MOVADO GROUP, INC. Company’s non U.S. operations are located in jurisdictions with statutory rates below U.S. rates.  The Company believes that the near term future effective tax rate will stabilize in the 25% to 30% range reflecting the Company’s current expectation that domestic earnings will gradually increase as a percentage of the overall earnings mix. However, there can be no assurance of this result as it is dependent on a number of factors, including the mix of foreign to domestic earnings, local statutory tax rates and the Company’s ability to utilize net operating loss carryforwards in certain jurisdictions. Operating activities generated cash flows of $25.3 million in fiscal 2001, $28.3 million in fiscal 2000 and ($9.1) million in fiscal 1999. Cash flows from operating activities in fiscal 2001 were less than fiscal 2000 mainly due to increased inventory positions. Operating cash flows in fiscal 2000 increased from fiscal 1999 due to a reduction in working capital. The Company used cash of $11.7 million in fiscal 2001 for investing activities, primarily for capital expenditures. This compared to a cash inflow of $17.5 million in fiscal 2000 mainly as a result of the sale  of its Piaget business to VLG for $28.4 million in cash. In fiscal 1999, $10.9 million of cash was utilized in  investing activities, primarily for capital expenditures. Capital expenditures amounted to $10.8 million in fiscal 2001 and related primarily to management information systems projects, the addition of one outlet store and two Movado Boutiques and the build out of the new distribution center in Moonachie, New Jersey. The Company’s capital expenditures for fiscal 2000 and fiscal 1999 amounted to $10.1 million and $11.7 million, respectively. Expenditures in fiscal 2000 were primarily related to management information systems projects, the addition of four new outlet stores and one Movado Boutique, and construction of a major tradeshow exhibition facility used annually at the Basel International Watch and Jewellery show. Expenditures in fiscal 1999 were primarily related to planned  expenditures for the Company’s information systems, including retail information systems, expansion of  the Company’s Movado Boutiques and further expansion of the Company’s network of outlet stores. The Company expects that annual capital expenditures in the near term will approximate the levels experienced in fiscal 2001 and 2000 and will relate primarily to relocating its U.S. headquarters, various information systems projects and leasehold improvements associated with additional Movado Boutiques and outlet stores. Cash used in financing activities amounted to $17.4 million in fiscal 2001. This compares to $22.1 million of cash used in and $18.6 million of cash provided by financing activities in fiscal 2000 and 1999, respectively. At January 31, 2001 the Company had two series of Senior Notes outstanding. Senior Notes due January 31, 2005 were originally issued in a private placement completed in fiscal 1994. These notes have required annual principal payments of $5.0 million since January 1998. The Company repaid $5 million and  $10 million in principal amount of these notes in fiscal 2001 and fiscal 2000, respectively. At January 31, 2001, $20 million in principal amount of these notes remained outstanding.  35 Liquidity and Financial Position