<PAGE>










                                   WHITEHALL

                                 JEWELLERS, INC.



















                               ANNUAL REPORT 2001



<PAGE>


                                 COMPANY PROFILE
                -------------------------------------------------



                   FOUNDED IN 1895, WHITEHALL JEWELLERS, INC.

           IS A LEADING NATIONAL SPECIALTY RETAILER OF FINE JEWELRY.

                   THE COMPANY OPERATES 373 STORES IN REGIONAL

              AND SUPERREGIONAL MALLS IN 38 STATES UNDER THE NAMES

                     WHITEHALL JEWELLERS, LUNDSTROM JEWELERS

               AND MARKS BROS. JEWELERS. WHITEHALL JEWELLERS, INC.

                  COMMON STOCK IS TRADED ON THE NEW YORK STOCK

                        EXCHANGE UNDER THE SYMBOL "JWL."




<PAGE>


To Our Shareholders

To paraphrase Charles Dickens, fiscal year 2001 was the best of times and the
worst of times. On the one hand, we had to deal with a recessionary environment
and the tragedy of September 11, both of which negatively impacted our sales. On
the other hand, we took advantage of this difficult macro environment to
improve many elements of our business in order to better position ourselves for
the coming decade. While our core model remains the same, the ambitious game
plan we initiated at the beginning of fiscal 2001 to increase operational
control of our business and improve our current and long-term profitability
has worked. Indeed, in the context of a difficult economy, we posted higher
earnings per share in fiscal 2001.



<PAGE>


We achieved and actually surpassed our expectations through numerous steps:

-    We eliminated two marginally profitable lines of business which did not
add long-term value to our Company. Sales from these lines comprised
approximately 5 percent of sales in fiscal 2000.

-    We improved merchandise gross margins by better controlling unauthorized
discounting. Merchandise gross margins improved by more than 200 basis points
over the prior year.

-    We reduced store personnel expense by carefully controlling staffing levels
while providing significant incentives to our most productive associates.

-    We significantly reduced other SG&A expenses, including credit expenses,
distribution costs and other operating expenses. We expect to see additional
savings from these changes during fiscal year 2002. Looking forward, our
on-going focus on performance monitoring will continue to generate new areas
for savings and efficiencies.

-    We reduced overhead expenses in our support office while investing in high
payback technology projects. Our support office head count is actually lower
today than when we operated over 100 fewer stores several years ago. During 2001
we rolled out a new point of sale system to all stores which has already had a
positive impact on the timeliness and accuracy of actionable daily information.

-    We reduced working capital and paid down debt. We reduced asset inventory
by over 6 percent on a per store basis. As a result of improved working capital
management in combination with higher cash flow from operations, we paid down
$16.2 million of bank debt in 2001. This debt reduction was accomplished while
opening 27 new stores during the year. During 2002, we expect revolver loans to
run tens of millions of dollars lower than in 2001.

     Our fourth quarter performance was extremely gratifying. While sales
declined in the fourth quarter, the trend was encouraging. More important,
thanks to our successful control initiatives, fourth quarter profit was up over
50 percent from the prior year and exceeded expectations.





                                      {2.}
<PAGE>

VISION FOR 2002 AND BEYOND Let me share our vision for the new decade. In order
to do so, I need to briefly reflect on our performance during the 1990's. Our
sales and profit growth for most of the 1990's, ending with the onset of the
recent recession, were stellar. We grew comps at more than 8 percent per year
during this time frame and compounded earning growth at over 25 percent during
this period.

     All of this came to an end with the recent recession. It was a difficult
time, but we took the opportunity to re-engineer parts of our business. In 2001,
we created a sound foundation for long-term profit growth. Indeed, our concept
facilitates this. We take small stores which structurally reduces both our
occupancy expense and personnel expense. By outsourcing consumer credit
processes to a third party, we take no credit risk for the customer's failure to
pay. We carry better quality fine jewelry and during my tenure we have not had a
significant merchandise write down.

     Our model for the 1990's clearly was a success. But, different times
require different strategies. As a result of our focused efforts during fiscal
2001, we have returned to our roots as an efficient, low cost operator. I
believe this is especially important today. While economists see the beginnings
of a recovery, most expect our economy to improve gradually. We believe that our
new structure will permit us to grow our earnings at 20 percent or more over the
next several years with no more than a mid single digit increase in comp store
sales when combined with our planned new store growth. While we plan to open 16
new stores in 2002, we expect new store growth to ramp back up to about 10
percent per year in fiscal 2003 and beyond. We can fully fund this rate of
growth through internally generated cash flow.

     Based on first quarter sales results, I believe we are at an inflection
point in our business. We have made difficult decisions to control operations
and achieve the financial flexibility of a stronger balance sheet. The top line
growth just mentioned, in combination with our more efficient cost structure,
should, I believe, over time return operating margins to historical levels and
eventually result in net income of 6 percent of sales or better. These levels of
improving profitability in combination




                                      {3.}
<PAGE>


with prudent new store growth and a continued focus on working capital
management should result in a higher return on invested capital than in the last
two years. Equally important, our new strategy is a safer more sustainable way
to achieve the lofty levels of profit performance which we demonstrated
throughout the 1990's.

     As I end this letter, our Company is 107 years old. It was founded by Ben
Roth, a distant relative of mine, and then run by my grandfather, Hugo Marks,
for whom I am named. He passed away in 1948, two years before I was born. I have
always regretted not meeting him, but I feel I know him from the stories I have
heard and from being a part of the business which I now manage. After my
grandfather passed away, the business was run by his children, including my
mother, June Patinkin. Along with my brother Matthew and my partner John
Desjardins, I joined the Company in 1979. We have seen it grow from fewer than a
dozen stores to the 373 stores we operate today. Working with many others, we
have created a unique, differentiated and lower risk jewelry store concept which
has a long track record of successful and profitable growth.

     I am the fourth generation of this family to lead this business. I take
this obligation very seriously. I am proud of my executive team including Lynn
Eisenheim, Jon Browne and Manny Brown, our support office staff and our store
supervisors, mangers and associates. It is a group of hard working and caring
individuals who have dedicated themselves to maintaining the principles, ethics
and practices of the successful business of which we are all a part. I am proud
of our team, I am pleased with the results of fiscal year 2001 and I look
forward to the challenges and the opportunities of fiscal year 2002 and beyond.

/s/ HUGH M. PATINKIN

HUGH M. PATINKIN

CHAIRMAN OF THE BOARD

CHIEF EXECUTIVE OFFICER AND PRESIDENT

APRIL 30, 2002




                                      {4.}
<PAGE>



                              Higher earnings per

                              share than fiscal 2000
                    $0.69}
                              despite recessionary

                              environment



                                Solid sales in a
                              tough retail setting


                               [PERFORMANCE CHART]





                              Net reduction
                $16.2 mil}
                              in debt(*)








(*) Total revolver loans and long-term debt.




<PAGE>

                     373 STORES  }
                                 }                        [MAP OF UNITED STATES]
                   IN 38 STATES  }


 5    Alabama                  8   Minnesota              5    Oklahoma

11    Arizona                  7   Massachusetts          3    Oregon

48    California               7   Maryland              13    Pennsylvania

 7    Colorado                 5   Michigan               1    Rhode Island

10    Connecticut              8   Missouri               3    South Carolina

 1    Delaware                23   North Carolina          1   South Dakota

40    Florida                  2   Nebraska                6   Tennessee

14    Georgia                  7   Nevada                 32   Texas

 1    Iowa                     3   New Hampshire          13   Virginia

32    Illinois                15   New Jersey              6   Washington

 4    Indiana                  4   New Mexico              1   West Virginia

 1    Kentucky                20   New York                2   Wisconsin

 1    Louisiana                3   Ohio




<PAGE>
                               THE WHITEHALL MODEL
                     --------------------------------------

Our real estate strategy is a key element of our business model. We identify
prime, high-traffic locations in regional malls throughout the country. Our
stores are small and inviting, with open storefronts that present our
merchandise and sales associates prominently to mall shoppers. We often optimize
a successful store and leverage our regional infrastructure by operating both
Whitehall and Lundstrom stores in the same mall.

   Our merchandise strategy is to serve customers who are interested in higher
quality diamond, precious gem and karat gold jewelry. About half our sales are
of bridal jewelry (historically the most stable part of a jeweler's business),
and traditionally more than 15 percent of our sales are generated by items
priced above $3,000. In fiscal 2001, one-third of our sales were generated by
items priced at $1,500 or more.

   Our "no risk" credit policy protects our business from problems associated
with customers' failure to pay. Working with private label non-recourse credit
purveyors, we offer many customers attractive credit terms. Our credit policy
also preserves strong cash flow for the Company. We generally receive cash
payment for private-label credit purchases in two business days.

   Our strategy for increasing in-store productivity is focused on controlling
payroll costs while we improve operating margins. By linking compensation to
sales, we retain our most productive sales associates. We use promotional
programs at the point of sale which provide customer value and generate in-store
excitement. Our network of 373 stores allows us to thoroughly test and fine tune
promotional campaigns before launching them companywide.

   As in the past, Whitehall Jewellers will use these strategies with the goal
of driving growth, capturing the interest of discriminating customers, and
creating shareholder value through strong earnings and significant returns on
investment.



                                      {7.}
<PAGE>

                              FINANCIAL STATEMENTS
                     --------------------------------------

                9 SELECT HISTORICAL FINANCIAL AND OPERATING DATA

                     10 MANAGEMENT'S DISCUSSION AND ANALYSIS

                  18 STATEMENTS OF OPERATIONS 19 BALANCE SHEETS

              20 STATEMENTS OF STOCKHOLDERS' EQUITY 21 STATEMENTS

                 OF CASH FLOWS 22 NOTES TO FINANCIAL STATEMENTS

                      36 REPORT OF INDEPENDENT ACCOUNTANTS

                            37 CORPORATE INFORMATION




                                      {8.}
<PAGE>


SELECTED HISTORICAL FINANCIAL AND OPERATING DATA

The following table sets forth certain financial and operating data of the
Company. The selected statement of operations data and balance sheet data as of
and for the fiscal year ended January 31, 2002 (fiscal 2001) and each of the
four prior fiscal years are derived from audited financial statements of the
Company. The selected financial information set forth below should be read in
conjunction with "Management's Discussion and Analysis of Financial Condition
and Results of Operations" and the Company's audited financial statements
appearing elsewhere herein.

<TABLE>
<CAPTION>

(in thousands, except per share
and selected operating data)                         Fiscal 2001     Fiscal 2000      Fiscal 1999      Fiscal 1998     Fiscal 1997
------------------------------------------------------------------------------------------------------------------------------------
<S>                                                  <C>              <C>              <C>             <C>             <C>
STATEMENT OF OPERATIONS DATA:

Net sales                                            $   338,911      $   355,065      $   315,406     $   238,942     $   188,898
Cost of sales (including buying
  and occupancy expenses)                                206,574          217,164          182,898         139,368         110,873
------------------------------------------------------------------------------------------------------------------------------------
   Gross profit                                          132,337          137,901          132,508          99,574          78,025
Selling, general and administrative expenses             109,975          115,600           95,252          72,261          55,809
------------------------------------------------------------------------------------------------------------------------------------
   Income from operations                                 22,362           22,301           37,256          27,313          22,216
Interest expense                                           6,902            5,757            5,819           4,123           3,806
------------------------------------------------------------------------------------------------------------------------------------
   Income before income taxes                             15,460           16,544           31,437          23,190          18,410
Income tax expense                                         5,380            6,170           12,103           8,928           7,180
------------------------------------------------------------------------------------------------------------------------------------
   Income before extraordinary items and
     cumulative effect of accounting change               10,080           10,374           19,334          14,262          11,230
Cumulative effect of accounting change, net(1)                --           (3,068)              --              --              --
Extraordinary item, net(2)                                    --               --               --              --          (1,035)
------------------------------------------------------------------------------------------------------------------------------------
   Net income                                        $    10,080      $     7,306      $    19,334     $    14,262     $    10,195
====================================================================================================================================

DILUTED EARNINGS PER SHARE:

   Income before extraordinary
      items and cumulative effect
     of accounting change                            $      0.69      $      0.65      $      1.28     $      0.92     $      0.73

Selected Operating Data:
   Stores open at end of period                              364              348              290             250             191
   Average net sales per store(3)                    $   952,000      $ 1,116,000      $ 1,163,000     $ 1,073,000     $ 1,045,000
   Average net sales per
     gross square foot(4)                            $     1,093      $     1,286      $     1,319     $     1,323     $     1,325
   Average merchandise sale                          $       304      $       319      $       303     $       286     $       273
   Comparable store sales
     (decrease) increase(5)                                (10.7%)           (1.7%)           11.0%            5.8%            4.8%

Balance Sheet Data (at end of period)
   Working Capital                                   $    53,197      $    46,187      $     1,338     $    38,478     $    34,967
   Total assets                                          252,348          255,794          219,363         171,601         120,758
   Total debt                                             45,667           61,860           59,007          49,526          28,907
   Stockholders' equity                                  113,684          103,171           71,928          62,168          47,803
</TABLE>


(1) Reflects net cumulative effect in the change in accounting for layaway
sales. (See Note 2)

(2) Reflects net extraordinary (loss) in connection with the extinguishment of
debt.

(3) Average net sales per store represents the total net sales for stores open
for a full fiscal year divided by the total number of such stores.

(4) Average net sales per gross square foot represents total net sales for
stores open for a full fiscal year divided by the total square feet of such
stores.

(5) Comparable store sales are defined as net sales of stores which are
operating for the month in the current reporting period as well as open for the
same month during the prior year reporting period. Fiscal year 1998 includes
sales from the acquired Jewel Box stores from October 1998 through January 1999.
Fiscal year 1999 includes sales from thee acquired Jewel Box stores from
February through July 1999 and from October through January 2000.




                                      {9.}
<PAGE>

MANAGEMENT'S DISCUSSION AND ANALYSIS

of Financial Condition and Results of Operations

The following discussion and analysis of the Company's financial condition and
results of operations should be read in conjunction with the Company's financial
statements, including the notes thereto.

Background The Company is a leading national specialty retailer of fine jewelry
operating 364 stores in 38 states as of January 31, 2002. The Company
experienced rapid growth over a number of years with net sales increasing to
$338.9 million in fiscal 2001 compared with $91.1 in fiscal 1993 and the number
of Company stores growing to 364 from 122 during that same period. However, a
slowing economy and lower consumer confidence leading up to and during fiscal
2001 resulted in lower sales than in the prior fiscal year. The Company
established a course of action during 2001 to create an improved gross margin
and expense structure. This course of action included a series of targeted
initiatives. During 2001, the Company eliminated trade-ins for merchandise which
customers purchased at a competitor's store and eliminated certain "break-up
sales" in which a customer takes elements of two different pieces of jewelry and
reassembles them into a new piece of jewelry. The Company believes that sales of
this type comprised approximately 5% of total sales in fiscal 2000. The Company
implemented stricter discounting guidelines, which the Company believes resulted
in somewhat lower sales. These initiatives resulted in improved gross
merchandise margin in fiscal 2001 of over 200 basis points for the year versus
fiscal 2000. The Company also targeted reductions in credit expense through the
reduced use of one year no interest pro- motions. As a result, credit expense
declined by 80 basis points compared to fiscal year 2000. Support office
personnel and other expense cuts resulted in a 30 basis point improvement in
support office costs. The Company also made inventory management improvements
which resulted in a reduction of over 6 percent in average store asset
inventory.

   The Company's business is highly seasonal, with a significant portion of its
sales transacted and all of its income generated during the fourth fiscal
quarter ending January 31, 2002. Historically, income generated in the fourth
fiscal quarter ending each January 31 represents from the majority of income to
all of the income generated during the fiscal year. The Company has historically
experienced lower net sales in each of its first three fiscal quarters and
expects this trend to continue. The Company's quarterly and annual results of
operations may fluctuate significantly as a result of factors including, among
others, increases or decreases in comparable store sales, the timing of new
store openings, net sales contributed by new stores, timing of certain holidays,
changes in the Company's merchandise, marketing, or credit programs, general
economic, industry, weather conditions and calamitous national events that
affect consumer spending, as well as pricing, merchandising, marketing, credit
and other programs of competitors.

   The Company offers a layaway program that enables its customers to hold an
item at its stores and pay for it over a one-year period without interest
charges. The Company retains possession of merchandise placed in layaway until
the customer has made all required payments. On December 3, 1999 the SEC issued
Staff Accounting Bulletin 101, "Revenue Recognition in Financial Statements."
Among other things, SAB 101 requires the deferral of revenue from layaway sales
until merchandise is delivered to the customer. Accordingly, the Company
implemented a change in accounting in the first quarter of fiscal year 2000. The
Company has recorded a charge of approximately $5.0 million, ($3.1 million net
of tax) which is presented as the cumulative effect of this accounting change on
February 1, 2000.



                                     {10.}
<PAGE>

Results of Operations The following table sets forth for the periods indicated
certain information derived from the statements of operations of the Company
expressed as a percentage of net sales for such periods.


<TABLE>
<CAPTION>
Percentage of Net sales                              Fiscal 2001   Fiscal 2000      Fiscal 1999
------------------------------------------------------------------------------------------------
<S>                                                  <C>           <C>              <C>
Net sales                                                100%        100.0%           100.0%
   Cost of sales (including buying
     and occupancy expenses)                            61.0          61.1             58.0
------------------------------------------------------------------------------------------------
   Gross profit                                         39.0          38.9             42.0
   Selling, general and administrative expenses         32.4          32.6             30.2
------------------------------------------------------------------------------------------------
Income from operations                                   6.6           6.3             11.8
Interest expense                                         2.0           1.6              1.8
------------------------------------------------------------------------------------------------
   Income before income taxes                            4.6           4.7             10.0
Income tax expense                                       1.6           1.7              3.8
------------------------------------------------------------------------------------------------
   Income before cumulative effect of
     accounting change                                   3.0           3.0              6.2
   Cumulative effect of accounting change, net            --          (0.9)              --
------------------------------------------------------------------------------------------------
   Net income                                            3.0%          2.1%             6.2%
================================================================================================
</TABLE>

Fiscal 2001 Compared to Fiscal 2000 Net sales decreased $16.2 million, or 4.6%,
to $338.9 million in fiscal 2001 from $355.1 million in fiscal 2000. Comparable
store sales decreased $36.4 million, or 10.7%, in fiscal 2001. Additionally,
sales were lower by $9.4 million due to store closings and stores closed for
remodeling for limited periods. These decreases were partially offset by sales
from new store openings of $29.7 million. The total number of merchandise units
sold remained flat compared to fiscal 2000, while the average price per
merchandise item sold decreased by approximately 4.7% to $304 in fiscal 2001
from $319 in fiscal 2000 reflecting a reduction in consumer demand for higher
priced items. Comparable store sales decreased in fiscal 2001 primarily due to
the recession, lower consumer confidence and the elimination during 2001 of
certain promotional practices related to break-up sales and trade-ins (which the
Company believes negatively impacted comparable store sales by 5%). Also, the
use of third party credit decreased to 40.1% of sales in fiscal 2001 from 41.4%
of sales in fiscal 2000. The decrease in credit sales resulted from lower third
party finance contract sales. The Company opened 27 new stores and closed eleven
stores during fiscal 2001, increasing the number of stores operated to 364 as of
January 31, 2002 from 348 as of January 31, 2001.

   Gross profit decreased $5.6 million, or 4.0%, to $132.3 million in fiscal
2001, from $137.9 million in fiscal 2000. As a percentage of net sales, gross
profit increased to 39.0% in fiscal 2001 from 38.9% in fiscal 2000. During
fiscal 2001, gross merchandise margin improved by over 200 basis points compared
to fiscal 2000. This improvement primarily resulted from the impact of
eliminating two promotional practices, outside trade-ins and certain breakup
sales, an improvement in diamond jewelry gross mar- gins, repair margins and the
higher penetration of warranty sales. This increase was offset by a shift in
demand away from slightly higher margin categories of gold, precious and
semi-precious merchandise to the diamond category which carries a somewhat lower
gross margin. The improvement in merchandise gross margin was offset by higher
occupancy, depreciation and buying expenses which grew more than the sales
contributed by the operation of an additional sixteen stores in fiscal 2001. In
addition, an impairment write-off of leasehold improvements and other fixed
assets totaling $0.8 million for seven store closings was taken in the third
quarter.


                                     {11.}
<PAGE>


   Management initiatives reduced selling, general and administrative expenses
by $5.6 million, or 4.9%, to $110.0 million in fiscal 2001 from $115.6 million
in fiscal 2000 while opening 27 new stores. As a percentage of net sales,
selling, general and administrative expenses decreased to 32.4% in fiscal 2001
from 32.6% in fiscal 2000. The dollar decrease primarily related to lower other
expense ($3.8 million), lower credit expense ($3.4 million) somewhat offset by
higher payroll costs ($1.3 million) and higher advertising costs ($0.3 million).
Selling, general and administrative expenses attributable to the 27 stores
opened in fiscal 2001 and the 66 stores opened in fiscal 2000, were absorbed in
developing the overall reduction in selling, general and administrative expenses
and partially offset greater reductions achieved in existing stores. Advertising
expenses increased in fiscal 2001, as compared to fiscal 2000, due to an
expansion of the Company's marketing and promotion programs. Payroll costs
increased in fiscal 2001, as compared to fiscal 2000, primarily due to the
increased number of stores, but were offset by expense reductions to reduce
store payroll hours and control labor rates. The reduction in credit expense
primarily relates to a significant reduction in the use of one year no interest
promotions, also lower sales volumes and reduced credit sales along with
reductions in accounts receivable reserves, which are established to address
exposures to chargebacks on credit receivables that have already been collected.
These reserves were reduced as a result of improved credit practices and
management's belief that the Company's exposure was diminished. The decrease in
other expenses resulted from the increased oversight and consolidation of
service and supply purchases.

   As a result of the factors discussed above, income from operations increased
to $22.4 million in fiscal 2001 from $22.3 million in fiscal 2000. As a
percentage of net sales, income from operations increased to 6.6% in fiscal 2001
from 6.3% in fiscal 2000.

   Interest expense increased $1.1 million, or 19.9%, to $6.9 million in fiscal
2001 from $5.8 million in fiscal 2000. The increase in interest expense is a
result of an increase in average outstanding borrowings partially offset by
lower average interest rates.

   Income tax effective rate decreased from 37.3% in fiscal 2000 to 34.8% in
fiscal 2001 primarily due to lower income tax and estimated accruals. The
Company expects to utilize certain income tax net operating losses expiring over
the next fifteen to twenty years.

Fiscal 2000 Compared to Fiscal 1999 Net sales increased $39.7 million, or 12.6%,
to $355.1 million in fiscal 2000 from $315.4 million in fiscal 1999. Sales from
new stores contributed $50.6 million to the overall increase in net sales. These
increases were offset partially by a comparable store sales decrease of $5.0
million, or 1.7% in fiscal 2000. Sales were $3.5 million lower due to store
closings, together with stores closed for remodeling for limited periods. Lower
sales also resulted from the change in accounting for layaway sales of $2.4
million. The total number of merchandise units sold increased by approximately
6.7% from fiscal 1999, while the average price per merchandise sale increased by
approximately 5.5% to $319 in fiscal 2000 from $303 in fiscal 1999. While the
Company posted strong comparable store sales increase of 11.0% in fiscal 1999,
comparable store sales in fiscal 2000 decreased due to a slowdown in the
economy, lower consumer confidence and poor weather during the Christmas selling
season. The Company opened 66 new stores and closed eight stores during fiscal
2000, increasing the number of stores operated to 348 as of January 31, 2001
from 290 as of January 31, 2000.

   Gross profit increased $5.4 million, or 4.1%, to $137.9 million in fiscal
2000, from $132.5 million in fiscal 1999. As a percentage of net sales, gross
margin decreased to 38.9% in fiscal 2000 from 42.0% in fiscal 1999.
Approximately half of the decrease was due to lower merchandise margins. This
occurred primarily as a result of increased promotional activity including
direct mail coupons as well as a shift in merchandise sales mix to diamonds. The
balance of the gross margin rate decline resulted primarily from less leverage
of occupancy and buying expenses because of lower sales and the $1.0 million
write off of store fixed assets resulting from the decision to close ten
additional stores in the fourth quarter.



                                     {12.}
<PAGE>

   Selling, general and administrative expenses increased $20.3 million, or
21.4%, to $115.6 million in fiscal 2000 from $95.3 million in fiscal 1999. As a
percentage of net sales, selling, general and administrative expenses were 32.6%
in fiscal 2000 and 30.2% in fiscal 1999. The dollar increase primarily related
to higher advertising expenses ($1.0 million), higher payroll expenses ($12.9
million), increased other operating expenses ($4.0 million) and higher credit
expense ($2.9 million). Selling, general and administrative expenses
attributable to the 66 stores opened in fiscal 2000 and the 46 stores opened in
fiscal 1999 accounted for $17.7 million of the total increase in selling,
general and administrative expenses. Advertising expenses increased in fiscal
2000, as compared to fiscal 1999, due to an expansion of the Company's marketing
programs, including direct mail coupons and birthday mailings. Payroll costs
increased in fiscal 2000, as compared to fiscal 1999, primarily due to the
increased number of stores, an effort to upgrade the quality of store sales
associates and managers, training of new store associates and the addition of
more field-based supervisors. Credit sales as a percentage of net sales
increased to 41.4% in fiscal 2000 from 40.0% in fiscal 1999 due to greater
emphasis on private label credit promotions. The usage of private label credit
contributed to an increase in the average price per merchandise sale and higher
total sales.

   As a result of the factors discussed above, income from operations decreased
40.2%, to $22.3 million in fiscal 2000 from $37.3 million in fiscal 1999. As a
percentage of net sales, income from operations decreased to 6.3% in fiscal 2000
from 11.8% in fiscal 1999.

   Interest expense was unchanged from fiscal 1999 at $5.8 million. As a
percentage of net sales, interest expense decreased to 1.6% in fiscal 2000 from
1.8% in fiscal 1999.

Liquidity and Capital Resources The Company's cash requirements consist
principally of funding inventory at existing stores, funding capital
expenditures and acquisitions of new stores and working capital (primarily
inventory) associated with the Company's new stores. The Company's primary
sources of liquidity have historically been cash flow from operations and bank
borrowings under the Company's revolver, which was amended effective October 31,
2001 as discussed in Note (11) of the January 31, 2002 financial statements.

Fiscal 2001 The Company's cash flow provided by operating activities increased
to $45.2 million in fiscal 2001 compared to cash flow used in operating
activities of $6.2 million in fiscal 2000. Increases in accounts payable ($12.3
million) and decreases in merchandise inventories ($7.1 million) as compared to
a prior year increase ($27.8 million) were the primary changes in 2001. The
decrease in inventory was achieved while the Company operated an additional 16
stores resulting in a decrease of over 6 percent in average store inventory.
Since the majority of the inventory reduction took place in central inventory,
store assortments continued to be very strong. Additional focus was given to the
timing and flow of merchandise purchases which contributed to the increase in
accounts payable. Cash used in investing activities included the funding of
capital expenditures of $12.7 million related primarily to the opening of 27 new
stores in fiscal 2001.

   Cash generated by financing activities included proceeds received from gold
transferred and consigned under the gold consignment facility ($3.1 million) and
proceeds from the exercise of options ($0.4 million). The Company utilized cash
for financing activities in fiscal 2001 primarily to (i) decrease revolver
borrowings under the credit facility ($12.0 million), (ii) decrease outstanding
checks ($13.6 million), (iii) make scheduled principal payments on the term loan
($4.3 million) and (iv) purchase gold under the gold consignment facility ($6.1
million). Stockholders equity increased from $103.2 million at January 31, 2001
to $113.7 million at January 31, 2002.

   Fiscal 2000 The Company's cash flows from operating activities decreased to
negative $6.2 million in fiscal 2000 from $13.1 million in fiscal 1999. Lower
income from operations together with increases in merchandise inventories ($27.8
million) and decreases in accrued taxes ($3.1 million) were partially offset by



                                     {13.}
<PAGE>

cumulative effect of the accounting change for layaways ($3.1 million),
decreases in accounts receivable ($2.0 million), increases in accounts payable
($0.3 million), accrued expenses and long term liabilities ($1.2 million),
prepaid expenses ($0.4 million), and depreciation and amortization ($10.4
million). Cash used in investing activities included the funding of capital
expenditures ($22.7 million) related primarily to the opening of 66 new stores
in fiscal 2000. Cash generated from financing activities included (i) sale of
2,325,000 shares of common stock to the public at $19.5625 generating net
proceeds of approximately $42.5 million, (ii) an increase in revolver borrowings
under the credit facility ($6.1 million), (iii) proceeds from gold sold and
consigned under the gold consignment facility ($2.0 million) and (iv) proceeds
from the exercise of stock options ($0.4 million). The Company utilized cash for
financing activities in fiscal 2000 primarily to purchase treasury stock as part
of the stock buy-back program ($19.0 million) and to make scheduled principal
payments on the term loan ($3.3 million). Stockholders' equity increased from
$71.9 million at January 31, 2000 to $103.2 million at January 31, 2001.

Other Liquidity and Capital Resources Elements During fiscal 2001, the Company
amended its $166.5 million credit facility. The Company has a $150.0 million
revolving credit facility and a $9.8 million term loan facility (originally
$16.5 million, less principal repayments) through June 30, 2004. A gold
consignment facility of up to $40.0 million is available under the revolving
credit facility. Interest rates and commitment fees charged on the unused
facility float based on the Company's quarterly performance. Since these
interest rates are determined by reference to Eurodollar or prime rates, changes
in market interests rates can materially affect the Company's interest expense.
Borrowings under the revolver are limited to a borrowing base determined based
on the levels of the Company's inventory and accounts receivable. Availability
under the revolver is based on amounts outstanding thereunder, including the
value of consigned gold which fluctuates based on current gold prices. The peak
outstanding borrowing under the Company's revolver during fiscal 2001 and 2000
was $90.4 million and $82.1 million, respectively. The Company periodically
determines the value of the unused facility based upon a formula the result of
which varies with fluctuations in inventory levels, aggregate borrowings and
performance versus certain financial covenant ratios. The unused facility was
$57.2 million as of January 31, 2002.

   The Company has a gold consignment facility as part of its credit facility
pursuant to which the Company accepts as consignee, and is responsible to return
at a future date, a fixed number of ounces of gold. The Company has the
opportunity to enter into gold consignments with certain third party financial
institutions. The Company provides the third party financial institution with
title to a certain number of troy ounces of gold held in the Company's existing
merchandise inventory in exchange for cash. The Company then consigns the gold
from the third party financial institution, pursuant to the gold consignment
agreement. This agreement entitles the Company to use the gold in the ordinary
course of its business.

   The gold consignment facility is a transfer of title in specified quantities
of the gold content of the Company's inventory. The Company continues to bear
responsibility for damage to the inventory, as is the case in all of its
consigned inventory arrangements with its other vendors. Similar to other
consigned inventories in the possession of the Company (for which the Company
bears risk of loss but does not possess title), the value of the inventory is
not included in the assets of the Company.

   The periodic charges paid by the Company are computed based on a percentage
of the value of the gold consigned. Therefore, an increase in the price of gold
could substantially increase the annual costs to the Company of the gold
consignment and the eventual cost to the Company upon the termination of this
arrangement. As of January 31, 2002, the Company had transferred and
simultaneously consigned 66,500 troy ounces of gold for $23.3 million. In April
2001, the company transferred and simultaneously consigned 12,000 troy ounces of
gold for $3.1 million under its gold consignment facility. The Company
subsequently purchased 22,000 troy ounces of gold for $6.1 million under the
gold consignment facility. On June 30, 2004, the terms of the gold consignment
agreement require the Company to deliver the specified



                                     {14.}
<PAGE>

quantities of consigned gold back to the third party financial institution at
the end of the facility (which currently expires in 2004). Physical delivery can
be made from the Company's inventory or from gold acquired by the Company in the
open market. As an alternative to physical delivery of these specific troy
ounces of gold, the Company can elect to purchase the consigned quantities at
the end of the consignment facility at the current market price for gold on that
date or the consignment facility may be renewed.

   A substantial portion of the merchandise sold by the Company is carried on a
consignment basis prior to sale or is otherwise financed by vendors, thereby
reducing the Company's direct capital investment in inventory. The peak
consigned inventories from merchandise vendors were $87.0 million and $76.1
million during fiscal 2001 and 2000, respectively. The willingness of vendors to
enter into such arrangements may vary substantially from time to time based on a
number of factors, including the merchandise involved, the financial resources
of vendors, interest rates, availability of financing, fluctuations in gem and
gold prices, inflation, the financial condition of the Company, the vendors'
understanding that the Company bears risk of loss but does not possess title,
and a number of economic or competitive conditions in the jewelry business or
the general economy. Any change in these relationships could have a material
adverse effect on the Company's results of operations or financial condition.

   On March 6, 2000 the Company completed the sale to the public of 2,325,000
shares of its common stock at an offering price of $19.5625 per share. The
Company received net proceeds of approximately $42.5 million, which it used to
reduce bank debt, to accelerate new store openings and for working capital and
general corporate purposes.

   On July 14, 2000, the Company announced that its Board of Directors had
authorized the repurchase of up to $15.0 million of its common stock. The
repurchase program authorized the Company to purchase shares over an 18-month
period in the open market or through privately negotiated transactions. On
August 23, 2000, the Company announced that its Board of Directors had
authorized a $5.0 million increase in the stock repurchase program. As of
January 31, 2002, the Company has repurchased 2,317,500 shares at a total cost
of approximately $19.0 million under this program.

   The Company's inventory levels and working capital requirements have
historically been highest in advance of the Christmas season. The Company has
funded these seasonal working capital needs through borrowings under the
Company's revolver and increases in trade payables and accrued expenses.

   Management expects that cash flows from operating activities and funds
available under its revolving credit facility will be sufficient to support the
Company's current new store expansion program and seasonal working capital needs
for the foreseeable future.

Interest Rate Risk The Company's exposure to changes in interest rates relates
primarily to its borrowing activities to fund business operations. The Company
principally uses floating rate borrowings under its revolving credit and term
loan facilities. The Company currently does not use derivative financial
instruments to protect itself from fluctuations in interest rates.

   The information below summarizes the Company's interest rate risk associated
with debt obligations outstanding as of January 31, 2002. The table presents
principal cash flows and related interest rates by fiscal year of maturity or
repricing date.

                                    Expected Fiscal Year of Maturity/Repricing
                                  ----------------------------------------------
(in millions)                        2002       2003       2004         Total
--------------------------------------------------------------------------------
Variable rate (a)                  $ 45.0                             $  45.0
Average interest rate                6.21%                               6.21%
Fixed rate                                               $ .640       $  .640
Average interest rate                                     12.15%        12.15%
--------------------------------------------------------------------------------

(a) Includes $9.8 million of term debt with scheduled principal payments due
between April 2002 and September 2003. All term loans are variable rate, which
reprice within 2002. Interest rates charged on the facility float based on the
Company's quarterly financial performance.



                                     {15.}
<PAGE>

Gold Price Risk The Company's exposure to changes in the price of gold relates
to its borrowing activities under its gold consignment facility. The Company
accepts as consignee, and is responsible to return at a future date, a fixed
number of ounces of gold. The periodic charges paid by the Company are computed
based on a percentage of the value of the gold consigned. An increase in the
price of gold could substantially increase the annual costs to the Company of
the gold consigned and the eventual costs to the Company upon the termination of
this arrangement.

   The information below summarizes the Company's market risks associated with
gold consigned as of January 31, 2002. The table below presents the number of
troy ounces of gold consigned and the current average gold prices by fiscal year
of maturity.

Expected Fiscal Year of Maturity

                                           Expected Fiscal Year of Maturity
                                     -------------------------------------------
                                       2002       2003        2004        Total
--------------------------------------------------------------------------------

Troy ounces of gold consigned                               66,500       66,500
Gold price as of January 31, 2002                          $   282      $   282
--------------------------------------------------------------------------------

In June 1998, the Financial Accounting Standards Board (FASB) issued Statement
of Financial Accounting Standards (SFAS) No. 133, "Accounting for Derivative
Instruments and Hedging Activities" (the effective date of which was amended in
September 1999 by SFAS No. 137). This Statement was further amended in June 2000
by SFAS No. 138. SFAS No. 133 and the amendments found in SFAS No. 138 require
that entities recognize all derivatives as either assets or liabilities in the
statement of financial position and measure those instruments at fair value.
Effective February 1, 2001, the Company adopted FAS133, as amended, with no
impact on its financial statements.
   The following summarizes the Company's contractual obligations at January 31,
2002:

                                           Due Fiscal  Due Fiscal            Due
                                    Total        2002   2003-2005     Thereafter
--------------------------------------------------------------------------------

Gold consigned                   $ 18,753    $     --    $ 18,753(*)    $     --
Long-term debt                      9,750       4,500       5,250             --
Subordinated debt                     640          --         640             --
Operating leases                  195,559      27,405      76,395         91,759
--------------------------------------------------------------------------------
Total contractual obligations    $224,702    $ 31,905    $101,038       $ 91,759
================================================================================

(*)Represents the dollar value of the Company's commitment to deliver 66,500
ounces of gold, based on gold prices as of January 31, 2002.

Critical Accounting Policies The Company's critical accounting policies,
including the assumption and judgments underlying them, are disclosed in the
Notes to the Financial Statements. These policies have been consistently applied
in all material respects and address such matters as revenue recognition,
inventory valuation, depreciation methods and asset impairment recognition.
While the estimates and judgments associated with the application of these
policies may be affected by different assumptions or conditions, the Company
believes the estimates and judgments associated with the reported amounts are
appropriate in the circumstances.

Accounting of Business Combinations and Goodwill and Other Tangibles In July,
2001, the Financial Accounting Standard Board issued Statement No. 141 ("SFAS
141"), "Business Combinations and Statement No. 142 ("SFAS 142"), "Goodwill and
Other Intangible Assets." The requirements of SFAS 141 are effective for any
business combination accounted for by the purchase method that is completed
after June 30, 2001. Under SFAS 142, goodwill and indefinite lived intangible
assets are no longer



                                     {16.}
<PAGE>


amortized but are reviewed annually (or more frequently if impairment indicators
arise) for impairment. With respect to goodwill and intangible assets acquired
prior to July 1, 2001, the Company will adopt SFAS 142 on February 1, 2002.
Goodwill amortized for the year ended January 31, 2002 was $262,000. The Company
does not expect the adoption of SFAS 142 to result in an impairment charge,
although the Company has not yet completed its transitional impairment
assessment.

Accounting for the Impairment of Disposal of Long-Lived Assets In August 2001,
the Financial Accounting Standards Board issued Statement No.144 "(SFAS 144),"
"Accounting for the impairment of Disposal of Long-Lived Assets." SFAS 144
establishes accounting requirements for impaired long-lived assets to be held
and used, long-lived assets to be disposed of other than by sale and long-lived
assets to be disposed of by sale. These requirements of SFAS 144 will become
effective for the Company as of February 1, 2002. The Company has not completed
its assessment of the affect of this standard at this time, but does not expect
it to be significant at this time.

Transactions with Affiliates and Related Parties The Company has concluded that
the related party trans- actions the Company is engaged in are immaterial.

Inflation The Company believes that inflation generally has not had a material
effect on the results of its operations. There is no assurance, however, that
inflation will not materially affect the Company in the future.

Forward-Looking Statements This release contains certain forward-looking
statements (as such term is defined in Section 27A of the Securities Act of 1933
and Section 21E of the Securities Exchange Act of 1934) and information relating
to the Company that are based on the current beliefs of management of the
Company as well as assumptions made by and information currently available to
management including statements related to the markets for our products, general
trends and trends in our operations or financial results, plans, expectations,
estimates and beliefs. In addition, when used in this report, the words
"anticipate," "believe," "estimate," "expect," "intend," "plan," "predict" and
similar expressions and their variants, as they relate to the Company or our
management, may identify forward-looking statements. Such statements reflect our
judgment as of the date of this report with respect to future events, the
outcome of which is subject to certain risks, including the factors described
below, which may have a significant impact on our business, operating results or
financial condition. Investors are cautioned that these forward-looking
statements are inherently uncertain. Should one or more of these risks or
uncertainties materialize, or should underlying assumptions prove incorrect,
actual results or outcomes may vary materially from those described herein.
Whitehall Jewellers undertakes no obligation to update forward-looking
statements. The following factors, among others, may impact forward looking
statements contained in this report: (1) economic conditions, calamitous
national events, the retail sales environment and our ability to execute our
business strategy and the related effects on comparable store sales and other
results; (2) the extent and results of our store expansion strategy and
associated occupancy costs, and access to funds for new store openings; (3) the
seasonality of our business; (4) the extent and success of our marketing and
promotional programs; (5) personnel costs and the extent to which we are able to
retain and attract key personnel; (6) competition; (7) the availability and cost
of consumer credit; (8) relationships with suppliers; (9) our ability to
maintain adequate information systems capacity and infrastructure; (10) our
leverage and cost of funds; (11) our ability to maintain adequate loss
prevention measures; (12) fluctuations in raw material prices, including
diamond, gem and gold prices; (13) the extent and results of our E-commerce
strategies and those of others; (14) regulation affecting the industry
generally, including regulation of marketing practices; (15) the successful
integration of acquired locations and assets into our existing operations; and
(16) the risk factors identified from time to time in our filings with the
Securities and Exchange Commission.



                                     {17.}
<PAGE>
STATEMENTS OF OPERATIONS

For the Years Ended January 31, 2002, 2001 and 2000

<TABLE>
<CAPTION>

(in thousands, except per share data)                 2002          2001           2000
---------------------------------------------------------------------------------------
<S>                                              <C>           <C>            <C>
Net sales                                        $ 338,911     $ 355,065      $ 315,406
Cost of sales (including buying
  and occupancy expenses)                          206,574       217,164        182,898
---------------------------------------------------------------------------------------
   Gross profit                                    132,337       137,901        132,508
Selling, general and administrative expenses       109,975       115,600         95,252
---------------------------------------------------------------------------------------
   Income from operations                           22,362        22,301         37,256
Interest expense                                     6,902         5,757          5,819
---------------------------------------------------------------------------------------
   Income before income taxes                       15,460        16,544         31,437
Income tax expense                                   5,380         6,170         12,103
---------------------------------------------------------------------------------------
   Income before cumulative effect
     of change in accounting, net                   10,080        10,374         19,334
Cumulative effect of change
  in accounting, net                                    --        (3,068)            --
---------------------------------------------------------------------------------------
   Net income                                    $  10,080     $   7,306      $  19,334
=======================================================================================

Basic earnings per share:
   Income before cumulative effect
     of change in accounting, net                $    0.69     $    0.66      $    1.33
   Cumulative effect of change
     in accounting, net                                 --         (0.19)            --
---------------------------------------------------------------------------------------
   Net income                                    $    0.69     $    0.47      $    1.33
=======================================================================================
   Weighted average common share
     and common share equivalents                   14,584        15,617         14,560
=======================================================================================
Diluted earnings per share:
   Income before cumulative effect
     of change in accounting, net                $    0.69     $    0.65      $    1.28
   Cumulative effect of change
     in accounting, net                                 --         (0.19)            --
---------------------------------------------------------------------------------------
   Net income                                    $    0.69     $    0.46      $    1.28
=======================================================================================
   Weighted average common share
     and common share equivalents                   14,685        15,964         15,129
=======================================================================================
</TABLE>


The accompanying notes are an integral part of the financial statements.




                                     {18.}
<PAGE>

BALANCE SHEETS

As of January 31, 2002 and January 31, 2001


<TABLE>
<CAPTION>
(in thousands, except per share amounts)                                         2002           2001
----------------------------------------------------------------------------------------------------
<S>                                                                         <C>            <C>
ASSETS

Current assets:
   Cash                                                                     $   2,741      $   2,926
   Accounts receivable, net                                                     1,189          1,406
   Merchandise inventories                                                    173,931        178,053
   Other current assets                                                           973            688
   Deferred income taxes, net                                                   2,704          2,817
   Deferred financing costs                                                       511            402
----------------------------------------------------------------------------------------------------
       Total current assets                                                   182,049        186,292
Property and equipment, net                                                    63,914         62,080
Goodwill, net                                                                   5,662          5,924
Deferred income taxes, net                                                         --            527
Deferred financing costs                                                          723            971
----------------------------------------------------------------------------------------------------
       Total assets                                                         $ 252,348      $ 255,794
====================================================================================================

LIABILITIES AND STOCKHOLDERS' EQUITY

Current liabilities:
   Revolver loans                                                           $  35,277      $  47,220
   Current portion of long-term debt                                            5,250          4,250
   Customer deposits                                                            3,963          4,214
   Accounts payable                                                            56,695         57,982
   Income taxes                                                                 3,226          2,940
   Accrued payroll                                                              6,270          5,170
   Other accrued expenses                                                      18,171         18,329
----------------------------------------------------------------------------------------------------
       Total current liabilities                                              128,852        140,105

Total long-term debt, net of current portion                                    5,140         10,390
Deferred income taxes, net                                                      2,012             --
Other long-term liabilities                                                     2,660          2,128
----------------------------------------------------------------------------------------------------
       Total liabilities                                                      138,664        152,623

Commitments and contingencies Stockholders' equity:
   Common Stock, ($.001 par value; 30,000,000 shares authorized;
     17,809,830 shares and 17,733,387 shares issued, respectively)                 17             17
   Class B Common Stock, ($1.00 par value; 29,567 shares authorized;
     142 shares and 148 shares issued and outstanding, respectively)               --             --
   Additional paid-in capital                                                 103,767        103,341
   Retained earnings                                                           38,870         28,790
----------------------------------------------------------------------------------------------------
                                                                              142,654        132,148
   Treasury stock, 3,200,209 and 3,200,876 shares, respectively at cost       (28,970)       (28,977)
----------------------------------------------------------------------------------------------------
       Total stockholders' equity, net                                        113,684        103,171
----------------------------------------------------------------------------------------------------
       Total liabilities and stockholders' equity                           $ 252,348      $ 255,794
====================================================================================================
</TABLE>

The accompanying notes are an integral part of the financial statements.



                                     {19.}
<PAGE>

STATEMENTS OF STOCKHOLDERS' EQUITY

For the Years Ended January 31, 2002, 2001 and 2000

<TABLE>
<CAPTION>
                                                             Class B        Additional
                                                  Common      Common           Paid-in          Retained          Treasury
(in thousands)                                     Stock       Stock           Capital          Earnings             Stock
---------------------------------------------------------------------------------------------------------------------------
<S>                                             <C>          <C>              <C>               <C>               <C>
Balance at January 31, 1999                     $     15          --          $ 60,003          $  2,150          $     --
Net income                                            --          --                --            19,334                --
Exercise of options                                   --          --               423                --                --
Treasury stock repurchase                             --          --                --                --            (9,997)
---------------------------------------------------------------------------------------------------------------------------
Balance at January 31, 2000                           15          --            60,426            21,484            (9,997)
Net income                                            --          --                --             7,306                --
Exercise of options                                   --          --               380                --                --
Equity offering                                        2          --            42,535                --                --
Treasury stock repurchase                             --          --                --                --           (18,980)
---------------------------------------------------------------------------------------------------------------------------
Balance at January 31, 2001                           17          --           103,341            28,790           (28,977)
Net income                                            --          --                --            10,080                --
Exercise of options                                   --          --               426                --                --
Stock issued under
  Employee Stock Purchase Plan                        --          --                --                --                 7
---------------------------------------------------------------------------------------------------------------------------
Balance at January 31, 2002                     $     17          --          $103,767          $ 38,870          $(28,970)
===========================================================================================================================
</TABLE>


The accompanying notes are an integral part of the financial statements.



                                     {20.}
<PAGE>
STATEMENTS OF CASH FLOWS

For the Years Ended January 31, 2002, 2001 and 2000

<TABLE>
<CAPTION>

(in thousands)                                                                         2002                2001                2000
-----------------------------------------------------------------------------------------------------------------------------------
<S>                                                                             <C>                 <C>                 <C>
Cash flows from operating activities:
   Net income                                                                   $    10,080         $     7,306         $    19,334
   Adjustments to reconcile net income to net
     cash provided by (used in) operating activities:
   Cumulative effect of accounting change, net                                           --               3,068                  --
   Depreciation and amortization                                                     10,715               9,198               7,586
   Store closing impairment charge                                                      822               1,118                 302
   Loss on disposition of assets                                                         74                  75                  95
   Changes in assets and liabilities, net of effects of acquisition:
       Decrease in accounts receivable, net                                             217               1,753                 138
       (Increase) in layaway receivables, net                                            --                  --              (2,124)
       Decrease (increase) in merchandise inventories,
        net of gold consignment                                                       7,133             (27,774)            (30,943)
       (Increase) decrease in other current assets                                     (285)                421                 220
       Increase (decrease) in deferred taxes, net                                     2,652                (645)               (255)
       Increase in accounts payable                                                  12,277                 273              11,404
       (Decrease) increase customer deposits                                           (251)                260                  --
       Increase (decrease) in income taxes                                              286              (2,455)              2,089
       Increase in accrued liabilities and
        long-term liabilities                                                         1,473               1,154               5,242
-----------------------------------------------------------------------------------------------------------------------------------
       Net cash provided by (used in) operating activities                           45,193              (6,248)             13,088
Cash flows from investing activities:
       Capital expenditures                                                         (12,695)            (22,688)            (22,199)
-----------------------------------------------------------------------------------------------------------------------------------
       Net cash used in investing activities                                        (12,695)            (22,688)            (22,199)
Cash flows financing activities:
   Borrowing on revolver loan                                                     1,043,464             444,147             343,362
   Repayment of revolver loan                                                    (1,055,407)           (438,044)           (334,146)
   Repayment of term loan                                                            (4,250)             (3,250)             (2,750)
   Purchase of gold consignment                                                      (6,118)                 --                  --
   Proceeds from gold consignment                                                     3,107               2,016               3,015
   Proceeds from equity offering                                                         --              42,537                  --
   Financing costs                                                                     (348)               (441)                 --
   Proceeds from exercise of stock options                                              426                 380                 423
   Proceeds from stock issued under the
     Employee Stock Purchase Plan                                                         7                  --                  --
   Purchase of treasury stock                                                            --             (18,980)             (9,997)
   (Decrease) increase in outstanding checks, net                                   (13,564)              1,071               9,635
-----------------------------------------------------------------------------------------------------------------------------------
       Net cash (used in) provided by financing activities                          (32,683)             29,436               9,542
-----------------------------------------------------------------------------------------------------------------------------------
       Net change in cash and cash equivalents                                         (185)                500                 431
Cash and cash equivalents at beginning of period                                      2,926               2,426               1,995
-----------------------------------------------------------------------------------------------------------------------------------
Cash and cash equivalents at end of period                                      $     2,741         $     2,926         $     2,426
===================================================================================================================================
Supplemental disclosures of cash flow information:
   Interest paid during year                                                    $     6,372         $     5,383         $     5,419
   Income taxes paid during year                                                $     2,274         $     9,319         $    10,188
-----------------------------------------------------------------------------------------------------------------------------------
</TABLE>

The accompanying notes are an integral part of the financial statements.



                                     {21.}
<PAGE>

NOTES TO FINANCIAL STATEMENTS

(1) DESCRIPTION OF OPERATIONS

The financial statements of Whitehall Jewellers, Inc. (the "Company") include
the results of the Company's chain of specialty retail fine jewelry stores. The
Company operates exclusively in one business segment, specialty retail jewelry.
The Company has a national presence with 364 and 348 stores located in 38 and 36
states operating in regional or super-regional shopping malls as of January 31,
2002 and January 31, 2001, respectively.

(2) ACCOUNTING CHANGE

On December 3, 1999 the SEC issued Staff Accounting Bulletin 101, "Revenue
Recognition in Financial Statements" ("SAB 101"). SAB 101, among other things,
requires that revenue from layaway sales should only be recognized upon delivery
of merchandise to the customer. The accounting required by this bulletin became
effective for the Company the first fiscal quarter of the fiscal year beginning
after December 15, 1999. Accordingly, the Company adopted this pronouncement in
the first quarter of fiscal year 2000.

   The Company recorded a charge of approximately $3.1 million during the first
quarter, which is net of a $1.9 million tax benefit, presented as a cumulative
effect of this accounting change as of February 1, 2000.

   The proforma impact of the change in accounting for layaway sales on the
Statement of Operations for the three years ended January 31, 2002, 2001 and
2000 is as follows:

                                              2002          2001          2000
------------------------------------------------------------------------------
Net sales                               $  338,911    $  355,065    $  312,421
Cost of sales                              206,574       217,164       181,463
   Gross profit                            132,337       137,901       130,958
------------------------------------------------------------------------------
Income from operations                  $   22,362    $   22,301    $   35,706
==============================================================================

(3) EQUITY OF OFFERING

In March 2000, the Company completed an offering of Common Stock (the
"Offering"). The Company issued 2,325,500 shares of Common Stock, and received
proceeds of $42.5 million net of underwriting discounts and offering costs. The
Company used the proceeds to reduce the Company's indebtedness and for working
capital and other general corporate purposes.

(4) COMMON STOCK REPURCHASE PROGRAM

On July 14, 2000, the Board of Directors authorized the Company to repurchase up
to $15.0 million of its Common Stock. On August 23, 2000, the Company announced
that its Board of Directors had increased the authorization to purchase shares
under the Stock Repurchase Program from $15.0 million to $20.0 million of the
Company's Common Stock. Shares repurchased by the Company reduce the weighted
average number of common shares outstanding for basic and diluted earnings per
share calculations.

   As of January 31, 2002, the Company had repurchased 2,317,500 shares under
this Stock Repurchase Program at a total cost of approximately $19.0 million.

(5) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Cash and Cash Equivalents For purposes of the statements of cash flows, the
Company considers any temporary cash investments purchased with an original
maturity of three months or less to be cash equivalents.

Merchandise Inventories Merchandise inventories are stated principally at the
lower of average cost or market. The Company also obtains merchandise from
vendors under various consignment agreements.



                                     {22.}
<PAGE>


The consigned inventory and related contingent obligations are not reflected in
the Company's financial statements. At the time of sale of consigned merchandise
to customers, the Company records the purchase liability and the related cost of
such merchandise in cost of sales.

Property and Equipment Property and equipment are carried at cost, less
accumulated depreciation and amortization. Furniture and fixtures are
depreciated on a straight-line basis over estimated useful lives ranging from
five to ten years. Software costs are amortized on a straight-line basis over
five years. Leasehold improvements are amortized on a straight-line basis over
the lesser of the remaining lease terms or ten years.

   Upon retirement or disposition of property and equipment, the applicable cost
and accumulated depreciation are removed from the accounts and any resulting
gains or losses are included in the results of operations.

Long Lived Assets When facts and circumstances indicate potential impairment,
the Company evaluates the recoverability of long-lived asset carrying values,
using projections of undiscounted future cash flows over remaining asset lives.
When impairment is indicated, any impairment loss is measured by the excess of
carrying values over fair values.

Goodwill Goodwill represents the excess of cost over the fair value of assets
acquired in purchase business combinations and is amortized over 25 years using
the straight-line method.

Deferred Financing Costs In connection with the Company's financing agreements,
the Company incurred various financing costs, which have been deferred on the
Company's balance sheet and are amortized over the terms of the agreements.

Accounts Payable Accounts payables include outstanding checks which were
$7,140,000 and $20,703,000 as of January 31, 2002 and 2001, respectively.

Store Preopening Expense Expenses associated with the opening of new store
locations are expensed in the period such costs are incurred.

Lease Expense The Company leases the premises for its office facilities and all
of its retail stores. Certain leases require increasing annual minimum lease
payments over the term of the lease. Minimum lease expense under these
agreements is recognized on a straight-line basis over the terms of the
respective leases. Virtually all leases covering retail stores provide for
additional contingent rentals based on a percentage of sales. These costs are
expensed in the period incurred.

Revenue Recognition The Company recognizes revenue from sales of merchandise
when earned, as required by SAB 101. Revenue is recognized when delivery has
occurred and title and risk of loss have transferred to the customer. The
Company accrues an estimate based on historical experience for expected returns
which have not been presented.

   Effective February 1, 2000, the Company changed its accounting policy for
layaway sales in accordance with SAB 101, which requires that revenue from
layaway sales be deferred until merchandise is delivered to the customer. The
Company charges the customer to cover the costs of administration for inactive
layaways.

   Prior to February 1, 2000, layaway receivables included those sales to
customers under the Company's layaway policies, which had not been fully
collected as of the end of the fiscal year. Layaway receivables are net of
customer payments received to date and net of an estimate for payments on
layaway sales which the Company anticipated would never be consummated. This
estimate is based on the Company's historical calculation of layaway sales.




                                     {23.}
<PAGE>

Earnings Per Share Basic earnings per share is computed by dividing net earnings
available to holders of common stock by the weighted average number of shares of
common stock outstanding. Diluted earnings per share are computed assuming the
exercise of all dilutive stock options. Under these assumptions, the weighted
average number of common shares outstanding is increased accordingly. The
Company completed a three-for-two stock split effected in the form of a stock
dividend payable on January 4, 2000 to all common shareholders of record at the
close of business on December 24, 1999. The financial statements have been
restated for all periods presented to give effect to this stock split.

Income Taxes Deferred income taxes are recognized for the tax consequences in
future years of differences between the tax basis of assets and liabilities
and their financial reporting amounts based on enacted tax laws and statutory
tax rates applicable to the periods in which the differences are expected to
affect taxable earnings. A valuation allowance is established when necessary to
reduce deferred tax assets to the amount expected to be realized.

Stock Based Compensation The Company accounts for stock based compensation
according to Accounting Principles Board Opinion No. 25, "Accounting for Stock
Issued to Employees," as interpreted, and will continue to do so in the future.
However, the disclosure requirements of SFAS No.123, "Accounting for Stock-Based
Compensation" have been adopted.

Management Estimates The preparation of financial statements in conjunction with
generally accepted accounting principles generally accepted in the United States
of America requires management to make estimates and assumptions that affect the
reported amounts of assets and liabilities and disclosure of contingent assets
and liabilities at the date of the financial statements and the reported amounts
of revenues and expenses during the reporting period. Valuation reserves for
inventory, accounts receivable, sales returns and deferred tax assets are
significant examples of the use of such estimates. Actual results could differ
from those estimates.

Account for Derivative Instruments and Hedging Activities Recent Accounting
Pronouncements- Statement of Financial Accounting Standards No. 133, "Accounting
for Derivative Instruments and Hedging Activities" ("FAS 133"), as amended by
Statement of Financial Accounting Standards No. 137, was required to be adopted
by the Company for its fiscal year beginning December 1, 2000. FAS 133 requires
disclosures of the objectives for holding or issuing derivative instruments, the
context to under- stand the objectives and the strategies for achieving the
objectives, disclosures related to the impact of derivatives as reflected in the
statement of comprehensive income as well as requiring that all derivative
instruments be recognized as either assets or liabilities in the balance sheet
and measured at their fair value. FAS 133 also requires changes in the fair
value of derivatives to be recorded in each period in current earnings or
comprehensive income, depending on the intended use of the derivatives. The
Company has adopted FAS 133, as amended, which has no impact on its financial
statements.

Accounting of Business Combinations and Goodwill and Other Tangibles In July,
2001, the Financial Accounting Standard Board issued Statement No. 141 ("SFAS
141"), "Business Combinations and Statement No. 142 ("SFAS 142"), "Goodwill and
Other Intangible Assets." SFAS 141 is effective for any business combination
completed after June 30, 2001 and requires the application of the purchase
method. Under SFAS 142, goodwill and indefinite lived intangible assets are no
longer amortized but are reviewed annually (or more frequently if impairment
indicators arise) for impairment. With respect to goodwill and intangible assets
acquired prior to July 1, 2001, the Company will adopt SFAS 142 on February 1,
2002. Goodwill amortized for the year ended January 31, 2002 was $262,000. The
Company does not expect the adoption of SFAS 142 to result in an impairment
charge, although the Company has not yet completed its transitional impairment
assessment.



                                     {24.}
<PAGE>


Accounting for the Impairment of Disposal of Long-Lived Assets In August 2001,
the Financial Accounting Standards Board issued Statement No. 144 ("SFAS 144"),
"Accounting for the Impairment of Disposal of Long-Lived Assets." SFAS 144
establishes accounting requirements for impaired long-lived assets to be held
and used, long-lived assets to be disposed of other than by sale and long-lived
assets to be disposed of by sale. These requirements of SFAS 144 will become
effective for the Company as of February 1, 2002. The Company has not completed
its assessment of the affect of this standard at this time, but does not expect
it to be significant at this time.

(6) ACQUISITION

On September 10, 1998, the Company acquired substantially all of the assets of
36 jewelry stores operating under the Jewel Box name from Carlyle & Co. Jewelers
and its affiliates, headquartered in Greensboro, North Carolina. The Company
purchased all associated inventory, accounts receivable and fixed assets for
approximately $22 million (including fees and other costs) in cash (the
"Acquisition"). The Acquisition has been accounted for using the purchase method
of accounting, and, accordingly, the purchase price has been allocated to the
assets purchased and the liabilities assumed based upon the fair values at the
date of Acquisition. The excess of the purchase price over the fair values of
the net assets acquired was $6.6 million and has been recorded as goodwill,
which is being amortized on a straight-line basis over 25 years. Goodwill
amortization was $262,000 for each of the years ended January 31, 2002, 2001 and
2000.

(7) ACCOUNTS RECEIVABLE, NET

The Company has charged bad debt expense of $577,000, $2,331,000 and $1,180,000
for doubtful accounts for the years ended January 31, 2002, 2001 and 2000,
respectively.

(in thousands)                                           2002          2001
----------------------------------------------------------------------------
Accounts receivable                                $    1,862    $    2,880
Less: allowance for doubtful accounts                    (673)       (1,474)
----------------------------------------------------------------------------
Accounts receivable, net                           $    1,189    $    1,406
============================================================================

(8) INVENTORY

As of January 31, 2002 and January 31, 2001, merchandise inventories consisted
of:

(in thousands)                                           2002          2001
----------------------------------------------------------------------------
Raw materials                                      $    6,958    $    7,104
Finished goods inventory                              166,973       170,949
----------------------------------------------------------------------------
Merchandise inventories                            $  173,931    $  178,053
============================================================================

Raw materials consist primarily of diamonds, precious gems, semi-precious gems
and gold. Included within finished goods inventory are allowances for inventory
shrink, scrap, and miscellaneous costs of $3,003,000 and $3,527,000 for the
years ended January 31, 2002 and 2001, respectively. As of January 31, 2002 and
2001, merchandise consignment inventories held by the Company that are not
included in its balance sheets total $80,425,000 and $76,079,000, respectively.
In addition, gold consignments of $23,298,000 and $26,310,000 are not included
in the Company's balance sheets at January 31, 2002 and 2001, respectively (see
Note 11, Financing Arrangements) as the title to such gold has passed to the
consignor and is subject to the same risk of physical loss as other inventory
held on consignment by the Company.




                                     {25.}

<PAGE>
   Certain merchandise procurement, distribution and warehousing costs are
allocated to inventory. As of January 31, 2002 and 2001, these amounts included
in inventory are $3,306,000 and $2,958,000, respectively. The amounts comprising
the overhead pool of capitalizable costs were $5,211,000, $4,964,000 and
$3,888,000 for the years ended January 31, 2002, 2001 and 2000, respectively.

(9) PROPERTY AND EQUIPMENT

Property and equipment includes the following as of January 31:

(in thousands)                                            2002             2001
--------------------------------------------------------------------------------
Furniture and fixtures, and software                 $  71,245        $  63,767
Leasehold improvements                                  37,417           34,745
--------------------------------------------------------------------------------
Property and equipment                                 108,662           98,512
Accumulated depreciation and amortization              (43,051)         (35,149)
Reserve for store closing                               (1,697)          (1,283)
--------------------------------------------------------------------------------
Property and equipment, net                          $  63,914        $  62,080
================================================================================

Depreciation expense was $9,955,000, $8,558,000 and $7,355,000 for the years
ended January 31, 2002, 2001, and 2000, respectively.

   The Company has recognized impairment charges included in costs of sales,
measured as the excess of net book value of furniture, fixtures and leasehold
improvements over their fair values, associated with managements decision to
close stores. The Company recorded $822,000, $1,118,000 and $302,000 in
impairment charges for the years ended January 31, 2002, 2001 and 2000. As of
January 31, 2002 the Company has completed the closure of eleven stores without
requiring significant adjustment to the recorded charges and continues to pursue
the closure of the remainder.

   The amount of internally developed software capitalized during the year
ending January 31, 2002 was $198,000 and is included in furniture, fixtures and
software. Amortization of capitalized software for the year ended January 31,
2002 was $17,000. The remaining unamortized costs included in property and
equipment as of January 31, 2002 was $ 181,000.

(10) LONG-TERM LIABILITIES

Included in long-term liabilities at January 31, 2002 and 2001 are $2,660,000
and $2,128,000 respectively, of deferred lease costs.

(11) FINANCING ARRANGEMENTS

Effective October 31, 2001, the Company amended certain terms and conditions
within its Amended and Restated Revolving Credit, Term Loan and Gold Consignment
Agreement (the "Credit Agreement"), with its bank group to provide for a total
facility of $166.5 million through June 30, 2004. Interest rates and the
commitment fee charged on the unused portion of the facility float based upon
the Company's quarterly financial performance.

   Under this Credit Agreement, the banks have a collateral security interest in
substantially all of the assets of the Company. The Credit Agreement contains
certain restrictions on capital expenditures, investments, payment of dividends,
assumption of additional debt, acquisitions and divestitures, among others, and
requires the Company to maintain certain financial ratios based on levels of
funded debt, capital expenditures and earnings before interest, taxes,
depreciation and amortization.

WHITEHALL JEWELLERS                   [26.]


<PAGE>

Revolver Loan The revolving loan facility under the Credit Agreement is
available up to a maximum of $150.0 million, including amounts borrowed under
the gold consignment facility, and is limited by a borrowing base computed based
on the value of the Company's inventory and accounts receivable. Availability
under the revolver is based on amounts outstanding thereunder, including the
value of consigned gold which fluctuates based on current gold prices. Interest
rates and commitment fees on the unused facility float based on the Company's
quarterly financial performance.

   Current interest rates for borrowings under this agreement are, at the
Company's option, based on Eurodollar rates or the banks' prime rate. Interest
is payable monthly for prime borrowings and upon maturity for Eurodollar
borrowings. The interest expense under the revolver facility for the years ended
January 31, 2002, 2001 and 2000 was $4,650,000, $3,449,000, and $3,279,000,
respectively, reflecting a weighted average interest rate of 6.4%, 8.0% and
6.9%, respectively.

Term Loan The term loan facility under the Credit Agreement is available up to a
maximum of $9.8 million (originally $16.5 million, less principal repayments).
Current interest rates for these borrowings are, at the Company's option, based
on Eurodollar rates or the banks' prime rate. Interest is payable monthly for
prime borrowings and upon maturity for Eurodollar borrowings. Interest rates and
the commitment fee charged on the unused facility float based on the Company's
quarterly financial performance. The interest expense under the term loan
facility for the years ended January 31, 2002, 2001 and 2000 was $841,000,
$1,348,000 and $1,372,000, respectively for these borrowings, reflecting a
weighted average interest rate of 6.7%, 8.3% and 7.3%, respectively.

Gold Consignment Facility The Company has the opportunity to enter into Gold
Consignments with certain third party financial institutions. The Company
provides the third party financial institution with title to a certain number of
troy ounces of gold held in the Company's existing merchandise inventory in
exchange for cash at the current market price of gold. The Company then consigns
the gold from the third party financial institution, pursuant to the Gold
Consignment Agreement. This agreement entitles the Company to use the gold in
the ordinary course of its business. The Gold Consignment Facility is a transfer
of title in specified quantities of the gold content of the Company's inventory
(a non-financial asset) to a financial institution in exchange for cash. The
Company continues to bear responsibility for damage to the inventory, as is the
case in all of its consigned inventory arrangements with its other vendors.

   The Company has accounted for the transaction as a reduction in its
inventories, as it has transferred title to the gold to the financial
institution. Similar to other consigned inventories in the possession of the
Company (for which the Company bears risk of loss but does not possess title),
the value of the inventory is not included in the assets of the Company. The
terms of the Gold Consignment Agreement require the Company to deliver the
specified quantities of consigned gold back to the third party financial
institution at the end of the facility (which currently expires in 2004).
Physical delivery can be made from the Company's inventory or from gold acquired
by the Company in the open market. As an alternative to physical delivery of
these specific troy ounces of gold, the Company can elect to purchase the
consigned quantities at the end of the Consignment Facility at the current
market price for gold on that date.

   During fiscal 2001, the Company sold and simultaneously consigned an
additional 12,000 troy ounces of gold for $3.1 million under the gold
consignment facility. Subsequently, the Company purchased 22,000 troy ounces of
gold held for the consignor in connection with the consignment facility for a
total of $6.1 million dollars. As of January 31, 2002, the Company had sold and
simultaneously consigned a net total of 66,500 troy ounces of gold for $23.3
million under a gold consignment facility. The facility provides for the sale of
a maximum of 115,000 troy ounces of gold or $40.0 million. Under the agreement,
the Company pays consignment fees the rate set by the bank based on the London
Interbank Bullion Rates payable monthly. A commitment fee on the unused portion
of the gold consignment facility is

                                      [27.]                   2001 ANNUAL REPORT
<PAGE>

payable monthly. Interest rates and the commitment fees charged on the unused
facility float based on the Company's quarterly financial performance. The
consignment fees totaled $804,000, $520,000, and $699,000 for the years ended
January 31, 2002, 2001 and 2000, respectively, at a weighted average rate of
3.7%, 2.5% and 3.6%, respectively. On June 30, 2004, the Company is required to
return or repurchase 66,500 troy ounces of gold under this agreement at the
prevailing gold rate in effect on that date, or the facility may be renewed.
Based on the gold rate as of January 31, 2002, the market value of the gold
consigned was $18.8 million.

Subordinated Notes In conjunction with the Company's initial public offering in
fiscal year 1996, subsequent follow-on offering in fiscal year 1996 and
recapitalization in fiscal year 1997, the Company issued Senior Subordinated
Notes totaling $20,000,000 due in 2004. Series A Senior Subordinated Notes due
2004 (the "Series A Notes") totaling $12,000,000 bear interest at 12.15% per
annum payable in cash, with interest payments due quarterly. The Series B Senior
Subordinated Notes due 2004 (the "Series B Notes") totaling $8,000,000 bear
interest at 15% per annum increasing 1% per annum beginning May 1, 1998, payable
in cash, with interest payments due quarterly.

   The Series A Notes subsequently were exchanged for the Series C Notes which
are identical in all material respects to the Series A Notes, except that the
Series C Notes have been registered under the Securities Act of 1933 (the
"Securities Act"). The Series B Notes subsequently were exchanged for the Series
D Notes which are identical in all material respects to the Series B Notes,
except that the Series D Notes have been registered under the Securities Act.

   In conjunction with the Company's Common Stock offering in November 1996, the
Series D Notes were redeemed at a premium. In January 1998, $1,480,000 of the
Series C Notes were redeemed for a total of $1,554,000. In January 1998, the
Company completed a tender offer to purchase $9,880,000 of the Series C Notes at
a premium of $1,087,000. Interest expense was $78,000 for each of the years
ended January 31, 2002, 2001 and 2000, respectively.

   As of January 31, 2002 and 2001, the current portion and noncurrent portion
of long-term debt consisted of the following:

(in thousands)                                             2002         2001
--------------------------------------------------------------------------------
Current portion of long-term debt:
   Term loan                                           $    5,250    $    4,250
--------------------------------------------------------------------------------
       Total                                           $    5,250    $    4,250
================================================================================

Long-term debt, net of current portion:
   Term loan                                           $    4,500    $    9,750
   Subordinated debt                                          640           640
--------------------------------------------------------------------------------
       Total                                           $    5,140    $   10,390
================================================================================

Future scheduled maturities under the loan agreements, excluding the revolver
for January 31, 2002, are as follows:
                                                   Subordinated
(in thousands)                              Term       Notes           Total
--------------------------------------------------------------------------------
January 31, 2003                          $ 5,250      $  --         $ 5,250
January 31, 2004                            4,500         --           4,500
April 30, 2004                                 --        640             640
--------------------------------------------------------------------------------
Total                                     $ 9,750      $ 640         $10,390
================================================================================

   The carrying amount of the Company's borrowings under the Credit Agreement
and other long-term borrowings approximates fair value.

WHITEHALL JEWELLERS                  [28.]
<PAGE>

( 1 2 )   D E F E R R E D   F I N A N C I N G   C O S T S

In conjunction with the Company's recapitalization of its financing arrangements
in fiscal year 1997 and the establishment of the Credit Agreement in fiscal year
1998 and the amendments to the Credit Agreement through fiscal year 2002, the
Company incurred $348,000, and $441,000 in deferred financing costs for the
years ended January 31, 2002 and 2001, respectively. The remaining costs are
being amortized over the extended term of the Credit Agreement. Amortization
expense in the years ended January 31, 2002, 2001 and 2000 was $487,000,
$378,000 and $362,000, respectively.

( 1 3 )   I N C O M E   T A X E S

The temporary differences between the tax basis of assets and liabilities and
their financial reporting amounts that give rise to a significant portion of the
deferred tax asset and deferred tax liability and their approximate tax effects
are as follows, as of January 31:
<TABLE>
<CAPTION>
                                                             2002                 2001
                                                  ---------------------------------------------
                                                  Temporary      Tax       Temporary     Tax
(in thousands)                                    Difference    Effect     Difference   Effect
-----------------------------------------------------------------------------------------------
<S>                                                <C>         <C>         <C>         <C>
Merchandise inventories                            $    677    $    249    $  1,753    $    666
Accrued rent                                          2,833       1,043       2,394         910
Accounts receivable                                   1,011         372       2,085         792
Sales returns                                         1,525         561       1,427         542
Vacation pay                                          1,379         507       1,148         436
Professional fees                                       500         184         200          76
Store closing payables                                  531         195         322         122
Other                                                   626         231         762         290
State income tax net operating loss carryforward        552         203           0           0
-----------------------------------------------------------------------------------------------
   Total deferred tax asset                           9,634       3,545      10,091       3,834
-----------------------------------------------------------------------------------------------
Property and equipment, net                           7,017       2,582         717         272
Other liability                                         737         271         575         218
-----------------------------------------------------------------------------------------------
   Total deferred tax liability                      (7,754)     (2,853)     (1,292)       (490)
-----------------------------------------------------------------------------------------------
   Net deferred tax asset                          $  1,880    $    692    $  8,799    $  3,344
===============================================================================================
</TABLE>
The net current and non-current components of deferred income taxes recognized
in the balance sheet at January 31 are as follows:
<TABLE>
<CAPTION>

(in thousands)                                                               2002         2001
-----------------------------------------------------------------------------------------------
<S>                                                                        <C>         <C>
Net current assets                                                         $  2,704    $  2,817
Net non-current asset (liability)                                            (2,012)        527
-----------------------------------------------------------------------------------------------
   Net deferred tax asset                                                  $    692    $  3,344
===============================================================================================
</TABLE>

   The Company has gross state net operating loss carryforwards of $7,732,000,
which have been benefited for deferred income tax purposes. The Company expects
to utilize certain income tax net operating losses expiring over the next
fifteen to twenty years.

                                      [29.]                   2001 ANNUAL REPORT
<PAGE>

The income tax expense for the years ended January 31, consists of the
following:
<TABLE>
<CAPTION>

(in thousands)                                      2002          2001          2000
-----------------------------------------------------------------------------------------------
<S>                                              <C>           <C>           <C>
Current expense                                  $    3,563    $    7,217    $   12,559
Deferred tax expense                                  1,817        (1,047)         (456)
-----------------------------------------------------------------------------------------------
Total income tax expense                         $    5,380    $    6,170    $   12,103
===============================================================================================
</TABLE>
   The provision for income taxes on income differs from the statutory tax
expense computed by applying the federal corporate tax rate of 34%, 34% and 35%
for the years ended January 31, 2002, 2001, and 2000, respectively.
<TABLE>
<CAPTION>

(in thousands)                                      2002          2001          2000
-----------------------------------------------------------------------------------------------
<S>                                              <C>           <C>           <C>
Taxes computed at statutory rate                 $    5,256    $    5,671    $   11,002
Sales income tax expense, net of federal benefit        291           504         1,395
Other                                                  (167)           (5)         (294)
-----------------------------------------------------------------------------------------------
Total income tax expense                         $    5,380    $    6,170    $   12,103
===============================================================================================
</TABLE>

( 1 4 )   C O M M O N   S T O C K

Following are the number of shares issued and outstanding for each of the
Company's classes of Common Stock as of January 31:
<TABLE>
<CAPTION>

                                                                           Class B
                                                       Common Stock      Common Stock         Treasury
(in thousands)                                    (par value $.001) (par value $.001)            Stock
-------------------------------------------------------------------------------------------------------
<S>                <C> <C>                              <C>                      <C>               <C>
Balance at January 31, 1999                             15,278,789               152               (26)
Exercise of Options/Restricted Shares                       74,331                --                --
Purchase of Treasury Stock                                      --                --          (883,350)
-------------------------------------------------------------------------------------------------------
Balance at January 31, 2000                             15,353,120               152          (883,376)
Conversion of Class B Common Stock                             151                (4)               --
Exercise of Options/Restricted Shares                       54,616                --                --
Issuance of Stock                                        2,325,500                --                --
Purchase of Treasury Stock                                      --                --        (2,317,500)
=======================================================================================================
Balance at January 31, 2001                             17,733,387               148        (3,200,876)
Conversion of Class B Common Stock                             213                (6)               --
Exercise of Options/Restricted Shares                       76,230                --                --
Issuance of Stock                                               --                --               667
-------------------------------------------------------------------------------------------------------
Balance at January 31, 2002                             17,809,830               142        (3,200,209)
=======================================================================================================
</TABLE>

   Each share of Class B Common Stock is exchangeable into common stock on a
35.4 for 1 basis. Each share of Common Stock is entitled to one vote, and each
share of Class B Common Stock is entitled to 35.4 votes on each matter submitted
to stockholders for vote.

( 1 5 )   E A R N I N G S   P E R   C O M M O N   S H A R E

Basic earnings per share is computed by dividing net earnings available to
holders of common stock by the weighted average number of shares of common stock
outstanding. Diluted earnings per share are computed assuming the exercise of
all dilutive stock options. Under these assumptions, the weighted average number
of common shares outstanding is increased accordingly.

WHITEHALL JEWELLERS                    [30.]

<PAGE>

The following table reconciles the numerators and denominators of the basic and
diluted earnings per share computations (in thousands, except per share
amounts):
<TABLE>
<CAPTION>

                                                2002                 2001                  2000
                                       ----------------------------------------------------------------
                                         Basic      Diluted    Basic      Diluted    Basic      Diluted
-------------------------------------------------------------------------------------------------------
<S>                                    <C>        <C>        <C>        <C>        <C>        <C>
EPS Numerator:
Net income                             $ 10,080   $ 10,080   $  7,306   $  7,306   $ 19,334   $ 19,344
EPS Denominator:
Average common shares outstanding:       14,584     14,584     15,617     15,617     14,560     14,560
Effect of dilutive securities:
Stock options                                --        101        --         347        --          569
-------------------------------------------------------------------------------------------------------
Total shares                             14,584     14,685     15,617     15,964     14,560     15,129
=======================================================================================================
Earnings per share                     $   0.69   $   0.69   $   0.47   $   0.46   $   1.33   $   1.28
=======================================================================================================
Stock options excluded from the
  calculation of diluted earnings
  per share (due to their antidilutive
  effect on the calculation)                --       1,133        --         483        --          11
========================================================================================================
</TABLE>
   On July 14, 2000, the Board of Directors authorized the Company to repurchase
up to $15.0 million of its Common Stock. On August 23, 2000, the Company
announced that its Board of Directors had increased the authorization to
purchase shares under the Stock Repurchase Program from $15.0 million to $20.0
million of the Company's Common Stock. Shares repurchased by the Company reduce
the weighted average number of common shares outstanding for basic and diluted
earnings per share calculations.

   During the years ended January 31, 2001 and 2000, the Company had repurchased
2,317,500 and 883,350 shares under Stock Repurchase Programs at a total cost of
approximately $19.0 million and $10.0 million, respectively.

( 1 6 )   E M P L O Y E E   B E N E F I T   P L A N

Effective October 1, 2001, the Company established an Employee Stock Purchase
Plan ("ESPP") for the benefit of substantially all employees. Employees become
eligible to participate in the ESPP after six consecutive months of employment
and the employee's customary employment is more than 20 hours per week. Through
employee contributions to the ESPP, the employee can purchase Common Stock of
the Company at 90% of the market value.

   Effective October 1, 1997, the Company established a 401(k) Plan (the "Plan")
for the benefit of substantially all employees, the assets of which are not
commingled with Company funds. Employees become eligible to participate in the
Plan after one year of service, which is defined as at least one year of
employment and 1,000 hours worked in that year. The Company may make
discretionary contributions to the Plan. No such discretionary contributions
have been made since inception.

   In 1988, the Company established an Employee Stock Ownership Plan (the
"ESOP"), which is a non-contributory plan established to acquire shares of the
Company's Class B Common Stock for the benefit of all employees. In conjunction
with completion of the Company's initial public offering and recapitalization
of its financing arrangements, the Company restructured the ESOP. As of January
31, 1998, all remaining shares had been released to participants. As long as the
Company's stock is publicly traded, the Company is not required to repurchase
shares from ESOP participants. The only remaining activity of the ESOP is to
make distributions to existing participants or beneficiaries.

                                      [31.]                   2001 ANNUAL REPORT
<PAGE>

( 1 7 )   S T O C K   P L A N S

On September 28, 1995, the Company authorized the equivalent of 1,039,647
options under the Incentive Stock Option Plan (the "1995 Plan") to be granted to
certain members of the Company's management. Options for the equivalent of
1,032,342 were issued at exercise prices ranging from $0.60 to $0.66 per share.
These prices were greater than or equal to the fair market value at the date of
grant, as determined by an independent third party valuation. The options allow
the holders to purchase Common Stock within a period ranging from five years to
five years and eight months, at a fixed price. No expense was recorded in
connection with these options. On September 28, 1995, the Company granted the
equivalent of 759,222 shares of Restricted Stock to certain members of the
Company's management. During fiscal 1995, the Company recognized $461,000 in
compensation expense relating to the issuance of these shares. This amount
represented the fair market value of the shares at the grant date, as determined
by an independent third party valuation.

   In April 1996, the Company approved the 1996 Long-Term Incentive Plan (the
"1996 Plan"). Under the 1996 Plan, the Company may grant incentive stock options
("ISOs") within the meaning of Section 422 of the Internal Revenue Code of 1986,
as amended, or nonqualified stock options.

   In addition, the Company may grant stock appreciation rights ("SARs"), bonus
stock awards which are vested upon grant, stock awards which may be subject to a
restriction period and specified performance measures and performance shares.
Performance shares are rights, contingent upon the attainment of the performance
measures within a specified performance period, to receive one share of Common
Stock, which may be restricted, or the fair market value of such performance
share in cash. A total of 1,156,784 shares of Common Stock have been reserved
for issuance under the 1996 Plan. Grants may be made under the 1996 Plan during
the ten years after its effective date. Options granted under the 1996 Plan
generally vest in four equal annual installments and expire ten years after the
date of grant. Options granted under the 1996 Plan generally vest in four equal
annual installments and expire ten years after the date of grant. Options and
shares granted under the plans are subject to forfeiture based on, among other
things, the nature and timing of the termination of employment.

   The Company approved the 1997 Long-Term Incentive Plan (the "1997 Plan") on
February 24, 1997 and the stockholders adopted the 1997 Plan on June 5, 1997. On
June 8, 1999 and June 1, 2000, the stockholders adopted an amendment to the
1997 Plan to increase the Common Stock reserved for issuance under the 1997
Plan. Under the 1997 Plan, the Company may grant ISOs or nonqualified stock
options. The 1997 Plan also provides for the grant of SARs, bonus stock awards
which are vested upon grant, stock awards which may be subject to a restriction
period and specified performance measures, and performance shares. Performance
shares are rights, contingent upon the attainment of performance measures within
a specified performance period, to receive one share of Common Stock, which may
be restricted, or the fair market value of such performance share in cash. A
total of 2,100,000 shares of Common Stock have been reserved for issuance under
the 1997 Plan. Grants may be made under the 1997 Plan during the ten years after
its effective date. Options granted under the 1997 Plan generally vest in four
equal annual installments and expire ten years after the date of grant.

   In December 1998, the Company adopted the 1998 Non-Employee Director Stock
Option Plan (the "1998 Plan"), effective February 1, 1998. Under the 1998 Plan,
non-employee directors may elect to receive all or a designated amount of their
directors' fee in the form of stock options. A total of 37,500 shares have been
reserved for issuance under the 1998 Plan. Grants may be made during the ten
years after its effective date. Options granted under the 1998 Plan vest at the
end of the quarter in which the date of grant occurs and expire ten years after
the date of grant. As of January 31, 2002, 35,003 options had been granted under
the 1998 Plan.


WHITEHALL JEWELLERS                    [32.]
<PAGE>

Option activity for the years ended January 31, 2000, 2001 and 2002 was as
follows:
<TABLE>
<CAPTION>

                                                                      Weighted-Average             Options
                                                          Shares       Exercise Price          Exercisable
----------------------------------------------------------------------------------------------------------
<S>                                                     <C>               <C>                     <C>
Balance at January 31, 1999                              1,556,103         $   9.02                659,057
==========================================================================================================
Options granted                                            711,751            12.96
Options exercised                                          (74,331)            6.15
Options canceled                                           (21,902)           10.93
----------------------------------------------------------------------------------------------------------
Balance at January 31, 2000                              2,171,621         $  10.38                980,633
==========================================================================================================
Options granted                                            429,363            21.38
Options exercised                                          (54,616)            7.24
Options canceled                                           (48,951)           12.84
----------------------------------------------------------------------------------------------------------
Balance at January 31, 2001                              2,497,417         $  12.29              1,460,575
==========================================================================================================
Options granted                                            469,849             8.03
Options exercised                                          (76,230)           11.75
Options canceled                                          (120,318)           19.39
----------------------------------------------------------------------------------------------------------
Balance at January 31, 2002                              2,770,718         $  11.36              1,567,816
==========================================================================================================
</TABLE>

   The weighted-average fair value of 469,849, 429,363, and 711,751, options
granted was $8.03, $13.37 and $12.97, for the years ended January 31, 2002, 2001
and 2000, respectively.

   The following table summarizes the status of outstanding stock options as of
January 31, 2002:
<TABLE>
<CAPTION>
                                                                           Options Exercisable
                                                                           -------------------
                             Options Outstanding
                   Number of    Weighted Average         Weighted-     Number of         Weighted-
Range of             Options           Remaining           Average       Options           Average
Exercise Prices  Outstanding    Contractual Life    Exercise Price   Exercisable    Exercise Price
---------------------------------------------------------------------------------------------------
<S>                  <C>                    <C>             <C>          <C>                <C>
$6.31 - $8.65        647,329                7.99            $ 7.83       189,812            $ 7.48
$8.66 - $9.33      1,049,028                4.33              9.33     1,044,613              9.33
$9.34 - $13.33       696,637                7.19             11.42       199,416             11.43
$13.34 - $24.25      377,724                8.01             22.91       133,975             22.65
---------------------------------------------------------------------------------------------------
$6.31 - $24.25     2,770,718                6.40            $11.36     1,567,816            $10.51
===================================================================================================
</TABLE>

   Had the Company elected to apply the provisions of SFAS No. 123, "Accounting
for Stock Based Compensation" regarding recognition of compensation expense to
the extent of the calculated fair value of stock options granted during the
years ended January 31, 2002, 2001 and 2000, reported net income and earnings
per share would have been reduced as follows:
<TABLE>
<CAPTION>

(in thousands, except per share amounts)                           2002          2001        2000
---------------------------------------------------------------------------------------------------
<S>                                                             <C>           <C>         <C>
Net income, as reported                                         $ 10,080      $  7,306    $ 19,334
Pro forma net income                                               7,621         3,723      17,037
Earnings per share, as reported                                     0.69          0.46        1.28
Pro forma earnings per share                                        0.52          0.23        1.13
---------------------------------------------------------------------------------------------------
</TABLE>


                                      [33.]                   2001 ANNUAL REPORT
<PAGE>
   For purposes of pro forma net income and earnings per share calculation in
accordance with SFAS No. 123, for each option granted under the 1995 Plan during
the year ended January 31, 1996, the fair value is estimated as of the date of
grant using the Minimum Value method using a weighted-average assumption of 6.1%
risk-free interest rate and 5.5 year option life. For each option granted during
the years ended January 31, 2002, 2001 and 2000, the fair value is estimated
using the Black-Scholes option- pricing model. The assumptions used are as
follows:


                                2002       2001       2000       1999      1998
--------------------------------------------------------------------------------
Risk-free interest rate         5.1%       6.6%       5.3%       5.3%      6.4%
Dividend yield                    0          0          0          0         0
Option life                 7 years     7 years    6 years    6 years   6 years
Volatility                       44%        53%        39%        40%       47%
--------------------------------------------------------------------------------

( 1 8 )   C O M M I T M E N T S   A N D   C O N T I N G E N C I E S

The Company is involved in legal actions arising in the normal course of
business. It is the opinion of management that additional liabilities, if any,
resulting from these legal issues, are not expected to have a material adverse
effect on the Company's financial condition or consolidated results of
operations.

   The Company leases the premises for its office facilities and all of its
retail stores, and certain office and computer equipment generally under
noncancelable agreements for periods ranging from three to 13 years. Most leases
require the payment of taxes, insurance and maintenance costs. Future minimum
rentals under noncancelable operating leases as of January 31, 2002 are as
follows:

Years ending January 31, (in thousands)                   Amount
-------------------------------------------------------------------
2003                                                     $  27,405
2004                                                        26,804
2005                                                        25,643
2006                                                        23,948
2007                                                        23,137
-------------------------------------------------------------------
Thereafter                                                  68,622
-------------------------------------------------------------------
                                                         $ 195,559
===================================================================

Total rental expense for all operating leases for the years ended January 31, is
as follows:

                                               2002          2001          2000
--------------------------------------------------------------------------------
Rental expense:
   Minimum                                $  26,730     $  23,179     $  17,950
   Rentals based on sales                     1,137         2,247         2,520
   Other                                        592           573           554
--------------------------------------------------------------------------------
                                          $  28,459     $  25,999     $  21,024
================================================================================


WHITEHALL JEWELLERS                    [34.]

<PAGE>

( 1 9 )   U N A U D I T E D   Q U A R T E R LY   R E S U L T S

The Company's results of operations fluctuate on a quarterly basis. The
following table sets forth summary unaudited financial information of the
Company for each quarter in fiscal 2001 and fiscal 2000. In the opinion of
management, this quarterly information has been prepared on a basis consistent
with the Company's audited financial statements appearing elsewhere in this
annual report, and reflects adjustments, consisting of normal recurring
adjustments, necessary for a fair presentation of such unaudited quarterly
results when read in conjunction with the audited financial statements and notes
thereto.
<TABLE>
<CAPTION>

                                                                 2001 Quarters Ended
                                           --------------------------------------------------------------------
(in thousands, except per share amounts)   April 30, 2001    July 31, 2001  October 31, 2001   January 31, 2002
---------------------------------------------------------------------------------------------------------------
<S>                                             <C>              <C>               <C>                <C>
Net sales                                       $  68,931        $  74,366         $  65,136          $ 130,478
Gross profit                                       25,614           27,902            22,107             56,714
Income (loss) from operations                        (868)             922            (3,714)            26,022
Net income (loss)                                  (1,622)            (643)           (3,492)            15,837
Diluted earnings per share:
Net income (loss)                               $   (0.11)       $   (0.04)        $   (0.24)         $    1.07
---------------------------------------------------------------------------------------------------------------
</TABLE>

<TABLE>
<CAPTION>

                                                                 2000 Quarters Ended
                                           --------------------------------------------------------------------
(in thousands, except per share amounts)   April 30, 2000    July 31, 2000  October 31, 2000   January 31, 2001
---------------------------------------------------------------------------------------------------------------
<S>                                             <C>              <C>              <C>                 <C>
Net sales                                       $  73,635        $  76,139        $   71,035          $ 134,256
Gross profit                                       29,231           29,488            26,139             53,043
Income (loss) from operations                       4,049            1,912            (1,545)            17,885
Income (loss) before cumulative
  effect of accounting change, net                  1,774              464            (1,996)            10,132
Cumulative effect of accounting change             (3,068)              --                --                --
Net income                                         (1,294)             464            (1,996)            10,132
Diluted earnings per share:
Income before cumulative effect
  of accounting change                          $    0.11        $    0.03        $    (0.13)         $    0.69
Cumulative effect of accounting change, net     $   (0.19)       $     --        $        --          $     --
Net income                                      $   (0.08)       $    0.03        $    (0.13)         $    0.69
---------------------------------------------------------------------------------------------------------------
</TABLE>

( 2 0 )   R E C L A S S I F I C A T I O N S

Certain Balance Sheet amounts from prior periods were reclassified to conform to
the current year presentation. These reclassifications had no impact on
earnings.


                                      [35.]                   2001 ANNUAL REPORT
<PAGE>

Report of Independent Accountants

To the Board of Directors and Shareholders of Whitehall Jewellers, Inc.

In our opinion, the accompanying balance sheets and the related statements of
operations, shareholders' equity, and cash flow, present fairly, in all material
respects, the financial position of Whitehall Jewellers, Inc. (the "Company") at
January 31, 2002 and 2001, and the results of its operations and its cash flows
for each of the three years in the period ended January 31, 2002, in conformity
with accounting principles generally accepted in the United States of America.
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 of these statements in accordance with
auditing standards generally accepted in the United States of America, which
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, assessing the accounting principles
used and significant estimates made by management, and evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.

   As described in Note 2 to the financial statements, the Company changed its
method of recognizing revenue for layaway sales during the year ended January
31, 2001.

[PRICEWATERHOUSECOOPERS LLP SIGNATURE]

Chicago, Illinois
March 11, 2002

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

The Company's stock began trading on the New York Stock Exchange under the
symbol "JWL" on January 27, 2000. Prior to that date the Company's stock traded
on the NASDAQ National Market System under the symbol "WHJI." At April 26, 2002,
there were 107 registered holders of Class B stock and 236 registered holders of
Common Stock for a total of 343 registered shareholders.
<TABLE>
<CAPTION>

                                                               2002                        2001
                                                        ---------------------------------------------
                                                          High        Low             High        Low
-------------------------------------------------------------------------------------------------------
<S>                                                     <C>       <C>               <C>       <C>
First Quarter                                           $  9.615  $  7.550          $ 24.625  $ 16.125

Second Quarter                                            10.480     8.080            18.625     7.125

Third Quarter                                             12.065     8.240            10.188     7.500

Fourth Quarter                                            15.730     8.030             8.375     6.000
-------------------------------------------------------------------------------------------------------
</TABLE>

The Company has not declared any dividends in fiscal 2002 and 2001, and intends
to retain its earnings to finance future growth. Therefore, the Company does not
anticipate paying any cash dividends in the foreseeable future. The declaration
and payment of dividends, if any, is subject to the discretion of the Board of
Directors of the Company and to certain limitations under the General
Corporation Law of the State of Delaware. In addition, the Company's Credit
Agreement contains restrictions of the Company's ability to pay dividends. The
timing, amount and form of dividends, if any, will depend, among other things,
on the Company's results of operations, financial condition, cash requirements
and other factors deemed relevant by the Board of Directors.



WHITEHALL JEWELLERS                    [36.]
<PAGE>

<TABLE>
<S><C>

CORPORATE INFORMATION

BOARD  OF  DIRECTORS            CORPORATE  OFFICERS                    INDEPENDENT  AUDITORS

HUGH  M.  PATINKIN              HUGH  M.  PATINKIN                     PricewaterhouseCoopers, LLP
Chairman of the Board,          Chairman of the Board,                 One North Wacker Drive
Chief Executive Officer,        Chief Executive Officer,               Chicago, IL 60606
President                       President
                                                                       TRANSFER  AGENT
RICHARD K. BERKOWITZ (1,2)      JOHN  R.  DESJARDINS                   Fleet National Bank
Arthur Anderson, L.L.P.         Executive Vice President,              c/o Equiserve Trust
Former Partner                  Secretary                              Company, N.A.
                                                                       150 Royall Street
DANIEL  H.  LEVY (1,2)          MATTHEW  M.  PATINKIN                  Canton, MA 02021
Donnkenny, Inc.                 Executive Vice President,
Chairman and                    Operations                             CORPORATE
Chief Executive Officer,                                               HEADQUARTERS
President                       LYNN EISENHEIM                         155 North Wacker Drive
                                Executive Vice President,              Chicago, IL 60606
NORMAN  J.  PATINKIN            Merchandising
United Marketing                                                       ANNUAL  MEETING
Group, L.L.C.                   MANNY  A.  BROWN                       The Annual Meeting
Former Chairman                 Executive Vice President,              of Shareholders will be
of the Board                    Operations                             held June 11, 2002 at
                                                                       10:00a.m. (C.D.T.)
JACK  A.  SMITH (1,2)           JON H. BROWNE
The Sports Authority, Inc.      Executive Vice President,              GENERAL  COUNSEL
Former Chairman and             Chief Financial Officer                Sidley Austin Brown & Wood
Chief Executive Officer         and Treasurer                          Bank One Plaza
                                                                       Chicago, IL 60603
JOHN  R.  DESJARDINS
Executive Vice President,                                              SHAREHOLDER  INQUIRIES
Secretary                                                              John R. Desjardins
                                                                       Executive Vice President
MATTHEW  M.  PATINKIN                                                  312.762.9751
Executive Vice President,
Operations                                                             INTERNET  WEBSITE
                                                                       www.whitehalljewellers.com
(1)Audit Committee
(2)Compensation Committee                                              COMMON  STOCK  LISTING
                                                                       Shares of Common Stock
                                                                       of Whitehall Jewellers, Inc.
                                                                       are listed and traded on the
                                                                       New York Stock Exchange under
                                                                       the symbol "JWL".
</TABLE>



<PAGE>


                            WHITEHALL JEWELLERS, INC.

                155 NORTH WACKER DRIVE | CHICAGO, ILLINOIS 60606

                                { 312.782.6800 }