<PAGE>

================================================================================

                                 UNITED STATES
                      SECURITIES AND EXCHANGE COMMISSION
                            Washington, D.C. 20549

                                   ---------

                                   FORM 10-K

(Mark One)

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

                  For the fiscal year ended October 29, 2000

                                      OR

[_] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
    ACT OF 1934

                   For the transition period from         to

                       Commission File Number 333-73107

                  ST. JOHN KNITS INTERNATIONAL, INCORPORATED
            (Exact name of registrant as specified in its charter)

             Delaware                                            52-2061057
  (State or other jurisdiction                               (I.R.S. Employer
of incorporation or organization)                         Identification Number)

         17622 Armstrong Avenue
          Irvine, California                                      92614
(Address of principal executive offices)                        (Zip Code)

      Registrant's telephone number, including area code: (949) 863-1171

      Securities registered pursuant to Section 12(b) or 12(g) of the Act:

                                     None

          Securities registered pursuant to Section 15(d) of the Act:

                             Title of each class:
                             --------------------

                  12 1/2% Senior Subordinated Notes due 2009

         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 Registrant is not subject to the reporting requirements of Item 405.

         As of January 19, 2001, the Registrant had 6,546,174 shares of Common
Stock outstanding, and the aggregate market value of Registrant's Common Stock
held by nonaffiliates was $9,970,818 (based on the average bid and ask prices of
the Common Stock on such date of $22.00 as reported on the OTC Bulletin Board
quotation system).

================================================================================
<PAGE>

                                     INDEX

<TABLE>
<CAPTION>
                                                                                                                Page
                                                                                                               Number
                                                                                                               ------
<S>                                                                                                            <C>
                                                         PART I

ITEM 1.      Business.......................................................................................        3
ITEM 2.      Properties.....................................................................................       13
ITEM 3.      Legal Proceedings..............................................................................       14
ITEM 4.      Submission of Matters to a Vote of Security holders............................................       14
                                                        PART II
ITEM 5.      Market for the Registrant's Common Equity and Related Stockholder Matters......................       15
ITEM 6.      Selected Financial Data........................................................................       16
ITEM 7.      Management's Discussion and Analysis of Financial Condition and Results of Operations..........       17
ITEM 7(a).   Quantitative and Qualitative Disclosures About Market Risk.....................................       22
ITEM 8.      Financial Statements and Supplementary Data....................................................       23
ITEM 9.      Changes in and Disagreements with Accountants on Accounting and Financial Disclosure...........       23
                                                       PART III
ITEM 10.     Directors and Executive Officers of St. John Knits International, Incorporated.................       24
ITEM 11.     Executive Compensation.........................................................................       26
ITEM 12.     Security Ownership of Certain Beneficial Owners and Management.................................       29
ITEM 13.     Certain Relationships and Related Transactions.................................................       30
                                                         PART IV
ITEM 14.      Exhibits, Financial Statements, Schedules and Reports on Form 8-K..............................      32
</TABLE>

                                       2
<PAGE>

                                    PART I

Item 1.  BUSINESS

Overview

         St. John Knits International, Incorporated ("SJKI" and together with
its subsidiaries, the "company") is a leading designer, manufacturer and
marketer of fine women's clothing and accessories. The St. John name has been
associated with high quality women's knitwear for nearly 40 years. The company's
core knitwear product line consists of a collection of lifestyle clothing for
women's business, evening and casual needs. The company manufactures its
products primarily to order and distributes them on a highly selective basis
through a group of upscale retailers with whom it has long-term relationships,
as well as through company-owned stores.

         The company's core knitwear products are considered unique and highly
desirable by customers due to their classic styling, durability, comfort, fit
and quality. These attributes, combined with selective distribution and targeted
advertising, have created a loyal base of customers consisting of professional
and higher-income women.

Products

St. John

         The company's products are organized primarily into six separate
product lines: Knitwear, Sport, Griffith & Gray, Shoes, Accessories and
Fragrance.

 Knitwear. The company organizes its St. John Knitwear into four groups:
Collection, Dressy, Basics and Couture. Due to the breadth of each product
group, the company competes in most segments of women's designer clothing. The
company's knitwear products are sold as a collection of lifestyle clothing for
women's business, evening and casual needs. Due to its all-purpose weight, St.
John Knitwear is a year-round product, not confined to a single season or
climate. The company manufactures all of its knitwear products and designs
knitwear collections to encourage consumers to coordinate outfits, resulting in
multiple product purchases within a collection.

         Collection. The company is best known for its Collection line
         ----------
         consisting of elegant ready-to-wear styles. This line of daytime knit
         fashions includes sophisticated dresses and suits that focus on a
         tailored look. The Collection line also includes jackets, pants,
         skirts, coats and sweaters. All items in the line are sold as
         separates, including two-piece suit styles.

         Dressy. The Dressy line consists of dresses, theater suits and dressy
         ------
         separates. The look of the Dressy line is one of understated elegance
         enhanced by innovative touches, such as layers of transparent
         paillettes and sequins, embroidered sleeves or glittery collars and
         cuffs.

         Basics. The Basics line is comprised of products which are sold
         ------
         throughout the year and which generally do not vary by season. These
         products consist of classic jackets, skirts and pants that are an
         integral part of women's wardrobes, all in solid black, white or navy.
         Simplicity of design and color allows these products to be combined
         with any number of styles from any of the company's product lines and
         worn for daytime or dressed up for evening. Retailers' inventories of
         Basics products tend to be maintained throughout the year and reordered
         as necessary.

         Couture. The Couture line is the company's most exclusive group of day
         -------
         and evening apparel and is produced in limited quantities. The day
         group includes dresses and two-piece suits which are designed with
         elegant embroidery. The evening group consists of two-piece suits and
         long gowns. Both groups are designed using colored paillettes and
         sequins.

 Sport. St. John Sport is a line of activewear which includes jackets, skirts,
pants, tops and jeans and is targeted to the designer sportsware customer as
well as our core knitwear customers. The line is manufactured primarily in the
company's production facilities and includes various knit styles along with
woven garnmets made from fabrics purchased in Italy.

 Griffith & Gray. Griffith & Gray includes suits, coats, dresses, separates and
eveningwear. The line targets a slightly younger customer than the core Knitwear
line. Approximately half of the line is manufactured in the company's
facilities, including various knit styles. The balance of the line is
manufactured by outside contractors located in Italy using high quality European
woven fabrics. Commencing with the Fall 1999 line, Griffith & Gray is carried
exclusively in our company-owned stores.



                                       3
<PAGE>

 Shoes.  The St. John Shoe line consists of pumps, sling backs, loafers, boots
and sandals, manufactured in Italy using high quality Italian leather. Shoes are
designed to match the styles and colors of the Knitwear line.

 Accessories.  The Accessories line is comprised of fashion jewelry, belts and
handbags. All Accessories are color coordinated with the various fashion
collections. Four collections of jewelry are produced each year.

 Fragrance. The Fragrance line includes perfume, eau de parfum, perfumed body
mist, body cream, lotion, body powder and bath products. The Fragrance line
includes two scents, the signature fragrance, St. John, and White Camellia, both
marketed as accessories to the St. John apparel line through most of the
company's major customers and company-owned retail stores.

         The following table details the approximate range of suggested retail
prices by product line. The suggested retail prices are indicative of individual
item prices.

<TABLE>

                                                                                        Range of Suggested
         Product Line                               Selected Products                     Retail Prices
         ------------                               -----------------                     -------------
         <S>                     <C>                                                    <C>
         Knitwear
             Collection           Dresses, Two-Piece Suits, Jackets, Pants, Skirts,         $350-$1,500
                                  Coats, Sweaters
             Dressy               Dresses, Theater Suits, Dressy Separates                  $650-$2,000
             Basics               Skirts, Jackets, Pants                                    $180-$  825
             Couture              Dresses, Gowns, Two-Piece Suits                           $900-$3,500
         Sport                    Jackets, Skirts, Pants, Tops, Jeans                       $ 95-$1,100
         Griffith & Gray          Suits, Coats, Dresses, Separates, Eveningwear             $200-$1,800
         Shoes                    Pumps, Sling Backs, Loafers, Boots, Sandals               $200-$  570
         Accessories              Jewelry,  Belts, Handbags                                 $ 50-$  545
         Fragrance                Perfume, Bath Products                                    $ 25-$  250
</TABLE>

Sales by Division

     The following is a comparison of the net sales by division for the past
three fiscal years (in 000's):


<TABLE>

                                                                                                     Fiscal Years
                                                                                     ---------------------------------------------
                                                                                         2000            1999              1998
                                                                                         ----            ----              ----
         <S>                                                                         <C>                 <C>             <C>
         Knitwear....................................................................  $221,667          $208,997        $195,245
         Company-Owned Retail Stores.................................................   112,145            89,577          74,330
         Sport.......................................................................    27,669            11,870           9,416
         Jewelry ....................................................................     5,884             6,132           7,215
         Shoes.......................................................................     5,300             6,137           6,439
         St. John Home...............................................................     4,960             8,552           6,260
         Accessories.................................................................     3,260             1,799           1,481
         Griffith & Gray.............................................................     1,809             2,578           5,654
         Fragrance...................................................................     1,331             1,581           2,263
         Coat........................................................................        --               (18)/(1)/     1,446
         SJK.........................................................................        --              (646)/(1)/     9,011
         St. John Company, Ltd.......................................................     7,241             5,996           4,415
         St. John Asia, Ltd..........................................................     1,080               308              --
         Sales Elimination...........................................................   (55,887)          (48,692)        (45,275)
                                                                                       --------          --------        --------
         Total Net Sales.............................................................  $336,459          $294,171        $277,900
                                                                                       ========          ========        ========
</TABLE>
----------
   (1)      The SJK and Coat lines were discontinued at the end of fiscal 1998.

                                       4
<PAGE>

Licenses

         The company has license agreements to manufacture and sell eyewear and
coats under the St. John name. The eyewear line was launched during fiscal 1998.
In February 1999, the company signed a licensing agreement to create a new line
of women's coats. The new St. John Coat Collection offers the usual classic
styles, elegance and superior quality which St. John customers have come to
expect. The new line was launched in August 1999. Prior to the license
agreement, the company's Coat Collection, consisting primarily of faux fur coats
in various styles and colors, was manufactured in the company's factories using
fabric imported from Europe.

         During fiscal 1999, the company cancelled its license agreement for the
manufacture and sale of watches.

St. John Home

         The company operates three home furnishing stores, located in
Scottsdale, Arizona, Costa Mesa, California and Palm Desert, California under
the name St. John Home. The Palm Desert location was opened during January 2001.
In addition, the company operates one St. John Home outlet store in Nevada. St.
John Home stores sell upscale home furnishings and gift items. The company
previously operated six home furnishing stores through a joint venture which was
terminated in May 1999. Three of those stores were closed, and one was
transferred to the joint venture partner.

Manufacturing

         The company has developed a vertically integrated manufacturing process
which it believes is unique and critical to its success. During fiscal 2000,
approximately 95% of the company's products were manufactured at the company's
own facilities, while the remaining 5% were manufactured by outside contractors,
primarily in Europe. The company twists and dyes its yarn, as well as knits,
constructs, presses and finishes its knitwear products, in its seven facilities
located in Southern California and one facility located in Mexico. The company
manufactures its knitwear using its highly automated electronic knitting
machines coupled with a skilled labor force. The company also manufactures its
own jewelry and hardware for its products. Products not manufactured by the
company principally consist of the Griffith & Gray and Shoe product lines as
well as home furnishings, handbags, scarves, belts and fragrance.

         The company believes that its vertical integration differentiates it
from other apparel manufacturers and has been critical to its success because it
enables the company to manufacture products to order, maximize manufacturing
flexibility and maintain superior quality control. The company believes that the
ability to produce to order limits its exposure to both the inventory and market
risks associated with many apparel companies that source products
internationally. The company's in-house manufacturing capabilities also enable
it to quickly increase production of popular styles. The company's ability to
control every aspect of the manufacturing process allows it to consistently
produce garments to its high quality standards. Finally, the company believes
that its vertical integration has enabled it to consistently achieve margins
that are among the highest in the apparel industry.

         The manufacturing process begins with the twisting together of wool and
rayon on the company's precision twisting machines in a proprietary process that
produces the company's "Santana" yarn. The twisted yarn is transferred to the
company's dye house for dyeing based on garment orders received. The dyed yarn
is knit on the company's computerized electronic knitting machines and then cut,
assembled and finished in the company's linking, seaming and hand finishing
facilities. The company's jewelry and hardware manufacturing plants produce the
buttons and buckles for garments, as well as bracelets, earrings, necklaces,
chokers and pins. The company also manufactures many of its woven products, as
well as blouses, jeans and certain scarves.

         During fiscal 1998, the company completed a new jewelry and garment
hardware manufacturing facility in Mexico. This facility gives the company
additional manufacturing capacity as well as the ability to lower the cost of
certain labor-intensive jewelry and hardware components through reduced labor
costs. In addition, workers at the Mexico facility cut and sew jeans and apply
paillettes and sequins to some of the company's apparel products.

Quality Control

         The company has achieved its quality reputation by vertically
integrating manufacturing processes and maintaining control over its operations.
The expansion into dyeing, yarn twisting and jewelry and hardware manufacturing
was due primarily to the inability of outside suppliers to provide products
meeting the company's standards on a consistent and timely basis. The company's
quality control program is designed to enable all finished goods to meet the
company's standards, and includes inspection points throughout the manufacturing
processes. During the manufacturing processes, every garment is individually
inspected.

                                       5
<PAGE>

         As noted above, the company uses outside contractors primarily for the
manufacturing of its shoes, handbags and certain woven products. The company has
instituted procedures to maintain the quality of products manufactured by
outside contractors.

Design

         The company designs its garments to be consistent with its classic,
timeless style. To accomplish this goal, design teams reference the prior
season's designs and patterns to establish a basis for the current season's
lines. The design teams also work closely with the sales force to incorporate
current consumer preferences into the season's line. Dye lots are kept
consistent with prior years to enable consumers to augment their wardrobes over
several seasons. Once design parameters for a particular item are established,
the design teams work with the manufacturing group to plan construction details
and hardware attachments, such as buttons, to ensure efficient manufacturing.
The design staff has an average of ten years of experience with the company.

Distribution

         The company's products are distributed primarily through a select group
of retail customers and the company's 23 boutiques, 10 outlet stores, three home
furnishing stores and one home furnishing outlet.

Retail Customers. The company selectively distributes its products through some
of the nation's leading upscale retailers, including Saks Fifth Avenue, Neiman
Marcus and Nordstrom, each of which accounted for more than 10% of the company's
net sales in fiscal 2000 (approximately 43% collectively) and have been
customers of the company for approximately 25, 20 and 15 years, respectively.
The company distributes its products to approximately 560 locations in the
United States and internationally. Since the mid-1980s, the company has worked
with these and certain other retail customers to create in-store boutiques,
which are designated areas devoted exclusively to the company's products. Other
significant customers of the company include Jacobson's, Macy's West, Lord &
Taylor and select Marshall Field's and Dayton Hudson stores.

Company-Owned Stores. In order to diversify its product distribution and enhance
name recognition, the company began opening its own retail boutiques in 1989 and
currently operates 23 such boutiques. The boutiques showcase the company's
entire line of products and have expanded the distribution and enhanced the
brand awareness of its products. The company also operates 10 outlet stores.
Unlike many of its competitors, the company does not expressly manufacture
product for its outlets, instead utilizing the outlets to sell seconds, design
samples and slow-moving inventory from the company's full-price boutiques. In
addition, the company operates three home furnishing stores and one home
furnishing outlet.

International. The company sells its products to retail customers in Asia,
Europe, Canada and Mexico. In Asia, the company has established relationships
with a number of highly qualified retailers, including Lane Crawford in Hong
Kong and China and ShinSegae in South Korea, and is seeking to increase its
penetration in these accounts. In Japan, the company operates a wholly owned
subsidiary that distributes its products throughout Japan and operates a number
of small retail stores and two in-hotel boutiques. The company's European
efforts involve expanding and upgrading its relationships with high quality
independent retail customers, principally in the United Kingdom, Germany,
Belgium, Switzerland and the Netherlands. During fiscal 2000, international
sales to retail customers and sales through the company's subsidiary in Japan
accounted for approximately 7.4% of SJKI's net sales.

Financial Information About Segments

         The company has two reportable business segments, wholesale and retail
sales. The company's wholesale sales business consists primarily of six
divisions: Knitwear, Sport, Griffith & Gray, Shoes, Accessories and Fragrance.
For fiscal 2000, retail sales were generated through the company's 22 St. John
boutiques, 10 St. John outlet stores, two St. John Home stores and one St. John
Home outlet store. Management evaluates segment performance based primarily on
revenue and earnings from operations. For segment information regarding net
sales, operating profits and assets, see note 14 to the company's financial
statements, included herein.

Marketing

         The company markets its Collection, Dressy and Couture lines along with
its Sport line twice a year, during the Fall and Cruise/Spring seasons. These
lines are shown in January for delivery between May and October and in August
for delivery between November and April. The majority of orders for each of
these six-month delivery periods normally are received within five weeks of
showings, and the goods are then made to order. The Shoe line is marketed four
times per year. The company markets its Basics, Accessories and Fragrance lines
throughout the year.

                                       6
<PAGE>

         The company shows its product lines to retail customer buyers in its
New York, Irvine and Dallas showrooms. Members of the company's senior
management team work closely with major retail customers to develop sales plans
and to determine the appropriate mix of merchandise. These detailed sales plans
are based on past purchases, expected sales growth and profitability. The
company also shows its products in its Dusseldorf and Japan showrooms as well as
in other foreign countries at various times during the year using its outside
sales representatives.

         The company's strategy is to sell its products to its retail accounts
and to facilitate the sale of its products through to the ultimate consumer. The
company employs a sales team, showroom personnel and customer service
representatives. The sales team is currently comprised of 22 U.S. and five
international field representatives. The sales team establishes and maintains
in-store boutique presentations, develops close working relationships with store
management and trains key sales people to be St. John specialists. The St. John
specialists at certain key retail accounts are eligible for the company's
incentive rewards. In addition, the company's customer service representatives
monitor computerized information on each store's sales and styles sold in an
effort to track and increase sales.

         In order to promote its upscale image, the company advertises in both
national and international fashion magazines, including Vanity Fair, Vogue, Elle
and Harper's. In fiscal 2000, the company spent approximately $13.3 million on
advertising. Management believes that this advertising approach enhances the
company's image. The company's advertising features Kelly Gray as its Signature
Model. The company also designs and produces seasonal exclusive St. John
catalogs, which are distributed at the discretion of individual retailers.
Distribution is usually limited to target repeat purchasers or those who meet
the company's consumer profile.

Raw Materials and Suppliers

         The company's primary raw materials in the production of its knitwear
are wool and rayon. In fiscal 2000, the company purchased approximately $10.7
million of wool and approximately $3.3 million of rayon. The company uses the
highest quality wool, primarily from Australia. Generally, a wool commitment is
taken with the company's primary U.S. spinner for a set quantity of wool based
on the company's forecasted wool requirements for approximately one year.
Multiple spinners are available, both domestically and internationally, with
comparable pricing for spun Australian wool yarn. The company generally holds an
inventory of twisted yarn sufficient for approximately six weeks of production
to protect it from potential supply interruptions. Rayon is available in raw or
dyed form from various European and Japanese suppliers.

         In addition to wool and rayon, the company purchases yarn and fabric
from various suppliers and has little difficulty in satisfying its requirements
from Europe and Asia. Certain raw materials used in the manufacture of
paillettes are purchased from a supplier in Europe. The company believes that
there are limited sources for these items.

Competition

         Due to its history of strong sales and market leadership in designer
knitwear, the company believes that it faces limited direct competition for its
core product offerings. In addition, the company believes that the risk of
strong new competitors is further limited given its substantial investment in
knitwear production technology and its strong relationships with its retail
accounts. In a broader context, the company does compete with such successful
designers as Armani, Calvin Klein, Chanel, Donna Karan and Escada for
higher-income female customers.

Trademarks

         The company owns and utilizes several trademarks, principal among which
are St. John(R), St. John by Marie Gray(R), St. John Sport by Marie Gray (R) and
Griffith & Gray(R). The company's principal marks are registered with the United
States Patent and Trademark Office and in several other major jurisdictions in
the world. The company regards its trademarks and other proprietary rights as
valuable assets and believes that they have significant value in the marketing
of its products. The company vigorously protects its trademarks against
infringement.

Regulation

         The company is subject to a variety of federal, state and local laws
and regulations including those relating to zoning, land use, environmental
protection and workplace safety. The company is also subject to laws governing
its relationship with its employees, including minimum wage requirements,
overtime, working conditions and work permit requirements. Although the company
believes that it is and has been in material compliance with all of the various
regulations applicable to its business, the company cannot assure that
requirements will not change in the future or that it will not incur significant
costs to comply with such requirements.

                                       7
<PAGE>

Geographic Information

          The table below presents information related to the geographic areas
in which the company operated during fiscal years 2000, 1999 and 1998 (in
000's):

                                                     Fiscal Years
                                        -------------------------------------
                                           2000          1999          1998
                                        ---------      --------      --------
Net sales:
     United States...................    $311,395      $269,701      $256,618
     Asia/(1)/.......................      15,284        13,344         9,877
     Europe/(1)/.....................       6,298         6,909         7,113
     Other/(1)/......................       3,482         4,217         4,292
                                         --------      --------      --------
                                         $336,459      $294,171      $277,900
                                         ========      ========      ========

(1)  Sales for these geographic areas include sales made into the area directly
     from the United States and sales made in the area by subsidiaries of the
     company.

The Company

   SJKI

          SJKI became the parent company of St. John Knits, Inc., a California
corporation ("St. John") and its subsidiaries as a result of mergers consummated
in July 1999. Prior to the mergers, SJKI was a wholly owned subsidiary of St.
John. See "Management's Discussion and Analysis of Financial Condition and
Results of Operations - Agreement and Plan of Merger." SJKI was incorporated in
Delaware during fiscal 1999. Prior to such time, SJKI was incorporated in
Barbados as a "large FSC" under Section 922 of the Internal Revenue Code of
1986, as amended.


   St. John Knits, Inc.

          St. John Knits Inc., a California corporation, is a wholly owned
subsidiary of SJKI and was incorporated during 1962.


   SJK International, Inc.

          SJK International, Inc. ("International") is a wholly owned subsidiary
of St. John and, during fiscal 2000, acted as a foreign sales corporation for
the company. International was incorporated during fiscal 1999 in Barbados as a
"large FSC" under Section 922 of the Internal Revenue Code of 1986, as amended.
International participates in certain of the company's foreign operations.

   St. John Company, Ltd.

          St. John Company, Ltd. is a wholly owned subsidiary of St. John which
was incorporated during fiscal 1997 under the laws of Japan. St. John Company,
Ltd. is licensed by the company to distribute the company's products in Japan.
During fiscal 2000, St. John increased its ownership percentage in this
subsidiary to 100% from 68% held previously.

   St. John Home Stores, LLC

        St. John Home Stores, LLC ("St. John Home"), a Delaware limited
liability company, is a wholly owned subsidiary of St. John. St. John Home was
formerly operated as Amen Wardy Home Stores, LLC, a 51 % owned subsidiary of St.
John. The name and ownership change occurred during fiscal 1999.

   St. John Trademarks, Inc.

          St. John Trademarks, Inc. is a wholly owned subsidiary of St. John.
St. John Trademarks, Inc. and St. John have entered into a partnership organized
under the laws of Luxembourg to hold certain of the company's proprietary
rights.

                                       8
<PAGE>

   St. John--Varian Development Company

         St. John--Varian Development Company, a 50 % owned joint venture
between St. John and an unrelated third party, was formed during fiscal 1995.
The joint venture owns a 175,000 square foot building located in Irvine which is
leased to the company under a lease agreement expiring in 2010.

   St. John--Italy, Inc.

         St. John--Italy, Inc., a California corporation, is a wholly owned
subsidiary of St. John. St. John--Italy, Inc. was incorporated during fiscal
1996 to operate as a branch in Italy. During fiscal 1997, the entity began
operating as a buying office for the company. Subsequent to the end of fiscal
1998, the company moved its operations to Irvine, California and is currently
not operating in Italy.

   St. John Knits AG

         St. John Knits AG is a wholly owned subsidiary of St. John which was
incorporated during fiscal 1996 under the laws of Switzerland. St. John Knits AG
operates a research and development facility and buying office located in
Switzerland.

   St. John de Mexico SA de CV

         St. John de Mexico SA de CV is a wholly owned subsidiary of St. John
which was incorporated during fiscal 1997 under the laws of Mexico. St. John de
Mexico operates as a manufacturing entity within Mexico to assist in the
production of the company's jewelry and hardware components. During fiscal 1998,
St. John de Mexico began assisting in the application of sequins on certain of
the company's product lines. During fiscal 2000, it also began assisting in the
manufacturing of certain items in the Sport product line.

   St. John Asia, Ltd.

         St. John Asia, Ltd. is a wholly owned subsidiary of St. John which was
incorporated during fiscal 1999 under the laws of Hong Kong. St. John Asia, Ltd.
operates a retail boutique in Hong Kong.

Employees

         At October 29, 2000, the company had approximately 5,015 full-time
employees, including six in executive positions, approximately 270 in design and
sample production, 3,150 in production, 180 in quality control, 330 in retail,
80 in sales and advertising and the balance in clerical and office positions. In
addition, the company had approximately 600 full-time employees working at the
company's facility in Mexico, 35 working at St. John Home and 45 at St. John
Company, Ltd. The company is not party to any labor agreements. The company
believes a significant number of its employees are highly skilled and that
turnover among these employees has been minimal. The company considers its
relationship with its employees to be good and has not experienced any
interruption of its operations due to labor disputes.

Risk Factors

Substantial Leverage and Debt Service. Our company is highly leveraged. As of
October 29, 2000, we had total debt of approximately $267.4 million, of which
approximately $167.0 million was senior debt, and a stockholders' deficit of
approximately $117.6 million, which resulted from the recapitalization of the
company in connection with the mergers consummated in July 1999. In addition, we
may borrow money under our revolving credit facility which is intended to be
used primarily for working capital. Subject to restrictions in our senior credit
facilities and the indenture governing our senior subordinated notes, we may
borrow more money for working capital, capital expenditures, acquisitions or
other purposes.

         Our high level of debt could have important consequences, including the
following:

     .   our debt level makes us more vulnerable to economic downturns and
         adverse developments in our business, may cause us to have difficulty
         borrowing money in the future for working capital, capital
         expenditures, acquisitions or other purposes and limits our ability to
         pursue other business opportunities and implement our business
         strategies;

                                       9
<PAGE>

     .    we will need to use a large portion of the money we earn to pay
          principal and interest on our senior credit facilities, our notes and
          on other debt, which will reduce the amount of money available to us
          to finance our operations and other business activities;

     .    some of our debt has a variable rate of interest, which exposes us to
          the risk of increased interest rates; and

     .    we may have a much higher level of debt than our competitors, which
          may put us at a competitive disadvantage and may reduce our
          flexibility in responding to changing business and economic
          conditions, including increased competition.

          We expect to obtain the money to pay our expenses and to pay the
principal and interest on our notes, our senior credit facilities and other debt
from our operations and from loans under our revolving credit facility. Our
ability to meet our expenses thus depends on our future performance, which will
be affected by financial, business, economic and other factors. We will not be
able to control many of these factors, such as economic conditions in the
markets where we operate and pressure from competitors. We cannot be certain
that the money we earn will be sufficient to allow us to pay principal and
interest on our debt and meet our other obligations. If we do not have enough
money, we may be required to refinance all or part of our existing debt, sell
assets or borrow more money. We cannot guarantee that we will be able to
refinance our debt, sell assets or borrow more money on terms acceptable to us.
In addition, the terms of existing or future debt agreements, including our
senior credit facilities and the indenture governing our notes, may restrict us
from adopting any of these alternatives.

Covenant restrictions may limit our ability to operate our business. The
indenture governing our senior subordinated notes contains covenants that, among
other things:

     .    limit our ability to incur indebtedness and pay dividends on and
          redeem capital stock; and

     .    create restrictions on:

          .    investments in unrestricted subsidiaries,

          .    limiting distributions from some of the company's subsidiaries,

          .    the use of proceeds from the sale of assets and subsidiary stock,

          .    entering into transactions with affiliates and

          .    creating liens.

          The indenture also restricts, subject to certain exceptions, our
ability to consolidate and merge with or to transfer all or substantially all
our assets to, another person.

          Under our senior credit facilities, we must also comply with certain
specified financial ratios and tests that may restrict our ability to make
distributions or other payments to our investors and creditors and if we do not
comply with these or other covenants and restrictions contained in the senior
credit facilities we could default under the senior credit facilities. Such
debt, together with accrued interest, could then be declared immediately due and
payable. Our ability to comply with such provisions may be affected by events
beyond our control.

          Although we believe that we will be able to maintain compliance with
our current financial tests there can be no assurance that we will be able to do
so. The restrictions imposed by such covenants may adversely affect our ability
to take advantage of favorable business opportunities. Failure to comply with
the terms of such covenants could result in acceleration of the indebtedness
represented by our notes.

Competition and/or an economic downturn could have a material adverse effect on
our business. The apparel industry is highly competitive. We compete primarily
on the basis of price and quality. We believe that our success depends in large
part on our ability to anticipate, gauge and respond to changing consumer
demands in a timely manner. We cannot assure that we will always be successful
in this regard. If we misjudge these demands, our sales may suffer, which could
adversely affect our business, financial condition and results of operations.

          We compete with numerous domestic and foreign designers, brands and
manufacturers of apparel and accessories, some of which may be significantly
larger and more diversified and have greater financial and other resources than
we do. Increased competition from these and future competitors could reduce our
sales and prices, adversely affecting our results. Because of our debt level, we
may be less able to respond effectively to such competition than others.

                                       10
<PAGE>

         The industry in which we operate is cyclical. Purchases of apparel
generally tend to decline during recessions and also may decline at other times.
A recession in the general economy or uncertainties regarding future economic
prospects could affect consumer spending habits and have a material adverse
effect on our business, financial condition and results of operations.

The loss of one or more of our primary customers could have a material adverse
effect on our business. We, like many of our competitors, sell to retailers. In
recent years, the retail industry has experienced consolidation and other
ownership changes. In the future, retailers in the United States and in foreign
markets may have financial problems or consolidate, undergo restructurings or
reorganizations, or realign their affiliations, any of which could decrease the
number of stores that carry our products or increase the ownership concentration
within the retail industry. We cannot assure you as to the future effect of any
such changes.

         During fiscal 2000 and 1999, net sales to our three largest retail
customers, Saks Fifth Avenue, Neiman Marcus and Nordstrom, totaled approximately
43% and 41% of net sales, respectively, and net sales to Saks Fifth Avenue, our
largest retail customer, accounted for approximately 15% of net sales in each
year. Although we have long-established relationships with many of our
customers, we do not have any long-term sales agreements. The loss of or
significant decrease in business from any of our major customers could have a
material adverse effect on our business, financial condition and results of
operations.

The loss of one or more members of our senior management team could have a
material adverse effect on our business. Our success has been largely dependent
on the personal efforts and abilities of Bob Gray, Chairman and Chief Executive
Officer, Marie Gray, Chief Designer, and Kelly Gray, President, each of whom has
an employment agreement with the company. The loss of the services of any of
these executives could have a material adverse effect on our business, financial
condition and results of operations.

We are controlled by Vestar. Vestar and the Grays, through Vestar/Gray Investors
LLC, beneficially own approximately 78% and 15%, respectively, of the
outstanding common stock of SJKI. As a result, Vestar will be able to
effectively control the outcome of certain matters requiring a stockholder vote,
including the election of three of the five directors of SJKI (the Grays will be
contractually entitled to appoint the remaining two directors). Such ownership
of common stock may have the effect of delaying, deferring or preventing a
change of control.

An increase in the price or a decrease in the availability of wool or rayon, our
primary raw materials, could have a material adverse effect on our business. Our
principal raw materials are wool and rayon. In fiscal 2000, we purchased
approximately $10.7 million of wool and approximately $3.3 million of rayon. The
price of wool and rayon may fluctuate significantly depending on world demand.
We cannot assure that such fluctuation in the price of wool or rayon will not
affect our business, financial condition and results of operations.

         We purchase wool imported primarily from Australia. We also import
other raw materials, including rayon, from Europe and Japan. In addition, our
shoes, small leather goods and certain woven products are manufactured in
Europe. Our imported materials and products are subject to United States customs
duties which comprise a material portion of the cost of the merchandise. A
substantial increase in customs duties could have a material adverse effect on
our business, financial condition and results of operations. The United States
and the countries in which materials and products are produced or sold may, from
time to time, impose new quotas, duties, tariffs or other restrictions, or
adversely adjust prevailing quota, duty or tariff levels, any of which could
have a material adverse effect on the company.

Our international operations expose us to additional political, economic and
regulatory risks not faced by businesses that operate only in the United States.
We conduct international operations in Mexico, Europe, Asia and Canada. In
fiscal 2000, approximately 7.4% of our sales occurred outside the United States,
and approximately 5% of our products were manufactured abroad by third-party
contractors. Any international operations will be subject to risks similar to
those affecting our U.S. operations in addition to a number of other risks,
including:

     .    lack of complete operating control;

     .    currency fluctuations;

     .    trade barriers;

     .    exchange controls;

     .    governmental expropriation;

     .    foreign taxation;

                                       11
<PAGE>

     .    difficulty in enforcing intellectual property rights;

     .    language and other cultural barriers; and

     .    political and economic instability.

          In addition, various jurisdictions outside the United States have laws
limiting the right and ability of non-United States subsidiaries and affiliates
to pay dividends and remit earnings to affiliated companies unless specified
conditions exist. Our ability to expand the manufacture and sale of our products
internationally is also limited by the necessity of obtaining regulatory
approval in new countries.

         Our financial performance on a U.S. dollar denominated basis can be
significantly affected by fluctuations in currency exchange rates. From time to
time we enter into agreements to seek to reduce our foreign currency exposure,
but we cannot assure that we will be successful in so doing.

Changes in, or the costs of complying with, various governmental regulations
could have a material adverse effect on our business. We are subject to a
variety of federal, state and local laws and regulations including those
relating to zoning, land use, environmental protection and workplace safety. We
are also subject to laws governing our relationship with our employees,
including minimum wage requirements, overtime, working conditions and work
permit requirements. Although we believe that we are and have been in material
compliance with all of the various regulations applicable to our business, we
cannot assure that requirements will not change in the future or that we will
not incur significant costs to comply with such requirements.

The loss or infringement of our trademarks and other proprietary rights could
have a material adverse effect on our business. We believe that our trademarks
and other proprietary rights are important to our success and competitive
position. Accordingly, we devote substantial resources to the establishment and
protection of our trademarks on a worldwide basis. We cannot assure that our
actions taken to establish and protect our trademarks and other proprietary
rights will be adequate to prevent imitation of our products by others or to
prevent others from seeking to block sales of our products as violative of their
trademarks and proprietary rights. Moreover, we cannot assure that others will
not assert rights in, or ownership of, trademarks and other proprietary rights
of ours or that we will be able to successfully resolve such conflicts. In
addition, the laws of certain foreign countries may not protect proprietary
rights to the same extent as do the laws of the United States. The loss of such
trademarks and other proprietary rights, or the loss of the exclusive use of our
trademarks and other proprietary rights, could have a material adverse effect on
our business, financial condition and results of operations.

Backlog

         At October 29, 2000, the company had unfilled customer orders for the
cruise/spring season of approximately $160 million compared with approximately
$103 million as of October 31, 1999. Orders for the cruise/spring season are
generally shipped during November through April. The company's experience has
been that the cancellations, rejections or returns of orders do not materially
reduce the amount of sales realized from its backlog.

                                       12
<PAGE>

Item 2.  PROPERTIES

         The principal executive offices of the company are located at 17622
Armstrong Avenue, Irvine, California 92614.


Company-owned Properties

         The general location, use and approximate size of the company-owned
properties are set forth below. All of such properties are used in the company's
wholesale business segment.
<TABLE>
<CAPTION>
                                                                                                                   Approximate
                                                                                                                     Area in
                         Location                                                   Use                            Square Feet
                         --------                                                   ---                            -----------
<S>                                                       <C>                                                      <C>
Irvine, California......................................  Design Facility,  Sewing, Warehousing, Shipping             110,500
Tijuana, Mexico.........................................  Jewelry and Hardware Manufacturing, Sewing, Knitting         63,100
Irvine, California......................................  Knitting                                                     32,100
Van Nuys, California....................................  Assembling, Sewing                                           27,900
San Ysidro, California..................................  Assembling                                                   27,300
Irvine, California......................................  Corporate Headquarters, Showroom, Administrative             25,100
                                                          Offices
Irvine, California......................................  Knitting                                                     20,500
</TABLE>
Leased Properties

         The general location, use, approximate size and lease expiration date
of the company's principal leased properties are set forth below. All of such
properties are used in the company's retail business segment except as noted.
<TABLE>
<CAPTION>
                                                                                                    Approximate       Lease
                                                                                                      Area in      Expiration
                         Location                                            Use                    Square Feet       Date
                         --------                                           ----                    -----------       ----
<S>                                                       <C>                                       <C>             <C>
Irvine, California/(1)// (2)/...........................  Knitting, Sewing, Finishing, Shipping,       175,000         7/10
                                                          Administrative Offices
Irvine, California/(2)/.................................  Twisting, Dyeing, Warehousing                 88,100         5/06
Alhambra, California/(2)/...............................  Assembling, Sewing                            41,000         8/06
Santa Ana, California/(2)/..............................  Jewelry and Hardware Manufacturing            25,000         5/04
Costa Mesa, California/(3)/.............................  Retail Boutique                               15,400         1/14
New York, New York/(2)/.................................  Showroom                                      12,300         6/11
New York, New York/(4)/.................................  Retail Boutique                                7,500         6/11
Beverly Hills, California...............................  Retail Boutique                                7,000         3/06
New York, New York/(4)/.................................  Retail Boutique                                6,200         6/11
Chicago, Illinois.......................................  Retail Boutique                                6,000         9/04
Las Vegas, Nevada.......................................  Retail Boutique                                5,600         1/09
Munich, Germany.........................................  Retail Boutique                                4,400         4/02
</TABLE>
--------------

(1)   The company leases this property from a general partnership in which St.
      John holds a 50 % interest.
(2)   This property is used in the company's wholesale business segment.
(3)   This lease includes both the St. John and St. John Home boutiques which
      were opened during fiscal 1999.
(4)   The square footage of the retail boutique located on 5th Avenue in New
      York City is covered by these two leases.

         As of October 29, 2000, annual base rents for the company's leased
properties listed in the table above ranged from approximately $230,000 to
$1,306,000. In general, the terms of these leases provide for rent escalations
dependent upon either increases in the lessor's operating expenses or
fluctuations in the consumer price index in the relevant geographical area.

         The company believes that there are facilities available for lease in
the event that either the productive capacities of the company's manufacturing
facilities need to be expanded or a current lease of a manufacturing facility
expires. The company also leases space for 20 additional retail boutiques
(including three that will open in fiscal 2001 or later), two additional
showrooms, one additional administrative and warehouse facility, 10 outlet
stores, two home furnishing stores and one home furnishing outlet store
(aggregating approximately 232,000 square feet).

                                       13
<PAGE>

Item 3.   LEGAL PROCEEDINGS

Litigation Regarding the Mergers

          On June 9, 2000, the company reached an agreement to settle a class
action shareholders' lawsuit arising from the mergers of the company that closed
on July 7, 1999. The terms of the settlement agreement, which received final
court approval on August 1, 2000, called for payment of $13.75 million to the
company's former public shareholders and their attorneys. Nearly all of this
payment was funded by the company's insurance carriers. Additionally, in the
event of a future sale, merger or public offering of the company, the company
has agreed to provide these former shareholders with an opportunity to receive a
specified percentage of proceeds from such an event under certain limited
circumstances. On September 1, 2000, one of the plaintiffs in this lawsuit filed
a notice of appeal from the judgment approving the settlement and the court
order regarding application for attorney's fees. Such appeal is still pending.

          The company is not a party to any other litigation which is
individually or in the aggregate material to its business.

Item 4.   SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

          Not applicable.

                                       14
<PAGE>

                                    PART II

Item 5.   MARKET FOR THE REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER
          MATTERS

          SJKI's common stock is quoted on the OTC Bulletin Board quotation
system under the symbol "SJKI". The following table sets forth, for each of the
full quarterly periods indicated, the quarterly high and low bid quotations for
SJKI's common stock as reported by the OTC Bulletin Board. The prices in the
table represent prices between dealers and do not include adjustments for retail
mark-ups, markdowns or commissions and may not represent actual transactions.


                                    Fiscal 2000            Fiscal 1999/(1)/
                                    -----------            ----------------
                Quarter           High       Low          High        Low
                -------           ----       ---          ----        ---
                Fourth           $28.00      $20.88       $24.50      $12.00
                Third             25.00       18.00
                Second            18.00       16.25
                First             16.00       14.50


---------
(1)  As a result of the mergers consummated on July 7, 1999, 455,969 shares of
     SJKI were issued to former shareholders of St. John, other than the Grays.
     Prior to such time, SJKI was a wholly owned subsidiary of St. John.

         As of January 22, 2001, there were approximately 15 holders of record
of SJKI's common stock.

         SJKI has never declared dividends on its common stock and does not
intend to pay dividends on its common stock in the future. SJKI's ability to pay
dividends depends upon the receipt of dividends from St. John, which is a wholly
owned subsidiary of SJKI. In addition, SJKI's ability to pay dividends on its
common stock is restricted by the terms of its senior credit facilities and the
indenture governing its senior subordinated notes as well as limitations under
applicable law and other factors the board of directors deems relevant. See
"Management's Discussion and Analysis of Financial Condition and Results of
Operations - Liquity and Capital Resources."

                                       15
<PAGE>

Item 6.  SELECTED FINANCIAL DATA

         The following selected financial data has been derived from the
consolidated financial statements of the company. This information should be
read in conjunction with the company's audited consolidated financial statements
and notes thereto and Item 7, "Management's Discussion and Analysis of Financial
Condition and Results of Operations."

<TABLE>
<CAPTION>
                                                                                            Fiscal Year Ended
                                                                     ------------------------------------------------------------
                                                                     October 29,  October 31, November 1, November 2, November 3,
                                                                         2000        1999        1998        1997       1996
                                                                         ----        ----        ----        ----       ----
                                                                              (in thousands, except per share amounts)
<S>                                                                  <C>          <C>         <C>         <C>         <C>
Income Statement Data:
Net sales/(1)/......................................................   $336,459    $ 294,171  $ 277,900   $ 240,479   $ 201,888
Cost of sales.......................................................    141,097      130,131    120,883      99,545      88,871
                                                                       --------    ---------  ---------   ---------   ---------
Gross profit........................................................    195,362      164,040    157,017     140,934     113,017
Selling, general and administrative expenses/(1/)...................    123,251      114,884    102,965      82,923      67,322
Transaction fees and expenses.......................................         --       15,123         --          --          --
                                                                       --------    ---------  ---------   ---------   ---------
Operating income....................................................     72,111       34,033     54,052      58,011      45,695
Interest expense....................................................     31,787       10,224         --          42          --
Other income........................................................      1,000        1,197      1,369         755       1,355
                                                                       --------    ---------  ---------   ---------   ---------
Income before income taxes..........................................     41,324       25,006     55,421      58,724      47,050
Income taxes........................................................     17,511       10,317     22,001      24,300      19,929
                                                                       --------    ---------  ---------   ---------   ---------
Net income..........................................................   $ 23,813    $  14,689  $  33,420   $  34,424   $  27,121
                                                                       ========    =========  =========   =========   =========
Net income per common share-diluted/(2/)............................   $   3.00    $    0.98  $    1.94   $    2.01   $    1.59
                                                                       ========    =========  =========   =========   =========
Dividends per share/(2/)............................................   $     --    $   0.075  $    0.10   $    0.10   $    0.10
                                                                       ========    =========  =========   =========   =========
Weighted average shares outstanding-diluted/(2/)....................      6,546       13,669     17,235      17,134      17,016
                                                                       ========    =========  =========   =========   =========
</TABLE>

<TABLE>
<CAPTION>
                                                                                              As of
                                                                     ------------------------------------------------------------
                                                                     October 29,  October 31, November 1, November 2, November 3,
                                                                         2000        1999        1998         1997        1996
                                                                         ----        ----        ----         ----        ----
                                                                                        (in thousands)
<S>                                                                  <C>          <C>         <C>         <C>         <C>
Balance Sheet Data:
Working capital.....................................................  $  69,820   $   89,140   $  89,190  $   69,693   $ 49,628
Total assets........................................................    220,543      206,810     182,390     153,904    116,494
Long-term debt/(3)/.................................................    261,847      287,321         408          --         --
Mandatorily redeemable preferred stock..............................     25,000       25,000          --          --         --
Redeemable common stock.............................................     29,069       29,069          --          --         --
Stockholders' equity (deficit)......................................   (146,670)    (166,000)    161,574     130,680     97,093
</TABLE>

-----------
(1)  Certain reclasses have been made to the prior year balances to conform with
     the current year presentation.

(2)  Net income per share, dividends per share and weighted average shares
     outstanding have been adjusted for the 2-for-1 stock split which occurred
     during the third quarter of fiscal 1996.

(3)  The company increased its long-term debt and issued the redeemable
     preferred stock in connection with the mergers consummated in July 1999. In
     addition, the deficit in stockholders' equity was incurred in connection
     with the mergers.

                                       16
<PAGE>

Item 7.  MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
         OF OPERATIONS

         Management's discussion and analysis should be read in conjunction with
the company's consolidated financial statements and the notes related thereto.

Agreement and Plan of Merger

         On July 7, 1999, (a) SJKAcquisition, Inc., a California corporation and
direct wholly owned subsidiary of SJKI, merged with and into St. John, with St.
John surviving the merger (the "reorganization merger") and (b) Pearl
Acquisition Corp., a Delaware corporation and direct wholly owned subsidiary of
Vestar/Gray Investors LLC, a Delaware limited liability company, merged with and
into SJKI, with SJKI surviving the merger (the "acquisition merger" and together
with the reorganization merger, the "mergers"), as contemplated by the Agreement
and Plan of Merger, dated as of February 2, 1999, among SJKI, St. John,
SJKAcquisition and Pearl. As a result of the mergers, St. John became a wholly
owned subsidiary of the SJKI. Immediately after the mergers, SJKI was
approximately 7% owned by former shareholders of St. John, other than Robert E.
Gray, Marie Gray and Kelly A. Gray, and approximately 93% owned by Vestar/Gray
Investors LLC. Vestar/Gray Investors LLC is approximately 84% owned by an
affiliate of Vestar Capital Partners III, L.P. and 16% owned by the Grays.

         As a result of the mergers, except for fractional shares and shares
owned by St. John, Pearl, Vestar/Gray Investors LLC and the Grays, and subject
to proration, each issued and outstanding share of St. John prior to the
reorganization merger was converted into the right to receive either $30 in cash
or, for each former issued and outstanding share of common stock of St. John
with respect to which an election had been made and not withdrawn in accordance
with the merger agreement, one fully paid and non-assessable share of SJKI's
common stock, with a total of 455,969 shares (after elimination of fractional
shares) of SJKI issued to former shareholders of St. John, other than the Grays.

         The aggregate cash consideration paid to company shareholders in
connection with the mergers was approximately $448.7 million. The company
financed the mergers with proceeds from senior secured credit facilities of
$190.0 million, an equity contribution by Vestar/Gray Investors LLC of $146.5
million, a subordinated debt offering of $100.0 million and the issuance of
preferred stock of $25.0 million. The transaction was recorded as a
recapitalization. Expenses related to the new debt financing of approximately
$15.2 million were recorded as deferred financing costs and are being amortized
over the life of the related debt. Expenses related to the purchase of the
company's outstanding stock of approximately $9.3 million were reflected as a
reduction in retained earnings at October 31, 1999. Expenses totaling
approximately $15 million were incurred during the third quarter of fiscal 1999
related to the mergers. These expenses were primarily related to payments made
to settle the company's outstanding stock options in connection with the
mergers.

Results of Operations

         The following table is derived from the company's Consolidated
Statements of Income and sets forth, for the periods indicated, the results of
operations as a percentage of net sales:

<TABLE>
<CAPTION>
                                                                      Percentage of Net Sales
                                                                         Fiscal Year Ended
                                                                         -----------------
                                                              October 29,   October 31,   November 1,
                                                                 2000          1999          1998
                                                                 ----          ----          ----
<S>                                                            <C>           <C>           <C>
Net sales..................................................     100.0%        100.0%        100.0%
Cost of sales..............................................      41.9          44.2          43.5
                                                                -----         -----         -----
Gross profit...............................................      58.1          55.8          56.5
Selling, general and administrative expenses...............      36.6          39.1          37.1
Transaction fees and expenses..............................        --           5.0            --
                                                                -----         -----         -----
Operating income...........................................      21.5          11.7          19.4
Interest expense...........................................       9.5           3.5            --
Other income...............................................       0.3           0.4           0.5
                                                                -----         -----         -----
Income before income taxes.................................      12.3           8.6          19.9
Income taxes...............................................       5.2           3.5           7.9
                                                                -----         -----         -----
Net income.................................................       7.1%          5.1%         12.0%
                                                                =====         =====         =====
</TABLE>

                                       17
<PAGE>

Fiscal 2000 Compared to Fiscal 1999

         Net sales for fiscal 2000 increased by $42.3 million, or 14.4% over
fiscal 1999. This increase was principally attributable to (i) an increase in
sales by company-owned retail stores of approximately $22.6 million, due in part
to increased sales at a number of the retail boutiques, including significant
increases at the boutiques located in New York City and Palm Desert, California,
and the addition of four retail boutiques and one outlet store since the
beginning of fiscal 2000 and (ii) an increase in sales to existing domestic
retail customers of approximately $20.7 million, including an increase of $15.8
million in sales of the Sport product line to these customers. These increases
in net sales were partially offset by a decrease in net sales for St. John Home
of $3.6 million, due to the closure of three stores and the transfer of one
store to a former joint venture partner during the second quarter of fiscal
1999. Net sales increased primarily as a result of increased unit sales of
various product lines.

         Gross profit for fiscal 2000 increased by $31.3 million, or 19.1% as
compared with fiscal 1999, and increased as a percentage of net sales to 58.1%
from 55.8%. This increase in the gross profit margin was primarily due to (i) an
increase in the gross profit margin for the Knit and Sport divisions, due to an
increase in the number of garments being manufactured and sold without a
corresponding increase in the production costs and an improvement in
manufacturing efficiency and (ii) an increase in the gross margin for the retail
boutiques due to a decrease in point of sale markdowns.

         Selling, general and administrative expenses for fiscal 2000 increased
by $8.4 million, or 7.3% over fiscal 1999, and decreased as a percentage of net
sales to 36.6% from 39.1%. This decrease was primarily due to the reduction in
selling, general and administrative expenses related to the closure of three
Home stores and the transfer of one Home store to a former joint venture partner
during the second quarter of fiscal 1999 and non-recurring expenses totaling
approximately $1.7 million related there to. This decrease was offset by non-
recurring costs incurred during fiscal 2000 related to the litigation involving
the mergers totaling approximately $1.5 million and costs incurred to repair the
corporate airplane of $1.0 million.

         Transaction fees and expenses for fiscal 1999 represent costs directly
associated with the completion of the mergers which are described above,
including $13.8 million of costs related to payments made to settle the
company's outstanding stock options. There were no corresponding fees and
expenses in fiscal 2000.

         Operating income for fiscal 2000 increased by $38.1 million, or 111.9%
over fiscal 1999. Operating income as percentage of net sales increased to 21.5%
from 11.7% during the same period. This increase in the operating income as a
percentage of net sales was primarily due to transaction fees and expenses which
were recorded during the third quarter of fiscal 1999, and an increase in the
gross profit margin and a decrease in selling, general and administrative
expenses as a percentage of net sales during fiscal 2000.

         Interest expense for fiscal 2000 increased by $21.6 million over fiscal
1999. This increase was due to the borrowings under the senior credit facility
and senior subordinated notes incurred during the third quarter of fiscal 1999
in connection with the completion of the mergers in July 1999.

Fiscal 1999 Compared to Fiscal 1998

         Net sales for fiscal 1999 increased by $16.3 million, or 5.9% over
fiscal 1998. This increase was principally attributable to (i) an increase in
sales by company-owned retail stores of approximately $15.2 million, due in part
to the expansion of the Las Vegas and South Coast Plaza boutiques which were
completed in May 1998 and December 1998, respectively, increased sales at the
boutique located in Beverly Hills and the addition of one retail boutique in
Scottsdale, Arizona and one outlet store since the beginning of fiscal 1998,
(ii) an increase in international sales of $3.2 million, which includes the
sales of St. John Company, Ltd., a majority owned subsidiary which commenced
operations in Japan during the fourth quarter of fiscal 1997 and (iii) an
increase in sales of approximately $2.3 million recorded by St. John Home, which
commenced operations during the fourth quarter of fiscal 1997. These increases
were offset by a decrease in sales to existing domestic retail customers,
primarily due to the discontinuance of the SJK line. Net sales increased
primarily as a result of increased unit sales of various product lines. See
"Business - Sales by Division."

         Gross profit for fiscal 1999 increased by $7.0 million, or 4.5% as
compared with fiscal 1998, and decreased as a percentage of net sales to 55.8%
from 56.5%. This decrease in the gross profit margin was primarily due to a
decrease in the gross margin for the Knitwear line, due to increased production
costs which were not offset by a corresponding increase in the selling price.
This increase in the production costs was due in part to the reevaluation of the
company's quality control program and the related procedures which were
implemented during the second half of fiscal 1998.

                                       18
<PAGE>

            Selling, general and administrative expenses for fiscal 1999
increased by $11.9 million, or 11.6% over fiscal 1998, and increased as a
percentage of net sales to 39.1% from 37.1%. This increase was primarily due to
(i) an increase of approximately $2.0 million in selling expenses related to
increased costs of promoting and marketing its products to its major customers,
(ii) non-recurring expenses totaling approximately $1.7 million incurred in
connection with resolving the litigation involving Amen Wardy Home Stores and
the closure of three such stores, (iii) the write off of the costs associated
with the acquisition of the company's trademark in Japan totaling approximately
$600,000 and (iv) additional legal fees related to the Amen Wardy Home
litigation and litigation involving the mergers.

            Transaction fees and expenses represent costs directly associated
with the completion of the mergers as discussed above under "Agreement and Plan
of Merger."

            Operating income for fiscal 1999 decreased by $20.0 million, or
37.0% as compared with fiscal 1998. Operating income as a percentage of net
sales decreased to 11.7% from 19.4% during the same period as a result of the
reasons mentioned above.

            Interest expense for fiscal 1999 increased by $10.2 million as
compared with fiscal 1998. This increase was due to the borrowings under the
senior credit facility and senior subordinated notes incurred in connection with
the mergers.

Liquidity and Capital Resources

            SJKI is effectively a holding company and, accordingly, must rely on
distributions, loans and other intercompany cash flows from its affiliates and
subsidiaries to generate the funds necessary to satisfy the repayment of its
outstanding loans. Except as may be required under applicable law, there are no
significant restrictions on the transfer of funds or assets from the company's
wholly owned subsidiaries, which have guaranteed obligations of SJKI, to SJKI.

            The company's primary cash requirements are to fund payments
required to service its debt, to fund its working capital needs, primarily
inventory and accounts receivable, and for the purchase of property and
equipment. During fiscal 2000, cash provided by operating activities was $45.1
million. Cash provided by operating activities was primarily generated by net
income, an increase in accounts payable, an increase in accrued expenses and a
decrease in accounts receivable. Cash used in investing activities was $29.4
million during fiscal 2000. The principal use of cash in investing activities
was for (i) the purchase of electronic knitting machines, (ii) the construction
of improvements for a new corporate headquarters in Irvine, California, (iii)
upgrades to the company's computer systems, (iv) construction of leasehold
improvements for a new boutique location in Palm Desert, California, (v)
construction of leasehold improvements for a new boutique in Seattle,
Washington, (vi) the construction of improvements for a new manufacturing
facility located in Irvine, California, (vii) the construction of leasehold
improvements for a new boutique location in Hawaii and (viii) the purchase of a
condominium located in New York City. Cash used in financing activities was
$22.8 million during fiscal 2000. Cash used in financing activities included the
prepayment of bank debt totaling $20 million.

            The company anticipates purchasing property and equipment of
approximately $20 million during fiscal 2001. The estimated $20 million will be
used principally for (i) upgrades to the company's computer systems, (ii) the
purchase of electronic knitting machines, (iii) the construction of leasehold
improvements for a new showroom location in New York and (iv) the construction
of leasehold improvements for new retail boutiques in Naples, Forida and Plano,
Texas and 2 additional locations to be determined.

            As of October 29, 2000, the company had approximately $69.8 million
in working capital and $25.1 million in cash and marketable securities. The
company's principal source of liquidity is internally generated funds. As part
of the senior credit facilities, the company has a $25 million revolving credit
facility which expires on July 31, 2005. The revolving credit facility is
secured and borrowings thereunder bear interest at the company's choice of the
bank's borrowing rate plus 1.0% (9.5% at October 29, 2000) or a Eurodollar rate
plus 2.0%. The availability of funds under the revolving credit facility is
subject to the company's continued compliance with certain covenants, including
a covenant that sets the maximum amount the company can spend annually on the
acquisition of fixed or capital assets, and certain financial covenants,
including a maximum leverage ratio, a minimum fixed charge coverage ratio and a
minimum interest expense coverage ratio. See "Credit Facilities" below. As of
October 29, 2000, no amounts were outstanding under the revolving credit
facility. The company invests its excess cash in a money market fund.

            Total debt outstanding decreased $22.5 million to $267.4 million at
October 29, 2000, as compared to the amount outstanding at October 31, 1999.
This decrease is primarily due to prepayments totaling $20 million. The
company's outstanding debt is comprised primarily of senior secured credit
facilities of $167.0 million and $98.8 million of senior subordinated notes.

                                       19
<PAGE>

            The company's primary ongoing cash requirements will be for debt
service and capital expenditures. The company's debt service requirements
consist primarily of principal and interest payments on bank borrowings and
interest on the notes. The company believes it will be able to finance its debt
service and capital expenditure requirements for the foreseeable future with
internally generated funds and availability under the revolving credit facility.
However, the company's ability to fund its capital investment requirements,
interest and principal payment obligations and working capital requirements and
to comply with all of the financial covenants under its debt agreements depends
on its future operating performance and cash flow, which in turn are subject to
prevailing economic conditions and to financial, business and other factors,
some of which are beyond the company's control. See "Risk Factors-Substantial
Leverage and Debt Service."

            St. John paid approximately $1,245,000 in dividends to its
shareholders during fiscal 1999 prior to the mergers. SJKI did not make any
payment of dividends during fiscal 2000 and does not anticipate the payment of
any cash dividends on its common stock in the future.

            The company's EBITDA as defined in its credit agreement for its
senior secured credit facilities was $86,900,000 and $66,528,000 for fiscal 2000
and 1999, respectively. EBITDA is not a defined term under GAAP and is not an
alternative to operating income or cash flow from operations as determined under
GAAP. The company believes that EBITDA provides additional information for
determining its ability to meet future debt service requirements; however,
EBITDA does not reflect cash available to fund cash requirements and should not
be construed as an indication of the company's operating performance or as a
measure of liquidity.

Credit Facilities

            In order to finance a portion of the cash consideration paid
pursuant to the mergers, the company entered into a credit agreement with a
group of financial institutions, which provides for an aggregate principal
amount of loans totaling $215 million. The credit agreement consists of three
facilities: (i) tranche A facility totaling $75 million which matures July 31,
2005, (ii) tranche B facility totaling $115 million which matures July 31, 2007
and (iii) the revolving credit facility totaling $25 million which matures July
31, 2005.

            Borrowings under the tranche A facility and the revolving credit
facility bear interest at a floating rate, which is based upon the leverage
ratio of the company, but cannot exceed the banks' borrowing rate plus 2.0% or
LIBOR plus 3.0%. Borrowings under the tranche B facility bear interest at a
floating rate, which is also based upon the leverage ratio of the company, but
cannot exceed the banks' borrowing rate plus 2.5% or LIBOR plus 3.5%. In
addition, the company is required to pay a commitment fee on the unused portion
of the revolving credit facility of 0.5% per year.

            Borrowings under the tranche A facility began to mature quarterly on
October 31, 1999, while borrowings under the tranche B facility began to mature
quarterly on October 31, 2000. The term loans require a mandatory prepayment
based upon the excess cash flow of the company.

            The obligations of the company under the credit agreement are
guaranteed by each domestic subsidiary of the company, including St. John, and
to the extent no adverse tax consequences would result from such guarantees,
each foreign subsidiary of the company. The credit agreement and the related
guarantees are secured by (i) a pledge of 100% of the capital stock of each
domestic subsidiary of the company, including St. John, and 65% of each foreign
subsidiary of the company and (ii) a security interest in, and mortgage on,
substantially all the assets of the company and each domestic subsidiary of the
company, including St. John, and to the extent no adverse tax consequences would
result therefrom, each foreign subsidiary of the company.

            The credit agreement requires the company to comply with specified
financial ratios, including a minimum interest coverage ratio, a maximum
leverage ratio and a minimum fixed charge coverage ratio. The credit agreement
also contains additional covenants that, among other things, restrict the
ability of the company to dispose of assets, incur additional indebtedness, pay
dividends, create liens on assets, make investments, loans or advances and
engage in mergers or consolidations. The credit agreement prohibits the company
from declaring or paying any dividends or making any payments with respect to
the company's senior subordinated notes if it fails to perform its obligations
under, or fails to meet the conditions of, the credit agreement or if payment
creates a default under the credit agreement. The credit agreement contains
customary events of default.

            The credit agreement permits the company to prepay loans and to
permanently reduce revolving credit commitments, in whole or in part, at any
time. In addition, the company is required to make mandatory prepayments of
tranche A and B facilities, subject to certain exceptions, in amounts equal to
(i) 75% of excess cash flow (as defined in the credit agreement); and (ii) 100%
of the net cash proceeds of certain dispositions of assets or issuances of debt
or equity of the company or any of its subsidiaries (in each case, subject to
certain exceptions and subject to a reduction to zero based upon the company's
financial performance).

                                       20
<PAGE>

Senior Subordinated Notes

            In addition to the credit facilities described above, the company
sold $100 million of senior subordinated notes (the "notes") to help finance the
mergers. The notes are unsecured and mature on July 1, 2009. The notes bear
interest at a rate of 12.5% per year and were issued at 98.616% of the actual
face value. Interest on the notes is payable semiannually to the holders of
record. The notes are subject to redemption by the company on or after July 1,
2004. In addition, on or before July 1, 2002, the company may redeem up to 35%
of the outstanding notes with the net cash proceeds of certain equity offerings.
The indenture governing the notes limits, among other things, the payment of
dividends, the incurrence of additional indebtedness and other restricted
payments. The indenture contains customary events of default.

Redeemable Common Stock

            In connection with the mergers, SJKI has entered into a
stockholders' agreement with Vestar/Gray Investors, Vestar and the Grays, which
states, among other things, that prior to a public offering of SJKI common
stock, if Bob Gray ceases to serve as Chairman or Chief Executive Officer of St.
John or SJKI or if the employment with SJKI of Marie Gray or Kelly Gray ceases
for any reason, then he or she will have the right to require SJKI to purchase
the shares of SJKI common stock beneficially owned by them, up to a maximum of
$5 million of such common stock for all the Grays during any 12-month period. If
any of the Grays are terminated without "cause" or resigns for "good reason," as
these terms are defined in their current respective employment agreements with
the company, then he or she will have the right to require SJKI to purchase the
shares of SJKI common stock beneficially owned by them, up to a maximum of 25%
of the total shares held by such terminated or resigning Gray employee during
any 12-month period. This agreement may be limited by the terms of the
agreements related to the credit facilities and the senior subordinated notes.

Mandatorily Redeemable Preferred Stock

            In order to finance a portion of the cash consideration paid in the
mergers, SJKI issued 250,000 shares of 15.25% Mandatorily Redeemable preferred
stock due 2010 (the "preferred stock") to Vestar/SJK Investors LLC. The
liquidation preference of the preferred stock is $100 per share. The preferred
stock ranks junior in right of payment to all liabilities and obligations
(whether or not for borrowed money) of SJKI (other than common stock of SJKI and
any preferred stock of SJKI which by its terms is on parity with or junior to
the preferred stock). Holders of the preferred stock will be entitled to
receive, when, and if declared by the Board of Directors of SJKI, out of funds
legally available therefor, dividends on the preferred stock, at an annual rate
equal to 15.25%, provided that if dividends are not paid on a dividend payment
date, dividends will continue to accrue on unpaid dividends. Dividends on the
preferred stock may only be paid in cash if permitted under the terms of the
company's senior secured credit facilities, indenture and other contractual
arrangements. Dividends accrue from the date of issuance and are payable semi-
annually in arrears on January 1 and July 1 of each year, commencing on January
1, 2000. If permitted under the terms of the company's senior secured credit
facilities, the indenture and other contractual arrangements, the preferred
stock may be redeemed at any time, in whole or in part, at the option of SJKI at
specified redemption prices. On July 1, 2010, SJKI is required to redeem
(subject to contractual and other restrictions with respect thereto and to the
legal availability of funds therefor) all outstanding shares of preferred stock
at a price equal to the liquidation value thereof plus all accumulated dividends
to the date of redemption. SJKI may, at its option, exchange all, but not less
than all, of the shares of the then outstanding preferred stock for debentures
of SJKI in a principal amount equal to the liquidation value of the preferred
stock plus accumulated dividends. The exchange debentures will bear interest at
15.25% per year, have a final stated maturity of July 1, 2010, have optional
redemption provisions comparable to the preferred stock and will have customary
covenants and events of default. SJKI may not cause the exchange of the
preferred stock for debentures unless permitted under the terms of the company's
senior secured credit facilities, the indenture and other contractual
arrangements.

Year 2000

            The company undertook many actions intended to assure that its
computer systems and other equipment were capable of functioning in, and
processing for, periods for the Year 2000 and beyond. These actions were
generally described in the company's report on Form 10-Q for the quarter ended
August 1, 1999. The company implemented a program intended to address, on a
timely basis, "Year 2000 Readiness" (the need for computer applications and
other systems used by the company to function in and after the Year 2000 and to
recognize and properly perform date sensitive functions involving dates after
December 31, 1999).

            As of January 25, 2001, the company has not experienced any material
consequences of failure of Year 2000 Readiness, either by the company, its
suppliers, or its customers. However, Year 2000 Readiness has many elements and
potential consequences, some of which may not be foreseeable or may be realized
in future periods. Therefore, there can be no assurance

                                       21
<PAGE>

that unforeseen circumstances could still not arise, or that the company will
not in the future identify equipment or systems which are not Year 2000 ready.

         The company's Year 2000 costs were approximately $716,000.

New Accounting Pronouncements

         See Note 2(o) "New Accounting Pronouncements" included under the
caption Notes to Consolidated Financial Statements included elsewhere in this
document.

Forward Looking Statements

         This Annual Report on Form 10-K contains certain statements which
describe the company's beliefs concerning future business conditions and the
outlook for the company based on currently available information. Wherever
possible the company has identified these "forward looking" statements (as
defined in Section 21E of the Securities Exchange Act of 1934) by words such as
"anticipates," "believes," "estimates," "expects" and other similar expressions.
The forward looking statements and associated risks set forth herein may include
or relate to: (i) the company's anticipated purchases of property and equipment
during fiscal 2001, (ii) the company's belief that it will be able to fund its
working capital and capital expenditure requirements with internally generated
funds and borrowings under the revolving credit facility and (iii) the company's
anticipation that it will not pay cash dividends on its common stock in the
future.

         These forward looking statements are subject to risks, uncertainties
and other factors which could cause the company's actual results, performance or
achievements to differ materially from those expressed in, or implied by, these
statements. See "Business-Risk Factors." In addition to the factors that may be
described in this report, the following factors could cause actual results to
differ from those expressed in any forward looking statements made by the
company: (i) the financial strength of the retail industry and the level of
consumer spending for apparel and accessories, (ii) the company's ability to
develop, market and sell its products, (iii) increased competition from other
manufacturers and retailers of women's clothing and accessories, (iv) general
economic conditions and (v) the inability of the company to meet the financial
covenants under its credit facilities and indenture.

Item 7(a). QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.

         The company has exposure to fluctuations in foreign currency exchange
rates for the revenues derived from sales to its foreign customers denominated
in foreign currency. In order to reduce the effects of such fluctuations, under
established procedures and controls, the company enters into forward contracts.
These contractual arrangements are entered with a major financial institution.
The company does not hold derivative financial instruments for trading. At
October 29, 2000, the company did not have any outstanding forward contracts.

         The primary business objective of this hedging program is to secure the
anticipated profit on sales denominated in foreign currencies. Forward contracts
are usually entered into at the time the company prices its products. The
company's primary exposure to foreign exchange fluctuation is on the Euro and
the British pound. At October 31, 1999, the company had contracts maturing
through February 29, 2000 to sell 2.2 million Euros and 280,000 British pounds
at rates ranging from 1.05 to 1.06 U.S. dollars to the Euro and 1.57 to 1.67
U.S. dollars to the British pound. The company also held a contract which
matured on November 30, 1999 to sell 700,000 deutsche marks at a rate of 1.66
deutsche marks to the U.S. dollar.

         The company is exposed to market risks related to fluctuations in
interest rates on its variable rate debt which consists of bank borrowings
related to the mergers. The company also holds fixed rate subordinated notes.
The company has entered into an interest rate collar agreement with a major
financial institution to limit its exposure on the variable rate debt. The
agreement became effective on October 4, 1999 and will expire on July 7, 2002.
The agreement sets a cap rate for libor contracts at 8.5%. The agreement also
sets a minimum rate of 5.37%. The agreement covers $40 million of the company's
variable rate debt.

         For fixed rate debt, changes in interest rates generally affect the
fair market value, but not earnings or cash flows. Conversely, for variable rate
debt, changes in interest rates generally do not influence fair market value,
but do affect future earnings and cash flows. The company has managed its
exposure to changes in interest rates by issuing part of its debt with a fixed
interest rate. Holding the variable rate debt balance constant, each one
percentage point increase in interest rates occurring on the first day of the
year would result in an increase in interest expense for the coming year of
approximately $1.7 million.

                                       22
<PAGE>

          The table below details the principal amounts and the average nominal
interest rates for the debt in each category based on the expected maturity
dates and applicable amortization schedules. The carrying value of the variable
rate debt approximates fair value as the interest rate is adjusted to market
periodically. The subordinated debt is publicly traded and the fair value is
based upon the quoted market value at October 29, 2000.

<TABLE>
<CAPTION>
                                     2001       2002       2003       2004       2005     Thereafter    Total      Fair Value
                                     ----       ----       ----       ----       ----     ----------    -----      ----------
                                                                        (Amount in thousands)

<S>                                <C>        <C>        <C>        <C>        <C>       <C>        <C>          <C>
Fixed rate subordinated notes      $   --     $   --     $    --    $    --    $    --   $100,000   $ 100,000    $   92,500
   Average interest rate                                                                     12.5%       12.5%           --

Variable rate debt                 $5,327     $9,759     $13,078    $23,737    $25,343   $ 89,756   $ 167,000    $  167,000
   Average interest rate              9.4%       9.4%        9.4%       9.4%       9.4%       9.4%        9.4%           --

Variable rate notes payable        $  253      $  24     $    24    $    24    $    24   $  1,275   $   1,624    $    1,624
   Average interest rate              2.4%       8.4%        8.4%       8.4%       8.4%       8.4%        7.4%           --
</TABLE>

         The company does not believe that the future market rate risks related
to the above securities will have a material impact on the company or the
results of its operations

Item 8.  FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

         See "Index to Consolidated Financial Statements" for a listing of the
consolidated financial statements and supplementary data filed with this report.

Item 9.  CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
         FINANCIAL DISCLOSURE

         Not applicable.

                                       23
<PAGE>

                                   PART III

Item 10.  DIRECTORS AND EXECUTIVE OFFICERS OF ST. JOHN KNITS INTERNATIONAL

          The following sets forth certain information concerning the directors
and executive officers of SJKI:

<TABLE>
<CAPTION>
              Name                             Position with St. John Knits International            Age
              ----                             ------------------------------------------            ---
<S>                         <C>                                                                      <C>
Bob Gray                    Chairman of the Board and Chief Executive Officer                          75
Hugh Mullins                Chief Executive Officer (effective February 1, 2001)                       49
Kelly Gray                  Director and President                                                     34
Marie Gray                  Chief Designer and Secretary                                               63
Bruce Fetter                Executive Vice President and Chief Operating Officer                       45
Roger Ruppert               Senior Vice President-Finance and Chief Financial Officer                  57
James Kelley                Director and Assistant Secretary                                           46
Daniel O'Connell            Director                                                                   46
Sander Levy                 Director                                                                   39
</TABLE>

Biographical Information

          Bob Gray, a co-founder of St. John, has served as Chairman of the
Board and Chief Executive Officer of the company since its inception in 1962.
Mr. Gray will relinquish his position as CEO on February 1, 2001, when Hugh
Mullins begins his employment with the company, but will continue as Chairman.
Prior to forming St. John, Mr. Gray held various sales and production positions
with Cannady Creations, a small sportswear company, from 1952 to 1962, his last
position being General Manager. He graduated from the University of Southern
California with a B.A. degree in political science and psychology. Mr. Gray is
the husband of Marie Gray and the father of Kelly Gray.

          Hugh Mullins will become Chief Executive Officer of the company when
he begins his employment with the company on February 1, 2001. From February
2000 to December 2000 he served as Chairman and Chief Executive Officer of
Neiman Marcus Stores. From December 1998 to February 2000 he served as Executive
Vice President of Neiman Marcus Stores. He held various other positions with
Neiman Marcus Stores from 1991 to December 1998. Prior to that he held various
store posts at Macy's San Francisco and Foley's in Houston. He graduated with a
B.S. degree in education from Concord College.

          Kelly Gray, a director of the company since October 1994, became
President of the company in April 1996. She served as Creative Director of the
company from June 1991 and Executive Vice President-Creative Director from
December 1995 until April 1996. Ms. Gray also heads the company's retail
boutique division and has design responsibilities for the St. John product line
and the Griffith & Gray line. In addition, she has been the company's Signature
Model since 1982. Prior to becoming Creative Director, Ms. Gray headed the
company's advertising department from 1988 to June 1991. Prior to heading the
advertising department of the company, Ms. Gray held various other
administrative positions with the company. Ms. Gray is the daughter of Bob Gray
and Marie Gray.

          Marie Gray, a co-founder of the company, has served as Chief Designer
of the company since its inception in 1962 and as Secretary of the company since
March 1993. Prior to forming the company, Ms. Gray was a fashion model, served
as hostess of the Queen For a Day television show and was a fit model for some
of the leading designers in the Los Angeles area. Ms. Gray is the wife of Bob
Gray and the mother of Kelly Gray.

         Bruce Fetter was appointed Executive Vice President and Chief Operating
Officer of the company in June 1999. He served as Senior Vice President and
Chief Operating Officer of the company since November 1997. He joined the
company in January 1997 as Vice President-Distribution and in April was
appointed Senior Vice President-Operations. From August 1994 to December 1996 he
held the position of Vice President-Logistics for Bob's Stores, a division of
the Melville Corporation. He graduated with a B.S. degree from the University of
Southern California in 1976, majoring in business.

         Roger Ruppert has served as Senior Vice President-Finance and Chief
Financial Officer of the company since October 1986. Prior to joining the
company, Mr. Ruppert was Vice President-Finance and Chief Financial Officer of
Cardis Corporation, a publicly traded auto parts distributor, from October 1985
to October 1986. He graduated with a B.S. degree in engineering from the U.S.
Naval Academy and also received an M.B.A. from the University of California, Los
Angeles. Mr. Ruppert is a certified public accountant.

                                       24
<PAGE>

          James Kelley, a director of the company since July 1999, is a Managing
Director of Vestar Capital and was a founding partner of Vestar Capital at its
inception in 1988. Mr. Kelley is a director of Consolidated Container Holdings,
LLC and Westinghouse Air Brake Technologies Corporation. Mr. Kelley received a
B.S. degree from the University of Northern Colorado, a J.D. degree from the
University of Notre Dame and an M.B.A. degree from Yale University.

          Daniel O'Connell, a director of the company since July 1999, is the
Chief Executive Officer and founder of Vestar Capital. Mr. O'Connell is a
director of Advanced Organics, Inc., Aearo Corporation, Cluett American Corp.,
Remington Products Company L.L.C., Russell-Stanley Holdings, Inc., Siegel gale
Holdings, Inc. and Sunrise Medical Inc. Mr. O'Connell received an A.B. degree
from Brown University and an M.B.A. degree from Yale University.

          Sander Levy, a director of the company since July 1999, is a Managing
Director of Vestar Capital and was a founding partner of Vestar Capital at its
inception in 1988. Mr. Levy is a director of Cluett American Corp. and Gleason
Corporation. Mr. Levy received a B.S. degree from The Wharton School of the
University of Pennsylvania and an M.B.A. degree from Columbia University.

Director Compensation

          Directors of SJKI do not receive compensation, except as officers or
employees of the company.

                                       25
<PAGE>

Item 11.  EXECUTIVE COMPENSATION

Summary Compensation Table

          The following table sets forth the compensation for services in all
capacities to SJKI and its subsidiaries of the following persons: (i) the chief
executive officer of the company during fiscal year 2000 and (ii) the other four
most highly compensated executive officers (the "Named Executive Officers"):

<TABLE>
<CAPTION>
                                                                                          Long Term
                                                   Annual Compensation/(1)/              Compensation
                                                   ------------------------              ------------
                                                                                             Awards
                                                                                             ------
                                                                                       Shares of Common
                                                                                       Stock underlying       All Other
                                                 Year       Salary/(2)/        Bonus       Options           Compensation
                                                 ----       -----------        -----       -------           ------------
<S>                                             <C>       <C>                  <C>       <C>                  <C>
Bob Gray                                        2000      $ 1,584,419          $  --     $     --             $        --
  Chairman and Chief Executive Officer          1999        1,615,663/(3)/        --       109,104              6,880,000/(5)/
                                                1998        1,617,132/(3)/        --            --                  1,383

Marie Gray                                      2000          525,710             --            --                     --
  Chief Designer and Secretary                  1999          551,311             --       109,104              1,720,000/(5)/
                                                1998          525,985             --            --                  1,383

Kelly Gray                                      2000          879,458/(4)/        --            --                     --
  President                                     1999          677,406/(4)/        --       145,472              1,290,000/(5)/
                                                1998          663,432/(4)/        --            --                  1,383

Bruce Fetter                                    2000          379,331             --            --                     --
  Chief Operating Officer                       1999          327,007             --        16,667                402,500/(5)/
                                                1998          258,130             --            --                  1,383

Roger Ruppert                                   2000          313,942             --            --                     --
  Chief Financial Officer                       1999          278,426             --         8,333                545,000/(5)/
                                                1998          231,997             --            --                  1,383
</TABLE>

_____________

(1)  The company has concluded that the aggregate amount of perquisites and
     other personal benefits, securities or property paid to each of the listed
     officers for each of the fiscal years 2000, 1999 and 1998 did not exceed
     the lesser of 10% of such officer's total annual salary and bonus for such
     year or $50,000. Therefore, any such amounts are not included in the table.

(2)  The amounts shown in this column include amounts and awards accrued during
     each of fiscal years 2000, 1999 and 1998 that were earned but not paid in
     such fiscal year.

(3)  This amount includes $ 327,000 of salary which was earned but initially
     deferred in fiscal 1999 and $500,000 of annual salary that was earned but
     deferred in fiscal year 1998, pursuant to the Employment Agreement, as
     amended, dated June 1, 1995 by and between the company and Mr. Gray. During
     fiscal 1999, in connection with the mergers, all such deferred compensation
     was paid to Mr. Gray.

(4)  This amount includes modeling fees of $400,000 which were paid to Ms. Gray
     during fiscal 2000 and $250,000 which were paid to Ms. Gray during each of
     fiscal years 1999 and 1998.

(5)  This amount was paid to settle outstanding stock options in connection with
     the mergers. Each outstanding option was cancelled and replaced with the
     right to receive a cash payment equal to the excess of $30 over the
     exercise price per share of the stock subject to such option.

                                       26
<PAGE>

Employment Agreements

          Bob Gray's employment agreement with the company provides for his
employment as Chairman of the Board and Chief Executive Officer until May 31,
2001. The agreement provides for the payment of a base salary of $1,475,000 and
that he devote substantially all his full business time and attention and best
efforts to the affairs of the company during the term of the agreement.

     The company also has employment agreements with Marie Gray, Kelly Gray and
Bruce Fetter. The employment agreements with Marie and Kelly Gray expire on
December 31, 2004. The agreement with Bruce Fetter expires on December 31, 2001.
The agreements provide for the payment of a base salary at the rate of $500,000
for Marie Gray, $500,000 for Kelly Gray and $425,000 for Bruce Fetter. In
addition, under Kelly Gray's employment agreement, the company will compensate
Ms. Gray $400,000 each year for her position as the Signature Model of the
company.

          In the event of termination of employment by the company with "cause",
or by the executive without "good reason, the employment agreements provide that
such executive will only receive salary and health benefits through the date of
termination. In the event of termination of employment by the company without
cause, or by the executive with good reason, Bob Gray would receive a lump sum
payment equal to all salary payments which would have been paid through the full
term of the agreement, plus health benefits for 18 months. Marie Gray and Kelly
Gray would receive continued salary payments for one year and health benefits
for the longer of the remainder of the term of the agreement or six months.
Bruce Fetter would receive continued salary payments and health benefits for the
longer of the remainder of the term of the agreement or six months. Each
employment agreement provides that the company shall pay severance benefits in
the form of salary and health benefits continuation for a period equal to one
month for each year of service, up to a maximum of 18 months, if the executive's
employment is terminated by reason of a disability. In cases where the
employee's employment is terminated by reason of the employee's death, the
company generally will provide certain health insurance benefits to the
employee's immediate family for a period of six months.

          Under Bob, Marie and Kelly Grays' employment agreements, each would
also receive a lump sum payment of $2,950,000, $1,000,000 and $1,000,000,
respectively, if they terminated their employment agreement for good reason due
to the fact that (i) a successor company's employment agreements did not assume
their employment agreements or (ii) a change of control occurred. Under Bruce
Fetter's employment agreement, in the event of a change of control wherein he is
terminated by the company without cause or he terminates his employment for good
reason within 12 months after such change in control, he would receive salary
and health benefits continuation for a period of 12 months. If Bruce Fetter's
agreement expires without being renewed for another year, he will receive
continued salary payments and health benefits for six months.

Retirement Plan

          The company maintains the Employees' Profit Sharing Plan, as amended
(the "Retirement Plan"), a qualified profit-sharing plan for the benefit of all
eligible employees. The Retirement Plan contemplates the sharing of profits and
is funded annually by cash contributions at the discretion of the board of
directors. The Retirement Plan was funded in each of fiscal years 2000, 1999 and
1998 with contributions of $500,000.

Stock Option Plan

          In connection with the mergers, in order to provide financial
incentives for certain of its employees, SJKI adopted a stock option plan, which
provides for the grant of options to purchase shares of SJKI common stock.

          SJKI granted Bob Gray, Marie Gray and Kelly Gray, as incentive
compensation, employee stock options to acquire SJKI common stock representing
approximately 5% of the total shares of SJKI common stock outstanding on a fully
diluted basis. The exercise price of the options is $30.00 per share. The
options vest and become exercisable in specified circumstances, including upon
the continued employment of the Grays for a specified period of time and the
achievement of specified performance criteria, and have up to a 10-year term.
Any unvested options expire following specified terminations of the applicable
individual's employment with SJKI. In addition, if the applicable performance
criteria are not met, the options will not become exercisable and will terminate
without payment therefor.

          In addition, some members of management other than the Grays received,
as incentive compensation, employee stock options to acquire shares of SJKI
common stock. The exercise price reflects the fair market value of the
underlying shares, as determined by the board of directors of SJKI in its best
judgment. The options vest and become exercisable upon the continued employment
of the applicable individual with SJKI for a specified period of time and have
up to a 10-year term. Any unvested options expire following specified
terminations of the applicable individual's employment with SJKI. In addition,
upon the occurrence of a change in control transaction, these options may become
fully vested and exercisable. The board of directors of SJKI determines which
members of management will receive these options.

                                       27
<PAGE>

          The shares of SJKI common stock underlying the options that these
members of management received as incentive compensation will, along with any
future grants, in the aggregate, represent approximately 5% of the outstanding
common stock of SJKI on a fully diluted basis.

Option Grants in Last Fiscal Year

          No options were granted to the Named Executive Officers during the
fiscal year ended October 29, 2000.

Aggregated Option Exercises in Last Fiscal Year and Fiscal Year-End Option
Values

          The following table sets forth information with respect to the Named
Executive Officers concerning the exercise of options during the fiscal year
ended October 29, 2000 and unexercised options held by each such officer as of
October 29, 2000:

<TABLE>
<CAPTION>
                                                                           Number of Securities
                                                                          Underlying Unexercised        Value of Unexercised
                                                  Shares                        Options at            In-the-Money Options at
                                               Acquired on    Value          Fiscal Year-End             Fiscal Year-End/(1)/
                                                                      ----------------------------------------------------------
Name                                             Exercise   Realized    Exercisable   Unexercisable  Exercisable   Unexercisable
----                                             --------   ---------   -----------   -------------  ------------  -------------
<S>                                              <C>        <C>         <C>           <C>             <C>          <C>
Bob Gray                                           --          --           --          109,104           --            --
Marie Gray....................................     --          --           --          109,104           --            --
Kelly Gray....................................     --          --           --          145,472           --            --
Bruce Fetter..................................     --          --           3,333        13,334           --            --
Roger Ruppert.................................     --          --           1,666         6,667           --            --
</TABLE>

(1)  All stock options currently held by the Named Executive Officers have an
     exercise price of $30. The current fair market value of the stock does not
     exceed the exercise price and therefore there is no current value to the
     unexercised options.

Compensation Committee Interlocks and Insider Participation

          The company does not have a compensation committee. Issues regarding
executive's compensation are address by the full board of directors. Bob and
Kelly Gray participated in deliberations regarding executive compensation during
fiscal 2000.

                                       28
<PAGE>

Item 12. SECURY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

         The following table sets forth information as of January 25, 2001
regarding the beneficial ownership of SJKI's common stock by: (i) each person
who is known by SJKI to be the beneficial owner of more than 5% of the common
stock; (ii) each of the directors of SJKI; (iii) each executive officer listed
in the Summary Compensation Table above; and (iv) all current directors and
executive officers of SJKI as a group.

<TABLE>
<CAPTION>
                                                                                            Approximate
                                                                                          Number of Shares
                                                                                            Beneficially
     Name                                                                                      Owned         Percentage Owned
     ----                                                                                      -----         ----------------
<S>                                                                                            <C>           <C>
     Vestar/Gray Investors LLC(1)                                                              6,090,205         93.03%
          1225 17th Street, Suite 1660
          Denver, Colorado 80202
     Bob Gray/(2)/                                                                               611,412          9.34%
     Marie Gray/(2)/                                                                             611,412          9.34%
     Kelly Gray                                                                                  357,571          5.46%
     Bruce Fetter/(3)/                                                                             5,083            *
     Roger Ruppert/(4)/                                                                            2,666            *
     Daniel O'Connell/(5)/                                                                     5,121,222         78.23%
     James Kelley/(5)/                                                                         5,121,222         78.23%
     Sander Levy/(5)/                                                                          5,121,222         78.23%
     All current directors and executive officers as a group (eight persons)/(6)/              6,097,954         93.08%
</TABLE>
-----------

*    less than 1%

(1)  Vestar Capital Partners III, L.P., 245 Park Avenue, New York, New York
     10167, beneficially owns 5,121,222 shares, or approximately 78.23%, of
     SJKI's common stock through its controlling interest in Vestar/SJK
     Investors LLC, which owns approximately 84% of Vestar/Gray Investors.

(2)  Includes 556,772 shares which are beneficially owned (through Vestar/Gray
     Investors) by the Gray Family Trust, of which Bob and Marie Gray serve as
     co-trustees and are the sole beneficiaries. In addition, includes 54,640
     shares which are beneficially owned (through Vestar/Gray Investors) by the
     Kelly Ann Gray Trust, of which Robert and Marie Gray serve as co-trustees
     and of which Kelly Gray is the sole beneficiary.

(3)  Includes 3,333 shares issuable upon exercise of options exercisable at or
     within 60 days of January 25, 2001.

(4)  Includes 1,666 shares issuable upon exercise of options exercisable at or
     within 60 days of January 25, 2001.

(5)  Includes shares beneficially owned by Vestar. Each of Mr. O'Connell, Mr.
     Kelley and Mr. Levy disclaims the existence of a group and disclaims
     beneficial ownership of the common stock not held by him.

(6)  Includes 4,999 shares issuable upon exercise of options exercisable at or
     within 60 days of January 25, 2001.

                                       29
<PAGE>

Item 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

         The company leases a manufacturing facility in Irvine, California from
GM Properties, a partnership in which the Gray Family Trust, of which Bob and
Marie Gray serve as co-trustees and are the sole beneficiaries, has a 50%
general partnership interest. The lease is for a five-year term expiring on May
31, 2006, with the company having the option to extend the lease for another
five-year term at a lease amount to be agreed upon. The current base monthly
lease payment under this lease is approximately $64,000, with annual increases
of 4%. During fiscal years 2000, 1999 and 1998, the company paid GM Properties
approximately $756,000, $729,000 and $701,000, respectively, under this lease.

         The company leases its Alhambra, California manufacturing facility from
Alhambra Partners, a limited partnership in which the Gray Family Trust has a
65% general partnership interest. The lease is for a five-year term expiring on
August 31, 2006, with the company having the option to extend the lease for a
five-year term at a lease amount to be agreed upon. The current base monthly
lease payment under this lease is approximately $25,000, with annual increases
of 4%. During fiscal years 2000, 1999 and 1998, the company paid Alhambra
Partners approximately $295,000, $285,000 and $274,000, respectively, under this
lease.

         The company periodically rents certain personal property from Ocean Air
Charters, Inc. ("Ocean"), in which Bob Gray and Marie Gray are the sole
shareholders. During fiscal years 2000, 1999 and 1998, the company paid
approximately $3,000, $8,000 and $21,000, respectively, with respect to such
property. In addition, St. John and Ocean each hold a 50% ownership interest in
a partnership ("Partnership") which owns an airplane. As of October 29, 2000,
each partner had a net capital investment in the Partnership of approximately
$2,035,000. During fiscal years 2000, 1999 and 1998, the Partnership leased the
airplane to the company and received lease payments totaling approximately
$953,000, $1,038,000 and $868,000, respectively. As of April 1, 1999, St. John
and the Partnership entered into a lease agreement for the airplane expiring
March 31, 2001, at a lease rate of $93,000 per month.

         Each of the arrangements between the company and entities controlled by
the Gray family is, in the opinion of management, on terms no less favorable to
the company than those that were available from persons not affiliated with the
company.

Certain Agreements Relating to the Mergers

         Vestar Capital, SJKI and St. John have entered into a management
agreement. Pursuant to the management agreement, SJKI and St. John paid to
Vestar Capital a transaction fee of $4.0 million at closing and reimbursed
Vestar Capital for all out-of-pocket expenses incurred in connection with the
mergers. In addition, under the agreement, Vestar Capital will provide
management services, including advisory and consulting services, in relation to
the selection, supervision and retention of independent auditors, outside legal
counsel, investment bankers or other financial advisors or consultants. For
these services, the management agreement provides that SJKI and St. John will
pay Vestar Capital an annual fee of $500,000 and will reimburse Vestar Capital
for all out-of-pocket expenses. The management agreement will terminate if
Vestar Capital and its partners and their respective affiliates, through
Vestar/Gray Investors or otherwise, hold, in the aggregate, less than 50% of the
SJKI stock beneficially owned by Vestar immediately following the closing of the
transactions and cease to control a majority of SJKI's board of directors.

         SJKI is approximately 93% owned by Vestar/Gray Investors. Vestar
beneficially owns approximately 84%, and the Grays beneficially own
approximately 16%, of Vestar/Gray Investors. The Vestar/Gray Investors limited
liability company agreement provides, among other things, that Vestar may
appoint three of SJKI's five directors and the Grays may appoint the remaining
two directors. The right of Vestar and the Grays to appoint directors will be
subject to reduction to the extent the amount of SJKI stock allocated to either
is reduced.

         SJKI has entered into a stockholders' agreement with Vestar/Gray
Investors, Vestar and the Grays, which states, among other things, that (i)
prior to a public offering of SJKI common stock, if Bob Gray ceases to serve as
Chairman or Chief Executive Officer of St. John or SJKI or if the employment
with SJKI of Marie Gray or Kelly Gray ceases for any reason, then he or she will
have the right to require SJKI, or, under some circumstances, St. John, to
purchase the shares of SJKI common stock beneficially owned by such employee, up
to a maximum of $5.0 million worth of such common stock for all Gray employees
during any 12-month period; and (ii) prior to a public offering of SJKI common
stock, if any of the Grays is terminated without "cause" or resigns for "good
reason," as these terms are defined in their current respective employment
agreements with the company, then he or she will have the right to require SJKI,
or, under some circumstances, St. John, to purchase shares of SJKI common stock
beneficially owned by such employee, up to a maximum of 25% of the common stock
beneficially owned by all such terminated or resigning Gray employees during any
12-month period.

                                       30
<PAGE>

         The stockholders' agreement also provides that each of the Grays, so
long as he or she is employed by the company and for a period of five years
after he or she ceases to be so employed, will not, directly or indirectly,
engage in the design, manufacturing, production, marketing, sale or distribution
of women's clothing or accessories anywhere in the world in which the company is
doing business, other than through his or her employment with the company. The
agreement also provides that if Kelly Gray is terminated without "cause" or
resigns for "good reason," as defined under her current employment agreement,
the term of the non-compete period will be reduced to three years, and, subject
to restrictions, she will be permitted to engage in certain otherwise
competitive activities.

         All outstanding shares of preferred stock of SJKI are currently held by
Vestar/SJK Investors LLC, Kelly Gray and The Gray Family Trust. The holders of
the preferred stock will be entitled to up to five demand registration rights at
the expense of SJKI.

                                       31
<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. Consolidated Financial Statements--See "Index to Consolidated
         Financial Statements"
         2. Consolidated Financial Statement Schedule--See "Index to
         Consolidated Financial Statements"
         3. Exhibits--See "Exhibit Index"

     (b) Reports on Form 8-K

            None

                                       32
<PAGE>

                  ST. JOHN KNITS INTERNATIONAL, INCORPORATED

                  INDEX TO CONSOLIDATED FINANCIAL STATEMENTS

<TABLE>
<CAPTION>
                                                                                                                       Page
                                                                                                                       ----
<S>                                                                                                                    <C>
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS............................................................................    34

CONSOLIDATED FINANCIAL STATEMENTS
     Consolidated Balance Sheets at October 29, 2000 and  October 31, 1999..........................................    35
     Consolidated Statements of Income for the years ended October 29, 2000, October 31, 1999 and  November 1,
        1998 .......................................................................................................    36
     Consolidated Statements of Stockholders' Equity (Deficit) for the years ended October 29, 2000, October 31,
        1999 and November 1, 1998 ..................................................................................    37
     Consolidated Statements of Cash Flows for the years ended October 29, 2000, October 31, 1999 and  November 1,
        1998........................................................................................................    38
     Notes to Consolidated Financial Statements.....................................................................    40

CONSOLIDATED FINANCIAL STATEMENT SCHEDULE
     Schedule II--Valuation and Qualifying Account...................................................................   63
</TABLE>

                                       33
<PAGE>

REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS

To St. John Knits International, Incorporated:

We have audited the accompanying balance sheets of ST. JOHN KNITS INTERNATIONAL,
INCORPORATED (a Delaware corporation) as of October 29, 2000 and October 31,
1999--as restated (see note 10), and the related consolidated statements of
income, shareholders' equity (deficit) and cash flows for each of the three
years in the period ended October 29, 2000. These financial statements are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these financial statements based on our audits.

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

In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of St. John Knits International,
Incorporated and subsidiaries as of October 29, 2000 and October 31, 1999, and
the results of its operations and its cash flows for each of the three years in
the period ended October 29, 2000 in conformity with accounting principles
generally accepted in the United States.

Our audit was made for the purpose of forming an opinion on the basic financial
statements taken as a whole. The schedule listed in the index to consolidated
financial statements is presented for purposes of complying with the Securities
and Exchange Commission's rules and are not part of the basic financial
statements. This schedule has been subjected to the auditing procedures applied
in the audit of the basic financial statements and, in our opinion, fairly state
in all material respects the financial data required to be set forth therein in
relation to the basic financial statements taken as a whole.

ARTHUR ANDERSEN LLP

Orange County, California
December 20, 2000

                                       34
<PAGE>

                  ST. JOHN KNITS INTERNATIONAL, INCORPORATED

                          CONSOLIDATED BALANCE SHEETS

<TABLE>
<CAPTION>
                                       ASSETS                                                 October 29,        October 31,
                                       ------                                                    2000               1999
                                                                                             -------------      -------------
<S>                                                                                          <C>                <C>
Current assets:
     Cash and cash equivalents............................................................   $  25,130,928      $  32,443,815
     Investments..........................................................................          17,373             25,412
     Accounts receivable, net.............................................................      31,219,148         33,562,573
     Inventories..........................................................................      49,166,611         43,521,734
     Deferred income tax benefit..........................................................      12,196,359          7,678,272
     Other................................................................................       3,386,916          2,634,127
                                                                                             -------------      -------------
         Total current assets.............................................................     121,117,335        119,865,933
                                                                                             -------------      -------------
Property and equipment:
     Machinery and equipment..............................................................      61,197,026         51,242,600
     Leasehold improvements...............................................................      36,863,431         32,856,047
     Buildings............................................................................      23,513,166         17,913,064
     Furniture and fixtures...............................................................       8,286,382          6,868,556
     Land.................................................................................       7,449,577          5,786,857
     Construction in progress.............................................................       5,678,064          4,132,267
                                                                                             -------------      -------------
                                                                                               142,987,646        118,799,391
     Less--Accumulated depreciation and amortization......................................      59,958,231         49,211,044
                                                                                             -------------      -------------
                                                                                                83,029,415         69,588,347
                                                                                             -------------      -------------
Deferred financing costs..................................................................      12,261,364         14,585,755
Other assets..............................................................................       4,135,066          2,770,219
                                                                                             -------------      -------------
                                                                                             $ 220,543,180      $ 206,810,254
                                                                                             =============      =============

                           LIABILITIES AND STOCKHOLDERS' DEFICIT
                           -------------------------------------

Current liabilities:
     Accounts payable.....................................................................   $  13,351,361      $   6,805,079
     Current portion of long-term debt....................................................       5,577,398          2,564,352
     Accrued expenses.....................................................................      14,125,099         11,275,809
     Accrued interest expense.............................................................       8,254,994          7,661,434
     Dividends payable....................................................................       5,429,572          1,228,472
     Income taxes payable.................................................................       4,558,120          1,190,888
                                                                                             -------------      -------------
         Total current liabilities........................................................      51,296,544         30,726,034
Long-term debt, net of current portion....................................................     261,846,745        287,321,021
                                                                                             -------------      -------------
         Total liabilities................................................................     313,143,289        318,047,055
                                                                                             -------------      -------------
Minority interest.........................................................................              --            693,391
                                                                                             -------------      -------------
Mandatorily redeemable preferred stock, $100 stated value:  Authorized--2,000,000
        shares, issued and outstanding--250,000 shares....................................      25,000,000         25,000,000
                                                                                             -------------      -------------

Redeemable common stock--as restated, par value $0.01, issued and outstanding--968,983
        shares............................................................................      29,069,490         29,069,490
                                                                                             -------------      -------------

Stockholders' deficit:
     Common stock, par value $0.01 per share : Authorized--10,000,000 shares, issued and
        outstanding--5,577,191 shares.....................................................          55,772             55,772
     Unrealized loss on securities........................................................         (36,665)           (28,261)
     Cumulative translation adjustment....................................................         152,776            406,823
     Additional paid-in capital...........................................................     118,081,394        118,081,394
     Accumulated deficit..................................................................    (264,922,876)      (284,515,410)
                                                                                             -------------      -------------
       Total stockholders' deficit........................................................    (146,669,599)      (165,999,682)
                                                                                             -------------      -------------
                                                                                             $ 220,543,180      $ 206,810,254
                                                                                             =============      =============
</TABLE>


                             See accompanying notes.

                                       35
<PAGE>

                  ST. JOHN KNITS INTERNATIONAL, INCORPORATED

                       CONSOLIDATED STATEMENTS OF INCOME

<TABLE>
<CAPTION>
                                                                                             For the years ended
                                                                            -----------------------------------------------------
                                                                              October 29,        October 31,       November 1,
                                                                                  2000               1999              1998
                                                                            ----------------  -----------------  ----------------
<S>                                                                         <C>               <C>                <C>
Net sales.................................................................    $336,458,871       $294,171,410      $277,900,181

Cost of sales.............................................................     141,096,934        130,130,588       120,882,597
                                                                             -------------      -------------     -------------

Gross profit..............................................................     195,361,937        164,040,822       157,017,584

Selling, general and administrative expenses..............................     123,251,422        114,884,303       102,965,084

Transaction fees and expenses.............................................              --         15,122,809                --
                                                                             -------------      -------------     -------------
Operating income..........................................................      72,110,515         34,033,710        54,052,500

Interest expense..........................................................      31,786,855         10,224,486                --

Other income..............................................................       1,000,246          1,196,654         1,369,022
                                                                             -------------      -------------     -------------
Income before income taxes................................................      41,323,906         25,005,878        55,421,522

Income taxes..............................................................      17,510,814         10,316,811        22,000,904
                                                                             -------------      -------------     -------------
Net income................................................................      23,813,092         14,689,067        33,420,618
                                                                             -------------      -------------     -------------

Comprehensive income, net of tax:

   Foreign currency translation adjustments...............................        (146,395)           123,649           127,794

   Unrealized loss on securities..........................................          (4,843)              (447)          (16,227)
                                                                             -------------      -------------     -------------
Comprehensive income......................................................    $ 23,661,854       $ 14,812,269      $ 33,532,185
                                                                             =============      =============     =============
Net income per common share:

   Basic..................................................................    $       3.00       $       1.01      $       2.00
                                                                             =============      =============     =============
   Diluted................................................................    $       3.00       $       0.98      $       1.94
                                                                             =============      =============     =============
Dividends per share.......................................................    $         --       $      0.075      $       0.10
                                                                             =============      =============     =============
Shares used in the calculation of net income per share:

   Basic..................................................................       6,546,174         13,389,747        16,693,955
                                                                             =============      =============     =============
   Diluted................................................................       6,546,174         13,668,638        17,234,630
                                                                             =============      =============     =============
</TABLE>


                            See accompanying notes.

                                       36
<PAGE>

                  ST. JOHN KNITS INTERNATIONAL, INCORPORATED

           CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY (DEFICIT)

<TABLE>
<CAPTION>
                                        Common Stock
                                    ---------------------
                                      Number                Additional   Cumulative   Unrealized
                                        of                   Paid-In     Translation   Loss on         Retained
                                      Shares      Amount     Capital     Adjustment   Securities  Earnings (Deficit)      Total
                                      ------      ------     --------    -----------  ----------  ------------------      -----
<S>                                <C>           <C>       <C>           <C>          <C>         <C>                 <C>
Balance November 2, 1997.........   16,634,548   $502,799  $ 18,929,541    $(19,351)    $     --    $ 111,267,104     $ 130,680,093
     Dividends declared
        ($.10 per share).........           --         --            --          --           --       (1,668,608)       (1,668,608)
     Shares issued upon
        exercise of options
        including tax benefit....      109,336         --     1,832,969          --           --               --         1,832,969
     Shares repurchased..........     (164,400)        --    (2,879,838)         --           --               --        (2,879,838)
     Unrealized loss on
        securities...............           --         --            --          --      (27,504)              --           (27,504)
     Foreign currency
        translation
        adjustment...............           --         --            --     216,600           --               --           216,600
     Net income..................           --         --            --          --           --       33,420,618        33,420,618
                                   -----------   --------  ------------    --------     --------    -------------     -------------
Balance November 1, 1998.........   16,579,484    502,799    17,882,672     197,249      (27,504)     143,019,114       161,574,330
     Dividends declared
        ($.075 per share)........           --         --            --          --           --       (1,244,545)       (1,244,545)
     Dividends accrued for
        preferred stock..........           --         --            --          --           --       (1,228,472)       (1,228,472)
     Shares issued upon
        exercise of options
        including tax benefit....       39,329         --       796,510          --           --               --           796,510
     Unrealized loss on
        securities...............           --         --            --          --         (757)              --              (757)
     Foreign currency
        translation
        adjustment...............           --         --            --     209,574           --               --           209,574
     Recapitalization
        transaction..............  (10,072,639)  (437,337)  128,407,850          --           --     (439,750,574)     (311,780,061)
     Redeemable common stock.....     (968,983)    (9,690)  (29,059,800)         --           --               --       (29,069,490)
     Reimbursement of
        short-swing profit.......           --         --        54,162          --           --               --            54,162
     Net income..................           --         --            --          --           --       14,689,067        14,689,067
                                   -----------   --------  ------------    --------     --------    -------------     -------------
Balance October 31, 1999.........    5,577,191     55,772   118,081,394     406,823      (28,261)    (284,515,410)     (165,999,682)
     Dividends accrued for
        preferred stock..........           --         --            --          --           --       (4,201,100)       (4,201,100)
     Unrealized loss on
        securities...............           --         --            --          --       (8,404)              --            (8,404)
     Foreign currency
        translation
        adjustment...............           --         --            --    (254,047)          --               --          (254,047)
     Recapitalization
        transaction..............           --         --            --          --           --          (19,458)          (19,458)
     Net income..................           --         --            --          --           --       23,813,092        23,813,092
                                   -----------   --------  ------------    --------     --------    -------------     -------------
Balance October 29, 2000.........    5,577,191   $ 55,772  $118,081,394    $152,776     $(36,665)   $(264,922,876)    $(146,669,599)
                                   ===========   ========  ============    ========     ========    =============     =============
</TABLE>

                            See accompanying notes.

                                       37
<PAGE>

                  ST. JOHN KNITS INTERNATIONAL, INCORPORATED

                     CONSOLIDATED STATEMENTS OF CASH FLOWS

<TABLE>
<CAPTION>
                                                                                               For the years ended
                                                                              ----------------------------------------------------
                                                                                October 29,      October 31,         November 1,
                                                                                   2000              1999               1998
                                                                              ---------------    --------------    ---------------
<S>                                                                           <C>                <C>               <C>
Cash flows from operating activities:
   Net income..............................................................   $    23,813,092    $   14,689,067    $    33,420,618
   Adjustments to reconcile net income to net cash provided
      by operating activities:
       Depreciation and amortization.......................................        13,362,734        13,611,668         11,370,680
       Amortization of discount on 12.5% notes due 2009....................           139,937            44,596                 --
       Amortization of deferred loan costs.................................         2,456,985           611,990                 --
       Net (increase) decrease in deferred income tax benefit..............        (4,518,087)           65,689         (1,950,000)
       Loss on disposal of property and equipment..........................           644,104         1,315,830            483,920
       Partnership losses..................................................           306,621           231,213            331,405
       Write-off of trademark in Japan.....................................                --           620,077                 --
       Minority interest in income of consolidated subsidiaries............            30,254            39,956             50,525
       Book value in excess of purchase price of minority interest in Japan
         subsidiary .......................................................          (495,188)               --                 --
       Decrease in accounts receivable.....................................         2,343,425         1,999,616          1,010,234
       (Increase) decrease in inventories..................................        (5,644,877)        4,226,552        (17,011,306)
       (Increase) decrease in other current assets.........................          (752,789)         (256,775)           214,390
       (Increase) decrease in other assets.................................            10,848          (472,032)          (488,410)
       Increase (decrease) in accounts payable.............................         6,546,282        (1,498,795)        (1,730,522)
       Increase in accrued expenses........................................         2,849,290           174,015          1,240,704
       Increase in accrued interest expense................................           593,560         7,661,434                 --
       Increase (decrease) in income taxes payable.........................         3,367,232         1,070,231         (1,960,585)
                                                                              ---------------    --------------    ---------------
           Net cash provided by operating activities.......................        45,053,423        44,134,332         24,981,653
                                                                              ---------------    --------------    ---------------
Cash flows from investing activities:
   Proceeds from sale of property and equipment............................            19,017           183,860             10,499
   Purchase of property and equipment......................................       (27,233,695)      (14,530,943)       (23,648,032)
   Purchase of minority interest in Japan subsidiary.......................          (228,457)               --                 --
   Purchase of foreign trademark...........................................           (70,000)               --                 --
   Sale of short-term investments..........................................             8,039         1,150,015          1,176,338
   Capital contributions to partnership....................................        (2,013,072)               --                 --
   Capital distributions from partnership..................................           167,528           127,341             84,496
                                                                              ---------------    --------------    ---------------
           Net cash used in investing activities...........................       (29,350,640)      (13,069,727)       (22,376,699)
                                                                              ---------------    --------------    ---------------
Cash flows from financing activities:
   Proceeds from credit agreement..........................................                --       190,000,000                 --
   Proceeds from issuance of subordinated notes............................                --        98,616,000                 --
   Addition to long-term debt..............................................                --         1,427,000            407,599
   Principal payments of long-term debt....................................       (22,601,167)         (837,800)                --
   Recapitalization transaction............................................           (19,458)     (311,780,061)                --
   Issuance of common stock................................................                --           796,510          1,832,969
   Issuance of preferred stock.............................................                --        25,000,000                 --
   Financing fees and expenses.............................................          (132,594)      (15,197,745)                --
   Cash dividends paid.....................................................                --        (1,244,545)        (2,084,472)
   Short-swing profit reimbursement........................................                --            54,162                 --
   Payment for the repurchase of common stock..............................                --                --         (2,879,838)
                                                                              ---------------    --------------    ---------------
           Net cash used in financing activities...........................       (22,753,219)      (13,166,479)        (2,723,742)
                                                                              ---------------    --------------    ---------------
</TABLE>

                                       38
<PAGE>

                  ST. JOHN KNITS INTERNATIONAL, INCORPORATED

                     CONSOLIDATED STATEMENTS OF CASH FLOWS

                                  (Continued)

<TABLE>
<CAPTION>
                                                                                                 For the years ended
                                                                               -----------------------------------------------------
                                                                                  October 29,      October 31,         November 1,
                                                                                     2000              1999               1998
                                                                               ----------------  ------------------  ---------------
<S>                                                                            <C>               <C>                 <C>
Effect of exchange rate changes..........................................          (254,047)          209,574             216,600
                                                                               ------------      ------------        ------------
Unrealized loss on securities............................................            (8,404)             (757)            (27,504)
                                                                               ------------      ------------        ------------
Net increase (decrease) in cash and cash equivalents.....................        (7,312,887)       18,106,943              70,308
Beginning balance, cash and cash equivalents.............................        32,443,815        14,336,872          14,266,564
                                                                               ------------      ------------        ------------
Ending balance, cash and cash equivalents................................      $ 25,130,928      $ 32,443,815        $ 14,336,872
                                                                               ============      ============        ============
Supplemental disclosures of cash flow information:
     Cash received during the year for interest income...................      $  1,348,567      $  1,239,507        $  1,154,834
                                                                               ============      ============        ============
     Cash paid during the year for:
         Interest expense................................................      $ 28,559,439      $  1,882,331        $         --
                                                                               ============      ============        ============
         Income taxes....................................................      $ 18,676,457      $ 10,554,471        $ 25,286,040
                                                                               ============      ============        ============

Supplemental disclosure of noncash financing activity:
     Dividends accrued on mandatorily redeemable preferred stock.........      $  4,201,100      $  1,228,472        $         --
                                                                               ============      ============        ============
</TABLE>


                            See accompanying notes.

                                       39
<PAGE>

                  ST. JOHN KNITS INTERNATIONAL, INCORPORATED

                  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

            October 29, 2000, October 31, 1999 and November 1, 1998

1.  Company Background and Basis of Presentation

         The consolidated financial statements include the accounts of St. John
Knits International, Incorporated ("SJKI"), a Delaware corporation, and its
subsidiaries, including St. John Knits, Inc. ("St. John"). SJKI and its
subsidiaries are collectively referred to herein as "the Company." All
interdivisional and intercompany transactions and accounts have been eliminated
in consolidation. The Company is a leading designer, manufacturer and marketer
of women's clothing and accessories. The Company's products are distributed
primarily through specialty retailers and the Company's own retail boutiques and
outlets.

         On February 2, 1999, St. John entered into a merger agreement to be
acquired by a group consisting of Vestar Capital Partners III, L.P. ("Vestar")
and Bob Gray, Marie Gray and Kelly Gray at an offer price of $30 per share.
Pursuant to the agreement, on July 7, 1999, the Company consummated two mergers.
As a result of the mergers, St. John became a wholly owned subsidiary of SJKI.
The mergers were accounted for as a recapitalization. The operating results for
all periods prior to the mergers consist entirely of the historical results of
St. John and its subsidiaries.

         During fiscal 1997, the Company formed St. John Company, Ltd. in Japan
to operate as a 51 percent owned subsidiary to distribute the Company's products
in Japan. During fiscal 1998, the Company increased its ownership percentage to
68 percent. During fiscal 2000, the Company increased its ownership to 100
percent. During fiscal 1997, the Company also formed Amen Wardy Home Stores,
LLC, a 51 percent owned limited liability company. During fiscal 1999 the
Company changed the name of this subsidiary to St. John Home Stores, LLC and now
owns 100 percent of this entity. St. John Home operates two home furnishing
stores and one outlet store. The operations of both entities are included in the
accompanying consolidated financial statements.

2.  Summary of Accounting Policies

    a. Definition of Fiscal Year

         The Company utilizes a 52-53 week fiscal year whereby the fiscal year
ends on the Sunday nearest to October 31. Accordingly, fiscal years 2000, 1999
and 1998 ended on October 29, October 31 and November 1, respectively. Fiscal
years 2000, 1999 and 1998 were comprised of 52 weeks.

   b. Use of Estimates

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

   c. Revenue Recognition

         Revenue on sales to specialty retailers is recognized when the goods
are shipped. The Company establishes liabilities for estimated returns,
allowances and wholesale markdowns at the time of shipment. The Company also
provides for estimated discounts when recording sales. Retail sales are
recognized at the point of sale. The Company establishes liabilities for
estimated returns at the retail stores. Accounts receivable are shown net of
allowances for discounts and uncollectible amounts of $2,255,000 and $1,468,000
in fiscal year 2000, and $2,270,000 and $1,205,000 in fiscal year 1999,
respectively.

                                       40
<PAGE>

                  ST. JOHN KNITS INTERNATIONAL, INCORPORATED

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

            October 29, 2000, October 31, 1999 and November 1, 1998

   d. Inventories

         Inventories are valued at the lower of cost (first-in, first-out) or
market.

         Inventories are comprised of the following:

<TABLE>
<CAPTION>
                                                                     2000             1999
                                                                     ----             ----
         <S>                                                     <C>               <C>
         Raw materials.......................................    $10,170,195       $11,940,108
         Work-in-process.....................................     12,175,945         6,847,155
         Finished products...................................     26,820,471        24,734,471
                                                                 -----------       -----------
                                                                 $49,166,611       $43,521,734
                                                                 ===========       ===========
</TABLE>

   e. Property and Equipment

         Property and equipment are stated at cost. The Company provides for
depreciation using the straight-line method to provide for the retirement of
property and equipment at the end of their estimated useful lives, which range
from three to thirty-nine years.

   f. Cash and Cash Equivalents

         For purposes of the statements of cash flows, cash and cash equivalents
include all liquid debt instruments purchased with a maturity of three months or
less.

   g. Foreign Exchange Transactions and Contracts

         The Company enters into foreign exchange contracts as a hedge against
exchange rate risk on the collection of certain accounts receivable denominated
in a foreign currency. The Company enters into contracts to sell foreign
currencies in the future only to protect the U.S. dollar value of certain
anticipated foreign currency transactions. The forward contracts are carried on
the balance sheet at their fair value with changes in their fair value initially
included as a separate component of stockholders' equity until the anticipated
transaction occurs. Such gains and losses then offset the related gains and
losses reported on the underlying transaction (Note 4).

   h. Income Taxes

         The Company utilizes the liability method of accounting for income
taxes required by Statement of Financial Accounting Standards ("SFAS") No. 109
"Accounting for Income Taxes."


   i. Earnings per Share

         The Company adopted SFAS No. 128 "Earnings Per Share" during fiscal
1998. Under this statement, primary earnings per share was replaced with
basic earnings per share. Basic earnings per share excludes the dilutive effect
of common stock equivalents, including stock options. Diluted earnings per
share, which replaced fully diluted earnings per share, includes all dilutive
items. Dilution is calculated based upon the treasury stock method, which
assumes that all dilutive securities were exercised and that the proceeds
received were applied to repurchase outstanding shares at the average market
price during the period.

                                       41
<PAGE>

                  ST. JOHN KNITS INTERNATIONAL, INCORPORATED

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

            October 29, 2000, October 31, 1999 and November 1, 1998

         The following is a reconciliation of the Company's net income and
weighted average shares outstanding for the purpose of calculating basic and
diluted earnings per share for all periods presented:

<TABLE>
<CAPTION>
                                                                                Fiscal Year Ended
                                                                 ------------------------------------------------
                                                                 October 29,        October 31,       November 1,
                                                                    2000               1999              1998
                                                                 -------------    -------------    --------------
<S>                                                              <C>               <C>              <C>
Net income.................................................      $23,813,092        $14,689,067       $33,420,618
Less:  preferred stock dividends...........................        4,201,100          1,228,472                --
                                                                 -----------        -----------       -----------
Income allocated to common stockholders....................      $19,611,992        $13,460,595       $33,420,618
                                                                 ===========        ===========       ===========
Weighted average shares outstanding-basic..................        6,546,174         13,389,747        16,693,955
                                                                 ===========        ===========       ===========
Basic earnings per share...................................      $      3.00        $      1.01       $      2.00
                                                                 ===========        ===========       ===========
Add:  dilutive effect of stock options.....................               --            278,891           540,675
                                                                 ===========        ===========       ===========
Weighted average shares outstanding-diluted................        6,546,174         13,668,638        17,234,630
                                                                 ===========        ===========       ===========
Diluted earnings per share.................................      $      3.00        $      0.98       $      1.94
                                                                 ===========        ===========       ===========
</TABLE>

   j. Foreign Currency Translation

         The Company translates the financial statements of its foreign
subsidiaries from the local (functional) currencies to U.S. dollars in
accordance with SFAS No. 52 "Foreign Currency Translation". Substantially all
assets and liabilities of the Company's foreign subsidiaries are translated at
year-end exchange rates, while revenue and expenses are translated at average
exchange rates prevailing during the year. Adjustments for foreign currency
translation fluctuations are excluded from net income and are included as a
separate component of consolidated stockholders' equity.

   k. Advertising and Promotion

         All costs associated with advertising and promotion of the Company's
products are expensed as incurred.

   l. Investments

         The Company's investments are categorized as available-for-sale
securities, as defined by SFAS No. 115 "Accounting for Certain Investments in
Debt and Equity Securities." Unrealized holding gains and losses are reflected
as a net amount in a separate component of stockholders' equity until realized.
For the purpose of computing realized gains and losses, cost is identified on a
specific identification basis.

   m. Comprehensive Income

         The Company has adopted SFAS No. 130 "Reporting Comprehensive Income"
during the first quarter of fiscal 1999. This statement requires that all items
that meet the definition of components of comprehensive income be reported in a
financial statement for the period in which they are recognized. Components of
comprehensive income include revenues, expenses, gains and losses that under
generally accepted accounting principles are included in comprehensive income
but excluded from net income.

                                       42
<PAGE>

                  ST. JOHN KNITS INTERNATIONAL, INCORPORATED

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

            October 29, 2000, October 31, 1999 and November 1, 1998

   n. Segment Reporting

         The Company adopted SFAS No. 131 "Disclosures About Segments of an
Enterprise and Related Information", in fiscal 1999. SFAS No. 131 established
new standards for reporting information about business segments and related
disclosures about products, geographic areas and major customers. The business
segments of the Company are wholesale and retail sales. Information on segment
reporting is included at Note 14.

   o. New Accounting Pronouncements

         During December 1999, the Securities and Exchange Commission issued
Staff Accounting Bulletin No. 101, "Revenue Recognition in Financial
Statements." SAB 101 summarizes certain of the SEC's views in applying generally
accepted accounting principles to revenue recognition in financial statements.
The Company will adopt this standard during the first quarter of fiscal 2001.
The adoption of this standard is not expected to have a material impact on the
Company's financial position or results of operations.

         During May 2000, Emerging Issues Task Force (EITF) No. 00-10
"Accounting for Shipping and Handling Fees and Costs" was issued. EITF No. 00-10
governs the accounting treatment and classification of the Company's delivery
revenues and certain of its delivery expenses and will be adopted by the Company
in the first quarter of fiscal 2001. The adoption of this EITF will only affect
the classification of revenues from deliveries to its customers and certain
delivery expenses related to shipping and handling of the Company's product and
is not expected to have material impact on the Company's financial position or
results of operations.

   p. Reclassifications

         Certain reclassifications have been made to prior year balances in
order to conform with the current year presentation.

3.  Fair Value of Financial Instruments

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

         Cash and Cash Equivalents - The carrying amount is a reasonable
estimate of the fair value.

         Investments - Investments consist primarily of municipal bonds with
maturity dates of less than six months and common stock, which are classified as
available-for-sale and reported at fair value.

         Senior Credit Facility - The term debt related to the senior credit
facility approximates the market value as the interest rate on the debt is
variable and similar to what is currently available.

         12.5% Senior Notes due 2009 - This issue is publicly traded (on a
limited basis). Therefore, the fair value of this issue is based on its quoted
market price.

         Mandatorily Redeemable Preferred Stock - Based on current market
conditions, the fair value of this item approximates book value.

         Foreign Currency Contracts - The fair value of foreign currency
contracts (used for hedging purposes) is estimated based on current market
prices.

         Interest Rate Collar - The fair value of this instrument is based upon
the present value of the estimated future cash flows.

                                       43
<PAGE>

                  ST. JOHN KNITS INTERNATIONAL, INCORPORATED

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

            October 29, 2000, October 31, 1999 and November 1, 1998

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

<TABLE>
<CAPTION>
                                                                                Fiscal Year Ended
                                                           --------------------------------------------------------------
                                                                        2000                            1999
                                                           -----------------------------     ----------------------------
                                                             Book Value       Fair Value     Book Value      Fair Value
                                                             ----------       ----------     ----------      ----------
<S>                                                        <C>              <C>             <C>            <C>
Financial Assets:
   Cash and cash equivalents..............................  $ 25,130,928    $25,130,928     $ 32,443,815   $ 32,443,815
   Investments............................................        17,373         17,373           25,412         25,412

Financial Liabilities:
   Long-term debt:
      Senior Credit Facility..............................   167,000,000    167,000,000      189,250,000    189,250,000
      121/2% Senior Subordinated Notes due 2009...........    98,800,533     92,500,000       98,660,596     87,000,000
   Mandatorily Redeemable Preferred Stock.................    25,000,000     25,000,000       25,000,000     25,000,000

Other:
   Foreign currency contracts.............................            --             --        3,191,185        (59,972)
   Interest rate collar...................................    40,000,000        (24,825)      45,000,000         33,578
</TABLE>

4.  Hedging Activities

         During the fourth quarter of fiscal 1998, the Company adopted SFAS No.
133, "Accounting for Derivative Instruments and Hedging Activities" and has
designated certain financial instruments as cash flow hedges which must be
reported in accordance with SFAS No. 133. The adoption of SFAS No. 133 did not
have a material effect on the Company's financial position or results of
operations.

         It is the Company's policy to reduce the effects of fluctuations in
foreign currency exchange rates associated with its sale of goods denominated in
a foreign currency by entering into forward contracts. The Company enters into
contracts to sell foreign currencies in the future only to protect the U.S.
dollar value of certain anticipated foreign currency transactions. The forward
contracts are carried on the balance sheet at their fair value with changes in
their fair value initially included in a separate component of stockholders'
equity until the anticipated transaction occurs. Such gains and losses then
offset the related gains and losses reported on the underlying transaction. The
Company recorded a net loss of $64,000 during fiscal 2000 and a net gain of
$168,000 during fiscal 1999.

         At October 29, 2000 the Company did not hold any foreign exchange
contracts. At October 31, 1999, the Company had contracts maturing through
February 29, 2000 to sell 2.2 million Euros and 280,000 British pounds at rates
ranging from 1.05 to 1.06 U.S. dollars to the Euro and 1.57 to 1.67 U.S. dollars
to the British pound. The Company also held a contract which matured on November
30, 1999 to sell 700,000 deutsche marks at a rate of 1.66 deutsche marks to the
U.S. dollar. At October 31, 1999 the fair value of these foreign currency
contracts was not recorded as a component of stockholders' equity as the amounts
were not material.

         The Company is exposed to market risks related to fluctuations in
interest rates on its variable rate debt which consists of bank borrowings
related to the mergers. The Company has entered into an interest rate collar
agreement with a major financial institution to limit its exposure on $45
million of the Company's variable rate debt and establishes a LIBOR cap at 8.50%
and a LIBOR floor at 5.37%. The agreement became effective on October 4, 1999
and will expire on July 7, 2002. The amount of debt covered under this agreement
decreased to $40 million effective July 5, 2000.

         The fair value of the interest rate collar agreement is included on the
balance sheet and the ineffective portion is included currently in interest
expense.

                                       44
<PAGE>

                  ST. JOHN KNITS INTERNATIONAL, INCORPORATED

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

            October 29, 2000, October 31, 1999 and November 1, 1998

5.  Accrued Expenses

         Accrued expenses for fiscal years 2000 and 1999 are comprised of the
following:

<TABLE>
<CAPTION>
                                                                                       2000             1999
                                                                                       ----             ----
         <S>                                                                        <C>             <C>
         Wages and benefits...................................................      $ 5,768,817     $ 4,567,077
         Workers' compensation................................................          259,283         240,303
         Profit-sharing plan contribution.....................................          500,000         500,000
         Promotional and advertising allowance................................        2,933,303       2,136,492
         Software purchase....................................................          715,375              --
         Other................................................................        3,948,321       3,831,937
                                                                                    -----------     -----------
                                                                                    $14,125,099     $11,275,809
                                                                                    ===========     ===========
</TABLE>

6.  Income Taxes

         The provision for income taxes for fiscal years 2000, 1999 and 1998,
consists of the following:

<TABLE>
<CAPTION>
                                                                       2000            1999            1998
                                                                       ----            ----            ----
         <S>                                                        <C>             <C>             <C>
         Current:
             Federal.............................................   $16,176,318     $ 9,248,127     $17,568,636
             State and foreign...................................     5,852,583       1,002,995       6,382,268
                                                                    -----------     -----------     -----------
                                                                     22,028,901      10,251,122      23,950,904
         Deferred (benefit) provision ...........................    (4,518,087)         65,689      (1,950,000)
                                                                    -----------     -----------     -----------
                                                                    $17,510,814     $10,316,811     $22,000,904
                                                                    ===========     ===========     ===========
</TABLE>

         The components of the deferred income tax (benefit) provision for
fiscal years 2000, 1999 and 1998 are as follows:

<TABLE>
<CAPTION>
                                                                        2000           1999             1998
                                                                        ----           ----             ----
         <S>                                                        <C>             <C>              <C>
         Allowance for uncollectible accounts.....................  $   (82,010)    $    86,516      $  (515,142)
         Inventory adjustments to market..........................   (2,236,374)     (1,097,816)         668,952
         Accrued expenses.........................................     (570,381)        157,138       (1,929,214)
         Depreciation.............................................     (789,533)        919,851               --
         Tax basis adjustments to inventory.......................     (839,789)             --         (174,596)
                                                                    -----------     -----------      -----------
                                                                    $(4,518,087)    $    65,689      $(1,950,000)
                                                                    ===========     ===========      ===========
</TABLE>

         The components of the Company's deferred income tax benefit as of
October 29, 2000 and October 31, 1999 are as follows:

<TABLE>
<CAPTION>
                                                                                          2000            1999
                                                                                          ----            ----
         <S>                                                                          <C>              <C>
         Deferred income tax benefit:
          Tax basis adjustments to inventory.....................................     $ 1,766,881      $  948,780
          Allowance for uncollectible accounts...................................         528,319         456,750
          Inventory adjustments to market........................................       4,666,725       3,112,131
          Accrued expenses.......................................................       3,303,008       2,057,618
          Depreciation...........................................................       1,931,426       1,102,993
                                                                                      -----------      ----------
                                                                                      $12,196,359      $7,678,272
                                                                                      ===========      ==========
</TABLE>

                                       45
<PAGE>

                  ST. JOHN KNITS INTERNATIONAL, INCORPORATED

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

            October 29, 2000, October 31, 1999 and November 1, 1998

         The reported provision for income taxes differs from the amount
computed by applying the statutory federal income tax rate to the income before
provision for income taxes for fiscal years 2000, 1999 and 1998 as follows:

<TABLE>
<CAPTION>
                                                                          2000            1999            1998
                                                                          ----            ----            ----
         <S>                                                            <C>             <C>            <C>
         Income tax provision computed at statutory rate............    $14,463,367     $ 8,752,057    $19,397,537
         State taxes, net of federal benefit........................      3,047,447       1,564,754      3,350,232
         Tax credits and other......................................             --              --       (746,865)
                                                                        -----------     -----------    -----------

         Tax provision..............................................    $17,510,814     $10,316,811    $22,000,904
                                                                        ===========     ===========    ===========
</TABLE>

7.  Benefit and Stock Option Plans

         The Company is self-insured for a portion of its medical benefits
programs. Amounts charged to expense for health benefits were $4,480,000,
$3,917,000 and $3,594,000 for fiscal years 2000, 1999 and 1998, respectively,
and were based on actual claims and an estimate of claims incurred but not
reported. The current liability for health benefits is included in accrued
expenses on the accompanying consolidated balance sheets. The Company maintains
excess insurance coverage on an individual and an aggregate basis.

         The Company maintains a qualified profit-sharing plan for the benefit
of all eligible employees. This plan contemplates the sharing of profits
annually at the discretion of the Board of Directors and is funded by cash
contributions. The contribution to this plan was $500,000, in each of the fiscal
years 2000, 1999 and 1998.

         Prior to the mergers, the Company had one stock option plan, the 1993
St. John Knits, Inc. Stock Option Plan (the "1993 Plan"). During fiscal 1999 the
Company terminated the 1993 Plan and adopted the 1999 St. John Knits
International, Incorporated Stock Option Plan (the "1999 Plan"). Options granted
under the 1999 Plan are nonstatutory stock options. The Company accounts for the
plans under Accounting Principles Board Opinion No. 25 "Accounting for Stock
Issued to Employees", under which no compensation cost has been recognized for
fiscal years 2000, 1999 and 1998.

         SFAS No. 123 "Accounting for Stock-Based Compensation" was issued in
1995 and, if fully adopted, changes the methods for recognition of cost on plans
similar to that of the Company. Adoption of SFAS No. 123 is optional for
employee stock option grants, however pro forma disclosure as if the Company had
adopted the cost recognition method is required. Had compensation cost for stock
options awarded under the 1999 Plan or 1993 Plan been determined to be
consistent with SFAS No. 123, the Company's net income and earnings per share
would have reflected the following pro forma amounts:

<TABLE>
<CAPTION>
                                                                                             2000           1999
                                                                                             ----           ----
       <S>                                                                                <C>             <C>
       Net income:                   As reported......................................    $23,813,092     $14,689,067
                                     Pro forma........................................    $22,749,609     $12,253,026
       Net income per share-diluted: As reported......................................    $      3.00     $      0.98
                                     Pro forma........................................    $      2.84     $      0.81
</TABLE>

         The Company may grant up to 727,360 options under the 1999 Plan. The
Company has granted 534,360 options as of October 29, 2000 under the 1999 Plan.
Stock options are issued at the approximate fair market value. Options generally
vest over three to five years; are exercisable in whole or in installments; and
expire ten years from date of grant.

                                       46
<PAGE>

                  ST. JOHN KNITS INTERNATIONAL, INCORPORATED

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

            October 29, 2000, October 31, 1999 and November 1, 1998

     The following is a summary of the activity in the 1999 Plan and the 1993
Plan for fiscal years 2000, 1999, and 1998:

<TABLE>
<CAPTION>
                                                                       2000                  1999                  1998
                                                                       -----                 -----                 ----
                                                                           Weighted              Weighted              Weighted
                                                                            Average              Average               Average
                                                                           Exercise              Exercise              Exercise
                                                                 Shares      Price    Shares      Price      Shares     Price
                                                                 -------     -----    -------     -----      ------     -----
<S>                                                              <C>       <C>        <C>        <C>        <C>        <C>
Outstanding, beginning of year................................    498,519   $30.00     921,652    $15.42     842,988    $17.16
Granted  .....................................................     35,841    30.00     498,519     30.00     527,334     27.12
Exercised.....................................................         --       --    (894,316)    15.42    (109,336)     9.79
Forfeited.....................................................       (667)   30.00     (27,336)    18.50    (339,334)    39.44
                                                                 --------   ------    --------    ------   ---------    ------
Outstanding, end of year......................................    533,693   $30.00     498,519    $30.00     921,652    $15.42
                                                                 ========             ========             =========    ======

Exercisable, end of year......................................     34,003   $30.00          --        --     677,960    $14.37
Weighted average fair value of options granted................              $ 5.04                $ 8.92                $11.34
</TABLE>

         The options outstanding as of October 29, 2000 have an exercise price
of $30.00 and a weighted average remaining contractual life of 8.79 years.

         The fair value of each option grant is estimated on the date of grant
using the Black-Scholes pricing model with the following assumptions used for
the grants in fiscal years 2000 and 1999: weighted average risk-free interest
rate of 6.51% and 6.09%; weighted average volatility of 37.31% and 33.73%;
expected life of 6 years; and weighted average dividend yield of 0.00%.

8.  Commitments

         The Company has entered into various leases for manufacturing,
showroom, warehouse, retail and office locations, including leases with related
parties (Note 11). The leases expire at various dates through the year 2014 and
certain leases contain renewal options. Rental expense under these leases was
approximately $14,687,000, $13,846,000 and $12,052,000 in fiscal years 2000,
1999 and 1998, respectively.

         The following is a schedule of future minimum rental payments required
under noncancellable operating leases as of October 29, 2000:

         2001.........................................   $ 14,503,000
         2002.........................................     14,505,000
         2003.........................................     14,234,000
         2004.........................................     14,388,000
         2005.........................................     13,744,000
         Thereafter...................................     60,757,000
                                                         ------------
                                                         $132,131,000
                                                         ============

         The Company has various employment contracts with certain key
employees, which expire at various times through December 31, 2004. These
agreements provide for total annual compensation aggregating $3,834,000 and the
payment of severance benefits upon the termination of employment.

         As of October 29, 2000 and October 31, 1999, the Company's commitments
to purchase wool yarn were approximately $12,983,000 and $7,897,000,
respectively.

                                       47
<PAGE>

                  ST. JOHN KNITS INTERNATIONAL, INCORPORATED

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

            October 29, 2000, October 31, 1999 and November 1, 1998


9. Long-term Debt

<TABLE>
<CAPTION>
                                                                    October 29,    October 31,
Long-term debt consists of the following:                              2000           1999
                                                                       ----           ----
<S>                                                                <C>             <C>
    Senior credit facility:
      Tranche A.................................................   $ 63,779,729   $ 74,250,000
      Tranche B.................................................    103,220,271    115,000,000
      Revolving credit facility.................................             --             --
                                                                   ------------   ------------
                                                                    167,000,000    189,250,000
    Senior subordinated notes, net of discount..................     98,800,533     98,660,596
    Other.......................................................      1,623,610      1,974,777
                                                                   ------------   ------------
                                                                    267,424,143    289,885,373
      Less - Current portion....................................      5,577,398      2,564,352
                                                                   ------------   ------------
                                                                   $261,846,745   $287,321,021
                                                                   ============   ============
</TABLE>

Senior Credit Facilities

         Concurrent with the consummation of the mergers, the Company entered
into a Credit Agreement with a syndicate of lending institutions (the
"Lenders"), which agreement provides for an aggregate principal amount of loans
of up to $215.0 million. Loans under the Credit Agreement consist of $190.0
million in aggregate principal amount of term loans ("Term Loan Facility"),
which facility includes a $75.0 million tranche A term loan subfacility, a
$115.0 million tranche B term loan subfacility, and a $25.0 million revolving
credit facility ("Revolving Credit Facility"). The Credit Agreement includes a
subfacility for swingline borrowings and a sublimit for letters of credit. The
Company's obligations under the Credit Agreement are secured by a security
interest in substantially all of the Company's assets. The Company used proceeds
from the Term Loan to provide a portion of the funding necessary to consummate
the mergers. There were no borrowings under the Revolving Credit Facility at
October 29, 2000.

         The tranche B term loan facility matures on July 31, 2007. The tranche
A term loan facility and the Revolving Credit Facility mature on July 31, 2005.
The Term Loan facility is subject to repayment according to quarterly
amortization of principal based upon the Scheduled Amortization (as defined in
the Credit Agreement). The Company may prepay the term loan facility.

         Indebtedness under the Term Loan Facility and the Revolving Credit
Facility bears interest at a rate based (at the Company's option) upon (i) LIBOR
for one, two, three or six months, plus 2.00% with respect to the tranche A term
loan facility and the Revolving Credit Facility or plus 3.00% with respect to
the tranche B term loan facility, or (ii) the Alternate Base Rate (9.50% at
October 29, 2000) plus 1.00% with respect to the tranche A term loan facility
and the Revolving Credit Facility or plus 2.00% with respect to the tranche B
term loan facility.

         Interest rates at October 29, 2000 were approximately 8.7% and 9.6% on
tranche A and tranche B term loans, respectively. Effective October 4, 1999, the
Company entered into an interest rate collar agreement with a major financial
institution. The agreement limits the Company's exposure on a portion of the
term loans by placing a cap on the rate for LIBOR contracts at 8.5%. The
contract also sets a minimum rate of 5.37%. The contract covers $45 million of
the term debt and will expire on July 7, 2002.

         The Company is required to pay to the Lenders in the aggregate a
commitment fee equal to 0.5% per annum on the undrawn amount of the Revolving
Credit Facility during the preceding quarter.

         Pursuant to the terms of the Agreement and the Revolving Credit
Facility, the Company is required to maintain certain financial ratios and
minimum levels of tangible net worth and working capital as well as to achieve
certain levels of earnings before interest, taxes, depreciation and
amortization. In addition, the Company is restricted from entering into certain
transactions or making certain payments and dividend distributions without the
prior consent of the lenders.

                                       48
<PAGE>

                  ST. JOHN KNITS INTERNATIONAL, INCORPORATED

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

            October 29, 2000, October 31, 1999 and November 1, 1998


Senior Subordinated Notes

         In connection with the mergers, the Company obtained financing through
the issuance of $100 million in senior subordinated debt ("Subordinated Notes").
The Subordinated Notes bear interest at a rate of 12.5% per year and were issued
at 98.616% of the actual face value. The Subordinated Notes will mature on July
1, 2009. Interest on the Subordinated Notes is payable in cash semi-annually on
January 1 and July 1 of each year. The Subordinated Notes are redeemable, in
whole or in part, at the option of the Company, at any time on or after July 1,
2004, at the redemption prices set forth below, plus accrued and unpaid interest
and liquidation damages, if any, to the date of redemption.

         Redemption Year                                Price
         ---------------                                -----
         2004........................................  106.250%
         2005........................................  104.688%
         2006........................................  103.125%
         2007........................................  101.563%
         2008 and thereafter.........................  100.000%

         In addition, at any time on or before July 1, 2002, the Company may
redeem up to 35% of the original aggregate principal amount of the Subordinated
Notes with the net proceeds of an Initial Public Equity offering at a redemption
price equal to 112.5% of the principal amount thereof, plus accrued and unpaid
interest and liquidated damages, if any, to the date of redemption (subject to
the right of holders of record on the relevant record date to receive interest
due on the relevant interest payment date); provided, however, that at least 65%
of the originally issued aggregate principal amount of the notes must remain
outstanding immediately after giving effect to each such redemption (excluding
any notes held by SJKI or any of its affiliates). Notice of any such redemption
must be given within 60 days after the date of the closing of the relevant
public equity offering of SJKI. These notes are subordinated to the Senior
Credit Facility as discussed above.

         Fees associated with obtaining the Subordinated Notes and the tranche A
and tranche B term loans were $15.3 million, which are amortized over the terms
of the respective notes using the effective interest rate method. Amortization
expense of approximately $2,457,000 relating to such fees is included in
interest expense for the year ended October 29, 2000.

         As of October 29, 2000, future maturities of long-term debt were as
follows:

         2001........................................  $  5,577,398
         2002........................................     9,782,831
         2003........................................    13,101,756
         2004........................................    23,761,058
         2005........................................    25,367,007
         Later years.................................   191,033,560
                                                       ------------
                                                       $268,623,610
                                                       ============
10. Redeemable Common and Preferred Stock

Redeemable Common Stock

         Redeemable common stock represents all of the shares of the Company's
common stock that are beneficially owned by the Grays. The value shown on the
Consolidated Balance Sheets reflect the value used in the mergers of $30 per
share, which also estimates the fair market value of the Company's common stock
at the balance sheet dates. The fiscal 1999 presentation has been reclassified
to be consistent with the fiscal 2000 presentation.

             In connection with the mergers, SJKI entered into a stockholders'
  agreement with Vestar/Gray Investors, Vestar and the Grays, which states,
  among other things, that prior to a public offering of SJKI common stock, if
  Bob Gray ceases to serve as Chairman or Chief Executive Officer of St. John or
  SJKI or if the employment with SJKI of Marie Gray or Kelly Gray ceases for any
  reason, then he or she will have the right to require SJKI to purchase the
  shares of SJKI common stock beneficially owned by them, up to a maximum of $5
  million of such common stock for all the Grays during any 12-month period.

                                       49
<PAGE>

                  ST. JOHN KNITS INTERNATIONAL, INCORPORATED

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

            October 29, 2000, October 31, 1999 and November 1, 1998


If any of the Grays are terminated without "cause" or resigns for "good reason,"
as these terms are defined in their current respective employment agreements
with the Company, then he or she will have the right to require SJKI to purchase
the shares of SJKI common stock beneficially owned by them, up to a maximum of
25% of the total shares held by such terminated or resigning Gray employee
during any 12-month period. This agreement may be limited by the terms of the
agreements related to the credit facilities and the senior subordinated notes.

Mandatorily Redeemable Preferred Stock

         The $25,000,000 Mandatorily Redeemable Preferred Stock consists of
250,000 shares of Preferred Stock with a liquidation preference of $100 per
share and ranks junior in right of payment to all liabilities and obligations
(whether or not for borrowed money) of SJKI (other than common stock of SJKI and
any preferred stock of SJKI which by its terms is on parity with or junior to
the Preferred Stock).

         Holders of Preferred Stock will be entitled to receive, when, as and if
declared by the board of directors of SJKI, out of funds legally available
therefor, dividends on the Preferred Stock, at an annual rate equal to 15.25%,
provided that if dividends are not paid on a dividend payment date, dividends
shall continue to accrue on unpaid dividends.

         The Preferred Stock may be redeemed at any time on or after July 1,
2004, in whole or in part, at the option of SJKI, at the redemption prices
(expressed in percentages of liquidation value) set forth below together with
all accumulated dividends to the date of redemption, if redeemed during the
12-month period beginning on July 1 of the years indicated.

         Redemption Year                                   Percentage

         2004............................................. 107.625%
         2005............................................. 105.719%
         2006............................................. 103.813%
         2007............................................. 101.906%
         2008 and thereafter.............................. 100.000%


         The Preferred Stock will also be redeemable in whole or in part, at the
option of SJKI at any time before July 1, 2004, at a redemption price equal to
the greater of (i) 100% of the liquidation value of the Preferred Stock and (ii)
the present values of the liquidation value at the mandatory redemption date,
discounted on a semi-annual basis at the Treasury Yield plus 15 basis points.
The "Treasury Yield" means, with respect to any redemption date, the rate per
annum equal to the semi-annual equivalent yield to maturity for a comparable
treasury issue.

         In addition, at any time and from time to time on or prior to July 1,
2002, SJKI may redeem in the aggregate up to 35% of the originally issued
liquidation value of the Preferred Stock with the net cash proceeds of one or
more Public Equity Offerings (as defined in the indenture) by SJKI at a
redemption price in cash equal to 115.25% of the liquidation value thereof, plus
accumulated dividends thereon, if any, to the date of redemption; provided,
however, that at least 65% of the originally issued aggregate liquidation value
of the Preferred Stock must remain outstanding immediately after giving effect
to each such redemption (excluding any Preferred Stock held by SJKI or any of
its affiliates). Notice of any such redemption must be given within 60 days
after the date of the closing of the relevant public equity offering of SJKI.
The Preferred Stock may only be redeemed if permitted under the terms of the
senior credit facilities, the indenture and other contractual arrangements of
SJKI.

         On July 1, 2010, SJKI will be required to redeem (subject to
contractual and other restrictions with respect thereto and to the legal
availability of funds therefor) all outstanding shares of Preferred Stock at a
price equal to the liquidation value thereof plus all accumulated dividends to
the date of redemption. Accordingly, the carrying value of such stock has been
classified outside of shareholders' equity.

         SJKI may, at its option, exchange all but not less than all of the
shares of then outstanding Preferred Stock for debentures of SJKI in a principal
amount equal to the liquidation value of the Preferred Stock plus accumulated
dividends.

                                       50
<PAGE>

                  ST. JOHN KNITS INTERNATIONAL, INCORPORATED

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

            October 29, 2000, October 31, 1999 and November 1, 1998

The exchange debentures will bear interest at 15.25% per annum, have a final
stated maturity of July 1, 2010, have optional redemption provisions comparable
to the Preferred Stock and will have customary covenants and events of default.
SJKI may not cause the exchange of Preferred Stock for debentures unless
permitted under the terms of the senior credit facilities, the indenture and
other contractual arrangements of SJKI.

11.  Related-Party Transactions

         The Company entered into a management agreement with Vestar. Pursuant
to the management agreement, the Company paid to Vestar a transaction fee of
$4.0 million at the closing of the mergers. The Company also pays an annual fee
of $500,000 to Vestar for management services.

         The Company leases two manufacturing facilities from partnerships in
which a stockholder of the Company is a significant partner. The annual payments
on these leases were approximately $1,051,000, $1,014,000 and $975,000 in fiscal
years 2000, 1999 and 1998, respectively. The leases expire at various dates
during fiscal year 2006 and are included in the future minimum rental payments
disclosure (Note 8).

         The Company periodically rents personal property provided by a company
that is owned by a stockholder. Rental payments for the use of such equipment
were approximately $3,000, $8,000 and $21,000 in fiscal years 2000, 1999 and
1998, respectively.

         At October 29, 2000 and October 31, 1999, the Company held a 50 percent
ownership interest in a partnership which leases transportation equipment to the
Company. The holder of the other 50 percent ownership interest is a corporation
which is wholly-owned by one of the Company's stockholders. At October 29, 2000
and October 31, 1999, the Company's investment in this partnership, net of
partnership losses, was approximately $2,035,000 and $496,000, respectively, and
is included in other assets on the accompanying consolidated balance sheets.
During fiscal years 2000, 1999 and 1998, the Company made lease payments to the
partnership of $953,000, $1,038,000 and $868,000, respectively. During the same
years, the Company reported net losses from the activities of the partnership of
$307,000, $231,000 and $331,000, respectively.

12.  Current Vulnerability Due to Certain Concentrations

         A substantial portion of the Company's sales are made to three major
customers. These three customers accounted for 15, 15 and 14 percent of net
sales during fiscal 2000, 15, 13 and 13 percent of net sales during fiscal 1999
and 17, 14 and 14 percent during fiscal 1998. The loss of any one of these
customers could have a materially adverse affect on the Company's business.

         The Company sells primarily to specialty apparel retailers; thus, the
risk of collection losses is concentrated in this industry. Management believes
that the Company's credit and collection policies are adequate to prevent
significant collection losses and that the allowance for uncollectible accounts
is adequate at October 29, 2000 and October 31, 1999.

13.  Litigation

Securities Fraud Class Action

         On January 23, 2000 the Company reached an agreement in principle to
settle a case filed in 1998 by Binary Traders, Inc. for $5 million, an amount
the Company's insurance carrier has agreed to pay. On October 13, 1998, Binary
Traders, Inc. had filed a complaint on behalf of purchasers of publicly traded
securities of St. John during the period of February 25, 1998 to August 20, 1998
(the "Class Period") against St. John, Bob Gray, and Kelly Gray in the United
States District Court, Central District of California, Southern Division (Binary
Traders, Inc. v. St. John Knits, Inc. et al.). The complaint, which sought class
action certification, alleged that the defendants violated federal securities
laws by allegedly making fraudulent statements during the Class Period and
sought an unspecified amount of compensatory damages. The settlement which was
reached on January 23, 2000, between the Company and Binary Traders, Inc.
received final approval from the court on April 24, 2000.

                                       51
<PAGE>

                  ST. JOHN KNITS INTERNATIONAL, INCORPORATED

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

            October 29, 2000, October 31, 1999 and November 1, 1998

Litigation Regarding the Transactions

         On June 9, 2000, the Company reached an agreement to settle a class
action shareholders' lawsuit arising from the mergers of the Company that closed
on July 7, 1999. The terms of the settlement agreement, which received final
court approval on August 1, 2000, called for payment of $13.75 million to the
Company's former public shareholders and their attorneys. Nearly all of this
payment was funded by the Company's insurance carriers. Additionally, in the
event of a future sale, merger or public offering of the Company, the Company
has agreed to provide these former shareholders with an opportunity to receive a
specified percentage of proceeds from such an event under certain limited
circumstances. On September 1, 2000, one of the plaintiffs in this lawsuit filed
a notice of appeal from the judgment approving the settlement and the court
order regarding application for attorney's fees. Such appeal is now pending.

Amen Wardy Home Stores Litigation

         In May 1999, the Company settled litigation relating to the Amen Wardy
Home Stores joint venture. In connection with this settlement, the Company
transferred ownership of the Las Vegas home furnishing store and the Amen Wardy
name to its former partner in the joint venture. The Company also transferred
certain property and agreed to pay certain expenses in connection with the
settlement.

                                       52
<PAGE>

                  ST. JOHN KNITS INTERNATIONAL, INCORPORATED

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

            October 29, 2000, October 31, 1999 and November 1, 1998

14. Segment Information

         The Company has two reportable business segments, wholesale and retail
sales. The Company's wholesale sales business consists primarily of six
divisions, Knitwear, Sport, Shoes, Accessories, Griffith & Gray and Fragrance.
For fiscal 2000, retail sales were generated through the Company's 22 St. John
boutiques, 10 St. John outlet stores, two St. John Home stores and one St. John
Home outlet store. Management evaluates segment performance based primarily on
revenue and earnings from operations.

         Segment information is summarized as follows for fiscal years 2000,
1999 and 1998 (in 000's):

<TABLE>
<CAPTION>
                                                                           Wholesale     Retail  Corporate   Eliminations      Total
                                                                           ---------     ------  ---------   ------------      -----
<S>                                                                        <C>         <C>       <C>         <C>           <C>
Fiscal 2000
     Net sales............................................................. $275,241   $117,105  $      --   $   (55,887)  $ 336,459
     Segment operating income..............................................   63,919      8,192         --                    72,111
     Segment assets........................................................  145,094     48,821     26,628                   220,543

Fiscal 1999
     Net sales............................................................. $244,734    $98,129  $      --   $   (48,692)  $ 294,171
     Segment operating income..............................................   47,646      1,511    (15,123)                   34,034
     Segment assets........................................................  137,209     46,842     22,759                   206,810

Fiscal 1998
     Net sales............................................................. $242,585    $80,590  $      --   $   (45,275)  $ 277,900
     Segment operating income..............................................   53,993         60         --                    54,053
     Segment assets........................................................  130,130     43,662      8,598                   182,390
</TABLE>

         The table below presents information related to geographic areas in
which the Company operated during fiscal years 2000, 1999 and 1998 (in 000's):


<TABLE>
<CAPTION>
                                                                                         Fiscal Years
                                                                               2000         1999          1998
                                                                            ---------   ----------      ---------
<S>                                                                          <C>          <C>           <C>
Net sales:
     United States...................................................       $ 311,395   $  269,701      $ 256,618
     Asia/(1)/.......................................................          15,284       13,344          9,877
     Europe/(1)/.....................................................           6,298        6,909          7,113
     Other/(1)/......................................................           3,482        4,217          4,292
                                                                            ---------   ----------      ---------
                                                                            $ 336,459   $  294,171      $ 277,900
                                                                            =========   ==========      =========
</TABLE>

(1)  Sales for these geographic areas include sales made into the area directly
     from the United States and sales made in the area by subsidiaries of the
     Company.

15. Supplemental Condensed Consolidated Financial Information

         The Company's payment obligations under the Senior Subordinated Notes
are guaranteed by certain of the company's wholly owned subsidiaries (the
Guarantor Subsidiaries). Such guarantees are full, unconditional and joint and
several. Except as may be required under applicable law, there are no
restrictions on the transfer of funds or assets from the Guarantor Subsidiaries
to SJKI. Separate financial statements of the Guarantor Subsidiaries are not
presented because the company's management has determined that they would not be
material to investors. The following supplemental financial information sets
forth, on an unconsolidated basis, balance sheet, statement of operations, and
statement of cash flows information for the Parent Company (consisting of St.
John Knits International, Incorporated and St. John Knits, Inc.), for the
Guarantor Subsidiaries and for the Company's other subsidiaries (the
Non-Guarantor Subsidiaries). The supplemental financial information reflects the
investments of the Parent company in the Guarantor and Non-Guarantor
Subsidiaries using the equity method of accounting. The supplemental financial
information is presented for the periods as of October 29, 2000 and October 31,
1999, and for the years ended October 29, 2000, October 31, 1999 and November 1,
1998.

                                       53
<PAGE>

                  ST. JOHN KNITS INTERNATIONAL, INCORPORATED
              SUPPLEMENTAL CONDENSED CONSOLIDATING BALANCE SHEET
                               OCTBOBER 29, 2000


<TABLE>
<CAPTION>

                                                        PARENT      GUARANTOR     NON-GUARANTOR
(Amounts in thousands)                                  COMPANY    SUBSIDIARIES   SUBSIDIARIES   ELIMINATIONS   CONSOLIDATED
                                                     --------------------------------------------------------------------------
ASSETS
<S>                                                     <C>              <C>            <C>         <C>            <C>
Current assets:
Cash, cash equivalents and investments                  $    24,746      $    100       $    302                   $     25,148
Accounts receivable, net                                     30,254           198          1,397          (630)          31,219
Inventories   (1)                                            46,114         1,617          1,365            71           49,167
Deferred income tax benefit                                  12,196                            -                         12,196
Other                                                         3,141            91            155                          3,387
Intercompany accounts receivable                                419                                       (419)               -
                                                        -----------------------------------------------------------------------
Total current assets                                        116,870         2,006          3,219          (978)         121,117
Property and equipment, net                                  77,041         1,269          4,719                         83,029
Investment in subsidiaries                                   (2,545)                           -         2,545                -
Receivable from consolidated subsidiaries                    17,086                            -       (17,086)               -
Deferred financing costs                                     12,261                            -                         12,261
Other assets                                                  3,028           179            929                          4,136
                                                        -----------------------------------------------------------------------
     Total assets                                       $   223,741      $  3,454       $  8,867    $  (15,519)    $    220,543
                                                        =======================================================================


LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
Current liabilities:
Accounts payable                                        $    12,838      $    219       $    668    $     (374)          13,351
Accrued expenses                                             13,783           159            182                         14,124
Current portion of long-term debt                             5,350                          229            (2)           5,577
Accrued interest expense                                      8,255                            -                          8,255
Dividends payable                                             5,430                            -                          5,430
Intercompany accounts payable                                                                419          (419)               -
Income taxes payable                                          8,520        (4,387)           425                          4,558
                                                        -----------------------------------------------------------------------
Total current liabilities                                    54,176        (4,009)         1,923          (795)          51,295

Intercompany payable                                                       13,194          3,892       (17,086)               -
Long-term debt, net of current portion                      261,848                          183          (183)         261,848
                                                        -----------------------------------------------------------------------
Total liabilities                                           316,024         9,185          5,998       (18,064)         313,143
Minority interest                                                                              -                              -
Mandatorily redeemable preferred stock                       25,000                            -                         25,000
Redeemable common stock                                      29,069                                                      29,069
Total stockholders' equity (deficit)                       (146,352)       (5,731)         2,869         2,545         (146,669)
                                                        -----------------------------------------------------------------------
  Total liabilities and stockholders' equity (deficit)  $   223,741      $  3,454       $  8,867    $  (15,519)    $    220,543
                                                        =======================================================================
</TABLE>

(1) Inventories are shown at cost for all entities

                                      54
<PAGE>

                  ST. JOHN KNITS INTERNATIONAL, INCORPORATED
              SUPPLEMENTAL CONDENSED CONSOLIDATING BALANCE SHEET
                               OCTOBER 31, 1999

<TABLE>
<CAPTION>

(Amounts in thousands)                                            PARENT     GUARANTOR    NON-GUARANTOR
                                                                  COMPANY  SUBSIDIARIES   SUBSIDIARIES   ELIMINATIONS  CONSOLIDATED
                                                                  ------------------------------------------------------------------
ASSETS
<S>                                                            <C>        <C>            <C>             <C>          <C>
Current assets:
Cash, cash equivalents and investments                          $  32,270  $         80   $         118   $         -  $     32,468
Accounts receivable, net                                           31,575           302           1,686                      33,563
Inventories   (1)                                                  39,701         1,917           1,876            28        43,522
Deferred income tax benefit                                         7,678                             -                       7,678
Other                                                               2,465           100              69                       2,634
Intercompany accounts receivable                                    1,484                             -        (1,484)            -
                                                                 --------      --------        --------      --------     ---------
Total current assets                                              115,173         2,399           3,749        (1,456)      119,865
Property and equipment, net                                        63,061         1,500           5,027                      69,588
Investment in subsidiaries                                         (1,837)                            -         1,837             -
Receivable from consolidated subsidiaries                          16,112                             -       (16,112)            -
Deferred financing costs                                           14,586                             -                      14,586
Other assets                                                        1,399            88           1,283                       2,770
                                                                 --------      --------        --------      --------     ---------
  Total assets                                                  $ 208,494  $      3,987   $      10,059       (15,731) $    206,809
                                                                 ========      ========        ========      ========     =========

LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
Current liabilities:
Accounts payable                                                $   6,414  $        264   $         127   $         -  $      6,805
Accrued expenses                                                   10,819           279             150            28        11,276
Current portion of long-term debt                                   2,248                           316                       2,564
Accrued interest expense                                            7,661                                                     7,661
Dividends payable                                                   1,228                                                     1,228
Intercompany accounts payable                                           -                         1,484       ( 1,484)            -
Income taxes payable                                                4,435        (3,413)            169                       1,191
                                                                 --------      --------        --------      --------     ---------
Total current liabilities                                          32,805        (2,870)          2,246       ( 1,456)       30,725

Intercompany payable                                                             11,244           4,868       (16,112)            -
Long-term debt, net of current portion                            287,082                           239                     287,321
                                                                 --------      --------        --------      --------     ---------
Total liabilities                                                 319,887         8,374           7,353       (17,568)      318,046
Minority interest                                                                                   693                         693
Mandatorily redeemable preferred stock                             25,000                             -                      25,000
Redeemable common stock                                            29,069                                                    29,069
Total stockholders' equity (deficit)                             (165,462)       (4,387)          2,013         1,837      (165,999)
                                                                 --------      --------        --------      --------     ---------
   Total liabilities and stockholders' equity (deficit)         $ 208,494  $      3,987   $      10,059   $   (15,731) $    206,809
                                                                 ========      ========        ========      ========     =========
</TABLE>

(1) Inventories are shown at cost for all entities

                                       55
<PAGE>

                  ST. JOHN KNITS INTERNATIONAL, INCORPORATED
         SUPPLEMENTAL CONDENSED CONSOLIDATING STATEMENT OF OPERATIONS
                      FISCAL YEAR ENDED OCTOBER 29, 2000

<TABLE>
<CAPTION>
                                                              PARENT      GUARANTOR      NON-GUARANTOR
                                                              COMPANY    SUBSIDIARIES    SUBSIDIARIES    ELIMINATIONS  CONSOLIDATED
                                                       ----------------------------------------------------------------------------
<S>                                                    <C>               <C>            <C>             <C>            <C>
(Amounts in thousands)
Net sales                                                   $ 323,177     $  4,960        $   8,321       $       -       $ 336,458
Cost of sales                                                 134,557        3,270            3,270                         141,097
                                                       ----------------------------------------------------------------------------
Gross profit                                                  188,620        1,690            5,051               -         195,361

Selling, general and administrative expenses                  115,240        4,001            4,010               -         123,251
Operating income (loss)                                        73,380       (2,311)           1,041               -          72,110

Interest expense                                               31,787          (17)                                          31,770
Other income (expense)                                            925          (24)             112             (30)            983
                                                       ----------------------------------------------------------------------------
Income (loss) before income taxes                              42,518       (2,318)           1,153             (30)         41,323
Income taxes                                                   17,967         (974)             517                          17,510
                                                       ----------------------------------------------------------------------------
Income (loss) before equity in loss of
  consolidated subsidiaries                                    24,551       (1,344)             636             (30)         23,813
Equity in loss of consolidated subsidiaries                      (708)           -                -             708               -
                                                       ----------------------------------------------------------------------------
Net income (loss)                                            $ 23,843     $ (1,344)       $     636       $     678       $  23,813
                                                       ============================================================================
</TABLE>

                                       56
<PAGE>

                     ST. JOHN INTERNATIONAL, INCORPORATED
         SUPPLEMENTAL CONDENSED CONSOLIDATING STATEMENT OF OPERATIONS
                      FISCAL YEAR ENDED OCTOBER 31, 1999

<TABLE>
<CAPTION>
                                                                                   NON-
                                                      PARENT     GUARANTOR      GUARANTOR
                                                     COMPANY    SUBSIDIARIES   SUBSIDIARIES   ELIMINATIONS   CONSOLIDATED
                                                     --------------------------------------------------------------------
(Amounts in thousands)
<S>                                                  <C>        <C>            <C>            <C>            <C>
Net sales                                            $279,315     $  8,552        $ 6,304         $    -        $ 294,171
Cost of sales                                         122,239        5,255          2,636                         130,130
                                                     --------------------------------------------------------------------
Gross profit                                          157,076        3,297          3,668               -         164,041

Selling, general and administrative expenses          103,334        7,576          3,974               -         114,884
Transaction fees and expenses                          15,123                                                      15,123
                                                     --------------------------------------------------------------------
Operating income (loss)                                38,619       (4,279)          (306)              -          34,034

Interest expense                                       10,225                                                      10,225
Other income/ (expense)                                 2,321       (1,251)           167             (40)          1,197
                                                     --------------------------------------------------------------------
Income (loss) before income taxes                      30,715       (5,530)          (139)            (40)         25,006
Income taxes                                           12,648       (2,270)           (61)                         10,317
                                                     --------------------------------------------------------------------
Income (loss) before equity in loss of
  consolidated subsidiaries                            18,067       (3,260)           (78)            (40)         14,689
Equity in loss of consolidated subsidiaries            (2,692)           -              -           2,692               -
                                                     --------------------------------------------------------------------
Net income (loss)                                    $ 15,375     $ (3,260)       $   (78)        $ 2,652       $  14,689
                                                     ====================================================================
</TABLE>

                                       57
<PAGE>

                  ST. JOHN KNITS INTERNATIONAL, INCORPORATED
         SUPPLEMENTAL CONDENSED CONSOLIDATING STATEMENT OF OPERATIONS
                      FISCAL YEAR ENDED NOVEMBER 1, 1998

<TABLE>
<CAPTION>
                                                                                        NON-
                                                         PARENT      GUARANTOR       GUARANTOR
                                                        COMPANY     SUBSIDIARIES    SUBSIDIARIES   ELIMINATIONS   CONSOLIDATED
                                                      ---------------------------------------------------------------------------
<S>                                                   <C>           <C>             <C>            <C>            <C>
(Amounts in thousands)

Net Sales                                             $ 267,225      $   6,260      $   4,415      $       --     $ 277,900
Cost of Sales                                           115,875          3,100          1,908              --       120,883
                                                      ---------------------------------------------------------------------------
Gross profit                                            151,350          3,160          2,507              --       157,017

Selling, general and administrative expenses             95,000          5,283          2,682              --       102,965
                                                      ---------------------------------------------------------------------------
Operating income (loss)                                  56,350         (2,123)          (175)             --        54,052

Other income (expense)                                    1,797           (423)            45             (50)        1,369
                                                      ---------------------------------------------------------------------------
Income (loss) before income taxes                        58,147         (2,546)          (130)            (50)       55,421
Income taxes                                             23,116         (1,051)           (64)                       22,001
                                                      ---------------------------------------------------------------------------
Income (loss) before equity in loss of
  consolidated subsidiaries                              35,031         (1,495)           (66)            (50)       33,420
Equity in loss of consolidated subsidiaries                (656)            --             --             656            --
                                                      ---------------------------------------------------------------------------
Net income (loss)                                     $  34,375      $  (1,495)     $     (66)     $      606     $  33,420
                                                      ===========================================================================
</TABLE>

                                       58
<PAGE>

                     ST. JOHN INTERNATIONAL, INCORPORATED
         SUPPLEMENTAL CONDENSED CONSOLIDATING STATEMENT OF CASH FLOWS
                      FISCAL YEAR ENDED OCTOBER 29, 2000

<TABLE>
<CAPTION>
                                                                    PARENT    GUARANTOR    NON-GUARANTOR
                                                                   COMPANY   SUBSIDIARIES  SUBSIDIARIES   ELIMINATIONS  CONSOLIDATED
                                                                 -------------------------------------------------------------------
<S>                                                              <C>               <C>             <C>           <C>       <C>
(Amounts in thousands)
OPERATING ACTIVITIES:

Net Income                                                          $ 23,843       $ (1,344)       $ 636         $ 678     $ 23,813
Adjustments to reconcile net income to net cash
     provided by (used in) operating activities:
     Depreciation and amortization                                    12,975            158          230                     13,363
     Amortization of discount on 12.5% notes due 2009                    140                                                    140
     Amortization of deferred loan costs                               2,457                                                  2,457
     Increase in deferred income tax benefit                          (4,518)                                                (4,518)
     Loss on disposal of property and equipment                          507            137                                     644
     Partnership losses                                                  307                                                    307
     Minority interest in income of consolidated subsidiaries              -                                        30           30
     Book value in excess of purchase price of minority interest
          in Japan subsidiary                                           (495)                                                  (495)
     Equity in income(loss) of consolidated subsidiaries                 708                                      (708)           -
Cash provided by (used in) changes in operating assets
      and liabilities
     Accounts receivable                                               2,094            106          143                      2,343
     Intercompany receivables (net)                                     (604)         1,949       (1,345)                         -
     Inventories                                                      (6,456)           300          511                     (5,645)
     Other current assets                                               (759)             6            -                       (753)
     Other assets                                                       (122)           (92)         225                         11
     Accounts payable                                                  6,565                         (19)                     6,546
     Accrued expenses                                                  2,983           (164)          30                      2,849
     Accrued interest expense                                            594                                                    594
     Income taxes payable                                              4,085           (974)         256                      3,367
                                                                   -----------------------------------------------------------------
          Net cash provided by operating activities                   44,304             82          667             -       45,053
                                                                   -----------------------------------------------------------------
INVESTING ACTIVITIES

     Proceeds from sale of property and equipment                         19                                                     19
     Purchases of property and equipment                             (26,974)           (62)        (198)                   (27,234)
     Purchase of minority interest in Japan subsidiary                  (228)                                                  (228)
     Purchase of foreign trademark                                       (70)                                                   (70)
     Sale of short-term investments                                        8                                                      8
     Capital contributions to partnership                             (2,013)                                                (2,013)
     Capital distributions from partnership                              167                                                    167
                                                                   -----------------------------------------------------------------
          Net cash used in investing activities                      (29,091)           (62)        (198)            -      (29,351)
                                                                   -----------------------------------------------------------------
FINANCING ACTIVITIES

     Principle payments of long-term debt                            (22,458)                       (143)                   (22,601)
     Recapitalization                                                    (19)                                                   (19)
     Financing fees and expenses                                        (133)                                                  (133)
                                                                   -----------------------------------------------------------------
          Net cash used in financing activities                      (22,610)             -         (143)            -      (22,753)
                                                                   -----------------------------------------------------------------
Effect of exchange rate changes                                         (111)                       (143)                      (254)
Unrealized loss on securities                                             (8)                                                    (8)
                                                                   -----------------------------------------------------------------
Net increase (decrease) in cash and cash equivalents                  (7,516)            20          183             -       (7,313)
Beginning balance, cash and cash equivalents                          32,245             80          119                     32,444
                                                                   -----------------------------------------------------------------
Ending balance, cash and cash equivalents                          $  24,729       $    100        $ 302         $   -     $ 25,131
                                                                   =================================================================
Supplemental disclosures of cash flow information:

     Cash received during the year for interest income             $   1,349                                               $  1,349
                                                                   =================================================================
     Cash paid during the year for:

          Interest Expense                                         $  28,552                       $   7                   $ 28,559
                                                                   =================================================================
          Income taxes                                             $  18,400                       $ 276                   $ 18,676
                                                                   =================================================================
Supplemental disclosure of noncash financing activity:
     Dividends accrued on mandatorily redeemable preferred stock   $   4,201                                               $  4,201
                                                                   =================================================================
</TABLE>

                                       59
<PAGE>

                     ST. JOHN INTERNATIONAL, INCORPORATED
         SUPPLEMENTAL CONDENSED CONSOLIDATING STATEMENT OF CASH FLOWS
                      FISCAL YEAR ENDED OCTOBER 31, 1999


<TABLE>
<CAPTION>
                                                                                               NON-
                                                                     PARENT    GUARANTOR     GUARANTOR
                                                                    COMPANY  SUBSIDIARIES  SUBSIDIARIES  ELIMINATIONS  CONSOLIDATED
                                                                  -----------------------------------------------------------------
<S>                                                               <C>       <C>           <C>           <C>            <C>
(Amounts in thousands)
OPERATING ACTIVITIES:

Net Income                                                        $   15,376   $ (3,260)      $ (79)       $ 2,652     $   14,689
Adjustments to reconcile net income to net cash
     provided by (used in) operating activities:
     Depreciation and amortization                                    13,165        266         181                        13,612
     Amortization of discount on 12.5% notes due 2009                     45                                                   45
     Amortization of deferred loan costs                                 612                                                  612
     Increase in deferred income tax benefit                              66                                                   66
     Loss on disposal of property and equipment                         (209)     1,525                                     1,316
     Partnership losses                                                  231                                                  231
     Write off of trademark in Japan                                     620                                                  620
     Minority interest in income of consolidated subsidiaries              -                                    40             40
     Equity in income (loss) of consolidated subsidiaries              2,692                                (2,692)             -
Cash provided by (used in) changes in operating assets
      and liabilities
     Accounts receivable                                               2,360       (103)       (257)                        2,000
     Intercompany receivables (net)                                   (3,674)     3,027         647                             -
     Inventories                                                       2,457      2,173        (404)                        4,226
     Other current assets                                               (443)       189          (3)                         (257)
     Other assets                                                       (481)       (85)         94                          (472)
     Accounts payable                                                 (1,499)                                              (1,499)
     Accrued expenses                                                    230       (105)         49                           174
     Accrued interest expense                                          7,662                                                7,662
     Income taxes payable                                              3,249     (2,269)         90                         1,070
                                                                  ---------------------------------------------------------------
          Net cash provided by operating activities                   42,459      1,358         318              -         44,135
                                                                  ---------------------------------------------------------------
INVESTING ACTIVITIES

     Proceeds from sale of property and equipment                        184                                                  184
     Purchases of property and equipment                             (12,769)    (1,433)       (329)                      (14,531)
     Sale of short-term investments                                    1,150                                                1,150
     Capital distributions from partnership                              127                                                  127
                                                                  ---------------------------------------------------------------
          Net cash used in investing activities                      (11,308)    (1,433)       (329)             -        (13,070)
                                                                  ---------------------------------------------------------------

FINANCING ACTIVITIES

     Proceeds from credit agreement                                  190,000                                              190,000
     Proceeds from issuance of subordinated notes                     98,616                                               98,616
     Addition to long-term debt                                        1,427                                                1,427
     Principle payments of long-term debt                               (670)                  (168)                         (838)
     Recapitalization                                               (311,780)                                            (311,780)
     Issuance of common stock                                            797                                                  797
     Issuance of preferred stock                                      25,000                                               25,000
     Financing fees and expenses                                     (15,198)                                             (15,198)
     Cash dividends paid                                              (1,245)                                              (1,245)
     Short-swing profit reimbursement                                     54                                                   54
                                                                  ---------------------------------------------------------------
          Net cash used in financing activities                      (12,999)         -        (168)             -        (13,167)
                                                                  ---------------------------------------------------------------

Effect of exchange rate changes                                           (2)                   212                           210
Unrealized loss on securities                                             (1)                                                  (1)
                                                                  ---------------------------------------------------------------
Net increase (decrease) in cash and cash equivalents                  18,149        (75)         33              -         18,107
Beginning balance, cash and cash equivalents                          14,096        155          86                        14,337
                                                                  ---------------------------------------------------------------
Ending balance, cash and cash equivalents                         $   32,245   $     80       $ 119        $     -     $   32,444
                                                                  ===============================================================

Supplemental disclosures of cash flow information:
     Cash received during the year for interest income            $    1,240                                           $    1,240
                                                                  ===============================================================
     Cash paid during the year for:
          Interest Expense                                        $    1,701                                           $    1,701
                                                                  ===============================================================
          Income taxes                                            $   10,554                                           $   10,554
                                                                  ===============================================================
Supplemental disclosure of noncash financing activity:
     Dividends accrued on mandatorily redeemable preferred stock  $    1,228                                           $    1,228
                                                                  ===============================================================
</TABLE>

                                       60
<PAGE>

                          ST. JOHN KNITS INTERNATIONAL, INCORPORATED
                    SUPPLEMENTAL CONDENSED CONSOLIDATING STATEMENT OF CASH FLOWS
                              FISCAL YEAR ENDED NOVEMBER 1, 1998

<TABLE>
<CAPTION>
                                                                                            NON-
                                                              PARENT      GUARANTOR       GUARANTOR
                                                              COMPANY    SUBSIDIARIES   SUBSIDIARIES  ELIMINATIONS  CONSOLIDATED
                                                              -------------------------------------------------------------------
(Amounts in thousands)
<S>                                                            <C>         <C>         <C>             <C>         <C>
OPERATING ACTIVITIES:

Net Income                                                     $  34,375   $ (1,495)   $    (66)        $ 606      $ 33,420
Adjustments to reconcile net income to net cash
     provided by (used in) operating activities:
     Depreciation and amortization                                11,039        232         100                      11,371
     Increase in deferred income tax benefit                      (1,950)                                            (1,950)
     Loss on disposal of property and equipment                      484                                                484
     Partnership losses                                              331                                                331
     Minority Interest                                                --                                   50            50
     Equity in income (loss) of consolidated subsidiaries            656                                 (656)           --
Cash provided by (used in) changes in operating assets
      and liabilities
     Accounts receivable                                           1,092       (201)        119                       1,010
     Intercompany receivables (net)                              (10,160)     6,714       3,446                          --
     Inventories                                                 (13,078)    (3,107)       (826)                    (17,011)
     Other current assets                                           (194)       395          13                         214
     Other assets                                                    (51)                  (437)                       (488)
     Accounts payable and other accrued expenses                    (742)       139         114                        (489)
     Income taxes payable                                           (582)    (1,051)       (328)                     (1,961)
                                                              -------------------------------------------------------------
          Net cash provided by operation activities               21,220      1,626       2,135            --        24,981
                                                              -------------------------------------------------------------
INVESTING ACTIVITIES

     Purchases of property and equipment                         (18,370)    (1,580)     (3,698)                    (23,648)
     Short-term investments                                        1,176                                              1,176
     Other                                                            95                                                 95
                                                              -------------------------------------------------------------
          Net cash used in investing activities                  (17,099)    (1,580)     (3,698)           --       (22,377)
                                                              -------------------------------------------------------------

FINANCING ACTIVITIES

     Issuance of common stock                                      1,233                    600                       1,833
     Payments from the repurchase of common stock                 (2,880)                                            (2,880)
     Additions to long-term debt                                      --                    407                         407
     Dividends paid                                               (2,084)                                            (2,084)
                                                              -------------------------------------------------------------
          Net cash provided by (used in) financing
            activities                                            (3,731)        --       1,007            --        (2,724)
                                                              -------------------------------------------------------------

Effect of exchange rate changes                                       69                    148                         217
Unrealized loss on securities                                        (27)                                               (27)
                                                              -------------------------------------------------------------
Net increase (decrease) in cash and cash equivalents                 432         46        (408)                         70
Beginning Balance, cash and cash equivalents                      14,014        109         144                      14,267
                                                              -------------------------------------------------------------
Ending Balance, cash and cash equivalents                      $  14,446   $    155    $   (264)        $  --      $ 14,337
                                                              =============================================================
Supplemental disclosures of cash flow information:
     Cash received during the thirty-nine weeks for
       interest income                                         $   1,155                                           $  1,155
                                                              =============================================================
     Cash paid during the thirty-nine weeks for:
          Interest Expense                                     $      --                                           $     --
                                                              =============================================================
          Income taxes                                         $  25,286                                           $ 25,286
                                                              =============================================================
</TABLE>

                                       61
<PAGE>

                  ST. JOHN KNITS INTERNATIONAL, INCORPORATED

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

            October 29, 2000, October 31, 1999 and November 1, 1998


16.  Results by Quarter (Unaudited)

        The unaudited results by quarter for fiscal years 2000 and 1999 are
shown below:

<TABLE>
<CAPTION>
                                                                                   First      Second       Third       Fourth
                                                                                  Quarter     Quarter     Quarter      Quarter
                                                                                 --------    --------     --------     -------
                                                                                    (in thousands, except per share amounts)
<S>                                                                              <C>         <C>          <C>         <C>
Year ended October 29, 2000
     Net sales.............................................................       $78,531     $84,242     $82,425       $91,261
     Gross profit..........................................................        43,500      49,158      48,410        54,293
     Net income............................................................         3,740       5,308       5,661         9,105
     Net income per common share-diluted...................................          0.42        0.65        0.70          1.22
Year ended October 31, 1999
     Net sales.............................................................       $73,389     $78,237     $70,309       $78,348
     Gross profit..........................................................        39,559      45,280      39,714        45,599
     Net income (loss).....................................................         5,824       8,268      (3,868)        4,465
     Net income (loss) per common share-diluted............................          0.34        0.49      (0.29)/(1)/     0.53
</TABLE>

________
(1)  Consummation of recapitalization transaction.

                                       62
<PAGE>

SCHEDULE II

                  ST. JOHN KNITS INTERNATIONAL, INCORPORATED

                       VALUATION AND QUALIFYING ACCOUNT

       For the Fiscal Years Ended October 29, 2000, October 31, 1999 and
                               November 1, 1998

<TABLE>
<CAPTION>
                                                                         Balance at      Charged to                 Balance at
                                                                         Beginning of    Costs and                    End of
                                                                         Fiscal Year     Expenses     Deductions    Fiscal Year
                                                                         -----------     --------     ----------    -----------
<S>                                                                      <C>            <C>          <C>           <C>
Allowance for Uncollectible Accounts:
     Fiscal year ended October 29, 2000.................................. $1,204,961     $299,434      $ 36,117     $1,468,278
     Fiscal year ended October 31, 1999.................................. $  950,757     $395,181      $140,977     $1,204,961
     Fiscal year ended November 1, 1998.................................. $  905,000     $283,826      $238,099     $  950,727
</TABLE>

                                       63
<PAGE>

                                  SIGNATURES

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

Date: January 26, 2001


                                   ST. JOHN KNITS INTERNATIONAL, INCORPORATED
                                      (REGISTRANT)


                                   By:              /s/ BOB GRAY
                                      ------------------------------------------
                                                        Bob Gray
                                                Chairman of the Board and
                                                 Chief Executive Officer

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

     Signature                             Title                       Date
     ---------                             -----                       ----

   /s/ BOB GRAY            Chairman of the Board and Chief      January 26, 2001
-------------------------
       Bob Gray            Executive Officer (Principal
                           Executive Officer)



   /s/ KELLY A. GRAY       Director and President               January 26, 2001
-------------------------
       Kelly A. Gray




   /s/ ROGER G. RUPPERT    Senior Vice President-Finance        January 26, 2001
-------------------------
       Roger G. Ruppert    and Chief Financial Officer
                           (Principal Financial Officer
                           and Principal Accounting Officer)




   /s/ DANIEL O'CONNELL    Director                             January 26, 2001
-------------------------
       Daniel O'Connell





   /s/ JAMES KELLEY        Director                             January 26, 2001
------------------------
       James Kelley




   /s/ SANDER LEVY         Director                             January 26, 2001
---------------------
       Sander Levy

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SUPPLEMENTAL INFORMATION TO BE FURNISHED WITH REPORTS FILED PURSUANT TO SECTION
15(d) OF THE ACT BY REGISTRANTS WHICH HAVE NOT REGISTERED SECURITIES PURSUANT TO
SECTION 12 OF THE ACT

          No annual report or proxy material has been sent to security holders
covering fiscal 2000.

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EXHIBIT INDEX

Exhibit No.                      Description of Exhibit
-----------                      ----------------------

      2.1    Agreement and Plan of Merger, dated as of February 2, 1999, among
             St. John Knits, Inc., SJK Acquisition, Inc., St. John Knits
             International, Incorporated and Acquisition Corp. (incorporated by
             reference to Exhibit 2.1 to St. John Knits International's
             Registration Statement on Form S-4 dated March 1, 1999).
      3.1    Restated Certificate of Incorporation of St. John Knits
             International, Incorporated (incorporated by reference to Exhibit
             3.1 to St. John Knits International's Registration Statement on
             Form S-4 dated September 3, 1999).
      3.2    By-Laws of St. John Knits International, Incorporated (incorporated
             by reference to Exhibit 3.2 to Amendment No. 2 to St. John Knits
             International's Registration Statement on Form S-4 dated May 17,
             1999).
      3.3    Certificate of Designation for 15.25% Exchangeable Preferred Stock
             due 2010 of St. John Knits International, Incorporated
             (incorporated by reference to Exhibit (a)(3) to St. John Knits
             International's Amendment No. 4 to Rule 13e-3 Transaction Statement
             on Schedule 13E-3 dated July 12, 1999).
      4.1    Indenture, dated as of July 7, 1999, by and among St. John Knits
             International, Incorporated, the guarantors named therein and The
             Bank of New York, as the trustee (incorporated by reference to
             Exhibit (a)(2) to St. John Knits International's Amendment No. 4 to
             Rule 13e-3 Transaction Statement on Schedule 13E-3 dated July 12,
             1999).
      4.2    Form of 12.5% Senior Subordinated Notes due 2009 (included as part
             of the Indenture filed as Exhibit 4.1 hereto).
      4.3    Exchange and Registration Rights Agreement, dated as of July 7,
             1999, by and among St. John Knits International, Incorporated, St.
             John Knits, Inc., St. John Italy, Inc., St. John Trademarks, Inc.,
             St. John Home, LLC, Chase Securities Inc., Bear, Stearns & Co. Inc.
             and PaineWebber Incorporated (incorporated by reference to Exhibit
             4.3 to St. John Knits International's Registration Statement on
             Form S-4 dated September 3, 1999).
      4.4    Subscription Agreement, dated as of July 7, 1999, between St. John
             Knits International, Incorporated and Vestar/SJK Investors LLC,
             relating to the 15.25% Exchangeable Preferred Stock due 2010 of St.
             John Knits International, Incorporated (incorporated by reference
             to Exhibit 4.5 of St. John Knits International's Registration
             Statement on Form S-4 dated September 3, 1999).
     10.1    Credit Agreement, dated July 7, 1999, by and among the Company, the
             Lenders from time to time party thereto and The Chase Manhattan
             Bank, as administrative agent (incorporated by reference to Exhibit
             (a)(1) to St. John Knits International's Amendment No. 4 to Rule
             13e-3 Transaction Statement on Schedule 13E-3 dated July 12, 1999).
     10.2    Voting Agreement, dated as of February 2, 1999, among Vestar
             Capital Partners III, L.P., Vestar/Gray LLC and the parties listed
             on Schedule A thereto (incorporated by reference to Exhibit 10.1 to
             St. John Knits International's Registration Statement on Form S-4
             dated March 1, 1999).
     10.3    Stockholders' Agreement, dated July 7, 1999, by and among the
             Company, SJK, Vestar/Gray Investors LLC, Vestar/SJK Investors LLC
             and the members of Vestar/Gray Investors LLC signatory thereto
             (incorporated by reference to Exhibit 99.3 of St. John Knits
             International's Form 8-K dated July 7, 1999).
     10.4    Amended and Restated Limited Liability Company Agreement of
             Vestar/SJK Investors LLC, dated as of July 7, 1999 (incorporated by
             reference to Exhibit 10.4 to St. John Knits International's
             Amendment No. 1 to the Registration Statement on Form S-4 dated
             November 12, 1999).
     10.5    Management Agreement among St. John Knits, Inc., St. John Knits
             International, Incorporated and Vestar Capital Partners
             (incorporated by reference to Exhibit 10.4 to Amendment No. 1 to
             St. John Knits International's Registration Statement on Form S-4
             dated April 28, 1999).
     10.6    Letter Agreement dated April 27, 1999, between Vestar Capital
             Partners and Robert E. Gray, attaching (i) a summary of terms for
             the Grays' stock options, (ii) a form of St. John Knits
             International, Incorporated 1999 Stock Option Plan and (iii) a form
             of stock option agreement (incorporated by reference to Exhibit
             10.5 to Amendment No. 1 to St. John Knits International's
             Registration Statement on Form S-4 dated April 28, 1999).
     10.7    Superior Court of the State of California County of Orange, Central
             Justice Center Minute Order, dated April 30, 1999 (incorporated by
             reference to Exhibit 10.8 to Amendment No. 2 to St. John Knits
             International's Registration Statement on Form S-4 dated May 17,
             1999).
     10.8    Lease Amendment Agreement dated April 1, 1997 between St. John
             Knits, Inc. and G.M. Properties (increasing the space of the
             corporate headquarters, warehousing and manufacturing facility)
             (incorporated by reference to Exhibit 10.1 to St. John Knits,
             Inc.'s Report on Form 10-K for the fiscal year ended November 2,
             1997).
     10.9    Agreement of Lease dated as of December 31, 1995 by and between St.
             John Knits, Inc. and Rolex Realty Company, Inc. (New York Boutique)
             (incorporated by reference to Exhibit 10.3 to St. John Knits,
             Inc.'s Report on Form 10-K for the fiscal year ended October 29,
             1995).

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     10.10   Lease dated June 1, 1986 between G.M. Properties and St. John
             Knits, Inc. (Corporate Headquarters) (incorporated by reference to
             Exhibit 10.4 to St. John Knits, Inc.'s Registration Statement on
             Form S-1, as amended (file no. 33-57128)).
     10.11   Industrial Real Estate Lease dated November 13, 1985 between
             Alhambra Partners, a California Limited Partnership, and St. John
             Knits, Inc., together with Amendment No. 1 to Industrial Real
             Estate Lease dated November 13, 1985 and Option to Extend Term
             dated November 13, 1985 (Assembling, Sewing) (incorporated by
             reference to Exhibit 10.5 to St. John Knits, Inc.'s Registration
             Statement on Form S-1, as amended (file no. 33-57128)).
     10.12   Agreement of Lease dated January 11, 1991 by and between Rolex
             Realty Company, Inc. and St. John Knits, Inc. together with Lease
             Modification Agreement dated January 11, 1991 and Second Lease
             Modification Agreement dated April 12, 1991 (New York Boutique)
             (incorporated by reference to Exhibit 10.9 to St. John Knits,
             Inc.'s Registration Statement on Form S-1, as amended (file no. 33-
             57128)).
     10.13   Amended and Restated Agreement of Limited Partnership of SJA 1&2,
             Ltd. dated October 31, 1993 by and between St. John Knits, Inc. and
             Ocean Air Charters, Inc. (incorporated by reference to Exhibit
             10.13 to St. John Knits International's Amendment No. 1 to the
             Registration Statement on Form S-4 dated November 12, 1999).
     10.14   Second Amended and Restated Employment Agreement between St. John
             Knits, Inc. and Robert E. Gray (incorporated by reference to
             Exhibit 10.14 to St. John Knits International's Amendment No. 1 to
             the Registration Statement on Form S-4 dated November 12, 1999).
     10.15   Employment Agreement dated as of July 14, 1998 between St. John
             Knits, Inc. and Marie St. John Gray (incorporated by reference to
             Exhibit 10.4 to St. John Knits, Inc.'s Quarterly Report on Form 10-
             Q for the quarter ended August 2, 1998).
     10.16   Employment Agreement dated as of July 14, 1998 between St. John
             Knits, Inc. and Kelly A. Gray (incorporated by reference to Exhibit
             10.5 to St. John Knits, Inc.'s Quarterly Report on Form 10-Q for
             the quarter ended August 2, 1998).
     10.17*  Employment Agreement dated as of January 1, 2001 between St. John
             Knits, Inc. and Bruce Fetter.
     10.18   First Amendment to Second Amended and Restated Employment
             Agreement, effective as of May 4, 2000, between Bob Gray and St.
             John Knits, Inc. (incorporated by reference to Exhibit 10.1 to St.
             John Knits International, Incorporated's Report on Form 10-Q for
             the quarter ended July 30, 2000).
     10.19   St. John Knits, Inc. Employees' Profit Sharing Plan dated as of
             August 21, 1995 (incorporated by reference to Exhibit 10.18 to St.
             John Knits, Inc.'s Report on Form 10-K for the fiscal year ended
             October 29, 1995).
     10.20*  Aircraft Lease dated April 1, 1999 by and between St. John Knits,
             Inc. and Ocean Air Charters, Inc. as Trustee of the SJA 1&2, Ltd.
             Trust (Lease for Company airplane).
     10.21   Form of Indemnity Agreement by and between St. John Knits, Inc.,
             St. John Knits International, Incorporated and each of their
             directors and officers (incorporated by reference to Exhibit 10.21
             to St. John Knits International's Amendment No. 1 to the
             Registration Statement on Form S-4 dated November 12, 1999).
     10.22   Distribution Agreement dated June 11, 1997 by and between St. John
             Knits, Inc. and Gary Farn, Ltd. (incorporated by reference to
             Exhibit 10.26 to St. John Knits, Inc.'s Report on Form 10-K for the
             fiscal year ended November 2, 1997).
     10.23   General Partnership Agreement of St. John-Varian Development
             Company dated April 3, 1995 by and between St. John Knits, Inc. and
             Varian Associates, a California General Partnership (incorporated
             by reference to Exhibit 10.28 to St. John Knits, Inc.'s Report on
             Form 10-K for the fiscal year ended October 29, 1995).
     10.24   Lease Agreement dated April 3, 1995 by and between St. John Knits,
             Inc. and St. John-Varian Development Company (Knitting, Sewing,
             Finishing, Shipping, Administrative Offices) (incorporated by
             reference to Exhibit 10.29 to St. John Knits, Inc.'s Report on Form
             10-K for the fiscal year ended October 29, 1995).
     10.25   Joint Venture Agreement dated July 17, 1997 between St. John Knits,
             Inc. and Commercial Development Co., Ltd. (incorporated by
             reference to Exhibit 10.30 to St. John Knits, Inc.'s Report on Form
             10-K for the fiscal year ended November 2, 1997).
     10.26*  Lease Extension Agreement dated November 20, 2000 between St. John
             Knits, Inc. and G.M. Properties (extending the lease for a
             manufacturing facility).
     10.27*  Lease Extension Agreement dated as of November 20, 2000 between St.
             John Knits, Inc. and Alhambra Partners (extending the lease for one
             of the Company's assembling and sewing facilities).
     10.28   License and Distribution Agreement dated as of August 1, 1997
             between St. John Knits, Inc. and St. John Co., Ltd. (incorporated
             by reference to Exhibit 10.35 to St. John Knits, Inc.'s Report on
             Form 10-K for the fiscal year ended November 2, 1997).
     10.29   Asset Purchase Agreement dated as of August 29, 1996 among St. John
             Knits, Inc., Jakob Schlaepfer & Co. AG and Jakob Schlaepfer, Inc.
             (incorporated by reference to Exhibit 10.39 to St. John Knits,
             Inc.'s Report on Form 10-K for the fiscal year ended November 3,
             1996).

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     10.30   Manufacturing and Supply Agreement dated as of November 9, 1996 by
             and between St. John Knits, Inc. and Calzaturificio M.A.B. S.p.A.
             (incorporated by reference to Exhibit 10.41 to St. John Knits,
             Inc.'s Report on Form 10-K for the fiscal year ended November 3,
             1996).
     10.31   Sales Representative Agreement dated November 13, 1996 by and
             between St. John Knits, Inc. and Hilda Chang (incorporated by
             reference to Exhibit 10.43 to St. John Knits, Inc.'s Report on Form
             10-K for the fiscal year ended November 3, 1996).
     10.32   Unit Price Construction Agreement between St. John de Mexico, S.A.
             de C.V. and Administration Tijuana Industrial, S.A. de C.V.
             (incorporated by reference to Exhibit 10.50 to St. John Knits,
             Inc.'s Report on Form 10-K for the fiscal year ended November 2,
             1997).
     10.33   1999 St. John Knits International, Incorporated Stock Option Plan
             (incorporated by reference to Exhibit 10.33 to St. John Knits
             International's Amendment No. 1 to the Registration Statement on
             Form S-4 dated November 12, 1999).
     10.34   Stock Option Agreement, dated as of July 7, 1999, between St. John
             Knits International and Bob Gray (incorporated by reference to
             Exhibit 10.34 to St. John Knits International's Amendment No. 1 to
             the Registration Statement on Form S-4 dated November 12, 1999).
     10.35   Stock Option Agreement, dated as of July 7, 1999, between St. John
             Knits International and Marie St. John Gray (incorporated by
             reference to Exhibit 10.35 to St. John Knits International's
             Amendment No. 1 to the Registration Statement on Form S-4 dated
             November 12, 1999).
     10.36   Stocion Agreement, dated as of July 7, 1999, between St. John Knits
             International and Kelly A. Gray (incorporated by reference to
             Exhibit 10.36 to St. John Knits International's Amendment No. 1 to
             the Registration Statement on Form S-4 dated November 12, 1999).
     10.37   Firsndment to Amended and Restated Employment Agreement, effective
             as of May 4, 2000, between Kelly A. Gray and St. John Knits, Inc.
             (incorporated by reference to Exhibit 10.1 to St. John Knits
             International, Incorporated's Report on Form 10-Q for the quarter
             ended July 30, 2000).
     10.38   First Amendment to Amended and Restated Employment Agreement,
             effective as of May 4, 2000, between Marie St. John Gray and St.
             John Knits, Inc. (incorporated by reference to Exhibit 10.1 to St.
             John Knits International, Incorporated's Report on Form 10-Q for
             the quarter ended July 30, 2000).
     10.39   Amended and Restated St. John Knits International, Incorporated
             1999 Stock Option Plan, executed May 15, 2000 (incorporated by
             reference to Exhibit 10.1 to St. John Knits International,
             Incorporated's Report on Form 10-Q for the quarter ended July 30,
             2000).
     10.40   Amendment, dated May 15, 2000, to the Management Stockholders'
             Agreement dated as of September 21, 1999 among St. John Knits
             International, Incorporated, Vestar/Gray Investors LLC, Vestar/SJK
             Investors LLC and the Management Investors (incorporated by
             reference to Exhibit 10.1 to St. John Knits International,
             Incorporated's Report on Form 10-Q for the quarter ended July 30,
             2000).

*  Filed herewith

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