Leasehold improvements.............................................  $  585,906  $1,856,577
Equipment..........................................................   3,074,654   6,196,722
Store fixtures.....................................................   2,466,500   4,200,903
Furniture and other fixtures.......................................     759,073   1,822,147
                                                                     ----------  ----------
                                                                      6,886,133  14,076,349
Less accumulated depreciation and amortization.....................  (2,317,618) (4,598,175)
                                                                     ----------  ----------
                                                                     $4,568,515  $9,478,174
                                                                     ----------  ----------
                                                                     ----------  ----------
</TABLE>

    The total cost of leased equipment capitalized at April 30, 1998 and 1999
was $1,123,546 and $1,692,396, respectively, with related accumulated
amortization of $325,387 and $620,923, respectively.

NOTE 5. DEBT

    In April 1999, the Company entered into a loan agreement with Washington
Mutual Bank d/b/ a Western Bank ("Western Bank") for a $40 million line of
credit, replacing the Company's previous line of credit. Western Bank has
included Bank of America National Trust and Savings Association d/b/ a Seafirst
Bank in the arrangement as co-lender. The revolving line of credit is to be used
for general corporate purposes, without limitation, repayment of any other
advances, reimbursement of draws

                                       37
<PAGE>
                               CUTTER & BUCK INC.

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

NOTE 5. DEBT (CONTINUED)
under letters of credit, equipment and leasehold improvements and other
corporate purposes and provides for a $25 million sublimit for direct advances.
Interest on borrowings is charged and payable monthly at either a floating rate
or the LIBOR rate plus 2%, each as defined in the loan agreement, at the
borrower's election (7.75% at April 30, 1999). The line of credit is
collateralized by a security interest in the Company's inventory, accounts
receivable, furniture and equipment, contract rights and general intangibles and
expires on August 1, 2000. The loan agreement contains certain restrictive
covenants covering minimum working capital and tangible net worth, as well as a
maximum debt-to-equity ratio. The Company was in compliance with these covenants
at April 30, 1999. Western Bank and Republic Business Credit Corporation have
entered into an intercreditor agreement allocating between them priority as to
the Company's assets in which both financial institutions have a security
interest. At April 30, 1999, letters of credit outstanding against this line of
credit totaled $18,773,683 and working capital advances were $9.5 million.

    During fiscal 1999, the Company's Dutch subsidiary entered into a loan
agreement with Cooperatieve Rabobank "Huizen" B.A. ("Rabobank") for a $3.4
million line of credit. The line of credit with Rabobank is to be used for
international letters of credit and working capital advances. Interest on
borrowings is charged and payable quarterly at a variable rate (4.45% at April
30, 1999). The line of credit is secured by the Company's European inventory, an
irrevocable standby letter of credit issued by Western Bank of $3.8 million and
subordination of $2.7 million of intercompany debt. At April 30, 1999, letters
of credit outstanding against this line of credit totaled $533,358 and working
capital advances totaled $2,584,704.

    The Company also has a $5 million term credit facility with Western Bank. As
of April 30, 1999 $5 million had been advanced against the term credit facility.
The term loan bears interest at a fixed rate of 6.6% with interest payable
monthly and annual principal payments of $714,286 due in August of years 2000
through 2004. The final principal payment of $1,428,570 is due in August 2005.
The term loan is also collateralized by a security interest in the Company's
inventory, accounts receivable, furniture and equipment, and contract rights.

NOTE 6. INCOME TAXES

    The foreign and domestic components of income before income taxes were as
follows:

<TABLE>
<CAPTION>
                                                                                  -----------------------------------
                                                                                         YEAR ENDED APRIL 30,
                                                                                  -----------------------------------
                                                                                        1997        1998         1999
                                                                                  ----------  ----------  -----------
<S>                                                                               <C>         <C>         <C>
Domestic........................................................................  $5,086,697  $8,794,780  $12,726,877
Foreign.........................................................................     121,520    (214,712)    (211,215)
                                                                                  ----------  ----------  -----------
                                                                                  $5,208,217  $8,580,068  $12,515,662
                                                                                  ----------  ----------  -----------
                                                                                  ----------  ----------  -----------
</TABLE>

                                       38
<PAGE>
                               CUTTER & BUCK INC.

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

NOTE 6. INCOME TAXES (CONTINUED)
    The provision for income taxes consisted of the following:

<TABLE>
<CAPTION>
                                                                                  ----------------------------------
                                                                                         YEAR ENDED APRIL 30,
                                                                                  ----------------------------------
                                                                                        1997        1998        1999
                                                                                  ----------  ----------  ----------
<S>                                                                               <C>         <C>         <C>
Current tax provision:
  Federal.......................................................................  $1,514,600  $3,318,545  $5,201,306
  State.........................................................................     200,000     100,000     148,609
                                                                                  ----------  ----------  ----------
                                                                                   1,714,600   3,418,545   5,349,915
Deferred federal tax benefit....................................................    (104,000)   (498,545)   (842,115)
                                                                                  ----------  ----------  ----------
                                                                                  $1,610,600  $2,920,000  $4,507,800
                                                                                  ----------  ----------  ----------
                                                                                  ----------  ----------  ----------
</TABLE>

    The provision for income taxes differs from the amount of tax determined by
applying the federal statutory rate for the following reasons:

<TABLE>
<CAPTION>
                                                                                  ----------------------------------
                                                                                         YEAR ENDED APRIL 30,
                                                                                  ----------------------------------
                                                                                        1997        1998        1999
                                                                                  ----------  ----------  ----------
<S>                                                                               <C>         <C>         <C>
Tax provision at federal statutory tax rate.....................................  $1,770,749  $2,917,223  $4,380,482
Foreign loss not benefited......................................................          --      73,002      73,925
Nondeductable expenses..........................................................      18,862      17,834      53,726
Decrease in valuation allowance.................................................    (440,278)         --          --
State income taxes, net of federal benefit......................................     132,000      66,000      96,596
Other...........................................................................     129,267    (154,059)    (96,929)
                                                                                  ----------  ----------  ----------
                                                                                  $1,610,600  $2,920,000  $4,507,800
                                                                                  ----------  ----------  ----------
                                                                                  ----------  ----------  ----------
</TABLE>

    The Company recorded compensation expense in 1998 and 1999 for income tax
purposes of approximately $1.1 million and $1.4 million respectively, resulting
from the exercise of nonqualified stock options and disqualifying dispositions
of Common Stock received through the exercise of incentive stock options. The
resulting tax benefit of $398,485 and $486,349 respectively, is included in
shareholders' equity.

                                       39
<PAGE>
                               CUTTER & BUCK INC.

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

NOTE 6. INCOME TAXES (CONTINUED)
    The 1997 tax provision is recorded net of the benefit of utilizing a net
operating loss carryforward of approximately $1,139,000. Significant components
of the Company's deferred tax assets and liabilities are as follows:

<TABLE>
<CAPTION>
                                                                                  --------------------
                                                                                       APRIL 30,
                                                                                  --------------------
                                                                                      1998        1999
                                                                                  --------  ----------
<S>                                                                               <C>       <C>
Deferred income tax assets:
  Reserve for doubtful accounts.................................................  $337,339  $  529,402
  Reserve for inventory obsolescence............................................   140,290     326,071
  Unicap........................................................................   195,897     563,664
  Depreciation and amortization.................................................    51,695     127,715
  Other.........................................................................    61,249     109,196
                                                                                  --------  ----------
Total deferred income tax assets................................................   786,470   1,656,048

Deferred income tax liabilities:
Prepaid expenses................................................................        --     (31,388)
Other...........................................................................    (3,925)         --
                                                                                  --------  ----------
Total deferred income tax liabilities...........................................    (3,925)    (31,388)
                                                                                  --------  ----------
Net deferred taxes..............................................................  $782,545  $1,624,660
                                                                                  --------  ----------
                                                                                  --------  ----------
</TABLE>

NOTE 7. COMMITMENTS

    The Company leases its office facilities, two retail stores and a warehouse
and embroidery production facility under operating leases. Total rent expense
amounted to $472,823 in 1997, $684,270 in 1998 and $1,325,647 in 1999.

    Future minimum payments, by year and in the aggregate, under capital leases
and noncancelable operating leases with initial or remaining terms of one year
or more consisted of the following at April 30, 1999:

<TABLE>
<CAPTION>
--------------------------------------------------------------------------------------------------------
                                                                                     CAPITAL   OPERATING
YEAR ENDING APRIL 30,                                                                 LEASES      LEASES
--------------------------------------------------------------------------------  ----------  ----------
<S>                                                                               <C>         <C>
2000............................................................................  $  433,490  $  796,137
2001............................................................................     422,144     460,861
2002............................................................................     265,300     285,977
2003............................................................................     198,224     226,332
2004............................................................................      40,248      11,088
                                                                                  ----------  ----------
Total minimum lease payments....................................................   1,359,406  $1,780,395
                                                                                              ----------
                                                                                              ----------
Less amount representing interest...............................................    (231,600)
                                                                                  ----------
Present value of net minimum lease payments.....................................   1,127,806
Less: current portion...........................................................    (220,546)
                                                                                  ----------
                                                                                  $  907,260
                                                                                  ----------
                                                                                  ----------
</TABLE>

                                       40
<PAGE>
                               CUTTER & BUCK INC.

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

NOTE 8. SHAREHOLDERS' EQUITY

    PREFERRED STOCK  The Company has authorized 6,000,000 shares of preferred
stock, no par value. There was no preferred stock outstanding at April 30, 1998
and 1999.

    COMMON STOCK  On November 1, 1996 the Company sold 1,993,960 shares of its
Common Stock in a secondary offering at $7.33 per share. Pursuant to the
exercise of the underwriters' over-allotment option, the Company sold an
additional 187,500 shares of Common Stock at $7.33 per share on December 3,
1996. Proceeds to the Company, net of underwriting discounts and commissions and
offering expenses totaling $1,434,356, amounted to $14,563,021.

    COMMON STOCK WARRANTS  In connection with the Company's initial public
offering, the Company issued warrants to the underwriters of the offering to
purchase 197,296 shares of Common Stock at an exercise price of $5.60. In April
1997, 78,918 of these warrants were exercised in a cashless transaction, and
40,150 shares of Common Stock were issued. The remaining warrants to purchase
118,378 shares were exercised in May 1998 with proceeds to the Company totaling
$662,920.

    STOCK OPTION PLANS  The Company has four stock option plans that provide for
the granting of options to employees, officers and directors of the Company to
purchase up to 1,312,969 shares of Common Stock. Options granted under the 1991
plan provide for 50% vesting on the first anniversary from the date of grant and
25% vesting on each of the second and third anniversaries. Options granted under
the 1995 employee plan generally provide for vesting over a four-year period
with vesting at 25% each year. Options granted under the 1995 director plan
become exercisable six months after the date of grant. Options granted under the
1997 plan generally provide for vesting over a five-year period with vesting at
20% each year. Options under the plans expire after 10 years and have been
granted at fair value on the date of grant.

    The weighted average fair value of stock options granted in 1997, 1998 and
1999 was $5.13, $10.59 and $9.05 repectively. The fair value of stock options
used to calculate pro forma net income and net income per share disclosures was
determined using the Black-Scholes option-pricing model with the following
weighted average assumptions for 1997, 1998 and 1999, respectively: risk-free
interest rate of 6.2%, 6.1% and 5.3%; volatility of 68%, 68% and 70%; expected
life of 4.5 years, 4 years and 5 years; and no future dividends.

    The weighted average fair value of shares granted under the Employee Stock
Purchase Plan in 1998 and 1999 was $2.02 and $3.21 respectively. The fair value
of shares granted under the Employee Stock Purchase Plan used to calculate pro
forma net income and net income per share disclosures was determined using the
Black-Sholes option-pricing model with the following weighted average
assumptions for 1997, 1998 and 1999 respectively: risk free interest rate of
6.8%, 6.2% and 5.0%; volatility of 68%, 68% and 70%; expected life of 6 months
and no future dividends. Had compensation cost for the stock option and Employee
Stock Purchase plans been recognized based on the fair value

                                       41
<PAGE>
                               CUTTER & BUCK INC.

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

NOTE 8. SHAREHOLDERS' EQUITY (CONTINUED)
at the date of grant for options and stock, awarded under the plans, pro forma
amounts of the Company's net income and net income per share would have been as
follows:

<TABLE>
<CAPTION>
                                                                                  ----------------------------------
                                                                                              APRIL 30,
                                                                                  ----------------------------------
                                                                                        1997        1998        1999
                                                                                  ----------  ----------  ----------
<S>                                                                               <C>         <C>         <C>
Net income......................................................................  $3,597,617  $5,660,068  $8,007,862
Pro forma compensation expense under SFAS No. 123...............................    (186,822)   (572,927)   (865,636)
                                                                                  ----------  ----------  ----------
Pro forma net income under SFAS No. 123.........................................  $3,410,795  $5,087,141  $7,142,226
                                                                                  ----------  ----------  ----------
                                                                                  ----------  ----------  ----------
Pro forma diluted earnings per share............................................  $     0.49  $     0.61  $     0.83
</TABLE>

    Under SFAS No. 123, compensation expense representing the fair value of the
option grant is recognized over the vesting period. The initial impact on pro
forma net income may not be representative of compensation expense in future
years, when the effect of the amortization of multiple awards would be reflected
in earnings.

    A summary of the Company stock option activity and related information is as
follows:

<TABLE>
<CAPTION>
                                              ----------------------------------------------------------------------
                                                                            APRIL 30,
                                              ----------------------------------------------------------------------
                                                       1997                    1998                    1999
                                              ----------------------  ----------------------  ----------------------
                                                           WEIGHTED                WEIGHTED                WEIGHTED
                                                            AVERAGE                 AVERAGE                 AVERAGE
                                                           EXERCISE                EXERCISE                EXERCISE
                                                OPTIONS       PRICE     OPTIONS       PRICE     OPTIONS       PRICE
                                              ---------  -----------  ---------  -----------  ---------  -----------
<S>                                           <C>        <C>          <C>        <C>          <C>        <C>
Balance, beginning of year..................    610,983   $    3.39     658,137   $    3.86     774,342   $    6.94
Granted.....................................     55,872        8.70     261,372       12.57     218,622       14.59
Exercised...................................     (8,718)       2.13    (132,792)       2.71    (296,245)       2.14
Canceled....................................         --          --     (12,375)       7.17      (4,312)      13.64
                                              ---------               ---------               ---------
Balance, end of year........................    658,137   $    3.86     774,342   $    6.94     692,407   $   10.91
                                              ---------               ---------               ---------
                                              ---------               ---------               ---------
Exercisable at end of year..................    369,475   $    2.49     405,400   $    3.40     254,522   $    7.49
                                              ---------       -----   ---------  -----------  ---------  -----------
</TABLE>

    The following information is provided for options outstanding and
exercisable at April 30, 1999:

<TABLE>
<CAPTION>
----------------------------------------------------------------------------------------------------------
                                                   OUTSTANDING
                                   -------------------------------------------         EXERCISABLE
                                                      WEIGHTED AVERAGE          --------------------------
                                              --------------------------------                 WEIGHTED
                                                  REMAINING         EXERCISE                    AVERAGE
RANGE OF EXERCISE PRICES             OPTIONS  CONTRACTUAL LIFE         PRICE      OPTIONS  EXERCISE PRICE
---------------------------------  ---------  -----------------  -------------  ---------  ---------------
<S>                                <C>        <C>                <C>            <C>        <C>
$ 1.44-$3.16.....................     67,031            4.8        $    1.62       67,030     $    1.62
  4.75- 7.17.....................    124,101            6.9             7.03       95,248          6.99
  8.09- 9.09.....................     43,311            7.8             8.60       22,311          8.63
 10.00-13.71.....................    240,842            8.3            12.55       56,061         12.77
 13.79-16.83.....................    217,122            9.2            14.63       13,872         16.17
                                   ---------                                    ---------
                                     692,407                                      254,522
                                   ---------                                    ---------
                                   ---------                                    ---------
</TABLE>

                                       42
<PAGE>
                               CUTTER & BUCK INC.

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

NOTE 8. SHAREHOLDERS' EQUITY (CONTINUED)
    At April 30, 1999, 183,788 shares were available for future grant and
876,195 shares were reserved for future issuance.

    RESTRICTED STOCK PLAN  In August 1998, the Company adopted a Stock Bonus
Plan which permits eligible employees receiving cash bonuses to elect to receive
shares of Restricted Stock of the Company in lieu of all or a portion of their
cash bonus. Up to 37,500 shares of Restricted Stock can be issued under the
Stock Bonus Plan and no more than 11,250 shares of Restricted Stock can be
issued to any one participant in any one year. Eligible employees are awarded
the Restricted Stock at a 15% discount from market price. As of April 30, 1999,
11,221 shares had been issued under the Stock Bonus Plan and 26,279 shares were
reserved for future issuance. The Company has recorded deferred compensation of
$171,744 in 1999. This amount is being amortized over the vesting period, 25%
every six months. Compensation expense relating to restricted stock awards was
$64,404 in 1999.

    SHAREHOLDER RIGHTS PLAN  In November 1998, the Board of Directors adopted a
Shareholder Rights Plan "Rights Plan" designed to protect shareholders from
certain takeover tactics. Under the Rights Plan, the Board of Directors declared
and distributed to our shareholders a dividend of one right, each referred to as
a Right, for each outstanding share of common stock. The Rights are not
exercisable or transferable separately from shares of common stock until the
earlier of : (1) 10 days following a public announcement that a person or group
has acquired, or obtained the right to acquire, beneficial ownership of a
designated percentage of the outstanding shares of the common stock and (2) 10
business days following the commencement or announcement of an intention to make
a tender or exchange offer that would result in an acquiring person or group
beneficially owning a designated percentage of outstanding shares of common
stock, unless the Board of Directors sets a later date, referred to as the
Distribution Date. The Board of Directors has the option to redeem the Rights at
a nominal cost or prevent the Rights from being triggered by designating offers
for all outstanding common stock as a permitted offer. The Company may redeem
the Rights during the initial 180 days after a triggering event generally only
by a majority of directors who are directors before any person or group obtains
or acquires the right to acquire a designated percentage of outstanding shares
of common stock. Prior to the Distribution Date, the Company is able to amend or
supplement the Rights Plan without the consent of any of the holders of the
Rights. Following the Distribution Date, the Rights Plan could be amended to
cure any ambiguity, to correct or supplement any inconsistent provision or any
other provision so long as such amendment or supplement would not adversely
affect the holders of the Rights, other than an acquiring person or group. The
Rights expire on November 20, 2008 unless earlier redeemed by the Company.

    Each Right, other than those Rights held by an acquiring person or group,
when exercisable, would entitle its holders to purchase one one-hundredth of a
share of class A junior preferred stock, subject to adjustment or, in certain
instances, other securities of the Company. In certain circumstances, if the
Company, in a merger or consolidation, is not the surviving entity or disposes
of more than 50% of the company's assets or earnings power, the Rights would
entitle their holders, other than an acquiring person or group, to purchase the
highest priority voting shares in the surviving entity or its affiliates having
a market value of two times the exercise price of the Rights.

    EMPLOYEE STOCK PURCHASE PLAN  In December 1995, the Company adopted an
Employee Stock Purchase Plan which allows eligible employees to buy Company
stock at a 15% discount from market price utilizing payroll deductions. As of
April 30, 1999, 24,221 shares had been issued under the plan and 350,779 shares
have been reserved for future issuance.

                                       43
<PAGE>
                               CUTTER & BUCK INC.

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

NOTE 8. SHAREHOLDERS' EQUITY (CONTINUED)
    STOCK SPLIT  On May 28, 1999, the Company's Board of Directors approved a
3-for-2 stock split of the shares of common stock, to be effected in the form of
a share dividend on shares of common stock outstanding on June 4, 1999. The
distribution of shares was made on June 15, 1999. Accordingly, the accompanying
consolidated financial statements have been restated to reflect the stock split.

NOTE 9. EMPLOYEE BENEFITS

    Effective January 1, 1995, the Company implemented a salary deferral 401(k)
plan for substantially all of its employees. The plan allows employees to
contribute a percentage of their pretax earnings annually, subject to
limitations imposed by the Internal Revenue Service. The plan also allows the
Company to contribute an amount at its discretion. To date, the Company has made
no contributions to the plan.

NOTE 10. EARNINGS PER SHARE

    The following table sets forth the computation of basic and diluted earnings
per share:

<TABLE>
<CAPTION>
                                                                                  ----------------------------------
                                                                                         YEAR ENDED APRIL 30,
                                                                                  ----------------------------------
                                                                                        1997        1998        1999
                                                                                  ----------  ----------  ----------
<S>                                                                               <C>         <C>         <C>
Numerator:
  Numerator for basic and diluted earnings per share--net income................  $3,597,617  $5,660,068  $8,007,862
                                                                                  ----------  ----------  ----------
                                                                                  ----------  ----------  ----------

Denominator:
  Denominator for basic earnings per share--weighted average common shares......   6,581,454   7,851,564   8,212,468

Effect of dilutive securities stock options.....................................     422,255     441,986     349,764
                                                                                  ----------  ----------  ----------
  Denominator for diluted earnings per share....................................   7,003,709   8,293,550   8,562,232
                                                                                  ----------  ----------  ----------
                                                                                  ----------  ----------  ----------
Basic earnings per share........................................................  $     0.55  $     0.72  $     0.98
Diluted earnings per share......................................................  $     0.51  $     0.68  $     0.94
</TABLE>

NOTE 11. LITIGATION

    The Company has been named as a defendant in two lawsuits related to its
sourcing of garments manufactured in Saipan. The first, Does v. The Gap, Inc.,
et al. was filed in the Federal District Court in Los Angeles on behalf of an
alleged class of garment factory workers located in Saipan, and generally
alleges that the defendants have conspired to control unlawful "sweatshop"
conditions constituting peonage and involuntary servitude. The plaintiffs in
this action generally seek an order enjoining defendants from continuing to
manufacture garments under the alleged "sweatshop" conditions, establishment of
a monitoring program and imposition of an asset freeze or constructive trust,
and punitive as well as treble, special and compensatory damages in unspecified
amounts. The second, UNITE v. The Gap, Inc. et al., was filed in the Superior
Court in San Francisco, California, by a union and three public interest groups,
and generally alleges that the defendants engaged in various unlawful business
acts and practices. The plaintiffs in this action generally seek an order
restraining the defendants from engaging in the allegedly unfair business acts
and practices, requiring a corrective

                                       44
<PAGE>
                               CUTTER & BUCK INC.

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

NOTE 11. LITIGATION (CONTINUED)
advertising compaign or monitoring program, imposition of an asset freeze or
constructive trust, payment of restitution and disgorgement of profits from
engaging in the allegedly unlawful business acts and practices in unspecified
amounts. In the federal action, all of the defendants including the Company have
filed motions to transfer the venue of that case to Saipan. The motion is noted
for consideration on July 12, 1999. The retailer or buyer defendants including
the Company have responded to written interrogatories concerning witnesses and
documents that relate to the Saipan garment business. The retailer or buyer
defendants including the Company also have submitted a motion to dismiss all of
the causes of action in the federal action, other than the claim for false
imprisonment, on the grounds that the allegations of the complaint fail to state
a claim upon which relief can be granted. In addition, the defendants, including
the Company, in the state action have filed a demurrer (motion to dismiss the
claims asserted in that lawsuit). The hearing on that motion is scheduled for
August 6, 1999. Although the Company intends to vigorously defend itself, these
lawsuits are subject to many uncertainties and management of the Company is not
able to make a determination of the ultimate exposure with respect to these
matters. As a result, there can be no assurance that these lawsuits will not
have a material adverse effect on the Company's financial position or results of
operations.

    The Company is also a party to routine litigation incidental to its
business. Management believes the ultimate resolution of these routine matters
will not have a material adverse effect on its financial position and results of
operations.

NOTE 12. QUARTERLY FINANCIAL DATA (UNAUDITED)

    Financial results by quarter for the fiscal years ended April 30, 1998 and
1999 are as follows:

<TABLE>
<CAPTION>
                                                                        -------------------------------------------
                                                                                   FISCAL QUARTER ENDED
                                                                        -------------------------------------------
                                                                        JULY 31  OCTOBER 31   JANUARY 31   APRIL 30
                                                                        -------  ----------   ----------   --------
<S>                                                                     <C>      <C>          <C>          <C>
IN THOUSANDS, EXCEPT SHARE AMOUNTS
1998
  Net sales...........................................................  $12,378   $17,349      $14,151     $ 26,226
  Gross profit........................................................    4,960     7,145        5,952       11,405
  Net income..........................................................      475     1,160          673        3,352
  Diluted earnings per share..........................................  $  0.06   $  0.14      $  0.08     $    .40

1999
  Net sales...........................................................  $17,763   $25,993      $23,148     $ 40,382
  Gross profit........................................................    7,612    10,939        9,892       17,785
  Net income..........................................................      794     1,664          969        4,581
  Diluted earnings per share..........................................  $  0.09   $  0.20      $  0.11     $   0.53
</TABLE>

                                       45
<PAGE>
 ITEM 9. CHANGES AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL
                                   DISCLOSURE

    None.

                                       46
<PAGE>
                                    PART III
          ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT

    The directors and executive officers of Cutter & Buck are as follows:

<TABLE>
<CAPTION>
----------------------------------------------------------------------------------------------------
NAME                                   AGE  POSITION
----------------------------------------------------------------------------------------------------
<S>                            <C>          <C>
Harvey N. Jones(1)                     48   Chairman and Chief Executive Officer
Martin J. Marks                        50   President, Chief Operating Officer, Treasurer, Secretary
                                            and Director
Jim C. McGehee                         49   Vice President of Sales
Patricia A. Nugent                     44   Vice President of Merchandise and Design
Jon P. Runkel                          42   Vice President of Production
Philip C. Davis                        41   Vice President of Operations
Philip B. Jones                        46   Vice President of International/Managing Director of
                                            Cutter & Buck (Europe) B.V.
Stephen S. Lowber                      48   Vice President and Chief Financial Officer
Jeffrey S. Buchman                     51   Vice President of Marketing and Communications
Ernest J. Pyle                         44   Vice President and Chief Information Officer
Michael S. Brownfield(1)(3)            59   Director
Frances M. Conley(1)(2)(3)             56   Director
Larry C. Mounger(2)(3)                 61   Director
James C. Towne(2)                      56   Director
</TABLE>

------------------------

(1) Member of the Nominating Committee.

(2) Member of the Audit Committee.

(3) Member of the Compensation Committee.

    HARVEY N. JONES has been Chief Executive Officer and a director of Cutter &
Buck since its inception in January 1990 and has been Chairman of the Board of
Directors since 1997.

    MARTIN J. MARKS, President, Chief Operating Officer, Treasurer, Secretary
and a director of Cutter & Buck, joined Cutter & Buck as Chief Financial Officer
in January 1991. Prior to being named President in 1997, he held the position of
Senior Vice President. Mr. Marks has a bachelor's degree in business
administration from Portland State University.

    JIM C. MCGEHEE, Vice President of Sales, joined Cutter & Buck in February
1990. Mr. McGehee has a bachelor's degree in business (marketing) from Auburn
University.

    PATRICIA A. NUGENT, Vice President of Merchandise and Design, joined Cutter
& Buck in December 1993 and served as Vice President of Production from April
1994 to April 1996. Beginning her career at Roffe/Demetre, she has experience
merchandising, designing, sourcing and in the technical aspects of apparel with
leading brands in men's and women's sportswear, activewear (golf, tennis,
running and skiing), outerwear and accessories. Ms. Nugent has a bachelor's
degree in Clothing and Textile Design from the University of Washington and a
design certificate from the Modeschule der StadtWien in Vienna, Austria.

    JON P. RUNKEL, Vice President of Production, joined Cutter & Buck in April
1995 and served as Operations Manager from April 1995 to April 1996. From
October 1994 to April 1995, he was a production manager of Organik Technologies,
Inc., an apparel manufacturer, producing contract work for such names as
Patagonia, Eddie Bauer, Timberland and Jantzen, and from March 1993 to September
1994, he was a consultant on operations and production for Susan Barry Designs,
a women's line.

                                       47
<PAGE>
    PHILIP C. DAVIS, Vice President of Operations, joined Cutter & Buck in
January 1997. From 1987 to 1996, he held various positions at Stusser Electric,
an electrical parts distribution company, including president from 1994 to 1996.
Mr. Davis has a bachelor's degree in economics from Stanford University.

    PHILIP B. JONES, Vice President of International / Managing Director of
Cutter & Buck (Europe) B.V., joined Cutter & Buck in July 1997. From 1989 to
June 1997, Mr. Jones was an independent international trade consultant serving
certain major U.S. companies. Mr. Jones holds a bachelor's degree in East Asian
studies from Harvard University.

    STEPHEN S. LOWBER, Vice President and Chief Financial Officer, joined Cutter
& Buck in September 1997. From April 1992 to June 1997, Mr. Lowber was Chief
Financial Officer of LUXAR Corporation, a medical devices manufacturing company.
Mr. Lowber has a bachelor's degree in accounting from Western Washington
University and a master's degree in business administration from Seattle
University, and he is a certified public accountant.

    JEFFREY S. BUCHMAN, Vice President of Marketing & Communications, joined
Cutter & Buck in July 1998. From 1974 to June 1998, Mr. Buchman was a faculty
member at The Fashion Institute of Technology, most recently serving as the
Chairman of the Advertising and Marketing Communications Department. From 1986
to 1998, he also served as the president of The Telefashion Group, a provider of
marketing and communications consulting services. Mr. Buchman has a bachelor's
degree in English from the State University of New York at Buffalo and a
master's degree in communications management from Brooklyn College.

    ERNEST J. PYLE, Vice President and Chief Information Officer, joined Cutter
& Buck in July 1998. From November 1995 to June 1998, Mr. Pyle held various
positions with System Software Associates, Inc., an enterprise resource planning
solutions provider, most recently serving as Vice President, North America. From
April 1992 to November 1995, he was owner of SSA Northwest, an independent
affiliate of Systems Software Associates, Inc. Mr. Pyle attended the University
of Washington and has an associate's degree in computer science from Peterson
Technical College.

    MICHAEL S. BROWNFIELD has been a director of Cutter & Buck since May 1995.
He is a private investor and has a bachelor's degree in chemistry from the
University of Oregon. Mr. Brownfield is the Chairman of Accurate Molded
Plastics, a private manufacturer of tooling and injection-molded plastics, and
also serves on the boards of directors of Heartsmart, Inc., a private biomedical
company, Northwest Cascade, Inc., a private construction company, Kitsap
Entertainment Corporation, a private restaurant franchisee, and Global Tel
Resources, Inc., a private telecommunications company.

    FRANCES M. CONLEY has been a director of Cutter & Buck since July 1990.
Since 1982, she has been a shareholder, director and principal of Roanoke
Capital, Ltd., the general partner of Roanoke Investors' Limited Partnership, a
venture capital limited partnership. She has a bachelor's degree in music from
Emmanuel College and a master's degree in business administration from the
Harvard Graduate School of Business Administration. Ms. Conley is a director of
Recreation Equipment Inc., a private national retailer of outdoor gear and
clothing.

    LARRY C. MOUNGER has been a director of Cutter & Buck since July 1990. Since
1997, he has been Chairman and Chief Executive Officer of Sunrise Clothing,
Inc., a screen printing company. From January 1993 to October 1995, he served as
President, Chief Executive Officer and a director of Sun Sportswear, Inc., a
publicly held garment screenprinter. He has a bachelor's degree in business
administration and a juris doctor degree from the University of Washington.

    JAMES C. TOWNE has been a director of Cutter & Buck since 1997. Mr. Towne
has been Chairman of Greenfield Development Corporation, a remediation and
development company since 1995. From 1982 to 1995, he was President, CEO or
Chairman of various companies, including Osteo Sciences Corporation, Photon
Kinetics, Inc., MCV Corporation, Metheus Corporation and Microsoft Corporation.
Mr. Towne also serves on the board of directors of Tully's Coffee Co., a private
specialty

                                       48
<PAGE>
coffee retailer. He has a bachelor's degree in economics and a master's degree
in business administration from Stanford University.

                        ITEM 11. EXECUTIVE COMPENSATION

    The information required by this Item is incorporated herein by reference to
the information contained in the "Executive Compensation" section of our Proxy
Statement to be filed with the Securities and Exchange Commission within 120
days after the close of our fiscal year.

                                       49
<PAGE>
    ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

    The information required by this Item is incorporated herein by reference to
the information contained in the "Security Ownership of Certain Beneficial
Owners and Management" section of our Proxy Statement to be filed with the
Securities and Exchange Commission within 120 days after the close of our fiscal
year.

                                       50
<PAGE>
            ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

    The information required by this Item is incorporated herein by reference to
the information contained in the "Certain Relationships and Related
Transactions" section of our Proxy Statement to be filed with the Securities and
Exchange Commission within 120 days after the close of our fiscal year.

                                       51
<PAGE>
                                    PART IV
   ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K

A. The following documents are filed as part of this report:

    1.  Consolidated Financial Statements

        Report of Ernst & Young LLP, Independent Auditors Report
       Consolidated Balance Sheets as of April 30, 1998 and 1999
       Consolidated Statements of Income for the years ended April 30, 1997,
        1998 and 1999
       Consolidated Statements of Shareholders' Equity for the years ended April
        30, 1997, 1998 and 1999
       Consolidated Statements of Cash Flows for the years ended April 30, 1997,
        1998 and 1999
       Notes to Consolidated Financial Statements

    2.  Financial Statement Schedules--see index on page 28 of this Report.

        All other financial statement schedules not listed are omitted because
        either they are not applicable or not required, or the required
        information is included in the consolidated financial statements.

    3.  Exhibits

Exhibits required by Item 601 of Regulation S-K:

<TABLE>
<CAPTION>
EXHIBIT NO.
-----------
<C>          <S>
       3.1   Restated Articles of Incorporation (3.1) (1)

       3.2   Bylaws (filed herewith)

       4.1   Specimen Common Stock Certificate (4.1)(1)

      10.3   Lease dated May 22, 1994 between First and Cedar Associates and Jones/Rodolfo Corporation d/b/a Cutter &
               Buck (10.3) (1)

      10.4   Indenture of Lease dated August 10, 1993 between Lakeplace Associates and Jones/Rodolfo Corporation
               (10.4) (1)

      10.5   Factoring Agreement dated March 1, 1995 between Republic Factors Corp. and Jones/Rodolfo Corporation
               (10.5) (1)

      10.6   Form of Registration Rights Agreement between Cutter & Buck Inc. and Roanoke Investors' Limited
               Partnership, Needham Capital SBIC, L.P. and Needham Emerging Growth Partners, L.P. (10.6) (1)

      10.9   1991 Stock Option Plan (10.9) (1)

      10.10  1995 Nonemployee Director Stock Incentive Plan (10.10) (1)

      10.11  1995 Employee Stock Option Plan (10.11) (1)

      10.12  1995 Employee Stock Purchase Plan (incorporated by reference to the Registrant's Registration Statement
               on Form S-8 (File No. 33-80783))

      10.13  Form of Representatives' Warrant (10.13) (1)

      10.14  Amended and Restated Loan Agreement April 28, 1999 between Cutter & Buck Inc. and Washington Mutual Bank
               d/b/a Western Bank, and supporting documents (filed herewith)

      10.15  1997 Stock Incentive Plan (incorporated by reference to the Registrant's Registration Statement on Form
               S-8 (File No. 333-43145))
</TABLE>

                                       52
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT NO.
-----------
<C>          <S>
      10.16  Stock Bonus Plan (10.16)(2)

      10.17  Lease dated August 11, 1998 between Pine Street Development LLC and Cutter and Buck Inc. (10.17)(2)

      10.18  Lease dated April 15, 1998 between Whitmac Company and Cutter and Buck Inc. (10.18)(2)

      10.19  Industrial Lease dated May 27, 1999 between Cutter & Buck Inc. and Zelman Renton, LLC (filed herewith)

      10.20  Change in Control Agreement dated March 15, 1999 between Cutter & Buck Inc. and Harvey N. Jones (filed
               herewith)

      10.21  Change in Control Agreement dated March 15, 1999 between Cutter & Buck Inc. and Martin J. Marks (filed
               herewith)

      23.1   Consent of Ernst & Young LLP, Independent Auditors (filed herewith)

      27.1   Financial Data Schedule (filed herewith)
</TABLE>

------------------------

(1) Incorporated by reference to the exhibit shown in the preceding parentheses
    and filed with the Registrant's Registration Statement on Form SB-2 (File
    No. 33-94540-LA)

(2) Incorporated by reference to the exhibit shown in the preceding parentheses
    and filed with the Registrant's Form 10-Q for the quarter ended October 31,
    1998.

B.  Reports on Form 8-K

There were no reports on Form 8-K filed during the fourth quarter ended April
    30, 1999.

                                       53
<PAGE>
                                   SIGNATURES

    Pursuant to the requirements of Section 13 or 15(d) of the Securities Act of
1934, the registrant has duly caused this report to be signed on its behalf by
the undersigned, thereunto duly authorized.

<TABLE>
<S>                             <C>  <C>
                                CUTTER & BUCK INC.
                                (Registrant)

                                By:             /s/ HARVEY N. JONES
                                     -----------------------------------------
                                        Harvey N. Jones, Chairman and Chief
June 21, 1999                                    Executive Officer
</TABLE>

    Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed by the following persons on behalf of the registrant and
in the capacities and on the dates indicated.

<TABLE>
<C>                             <S>                         <C>
                                Chairman, Chief Executive
     /s/ HARVEY N. JONES          Officer and Director
------------------------------    (Principal Executive         June 21, 1999
       Harvey N. Jones            Officer)

     /s/ MARTIN J. MARKS        President, Chief Operating
------------------------------    Officer, Treasurer,          June 21, 1999
       Martin J. Marks            Secretary and Director

                                Vice President and Chief
    /s/ STEPHEN S. LOWBER         Financial Officer
------------------------------    (Principal Financial and     June 21, 1999
      Stephen S. Lowber           Accounting Officer)

  /s/ MICHAEL S. BROWNFIELD
------------------------------  Director                       June 21, 1999
    Michael S. Brownfield

    /s/ FRANCES M. CONLEY
------------------------------  Director                       June 21, 1999
      Frances M. Conley

     /s/ LARRY C. MOUNGER
------------------------------  Director                       June 21, 1999
       Larry C. Mounger

      /s/ JAMES C. TOWNE
------------------------------  Director                       June 21, 1999
        James C. Towne
</TABLE>

                                       54
<PAGE>
                     INDEX TO FINANCIAL STATEMENT SCHEDULES

<TABLE>
<CAPTION>
SCHEDULE
-------------
<S>            <C>                                                                                           <C>
Schedule II..  Valuation and Qualifying Accounts
</TABLE>

                                       55
<PAGE>
                                  SCHEDULE II
                       VALUATION AND QUALIFYING ACCOUNTS
                               CUTTER & BUCK INC.
<TABLE>
<CAPTION>
              COL. A                    COL. B                   COL. C                   COL. D         COL. E

<S>                                  <C>            <C>              <C>              <C>             <C>
                                                               ADDITIONS
                                                    --------------------------------

<CAPTION>
                                                      CHARGED TO
                                      BALANCE AT       REVENUE,        CHARGED TO                      BALANCE AT
                                       BEGINNING         COSTS       OTHER ACCOUNTS     DEDUCTIONS         END
DESCRIPTION                            OF PERIOD      OR EXPENSES      --DESCRIBE       --DESCRIBE      OF PERIOD
-----------------------------------  -------------  ---------------  ---------------  --------------  -------------
<S>                                  <C>            <C>              <C>              <C>             <C>
Year Ended April 30, 1999
  Reserves and allowances deducted
    from asset accounts:
    Allowance for doubtful
      accounts.....................    $ 654,731     $     447,460             --      $  284,717(A)   $   817,474
    Reserve for sales returns and
      allowances...................    $ 533,082     $   3,782,784             --      $3,407,149(B)   $   908,717
    Reserve for inventory
      obsolescence.................    $ 499,453     $     873,736             --      $  295,436(C)   $ 1,077,753

Year Ended April 30, 1998
  Reserves and allowances deducted
    from asset accounts:...........
    Allowance for doubtful
      accounts.....................    $ 142,669     $     518,277             --      $    6,215(A)   $   654,731
    Reserve for sales returns and
      allowances...................    $ 285,892     $   2,106,839             --      $1,859,649(B)   $   533,082
    Reserve for inventory
      obsolescence.................    $  97,785     $     556,588             --      $  154,920(C)   $   499,453

Year Ended April 30, 1997
  Reserves and allowances deducted
    from asset accounts:...........
    Allowance for doubtful
      accounts.....................    $ 212,314     $      52,877             --      $  122,522(A)   $   142,669
    Reserve for sales returns and
      allowances...................    $ 106,573     $   1,264,437             --      $1,085,118(B)   $   285,892
    Reserve for inventory
      obsolescence.................    $ 201,521                --             --      $  103,736(C)   $    97,785
</TABLE>

------------------------

(A) Deductions consist of write-offs of uncollectable accounts, net of
    recoveries.

(B) Deductions consist of losses on sales retures and other credits allowed.

(C) Deductions consist of inventory sold at a loss.

                                       56