2001 Annual Report

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a founding member of Social Accountability 8000

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The solidhistoryand sound future
of a Company relies on the qualityof the product,
thevisionof its leaders
and the dedicationof its employees.

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CUTTER & BUCK

Fellow
Shareholders,

We
entered fiscal 2001 with high hopes of continuing our strong growth pace. During our first two quarters, performance met our expectations. At that time, all signs indicated
continued sales success, so we made our inventory purchases and business commitments for the second half of the fiscal year. In December, our business was impacted as the economy had taken a sudden
downturn, and we found ourselves in a radically new environment. Our Corporate customers reacted to the economic downturn by quickly reining in their marketing budgets, while our Golf customers
suffered not only from the economic malaise but many of them also were faced with severe Winter and Spring weather. That weather also delayed many course openings. As a result we fell short of our
ownas well as Wall Street'ssales and earnings expectations, and had a disappointing and frustrating back half of fiscal 2001. For the year, we grew our revenues 12% to
$171,068,000, with most of it in a very tough business climate. Net income decreased 65% to $3,701,000, mainly because it understandably took time to delay or stop our growth investments in reaction
to the cooling economy. Our costs were out of proportion to our lower than expected revenues.

At
a time like this we have to ask ourselves: should we have done things differently? We've had a lot of such discussions with our management team and Board of Directors. I think that
it's constructive to look at where we've been in the last few years.

First,
our constant challenge for the past five years has been to build an infrastructure capable of sustaining and servicing our rapid growth. This has necessitated that we make
well-considered investments ahead of the growth curve to meet the increased demands of our growing business. The investments that we made in people, products and resources were carefully
evaluated and have provided the superstructure for a Company that has grown from $47 million to $171 million in revenues in five short years.

Our
recent investments include:

Inventory:
Without a significant Classics inventory, we would not have become the leading supplier of basic garments to the golf industry, nor would we have been able to grow our
Corporate business from $9 million to $62 million over the last five years. Although our Classics inventory is now higher than planned, we intend to work it into shape over the first
three quarters of fiscal 2002 with no expected margin erosion.

Customer
care: All of our businesses depend upon relationships. We have aggressively hired and trained sales and support staff. We have a large, focused sales force, and our
representatives do a great job of taking care of our customers. To help our sales force, we have expanded our customer service teams and have continued to enhance our technology to aide in faster and
easier servicing of our customers.

Marketing:
We believe the best place to influence the Cutter & Buck consumer is at the point of sale. Cutter & Buck has elegant, branded fixturing programs in 2,745 of
the most prestigious golf and fashion shops around the world. We have also created a world class merchandising system for use at some of the most heralded tournaments in golf. These investments are
"silent salesmen" for our brand every single day and are designed to enable our customers to realize faster return on their inventory purchases.

Distribution:
In the past fiscal year, we finalized the implementation of a total distribution system overhaul. In our new distribution center, we installed a warehouse management
system to automate and enhance our shipping and receiving capabilities. Our Operations and Information Technology teams made this happen without a hitch. We expect the new warehouse management system
to continue to help us meet our peak shipping goals with 40% less manpower and an accuracy rate that is close to perfect. With this overhaul in place, our distribution capabilities are prepared for
the next stage of growth.

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Technology: Like most companies, we have a goal of increasing our productivity and operating leverage by making intelligent investments in technology. In addition to our distribution
center investments, we have provided laptops that enable all of our salespeople to enter their orders from the field through a virtual private network. During this last year, we made our inventory and
order status information available to our customers online through our proprietary extranet, and our Corporate customers will soon be able to enter and send orders to us over the same system. Our
store managers receive pictorial merchandising diagrams over the internet. Our critical business information is being gathered and disseminated with more skill and speed every month, and our Company
intranet helps fortify our strong Company culture. This next year, we will continue to carefully invest in mission critical technology.

Expanded
Opportunities: We have not only added new products to our Golf, Corporate and Specialty Retail collections, but we have invested in new businesses that we expect will provide
significant revenues and profits in the future. Our Women's fashions are already important to every one of our established business channels, and we believe that they will someday enjoy the same
revenues as our Men's products. Our Consumer Direct business, consisting of our twelve beautiful retail stores and our handsome and informative e-commerce site, has provided enormous
uplift to the Cutter & Buck brand. Our stores and website not only point consumers to all of our authorized dealers, but also serve those
that have not otherwise been able to find adequate presentations of Cutter & Buck in their local community.

The
investments we've made in our infrastructure and new businesses have added to our fixed expenses, but should position us for strong growth when the economic uncertainty subsides.
However, our business plan does not anticipate that the economy will give us that opportunity in fiscal year 2002. We're not going to promise exciting results in this kind of environment, and we have
pegged our business plan to numbers that we have confidence in achieving.

For
fiscal year 2002, our major objectives are:

First,
continue to build Cutter & Buck into a prestigious multi-channel lifestyle brand. Our strategy is working. We will maximize our strength in our core businesses and
nurture our opportunities in the newer ones. Over the past few years, we've steadily invested to enhance our competitive strengths in Golf, Specialty Retail and Corporate. This year, we expect to reap
some rewards from all these investments without spending much more. Also over the past few years, we broadened our strategy to include Women's, E-business and Company Stores. We're happy
with what we've been able to achieve. These investments are currently generating significant branding benefits, even if they're still growing to profitability. In a couple of years, we expect these
investments to be very important to our profit picture.

Second,
our balance sheet is strong, and we intend to keep it that way. In fact, we intend to generate positive free cash flow (operating cash flow less capital expenditures) for the
first time as a public Company. To do this, we're reducing our capital expenditures and taking a breather in the rate of Company store expansion. We will also convert inventory into cash by working
down our Classics and by purchasing our Fashion inventory very carefully. In this environment, we're willing to leave money on the table by selling out of our Fashion goods early.

Next,
even though we're clearly focused on executing our long-term strategy, we're determined to show the best possible results for fiscal year 2002. To do this, we've cut
back operating expenses throughout the Company and proceeded with a selective staff reduction. At the same time, we've created powerful programs to win market share and strengthen relationships in
every one of our businesses. This includes a continuation of our advertising program in national consumer publications, the sponsorship of star golfer Annika Sorenstam to build awareness for our
terrific Women's Golf collection, in-store incentive programs with our best retail customers, and direct mail communication with our consumers.

And
finally, we expect to emerge from this period with strengtha strong balance sheet, a strong brand, and strong relationships with our customers and suppliers. At the
beginning of February, we sent

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our managers into the field to determine the exact state of our market position in our major businesses, and found that our brand is powerful, our products are selling and we have
well-established relationships with our customers. In this environment, we want to win market share, not lose it. Our Company is healthy and we expect continued growth as the economy
begins to recover. Despite our cautious approach to fiscal 2002, we are full of optimism about the future. Our respected brand provides us with extensive opportunities and it enjoys more awareness,
loyalty and respect every day. Our multi-channel strategy addresses the desires of today's consumerhow they shop and why they bond with certain brands. Our products are among the best in
the apparel industry. Our organization is committed to continual process enhancement and customer care. And we do all this with a deep commitment to social accountability. I hope that you share our
values.

We
appreciate your support and confidence as we build Cutter& Buck into a premier worldwide brand.

LOGO

Harvey
N. Jones
Chairman and CEO

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2001  FINANCIAL REPORT

|MANAGEMENT'S DISCUSSION AND ANALYSIS       |  | 8 
|------------------------------------------ |  | --
|SELECTED FINANCIAL DATA                    |  | 20
|INDEPENDENT AUDITOR'S REPORT               |  | 21
|CONSOLIDATED FINANCIAL STATEMENTS          |  | 22
|NOTES TO CONSOLIDATED FINANCIAL STATEMENTS |  | 26
|COMMON STOCK                               |  | 38
|CORPORATE INFORMATION                      |  | 39

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MANAGEMENT'S DISCUSSION AND ANALYSIS OF  FINANCIAL CONDITIONS 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 Annual Report. In addition to the historical information contained here, this Annual 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, but are
not limited to the following: style changes and product acceptance, relations with and performance of suppliers, the ability of the Company to control costs and expenses, the ability of the Company to
carry out successful design and planned product and brand messaging/extension activities and to penetrate its chosen distribution channels, competition, access to capital, foreign currency risks,
risks associated with opening and operating retail locations, risks associated with the Company's entry into new markets or distribution channels, technological change, political and trade relations
and the overall level of consumer spending on apparel and global economic conditions. Additional information on these and other factors that could affect the Company's financial results is set forth
below and in our Securities and Exchange Commission filings. Finally, there may be other factors not mentioned above or included in the Company's SEC filings that may cause actual results to differ
materially from any forward-looking information. You should not place undue reliance on these forward-looking statements. The Company assumes no obligation to update any forward-looking statements as
a result of new information, future events or developments, except as required by the Securities laws.

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 with the latest
textile and fashion innovations. We sell our distinctive sportswear, fashion and outerwear products primarily through golf pro shops and resorts, corporate accounts, specialty retail, international
and other channels including Company-owned retail stores. In fiscal 2001, net sales to golf pro shops and resorts represented 33.0% of our net sales, corporate accounts represented 36.3% of our net
sales, specialty retail represented 13.6% of our net sales, international represented 6.4% of our net sales and other distribution channels, including Company-owned retail, represented 10.7% of our
net sales.

During
fiscal 2001 net sales increased approximately $18.6 million or 12.2%. This increase was primarily attributable to growth in our corporate, specialty retail and other
distribution channels. The increase in net sales to these channels was partially offset by a decrease in sales to our golf distribution channel. Corporate and specialty retail net sales increased due
to an increase in the number of accounts and an increase in the average annual net sales per account. Net sales to our other distribution channels increased due to an increase in the number of
Company-owned retail stores and higher liquidation sales. Net sales to our golf distribution channel decreased as cold winter and spring weather delayed some course openings and resulted in a decrease
in the number of rounds played and a corresponding decrease in net sales. International net sales remained relatively flat in fiscal 2001. 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.

We
have continued to invest in new business initiatives, management and systems. We have also enhanced our customer support, embroidery services and added six new Company-owned retail
stores. These investments have resulted in operating expenses growing at a faster rate than the growth in net

8

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sales and have increased operating expenses as a percentage of net sales. The increase in our sales volume has given us negotiating leverage to purchase product at lower unit costs, thereby increasing
gross margins. Sales through our retail stores and higher margin women's line have also grown and contributed to increased gross margins. These improvements were offset by higher
off-channel liquidation sales primarily in the fourth quarter of fiscal 2001 and higher levels of sales allowances than in fiscal 2000.

Our
flagship retail store is located in Seattle and as of April 30, 2001 we have eleven additional stores in selected metropolitan markets. We expect to open another one or two
stores during fiscal 2002.

As
a result of the slowed economy, we expect flat to very modest sales growth for fiscal 2002. We plan to control the growth of fixed expenses by reducing head count and discretionary
spending. However, we will continue to develop our new businesses in Women's, Company-owned retail stores and E-business, which will result in operating expenses being somewhat higher than
in fiscal 2001.

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:

|Year Ended April 30,                    |                                                                | 2001                         |      | 2000  |      | 1999  |     
|--------------------------------------- | -------------------------------------------------------------- | ---------------------------- | ---- | ----- | ---- | ----- | ----
|Consolidated Statements of Income Data: |                                                                |                              |      |       |      |       |     
|Net sales                               |                                                                | 100.0                        | %    | 100.0 | %    | 100.0 | %   
|Cost of sales                           |                                                                | 58.1                         |      | 55.7  |      | 56.9  |     
|                                        |                                                                |                              |      |       |      |       |     
|Gross profit                            |                                                                | 41.9                         |      | 44.3  |      | 43.1  |     
|Operating expenses:                     |                                                                |                              |      |       |      |       |     
|                                        | Design and production                                          |                              | 2.4  |       | 2.3  |       | 2.7 
|                                        | Selling and shipping                                           |                              | 27.3 |       | 23.6 |       | 20.7
|                                        | General and administrative                                     |                              | 8.3  |       | 7.4  |       | 8.0 
|                                        |                                                                |                              |      |       |      |       |     
|                                        |                                                                | Total operating expenses     |      | 38.0  |      | 33.3  |     
|                                        |                                                                |                              |      |       |      |       |     
|Operating income                        |                                                                | 3.9                          |      | 11.0  |      | 11.7  |     
|Other income (expense):                 |                                                                |                              |      |       |      |       |     
|                                        | Factor commission and interest expense, net of interest income |                              | (0.7 | )     | (0.3 | )     | (0.4
|                                        | License and royalty income, net of other expense               |                              | 0.3  |       | 0.2  |       | 0.4 
|                                        |                                                                |                              |      |       |      |       |     
|                                        |                                                                | Total other income (expense) |      | (0.4  | )    | (0.1  | )   
|                                        |                                                                |                              |      |       |      |       |     
|Income before income taxes              |                                                                | 3.5                          |      | 10.9  |      | 11.7  |     
|Income taxes                            |                                                                | (1.3                         | )    | (3.9  | )    | (4.2  | )   
|                                        |                                                                |                              |      |       |      |       |     
|Net income                              |                                                                | 2.2                          | %    | 7.0   | %    | 7.5   | %   
|                                        |                                                                |                              |      |       |      |       |     

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Year Ended April 30, 2001 Compared to the Year Ended April 30, 2000

Net Sales

During
fiscal 2001, total net sales increased $18.6 million, or 12.2%, to $171.1 million. The detail of net sales by distribution channel is as follows:

|Year Ended April 30,    |  | 2001 |       | 2000 |   | Increase
(Decrease) |  | Percent
Change |     
|----------------------- |  | ---- | ----- | ---- | - | ------------------- |  | -------------- | ----
|
|Golf                    |  | $    | 56.4  |      | $ | 59.1                |  | $              | (2.7
|Corporate               |  |      | 62.1  |      |   | 56.4                |  |                | 5.7 
|Specialty retail stores |  |      | 23.2  |      |   | 16.1                |  |                | 7.1 
|International           |  |      | 11.0  |      |   | 10.8                |  |                | 0.2 
|Other                   |  |      | 18.4  |      |   | 10.1                |  |                | 8.3 
|                        |  |      |       |      |   |                     |  |                |     
|                        |  | $    | 171.1 |      | $ | 152.5               |  | $              | 18.6
|                        |  |      |       |      |   |                     |  |                |     

During
fiscal 2001 net sales to the golf distribution channel decreased $2.7 million or 4.6% from the prior year. This decrease was due to cold winter and spring weather, which
delayed some course openings and had a negative impact on the number of golf rounds played during the year. Although sales to our golf distribution channel were down, the number of golf pro shops
purchasing Cutter & Buck products increased in fiscal 2001. This was primarily due to the growth in the size of our golf sales force including the number of sales representatives that showcase
our women's line.

Net
sales through the corporate distribution channel increased $5.7 million, or approximately 10.1%, to $62.1 million in fiscal 2001 from $56.4 million in fiscal
2000. The increase in fiscal 2001 represented approximately 30.6% of the total increase in net sales for the year. This increase is primarily attributable to the increased size and effectiveness of
our exclusive corporate sales force, increases in product styles and inventory levels of our Classics products, relationships with a greater number of promotional products companies that resell
Cutter & Buck apparel to corporate accounts and our growing brand strength.

Specialty
retail store sales increased $7.1 million or approximately 44.1% to $23.2 million in fiscal 2001 representing approximately 13.6% of our net sales in fiscal
2001. This increase is primarily attributable to the increase in the number of specialty retail stores purchasing Cutter & Buck products. International sales, which include sales of our wholly
owned European subsidiary, distributors and licensees were relatively flat compared to fiscal 2000. Sales to other distribution channels, including liquidation and Company-owned retail increased from
$10.1 million or 6.6% of net sales in fiscal 2000 to $18.4 million or 10.7% of net sales in fiscal 2001. This increase is attributable to an increase in the number of Company-owned
retail stores and higher liquidation sales to move out-of-season fashion inventory.

Gross Margin

In fiscal 2001, our gross margin was 41.9% of net sales, compared to 44.3% in fiscal 2000. The decrease during fiscal 2001 is due to higher
off-channel liquidation sales primarily in the fourth quarter of fiscal 2001 and higher levels of sales allowances than in fiscal 2000. This decrease was partially offset by an increase in
gross margin due to lower unit costs and increased sales through our retail stores and higher margin women's line.

Design and Production Expenses

Design and production expenses increased by $0.6 million, or 18.2%, to $4.1 million in fiscal 2001 from $3.5 million in fiscal 2000 and
increased slightly as a percentage of net sales to 2.4% in fiscal 2001

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from 2.3% in fiscal 2000. Design expenses reflect the additional personnel, sample development and travel costs to support our expanding sportswear collection, including our women's line and
accessories products.

The
increase in production expenses was attributable to increased personnel, quality control and travel costs, and costs associated with the strengthening of our embroidery
development organization to support our growing embroidery business.

Selling and Shipping Expenses

Selling and shipping expenses increased by $10.7 million, or 29.8%, to $46.7 million in fiscal 2001 from $36.0 million in fiscal 2000, and
increased as a percentage of net sales to 27.3% in fiscal 2001 from 23.6% in fiscal 2000. The increase in selling expenses was attributable to increased salaries and commissions, travel and training
costs associated with the increase in our sales force and increased trade advertising, showroom costs, and customer service staffing associated with a higher sales volume. In addition, fixturing
expenses increased due to the continued investment in our in-store and concept shop fixture program. During fiscal 2001, we purchased and installed approximately $1 million of
in-store and concept shop fixturing. The investment in these fixtures is amortized as a marketing expense over a three-year period.

The
increase in shipping expenses was due to increased warehouse staffing expense, rent and depreciation expense and packaging supplies costs. Warehouse staffing costs increased as a
result of having a more highly skilled workforce and stronger distribution center management. Rent and depreciation expense increased due to the new distribution center and the warehouse management
system. Packaging supplies cost increased with the higher levels of inventory. The store level operating expenses associated with Company-owned retail stores are also included in selling and shipping
expenses and reflect expenses associated with twelve retail locations during fiscal 2001 compared to six in fiscal 2000.

General and Administrative Expenses

General and administrative expenses increased by $2.9 million, or 25.3%, to $14.1 million in fiscal 2001 from $11.3 million in fiscal
2000, and increased as a percentage of net sales to 8.3% in fiscal 2001 from 7.4% in fiscal 2000. The increase was attributable to increased management and staffing costs, including costs associated
with our retail operations and e-commerce initiative, increased depreciation and rent expense associated with information technology initiatives and corporate facilities, increased
insurance costs, legal and communications expenses, and our corporate social responsibility initiative.

Operating Income

As a result of the above items, operating income decreased by $10.1 million, or 59.9%, to $6.7 million in fiscal 2001 from $16.8 million
in fiscal 2000, and decreased as a percentage of net sales to 3.9% in fiscal 2001 from 11.0% in fiscal 2000.

Factor Commission and Interest Expense, Net of Interest Income

Factor commission and interest expense, net of interest income, increased by approximately $0.8 million to $1.3 million in fiscal 2001 from
$0.5 million in fiscal 2000 and increased as a percentage of net sales to 0.7% in fiscal 2001 from 0.3% in fiscal 2000. The increase is primarily due to interest expense associated with capital
leases entered into during fiscal 2001 and increases in our line of credit. Factoring during fiscal 2001 was limited to our European operations.

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License and Royalty Income, Net of Other Expense

License and royalty income, net of other expense, increased by $0.2 million, or 71.4%, to $0.5 million, representing 0.3% of net sales in fiscal
2001, from $0.3 million and 0.2% of net sales in fiscal 2000. This category includes gains and losses from foreign currency transactions which resulted in a net transaction gain of $134,000 in
fiscal 2001 compared to $43,000 in fiscal 2000 and accounted for most of the increase in this category.

Income Taxes

We recorded $2.3 million of income tax expense in fiscal 2001. The effective rate for income taxes in fiscal 2001 and 2000 was 38% and 36%,
respectively. The effective rate increased as the Company opened retail stores in additional states, thereby increasing state income taxes.

Year Ended April 30, 2000 Compared to the Year Ended April 30, 1999

Net Sales

During fiscal 2000, net sales increased by $45.2 million, or 42.1%, to $152.5 million. The detail of net sales by distribution channel is as
follows:

|Year Ended April 30,    |  | 2000 |       | 1999 |   | Increase |  | Percent
Change |     
|----------------------- |  | ---- | ----- | ---- | - | -------- |  | -------------- | ----
|
|Golf                    |  | $    | 59.1  |      | $ | 51.0     |  | $              | 8.1 
|Corporate               |  |      | 56.4  |      |   | 32.7     |  |                | 23.7
|Specialty retail stores |  |      | 16.1  |      |   | 10.8     |  |                | 5.3 
|International           |  |      | 10.8  |      |   | 8.0      |  |                | 2.8 
|Other                   |  |      | 10.1  |      |   | 4.8      |  |                | 5.3 
|                        |  |      |       |      |   |          |  |                |     
|                        |  | $    | 152.5 |      | $ | 107.3    |  | $              | 45.2
|                        |  |      |       |      |   |          |  |                |     

The
$8.1 million increase in net sales to the golf distribution channel in fiscal 2000 represented approximately 17.9% 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. The increase in the number of our golf pro shop customers is primarily due to the growth in the size of our golf sales force. The increase in average annual net sales
per golf pro shop for fiscal 2000 compared to fiscal 1999 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 the corporate distribution channel increased $23.7 million, or approximately 72.5%, to $56.4 million in fiscal 2000 from $32.7 million in fiscal
1999. The increase in fiscal 2000 represented approximately 52.4% of the total increase in net sales for the year. This increase is primarily attributable to the increased size and effectiveness of
our exclusive corporate channel sales force, increases in our product styles and inventory levels of our Classics products, relationships with a greater number of promotional products companies that
resell Cutter & Buck apparel to corporate accounts and our growing brand strength.

Specialty
retail store sales increased $5.3 million or approximately 49.3% to $16.1 million in fiscal 2000 representing approximately 10.5% of our net sales in fiscal
2000. This increase is primarily attributable to the increase in the number of specialty retail stores purchasing Cutter & Buck products. International sales which include sales of our
wholly-owned European subsidiary, distributors and licensees increased $2.8 million or approximately 35.1% to $10.8 million in fiscal 2000. Sales to other

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distribution channels, including liquidation and Company-owned retail stores also increased from $4.8 million or 4.5% of net sales in fiscal 1999 to $10.1 million or 6.6% of net sales in
fiscal 2000.

Gross Margin

In fiscal 2000, our gross margin was 44.3% of net sales, compared to 43.1% in fiscal 1999. The increase during fiscal 2000 was primarily due to higher
production volumes which has given us the ability to expand our international sourcing and has enhanced our negotiating leverage to purchase product at lower unit costs, thereby increasing gross
margin. This reduction in unit costs was partially offset by slightly higher liquidation sales in fiscal 2000 compared to fiscal 1999, a discount program that was offered to the golf channel for the
spring season and higher unit embroidery costs.

Design and Production Expenses

Design and production expenses increased by $0.6 million, or 18.9%, to $3.5 million in fiscal 2000 from $2.9 million in fiscal 1999 but
decreased as a percentage of net sales to 2.3% in fiscal 2000 from 2.7% in
fiscal 1999. The dollar increase was primarily attributable to increased management and staffing costs to support our expanding sportswear collection including the women's line and golf footwear, and
increased embroidery development costs for the golf and corporate distribution channels. These increases were more than offset by the benefits of higher sales volume which resulted in an overall
reduction in design and production costs as a percentage of net sales in fiscal 2000 compared to fiscal 1999.

Selling and Shipping Expenses

Selling and shipping expenses increased by $13.8 million, or 62.4%, to $36.0 million in fiscal 2000 from $22.2 million in fiscal 1999, and
increased as a percentage of net sales to 23.6% in fiscal 2000 from 20.7% in fiscal 1999. The increase in selling expenses was attributable to increased salaries and commissions, travel expense and
sales sample expense associated with a larger sales force, and increased customer service staffing, trade advertising, and trade show costs associated with higher sales volume. In addition, fixturing
expenses increased due to the continued investment in our in-store and concept shop fixture program. During fiscal 2000, we purchased and installed approximately $1.6 million of
in-store and concept shop fixturing. The investment in these fixtures is amortized as a marketing expense over a three year period. The increase in shipping expenses was due to increased
warehouse staffing expense, facilities costs and packaging costs directly associated with the Company's increased sales volumes and higher levels of inventory. Costs associated with the move to the
new distribution center also contributed to the increase in shipping expenses. The store level operating expenses associated with Company-owned retail stores are also included in selling and shipping
expenses and reflect expenses associated with six retail locations during fiscal 2000 compared to one in fiscal 1999.

General and Administrative Expenses

General and administrative expenses increased by $2.6 million, or 30.5%, to $11.3 million in fiscal 2000 from $8.6 million in fiscal 1999,
but decreased as a percentage of net sales to 7.4% in fiscal 2000 from 8.0% in fiscal 1999. The dollar increase during fiscal 2000 was primarily due to increased management and staffing costs,
including a team hired to manage our retail operations and a director of e-business development. The increased general and administrative expenses in fiscal 2000 also reflected increased
depreciation expense associated with information technology initiatives and corporate facilities as well as increased legal and accounting fees. Since these expenses grew at a slower rate than the
growth in sales, general and administrative expenses decreased as a percentage of net sales.

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Operating Income

As a result of the above items, operating income increased by $4.3 million, or 34.1%, to $16.8 million in fiscal 2000 from $12.5 million
in fiscal 1999, but decreased as a percentage of net sales to 11.0% in fiscal 2000 from 11.7% in fiscal 1999.

Factor Commission and Interest Expense, Net of Interest Income

Factor commission and interest expense, net of interest income, increased by approximately $0.1 million to $0.5 million in fiscal 2000 from
$0.4 million in fiscal 1999, but decreased as a percentage of net sales to 0.3% in fiscal 2000 from 0.4% in fiscal 1999. The dollar increase is primarily due to interest expense resulting from
capital leases entered into during fiscal 2000, interest expense relating to the $5 million term credit facility which was outstanding for all of fiscal 2000 versus a portion of fiscal 1999 and
higher interest rates on our European line of credit. Factoring during fiscal 2000 was limited to our European operations.

License and Royalty Income, Net of Other Expense

License and royalty income, net of other expense, decreased by $0.1 million, or 28.2%, to $0.3 million, representing 0.2% of net sales in fiscal
2000, from $0.4 million and 0.4% of net sales in fiscal 1999. This category also includes gains and losses from foreign currency transactions, which resulted in a net transaction gain of
$43,000 in fiscal 2000 compared to $19,000 in fiscal 1999. The decrease in license and royalty income in fiscal 2000 was primarily attributable to the termination of our license agreement in Japan.

Income Taxes

We recorded $6.0 million of income tax expense in fiscal 2000. The effective rate for income taxes in fiscal 2000 and 1999 was 36%.

Quarterly Results and Seasonality

Historically, we have generally experienced our lowest level of net sales in the first and third quarters 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 specialty retail stores in the
second and fourth quarters. 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.

14

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The following tables set forth certain unaudited financial data, including percentages of net sales, for the eight quarters ended April 30, 2001.

Quarterly Results in Thousands

|2001 Quarter Ended                           |                                                                | July 31, 2000                |        | Oct. 31, 2000 |        | Jan. 31, 2001 |        | Apr. 30, 2001 |       
|-------------------------------------------- | -------------------------------------------------------------- | ---------------------------- | ------ | ------------- | ------ | ------------- | ------ | ------------- | ------
|Consolidated Statements of Income Data:      |                                                                |                              |        |               |        |               |        |               |       
|Net sales                                    |                                                                | $                            | 39,029 |               | $      | 46,074        |        | $             | 32,369
|Cost of sales                                |                                                                |                              | 21,512 |               |        | 25,528        |        |               | 17,558
|                                             |                                                                |                              |        |               |        |               |        |               |       
|Gross profit                                 |                                                                |                              | 17,517 |               |        | 20,546        |        |               | 14,811
|Operating expenses:                          |                                                                |                              |        |               |        |               |        |               |       
|                                             | Design and production                                          |                              |        | 1,005         |        |               | 970    |               |       
|                                             | Selling and shipping                                           |                              |        | 11,001        |        |               | 11,266 |               |       
|                                             | General and administrative                                     |                              |        | 3,268         |        |               | 3,323  |               |       
|                                             |                                                                |                              |        |               |        |               |        |               |       
|                                             |                                                                | Total operating expenses     |        |               | 15,274 |               |        | 15,559        |       
|                                             |                                                                |                              |        |               |        |               |        |               |       
|Operating income (loss)                      |                                                                |                              | 2,243  |               |        | 4,987         |        |               | (1,374
|Other income (expense):                      |                                                                |                              |        |               |        |               |        |               |       
|                                             | Factor commission and interest expense, net of interest income |                              |        | (233          | )      |               | (230   | )             |       
|                                             | License and royalty income, net of other expense               |                              |        | 122           |        |               | 165    |               |       
|                                             |                                                                |                              |        |               |        |               |        |               |       
|                                             |                                                                | Total other income (expense) |        |               | (111   | )             |        | (65           | )     
|                                             |                                                                |                              |        |               |        |               |        |               |       
|Income (loss) before income taxes (benefits) |                                                                |                              | 2,132  |               |        | 4,922         |        |               | (1,552
|Income taxes (benefits)                      |                                                                |                              | 810    |               |        | 1,871         |        |               | (589  
|                                             |                                                                |                              |        |               |        |               |        |               |       
|Net income (loss)                            |                                                                | $                            | 1,322  |               | $      | 3,051         |        | $             | (963  
|                                             |                                                                |                              |        |               |        |               |        |               |       

|2000 Quarter Ended                      |                                                                | July 31, 1999                |        | Oct. 31, 1999 |        | Jan. 31, 2000 |       | Apr. 30, 2000 |       
|--------------------------------------- | -------------------------------------------------------------- | ---------------------------- | ------ | ------------- | ------ | ------------- | ----- | ------------- | ------
|Consolidated Statements of Income Data: |                                                                |                              |        |               |        |               |       |               |       
|Net sales                               |                                                                | $                            | 29,189 |               | $      | 36,891        |       | $             | 31,786
|Cost of sales                           |                                                                |                              | 16,417 |               |        | 20,741        |       |               | 17,540
|                                        |                                                                |                              |        |               |        |               |       |               |       
|Gross profit                            |                                                                |                              | 12,772 |               |        | 16,150        |       |               | 14,246
|Operating expenses:                     |                                                                |                              |        |               |        |               |       |               |       
|                                        | Design and production                                          |                              |        | 804           |        |               | 879   |               |       
|                                        | Selling and shipping                                           |                              |        | 7,474         |        |               | 8,567 |               |       
|                                        | General and administrative                                     |                              |        | 2,590         |        |               | 2,964 |               |       
|                                        |                                                                |                              |        |               |        |               |       |               |       
|                                        |                                                                | Total operating expenses     |        |               | 10,868 |               |       | 12,410        |       
|                                        |                                                                |                              |        |               |        |               |       |               |       
|Operating income                        |                                                                |                              | 1,904  |               |        | 3,740         |       |               | 2,106 
|Other income (expense):                 |                                                                |                              |        |               |        |               |       |               |       
|                                        | Factor commission and interest expense, net of interest income |                              |        | (300          | )      |               | (6    | )             |       
|                                        | License and royalty income, net of other expense               |                              |        | 21            |        |               | 61    |               |       
|                                        |                                                                |                              |        |               |        |               |       |               |       
|                                        |                                                                | Total other income (expense) |        |               | (279   | )             |       | 55            |       
|                                        |                                                                |                              |        |               |        |               |       |               |       
|Income before income taxes              |                                                                |                              | 1,625  |               |        | 3,795         |       |               | 2,136 
|Income taxes                            |                                                                |                              | 585    |               |        | 1,366         |       |               | 769   
|                                        |                                                                |                              |        |               |        |               |       |               |       
|Net income                              |                                                                | $                            | 1,040  |               | $      | 2,429         |       | $             | 1,367 
|                                        |                                                                |                              |        |               |        |               |       |               |       

15

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Quarterly Results as a Percentage of Net Sales

|2001 Quarter Ended                           |                                                                | July 31, 2000                |      | Oct. 31, 2000 |      | Jan. 31, 2001 |      | Apr. 30, 2001 |     
|-------------------------------------------- | -------------------------------------------------------------- | ---------------------------- | ---- | ------------- | ---- | ------------- | ---- | ------------- | ----
|Consolidated Statements of Income Data:      |                                                                |                              |      |               |      |               |      |               |     
|Net sales                                    |                                                                | 100.0                        | %    | 100.0         | %    | 100.0         | %    | 100.0         | %   
|Cost of sales                                |                                                                | 55.1                         |      | 55.4          |      | 54.2          |      | 64.9          |     
|                                             |                                                                |                              |      |               |      |               |      |               |     
|Gross profit                                 |                                                                | 44.9                         |      | 44.6          |      | 45.8          |      | 35.1          |     
|Operating expenses:                          |                                                                |                              |      |               |      |               |      |               |     
|                                             | Design and production                                          |                              | 2.6  |               | 2.1  |               | 3.4  |               | 2.0 
|                                             | Selling and shipping                                           |                              | 28.2 |               | 24.5 |               | 35.9 |               | 23.9
|                                             | General and administrative                                     |                              | 8.4  |               | 7.2  |               | 10.7 |               | 7.5 
|                                             |                                                                |                              |      |               |      |               |      |               |     
|                                             |                                                                | Total operating expenses     |      | 39.2          |      | 33.8          |      | 50.0          |     
|                                             |                                                                |                              |      |               |      |               |      |               |     
|Operating income (loss)                      |                                                                | 5.7                          |      | 10.8          |      | (4.2          | )    | 1.7           |     
|Other income (expense):                      |                                                                |                              |      |               |      |               |      |               |     
|                                             | Factor commission and interest expense, net of interest income |                              | (0.6 | )             | (0.5 | )             | (0.9 | )             | (1.0
|                                             | License and royalty income, net of other expense               |                              | 0.4  |               | 0.4  |               | 0.3  |               | 0.1 
|                                             |                                                                |                              |      |               |      |               |      |               |     
|                                             |                                                                | Total other income (expense) |      | (0.2          | )    | (0.1          | )    | (0.6          | )   
|                                             |                                                                |                              |      |               |      |               |      |               |     
|Income (loss) before income taxes (benefits) |                                                                | 5.5                          |      | 10.7          |      | (4.8          | )    | 0.8           |     
|Income taxes (benefits)                      |                                                                | 2.1                          |      | 4.1           |      | (1.8          | )    | 0.3           |     
|                                             |                                                                |                              |      |               |      |               |      |               |     
|Net income (loss)                            |                                                                | 3.4                          | %    | 6.6           | %    | (3.0          | )%   | 0.5           | %   
|                                             |                                                                |                              |      |               |      |               |      |               |     

|2000 Quarter Ended                      |                                                                | July 31, 1999                |      | Oct. 31,1999 |      | Jan. 31, 2000 |      | Apr. 30, 2000 |     
|--------------------------------------- | -------------------------------------------------------------- | ---------------------------- | ---- | ------------ | ---- | ------------- | ---- | ------------- | ----
|Consolidated Statements of Income Data: |                                                                |                              |      |              |      |               |      |               |     
|Net sales                               |                                                                | 100.0                        | %    | 100.0        | %    | 100.0         | %    | 100.0         | %   
|Cost of sales                           |                                                                | 56.2                         |      | 56.2         |      | 55.2          |      | 55.4          |     
|                                        |                                                                |                              |      |              |      |               |      |               |     
|Gross profit                            |                                                                | 43.8                         |      | 43.8         |      | 44.8          |      | 44.6          |     
|Operating expenses:                     |                                                                |                              |      |              |      |               |      |               |     
|                                        | Design and production                                          |                              | 2.8  |              | 2.4  |               | 2.7  |               | 1.7 
|                                        | Selling and shipping                                           |                              | 25.6 |              | 23.2 |               | 27.1 |               | 20.7
|                                        | General and administrative                                     |                              | 8.9  |              | 8.0  |               | 8.4  |               | 5.6 
|                                        |                                                                |                              |      |              |      |               |      |               |     
|                                        |                                                                | Total operating expenses     |      | 37.3         |      | 33.6          |      | 38.2          |     
|                                        |                                                                |                              |      |              |      |               |      |               |     
|Operating income                        |                                                                | 6.5                          |      | 10.2         |      | 6.6           |      | 16.6          |     
|Other income (expense):                 |                                                                |                              |      |              |      |               |      |               |     
|                                        | Factor commission and interest expense, net of interest income |                              | (1.0 | )            | (0.0 | )             | (0.1 | )             | (0.3
|                                        | License and royalty income, net of other expense               |                              | 0.1  |              | 0.1  |               | 0.2  |               | 0.3 
|                                        |                                                                |                              |      |              |      |               |      |               |     
|                                        |                                                                | Total other income (expense) |      | (0.9         | )    | 0.1           |      | 0.1           |     
|                                        |                                                                |                              |      |              |      |               |      |               |     
|Income before income taxes              |                                                                | 5.6                          |      | 10.3         |      | 6.7           |      | 16.6          |     
|Income taxes                            |                                                                | 2.0                          |      | 3.7          |      | 2.4           |      | 6.0           |     
|                                        |                                                                |                              |      |              |      |               |      |               |     
|Net income                              |                                                                | 3.6                          | %    | 6.6          | %    | 4.3           | %    | 10.6          | %   
|                                        |                                                                |                              |      |              |      |               |      |               |     

16

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Liquidity and Capital Resources

Net cash used in operating activities in fiscal 2001 was $9.5 million. This resulted primarily from increases in inventory of $16.8 million,
prepaid expenses and other current assets of $1.2 million, deferred income taxes of $1.3 million and income tax payments of $3.4 million. These increases were partially offset by
cash generated from profitable operations, collections of account receivables and the timing of payments for certain payables. Approximately $14.8 million of the increase in inventory relates
to Classics merchandise, $1.7 million relates to footwear and accessories and $2.6 million relates to retail stores and e-commerce. These increases were partially offset by
decreases of $1.3 million in fashion inventory, $0.3 million in embroidery work in process and other and $0.7 million in our European operations. The growth in inventory in fiscal
2001 is higher than planned due to our unanticipated sales shortfall during the Spring season. We expect inventory levels to increase during the first quarter of fiscal 2002 as we bring in Fall
fashion merchandise and continue to receive Classics merchandise buys that were moved out of fiscal 2001. We reduced our inventory buys beginning in the second quarter of fiscal 2002 and as a result,
we expect inventory levels to trend down in that quarter as well as the remainder of the fiscal year.

Net
cash used in operating activities in fiscal 2000 was $7.8 million. This resulted primarily from increases in accounts receivable, inventory and prepaid expenses and other
current assets of $18.2 million, $8.5 million and $0.3 million, respectively. These increases were partially offset by cash generated from profitable operations and the timing of
payments for certain payables. Approximately $3.4 million of the increase in inventory relates to fashion merchandise, $1.6 million relates to footwear and accessories,
$1.0 million relates to European operations and the balance of the increase relates primarily to embroidery work in process and the addition of new retail store locations. The increase in
inventory in fiscal 2000 was designed to support planned sales volume during fiscal 2001.

Net
cash used in investing activities was $3.0 million in fiscal 2001 and was primarily due to purchases of capital equipment of approximately $10.5 million. These
purchases were partially offset by proceeds of approximately $6.7 million from the sale of certain capital assets in a sale and leaseback transaction. Net cash provided by financing activities
was $13.2 million in fiscal 2001. This resulted from net borrowings of $15.0 million and the exercise of stock options as well as the sale of $0.3 million of common stock under
the employee stock purchase plan. These increases were partially offset by $2.2 million of principal payments under capital leases.

During
fiscal 2001, capital expenditures, including equipment acquired under capital leases, included $1 million for in-store fixtures and concept shops,
$4.7 million for equipment and leasehold improvements associated with Company-owned retail stores, $1.9 million for the distribution center and warehouse management system,
$0.5 million for the development of our e-commerce website and $2.4 million for computer hardware and software, leasehold improvements and other furniture and equipment.
Capital expenditures during fiscal 2000 totaled $12.2 million and included $3.6 million for in-store fixtures, concept shops, a PGA merchandise tent and a PGA trade show
booth, $3.1 million for equipment and leasehold improvements associated with Company-owned retail stores, $3.3 million for the new distribution center, embroidery equipment and warehouse
management system and $2.2 million for computer hardware, software, leasehold improvements and other furniture and equipment. Capital expenditures during fiscal 1999 included
$1.7 million for in-store fixtures, $1.2 million for warehouse and embroidery equipment, $0.6 million for equipment and leasehold improvements associated with a
Company-owned retail store and $3.7 million for computer hardware, software, leasehold improvements and other furniture and equipment.

Capital
expenditures of approximately $4 million are planned for fiscal 2002, including amounts for information technology initiatives, in-store fixtures and
concept shops, equipment and leasehold improvements associated with Company-owned retail stores, computer hardware, software, and furniture and office equipment.

17

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The $40 million line of credit with Washington Mutual Bank d/b/a Western Bank ("Western Bank") expired on August 1, 2000. We renegotiated the line of credit and on
July 28, 2000 entered into a new
loan agreement for a $55 million line of credit. The line of credit is to be used for general corporate purposes. Interest on borrowings is charged and payable monthly at either the Prime rate
or the LIBOR rate plus 1.75%, each as defined in the loan agreement, at the borrower's election. The $55 million line of credit expires on August 1, 2002 and is collateralized by a
security interest in the Company's inventory, accounts receivable, furniture and equipment, contract rights 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. The Company was in compliance with these
covenants at April 30, 2001.

In
November 2000, the Company amended its $55 million line of credit agreement with Western Bank to allocate $5 million for use solely by the Dutch subsidiary,
replacing the subsidiary's previous line of credit. The allocated amount is to be used by the subsidiary for the same purposes and is subject to the same terms and performance criteria described
above. At April 30, 2001, working capital advances totaled $18.7 million of which $3.3 million relates to our Dutch subsidiary. In addition, we had open letters of credit in the
aggregate amount of $20.2 million.

Our
primary need for funds is to finance increased working capital and to fund capital expenditures, including opening additional Company-owned retail stores. Assuming we successfully
renew our bank line of credit in August 2002, 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 the current and next fiscal years. 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.

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, cylinder and option contracts to
hedge accounts receivable denominated in currencies other than the 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 2001 we incurred a net foreign exchange transaction gain of $134,000 compared to $43,000 during fiscal 2000.

The
fair value of foreign exchange contracts is based on quoted market prices. At April 30, 2001 we had one open option contract to sell £400,000 Great Britain
Pounds. 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.

18

---

In June 1998, the Financial Accounting Standards Board issued Statement of Financial Accounting Standards No.133, "Accounting for Derivative Instruments and Hedging Activities"
("SFAS No.133"). SFAS No.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 limits its use of derivative financial instruments to the management of foreign currency risks. The Company adopted SFAS No.133 on May 1, 2001, as required. The adoption of SFAS No.133
did not have a material impact on the Company's consolidated financial statements.

19

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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 Annual Report. The consolidated statements of income data for each of the three years in the period ended April 30, 2001 and the consolidated balance sheets data as of
April 30, 2001 and 2000 are derived from our audited consolidated financial statements which are included elsewhere in this Annual Report. The consolidated statements of income data for each of
the two years in the period ended April 30, 1998, and the consolidated balance sheets data as of April 30, 1999, 1998 and 1997 are derived from audited consolidated financial statements
that are not included herein. Historical results are not necessarily an indication of future results.

|Year Ended April 30,                    |                                                                | 2001                         |         | 2000   |        | 1999    |        | 1998   |         | 1997   |       
|--------------------------------------- | -------------------------------------------------------------- | ---------------------------- | ------- | ------ | ------ | ------- | ------ | ------ | ------- | ------ | ------
|
|Consolidated Statements of Income Data: |                                                                |                              |         |        |        |         |        |        |         |        |       
|Net sales                               |                                                                | $                            | 171,068 |        | $      | 152,453 |        | $      | 107,286 |        | $     
|Cost of sales                           |                                                                |                              | 99,389  |        |        | 84,943  |        |        | 61,058  |        |       
|                                        |                                                                |                              |         |        |        |         |        |        |         |        |       
|Gross profit                            |                                                                |                              | 71,679  |        |        | 67,510  |        |        | 46,228  |        |       
|Operating expenses:                     |                                                                |                              |         |        |        |         |        |        |         |        |       
|                                        | Design and production                                          |                              |         | 4,094  |        |         | 3,465  |        |         | 2,915  |       
|                                        | Selling and shipping                                           |                              |         | 46,725 |        |         | 35,992 |        |         | 22,168 |       
|                                        | General and administrative                                     |                              |         | 14,124 |        |         | 11,273 |        |         | 8,636  |       
|                                        |                                                                |                              |         |        |        |         |        |        |         |        |       
|                                        |                                                                | Total operating expenses     |         |        | 64,943 |         |        | 50,730 |         |        | 33,719
|                                        |                                                                |                              |         |        |        |         |        |        |         |        |       
|Operating income                        |                                                                |                              | 6,736   |        |        | 16,780  |        |        | 12,509  |        |       
|                                        | Factor commission and interest expense, net of interest income |                              |         | (1,256 | )      |         | (460   | )      |         | (393   | )     
|                                        | License and royalty income, net of other expense               |                              |         | 492    |        |         | 288    |        |         | 400    |       
|                                        |                                                                |                              |         |        |        |         |        |        |         |        |       
|                                        |                                                                | Total other income (expense) |         |        | (764   | )       |        | (172   | )       |        | 7     
|                                        |                                                                |                              |         |        |        |         |        |        |         |        |       
|Income before income taxes              |                                                                |                              | 5,972   |        |        | 16,608  |        |        | 12,516  |        |       
|Income taxes                            |                                                                |                              | 2,271   |        |        | 5,979   |        |        | 4,508   |        |       
|                                        |                                                                |                              |         |        |        |         |        |        |         |        |       
|Net income                              |                                                                | $                            | 3,701   |        | $      | 10,629  |        | $      | 8,008   |        | $     
|                                        |                                                                |                              |         |        |        |         |        |        |         |        |       
|Basic earnings per share                |                                                                | $                            | 0.35    |        | $      | 1.08    |        | $      | 0.98    |        | $     
|Diluted earnings per share              |                                                                | $                            | 0.35    |        | $      | 1.06    |        | $      | 0.94    |        | $     
|Shares used in computation of:          |                                                                |                              |         |        |        |         |        |        |         |        |       
|                                        | Basic earnings per share                                       |                              |         | 10,448 |        |         | 9,839  |        |         | 8,212  |       
|                                        | Diluted earnings per share                                     |                              |         | 10,526 |        |         | 10,021 |        |         | 8,562  |       

|April 30,                         |  | 2001 |         | 2000 |   | 1999    |  | 1998 |        | 1997
|--------------------------------- |  | ---- | ------- | ---- | - | ------- |  | ---- | ------ | ----
|
|Consolidated Balance Sheets Data: |  |      |         |      |   |         |  |      |        |     
|Cash                              |  | $    | 8,072   |      | $ | 7,367   |  | $    | 4,760  |     
|Working capital                   |  |      | 79,390  |      |   | 77,101  |  |      | 44,911 |     
|Total assets                      |  |      | 142,953 |      |   | 118,792 |  |      | 80,589 |     
|Short-term debt                   |  |      | 21,469  |      |   | 4,455   |  |      | 12,305 |     
|Long-term debt                    |  |      | 10,346  |      |   | 6,545   |  |      | 5,907  |     
|Total shareholders' equity        |  |      | 93,265  |      |   | 88,907  |  |      | 48,908 |     

20

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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, 2001 and 2000, and the related consolidated statements of
income, shareholders' equity, and cash flows for each of the three years in the period ended April 30, 2001. These financial statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on our audits.

We
conducted our audits in accordance with auditing standards generally accepted in the United States. 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 respects, the consolidated financial position of Cutter & Buck Inc. at
April 30, 2001 and 2000, and the consolidated results of its operations and its cash flows for each of the three years in the period ended April 30, 2001, in conformity with accounting
principles generally accepted in the United States.

|                                  |  | SIG
|--------------------------------- |  | ---
|Seattle, Washington
June 20, 2001 |  |    

21

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CONSOLIDATED BALANCE SHEETS

|Year Ended April 30,                            |                                                                                                                            | 2001                      |            | 2000        |            
|----------------------------------------------- | -------------------------------------------------------------------------------------------------------------------------- | ------------------------- | ---------- | ----------- | -----------
|Assets                                          |                                                                                                                            |                           |            |             |            
|Current assets:                                 |                                                                                                                            |                           |            |             |            
|                                                | Cash and cash equivalents                                                                                                  |                           | $          | 8,072,456   |            
|                                                | Accounts receivable, net of allowances for doubtful accounts and returns of $3,320,416 in 2001 and $2,351,024 in 2000      |                           |            | 48,517,944  |            
|                                                | Inventories                                                                                                                |                           |            | 53,553,275  |            
|                                                | Deferred income taxes                                                                                                      |                           |            | 3,350,725   |            
|                                                | Prepaid expenses and other current assets                                                                                  |                           |            | 4,646,569   |            
|                                                |                                                                                                                            |                           |            |             |            
|                                                |                                                                                                                            | Total current assets      |            |             | 118,140,969
|Furniture and equipment, net                    |                                                                                                                            |                           | 23,192,033 |             |            
|Deferred income taxes                           |                                                                                                                            |                           | 763,321    |             |            
|Other assets                                    |                                                                                                                            |                           | 857,100    |             |            
|                                                |                                                                                                                            |                           |            |             |            
|                                                |                                                                                                                            | Total assets              |            | $           | 142,953,423
|                                                |                                                                                                                            |                           |            |             |            
|Liabilities and Shareholders' Equity            |                                                                                                                            |                           |            |             |            
|Current liabilities:                            |                                                                                                                            |                           |            |             |            
|                                                | Short-term borrowings                                                                                                      |                           | $          | 18,732,209  |            
|                                                | Accounts payable                                                                                                           |                           |            | 12,885,720  |            
|                                                | Accrued liabilities                                                                                                        |                           |            | 4,119,834   |            
|                                                | Income taxes payable                                                                                                       |                           |            |            |            
|                                                | Current portion of capital lease obligations and debt                                                                      |                           |            | 2,736,537   |            
|                                                | Other current liabilities                                                                                                  |                           |            | 276,333     |            
|                                                |                                                                                                                            |                           |            |             |            
|                                                |                                                                                                                            | Total current liabilities |            |             | 38,750,633 
|Capital lease obligations, less current portion |                                                                                                                            |                           | 6,774,898  |             |            
|Long-term debt, less current portion            |                                                                                                                            |                           | 3,571,428  |             |            
|Other liabilities                               |                                                                                                                            |                           | 591,721    |             |            
|Commitments and contingencies                   |                                                                                                                            |                           |           |             |            
|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; 10,539,512 issued and outstanding in 2001 and 10,344,672 in 2000 |                           |            | 64,187,129  |            
|                                                | Deferred compensation                                                                                                      |                           |            | (968,764    | )          
|                                                | Retained earnings                                                                                                          |                           |            | 30,506,410  |            
|                                                | Accumulated other comprehensive loss                                                                                       |                           |            | (460,032    | )          
|                                                |                                                                                                                            |                           |            |             |            
|                                                | Total shareholders' equity                                                                                                 |                           |            | 93,264,743  |            
|                                                |                                                                                                                            |                           |            |             |            
|                                                | Total liabilities and shareholders' equity                                                                                 |                           | $          | 142,953,423 |            
|                                                |                                                                                                                            |                           |            |             |            

See
accompanying Notes.

22

---



CONSOLIDATED STATEMENTS OF INCOME

|Year Ended April 30,       |                                                                                                                            | 2001                         |             | 2000       |            | 1999        |           
|-------------------------- | -------------------------------------------------------------------------------------------------------------------------- | ---------------------------- | ----------- | ---------- | ---------- | ----------- | ----------
|Net sales                  |                                                                                                                            | $                            | 171,067,509 |            | $          | 152,452,723 |           
|Cost of sales              |                                                                                                                            |                              | 99,389,000  |            |            | 84,942,984  |           
|                           |                                                                                                                            |                              |             |            |            |             |           
|Gross profit               |                                                                                                                            |                              | 71,678,509  |            |            | 67,509,739  |           
|                           | Operating expenses:                                                                                                        |                              |             |            |            |             |           
|                           | Design and production                                                                                                      |                              |             | 4,094,259  |            |             | 3,464,916 
|                           | Selling and shipping                                                                                                       |                              |             | 46,725,117 |            |             | 35,992,104
|                           | General and administrative                                                                                                 |                              |             | 14,123,570 |            |             | 11,272,395
|                           |                                                                                                                            |                              |             |            |            |             |           
|                           |                                                                                                                            | Total operating expenses     |             |            | 64,942,946 |             |           
|                           |                                                                                                                            |                              |             |            |            |             |           
|Operating income           |                                                                                                                            |                              | 6,735,563   |            |            | 16,780,324  |           
|Other income (expense):    |                                                                                                                            |                              |             |            |            |             |           
|                           | Factor commission and interest expense, net of interest income of $134,195 in 2001, $579,028 in 2000, and $245,314 in 1999 |                              |             | (1,255,501 | )          |             | (459,658  
|                           | License and royalty income, net of other expense                                                                           |                              |             | 492,415    |            |             | 287,252   
|                           |                                                                                                                            |                              |             |            |            |             |           
|                           |                                                                                                                            | Total other income (expense) |             |            | (763,086   | )           |           
|                           |                                                                                                                            |                              |             |            |            |             |           
|Income before income taxes |                                                                                                                            |                              | 5,972,477   |            |            | 16,607,918  |           
|                           |                                                                                                                            |                              |             |            |            |             |           
|Income taxes               |                                                                                                                            |                              | 2,271,000   |            |            | 5,978,850   |           
|                           |                                                                                                                            |                              |             |            |            |             |           
|Net income                 |                                                                                                                            | $                            | 3,701,477   |            | $          | 10,629,068  |           
|                           |                                                                                                                            |                              |             |            |            |             |           
|Basic earnings per share   |                                                                                                                            | $                            | 0.35        |            | $          | 1.08        |           
|                           |                                                                                                                            |                              |             |            |            |             |           
|Diluted earnings per share |                                                                                                                            | $                            | 0.35        |            | $          | 1.06        |           
|                           |                                                                                                                            |                              |             |            |            |             |           

See
accompanying Notes.

23

---



CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY

|                                                             |  | Common Stock |  |   |            |  |   | Accumulated
Other
Comprehensive
Loss |   |   |           
|------------------------------------------------------------ |  | ------------ |  | - | ---------- |  | - | ------------------------------------ | - | - | ----------
|
|
|Balance, May 1, 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
|Sale of common stock, net of offering expenses of $2,462,760 |  | 1,955,000    |  |   | 28,817,240 |  |   |                                     |   |   |          
|Stock issued under employee stock purchase plan              |  | 26,254       |  |   | 351,736    |  |   |                                     |   |   |          
|Exercise of stock options                                    |  | 33,657       |  |   | 196,055    |  |   |                                     |   |   |          
|Deferred compensation relating to restricted                 |  | stock grants |  |   | 17,525     |  |   | 252,016                              |   |   | (252,016  
|Amortization of deferred compensation                        |  |             |  |   |           |  |   | 148,872                              |   |   |          
|Tax benefit on exercise of stock options                     |  |             |  |   | 29,990     |  |   |                                     |   |   |          
|Net income                                                   |  |             |  |   |           |  |   |                                     |   |   | 10,629,068
|Foreign currency translation                                 |  |             |  |   |           |  |   |                                     |   |   |          
|                                                             |  |              |  |   |            |  |   |                                      |   |   |           
|Comprehensive income                                         |  |             |  |   |           |  |   |                                     |   |   |          
|                                                             |  |              |  |   |            |  |   |                                      |   |   |           
|Balance, April 30, 2000                                      |  | 10,344,672   |  |   | 62,645,047 |  |   | (210,484                             | ) |   | 26,804,933
|Stock issued under employee stock purchase plan              |  | 39,514       |  |   | 261,088    |  |   |                                     |   |   |          
|Exercise of stock options                                    |  | 15,250       |  |   | 120,780    |  |   |                                     |   |   |          
|Expense relating to stock options granted to non-employee    |  |             |  |   | 32,050     |  |   |                                     |   |   |          
|Deferred compensation relating to restricted stock grants    |  | 140,076      |  |   | 1,114,342  |  |   | (1,114,342                           | ) |   |          
|Amortization of deferred compensation                        |  |             |  |   |           |  |   | 356,062                              |   |   |          
|Tax benefit on exercise of stock options                     |  |             |  |   | 13,822     |  |   |                                     |   |   |          
|Net income                                                   |  |             |  |   |           |  |   |                                     |   |   | 3,701,477 
|Foreign currency translation                                 |  |             |  |   |           |  |   |                                     |   |   |          
|                                                             |  |              |  |   |            |  |   |                                      |   |   |           
|Comprehensive income                                         |  |             |  |   |           |  |   |                                     |   |   |          
|                                                             |  |              |  |   |            |  |   |                                      |   |   |           
|Balance, April 30, 2001                                      |  | 10,539,512   |  | $ | 64,187,129 |  | $ | (968,764                             | ) | $ | 30,506,410
|                                                             |  |              |  |   |            |  |   |                                      |   |   |           

See accompanying Notes.

24

---



CONSOLIDATED STATEMENTS OF CASH FLOWS

|Year Ended April 30,                                                          |                                                       | 2001                                      |            | 2000       |             | 1999        |          
|----------------------------------------------------------------------------- | ----------------------------------------------------- | ----------------------------------------- | ---------- | ---------- | ----------- | ----------- | ---------
|Operating activities:                                                         |                                                       |                                           |            |            |             |             |          
|Net income                                                                    |                                                       | $                                         | 3,701,477  |            | $           | 10,629,068  |          
|Adjustments to reconcile net income to net cash used in operating activities: |                                                       |                                           |            |            |             |             |          
|                                                                              | Depreciation and amortization                         |                                           |            | 5,066,227  |             |             | 3,786,907
|                                                                              | Deferred income taxes                                 |                                           |            | (1,283,715 | )           |             | (689,595 
|                                                                              | Deferred gain on sale and leaseback of capital assets |                                           |            | 383,552    |             |             |         
|                                                                              | Amortization of deferred compensation                 |                                           |            | 356,062    |             |             | 148,872  
|                                                                              | Non cash compensation expense                         |                                           |            | 32,050     |             |             |         
|                                                                              | Changes in assets and liabilities:                    |                                           |            |            |             |             |          
|                                                                              |                                                       | Receivables, net                          |            |            | 1,900,003   |             |          
|                                                                              |                                                       | Inventories                               |            |            | (16,841,544 | )           |          
|                                                                              |                                                       | Prepaid expenses and other current assets |            |            | (1,217,009  | )           |          
|                                                                              |                                                       | Accounts payable and accrued liabilities  |            |            | 1,789,500   |             |          
|                                                                              |                                                       | Income taxes payable                      |            |            | (3,423,068  | )           |          
|                                                                              |                                                       |                                           |            |            |             |             |          
|Net cash used in operating activities                                         |                                                       |                                           | (9,536,465 | )          |             | (7,797,801  | )        
|Investing activities:                                                         |                                                       |                                           |            |            |             |             |          
|Purchases of furniture and equipment                                          |                                                       |                                           | (9,241,358 | )          |             | (9,939,082  | )        
|Proceeds from sale and leaseback of capital assets                            |                                                       |                                           | 6,745,675  |            |             |            |          
|Increase in trademarks, patents and marketing rights                          |                                                       |                                           | (455,560   | )          |             | (109,059    | )        
|                                                                              |                                                       |                                           |            |            |             |             |          
|Net cash used in investing activities                                         |                                                       |                                           | (2,951,243 | )          |             | (10,048,141 | )        
|Financing activities:                                                         |                                                       |                                           |            |            |             |             |          
|Net proceeds from (repayments of) short term borrowings                       |                                                       |                                           | 15,043,294 |            |             | (8,614,755  | )        
|Proceeds from long term debt                                                  |                                                       |                                           |           |            |             |            |          
|Principal payments under capital lease obligations                            |                                                       |                                           | (2,209,738 | )          |             | (387,216    | )        
|Issuance of common stock                                                      |                                                       |                                           | 395,690    |            |             | 29,395,021  |          
|                                                                              |                                                       |                                           |            |            |             |             |          
|Net cash provided by financing activities                                     |                                                       |                                           | 13,229,246 |            |             | 20,393,050  |          
|Effects of foreign exchange rate changes on cash                              |                                                       |                                           | (35,694    | )          |             | 59,245      |          
|                                                                              |                                                       |                                           |            |            |             |             |          
|Net increase (decrease) in cash and cash equivalents                          |                                                       |                                           | 705,844    |            |             | 2,606,353   |          
|Cash and cash equivalents, beginning of year                                  |                                                       |                                           | 7,366,612  |            |             | 4,760,259   |          
|                                                                              |                                                       |                                           |            |            |             |             |          
|Cash and cash equivalents, end of year                                        |                                                       | $                                         | 8,072,456  |            | $           | 7,366,612   |          
|                                                                              |                                                       |                                           |            |            |             |             |          
|Supplemental information:                                                     |                                                       |                                           |            |            |             |             |          
|Cash paid during the year for interest                                        |                                                       | $                                         | 875,015    |            | $           | 933,644     |          
|                                                                              |                                                       |                                           |            |            |             |             |          
|Cash paid during the year for income taxes                                    |                                                       | $                                         | 7,195,229  |            | $           | 6,271,345   |          
|                                                                              |                                                       |                                           |            |            |             |             |          
|Non cash financing and investing activities:                                  |                                                       |                                           |            |            |             |             |          
|Equipment acquired under capital leases                                       |                                                       | $                                         | 8,042,840  |            | $           | 2,223,457   |          
|                                                                              |                                                       |                                           |            |            |             |             |          
|Deferred compensation for issuance of restricted stock                        |                                                       | $                                         | 1,114,342  |            | $           | 252,016     |          
|                                                                              |                                                       |                                           |            |            |             |             |          

See
accompanying Notes.

25

---



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, fashion and outerwear apparel. The Company's trade
customers are principally golf pro shops and resorts, corporate accounts, specialty retail and Company-owned retail stores.

The
Company has two wholly-owned subsidiaries, Cutter & Buck (Europe) B.V. and Cutter & Buck GmbH established for the purpose of direct marketing, sales and distribution
of Cutter & Buck sportswear, fashion and outerwear in Europe.

Principles of Consolidation

The accompanying consolidated financial statements include the accounts of the Company and its wholly owned subsidiaries. All significant intercompany accounts
and transactions have been eliminated.

Cash and cash equivalents

The Company considers all short-term investments with maturities of 90 days or less at purchase to be cash equivalents.

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 slow-moving and out-of-season fashion merchandise. The
net realizable value of this merchandise is estimated based upon disposition plans and historical experience. A valuation allowance is established to reduce the carrying amount of
slow-moving 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 are recorded at cost. Depreciation is calculated on a straight-line basis over the estimated useful lives of the related
assets. Machinery and equipment are depreciated over three to seven years. Furniture and equipment are depreciated over three to five years. Leasehold improvements are depreciated over the lesser of
the lease term or the estimated economic useful life of the asset, generally five to ten years. Furniture and equipment acquired under capital leases are 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.

26

---

Advertising

Advertising costs are expensed as incurred. Advertising expense was $3,310,888, $2,460,647 and $1,410,044 for the years ended April 30, 2001, 2000 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, 2001 and 2000 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.

Revenue Recognition

Revenue is recognized at the time the product is shipped to the customer and, in the case of Company-owned retail, when product is sold to customers. There is
no right to return for customers, other than
for defective products. An allowance for these estimated sales returns is provided when the related revenue is recorded.

Shipping and Handling Costs

Shipping and handling costs billed to customers and incurred by the Company in shipping product to customers are charged to cost of sales.

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 recorded as a component of comprehensive income. Gains and
losses from foreign currency transactions are included in other income and were $134,000, $43,000 and $19,000 in fiscal 2001, 2000 and 1999, respectively.

Stock-Based Compensation

The Company has elected to apply the disclosure-only provisions of Statement of Financial Accounting Standards No.123, "Accounting for Stock-Based
Compensation" ("SFAS No.123"). Accordingly, the Company accounts 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.

27

---

Stock compensation expense for options granted to non-employees is determined in accordance with SFAS No.123 and the Emerging Issues Task Force consensus inIssue
No.96-18, "Accounting for Equity Instruments that are Issued to Other Than Employees for Acquiring, or in Conjunction with Selling, Goods or Services'("EITF No.96-18").
Accordingly, expense is recorded based on the fair value of the consideration received or the fair value of the equity instruments issued, whichever is more reliably measured.

Earnings Per Share

Basic earnings per share are based on the weighted average number of common shares outstanding. Diluted earnings per share are 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.

Segment and Geographic Information

The Company has two operating segments, the wholesale and retail sales of sportswear, fashion and outerwear apparel. The information for these segments is the
information used by the Company's chief operating decision maker to evaluate operating performance. Financial information from segments below the quantitative thresholds provided in Statement of
Financial Accounting Standards No.131, "Disclosures about Segments of an Enterprise and Related Information" is aggregated into one reportable segment of the Company. Since the retail business segment
does not meet the quantitative thresholds for a reportable segment it is not separately reported. International sales represented approximately 6.4%, 7.1%, and 7.5% of net sales for the years ended
April 30, 2001, 2000 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 3.5%, 6.7% and 14.6% of the Company's long-term assets for fiscal 2001, 2000 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 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 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.
The Company does not use derivative financial instruments for speculative or trading purposes. The Company reduces the risks associated with changes in foreign currency exchange rates by entering into
forward, cylinder and option contracts to hedge accounts receivable denominated in non-euro currencies. Gains and losses on contracts which hedge specific foreign currency denominated
commitments are recognized in the period in which the transaction is completed and the related amounts are recorded as other income.

The
fair value of foreign exchange contracts is based on quoted market prices. At April 30, 2001 the Company held one option contract to sell £400,000 Great Britain
Pounds. This contract matured on

28

---

May 2, 2001. The Company had no open forward contracts at April 30, 2000. The fair value of forward exchange contracts approximated cost at April 30, 2001. 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 No.133, "Accounting for Derivative Instruments
and Hedging Activities" ("SFAS No.133"). SFAS No.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 limits its use of derivative financial instruments to the management of foreign currency risks. The Company adopted SFAS No.133 on May 1, 2001, as
required. The adoption of SFAS No.133 did not have a material impact on the Company's consolidated financial statements.

In
December 1999, the Securities and Exchange Commission released Staff Accounting Bulletin No.101, "Revenue Recognition in Financial Statements" ("SAB No.101"), which provides
guidance on the recognition, presentation and disclosure of revenue in financial statements. The Company adopted SAB No.101 in fiscal 2001, which did not have a material impact on the Company's
consolidated financial statements.

Note 2.

Prepaid Expenses and Other Current Assets

April 30,

2001

2000Prepaid expenses

$
3,392,930

$
2,113,524Samples


1,253,639


1,334,265$
4,646,569

$
3,447,789


Note 3.

Accounts Receivable

During fiscal 2000, the Company terminated its factoring agreement with its sole factor company in the United States. The Company's European subsidiary
continues to factor certain receivables with a European factor company. Factored receivables are not material to accounts receivable balances.

29

---

Note 4.

Furniture and Equipment

Furniture and equipment consisted of the following:

April 30,

2001

2000Leasehold improvements

$
8,404,675

$
5,073,047Machinery and equipment


9,915,963


5,387,735Store fixtures


8,114,225


5,909,059Furniture and other fixtures


9,896,586


8,338,23736,331,449


24,708,078Less accumulated depreciation and amortization


(13,566,281
)

(8,385,082
)Construction in progress


426,865


1,490,395$
23,192,033

$
17,813,391


The
total cost of leased equipment capitalized at April 30, 2001 and 2000 was $11,928,062 and $3,915,853, respectively, with related accumulated amortization of $2,502,152 and
$1,182,811, respectively.

Note 5.

Debt

In July 2000, the Company entered into a loan agreement with Washington Mutual Bank d/b/a/ Western Bank ("Western Bank") for a $55 million line
of credit, replacing the Company's previous line of credit. Western Bank has included Bank of America, N.A. in the arrangement as co-lender. The revolving line of credit is to be used for
general corporate purposes. Interest on borrowings is charged and payable monthly at either the Prime rate or the LIBOR rate plus 1.75%, each as defined in the loan agreement, at the borrower's
election. The line of credit expires on August 1, 2002 and is collateralized by a security interest in the Company's inventory, accounts receivable, furniture and equipment, contract rights 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 maximum capital expenditures. The Company was in compliance with these covenants at April 30, 2001. At April 30, 2001, letters of credit outstanding against this line of credit
totaled approximately $20.0 million and working capital advances totaled $15.4 million, of which $2 million was at an interest rate of 6.8%, $5.7 million was at an interest
rate of 6.1% and $7.7 million was at an interest rate of 7.5%.

In
November 2000, the Company amended its $55 million line of credit agreement with Western Bank to allocate $5 million for use solely by the Dutch subsidiary,
replacing the subsidiary's previous line of credit. The allocated amount is to be used by the subsidiary for the same purposes and is subject to the same terms and performance criteria described
above. At April 30, 2001 letters of credit outstanding against this line of credit totaled approximately $235,000 and working capital advances totaled approximately $3.3 million at an
interest rate of 6.2%.

The
Company also has a $5 million term credit facility with Western Bank. As of April 30, 2001 $3.6 million remained outstanding against the term credit facility.
The term loan bears interest at a fixed rate of 6.6% with interest payable monthly and remaining annual principal payments of $714,286 due in August 2002 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.

30

---

Note 6.

Income Taxes

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

Year Ended April 30,

2001

2000

1999Domestic

$
6,923,399

$
17,662,157

$
12,726,877Foreign


(950,922
)

(1,054,239
)

(211,215
)$
5,972,477

$
16,607,918

$
12,515,662


The
provision for income taxes consisted of the following:

Year Ended April 30,

2001

2000

1999Current tax provision:Federal

$
3,362,568

$
6,411,966

$
5,201,306State


192,147


256,479


148,6093,554,715


6,668,445


5,349,915Deferred federal tax benefit


(1,283,715
)

(689,595
)

(842,115
)$
2,271,000

$
5,978,850

$
4,507,800


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

Year Ended April 30,

2001

2000

1999Tax provision at federal statutory tax rate

$
2,090,367

$
5,812,771

$
4,380,482Non-deductible expenses


38,674


22,353


53,726State income taxes, net of federal benefit


77,642


166,711


96,596Other


64,317


(22,985
)

(23,004
)$
2,271,000

$
5,978,850

$
4,507,800


The
Company recorded compensation expense in 2001, 2000 and 1999 for income tax purposes of approximately $37,000, $83,000 and $1.4 million respectively, resulting from the
exercise of non-qualified stock options and disqualifying dispositions of common stock received through the exercise of incentive stock options. The resulting tax benefit of $13,822,
$29,990 and $486,349 respectively, is included in shareholders' equity.

31

---

Significant components of the Company's deferred tax assets and liabilities are as follows:

April 30,

2001

2000Deferred income tax assets:Reserve for doubtful accounts

$
1,228,554

$
764,071Reserve for inventory obsolescence


680,910


398,964Unicap


1,387,030


1,037,348Depreciation and amortization


626,884


308,560Other


190,668


50,144Total deferred income tax assets


4,114,046


2,559,087Deferred income tax liabilities:Prepaid expenses


(158,317
)

(72,362
)Capitalized system costs


(357,759
)

(172,470
)Total deferred income tax liabilities


(516,076
)

(244,832
)Net deferred taxes

$
3,597,970

$
2,314,255


Note 7.

Commitments

The Company leases its office facilities, retail stores, a distribution center and certain office equipment under operating leases. Most of these leases
contain renewal options, and certain leases contain provisions for payment of additional rent based on a percentage of sales. Some leases also include early termination options which can be exercised
under specific conditions. Total rent expense amounted to $4,564,015 in 2001, $2,608,421 in 2000 and $1,325,647 in 1999.

On
January 24, 2001, the Company entered into a sale and leaseback agreement for approximately $6.7 million of capital assets. The resulting commitment is accounted for
as a capital lease, with terms between three and five years. The Company deferred a gain of approximately $0.4 million, which is being amortized in proportion to the amortization of the leased
assets.

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, 2001:

Year Ending April 30,

Capital
Leases

Operating
Leases2002

$
3,436,810

$
4,538,0052003


3,638,476


3,987,9532004


2,958,918


3,668,8442005


739,942


3,629,4822006


193,559


3,577,542Thereafter





5,564,667Total minimum lease payments


10,967,705

$
24,966,493Less amount representing interest


1,456,270Present value of net minimum lease payments


9,511,435Less: current portion


2,736,537$
6,774,898


32

---

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, 2001 and 2000.

Common Stock

On July 23, 1999, the Company sold 1,700,000 shares of its common stock in a follow-on offering at $16 per share. Pursuant to the exercise
of the underwriter's over-allotment option, the Company sold an additional 255,000 shares of common stock at $16 per share on August 3, 1999. Proceeds to the Company, net of
underwriting discounts and commissions and offering expenses totaling $2,462,760, amounted to $28,817,240.

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, 2001, 89,989 shares had been issued under the plan and 285,011 shares have been reserved for future issuance.

The
weighted average fair value of shares granted under the Employee Stock Purchase Plan in 2001, 2000 and 1999 was $2.28, $4.39 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-Scholes option pricing model with the
following weighted average assumptions for 2001, 2000, and 1999 respectively: risk-free interest rate of 5.7%, 6.0% and 5.0%; volatility of 77%, 69% and 70%; expected life of
6 months and no future dividends.

Stock Option Plans

The Company has eight stock option plans that provide for the granting of options to employees, officers and directors of the Company to purchase up to
2,726,386 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
director plan and 1999 director plan are exercisable six months after the date of grant. Options granted under the 1995 employee plan, the 1997 plan and the 2000 plans generally provide for vesting
over a four-year period with vesting at 25% 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 2001, 2000, and 1999 was $5.50, $8.99, and $9.05 respectively. 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 2001, 2000, and 1999, respectively:
risk-free interest rate of 5.3%, 6.0%, and 5.3%; volatility of 77%, 69%, and 70%; expected life of 5 years, and no future dividends.

33

---

Had compensation cost for the stock option and Employee Stock Purchase plans been recognized based on the fair value 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:

Year Ended April 30,

2001

2000

1999Net income

$
3,701,477

$
10,629,068

$
8,007,862Pro forma compensation expense under SFAS No.123


(1,105,340
)

(1,471,269
)

(865,636
)Pro forma net income under SFAS No.123

$
2,596,137

$
9,157,799

$
7,142,226Pro forma diluted earnings per share

$
0.25

$
0.91

$
0.83


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:

April 30,

2001

2000

1999Options

Weighted
Average
Exercise
Price

Options

Weighted
Average
Exercise
Price

Options

Weighted
Average
Exercise
PriceBalance, beginning of year

850,000

$
12.00

692,407

$
10.91

774,342

$
6.94Granted

454,500


8.32

228,000


14.33

218,622


14.59Exercised

(15,250
)

7.92

(33,657
)

6.41

(296,245
)

2.14Canceled

(86,500
)

13.39

(36,750
)

13.01

(4,312
)

13.64Balance, end of year

1,202,750

$
10.52

850,000

$
12.00

692,407

$
10.91Exercisable at end of year

530,362

$
10.85

376,718

$
9.87

254,522

$
7.49


The
following information is provided for options outstanding and exercisable at April 30, 2001:

OutstandingExercisableWeighted AverageWeighted
Average
Exercise
PriceRange of Exercise Price

Options

Remaining
Contractual
Life

Exercise
Price

Options$
1.44 - $3.16

56,015

1.66

$
1.47

56,015

$
1.474.75 - 7.17

193,899

3.06


4.22

103,899


7.017.81 - 12.50

445,474

8.22


9.29

103,484


10.6413.44 - 13.79

398,240

7.32


13.73

196,577


11.2114.09 - 17.25

109,122

7.82


16.18

70,387


16.071,202,750






530,362


At
April 30, 2001, 907,756 shares were available for future grant and 2,240,699 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

34

---

any one year. Eligible employees are awarded the Restricted Stock at a 15% discount from market price. As of April 30, 2001, 35,346 shares had been issued under the Stock Bonus Plan and 2,154
shares were reserved for future issuance. The Company has recorded deferred compensation of $1,114,342 in 2001, $252,016 in 2000, and $171,744 in 1999. These amounts are being amortized over the
vesting period, 25% every six months. Compensation expense relating to restricted stock awards was $356,062 in 2001, $148,872 in 2000, and $64,404 in 1999.

Non-employee Stock Option

In January 2001, the Company entered into a three year endorsement agreement with a professional golfer. Under the terms of the agreement, the Company
granted 60,000 stock options that vest based on certain performance requirements. These options are accounted for at fair market value in accordance with EITF No.96-18. As of
April 30, 2001, the Company recorded marketing expense of $32,050 relating to stock options which vested as a result of achieving some of the performance requirements.

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.

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

35

---

on June 4, 1999. The distribution of shares was made on June 15, 1999. The Company's 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:

Year Ended April 30,

2001

2000

1999Numerator:Numerator for basic and diluted earnings per sharenet income

$
3,701,477

$
10,629,068

$
8,007,862Denominator:Denominator for basic earnings per share weighted average common shares


10,447,912


9,838,565


8,212,468Effect of dilutive securities weighted average stock options


77,673


182,368


349,764Denominator for diluted earnings per share


10,525,585


10,020,933


8,562,232Basic earnings per share

$
0.35

$
1.08

$
0.98Diluted earnings per share

$
0.35

$
1.06

$
0.94


Note 11.

Litigation

As previously described, the Company is a party to a lawsuit related to labor issues in Saipan, Does vs. The Gap, Inc. That lawsuit has been settled,
subject to court approval. The hearing for preliminary approval of the settlement is currently scheduled for February 28, 2002.

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.

36

---

Note 12.

Quarterly Financial Data (unaudited)

Financial results by quarter for the fiscal years ended April 30, 2001 and 2000 are as follows:

|Fiscal Quarter Ended |                                   | July 31 |   | October 31 |  | January 31 |        | April 30
|-------------------- | --------------------------------- | ------- | - | ---------- |  | ---------- | ------ | --------
|
|2001                 |                                   |         |   |            |  |            |        |         
|                     | Net sales                         |         | $ | 39,029     |  | $          | 46,074 |         
|                     | Gross profit                      |         |   | 17,517     |  |            | 20,546 |         
|                     | Net income (loss)                 |         |   | 1,322      |  |            | 3,051  |         
|                     | Basic earnings (loss) per share   |         | $ | 0.13       |  | $          | 0.29   |         
|                     | Diluted earnings (loss) per share |         | $ | 0.13       |  | $          | 0.29   |         

|2000 |                            |  |   |        |  |   |        |  |   |        |  |  
|---- | -------------------------- |  | - | ------ |  | - | ------ |  | - | ------ |  | -
|     | Net sales                  |  | $ | 29,189 |  | $ | 36,891 |  | $ | 31,786 |  | $
|     | Gross profit               |  |   | 12,772 |  |   | 16,150 |  |   | 14,246 |  |  
|     | Net income                 |  |   | 1,040  |  |   | 2,429  |  |   | 1,367  |  |  
|     | Basic earnings per share   |  | $ | 0.12   |  | $ | 0.24   |  | $ | 0.13   |  | $
|     | Diluted earnings per share |  | $ | 0.12   |  | $ | 0.23   |  | $ | 0.13   |  | $

37

---



COMMON STOCK

The Company's common stock is listed on the Nasdaq National Market under the symbol "CBUK". The following table sets forth, for the periods indicated, the high
and low sales prices of the common stock as reported on the Nasdaq National Market.

|Fiscal 2001 |        | High |   | Low  
|----------- | ------ | ---- | - | -----
|Quarter:    |        |      |   |      
|            | First  |      | $ | 12.13
|            | Second |      | $ | 15.94
|            | Third  |      | $ | 11.75
|            | Fourth |      | $ | 11.69

|Fiscal 2000 |        | High |   | Low  
|----------- | ------ | ---- | - | -----
|Quarter:    |        |      |   |      
|            | First  |      | $ | 22.17
|            | Second |      | $ | 17.75
|            | Third  |      | $ | 17.75
|            | Fourth |      | $ | 14.44

38

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|CORPORATE INFORMATION                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|DirectorsMichael S. Brownfield
Chairman
Accurate Molded Plastics
Frances M. Conley
Principal, Roanoke Capital, Ltd.
Harvey N. Jones
Chairman of the Board
Chief Executive Officer
Martin J. Marks
President,
Chief Operating Officer
Larry C. Mounger
Chairman and
Chief Executive Officer,
Sunrise Clothing, Inc.
James C. Towne
Chairman,
Greenfield Development
Corporation OfficersHarvey N. Jones
Chairman of the Board,
Chief Executive Officer
Martin J. Marks
President,
Chief Operating Officer
Jim C. McGehee
Senior Vice President of Sales
Stephen S. Lowber
Vice President,
Chief Financial Officer
Patricia A. Nugent
Vice President of
Merchandise and Design

39

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