<Page>
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------

                                 UNITED STATES
                       SECURITIES AND EXCHANGE COMMISSION

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


                         ANNUAL REPORT ON FORM 10-K/A-2


(MARK ONE)

<Table>
<C>        <S>
   /X/     ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
           SECURITIES EXCHANGE ACT OF 1934

              FOR THE FISCAL YEAR ENDED DECEMBER 31, 2000
                                  OR

   / /     TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
           SECURITIES EXCHANGE ACT OF 1934
</Table>

        FOR THE TRANSITION PERIOD FROM ______________ TO ______________

                         COMMISSION FILE NUMBER 1-11805

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

                         DONNA KARAN INTERNATIONAL INC.
             (Exact name of registrant as specified in its charter)

<Table>
<S>                                              <C>
                   DELAWARE                                        13-3882426
        (State or other jurisdiction of                           (IRS Employer
        incorporation or organization)                         Identification No.)

              550 SEVENTH AVENUE
              NEW YORK, NEW YORK                                      10018
    (Address of principal executive office)                        (zip code)
</Table>

      REGISTRANT'S TELEPHONE NUMBER, (INCLUDING AREA CODE): (212) 789-1500

        SECURITIES REGISTERED PURSUANT TO SECTION 12(b) OF THE ACT: NONE

<Table>
<Caption>
                                                  NAME OF EACH EXCHANGE
TITLE OF EACH CLASS                                ON WHICH REGISTERED
-------------------                               ---------------------
<S>                                      <C>
Common Stock                                     New York Stock Exchange
</Table>

        SECURITIES REGISTERED PURSUANT TO SECTION 12(g) OF THE ACT: NONE
                            ------------------------

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

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

    The aggregate market value of Registrant's Common Stock held by
nonaffiliates as of March 28, 2001 was $101,872,962 based on 11,194,831 such
shares outstanding on such date and the closing sales price for the Common Stock
on such date of $9.10 as reported on the New York Stock Exchange. As of
March 28, 2001, the Registrant had 22,253,254 shares of Common Stock
outstanding.*

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

*   Does not include 18 shares of Class A Common Stock, par value $.01 per
    share, and two shares of Class B Common Stock, par value $.01 per share,
    outstanding as of such date.

--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
<Page>

    The following Items of the Company's Annual Report on Form 10-K for the year
ended December 31, 2000 are hereby amended and, as so amended, are restated
below in their entirety; Item 3. Legal Proceedings; Item 6. Selected Financial
Data; Item 7. Management's Discussion and Analysis of Financial Condition and
Results of Operations; and Item 14. Exhibit, Financial Statements, Schedules and
Reports on Form 8-K.


ITEM 3. LEGAL PROCEEDINGS


    In December 2000, several putative class actions were filed in state court
in Delaware and New York in connection with the LVMH Merger Offer. The actions
filed in Delaware Chancery Court (New Castle County) are captioned: HARBOR
FINANCE PARTNERS V. DONNA KARAN, ET AL., C.A. No. 18559-NC; DONNA HOUGHTON V.
DONNA KARAN, ET AL., C.A. No. 18566-NC; DANIEL ORINGER V. DONNA KARAN, ET AL.,
C.A. No. 18567-NC; PHIL DORFMAN V. DONNA KARAN, ET AL., C.A. No. 18568-NC; E.
JANET ALLRED V. DONNA KARAN, ET AL., C.A. No. 18569-NC; and FREDERICK V. MAUER
V. DONNA KARAN, ET AL., C.A. No. 18574-NC. The actions filed in New York Supreme
Court are captioned: ALICE BERMAN V. DONNA KARAN INTERNATIONAL INC., ET AL.,
Index No. 125465/00; HARBOR FINANCE PARTNERS V. DONNA KARAN, ET AL., Index No.
605638/00; and ROLLING INVESTOR GROUP INC. V. DONNA KARAN INTERNATIONAL INC., ET
AL., Index No. 600032/01 (the actions filed in New York and Delaware are
collectively referred to as the "LVMH Actions"). All of the complaints name the
Company, Donna Karan, Stephan Weiss, and John Idol as defendants. Two of the
complaints also name the Company's outside Board members as defendants and three
of the complaints also name LVMH as a defendant. None of the lawsuits specifies
any amount of damages sought and, therefore, it is not practicable to estimate a
range of possible loss in connection with this litigation.



    The LVMH Actions allege, INTER ALIA, that the $8.50 price initially offered
by LVMH to purchase the Company's common stock is inadequate, that the
individual defendants breached their fiduciary duties in connection with the
LVMH Merger Offer, and that Donna Karan and Stephan Weiss furthered their own
interests, at the expense of the Company's interests, in allegedly negotiating
with LVMH concerning the proposed sale of the Company to LVMH.



    Following the commencement of the LVMH Actions, counsel for the Company and
the other defendants entered into (i) a stipulation with counsel for plaintiffs
in the actions filed in New York staying such actions and providing that the
outcome of those actions will be governed by the outcome of the actions filed in
Delaware; and (ii) a stipulation with counsel for plaintiffs in the actions
filed in Delaware providing that such actions will be consolidated and that
defendants need not respond to the individual complaints pending the filing of a
consolidated amended complaint. No consolidated amended complaint has been filed
and discovery has not commenced.



    The Company is also involved from time to time in routine legal matters and
litigation incidental to its business. While the outcome of these matters, as
well as the LVMH Actions, could have a material adverse effect on the Company's
results of operations and cash flows in the period in which such outcome is
determined, in the Company's opinion, the results of these matters are not
expected to have a material effect on the Company's financial position or
results of operations. Accordingly, no reserve for the outcome of these matters
has been recorded in the Company's financial statements as of December 31, 2000.


                                       2
<Page>
ITEM 6. SELECTED FINANCIAL DATA

    The following selected financial data should be read in conjunction with the
Company's Financial Statements and the notes thereto and "Management's
Discussion and Analysis of Financial Condition and Results of Operations"
included elsewhere herein.


<Table>
<Caption>
                                                                  FISCAL YEAR ENDED
                                         --------------------------------------------------------------------
                                         DECEMBER 31,   JANUARY 2,   JANUARY 3,   DECEMBER 28,   DECEMBER 29,
                                             2000          2000         1999          1997           1996
                                         ------------   ----------   ----------   ------------   ------------
                                                    (DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
<S>                                      <C>            <C>          <C>          <C>            <C>
STATEMENT OF INCOME DATA:
Net revenues(1)........................   $  662,695    $  661,837   $  622,646    $  638,725     $  612,840
Gross profit(1)(2)(3)..................      217,915       211,151      154,087       121,407        200,776
Selling, general, and administrative
  expenses(2)(3)(4)(5).................      193,170       193,827      152,089       204,088        187,474
Restructuring charges (credits),
  net(2)(3)............................         (200)        2,645         (267)        8,635             --
                                          ----------    ----------   ----------    ----------     ----------
Operating income (loss)................       24,945        14,679        2,265       (91,316)        13,302
Equity in (loss) earnings of
  affiliate(6).........................           --            --          (65)        1,435          3,089
Interest expense, net..................       (2,595)       (4,090)      (2,050)       (2,515)        (8,534)
Gain on sale of interests in
  affiliate(6).........................           --            --           88            --             --
                                          ----------    ----------   ----------    ----------     ----------
Income (loss) before provision for
  income taxes.........................       22,350        10,589          238       (92,396)         7,857
Provision (benefit) for income
  taxes(7).............................        3,163           553          110       (11,034)       (17,179)
                                          ----------    ----------   ----------    ----------     ----------
Net income (loss)......................   $   19,187    $   10,036   $      128    $  (81,362)    $   25,036
                                          ==========    ==========   ==========    ==========     ==========
Net income (loss) per common shares(8):
  Basic................................   $     0.89    $     0.46   $     0.01    $    (3.78)    $     1.56
  Diluted..............................   $     0.87    $     0.46   $     0.01    $    (3.78)    $     1.56

Weighted average common shares
  outstanding(8):
  Basic................................   21,604,767    21,599,500   21,598,264    21,512,050     16,010,825
  Diluted..............................   22,055,974    21,702,700   21,631,664    21,512,050     16,010,825

BALANCE SHEET DATA:
  Working capital......................   $  110,993    $   98,857   $   91,668    $   79,989     $  146,805
  Total assets.........................      324,214       304,291      278,729       287,488        311,695
  Total long-term debt, including
    Current portion....................        8,209         8,209           --            36            318
Stockholders' equity...................      152,860       132,769      122,104       122,464        203,791
</Table>


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

(1) Included in the financial statements for the fiscal year ended January 2,
    2000 is a one-time recognition of deferred revenue amounting to
    $5.0 million, relating to the ELI beauty license consummated in fiscal 1997.

(2) Included in the financial statements for the fiscal year ended December 31,
    2000 are credits of $1.6 million related to previously recorded
    restructuring charges that were determined to be no longer necessary. This
    amount is included as follows: $0.8 million as cost of sales; $0.6 million
    as selling, general and administrative expenses; and $0.2 million as
    restructuring credits. Included in the financial statements for the fiscal
    year ended January 2, 2000 are restructuring and other non-recurring charges
    of $11.0 million as follows: $0.8 million as cost of sales; $6.1 million as
    selling, general and administrative expenses; and $4.1 million as
    restructuring charges. The restructuring charges are recorded net of
    $1.4 million of prior year's restructuring charges that were determined to
    be no longer necessary.

                                       3
<Page>
(3) Included in the financial statements for the fiscal year ended December 28,
    1997 are restructuring charges, other charges, primarily nonrecurring, and
    operating losses aggregating $61.5 million as follows: restructuring charges
    of $8.6 million; $21.1 million related to the wind-down of the Company's
    beauty business (net of a $2.2 million gain in connection with the
    consummation of this transaction) of which $11.7 million is recorded as cost
    of sales, $10.9 million is recorded as sales returns and $0.7 million is
    recorded as selling, general, and administrative expenses; $2.3 million of
    operating losses of the beauty business subsequent to the consummation of
    this transaction; $12.5 million related to the wind-down of the Company's
    DKNY JEANS business as a result of the license of the business classified as
    $9.4 million of cost of sales and $3.1 million of selling, general and
    administrative expenses; and, $17.0 million of other charges related to the
    realignment of a retail and distribution arrangement, additional severance
    costs, and other costs related to strategic initiatives and cost
    containment, which have been classified as $15.4 million of selling, general
    and administrative expenses and $1.6 million of cost of sales.

(4) Included in the financial statements for the fiscal year ended December 31,
    2000 were $2.4 million in expenses related to the LVMH Merger Offer, which
    have been classified as selling, general and administrative expenses.

(5) Included in selling, general and administrative expenses for the fiscal year
    ended December 29, 1996 are one-time charges for bonuses relating to the
    Company's initial public offering (the "Offering") of $5.3 million, the
    award of 105,100 shares of common stock to certain employees pursuant to the
    Company's 1996 Stock Incentive Plan which amounted to $2.5 million, and
    $3.2 million related to the purchase of all sales and marketing plans,
    patterns, samples, fabrics and other materials developed by a former
    licensee in connection with the termination of a license agreement.

(6) On March 31, 1995, the Company sold 70% of its interest in the operations of
    Donna Karan Japan to a nonaffiliated party. Subsequent to the sale, the
    Company accounted for its remaining 30% interest in the operations of Donna
    Karan Japan using the equity method of accounting. Equity in earnings (loss)
    of affiliate amounted to ($0.1) million, $1.4 million and $3.1 million for
    the quarter ended March 30, 1998 and fiscal 1997 and 1996, respectively. An
    agreement with Donna Karan Japan provides for a management fee payable to
    the Company based upon net sales of Donna Karan Japan, which amount is
    included as an offset against selling, general and administrative expenses.
    In March 1998, the Company and the nonaffiliated party sold all of their
    outstanding shares in Donna Karan Japan to a Japanese public company. See
    Note 6 in the notes to financial statements elsewhere herein.

(7) The provision for income taxes for the fiscal years ended December 31, 2000
    and January 2, 2000 are net of $6.0 million and $4.0 million reductions,
    respectively, in a previously recorded valuation allowance due to the
    recognition of certain deferred tax assets. The benefit for income taxes for
    the fiscal year ended December 28, 1997 is net of a $24.0 million valuation
    allowance which was recorded due to the inherent uncertainties in estimating
    future taxable income (see Note 14 in the notes to financial statements
    elsewhere herein). The provision for income taxes for the fiscal year ended
    December 29, 1996 includes a $19.0 million tax benefit which was recorded by
    the Company concurrent with becoming subject to Federal and additional state
    income taxes.


(8) Options outstanding during 1997 and 1996 were not included in the
    calculation of earnings per share because the effect would be antidilutive.
    Net income per common share for the year ended December 29, 1996 is based
    upon 10,612,934 shares of common stock outstanding for the period from
    January 1, 1996 to the date of our initial public offering in July 1996, and
    21,468,034 shares of common stock outstanding subsequent to our initial
    public offering.


                                       4
<Page>
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
        OF OPERATIONS

OVERVIEW


    The Company's business is comprised of wholesale, licensing and retail
activities. The following table is a comparative summary of the Company's
results of operations for the fiscal years ended December 31, 2000 ("fiscal
2000"), January 2, 2000 ("fiscal 1999"), and January 3, 1999 ("fiscal 1998") and
reflects the basis of presentation described in Note 1 in the notes to financial
statements included elsewhere herein. The Company utilizes a 52- or 53-week
fiscal year ending on the Sunday nearest December 31. Fiscal 2000 and fiscal
1999 results include 52 weeks as compared to 53 weeks in fiscal 1998.



<Table>
<Caption>
                                                        FISCAL 2000              FISCAL 1999              FISCAL 1998
                                                    -------------------      -------------------      -------------------
<S>                                                 <C>        <C>           <C>        <C>           <C>        <C>
NET REVENUES......................................   $662.7     100.0%        $661.8     100.0%        $622.6     100.0%
GROSS PROFIT......................................    217.9      32.9%         211.1      31.9%         154.1      24.7%
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES......    193.2      29.2%         193.8      29.3%         152.1      24.4%
OPERATING INCOME..................................     24.9       3.8%          14.7       2.2%           2.3       0.4%
NET INCOME........................................     19.2       2.9%          10.0       1.5%           0.1        --
</Table>



SIGNIFICANT TRANSACTIONS


    In December 2000, the Company announced that it had received a proposal from
LVMH to enter into merger negotiations to acquire all of the outstanding stock
of the Company for a purchase price of $8.50 per share in cash. On April 2,
2001, the Company and LVMH announced that they had entered into a Merger
Agreement, which sets forth the terms and conditions of the proposed acquisition
of the Company by LVMH. Pursuant to the Merger Agreement, an indirect
wholly-owned subsidiary of LVMH will be merged with and into the Company and the
Company will survive the Merger as an indirect subsidiary of LVMH. The Merger is
subject to the approval of the stockholders of the Company and the satisfaction
of other customary closing conditions, including the receipt of required
regulatory approvals. During fiscal 2000, the Company incurred $2.4 million in
expenses related to the LVMH Merger Offer, which have been classified as
selling, general and administrative expenses (see Note 13 in the notes to
financial statements contained elsewhere herein).


    In December 2000, several putative class actions were filed in state court
in Delaware and New York (collectively the "LVMH Actions") in connection with
the LVMH Merger Offer. All of the complaints name the Company, its Chairman, its
Vice Chairman and its Chief Executive Officer as defendants. Two of the
complaints also name the Company's outside Board members as defendants and three
of the complaints also name LVMH as a defendant. None of the lawsuits specifies
any amount of damages sought and, therefore, it is not practicable to estimate a
range of possible loss in connection with this litigation.



    The LVMH Actions allege, INTER ALIA, that the $8.50 price initially offered
by LVMH to purchase the Company's common stock is inadequate, that the
individual defendants breached their fiduciary duties in connection with the
LVMH Merger Offer and that the Chairman and Vice Chairman of the Company
furthered their own interests, at the expense of the Company's interests, in
allegedly negotiating with LVMH concerning the proposed sale of the Company to
LVMH.



    Following the commencement of the LVMH Actions, counsel for the Company and
the other defendants entered into (i) a stipulation with counsel for plaintiffs
in the actions filed in New York staying such actions and providing that the
outcome of those actions will be governed by the outcome of the actions filed in
Delaware; and (ii) a stipulation with counsel for plaintiffs in the actions
filed in Delaware providing that such actions will be consolidated and that
defendants need not respond to the


                                       5
<Page>

individual complaints pending the filing of a consolidated amended complaint. No
consolidated amended complaint has been filed and discovery has not commenced.



    The Company is also involved from time to time in routine legal matters and
litigation incidental to its business. While the outcome of these matters, as
well as the LVMH Actions, could have a material adverse effect on the Company's
results of operations and cash flows in the period in which such outcome is
determined, in the Company's opinion, the results of these matters are not
expected to have a material effect on the Company's financial position or
results of operations. Accordingly, no reserve for the outcome of these matters
has been recorded in the Company's financial statements as of December 31, 2000.



    In December 1999, the Company consummated the grant to LCI of the exclusive
rights to design, produce, market and sell a new line of women's career and
casual sportswear in the United States and Canada, which line launched for the
Spring 2001 season under the CITY DKNY label. Under the agreement, LCI is
obligated to pay the Company a royalty equal to a percentage of net sales of
such licensed product. Upon consummation of the transaction, the Company
received $6.4 million in prepaid royalties, which will be recognized as earned
as LCI ships the licensed product. See Note 7 in the notes to financial
statements contained elsewhere herein.



    In November 1999, the Company announced that it was implementing a series of
strategic initiatives intended to further reduce costs and streamline
operations, and focus on key business areas. As a result, the Company recorded
restructuring and other non-recurring charges of $11.0 million, of which
$0.8 million was classified as cost of sales, $6.1 million as selling, general
and administrative expenses and $4.1 million as restructuring charges. The
strategic initiatives included consolidating the Donna Karan New York and DKNY
women's divisions and integrating the marketing and public relations functions
into one unit, resulting in a charge of $2.6 million, closing seven
non-performing outlet stores, resulting in a charge of $2.2 million, recognizing
an impairment of under-performing retail stores, resulting in a charge of
$3.7 million, the write-off of certain under-performing co-op shops, resulting
in a charge of $1.1 million, and certain other non-recurring charges of
$1.4 million. The Company anticipates achieving annual savings of approximately
$6.0 million as a result of these strategic initiatives. See Note 9 in the notes
to financial statements contained elsewhere herein.


    In January 1999, the Company acquired the assets of three free-standing
retail stores in the United Kingdom which were previously owned and operated by
a Singapore-based company, for approximately $17.4 million. The aggregate
purchase price was financed with working capital and the issuance of
subordinated notes payable which mature in January 2002. See Note 11 in the
notes to financial statements contained elsewhere herein.


    In January 1998, the Company granted LCI the exclusive, long-term rights to
the DKNY JEANS and DKNY ACTIVE trademarks for apparel products and to source,
market, distribute, and sell both collections in the Western Hemisphere. In
connection therewith and with the sale to LCI of certain usable inventory and
other assets relating to the existing business, the Company received
$30.0 million in fiscal 1997 and receives additional royalties from LCI based on
sales of such jeanswear and related apparel and activewear products. Of this
$30.0 million amount, $8.4 million represented prepaid royalties and was
recognized as earned as LCI shipped the licensed product, and $21.6 million
represented an up-front payment in exchange for the exclusive rights granted and
is being amortized on a straight-line basis into income over the term of the
agreement. (See Note 7 in the notes to financial statements contained elsewhere
herein.) In connection with the transaction with LCI, in fiscal 1997 the Company
recorded a loss of $12.5 million, which represented the writedown of inventory
to net realizable value, as well as other costs necessary to exit its existing
jeans business.


    The Company sells its products in Japan through Donna Karan Japan, a
Japanese corporation. In March 1998, the Company and a nonaffiliated party sold
all of their outstanding shares in Donna Karan Japan to a Japanese public
company. At the same time, Donna Karan Japan was granted a

                                       6
<Page>
16-year exclusive license to import, manufacture, license, and/or distribute
DONNA KARAN NEW YORK and DKNY products in Japan, with certain exceptions. In
addition, Donna Karan Japan was granted the exclusive right to develop and
operate a total of 12 DONNA KARAN NEW YORK and DKNY retail boutiques in Japan
over the term of the agreement. Upon consummation of this transaction, the
Company received $15.9 million. The Company receives a royalty on net sales of
licensed products and a servicing fee on net sales of DONNA KARAN NEW YORK
products imported by Donna Karan Japan. See Note 6 in the notes to financial
statements contained elsewhere herein.

RESULTS OF OPERATIONS

NET REVENUES


    Net revenues in fiscal 2000 increased $0.9 million to $662.7 million as
compared to fiscal 1999 and increased $39.2 million, or 6.3%, to $661.8 million
for fiscal 1999 compared to fiscal 1998. Excluding the one-time recognition of
$5.0 million of deferred revenue in fiscal 1999 related to the ELI beauty
license consummated in fiscal 1997 (the "licensing credit"), net revenues
increased $5.9 million in fiscal 2000 as compared to the prior year. Excluding
the licensing credit in fiscal 1999 and certain sales of merchandise to LCI
relating to the DKNY JEANS license amounting to $26.8 milion in fiscal 1998, net
revenues in fiscal 1999 increased $61.0 million, or 10.2%, as compared to the
prior year.


    In fiscal 2000, net revenues increased due to a $10.1 million, or 28.8%,
increase in licensing revenues substantially offset by a $3.6 million, or 2.8%,
decrease in retail sales and a $5.6 million, or 1.1% decrease in wholesale
revenues. In fiscal 1999, net revenues increased due to a $16.7 million, or
90.4%, increase in licensing revenues and a $37.1 million, or 39.7%, increase in
retail sales, partially offset by a $14.6 million, or 2.9%, decrease in
wholesale revenues.

    Wholesale revenues in fiscal 2000 decreased $5.6 million, or 1.1%, to
$490.7 million as compared to $496.3 million in the prior year. The decrease was
primarily attributable to a decrease in revenues in the women's and accessories
businesses, partially offset by an increase in the menswear business. Wholesale
revenues in fiscal 1999 decreased $14.6 million, or 2.9%, to $496.3 million as
compared to $510.9 million in the prior year. Exclusive of certain sales of
merchandise to LCI relating to the DKNY JEANS license in fiscal 1998, wholesale
revenues increased $12.2 million, or 2.5%. The increase was primarily
attributable to an increase in sales from accessories and the menswear business,
partially offset by a decrease in sales from the women's business and
elimination of sales in the DKNY KIDS business which was licensed in 1998.

    Licensing revenues in fiscal 2000 increased 28.8% to $45.2 million in fiscal
2000 from $35.1 million in fiscal 1999. Exclusive of the one-time recognition of
the licensing credit in fiscal 1999, licensing revenues increased
$15.1 million, or 50.1%. The increase was primarily due to new product licenses,
as well as growth under certain existing license agreements. Licensing revenues
in fiscal 1999 increased 90.4%, from $18.5 million in fiscal 1998 to
$35.1 million in fiscal 1999. Exclusive of the one-time recognition of the
licensing credit in fiscal 1999, licensing revenues increased $11.7 million or
63.3%. The increase was primarily due to royalties from: the Company's regional
Japanese license; DKNY JEANS and ACTIVE license; and, growth in sales of certain
other new and existing licensed products.

    Retail sales in fiscal 2000 decreased $3.6 million, or 2.8%, to
$126.8 million as compared to $130.4 million in the prior year. The decrease was
primarily attributable to a 9.7% decrease in comparable store sales and a
decrease in the number of outlet stores, partially offset by an increase in the
number of full-price free-standing stores. Retail sales in fiscal 1999 increased
$37.1 million, or 39.7%, to $130.4 million as compared to $93.3 million in the
prior year. The increase was primarily attributable to: the opening and
acquisition of full-price free-standing stores; an increase in the number of
outlet stores; and a 5.0% increase in comparable store sales.

                                       7
<Page>
GEOGRAPHIC

    Net revenues in the United States in fiscal 2000 decreased approximately
6.0% to $434.8 million as compared to fiscal 1999 and increased approximately
9.4% to $462.8 million in fiscal 1999 as compared to fiscal 1998. Exclusive of:
the one-time recognition of the licensing credit in fiscal 1999; certain sales
of merchandise to LCI relating to the DKNY JEANS license in fiscal 1998; and
sales of the DKNY KIDS business which was licensed in fiscal 1998, net revenues
in the United States increased $65.8 million or 16.8%, in fiscal 1999 as
compared to fiscal 1998.

    Net revenues in Japan in fiscal 2000 decreased 20.6% to $22.1 million as
compared to fiscal 1999 and decreased 40.2% to $27.8 million in fiscal 1999 as
compared to fiscal 1998. In both fiscal 2000 and 1999, the decrease was
primarily attributable to the planned decrease in wholesale revenues to Japan,
as a result of the Company's licensing agreement with DKJ. See Note 6 in the
notes to financial statements.

    Net revenues for other geographic areas increased 20.1% to $205.7 million in
fiscal 2000 as compared to fiscal 1999 and increased 11.8% to $171.2 million in
fiscal 1999 as compared to fiscal 1998. The increase in fiscal 2000 was
primarily attributable to increased sales in the Company's International DKNY
JEANS business. The increase in fiscal 1999 was primarily attributable to the
Company's free-standing retail stores in the United Kingdom.

RESTRUCTURING CHARGES (CREDITS), NET AND OTHER NON-RECURRING CHARGES

    In fiscal 1999 the Company recorded restructuring and other non-recurring
charges in the amount of approximately $11.0 million primarily related to
strategic initiatives including: division consolidations, asset write-downs,
personnel related expenses, the closing of non-performing outlet stores and
certain other non-recurring charges. These charges were classified as
$0.8 million in cost of sales, $6.1 million in selling, general and
administrative expenses and $4.1 million in restructuring charges. Additionally,
in fiscal 2000 and fiscal 1999 the Company determined that certain amounts
related to its prior restructuring were no longer necessary. Accordingly, the
Company credited into income $1.6 million in fiscal 2000 and $1.4 million in
fiscal 1999 related to these restructuring charges. The credit in fiscal 2000
was classified as $0.8 million in cost of sales, $0.6 million in selling,
general and administrative expenses and $0.2 million in restructuring charges.
Of the total amount, $1.0 million was a credit from the 1999 restructure, while
$0.6 related to a restructure charge that was taken in 1997. The credit in 1999
was classified as restructuring charges (credits).

GROSS PROFIT

    Gross profit in fiscal 2000 was 32.9% of net revenues as compared to 31.9%
of net revenues in fiscal 1999 and 24.7% of net revenues in fiscal 1998.
Excluding the $0.8 million in non-recurring charges that were determined to be
no longer necessary in fiscal 2000, and the one-time recognition of the
licensing credit of $5.0 million and the non-recurring charges of $0.8 million
in fiscal 1999, gross profit margin for fiscal 2000 increased to 32.8% as
compared to 31.5% in fiscal 1999. The increase in fiscal 2000 was primarily
related to a change in the revenue mix to higher margin licensing business and
full-price retail stores. Excluding the one-time recognition of the credit of
$5.0 million and the restructuring charge of $0.8 million in fiscal 1999 and the
impact of the DKNY JEANS sales to LCI in fiscal 1998, gross profit margin for
fiscal 1999 increased to 31.5% as compared to 25.9% in fiscal 1998. The increase
in fiscal 1999, exclusive of the credit and the effect of the DKNY JEANS sales
to LCI, was primarily attributable to a change in the revenue mix to higher
margin licensing business and full-price retail stores.

                                       8
<Page>
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES

    Selling, general and administrative expenses were 29.2% of net revenues in
fiscal 2000, as compared with 29.3% and 24.4% of net revenues in fiscal 1999 and
fiscal 1998, respectively. Exclusive of the credit in fiscal 1999 and the effect
of the DKNY JEANS sales to LCI in fiscal 1998, selling, general and
administrative expenses were 29.5% and 25.5% of net revenues for fiscal 1999 and
1998, respectively. In fiscal 2000, selling, general and administrative expenses
include $2.4 million in transaction costs related to the LVMH Merger Offer, as
well as the reversal of $0.6 million in restructuring and non-recurring charges
that were deemed to be no longer necessary. Exclusive of these items, selling,
general and administrative expenses were $191.4 million, or 28.9% of net
revenues. In fiscal 1999, selling, general and administrative expenses include
non-recurring charges of $6.1 million related to strategic initiatives.
Exclusive of the credit and the non-recurring charges, selling, general and
administrative expenses were $187.7 million, or 28.6% of net revenues. The
increase in fiscal 2000 and fiscal 1999, as compared to fiscal 1998 was
primarily a result of the growth of the Company's full-price free-standing
retail stores and certain initiatives in the wholesale segment, as well as
increased costs associated with the Company's ongoing licensing efforts.

OPERATING INCOME

    Operating income increased $10.2 million to $24.9 million in fiscal 2000 as
compared to fiscal 1999 and increased $12.4 million to $14.7 million in fiscal
1999 as compared to $2.3 million in fiscal 1998. Exclusive of the transaction
costs and the reversal of the restructuring and non-recurring charges, operating
income in fiscal 2000 was $25.7 million. Exclusive of the credit, and net
restructuring and other charges, primarily nonrecurring, operating income in
fiscal 1999 was $19.3 million. Operating income as a percent of net revenues for
fiscal 2000 was 3.8%, as compared to 2.2% and 0.4%, in fiscal 1999 and fiscal
1998, respectively. Exclusive of the non-recurring items, operating income as a
percent of net revenues for fiscal 2000 and fiscal 1999 was 3.9% and 2.9%,
respectively. In fiscal 2000, the increase in operating income is attributable
to increased operating profit in the licensing segment, decreased operating
losses in the retail segment, and increased operating profit in the wholesale
segment as well as the absence of restructuring and other non-recurring charges.
In fiscal 1999, the increase in operating income is attributable to increased
operating profit in the licensing segment, decreased operating losses in the
retail segment, and increased operating profit in the wholesale segment.

INTEREST EXPENSE, NET

    Interest expense, net of interest income, decreased $1.5 million to
$2.6 million in fiscal 2000 as compared to fiscal 1999 and increased
$2.0 million to $4.1 million in fiscal 1999 from $2.1 million in fiscal 1998. In
fiscal 2000, the decrease is primarily attributable to lower borrowings during
the first and second quarters of fiscal 2000. In fiscal 1999, the increase is
primarily attributable to an increase in average borrowings during the year.

PROVISION FOR INCOME TAXES

    The provision for income taxes represents Federal, foreign, state and local
income taxes. The provision for income taxes for fiscal 2000, 1999 and 1998 was
$3.2 million, $0.6 million and $0.1 million, respectively. In fiscal 2000 and
fiscal 1999, the Company recognized a tax credit of $6.0 million and
$4.0 million, respectively, relating to an adjustment of its valuation
allowance. Prior to the tax credit, the provision was $9.2 million and
$4.6 million, in fiscal 2000 and fiscal 1999, respectively. Realization of the
future tax benefits related to any deferred tax assets is dependent primarily on
the Company's ability to generate sufficient taxable income within the net
operating loss carryforward period. Due to the inherent uncertainties in
estimating future taxable income, in fiscal 1997 the Company provided for a
valuation allowance of $24.0 million, of which $6.0 million and

                                       9
<Page>
$4.0 million were determined to be no longer required in fiscal 2000 and 1999,
respectively, based on taxable income in those years. As of December 31, 2000,
the remaining valuation allowance was $14.0 million.

NET INCOME

    Net income was $19.2 million in fiscal 2000, as compared to $10.0 million in
fiscal 1999 and $0.1 million in fiscal 1998. Exclusive of the transaction costs,
the reversal of the restructuring and non-recurring charges, and the reduction
of the valuation allowance, net income in fiscal 2000 was $13.7 million.
Exclusive of the non-recurring and unusual items, and the reduction of the tax
valuation allowance, net income in fiscal 1999 was $8.6 million. In fiscal 2000,
the increase was primarily attributable to increased gross profit margins. In
fiscal 1999, the increase was primarily attributable to increased net revenues
and gross profit margins.

NET INCOME (LOSS) PER COMMON SHARE


    Net income per common share on a diluted basis was $0.87 per share in fiscal
2000, as compared to $0.46 per share in fiscal 1999, and $0.01 per share in
fiscal 1998.


LIQUIDITY AND CAPITAL RESOURCES

    The Company's principal sources of funds have historically been, and are
expected to continue to be, cash flow from operations and borrowings under its
revolving credit facility. The Company's principal need for funds is to finance
working capital (principally inventory and receivables), capital expenditures
(including the construction of new shop-in-shops and outlet and full-price
free-standing retail stores), and investments in the start-up of new collections
and the extension of existing collections. At December 31, 2000, the Company had
cash and cash equivalents of $15.5 million compared with $15.0 million at
January 2, 2000.


    In February 2000, the Company amended the $150.0 million revolving Credit
Facility (the "Facility") in place at January 2, 2000 and extended its term to
expire on May 1, 2003 (the Facility was further amended in August 2001. See
Note 19 in the notes to financial statements contained elsewhere herein). The
Facility includes a $90.0 million subfacility for letters of credit and a
$30.0 million subfacility for loans in certain foreign currencies. Borrowings
under the Facility bear interest at a fixed spread over the lead bank's prime
rate or, at the option of the Company, at a fixed spread over the LIBOR and are
limited to a borrowing base calculated on eligible accounts receivable,
inventory, and letters of credit. The Facility is secured by accounts receivable
and inventory of the Company and a pledge of all the equity interests of the
subsidiaries of the Company. The Facility includes financial and other
restrictive covenants, including a limitation on additional debt which can be
incurred, and on the amount of dividends which the Company can pay. The Facility
is used for working capital requirements and general corporate purposes. At
December 31, 2000 and January 2, 2000, there were no direct borrowings
outstanding under the Facility. In connection with the Company's acquisition of
three stores in the United Kingdom in fiscal 1999, the Company issued
subordinated notes payable which are due January 2, 2002. See Note 11 in the
notes to financial statements. The Company had a $6.7 million note payable to a
principal stockholder as of December 28, 1997, which was repaid by the Company
during the first quarter of 1998.


    The Company has supplemented its cash flow from operations with bank lines
of credit and proceeds from its license and strategic alliances. In
December 1999, the Company received from LCI $6.4 million related to the grant
of rights for the production, marketing and sale of a new line of career and
casual sportswear for women, which launched in Spring 2001 under the CITY DKNY
label. In March 1998, the Company received $15.2 million related to a 16-year
exclusive license to import, manufacture, license and/or distribute DONNA KARAN
NEW YORK and DKNY products in Japan, with

                                       10
<Page>
certain exceptions. In January 1998, the Company received from LCI
$30.0 million related to the granting of rights for the marketing, distribution,
and sale of DKNY JEANS and ACTIVEWEAR apparel products in the Western
Hemisphere. In November 1997, the Company received from ELI $25.0 million
related to the grant of worldwide rights for the manufacturing, marketing,
distribution and sale of beauty and beauty-related products and the sale of
certain assets relating to the existing business.

    Net cash provided by operating activities in fiscal 2000 was $6.9 million,
as compared to $27.8 million in fiscal 1999, and $39.5 million in fiscal 1998.
The fiscal 2000 decrease primarily reflects higher net income and a decrease in
net accounts receivable, partially offset by higher inventories, prepaid
expenses and other current assets, and deposits and other noncurrent assets, as
well as a lower increase in accounts payable, accrued expenses and other current
liabilities. The fiscal 1999 decrease primarily reflects the Company's recording
of greater deferred income associated with the Company's licensing agreements in
the prior-year, a greater increase in accounts receivable, deferred taxes, and
deposits and other current assets, partially offset by an increase in accounts
payable, accrued expenses and other current liabilities, a lesser decrease in
inventory and an increase in net income. Net cash used for investing activities
in fiscal 2000 was $6.4 million, as compared to $20.2 million in fiscal 1999 and
$7.5 million in fiscal 1998. Net cash used for investing activities primarily
reflects capital expenditures which amounted to $6.4 million, $11.0 million and
$8.2 million in fiscal 2000, 1999 and 1998, respectively. Spending for all three
periods primarily reflects expenditures for equipment, machinery, computers,
office furniture, leasehold improvements, outlet stores, and full-price
free-standing retail stores. Additionally, in fiscal 1999, the Company used cash
of $9.2 million in the acquisition of three free-standing stores in the United
Kingdom. See Note 11 in the notes to financial statements. As of December 31,
2000, the Company had outstanding commitments for capital expenditures of
approximately $2.5 million.

    The Company borrows on a seasonal basis for working capital and other
purposes. In fiscal 2000, the Company had $33 thousand in proceeds from the
exercise of stock options. In fiscal 1999, the Company used no net cash in
financing activities. Net cash used for financing activities of $29.1 million in
fiscal 1998 primarily relates to the repayment of amounts outstanding under the
Company's Facility and the repayment of a note payable to a principal
stockholder.

    The Company uses derivative financial instruments for the purpose of
managing its exposure to adverse fluctuations in foreign currency exchange
rates. The Company does not utilize derivative financial instruments for trading
or other speculative purposes. The Company conducts business in many foreign
currencies. As a result, it is subject to foreign currency exchange rate risk
due to the effects that foreign exchange rate movements of these currencies,
principally the Euro, Italian lire, U.K. pound, and Dutch guilder, have on the
Company's costs and cash flows. The Company addresses its risks through a
program of risk management, the principal objective of which is to minimize the
effect of foreign exchange rate movements on the Company's operating activities.

    The Company enters into forward exchange contracts to hedge purchases,
accounts receivable and accounts payable denominated in foreign currencies for
periods consistent with its identified exposures. Gains and losses related to
qualifying hedges of these exposures are deferred and recognized in operating
income when the underlying hedged transaction occurs. The Company from
time-to-time also enters into purchased foreign currency options to hedge
anticipated transactions where there is a high probability that anticipated
exposures will materialize. Any gains or losses realized on such options that
qualify as hedges are deferred and recognized in operating income when the
underlying hedged transaction occurs. Premiums on foreign currency options are
amortized over the period being hedged. Foreign currency transactions that do
not qualify as hedges are marked-to-market on a current basis with gains and
losses recognized through income and reflected in operating expenses. In
addition, any previously deferred gains and losses on hedges that are terminated
prior to the transaction date are

                                       11
<Page>
recognized in current income when the hedge is terminated. The contracts have
varying maturities with none exceeding 24 months.

    As a matter of policy, the Company enters into contracts with parties which
are major international banks and financial institutions that have at least an
"A" (or equivalent) credit rating. The Company's exposure to credit loss in the
event of nonperformance by any of the counterparties is limited to only the
recognized, but not realized, gains attributable to the contracts. Management
believes risk of loss is remote, and in any event, would be immaterial. Costs
associated with entering into such contracts have not been material to the
Company's financial results. At December 31, 2000, the Company had contracts to
exchange foreign currencies in the form of forward exchange contracts in the
amount of $131.2 million.

    The Company extends credit to its customers, including those who have
accounted for significant portions of the Company's gross revenues. Accordingly,
the Company may have significant exposure for accounts receivable from its
customers, or group of customers under common ownership. The Company has credit
policies and procedures, which it uses to manage its credit risk. To further
manage its credit risk, the Company insures its accounts receivable under credit
risk insurance policies, subject to certain limitations.

    The Company anticipates that it will be able to satisfy its ongoing cash
requirements for the foreseeable future, primarily with cash flow from
operations, supplemented by borrowings under its Facility and, from
time-to-time, amounts received in connection with strategic transactions,
including licensing arrangements. Events that may impact this include, but are
not limited to, future events that may have the effect of reducing available
cash balances (such as unexpected operating losses or increased capital or other
expenditures), as well as future circumstances that might reduce or eliminate
the availability of external financing.

DERIVATIVE FINANCIAL INSTRUMENTS

    The Company conducts business in many foreign currencies. As a result, it is
subject to foreign currency exchange rate risk due to the effects that foreign
exchange rate movements of these currencies have on the Company's costs and on
the cash flows which it receives from its foreign subsidiaries. The Company
believes that currently it has no other material market risk exposures. The
Company addresses its risks through a controlled program of risk management that
includes the use of derivative financial instruments. The Company primarily
enters into foreign currency forward exchange contracts to reduce the effects of
fluctuating foreign currency exchange rates, and accordingly categorizes these
instruments as entered into for purposes other than trading. See Note 3 in the
notes to financial statements.

    The Company uses a value-at-risk model to assess the market risk of its
derivative financial instruments. Value-at-risk represents the potential losses
for an instrument or portfolio from adverse changes in market factors, for a
specified time period and confidence level. The Company estimates value-at-risk
across all of its derivative financial instruments using a model with historical
volatilities and correlations calculated over the past 250-day period. The
Company's measured value-at-risk from holding such derivative instruments, using
a variance/co-variance model with a 95 percent confidence level, assuming normal
market conditions at December 31, 2000 was approximately $3.8 million.

    The Company's calculated value-at-risk exposure represents an estimate of
reasonably possible net losses that would be recognized on its portfolio of
derivative financial instruments assuming hypothetical movements in future
market rates and is not necessarily indicative of actual results which may or
may not occur. It does not represent the maximum possible loss nor any expected
loss that may occur, since actual future gains and losses will differ from those
estimated, based upon actual fluctuations in market rates, operating exposures
and the timing thereof, and changes in the Company's portfolio of derivative
financial instruments during the year.

                                       12
<Page>
    The Company believes however, that any loss incurred would be offset by the
effects of currency movements on the respective underlying transaction for which
the hedge is intended.

OUTLOOK

    The Company continues to invest in additional full-price free-standing
retail stores, expand its licensing activities, implement its strategic plan,
and respond to external market conditions, and as a result, selling, general and
administrative expenses may increase as a percent of net revenues. Additionally,
the Company is continuing its strategy of identifying and pursuing new licensing
opportunities, which are intended to be complementary to its existing product
lines. The Company believes that this strategy will enable it to expand its
product offerings as well as enter into new international markets. Through these
strategic alliances and the roll-out of existing licenses, the Company
anticipates increased licensing revenues as a result of extending and broadening
the reach of its brands and products. However, the Company's ability to maintain
and increase licensing revenue is dependent upon certain factors not within the
Company's control, including the retail performance of products sold by
licensees. Lastly, as the Company diversifies its revenue mix, lessening the
Company's dependency on any one particular business, further declines in the
women's wholesale business may occur.

    In fiscal 2000 and fiscal 1999, revenue from sales to Asia represented
approximately 6.7% and 8.1%, respectively, of the Company's wholesale net
revenues including approximately 3.4% and 4.9% to Japan, respectively, and
approximately 3.3% and 3.2%, respectively, to other areas in Asia. The Company
has continued to experience a declining sales trend in fiscal 2000 as compared
to fiscal 1999, which the Company believes was due, in part, to the general
economic conditions in Asia.

SEASONALITY OF BUSINESS

    The Company's business varies with general seasonal trends that are
characteristic of the apparel and retail industries, and it generally
experiences lower net revenues and net income (or higher net losses) in the
first half of each fiscal year, as compared to the second half of its fiscal
year. Accordingly, the Company's outstanding borrowings under its revolving
credit facility, historically, have been lower on or about its fiscal year end.
On a quarterly basis, the Company's operations may vary with production and
shipping schedules, the introduction of new products, and variation in the
timing of certain holidays from year to year. The Company historically has
experienced lower net revenues and operating income in the second quarter than
in other quarters due to (i) lower demand among retail customers typical of the
apparel industry, and (ii) certain expenses that are constant throughout the
year being relatively higher as a percentage of net revenues. As the Company's
business continues to evolve and as it increases its free-standing full price
retail business, the Company's operating performance may not reflect the typical
seasonality of the apparel industry.

EURO CONVERSION

    As part of the European Economic and Monetary Union (EMU), a single currency
(the "Euro") will replace the national currencies of most of the European
countries in which the Company conducts business. The conversion rates between
the Euro and the participating nations currencies were fixed irrevocably as of
January 1, 1999, with the participating national currencies being removed from
circulation between January 1 and June 30, 2002 and replaced by Euro notes and
coinage. During the "transition period" from January 1, 1999 through
December 31, 2001, public and private entities as well as individuals may pay
for goods and services using either checks, drafts, or wire transfers
denominated in Euro or the participating country's national currency.

    Under the regulations governing the transition to a single currency, there
is a "no compulsion, no prohibition" rule which states that no one is obliged to
use the Euro until the notes and coinage have

                                       13
<Page>
been introduced on January 1, 2002. The Company is currently conducting business
in both the Euro and the national currencies of the participating nations. Full
conversion of operations to the Euro is expected to be completed by the time
national currencies are removed from circulation. The anticipated cost related
to software and business process conversion to the Euro is currently not
expected to be material.

ACCOUNTING STANDARDS

    In June 1998, the Financial Accounting Standards Board ("FASB") issued
Statement No. 133, "Accounting for Derivative Instruments and Hedging
Activities," as amended, which is required to be adopted in fiscal years
beginning after June 15, 2000. The Company will adopt the provisions of this
Statement effective January 1, 2001. This statements requires that all
derivatives be recorded in the balance sheet as either an asset or liability
measured at fair value and that changes in fair value be recognized currently in
earnings unless specific hedge accounting criteria are met. If the derivative is
a hedge, depending on the nature of the hedge, changes in the fair value of
derivatives will either be offset against the change in fair value of the hedged
assets, liabilities, or firm commitments through earnings or recognized in other
comprehensive income until the hedged item is recognized in earnings. The
ineffective portion of a derivative's change in fair value will be immediately
recognized in earnings. The cumulative effect of adoption of this Statement will
not be material to the Company's results of operations or financial condition.

                                       14
<Page>
PART IV

ITEM 14. EXHIBITS, FINANCIAL STATEMENTS, SCHEDULES, AND REPORTS ON FORM 8-K

    (a) The following documents are filed as part of this report:

       1.  Financial Statements--See "Index to Financial Statements"

       2.  Financial Statement Schedule--Schedule II Valuation and Qualifying
           Accounts and Reserves

        All other schedules for which provision is made in the applicable
    accounting regulations of the Securities and Exchange Commission are not
    required under the related instructions or are inapplicable and therefore
    have been omitted.

       3.  Exhibits--see "Exhibit Index"

    (b) The Company filed no reports on Form 8-K during the last quarter of the
       period covered by this report.

                                       15
<Page>
                         DONNA KARAN INTERNATIONAL INC.

                         INDEX TO FINANCIAL STATEMENTS

       YEARS ENDED DECEMBER 31, 2000, JANUARY 2, 2000 AND JANUARY 3, 1999

<Table>
<Caption>
                                                                PAGE
                                                              --------
<S>                                                           <C>
Report of Independent Auditors..............................    F-2

Statements of Income for the years ended December 31, 2000,
  January 2, 2000 and January 3, 1999.......................    F-3

Balance Sheets as of December 31, 2000 and January 2,
  2000......................................................    F-4

Statements of Stockholders' Equity for the years ended
  December 31, 2000, January 2, 2000 and January 3, 1999....    F-5

Statements of Cash Flows for the years ended December 31,
  2000, January 2, 2000 and January 3, 1999.................    F-6

Notes to Financial Statements...............................    F-7
</Table>

                                      F-1
<Page>
                         REPORT OF INDEPENDENT AUDITORS

The Board of Directors of
Donna Karan International Inc.

    We have audited the consolidated balance sheets of Donna Karan
International Inc. and subsidiaries (the "Company") as of December 31, 2000 and
January 2, 2000, and the related consolidated statements of income,
stockholders' equity, and cash flows for each of the three years in the period
ended December 31, 2000. Our audits also included the financial statement
schedule listed in the Index at Item 14(a). These financial statements and
schedule are the responsibility of the Company's management. Our responsibility
is to express an opinion on these financial statements and schedule 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 Donna Karan
International Inc. at December 31, 2000 and January 2, 2000, and the
consolidated results of their operations and their cash flows for each of the
three years in the period ended December 31, 2000, in conformity with accounting
principles generally accepted in the United States. Also, in our opinion, the
related financial statement schedule, when considered in relation to the basic
financial statements taken as a whole, presents fairly in all material respects
the information set forth therein.

                                                               ERNST & YOUNG LLP


New York, New York
March 13, 2001, except for Note 18 as to
which the date is April 2, 2001, and
Note 19 as to which the
date is August 14, 2001


                                      F-2
<Page>
                         DONNA KARAN INTERNATIONAL INC.

                              STATEMENTS OF INCOME

<Table>
<Caption>
                                                                             YEAR ENDED
                                                           -----------------------------------------------
                                                            DECEMBER 31,      JANUARY 2,      JANUARY 3,
                                                                2000             2000            1999
                                                           ---------------   -------------   -------------
                                                            (DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
<S>                                                        <C>               <C>             <C>
NET REVENUES.............................................    $  662,695       $  661,837      $  622,646
Cost of sales............................................       444,780          450,686         468,559
                                                             ----------       ----------      ----------
GROSS PROFIT.............................................       217,915          211,151         154,087
Selling, general, and administrative expenses............       193,170          193,827         152,089
Restructuring charges (credits), net.....................          (200)           2,645            (267)
                                                             ----------       ----------      ----------
OPERATING INCOME.........................................        24,945           14,679           2,265
Other income (expense):
  Equity in loss of affiliate............................            --               --             (65)
  Interest income........................................           498               97             599
  Interest expense.......................................        (3,093)          (4,187)         (2,649)
  Gain on sale of interests in affiliates................            --               --              88
                                                             ----------       ----------      ----------
INCOME BEFORE INCOME TAXES...............................        22,350           10,589             238
Provision for income taxes...............................         3,163              553             110
                                                             ----------       ----------      ----------
NET INCOME...............................................    $   19,187       $   10,036      $      128
                                                             ==========       ==========      ==========
Net income per common share:
  Basic..................................................    $     0.89       $     0.46      $     0.01
  Diluted................................................    $     0.87       $     0.46      $     0.01

Weighted average common shares outstanding:
  Basic..................................................    21,604,767       21,599,500      21,598,264
  Diluted................................................    22,055,974       21,702,700      21,631,664
</Table>

                       See notes to financial statements

                                      F-3
<Page>
                         DONNA KARAN INTERNATIONAL INC.

                                 BALANCE SHEETS

<Table>
<Caption>
                                                              DECEMBER 31,   JANUARY 2,
                                                                  2000          2000
                                                              ------------   ----------
                                                                   (IN THOUSANDS)
<S>                                                           <C>            <C>
ASSETS
CURRENT ASSETS
  Cash and cash equivalents.................................    $ 15,535      $ 15,038
  Accounts receivable, net of allowances of $36,178 and
    $27,193 respectively....................................      85,007        86,314
  Inventories...............................................      88,691        82,792
  Deferred income taxes.....................................      28,297        26,408
  Prepaid expenses and other current assets.................      27,920        17,567
                                                                --------      --------
      Total current assets..................................     245,450       228,119
Property and equipment, at cost--net........................      38,987        41,512
Deferred income taxes.......................................      19,650        19,543
Deposits and other noncurrent assets........................      20,127        15,117
                                                                --------      --------
                                                                $324,214      $304,291
                                                                ========      ========
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
  Accounts payable..........................................    $ 76,956      $ 57,923
  Accrued expenses and other current liabilities............      57,501        71,339
                                                                --------      --------
      Total current liabilities.............................     134,457       129,262
                                                                --------      --------
Subordinated notes payable..................................       8,209         8,209
Deferred income.............................................      28,688        34,051
Commitments and contingencies (Note 13)

STOCKHOLDERS' EQUITY
  Common stock, $0.01 par value, 35,000,000 shares
    authorized, 22,127,805 shares at December 31, 2000, and
    21,600,264 shares at January 2, 2000 issued and
    outstanding.............................................         221           216
  Common stock class A, $0.01 par value, 18 shares
    authorized, issued and outstanding......................          --            --
  Common stock, class B, $0.01 par value, 2 shares
    authorized, issued and outstanding......................          --            --
  Preferred stock, $0.01 par value, 1,000,000 shares
    authorized, no shares issued and outstanding............          --            --
  Additional paid-in capital................................     192,348       188,471
  Retained deficit..........................................     (34,524)      (53,711)
  Accumulated other comprehensive loss......................      (1,415)         (991)
                                                                --------      --------
                                                                 156,630       133,985
  Less:
    Treasury stock, at cost (16,270 shares and 17,770
      shares, respectively).................................        (384)         (419)
    Unearned compensation...................................      (3,386)         (797)
                                                                --------      --------
      Total stockholders' equity............................     152,860       132,769
                                                                --------      --------
                                                                $324,214      $304,291
                                                                ========      ========
</Table>

                       See notes to financial statements

                                      F-4
<Page>
                         DONNA KARAN INTERNATIONAL INC.

                       STATEMENTS OF STOCKHOLDERS' EQUITY

<Table>
<Caption>
                                                                            YEAR ENDED
                                                              --------------------------------------
                                                              DECEMBER 31,   JANUARY 2,   JANUARY 3,
                                                                  2000          2000         1999
                                                              ------------   ----------   ----------
                                                                          (IN THOUSANDS)
<S>                                                           <C>            <C>          <C>
Common stock, beginning of year.............................    $    216      $    216     $    216
Restricted stock award......................................           5            --           --
                                                                --------      --------     --------
Common stock, end of year...................................         221           216          216
                                                                --------      --------     --------

Additional paid-in capital, beginning of year...............     188,471       188,479      188,491
Restricted stock award......................................       3,869            (8)         (12)
Stock options exercised.....................................          33            --           --
Vesting of restricted stock award...........................         (25)           --           --
                                                                --------      --------     --------
Additional paid-in capital, end of year.....................     192,348       188,471      188,479
                                                                --------      --------     --------
Retained deficit, beginning of year.........................     (53,711)      (63,747)     (63,875)
Net income..................................................      19,187        10,036          128
                                                                --------      --------     --------

Retained deficit, end of year...............................     (34,524)      (53,711)     (63,747)
                                                                --------      --------     --------
Treasury stock, beginning of year...........................        (419)         (443)        (479)
Vesting of restricted stock award...........................          35            24           36
                                                                --------      --------     --------

Treasury stock, end of year.................................        (384)         (419)        (443)
                                                                --------      --------     --------

Unearned compensation, beginning of year....................        (797)       (1,195)      (1,434)
Restricted stock award......................................      (3,874)           --           --
Amortization................................................       1,285           398          239
                                                                --------      --------     --------
Unearned compensation, end of year..........................      (3,386)         (797)      (1,195)
                                                                --------      --------     --------

Accumulated other comprehensive loss, beginning of year.....        (991)       (1,206)        (455)
Foreign currency translation, adjustments...................        (424)          215         (751)
                                                                --------      --------     --------
Accumulated other comprehensive loss, end of year...........      (1,415)         (991)      (1,206)

Total stockholders' equity..................................    $152,860      $132,769     $122,104
                                                                ========      ========     ========

Comprehensive income (loss).................................    $ 18,763      $ 10,251     $   (623)
                                                                ========      ========     ========
</Table>

                       See notes to financial statements

                                      F-5
<Page>
                         DONNA KARAN INTERNATIONAL INC.

                            STATEMENTS OF CASH FLOWS

<Table>
<Caption>
                                                                            YEAR ENDED
                                                              --------------------------------------
                                                              DECEMBER 31,   JANUARY 2,   JANUARY 3,
                                                                  2000          2000         1999
                                                              ------------   ----------   ----------
                                                                          (IN THOUSANDS)
<S>                                                           <C>            <C>          <C>
OPERATING ACTIVITIES
  Net income................................................    $ 19,187      $ 10,036     $    128
  Adjustments to reconcile net income to net cash provided
    by operating activities:
    Depreciation and amortization...........................      16,281        19,406       11,169
    Amortization of deferred income.........................     (12,847)      (14,494)      (7,956)
    Provision for bad debts.................................      (1,215)        2,717        1,544
    Deferred income taxes...................................      (1,996)       (4,211)        (989)
    Provision for restricted stock compensation.............       1,285           398          239
    Other, net..............................................          10            16         (266)
  Changes in operating assets and liabilities:
    Decrease (increase) in accounts receivable..............       3,222       (18,054)      (4,383)
    (Increase) decrease in inventories......................      (5,899)       10,819       22,541
    (Increase) decrease in prepaid expenses and other
      current assets........................................     (11,053)        1,294       (6,790)
    Increase in deposits and other noncurrent assets........     (12,351)       (6,464)      (3,508)
    Increase (decrease) in accounts payable, accrued
      expenses, and other current liabilities...............      17,618        28,785       (8,616)
    (Decrease) increase in deferred income..................      (5,363)       (2,444)      36,360
                                                                --------      --------     --------
      NET CASH PROVIDED BY OPERATING ACTIVITIES.............       6,879        27,804       39,473
                                                                --------      --------     --------

INVESTING ACTIVITIES
  Purchase of free-standing retail stores...................          --        (9,200)          --
  Proceeds from sale of affiliate...........................          --            --          646
  Purchase of property and equipment........................      (6,415)      (11,014)      (8,158)
                                                                --------      --------     --------
      NET CASH USED IN INVESTING ACTIVITIES.................      (6,415)      (20,214)      (7,512)
                                                                --------      --------     --------

FINANCING ACTIVITIES
  Net repayment of revolving credit facility................          --            --      (22,314)
  Repayment of note payable to principal....................          --            --       (6,700)
  Other.....................................................          33            --          (36)
                                                                --------      --------     --------
      NET CASH PROVIDED BY (USED FOR) FINANCING
        ACTIVITIES..........................................          33            --      (29,050)
                                                                --------      --------     --------

NET INCREASE IN CASH AND CASH EQUIVALENTS...................         497         7,590        2,911
CASH AND CASH EQUIVALENTS AT BEGINNING OF YEAR..............      15,038         7,448        4,537
                                                                --------      --------     --------
CASH AND CASH EQUIVALENTS AT END OF YEAR....................    $ 15,535      $ 15,038     $  7,448
                                                                ========      ========     ========
</Table>

                       See notes to financial statements

                                      F-6
<Page>
                         DONNA KARAN INTERNATIONAL INC.

                         NOTES TO FINANCIAL STATEMENTS

NOTE 1.--SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

    BASIS OF PRESENTATION

    The accompanying financial statements include the accounts of Donna Karan
International Inc. and subsidiaries ("DKI" or the "Company"). The accompanying
financial statements include the results of operations of DKI for the fiscal
years ended December 31, 2000, January 2, 2000, and January 3, 1999. All
significant intercompany balances and transactions have been eliminated. The
equity method of accounting was used for Donna Karan Japan K.K. ("DKJ") since
the date the Company sold 70% of its interest to a nonaffiliated party and until
March 1998, when the Company and such nonaffiliated party sold all of their
remaining outstanding shares to a Japanese public company (see Note 6).

    The Company's fiscal year consists of the 52- or 53-week period ending on
the Sunday nearest December 31, with fiscal 2000 and fiscal 1999 consisting of a
52-week year and fiscal 1998 consisting of a 53-week year.

    Certain amounts in the financial statements of prior years have been
reclassified to conform to the current year presentation.

    NET INCOME PER COMMON SHARE

    In accordance with the requirements of Financial Accounting Standards
("SFAS") No. 128, net income per common share amounts ("basic EPS") were
computed by dividing net income by the weighted average number of common shares
outstanding and contingently issuable shares (which satisfy certain conditions)
and excluding any potential dilution. Net income per common share amounts
assuming dilution ("diluted EPS") were computed by reflecting potential dilution
from the exercise of stock options. SFAS No. 128 requires the presentation of
both basic EPS and diluted EPS on the face of the statements of income.

    Reconciliation between the numerators and denominators of the basic and
diluted EPS computations is as follows:

<Table>
<Caption>
                                                         DECEMBER 31,     JANUARY 2,      JANUARY 3,
                                                             2000            2000            1999
                                                        --------------   -------------   -------------
                                                        (DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
<S>                                                     <C>              <C>             <C>
NUMERATOR:
Net income attributable to common stock...............    $    19,187     $    10,036     $       128
                                                          ===========     ===========     ===========
DENOMINATOR:
Weighted average common shares outstanding--Basic.....     21,604,767      21,599,500      21,598,264
Effect of dilutive securities:
  Stock options.......................................         17,533         103,200          33,400
  Restricted common stock.............................        433,674              --              --
                                                          -----------     -----------     -----------
Weighted average common shares outstanding--Diluted...     22,055,974      21,702,700      21,631,664
                                                          ===========     ===========     ===========
Basic EPS.............................................    $      0.89     $      0.46     $      0.01
                                                          ===========     ===========     ===========
Diluted EPS...........................................    $      0.87     $      0.46     $      0.01
                                                          ===========     ===========     ===========
</Table>

                                      F-7
<Page>
                         DONNA KARAN INTERNATIONAL INC.

                   NOTES TO FINANCIAL STATEMENTS (CONTINUED)

    INVENTORIES

    Inventory is stated at the lower of cost or market, with cost being
determined on the first-in, first-out method.

<Table>
<Caption>
                                                        DECEMBER 31,   JANUARY 2,
                                                            2000          2000
                                                        ------------   ----------
                                                             (IN THOUSANDS)
<S>                                                     <C>            <C>
Raw materials.........................................     $ 3,522       $ 2,947
Work in process.......................................       3,920         2,730
Finished goods........................................      81,249        77,115
                                                           -------       -------
                                                           $88,691       $82,792
                                                           =======       =======
</Table>

    PROPERTY AND EQUIPMENT

    Property and equipment are carried at cost less accumulated depreciation.
Depreciation of machinery, equipment and fixtures, including amounts accounted
for under capital leases, is computed using straight-line and accelerated
methods based on their estimated useful lives, which range from 5 to 7 years.
Leasehold improvements are amortized on a straight-line basis over the lease
term, which in certain instances include the anticipated renewal period. The
Company's share of the cost of constructing in-store shop displays is
capitalized and amortized using the straight-line method over their estimated
useful lives of 4 years. At December 31, 2000 and January 2, 2000, the
unamortized balance of these costs of $17.5 million and $11.8 million,
respectively, was included in "Deposits and other noncurrent assets" in the
accompanying balance sheets. Amortization expense of these costs for the years
ended December 31, 2000, January 2, 2000 and January 3, 1999 amounted to
approximately $6.5 million, $5.1 million and $4.4 million, respectively.

    Major classes of property and equipment consist of the following:

<Table>
<Caption>
                                                        DECEMBER 31,   JANUARY 2,
                                                            2000          2000
                                                        ------------   ----------
                                                             (IN THOUSANDS)
<S>                                                     <C>            <C>
Machinery, equipment and fixtures.....................    $ 29,688      $ 28,281
Leasehold improvements................................      63,359        61,776
                                                          --------      --------
                                                            93,047        90,057
Less accumulated depreciation and amortization........     (54,060)      (48,545)
                                                          --------      --------
                                                          $ 38,987      $ 41,512
                                                          ========      ========
</Table>

    Depreciation and amortization of property and equipment amounted to
$9.0 million, $9.6 million, and $5.5 million for the years ended December 31,
2000, January 2, 2000 and January 3, 1999, respectively.

    LONG-LIVED ASSETS

    The Company accounts for long-lived assets, including intangibles, at the
lower of amortized cost or fair value, less disposition costs. Whenever events
or changes in circumstances have indicated that the carrying amount of assets
might not be recoverable, the Company, using its best estimates, reviews for
impairment the carrying value of those long-lived assets. In fiscal 1999, the
Company identified

                                      F-8
<Page>
                         DONNA KARAN INTERNATIONAL INC.

                   NOTES TO FINANCIAL STATEMENTS (CONTINUED)

certain underperforming stores as a result of this review, and recorded a charge
of approximately $3.7 million, related to this impairment loss (see Note 9).

    ACCRUED EXPENSES AND OTHER CURRENT LIABILITIES

    Accrued expenses and other current liabilities are comprised of the
following:

<Table>
<Caption>
                                                        DECEMBER 31,   JANUARY 2,
                                                            2000          2000
                                                        ------------   ----------
                                                             (IN THOUSANDS)
<S>                                                     <C>            <C>
Accrued expenses......................................     $13,169       $17,326
Unearned revenues.....................................       7,367        14,852
Accrued compensation..................................      12,712        14,061
Accrued royalties.....................................      12,920        10,559
Accrued income taxes..................................       6,868         6,469
Accrued restructuring and other charges...............         892         5,370
Accrued taxes other than income taxes.................       2,671         1,722
Other.................................................         902           980
                                                           -------       -------
                                                           $57,501       $71,339
                                                           =======       =======
</Table>

    REVENUE RECOGNITION

    Revenues from merchandise sales are recognized upon shipment of products to
the customer or, in the case of sales by Company-owned stores, when payment is
received. The Company reports its sales on a net basis, which is computed by
deducting from gross sales the amount of anticipated discounts, returns and
allowances. Income from licensing agreements is recognized when earned and is
included in net revenues. Shipping and handling costs related to merchandise
sales are classified as selling, general and administrative expenses.

    ADVERTISING AND PROMOTION

    Costs associated with the production of advertising are expensed upon the
first showing of the related advertisement, which is generally less than six
months after the production costs are incurred. At December 31, 2000 and
January 2, 2000, advertising costs totaling $4.3 million and $1.9 million,
respectively, were included in "Prepaid expenses and other current assets" in
the accompanying balance sheets. Advertising and marketing expenses, including
costs related to the Company's Creative Services Department, for the years ended
December 31, 2000, January 2, 2000, and January 3, 1999 were $35.8 million,
$34.1 million and $31.0 million, respectively.

    STORE PRE-OPENING COSTS

    In accordance with Accounting Standards Executive Committee ("AcSec")
Statement of Position ("SOP") No. 98-5 "Reporting on the Costs of Start-up
Activities," costs associated with the opening or remodeling of stores, such as
pre-opening rent and payroll, are expensed as incurred. In fiscal 1999, the
Company expensed $1.9 million of costs associated with the opening of its DKNY
Flagship store on Madison Avenue in New York City, New York.

                                      F-9
<Page>
                         DONNA KARAN INTERNATIONAL INC.

                   NOTES TO FINANCIAL STATEMENTS (CONTINUED)

    CASH AND CASH EQUIVALENTS

    The Company considers all highly liquid investments with original maturities
of three months or less to be cash equivalents. Cash includes approximately
$5.7 million and $9.4 million of short-term deposits at December 31, 2000 and
January 2, 2000, respectively.

    STATEMENT OF CASH FLOWS

    Supplemental disclosures of cash flow information:

<Table>
<Caption>
                                                            YEAR ENDED
                                              --------------------------------------
                                              DECEMBER 31,   JANUARY 2,   JANUARY 3,
                                                  2000          2000         1999
                                              ------------   ----------   ----------
                                                          (IN THOUSANDS)
<S>                                           <C>            <C>          <C>
Cash paid during the year for:
  Interest..................................     $2,353        $2,825       $1,507
                                                 ======        ======       ======
  Taxes.....................................     $6,220        $  673       $6,174
                                                 ======        ======       ======
</Table>

    FOREIGN CURRENCY TRANSLATION AND TRANSACTIONS

    For foreign operations, local currencies are considered the functional
currency. All assets and liabilities of foreign subsidiaries and affiliates are
translated at year-end rates of exchange, while results of operations are
translated at weighted average rates of exchange for the year. Unrealized
translation gains or losses are generally reported in stockholders' equity as
accumulated other comprehensive income. Such adjustments amounted to
approximately $0.4 million of unrealized translation losses and $0.2 million of
unrealized translation gains in fiscal 2000 and fiscal 1999, respectively. Gains
and losses from foreign currency transactions are included in operations.

    The Company enters into forward exchange contracts and from time-to-time
purchases foreign currency options to hedge foreign currency transactions for
periods consistent with its identified exposures. These financial instruments
are designed to minimize exposure and reduce risk from exchange rate
fluctuations in the regular course of business. The Company does not engage in
speculation. Gains and losses on foreign exchange contracts which hedge
exposures on firm foreign currency commitments are deferred and recognized as
adjustments to the bases of those assets. For the years ended December 31, 2000,
January 2, 2000 and January 3, 1999, gains and losses on foreign exchange
contracts offset gains and losses on the underlying transactions.

    MANAGEMENT ESTIMATES

    The preparation of financial statements in conformity with accounting
principles generally accepted in the United States requires management to make
estimates and assumptions that affect the reported amounts of assets,
liabilities, revenues and expenses reported in those financial statements.
Actual results could differ from those estimates and assumptions.

    IMPACT OF RECENTLY ISSUED ACCOUNTING STANDARDS

    In December 1999, the Securities and Exchange Commission issued Staff
Accounting Bulletin 101 "Revenue Recognition in Financial Statements." The
effective date has been deferred pending additional interpretive guidance. Based
on current interpretations, no material impact on the Company's Financial
Statement is anticipated.

                                      F-10
<Page>
                         DONNA KARAN INTERNATIONAL INC.

                   NOTES TO FINANCIAL STATEMENTS (CONTINUED)

    In June 1998, the Financial Accounting Standards Board ("FASB") issued
Statement No. 133, "Accounting for Derivative Instruments and Hedging
Activities," as amended, which is required to be adopted in fiscal years
beginning after June 15, 2000. The Company will adopt the provisions of this
Statement effective January 1, 2001. This Statement requires that all
derivatives be recorded in the balance sheet as either an asset or liability
measured at fair value and that changes in fair value be recognized currently in
earnings unless specific hedge accounting criteria are met. If the derivative is
a hedge, depending on the nature of the hedge, changes in the fair value of
derivatives will either be offset against the change in fair value of the hedged
assets, liabilities, or firm commitments through earnings or recognized in other
comprehensive income until the hedged item is recognized in earnings. The
ineffective portion of a derivative's change in fair value will be immediately
recognized in earnings. The Company's cumulative effect of adoption of this
Statement will not be material to the Company's results of operations or
financial condition.

NOTE 2.--BORROWINGS


    In February 2000, the Company amended the $150.0 million revolving Credit
Facility (the "Facility") in place at January 2, 2000 and extended its term, to
expire on May 1, 2003. Direct borrowings under the Facility bear interest at a
fixed spread over the lead bank's prime rate or, at the option of the Company,
at a fixed spread over the LIBOR and are limited to a borrowing base calculated
on eligible accounts receivable, inventory, and letters of credit. The Facility
is secured by accounts receivable and inventory of the Company, as well as a
pledge of all equity interests of the subsidiaries of the Company. The Facility
also contains certain restrictive covenants which, among other things, require
the Company to maintain certain financial ratios and restrict investments,
incurrence of additional indebtedness, and payment of dividends. At
December 31, 2000 and January 2, 2000, there were no direct borrowings
outstanding under the Facility.


    In connection with the Facility, the Company incurred certain financing
costs which were deferred and are being amortized over the remaining term of the
Facility. At December 31, 2000, and January 2, 2000 unamortized financing costs
of approximately $0.6 million and $0.6 million, respectively were included in
"Deposits and other noncurrent assets" in the accompanying balance sheets.
Amortization of deferred financing costs of approximately $0.8 million,
$1.3 million and $1.3 million in fiscal 2000, 1999 and 1998, respectively, were
included in interest expense.

    Letters of credit outstanding were approximately $56.6 million and
$60.3 million at December 31, 2000 and January 2, 2000, respectively.

NOTE 3.--FINANCIAL INSTRUMENTS

    DERIVATIVE FINANCIAL INSTRUMENTS RISK

    The Company selectively uses a combination of derivative financial
instruments to maintain the value-at-risk inherent in its foreign currency
exposures within acceptable parameters, as determined by senior management. The
purpose of this approach is to reduce the Company's exposure to market risk
resulting from fluctuations in foreign exchange rates. Derivative financial
instruments currently utilized by the Company principally include forward
exchange contracts and from time-to-time purchased foreign currency options.
Hedges are executed centrally to facilitate the netting of offsetting currency
exposures, to ensure control over the use of derivative financial instruments
and to minimize transaction costs. The Company does not hold or enter into
financial instruments for trading or speculative purposes.

                                      F-11
<Page>
                         DONNA KARAN INTERNATIONAL INC.

                   NOTES TO FINANCIAL STATEMENTS (CONTINUED)

    The Company has a policy of only entering into contracts with counterparties
that have at least an "A" (or equivalent) credit rating. The counterparties to
these contracts are major financial institutions and the Company does not have
significant exposure to any one counterpart. Management believes that risk of
loss is remote and in any event would be immaterial.

    FOREIGN EXCHANGE RISK MANAGEMENT

    The Company enters into forward exchange contracts to hedge inventory
purchases, accounts receivable and accounts payable denominated in foreign
currencies for periods consistent with its identified exposures. Gains and
losses related to qualifying hedges of these exposures are deferred and
recognized in operating income when the underlying hedged transaction occurs.
The Company also enters into purchased foreign currency options from
time-to-time to hedge anticipated transactions where there is a high probability
that anticipated exposures will materialize. Any gain realized on such options
that qualify as hedges are deferred and recognized in operating income when the
underlying hedged transactions occurs. Foreign currency transactions, which do
not qualify as hedges, are marked to market on a current basis with associated
gains and losses reflected in operating income. In addition, any previously
deferred gains and losses on hedges which are terminated prior to the
transaction date are recognized in current operations when the hedge is
terminated. The contracts have varying maturities with none exceeding
24 months. Foreign currencies exchanged under these contracts are principally
the Italian Lira, U.K. Pound, Dutch Guilder, Japanese Yen and the European
Economical Monetary Union Euro.

    Deferred unrealized gains and losses from derivative financial instruments
consist of the following:

<Table>
<Caption>
                                        DECEMBER 31, 2000                 JANUARY 2, 2000
                                  ------------------------------   ------------------------------
                                  NOTIONAL                         NOTIONAL
                                  AMOUNTS     GAINS      LOSSES    AMOUNTS     GAINS      LOSSES
                                  --------   --------   --------   --------   --------   --------
                                                          (IN THOUSANDS)
<S>                               <C>        <C>        <C>        <C>        <C>        <C>
Forward exchange contracts......  $131,198      $--       $901     $115,772    $2,859       $--
</Table>

    FAIR VALUE OF FINANCIAL INSTRUMENTS

    The following methods and assumptions were used to estimate the fair value
of each class of financial instruments for which it is practicable to estimate
that value:

    Cash and cash equivalents:

       The carrying amount approximated fair value, primarily because of the
       short maturity of cash equivalent instruments.

    Borrowing under revolving line of credit and Subordinated notes payable:

       The fair value of the Company's debt approximates its carrying value,
       primarily because they bear interest at a variable rate.

    Forward exchange contracts:

       The fair value of forward exchange contracts is the estimated amount the
       Company would receive or pay to terminate the agreements, as determined
       by dealer quotes.

                                      F-12
<Page>
                         DONNA KARAN INTERNATIONAL INC.

                   NOTES TO FINANCIAL STATEMENTS (CONTINUED)

    The estimated fair values of the Company's financial instruments are as
follows:

<Table>
<Caption>
                                                        DECEMBER 31, 2000        JANUARY 2, 2000
                                                      ---------------------   ---------------------
                                                      NOTIONAL                NOTIONAL
                                                       AMOUNT    FAIR VALUE    AMOUNT    FAIR VALUE
                                                      --------   ----------   --------   ----------
                                                                     (IN THOUSANDS)
<S>                                                   <C>        <C>          <C>        <C>
NONDERIVATIVES
Cash and cash equivalents...........................  $ 15,535    $ 15,535    $ 15,038    $ 15,038
Subordinated notes payable..........................     8,209       8,209       8,209       8,209

DERIVATIVES
Forward exchange contracts..........................  $131,198    $132,059    $115,772    $119,598
</Table>

NOTE 4.--EMPLOYEE BENEFIT PLANS

    The Company is required to make contributions to a multi-employer union
pension and health and welfare plan. These payments are based on wages paid to
the Company's union employees and amounts paid to contractors utilized by the
Company. The Company does not participate in the management of the plans and has
not been furnished with any information with respect to the type of benefits
provided, vested and nonvested benefits or plan assets. Health and welfare plan
expense approximated $1.1 million, $1.3 million and $1.7 million for the fiscal
years ended December 31, 2000, January 2, 2000 and January 3, 1999,
respectively. Pension expense approximated $0.4 million, $0.6 million and
$0.7 million for the fiscal years ended December 31, 2000, January 2, 2000 and
January 3, 1999, respectively. Separate actuarial calculations regarding the
Company's share of plan benefits and net assets available for plan benefits have
not been determined.

    Under the Employee Retirement Income Security Act of 1974, as amended, an
employer, upon withdrawal from or termination of a multi-employer plan, is
required to continue funding its proportionate share of the plan's unfunded
vested benefits. As of December 31, 2000, the Company had no intention of
withdrawing from the plan.

    The Company sponsors a defined contribution benefit plan covering its
non-union employees with a minimum of six months of eligible service. The
Company matches employee contributions at a rate of 50%, to a maximum of 6% of
an employee's annual salary. Under the terms of the plan, a participant is 100%
vested in the employer's matching contribution after six years of credited
service. Expenses under this plan, net of forfeitures, were approximately
$0.3 million, $0.8 million and $0.8 million for the fiscal years ended
December 31, 2000, January 2, 2000 and January 3, 1999, respectively.

    During 1997, the Company adopted a bonus plan covering executives and
certain members of management. Individual bonus payments are based on management
and compensation levels, performance goals and the Company's overall
performance. The Company also adopted a deferred compensation plan covering
certain senior executives, which is based on compensation, is dependent upon the
Company achieving profitability, and vests after a five year period. In
addition, amounts under the deferred compensation plan will become fully vested
upon a change in control of the Company (as defined in the plan). In fiscal
2000, 1999 and 1998, expenses under these plans were approximately
$8.0 million, $7.8 million and $5.9 million, respectively.

NOTE 5.--LEASES

    Rent expense included in the Company's financial statements was
approximately $33.7 million, $32.3 million and $23.5 million for the fiscal
years ended December 31, 2000, January 2, 2000, and

                                      F-13
<Page>
                         DONNA KARAN INTERNATIONAL INC.

                   NOTES TO FINANCIAL STATEMENTS (CONTINUED)

January 3, 1999, respectively. At December 31, 2000, future minimum annual
rental commitments under noncancellable operating leases for office, warehouse
and retail facilities, and equipment are as follows (in thousands):

<Table>
<S>                                                           <C>
2001........................................................  $ 24,392
2002........................................................    22,177
2003........................................................    19,862
2004........................................................    17,842
2005........................................................    17,239
Thereafter..................................................    80,741
                                                              --------
                                                              $182,253
                                                              ========
</Table>

    In addition, certain of the leases contain options to renew for periods up
to 10 years and others include contingent payments based on sales.

    The Company has entered into certain sub-lease arrangements. At
December 31, 2000, future offsets to annual rental commitments as a result of
these subleases are as follows (in thousands):

<Table>
<S>                                                           <C>
2001........................................................   $1,626
2002........................................................    1,543
2003........................................................    1,310
2004........................................................    1,143
2005........................................................    1,143
Thereafter..................................................    2,535
                                                               ------
                                                               $9,300
                                                               ======
</Table>

NOTE 6.--SALE OF INTERESTS IN AFFILIATES

    In March 1998, the Company and a nonaffiliated party sold all of their
remaining outstanding shares in DKJ to a nonaffiliated party, a Japanese public
company. At the same time, DKJ was granted a 16-year exclusive license to
import, manufacture, license and/or distribute DONNA KARAN NEW YORK and DKNY
products in Japan, with certain exceptions. In addition, DKJ was granted the
exclusive right to develop and operate a total of 12 DONNA KARAN NEW YORK and
DKNY retail boutiques in Japan over the term of the agreement. On consummation
of the transaction, the Company received $15.9 million, which is being amortized
over the term of the agreement. The Company receives a royalty on net sales of
licensed products and a servicing fee on net sales of Donna Karan products
imported by DKJ.


    In consideration of the sale of its interest in DKJ, the Company received
approximately $646,000 and recognized a gain, net of transaction costs, of
approximately $88,000 in the fiscal year ended January 3, 1999. Equity in DKJ's
loss amounted to approximately $0.1 million for the fiscal year ended
January 3, 1999. As a result of the Company's agreement with DKJ in 1995, which
provided for a fee based upon net sales of DKJ, the Company recognized
management fee income, recorded as an offset of selling, general, and
administrative expenses of approximately $0.4 million, $0.6 million and
$0.8 million during the years ended December 31, 2000, January 2, 2000, and
January 3, 1999, respectively.


                                      F-14
<Page>
                         DONNA KARAN INTERNATIONAL INC.

                   NOTES TO FINANCIAL STATEMENTS (CONTINUED)

NOTE 7.--APPAREL LICENSING AGREEMENT


    In December 1999, the Company consummated an agreement to grant to Liz
Claiborne Inc. ("LCI") the exclusive right to design, produce, market and sell a
new line of women's career and casual sportswear, which line launched for the
Spring 2001 season under the CITY DKNY label. Under the agreement, LCI is
obligated to pay the Company a royalty equal to a percentage of net sales of
such licensed product. Upon consummation of the transaction, the Company
received $6.4 million in prepaid royalties, which will be recognized as earned
as LCI ships the licensed product. The initial term of the license agreement is
for 6 years through December 31, 2005, with an option to renew for two
additional 5-year periods, if certain sales thresholds are met.



    On January 8, 1998, the Company and LCI consummated an agreement whereby the
Company granted to LCI exclusive, long-term rights to the DKNY JEANS and DKNY
ACTIVE trademarks for apparel products to market, distribute and sell both
collections in the Western Hemisphere. Under the agreement, LCI is obligated to
pay the Company a royalty equal to a percentage of net sales of the DKNY JEANS
and ACTIVE products. The initial term of the license agreement is for 15 years
through December 31, 2012, with an option to renew for an additional 15-year
period if certain sales thresholds are met, which would continue the license
through December 31, 2027. Upon consummation of the transaction, the Company
received from LCI $8.4 million in prepaid royalties, which were recognized as
earned as LCI shipped the licensed product. In addition, the Company received a
$21.6 million up-front payment in exchange for the exclusive rights granted.
This amount is being amortized on a straight-line basis into income over the
term of the agreement. Aggregate minimum royalties for the initial 15-year term
are $152.0 million.


NOTE 8.--BEAUTY LICENSING AGREEMENT


    On November 10, 1997, the Company and Estee Lauder Inc. ("ELI") consummated
an agreement whereby the Company granted to ELI exclusive worldwide rights to
the DONNA KARAN NEW YORK and DKNY trademarks for the manufacture, marketing,
distribution and sale of beauty and beauty-related products, including
fragrances, cosmetics, skincare products, and beauty-related accessories. In
connection therewith and with the sale to ELI of certain other assets relating
to the existing business, the Company received $25.0 million and receives
additional royalties from ELI based on sales of such beauty and beauty-related
products. Of this $25 million amount, $10 million represents prepaid royalties,
which are being recognized as earned as ELI ships the licensed product.



    Of the remaining $15.0 million, the Company recognized $10.0 million in
fiscal 1997 since, other than certain veto rights related to the product, the
Company would not be involved in the future day-to-day business and recognized a
one-time licensing credit of $5.0 million in fiscal 1999 as a result of
satisfying certain conditions of the beauty license related to the launch of new
products in accordance with an agreed-upon schedule.



    In fiscal 1997, upon closing the transaction with ELI, the Company recorded
a loss of approximately $21.1 million (net of a $2.2 million gain in connection
with the consummation of the transaction.) This loss represented reserves
recorded, primarily related to inventories, receivables and severance to cover
the shut-down of the Company's existing beauty business, and is net of a gain of
approximately $2.2 million, representing the portion of the proceeds recognized
as income (the aforementioned $10.0 million) reduced by the cost of exiting the
beauty business.


                                      F-15
<Page>
                         DONNA KARAN INTERNATIONAL INC.

                   NOTES TO FINANCIAL STATEMENTS (CONTINUED)

NOTE 9.--RESTRUCTURING AND OTHER CHARGES


    On November 2, 1999 the Company announced that it was implementing a series
of strategic initiatives intended to further reduce costs, increase efficiencies
and focus on key business areas. In connection with the strategic initiatives,
and in accordance with SFAS No. 121, "Accounting for the Impairment of
Long-Lived Assets and for Long-Lived Assets to Be Disposed Of," and EITF Issue
94-3 "Liability Recognition for Certain Employee Termination Benefits and Other
Costs to Exit an Activity (including Certain Costs Incurred in a
Restructuring)," the Company recorded in the fourth quarter restructuring and
other non-recurring charges of $11.0 million, of which $0.8 million was
classified as cost of sales, $6.1 million as selling, general and administrative
expenses and $4.1 million as restructuring charges. The strategic initiatives
included: (i) consolidating the Donna Karan New York and DKNY women's divisions
and integrating the marketing and public relations functions into one unit,
resulting in a charge of $2.6 million which was primarily for employee
serverance; (ii) closing seven non-performing outlet stores, resulting in a
charge of $2.2 million, which was primarily for the write-down to net realizable
value of inventory and fixed assets, and the costs of buying out leases;
(iii) recognizing an impairment of under-performing retail stores based upon the
present value of projected cash flows to determine the fair value of the stores,
resulting in an impairment charge of $3.7 million; (iv) the write-off of certain
under-perfoming co-op shops that were identified and abandoned, resulting in a
charge of $1.1 million; and (v) certain other non-recurring charges of
$1.4 million, primarily for the write-off of fixed assets and leasehold
improvements related the consolidation of certain divisions and functions. The
Company anticipates achieving annual savings of approximately $6.0 million as a
result of these stategic initiatives. The cash and noncash elements of the
restructuring charge approximated $4.3 million and $6.7 million, respectively.
As a result of the strategic initiatives, approximately 160 positions were
eliminated in the Company, of which 50 were unfilled positions. Of the remaining
110 positions, 42 employees were terminated in fiscal 1999 and 68 employees were
terminated in fiscal 2000.


    Included in the aforementioned strategic initiatives and concurrent with the
Company's annual planning process, the Company determined that the estimated
future undiscounted cash flows were below the carrying value of certain retail
stores. Accordingly, during the fourth quarter of fiscal 1999, the Company
adjusted the carrying value of these stores, to their estimated fair value and
recorded an impairment charge of $3.7 million, which has been classified as
selling, general and administrative expenses. The Company calculated the present
value of projected cash flows to determine the fair value of the store assets.

    Additionally, as a result of the strategic initiatives, certain
under-performing co-op shops were identified to be abandoned, and seven
non-performing outlet stores were scheduled to be closed, resulting in the
recording of a charge of approximately $1.1 million and $2.2 million,
respectively. The charge includes $0.8 million related to cost of sales and
$2.5 million classified as selling, general and administrative expenses.

                                      F-16
<Page>
                         DONNA KARAN INTERNATIONAL INC.

                   NOTES TO FINANCIAL STATEMENTS (CONTINUED)

    The major components of the fiscal 1999 restructuring and other charges are
as follows:


<Table>
<Caption>
                                                              FISCAL YEAR ENDED JANUARY 2, 2000
                                                    ------------------------------------------------------
                                                                    UTILIZED                    BALANCE AT
                                                    ORIGINAL   -------------------     NOT      JANUARY 2,
                                                    ACCRUAL      CASH     NONCASH    UTILIZED      2000
                                                    --------   --------   --------   --------   ----------
<S>                                                 <C>        <C>        <C>        <C>        <C>
Writedown of long-lived assets....................  $ 4,827      $ --      $4,827       $--       $   --
Exit costs (including inventory markdowns)........    2,155       605         258       --         1,292
Employee termination and severance costs..........    2,283       340          --       --         1,943
Other.............................................    1,686        19         440       --         1,227
                                                    -------      ----      ------       --        ------
                                                    $10,951      $964      $5,525       $--       $4,462
                                                    =======      ====      ======       ==        ======
</Table>



<Table>
<Caption>
                                                            FISCAL YEAR ENDED DECEMBER 31, 2000
                                                -----------------------------------------------------------
                                                BALANCE AT         UTILIZED                     BALANCE AT
                                                JANUARY 2,   --------------------     NOT      DECEMBER 31,
                                                   2000        CASH      NONCASH    UTILIZED       2000
                                                ----------   --------   ---------   --------   ------------
<S>                                             <C>          <C>        <C>         <C>        <C>
Writedown of long-lived assets................    $   --      $   --    $     --     $   --        $ --
Exit costs (including inventory markdowns)....     1,292         186          37      1,001          68
Employee termination and severance costs......     1,943       1,755          --         --         188
Other.........................................     1,227         591          --         --         636
                                                  ------      ------    ---------    ------        ----
                                                  $4,462      $2,532    $     37     $1,001        $892
                                                  ======      ======    =========    ======        ====
</Table>



    During the year ended December 31, 2000, the Company utilized approximately
$2.6 million of reserves previously established in connection with its fiscal
1999 restructuring plan and reversed $1.0 that was no longer deemed necessary.
This reversal related to inventory and legal reserves that were ultimately not
needed upon the closing of the seven non-performing outlet stores. The Company
anticipates utilizing the remaining balance of its reserves during fiscal 2001.



    In 1997, the Company recorded restructuring charges of approximately
$8.6 million, primarily for severance, the abandonment of leased space and the
closing of the Company's Prato, Italy office. In addition, during 1997 the
Company recognized other charges amounting to $17.0 million, primarily for
additional severance costs, costs related to the realignment of a retail and
distribution agreement in Europe, and other costs recorded during a cost
containment review process. In the fourth quarter of 1999, the Company completed
the closing of its Prato office, and $1.4 million in reserves that had been
recorded in connection with this closing, primarily estimated severance costs
and legal, accounting and other fees, were no longer needed, and accordingly,
were reversed. Additionally, in the fourth quarter of 2000, the Company
determined that all initiatives contemplated as part of the 1997 cost
containment review process had been completed, and any remaining reserves for
estimated costs set up at that time should be reversed. Accordingly,
$0.6 million of the original $17.0 million charge was reversed.


                                      F-17
<Page>
                         DONNA KARAN INTERNATIONAL INC.

                   NOTES TO FINANCIAL STATEMENTS (CONTINUED)


    During the fiscal year ended December 28, 1997, the Company utilized
$9.2 million in reserves recorded related to the 1997 restructuring and other
charges. The activity in the reserve account for the fiscal years 1998, 1999 and
2000 are as follows:



<Table>
<Caption>
                                                            FISCAL YEAR ENDED JANUARY 3, 1999
                                                ----------------------------------------------------------
                                                 BALANCE AT         UTILIZED                    BALANCE AT
                                                DECEMBER 28,   -------------------     NOT      JANUARY 3,
                                                    1997         CASH     NONCASH    UTILIZED      1999
                                                ------------   --------   --------   --------   ----------
<S>                                             <C>            <C>        <C>        <C>        <C>
Employee termination and severance costs......     $ 4,737      $3,281     $   --       $--       $1,456
European retail and distribution agreement....       5,900         221         --       --         5,679
Writedown of long-lived assets................         643          --        643       --            --
Other.........................................       5,142       2,054      1,818       --         1,270
                                                   -------      ------     ------       --        ------
                                                   $16,422      $5,556     $2,461       $--       $8,405
                                                   =======      ======     ======       ==        ======
</Table>



<Table>
<Caption>
                                                             FISCAL YEAR ENDED JANUARY 2, 2000
                                                  --------------------------------------------------------
                                                  BALANCE AT        UTILIZED                    BALANCE AT
                                                  JANUARY 3,   -------------------     NOT      JANUARY 2,
                                                     1999        CASH     NONCASH    UTILIZED      2000
                                                  ----------   --------   --------   --------   ----------
<S>                                               <C>          <C>        <C>        <C>        <C>
Employee termination and severance costs........    $1,456      $  631       --          822       $  3
European retail and distribution agreement......     5,679       5,679       --           --         --
Other...........................................     1,270          --       --          604        666
                                                    ------      ------       --       ------       ----
                                                    $8,405      $6,310       $--      $1,426       $669
                                                    ======      ======       ==       ======       ====
</Table>



<Table>
<Caption>
                                                             FISCAL YEAR ENDED DECEMBER 31, 2000
                                                  ----------------------------------------------------------
                                                  BALANCE AT        UTILIZED                     BALANCE AT
                                                  JANUARY 2,   -------------------     NOT      DECEMBER 31,
                                                     2000        CASH     NONCASH    UTILIZED       2000
                                                  ----------   --------   --------   --------   ------------
<S>                                               <C>          <C>        <C>        <C>        <C>
Employee termination and severance costs........     $  3        $ 3         --          --          $--
Other...........................................      666         41         --         625          --
                                                     ----        ---         --        ----          --
                                                     $669        $44         $--       $625          $--
                                                     ====        ===         ==        ====          ==
</Table>


NOTE 10.--RELATED PARTY TRANSACTIONS


    In July 1996, the Company entered into a licensing agreement (the "Gabrielle
License") with Gabrielle Studio, Inc. ("Gabrielle Studio"), a corporation owned
by two of the Company's principal stockholders and their children's trust, which
grants the Company the exclusive worldwide rights, in perpetuity, to use, and to
sublicense the right to use, the trademarks "DONNA KARAN", "DONNA KARAN NEW
YORK", "DKNY", "DK" and all variations thereof and to use, and to sublicense the
right to use, the name, signature and likeness of Donna Karan in connection with
the design, manufacture, distribution, sale, advertising, marketing and
promotion of products of any kind, nature or description, except for specified
products and the provision of specified store services. The Gabrielle License
provides that the Company will pay to Gabrielle Studio an annual royalty equal
to 1.75% of the first $250 million of net sales for any year, plus 2.5% of the
next $500 million of net sales for that year, plus 3% of the next $750 million
of net sales for that year, plus 3.5% of all net sales for that year in excess
of $1.5 billion. For purposes of computing the annual royalty, "net sales"
includes sales by the Company, the Company's affiliates and subsidiaries and any
sublicensees of products bearing any of the licensed trademarks or the Donna
Karan name. The Company incurred $30.6 million, $25.0 million and


                                      F-18
<Page>
                         DONNA KARAN INTERNATIONAL INC.

                   NOTES TO FINANCIAL STATEMENTS (CONTINUED)


$19.5 million in royalty expense for the years ended December 31, 2000,
January 2, 2000, and January 3, 1999, respectively, which was included in cost
of sales. Included in accrued expenses at December 31, 2000 and January 2, 1999,
were royalties payable of $12.9 million and $10.6 million, respectively.



    The Gabrielle License imposes obligations on the Company with respect to the
use of sales materials, protection of the licensed trademarks, indemnification
of Gabrielle Studio, the maintenance of public liability insurance and quality
control of products bearing the licensed trademarks or the Donna Karan name. The
Gabrielle License also limits the use of the licensed trademarks in specified
circumstances and in general prohibits any transfer or assignment of the
parties' rights under the Gabrielle License.



    The Gabrielle License may be terminated by Gabrielle Studio upon the failure
of the Company to pay any amount due within 60 days of receipt of notice of such
failure, or if the Company violates the quality control provisions of the
Gabrielle License and fails to initiate and thereafter pursue appropriate
corrective action within 60 days after a final unappealable determination by an
arbitration tribunal or court of competent jurisdiction that such violation has
occurred. The Gabrielle License also may be terminated by Gabrielle Studio upon
the occurrence of, among other events, a "change of control" of the Company,
including certain changes in the ownership of voting securities, an acquisition
by a third party of 30% or more of the voting securities of the Company,
mergers, sales of assets, and certain changes in the composition of the Board of
Directors.



    In January 2001, LVMH Moet Hennessey Louis Vuitton Inc. ("LVMH") consummated
the acquisition of Gabrielle Studio from two of the Company's principal
stockholders and their children's trust. The Company believes that its
relationship under the Gabrielle License will not materially change under this
new ownership.



    In October 1998, the Company and a wholly-owned affiliate of Ms. Donna
Karan, Chairman of the Board and Chief Designer of the Company, entered into a
boutique license agreement (the "Boutique Agreement"), granting the affiliated
entity the right to open and operate a DONNA KARAN NEW YORK Flagship Collection
Store. The Boutique Agreement has an initial five-year term, with two renewal
periods at the affililated entity's option if specified conditions are met. The
store, which is anticipated to open in 2001, will be located at 819 Madison
Avenue in New York City. The Boutique Agreement states that the Company will
provide the affiliated entity with certain management services related to the
operation of the store in exchange for an annual fee equal to the greater of
1.5% of sales and $75,000. The store will also be entitled to offer a limited
amount of non-branded products. In connection with the purchase of Gabrielle
Studio in January 2001, LVMH agreed to assume the rights and obligations of
Ms. Karan's affiliate in connection with the construction and operation of the
DONNA KARAN NEW YORK flagship store. The assumption of such rights and
obligations by LVMH shall be effective no earlier than June 15, 2001 and no
later than September 15, 2001.



    The Company has an employee discount policy, whereby employees of the
Company and their immediate family members may purchase Company products at
specified discounts from the stated wholesale price. As of December 31, 2000
Ms. Donna Karan owed the Company $221,000 for purchases made under this policy.
This amount has been classified in accounts receivable in the accompanying
balance sheet.



    Under a stockholders agreement entered into on June 10, 1996, Ms. Donna
Karan, Mr. Stephan Weiss (officers and principal stockholders of the Company),
their affiliated trusts and Gabrielle Studio, collectively referred to as the
"Karan/Weiss Group," are entitled to designate one member of the Company's board
of directors, in addition to Ms. Karan and Mr. Weiss, as long as the combined


                                      F-19
<Page>
                         DONNA KARAN INTERNATIONAL INC.

                   NOTES TO FINANCIAL STATEMENTS (CONTINUED)


ownership of the shares of the Company's common stock held by members of the
Karan/Weiss Group is not less than 20% of the then outstanding common stock.
Additionally, under the stockholders agreement, Messrs. Tomio Taki and Frank R.
Mori, Takihyo Inc. (principal stockholders of the Company) and affiliates of
Messrs. Taki and Mori, collectively referred to as the "Takihyo Group," are
entitled to designate (1) two members of the Company's board of directors until
such time as the Takihyo Group sells any shares of common stock owned by it,
other than shares distributed to stockholders of Takihyo Inc., and
(2) thereafter, one member of the Company's board of directors as long as the
Takihyo Group owns not less than 10% of the then outstanding common stock.
However, if either Mr. Taki or Mr. Mori is otherwise able to serve, and is
serving, as the one designee of the Takihyo Group, then he will be entitled to
continue to serve as a director as long as the Takihyo Group continues to own
not less than 5% of the then outstanding common stock. The stockholders
agreement provides that none of Mr. Mori, Mr. Taki or any other affiliate of the
Takihyo Group may serve as a director as long as the Takihyo Group has an
ownership interest in, or either Mr. Mori or Mr. Taki is an officer or director
of, any of the Company's competitors. Under the stockholders agreement, the
Karan/Weiss Group, on the one hand, and the Takihyo Group, on the other hand,
have agreed to vote the shares of common stock owned by them for each other's
designees as directors and, in the case of the Takihyo Group, for Ms. Karan and
Mr. Weiss. The designee to the board of directors of the Karan/ Weiss Group and
designees of the Takihyo Group, other than Messrs. Taki or Mori, must be
reasonably satisfactory to the Company's board of directors. Ms. Karan and
Mr. Weiss currently are serving on the Company's board of directors as the only
designees of the Karan/Weiss Group. Mr. Mori currently is serving on the
Company's board of directors as the only designee of the Takihyo Group.


NOTE 11.--ACQUISITIONS

    In January 1999, the Company acquired the assets of three free-standing
retail stores in the United Kingdom which were previously owned and operated by
a Singapore-based company, for approximately $17.4 million. The aggregate
purchase price was financed with working capital and the issuance of
subordinated notes payable which mature in January 2002, and bear interest at
LIBOR.

    The acquisition was accounted for as a purchase business combination, with
any excess of the remaining purchase price over the estimated fair value of the
assets acquired, being recorded as goodwill.

NOTE 12.--STOCK OPTIONS AND RESTRICTED STOCK

    The Company has three plans which reserve shares of common stock for
issuance. One plan is for employees, officers, advisors and independent
consultants of the Company (the "Stock Incentive Plan"). The other two plans are
for non-employee directors (the "Non-Employee Director Stock Option Plan" and
the "Non-Employee Director Restricted Stock Plan"). Options and restricted stock
granted under the plans will become fully vested upon a change in control of the
Company (as defined in the plan). The Company has adopted the disclosure-only
provisions of SFAS No. 123, "Accounting for Stock-Based Compensation."
Accordingly, no compensation cost has been recognized for the stock options
awarded under these plans. If compensation cost for the stock options awarded
had been determined based on the fair value at the grant dates for awards in
fiscal 2000, 1999 and 1998 consistent with the

                                      F-20
<Page>
                         DONNA KARAN INTERNATIONAL INC.

                   NOTES TO FINANCIAL STATEMENTS (CONTINUED)

provisions of SFAS No. 123, the Company's pro forma net income (loss) and net
income (loss) per common share would have been as follows (in thousands, except
per share data):

<Table>
<Caption>
                                                                            YEAR ENDED
                                                              --------------------------------------
                                                              DECEMBER 31,   JANUARY 2,   JANUARY 3,
                                                                  2000          2000         1999
                                                              ------------   ----------   ----------
<S>                                                           <C>            <C>          <C>
Net income--as reported.....................................     $19,187       $10,036      $   128
                                                                 =======       =======      =======
Net income (loss)--pro forma................................     $16,732       $ 6,624      $(1,829)
                                                                 =======       =======      =======

Net income (loss) per common share--basic
  As reported...............................................     $  0.89       $  0.46      $  0.01
  Pro forma.................................................     $  0.77          0.31        (0.08)

Net income (loss) per common share--diluted
  As reported...............................................     $  0.87       $  0.46      $  0.01
  Pro forma.................................................     $  0.76          0.31        (0.08)
</Table>

    The pro forma effect on net income for fiscal 2000, 1999 and 1998 is not
representative of the pro forma effect on net income in future years since
compensation cost is allocated on a straight-line basis over the vesting periods
of the grants which extends beyond the reported years.

    The fair value of each option grant is estimated on the date of grant using
the Black-Scholes option-pricing model with the following assumptions:

<Table>
<Caption>
                                                            YEAR ENDED
                                              --------------------------------------
                                              DECEMBER 31,   JANUARY 2,   JANUARY 3,
                                                  2000          2000         1999
                                              ------------   ----------   ----------
<S>                                           <C>            <C>          <C>
Expected volatility.........................     60.6   %      57.4   %     59.2   %
Average expected option life................   6 years        6 years      6 years
Average risk free interest rate.............     5.1    %       6.7   %      5.1   %
Dividend yield..............................     0.0    %       0.0   %      0.0   %
</Table>

    Under the Stock Incentive Plan, which was amended in fiscal 1997, options to
purchase shares of common stock and awards of restricted shares of common stock
of up to a combined 2,600,000 shares may be granted (includes an award of
105,100 shares granted at the Company's initial public offering and 150,000
shares of restricted common stock (see Note 13)). The exercise price of the
options may not be less than 100% of the market value of a share of common stock
at the time of grant. An incentive stock option may not be exercised within one
year of the date of grant, and no options may be exercised after ten years from
the effective date of the plan. The options granted in fiscal 2000, fiscal 1999
and fiscal 1998 vest on a yearly basis in 33 1/3% increments, beginning on the
first anniversary of the date of grant. Common stock reserved for future grants
under the Stock Incentive Plan aggregated 1,056,420 shares as of December 31,
2000.

    Under the Non-Employee Director Stock Option Plan, options to purchase up to
100,000 shares of common stock may be granted, subject to adjustments in certain
circumstances. Each eligible director, on the initial grant date, is granted
options to purchase 7,500 shares of common stock. Each year, other than with
respect to the year in which an eligible director receives an initial grant of
options, each eligible director will receive an additional option to purchase
1,000 shares of common stock. Upon the exercise of an option, the purchase price
paid will be 100% of the market value of such share at the time of the grant of
the option. Options granted will be exercisable on or after the first
anniversary of the date of grant, and will expire on the tenth anniversary of
the date of grant. Common stock reserved

                                      F-21
<Page>
                         DONNA KARAN INTERNATIONAL INC.

                   NOTES TO FINANCIAL STATEMENTS (CONTINUED)

for future grants under the Non-Employee Director Stock Option Plan aggregated
70,000 shares as of December 31, 2000.

    A summary of the Company's stock option programs as of fiscal 2000, 1999 and
1998 and changes during the years then ended, are presented below:

<Table>
<Caption>
                                                                                  NON-EMPLOYEE DIRECTOR
                                                     STOCK INCENTIVE PLAN           STOCK OPTION PLAN
                                                  ---------------------------   -------------------------
                                                                  WEIGHTED                    WEIGHTED
                                                                  AVERAGE                     AVERAGE
                                                    SHARES     EXERCISE PRICE    SHARES    EXERCISE PRICE
                                                  ----------   --------------   --------   --------------
<S>                                               <C>          <C>              <C>        <C>
Outstanding at December 28, 1997................   1,741,500       $18.74        23,500        $17.98
Granted.........................................     953,717         8.90         3,000         15.56
Forfeited or cancelled..........................  (1,413,707)       20.16            --            --
                                                  ----------       ------        ------        ------
Outstanding at January 3, 1999..................   1,281,510         9.85        26,500         17.71
Granted.........................................     405,540         6.87         9,500          8.53
Exercised.......................................      (1,459)        6.25            --            --
Forfeited or cancelled..........................    (137,581)       12.12        (1,000)        15.56
                                                  ----------                     ------
Outstanding at January 2, 2000..................   1,548,010         8.80        35,000         15.28
Granted.........................................     131,433         7.44         3,000          7.06
Exercised.......................................      (5,168)        6.41            --            --
Forfeited or cancelled..........................    (905,168)       10.35        (8,000)        19.90
                                                  ----------                     ------
Outstanding at December 31, 2000................     769,107       $ 6.74        30,000        $13.22
                                                  ==========                     ======
</Table>

    The weighted average fair value of options granted during 2000, 1999 and
1998 was $4.52, $4.21 and $5.36 per share, respectively.

    For various price ranges, weighted average characteristics of outstanding
stock options at December 31, 2000 are as follows:

<Table>
<Caption>
                                                            OUTSTANDING                         EXERCISABLE
                                              ----------------------------------------   -------------------------
                                                                           WEIGHTED                    WEIGHTED
                                                          REMAINING        AVERAGE                     AVERAGE
RANGE OF EXERCISE PRICES                      OPTIONS    LIFE (YEARS)   EXERCISE PRICE   OPTIONS    EXERCISE PRICE
------------------------                      --------   ------------   --------------   --------   --------------
<S>                                           <C>        <C>            <C>              <C>        <C>
STOCK INCENTIVE PLAN
  $5.94 to $6.25............................  510,089        6.4            $ 6.24       455,279        $ 6.25
  $7.00 to $7.44............................  251,518        5.8              7.23        72,848          7.16
  $24.00....................................    7,500        5.4             24.00         7,500         24.00
                                              -------                                    -------
  $5.94 to $24.00...........................  769,107        6.2              6.74       535,627          6.62
                                              =======                                    =======

NON-EMPLOYEE DIRECTOR STOCK OPTION PLAN
  $7.06 to $11.00...........................   13,000        8.6            $ 8.29        10,000        $10.77
  $13.25 to $21.13..........................   17,000        5.6             17.00        17,000         17.00
                                              -------                                    -------
  $7.06 to $21.13...........................   30,000        6.9             13.22        27,000         14.69
                                              =======                                    =======
</Table>


    In January 2000, The Company' Incentive Compensation Subcommittee approved
an exchange program which permitted the Company's executive officers to elect to
have the Company cancel all of their existing vested and unvested options, and
receive an award of restricted shares of common stock intended to have the same
economic value as the options, determined on a Black-Scholes basis. The


                                      F-22
<Page>
                         DONNA KARAN INTERNATIONAL INC.

                   NOTES TO FINANCIAL STATEMENTS (CONTINUED)


restricted shares will vest on the third anniversary of the date of the grant or
earlier in 20% increments if the Company's common stock attains certain price
levels. As a result of the program, options to purchase 770,000 shares were
cancelled and 388,226 restricted shares were awarded. The market value of these
shares on the date of grant has been recorded as unearned compensation and is
being charged to selling, general and administrative expenses over the
corresponding three-year vesting period. In addition, in March 2000, under the
Stock Incentive Plan, the Company awarded 140,791 restricted shares of common
stock to executive officers and certain key employees. The restricted shares
will vest on the fifth anniversary of the date of the grant or earlier in 20%
increments if the Company's common stock attains certain price levels. All of
the restricted shares awarded in 2000 are subject to certain restrictions on
transferability and a risk of forfeiture. The market value of these shares on
the date of grant has been recorded as unearned compensation, and is being
charged to selling, general and administrative expenses over the corresponding
vesting period. Compensation expense recognized during fiscal 2000, 1999 and
1998 related to restricted stock amounted to approximately $1.3 million,
$0.4 million and $0.2 million, respectively, and is included in selling, general
and administrative expenses.


    Under the Non-Employee Director Restricted Stock Plan, each non-employee
director is entitled to receive a grant of 500 shares of common stock as of the
first day of the month following the annual meeting of stockholders, which will
vest on the first anniversary of the date of grant. In addition, the restricted
stock award will become fully vested upon a change in control of the Company (as
defined in the plan).


    The following table summarizes the activity of restricted stock for fiscal
2000, 1999 and 1998:



<Table>
<Caption>
                                                                                       NON-EMPLOYEE
                                                                                         DIRECTOR
                                                          STOCK INCENTIVE PLAN    RESTRICTED STOCK PLAN
                                                         ----------------------   ----------------------
                                                                      WEIGHTED                 WEIGHTED
                                                                      AVERAGE                  AVERAGE
                                                          SHARES     FAIR VALUE    SHARES     FAIR VALUE
                                                         ---------   ----------   ---------   ----------
<S>                                                      <C>         <C>          <C>         <C>
Unvested shares outstanding at December 28, 1997.......   150,000      $10.63           --         --
Shares awarded.........................................        --          --           --         --
Shares forfeited.......................................        --          --           --         --
Shares vested..........................................        --          --           --         --
Unvested shares outstanding at January 3, 1999.........   150,000       10.63           --         --
Shares awarded.........................................        --          --        1,500      11.00
Shares forfeited.......................................        --          --           --         --
Shares vested..........................................        --          --           --         --
Unvested shares outstanding at January 2, 2000.........   150,000       10.63        1,500      11.00
Shares awarded.........................................   529,017        7.44        1,500       7.06
Shares forfeited.......................................    (9,644)       7.44           --         --
Shares vested..........................................        --          --       (1,500)     11.00
Unvested shares outstanding at December 31, 2000          669,373      $ 8.15        1,500      $7.06
</Table>


NOTE 13.--COMMITMENTS AND CONTINGENCIES

    The Company has employment agreements with key executives which provide for
guaranteed minimum compensation, minimum cash bonuses, stock options and
termination payments and benefits. One employment agreement calls for a
severance package, if the employee is terminated without cause during the one
year period subsequent to a change in control, of three times the employee's
base salary plus three times the bonus compensation for the immediately prior
fiscal year. The employee is also

                                      F-23
<Page>
                         DONNA KARAN INTERNATIONAL INC.

                   NOTES TO FINANCIAL STATEMENTS (CONTINUED)

entitled to receive $750,000 on the earlier of six months following a change in
control, or termination without cause on or after a change in control. If these
payments, as well as any other benefits due to the employee, are subject to an
excise tax under the Internal Revenue Code of 1986 as "excess parachute
payments", then the employee will be entitled to receive a tax gross-up so that
the employee is in the same tax position as if there were no such excise tax.
This same agreement contains a provision whereby the Company has granted 150,000
shares of restricted common stock to the employee. These shares are subject to
certain restrictions on transferability and a risk of forfeiture. The forfeiture
provisions expire at the earlier of five years from the date of grant or upon
the attainment of certain market value goals for the common stock. As of
December 31, 2000, all 150,000 shares were subject to the forfeiture provisions.
These shares have been recorded as unearned compensation and are presented as a
separate component of stockholders' equity. The unearned compensation is being
charged to selling, general and administrative expenses over the five-year
vesting period, or until such time as the market value goals are attained, in
which case the expense will be accelerated to match the amounts earned. Total
expense for the fiscal 2000, 1999 and 1998 amounted to approximately $319,000,
$398,000 and $239,000, respectively. Another employment agreement contains a
deferred compensation clause whereby the employee is entitled to $1 million plus
interest in October 2005. This amount becomes vested at the rate of 20% per year
in the event the employee is terminated without cause, and becomes fully vested
upon a change in control of the Company.

    The Company has a severance plan that covers certain executive officers and
key employees of the Company. In the event of a change in control, as defined,
each covered employee who is terminated without cause during the one year period
subsequent to, or 90 days prior to, the change in control is entitled to
receive, in addition to severance benefits payable under such individual's
employment contract or other severance benefits due, a lump sum payment equal to
the employees then current annual salary.

    The Company has an Executive Incentive Plan ("EIP") whereby bonuses are
generally paid to certain executive officers and key employees, based on
pre-determined performance criteria. In the event of a change in control, under
the terms of the EIP, the Company is obligated to make at least a pro-rata
payment of each employee's target bonus for that plan year up to the date of the
change in control. However, the Company may elect to make an additional payment
of up to the employee's full bonus target for such plan year. All payments made
under this change in control provision will reduce the employee's final award
for such plan year.

    The Company also has a Voluntary Deferred Compensation Plan for Non-Employee
Directors of the Company. This plan provides that an eligible director, at the
election of the director, may defer payment of his or her cash retainer and
meeting fees for five years or until he or she ceases to be a director. The
deferred amounts, at the election of the director, during the deferral period
either (i) are credited with interest at prescribed rates or (ii) are converted
to the equivalent of that number of shares of the Company's common stock (based
on the market price at the time of the deferral) that could be purchased with
the deferred amounts. All payments under the Deferred Compensation Plan are in
the form of cash. The Deferred Compensation Plan provides that lump-sum payments
of all deferred compensation will be made as soon as administratively feasible
following the date that (i) the participating director ceases to be a member of
the Board of Directors or (ii) the Deferred Compensation Plan is terminated.


    In December 2000, several putative class actions were filed in state court
in Delaware and New York (collectively the "LVMH Actions") in connection with
the offer of LVMH to acquire the outstanding shares of the Company for a price
of $8.50 per share (the "LVMH Offer"). All of the complaints name the Company,
its Chairman, its Vice Chairman and its Chief Executive Officer as


                                      F-24
<Page>
                         DONNA KARAN INTERNATIONAL INC.

                   NOTES TO FINANCIAL STATEMENTS (CONTINUED)


defendants. Two of the complaints also name the Company's outside Board members
as defendants and three of the complaints also name LVMH as a defendant. None of
the lawsuits specifies any amount of damages sought and, therefore, it is not
practicable to estimate a range of possible loss in connection with this
litigation.



    The LVMH Actions allege, INTER ALIA, that the $8.50 price initially offered
by LVMH to purchase the Company's common stock is inadequate, that the
individual defendants breached their fiduciary duties in connection with the
LVMH Offer and that the Chairman and Vice Chairman furthered their own
interests, at the expense of the Company's interests, in allegedly negotiating
with LVMH concerning the proposed sale of the Company to LVMH.


    Following the commencement of the LVMH Actions, counsel for the Company and
the other defendants entered into (i) a stipulation with counsel for plaintiffs
in the actions filed in New York staying such actions and providing that the
outcome of those actions will be governed by the outcome of the actions filed in
Delaware; and (ii) a stipulation with counsel for plaintiffs in the actions
filed in Delaware providing that such actions will be consolidated and that
defendants need not respond to the individual complaints pending the filing of a
consolidated amended complaint. No consolidated amended complaint has been filed
and discovery has not commenced.


    The Company is also involved from time to time in routine legal matters and
litigation incidental to its business. While the outcome of these matters, as
well as the LVMH Actions, could have a material adverse effect on the Company's
results of operations and cash flows in the period in which such outcome is
determined, in the Company's opinion, the results of these matters are not
expected to have a material effect on the Company's financial position or
results of operations. Accordingly, no reserve for the outcome of these matters
has been recorded in the Company's financial statements as of December 31, 2000.


NOTE 14.--INCOME TAXES

    The Company accounts for income taxes under SFAS No. 109, "Accounting for
Income Taxes" which requires the asset and liability method of accounting for
income taxes. Under the asset and liability method, deferred income taxes are
recognized for the tax consequences of "temporary differences" by applying
enacted statutory tax rates applicable to future years to differences between
the financial carrying amounts and the tax basis of existing assets and
liabilities.

    The income tax provision consists of the following:

<Table>
<Caption>
                                                                            YEAR ENDED
                                                              --------------------------------------
                                                              DECEMBER 31,   JANUARY 2,   JANUARY 3,
                                                                  2000          2000         1999
                                                              ------------   ----------   ----------
                                                                          (IN THOUSANDS)
<S>                                                           <C>            <C>          <C>
Current income taxes:
  Federal Taxes.............................................     $ 3,523       $ 2,907      $(2,374)
  State and local taxes.....................................       1,115         1,485        1,245
  Foreign taxes.............................................         521           372        2,227
                                                                 -------       -------      -------
                                                                   5,159         4,764        1,098
Deferred income taxes.......................................      (1,996)       (4,211)        (988)
                                                                 -------       -------      -------
                                                                 $ 3,163       $   553      $   110
                                                                 =======       =======      =======
</Table>

                                      F-25
<Page>
                         DONNA KARAN INTERNATIONAL INC.

                   NOTES TO FINANCIAL STATEMENTS (CONTINUED)

    Deferred income taxes reflect the net effects of temporary differences
between the carrying amounts of assets and liabilities for financial reporting
purposes and the amounts used for income tax purposes. Significant items
comprising the Company's net deferred tax asset were as follows:

<Table>
<Caption>
                                                                     YEAR ENDED
                                                              -------------------------
                                                              DECEMBER 31,   JANUARY 2,
                                                                  2000          2000
                                                              ------------   ----------
                                                                   (IN THOUSANDS)
<S>                                                           <C>            <C>
Current:
  Uniform inventory capitalization..........................    $  2,728      $  2,717
  Allowance for doubtful accounts and other receivable
    related reserves........................................      15,911        10,428
  Inventory.................................................       5,222         6,572
  Other accruals............................................       9,778        11,123
  Deferred revenue..........................................       2,963         5,989
  Net foreign operating loss carryforwards..................         737         1,074
                                                                --------      --------
                                                                  37,339        37,903
                                                                --------      --------
Non-Current:
  Deferred revenue..........................................      11,562        11,404
  Depreciation..............................................      11,304        13,711
  Foreign tax credit carryforwards..........................       1,742         2,933
                                                                --------      --------
                                                                  24,608        28,048
                                                                --------      --------

Valuation allowance.........................................     (14,000)      (20,000)
                                                                --------      --------
                                                                $ 47,947      $ 45,951
                                                                ========      ========
</Table>

    The Company has available foreign net operating loss carryforwards of
approximately $2.4 million to offset future taxable income. The foreign net
operating loss carryforwards do not expire. In addition, the Company has foreign
tax credit carryforwards of approximately $1.7 million which expire from fiscal
2002 through fiscal 2004.

    Realization of the future tax benefits related to the deferred tax assets is
dependent on many factors including the Company's ability to generate sufficient
taxable income within the net operating loss carry forward period and potential
limitations imposed by the Internal Revenue Code. Due to the inherent
uncertainties in estimating future taxable income, the Company recorded a
valuation allowance of $24.0 million in fiscal 1997. During fiscal 2000 and
1999, the Company recognized certain deferred tax assets and reduced the
valuation allowance by $6.0 million and $4.0 million, respectively, based upon
taxable income in those years. The valuation allowances at December 31, 2000 and
January 2, 2000 were $14.0 million and $20.0 million, respectively.

    The foreign and domestic components of income before income taxes were a
foreign income of $4.8 million and domestic income of $17.5 million in 2000 and
foreign loss of $4.1 million and domestic income of $14.6 million in 1999.

                                      F-26
<Page>
                         DONNA KARAN INTERNATIONAL INC.

                   NOTES TO FINANCIAL STATEMENTS (CONTINUED)

    A reconciliation between the provision for income taxes computed by applying
the statutory Federal income tax rate to income before taxes and the actual
provision for income taxes is as follows:

<Table>
<Caption>
                                                                            YEAR ENDED
                                                              --------------------------------------
                                                              DECEMBER 31,   JANUARY 2,   JANUARY 3,
                                                                  2000          2000         1999
                                                              ------------   ----------   ----------
                                                                          (IN THOUSANDS)
<S>                                                           <C>            <C>          <C>
Federal statutory rate......................................     $ 7,822       $ 3,706      $    83
State and local taxes, net of Federal tax benefits..........         892           711          770
Taxes related to foreign income, net of credits.............        (619)         (389)      (1,080)
Valuation allowance.........................................      (6,000)       (4,000)          --
Other items, net............................................       1,068           525          337
                                                                 -------       -------      -------
                                                                 $ 3,163       $   553      $   110
                                                                 =======       =======      =======
Effective tax rate..........................................        14.2%          5.2%        46.2%
                                                                 =======       =======      =======
</Table>

    Exclusive of the impact of the valuation allowance, the Company's effective
tax rate was 41.0% and 43.0% in fiscal 2000 and fiscal 1999, respectively.

NOTE 15.--COMPREHENSIVE INCOME (LOSS)

    Comprehensive income (loss) is comprised of net income and other
comprehensive income (loss), which contains gains or losses from foreign
currency translation. The change in accumulated other comprehensive loss,
exclusive of deferred income taxes, for the years ended at December 31, 2000 and
January 2, 2000 is as follows:

<Table>
<Caption>
                                                                     YEAR ENDED
                                                              -------------------------
                                                              DECEMBER 31,   JANUARY 2,
                                                                  2000          2000
                                                              ------------   ----------
                                                                   (IN THOUSANDS)
<S>                                                           <C>            <C>
Foreign currency translation, beginning of year.............     $  (991)      $(1,206)
Current period income (loss)................................        (424)          215
                                                                 -------       -------
Foreign currency translation, end of year...................     $(1,415)      $  (991)
                                                                 =======       =======
</Table>


    Comprehensive income (loss) is as follows:



<Table>
<Caption>
                                                                        YEAR ENDED
                                                   -----------------------------------------------------
                                                   DECEMBER 31, 2000   JANUARY 2, 2000   JANUARY 3, 1999
                                                   -----------------   ---------------   ---------------
                                                                      (IN THOUSANDS)
<S>                                                <C>                 <C>               <C>
Net income.......................................       $19,187            $10,036            $ 128

Foreign currency translation adjustments,
  Before taxes...................................          (424)               215             (751)
Provision (benefit) for taxes(1).................            --                 --               --
                                                        -------            -------            -----
Foreign currency translation adjustments,
  net of taxes...................................          (424)               215             (751)
                                                        -------            -------            -----
Comprehensive income.............................       $18,763            $10,251            $(623)
                                                        =======            =======            =====
</Table>


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

(1) For fiscal 2000, 1999 and 1998 there was no sale or liquidation of the
    Company's investment in a foreign entity. As such, no reclassification
    adjustments were required and gross amounts were displayed exclusive of any
    provision for income taxes.

                                      F-27
<Page>
                         DONNA KARAN INTERNATIONAL INC.

                   NOTES TO FINANCIAL STATEMENTS (CONTINUED)

NOTE 16.--SEGMENT INFORMATION

    The Company has three reportable business segments: wholesale, licensing,
and retail. The Company's wholesale business consists of three divisions:
womenswear, menswear, and accessories, all of which sell products under the
DONNA KARAN NEW YORK and DKNY brands to department stores, specialty stores,
boutiques, and to the Company's owned and licensed free-standing stores. The
accessories division also sells products under the DKNY JEANS, DKNY ACTIVE and
CITY DKNY brands. The Company also sells products in Europe under the DKNY JEANS
brand. The licensing division forms strategic alliances with companies, through
which it licenses the right to develop, market, and sell products under the
DONNA KARAN NEW YORK, DKNY, DKNY JEANS, DKNY ACTIVE and CITY DKNY brands, and
licenses, on a royalty-free basis, free-standing stores under the DONNA KARAN
NEW YORK, DKNY and DKNY JEANS names. The retail division operates outlet stores
and full-price, domestic free-standing retail stores.

    The Company's reportable segments are individual business units that offer
different products and services. They are managed separately because each
business requires different strategic initiatives, promotional campaigns,
marketing, and advertising, based upon its own individual positioning in the
market.

    The accounting policies of the segments are the same as those described in
the summary of significant accounting policies. The Company evaluates
performance based upon profit or loss from operations before interest expense
and interest income, nonrecurring gains and losses, and income taxes.

    Information related to the Company's geographic segments are as follows:

<Table>
<Caption>
                                              DECEMBER 31,   JANUARY 2,   JANUARY 3,
                                                  2000          2000         1999
                                              ------------   ----------   ----------
                                                          (IN THOUSANDS)
<S>                                           <C>            <C>          <C>
Net revenues:
United States...............................    $434,845      $462,752     $422,947
Japan.......................................      22,102        27,842       46,528
Other.......................................     205,748       171,243      153,171
                                                --------      --------     --------
                                                $662,695      $661,837     $622,646
                                                ========      ========     ========
</Table>

    In fiscal 2000, the Company had one customer who accounted for 10.2% of
revenues. In fiscal 1998 sales to entities affiliated with a Singapore-based
company, including DKJ, and certain free-standing international retail stores,
were 10.5% of the Company's revenues. In fiscal 1999, no customer accounted for
greater than 10% of revenues.

    Sales to Japan for the quarter ended March 28, 1998 were made to a 30% owned
subsidiary (see Note 6).

                                      F-28
<Page>
                         DONNA KARAN INTERNATIONAL INC.

                   NOTES TO FINANCIAL STATEMENTS (CONTINUED)

    Intersegment sales and transfers are recorded at amounts that approximate
cost. All intercompany revenues and profit or loss is eliminated in
consolidation.

<Table>
<Caption>
                                               WHOLESALE      LICENSING       RETAIL            TOTAL
                                               ---------      ---------      ---------         --------
                                                                    (IN THOUSANDS)
<S>                                            <C>            <C>            <C>               <C>
DECEMBER 31, 2000
Net revenues from external customers.........  $490,684        $45,246       $ 126,765         $662,695
Intersegment revenues........................    68,834             --              --           68,834
Segment operating profit (loss)..............    16,068(1)      21,260         (12,383)(1)       24,945
Segment assets...............................   258,910         10,100          55,204          324,214

JANUARY 2, 2000
Net revenues from external customers.........  $496,288        $35,142(3)    $ 130,407         $661,837
Intersegment revenues........................    74,179             --              --           74,179
Segment operating profit (loss)..............    14,556(2)      18,022(3)      (17,899)(2)(4)    14,679
Segment assets...............................   240,440          4,729          59,122          304,291

JANUARY 3, 1999
Net revenues from external customers.........   510,872         18,458          93,316          622,646
Intersegment revenues........................    56,420             --              --           56,420
Segment operating profit (loss)..............    11,999          6,382         (16,116)           2,265
Segment assets...............................   242,399          1,421          34,909          278,729
</Table>

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

(1) In fiscal 2000, the Company reversed previously recorded and other
    non-recurring charges of $1.6 million that were no longer deemed necessary,
    and recorded costs related to the LVMH Merger Offer of $2.4 million.
    Exclusive of these charges and credits, operating profit (loss) for the
    wholesale and retail segments would have been $17.8 million and
    ($13.4) million, respectively.

(2) In December 1999, the Company recorded restructuring and non-recurring
    charges related to the consolidation of divisions, the impairment of
    under-performing assets and the closing of outlet stores (see Note 9).
    Exclusive of these charges, operating profit (loss) for the wholesale and
    retail segments was $18.2 million and ($12.0) million, respectively.

(3) In fiscal 1999, includes recognition of a one-time licensing credit of
    $5.0 million, related to the ELI beauty license (see Note 8). Exclusive of
    the one-time licensing credit, segment net revenues and operating profit in
    fiscal 1999 was $30.1 million and $13.0 million, respectively.

(4) In fiscal 1999, The Company expensed $1.9 million of costs associated with
    the opening of its DKNY flagship store on Madison Avenue in New York City,
    New York (see Note 1). Prior to the charges (see note (2) above) and the
    opening costs, segment operating loss in fiscal 1999 was $10.1 million.

                                      F-29
<Page>
                         DONNA KARAN INTERNATIONAL INC.

                   NOTES TO FINANCIAL STATEMENTS (CONTINUED)

NOTE 17.--QUARTERLY RESULTS OF OPERATIONS (UNAUDITED)

    The following summarizes the unaudited quarterly operating results of the
Company for fiscal 2000 and fiscal 1999 (in thousands, except per share
amounts):

<Table>
<Caption>
                                                                     QUARTER ENDED
                                                    -----------------------------------------------
2000                                                APRIL 2    JULY 2(1)    OCT. 1    DEC. 31(2)(3)
----                                                --------   ---------   --------   -------------
<S>                                                 <C>        <C>         <C>        <C>
Net revenues......................................  $172,770   $120,513    $203,741     $165,671
Gross profit......................................    55,979     32,324      72,648       56,964
Net income (loss).................................     3,329     (6,982)     13,980        8,860
Net income (loss) per common share:
  Basic...........................................      0.15      (0.32)       0.65         0.41
  Diluted.........................................      0.15      (0.32)       0.63         0.40
</Table>

<Table>
<Caption>
                                                                     QUARTER ENDED
                                                      -------------------------------------------
1999                                                  APRIL 4     JULY 4    OCT. 3(4)   JAN. 2(5)
----                                                  --------   --------   ---------   ---------
<S>                                                   <C>        <C>        <C>         <C>
Net revenues........................................  $160,720   $122,033   $202,511    $176,573
Gross profit........................................    47,199     33,638     72,498      57,816
Net income (loss)...................................     2,163     (7,870)    12,951       2,792
Net income (loss) per common share:
  Basic.............................................      0.10      (0.36)      0.60        0.13
  Diluted...........................................      0.10      (0.36)      0.60        0.13
</Table>

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

(1) In fiscal 2000, includes the reversal of previously recorded restructuring
    and other non-recurring charges of $1.0 million that were no longer deemed
    necessary. Exclusive of these reversals, net loss per common share on a
    fully diluted basis was $0.34 per share.

(2) In fiscal 2000, includes the reversal of previously recorded restructuring
    and other non-recurring charges of $0.6 million that were no longer deemed
    necessary, costs related to a proposed merger of $2.4 million, and a $6.0
    million reduction in a previously recorded income tax valuation allowance
    (see Note 14). Exclusive of these charges and credits, net income per common
    share on a fully diluted bases was $0.18 per share.

(3) In the fourth quarter of fiscal 2000, gross profit includes $1.4 million, or
    $0.04 per share on a fully diluted basis, as a result of the resolution of
    certain amounts with third parties related to product costs, offset in part
    by unfavorable inventory variances. The net effect in the full fiscal year
    2000 for these items was not material.

(4) In fiscal 1999, includes recognition of the one-time licensing credit,
    relating to the ELI beauty license, amounting to $5.0 million (see Note 8).
    Exclusive of the licensing credit, net income per common share on a fully
    diluted basis was $0.46 per share.

(5) In fiscal 1999, includes restructuring and other non-recurring charges of
    $9.6 million (see Note 9) and a $4.0 million reduction in a previously
    recorded income tax valuation allowance (see Note 14). Exclusive of these
    charges and credits, net income per common share on a fully diluted basis
    was $0.19 per share.

                                      F-30
<Page>
                         DONNA KARAN INTERNATIONAL INC.

                   NOTES TO FINANCIAL STATEMENTS (CONTINUED)

NOTE 18.--SUBSEQUENT EVENT

    On April, 2, 2001, the Company and LVMH announced that they had entered into
an Agreement and Plan of Merger, dated as of March 31, 2001 (the "Merger
Agreement"), which sets forth the terms and conditions of the proposed
acquisition of the Company by LVMH. Pursuant to the Merger Agreement, an
indirect wholly-owned subsidiary of LVMH will be merged with and into the
Company (the "Merger") and the Company will survive the Merger as an indirect
subsidiary of LVMH. The Merger is subject to the approval of the stockholders of
the Company and the satisfaction of other customary closing conditions,
including the receipt of required regulatory approvals.


NOTE 19.--SUBSEQUENT EVENT



    The Company's results of operations in the second quarter of fiscal 2001,
having been affected by business and economic conditions, are below forecast and
are expected to continue below forecast for the balance of the fiscal year. In
August 2001, the Company entered into an agreement with Gabrielle Studio, Inc.
(an LVMH affiliate) pursuant to which Gabrielle Studio, Inc. agreed to defer
until June 30, 2002 the payment of royalties owed by the Company for the second,
third and fourth quarters of 2001. The Company believes that the deferral of
such royalty payments will enable it to meet its credit facility covenants,
amended as follows, for the remainder of its fiscal year. In August 2001, the
Company also amended its credit facility. The August 2001 credit facility
amendment provides (i) that an event of default will occur on January 7, 2002 if
the merger with LVMH has not occurred, (ii) for changes in the application of
credit facility covenant calculations so as to exclude from such calculations,
the royalty payments deferred by the above referenced agreement with Gabrielle
Studio, Inc., together with certain unpaid severance and merger expenses, and
(iii) that the Company must maintain a minimum of $20 million in availability
under the credit facility from December 15, 2001 through the expiration of the
credit facility. In addition to the August 2001 credit facility amendment, in
June 2001 the Company also entered into an amendment of its credit facility
which enabled the Company to borrow amounts in excess of its calculated
borrowing base during the months of June, July and August 2001. The failure of
the Merger with LVMH to close by January 7, 2002 will cause an event of default
under the credit agreement. The Company believes that the Merger will occur
prior to January 7, 2002, and if not, that it will be required to amend its
existing credit facility (which expires May, 2003), or obtain an alternate
source of long-term financing. However, there can be no assurances that an
amended credit facility or any new financing will be available and, if
available, that the terms will be as favorable as the existing terms in the
current credit facility.


                                      F-31
<Page>
                               INDEX TO EXHIBITS

<Table>
<Caption>
      EXHIBITS
---------------------
<C>                     <S>
         2.1            Agreement and Plan of Contribution, dated as of June 10,
                        1996, among the Company, Takihyo Inc., Donna Karan, Stephan
                        Weiss, Stephan Weiss, as trustee under Trust Agreement for
                        the benefit of Lisa Weiss Keyes, Corey Weiss, and Gabrielle
                        Karan, Stephan Weiss, as trustee under Trust Agreement for
                        the benefit of Donna Karan, Gabrielle Studio, Inc., Tomio
                        Taki, Frank R. Mori, Christopher Mori and Heather Mori
                        (Incorporated by reference from Exhibit 2.1 to the Company's
                        Registration Statement on Form S-1, dated June 27, 1996)

         3.1            Amended and Restated Certificate of Incorporation of the
                        Company (Incorporated by reference from Exhibit 3.2 to the
                        Company's Registration Statement on Form S-1, dated
                        June 27, 1996)

         3.2            Bylaws of the Company (Incorporated by reference from
                        Exhibit 3.3 to the Company's Registration Statement on
                        Form S-1, dated June 27, 1996)

         3.3            Amendment No. 1 to By-laws of the Company (Incorporated by
                        reference from Exhibit 3.1 to the Company's Form 10-Q for
                        the quarter ended September 28, 1997)

        10.1            Second Amended and Restated Credit Agreement, dated as of
                        January 29, 1998 among The Donna Karan Company, The Donna
                        Karan Company Store, G.P., Donna Karan Studio, DK Footwear
                        Partners, the institutions time to time parties thereto, and
                        Citibank, N.A., as administrative agent (Incorporated by
                        reference from Exhibit 10.1 to the Company's Form 10-K for
                        the year ended December 28, 1997)

        10.2            Registration Rights Agreement, dated as of June 10, 1996,
                        among the Company, Donna Karan, Stephan Weiss, Stephan
                        Weiss, as trustee under Trust under trust agreement for the
                        benefit of Lisa Weiss Keyes, Corey Weiss, and Gabrielle
                        Karan, Stephan Weiss, as trustee under Trust Agreement for
                        the benefit of Donna Karan, Gabrielle Studio, Inc., Takihyo
                        Inc., Tomio Taki, Frank R. Mori, Christopher Mori, and
                        Heather Mori (Incorporated by reference from Exhibit 10.4 to
                        the Company's Registration Statement on Form S-1, dated
                        June 27, 1996)

        10.3            License Agreement, dated as of July 3, 1996, between
                        Gabrielle Studio, Inc. and Donna Karan Studio (Incorporated
                        by reference from Exhibit 10.5 to the Company's Registration
                        Statement on Form S-1, dated June 27, 1996)

        10.4            Guaranty of License, dated as of July 3, 1996, from the
                        Company to Gabrielle Studio, Inc. (Incorporated by reference
                        from Exhibit 10.6 to the Company's Registration Statement on
                        Form S-1, dated June 27, 1996)

        10.5            License Agreement, dated as of July 3, 1996, between Donna
                        Karan Studio and Stephan Weiss (Incorporated by reference
                        from Exhibit 10.7 to the Company's Registration Statement on
                        Form S-1, dated June 27, 1996)

        10.6            Employment Agreement, dated as of July 3, 1996, between the
                        Company and Donna Karan (Incorporated by reference from
                        Exhibit 10.8 to the Company's Registration Statement on
                        Form S-1, dated June 27, 1996)*

        10.7            Employment Agreement, dated as of July 3, 1996, between the
                        Company and Stephan Weiss (Incorporated by reference from
                        Exhibit 10.9 to the Company's Registration Statement on
                        Form S-1, dated June 27, 1996)*

        10.8            Stockholders Agreement, dated as of June 10, 1996, among
                        Donna Karan, Stephan Weiss. Stephan Weiss as trustee under
                        Trust Agreement for the benefit of Lisa Weiss Keyes,
                        Corey Weiss, and Gabrielle Karan, Stephan Weiss as trustee
                        under Trust Agreement for the benefit of Donna Karan,
                        Gabriel Studio, Inc., Takihyo Inc., Tomio Taki,
                        Frank R. Mori, Christopher Mori, and Heather Mori
                        (Incorporated by reference from Exhibit 10.10 to the
                        Company's Registration Statement on Form S-1, dated
                        June 27, 1996)
</Table>

<Page>


<Table>
<Caption>
      EXHIBITS
---------------------
<C>                     <S>
        10.9            Employment Agreement, dated as of October 15, 1996, between
                        The Donna Karan Company and Joseph R. Parsons (Incorporated
                        by reference from Exhibit 10.14 to the Company's Form 10-K
                        for the year ended December 29, 1996)*

        10.10           Employment Agreement, dated as of July 25, 1997, among the
                        Company, The Donna Karan Company and John D. Idol, and
                        related bonus programs. (Incorporated by reference from
                        Exhibit 10.5 to the Company's Form 10-Q for the quarter
                        ended September 28, 1997)*

        10.11           Amendment No. 1 to Employment Agreement between the Company
                        and Donna Karan (Incorporated by reference from
                        Exhibit 10.2 to the Company's 10-Q for the quarter ended
                        September 28, 1997)*

        10.12           Amendment No. 1 to Employment Agreement between the Company
                        and Stephan Weiss (Incorporated by reference from
                        Exhibit 10.3 to the Company's Form 10-Q for the quarter
                        ended September 28, 1997)*

        10.13           Amendment No. 2 to Employment Agreement between the Company
                        and Stephan Weiss (Incorporated by reference from
                        Exhibit 10.4 to the Company's Form 10-Q for the quarter
                        ended September 28, 1997)*

        10.14           Agreement, dated as of September 30, 1997, between The
                        Donna Karan Company and Estee Lauder Inc. (Incorporated by
                        reference from Exhibit 2.1 to the Company's Form 8-K, dated
                        November 10, 1997)

        10.15           Amended and Restated Second Amendment, dated as of
                        October 30, 1998, among The Donna Karan Company. The
                        Donna Karan Company Store, G.P., Donna Karan Studio, and
                        DK Footwear Partners, the financial institutions time to
                        time parties thereto as lenders, the financial institutions
                        from time to time parties thereto as issuing banks, and
                        Citibank, N.A., as administrative agent (Incorporated by
                        reference from Exhibit 10.20 to the Company's Form 10-K for
                        the year ended January 3, 1999)

        10.16           Employment Agreement, dated as of December 18, 1998, between
                        the Company and Lee Goldenberg. (Incorporated by reference
                        from Exhibit 10.21 to the Company's Form 10-K for the year
                        ended January 3, 1999)*

        10.17           Voluntary Deferred Compensation Plan for Non-Employee
                        Directors (Incorporated by reference from Exhibit 10.3 to
                        the Company's Form 10-Q for the quarter ended June 28,
                        1998)*

        10.18           Amendment No. 2 to Employment Agreement, dated as of
                        November 1, 1999, by and between the Company and Donna Karan
                        (Incorporated by reference from Exhibit 10.25 to the
                        Company's Form 10-K for the year ended January 2, 2000)*

        10.19           Third Amendment, dated as of May 15, 1999, among The Donna
                        Karan Company, The Donna Karan Company Store, G.P., Donna
                        Karan Studio, and DK Footwear Partners, the financial
                        institutions from time to time parties thereto as lenders,
                        the financial institutions from time to time parties thereto
                        as issuing banks, Citibank, N.A., as administrative agent,
                        The Chase Manhattan Bank and Nationsbank, N.A., as co-agents
                        (Incorporated by reference from Exhibit 10.27 to the
                        Company's Form 10-K for the year ended January 2, 2000)

        10.20           Fourth Amendment, dated as of February 14, 2000, among The
                        Donna Karan Company, The Donna Karan Company Store, G.P.,
                        Donna Karan Studio, and DK Footwear Partners, the financial
                        institutions from time to time parties thereto as lenders,
                        the financial institutions from time to time parties thereto
                        as issuing banks, Citibank, N.A., as administrative agent,
                        The Chase Manhattan Bank and Nationsbank, N.A., as co-agents
                        (Incorporated by reference from Exhibit 10.28 to the
                        Company's Form 10-K for the year ended January 2, 2000)

        10.21           Fifth Amendment, dated as of June 9, 2000, among The Donna
                        Karan Company, The Donna Karan Company Store, G.P., Donna
                        Karan Studio, and DK Footwear Partners, the financial
                        institutions from time to time parties thereto as lenders,
                        the financial institutions from time to time parties thereto
                        as issuing banks, Citibank, N.A., as administrative agent,
                        The Chase
</Table>


<Page>


<Table>
<Caption>
      EXHIBITS
---------------------
<C>                     <S>
                        Manhattan Bank and Nationsbank, N.A., as co-agents.
                        (Incorporated by reference from Exhibit 10.1 to the
                        Company's Form 10-Q for the quarter ended July 2, 2000)

        10.22           Sixth Amendment, dated as of November 20, 2000, among The
                        Donna Karan Company, The Donna Karan Company Store, G.P.,
                        Donna Karan Studio, and DK Footwear Partners, the financial
                        institutions from time to time parties thereto as issuing
                        banks, Citibank, N.A., as administrative agent, The Chase
                        Manhattan Bank and Nationsbank, N.A., as co-agents.**

        10.23           Amendment, dated as of November 30, 2000, to the Employment
                        Agreement among the Company, The Donna Karan Company, and
                        John D. Idol and related letter agreement, dated as of
                        December 14, 2000*/**

        10.24           Employment Agreement, dated as of October 10, 2000, between
                        The Donna Karan Company and Joseph B Parsons*/**

        10.25           Amendment, dated October 10, 2000, to the Employment
                        Agreement between the Company and Lee Goldenberg*/**

        10.26           Donna Karan International Inc. 1996 Non-Employee Director
                        Stock Option Plan (as amended and restated through
                        December 8, 2000)*/**

        10.27           Donna Karan International Inc. 1996 Stock Incentive Plan (as
                        amended and restated through December 8, 2000)*/**

        10.28           Donna Karan International Inc. Wealth Accumulation Plan,
                        effective December 28, 1997 (amended and restated through
                        December 8, 2000)*/**

        10.29           Donna Karan International Inc. Executive Incentive Plan,
                        effective December 28, 1997 (amended and restated through
                        December 8, 2000)*/**

        10.30           Donna Karan International Inc. 1998 Non-Employee Director
                        Restricted Stock Plan (as amended and restated through
                        December 8, 2000)*/**

        10.31           Donna Karan International Inc. Deferred Bonus Plan,
                        effective as of February 1, 1999 (amended and restated
                        through December 8, 2000)*/**

        10.32           Donna Karan International Inc. Executive Severance Plan,
                        effective as of November 30, 2000 (as amended through
                        December 8, 2000)*/**

        10.33           Amendment, dated as of March 30, 2001, to the Employment
                        Agreement among the Company. The Donna Karan Company, and
                        John D. Idol*/**

        21.1            Subsidiaries of the Company**

        23.1            Consent of Ernst & Young LLP
</Table>


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

*   Exhibit is a management contract or compensatory plan or arrangement


**  Previously Filed

<Page>
                                   SIGNATURES

    Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this amendment to the Annual Report on Form 10-K to
be signed on its behalf by the undersigned, thereunto duly authorized.


<Table>
<S>                                          <C>  <C>
                                             DONNA KARAN INTERNATIONAL INC.
                                             (Registrant)

Dated:  August 21, 2001                      By:             /s/ JOSEPH B. PARSONS
                                                  -------------------------------------------
                                                               Joseph B. Parsons,
                                                     CHIEF FINANCIAL AND OPERATIONS OFFICER
</Table>