<PAGE>


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


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

                                    FORM 10-Q

         X     QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF
        ---    THE SECURITIES EXCHANGE ACT OF 1934

               For the Quarterly Period Ended November 1, 2003
                                              ----------------

                                       or

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

               For the Transition Period from _________ to __________

                         Commission File Number: 0-25716


                            FINLAY ENTERPRISES, INC.
             ------------------------------------------------------
             (Exact name of registrant as specified in its charter)


           Delaware                                              13-3492802
-------------------------------                              -------------------
(State or other jurisdiction of                               (I.R.S. Employer
 incorporation or organization)                              Identification No.)


     529 Fifth Avenue, New York, NY                                 10017
----------------------------------------                          ----------
(Address of principal executive offices)                          (zip code)


                                 (212) 808-2800
              ----------------------------------------------------
              (Registrant's telephone number, including area code)

Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the Registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.

                           Yes  X                   No
                               ---                     ---

Indicate by check mark whether the registrant is an accelerated filer (as
defined in Rule 12b-2 of the Exchange Act).

                           Yes  X                   No
                               ---                     ---


As of December 9, 2003, there were 9,084,895 shares of common stock, par value
$.01 per share, of the registrant outstanding.

<PAGE>


                            FINLAY ENTERPRISES, INC.

                                    FORM 10-Q

                     QUARTERLY PERIOD ENDED NOVEMBER 1, 2003

                                      INDEX

<TABLE>
<CAPTION>
                                                                                                  PAGE(S)
                                                                                                  -------
<S>                                                                                               <C>
PART I - FINANCIAL INFORMATION

      Item 1.    Consolidated Financial Statements (Unaudited)

                 Consolidated Statements of Operations for the thirteen weeks and
                 thirty-nine weeks ended November 1, 2003 and November 2, 2002.......................1

                 Consolidated Balance Sheets as of November 1, 2003 and
                 February 1, 2003....................................................................3

                 Consolidated Statements of Changes in Stockholders' Equity for
                 the year ended February 1, 2003 and the thirty-nine weeks ended
                 November 1, 2003....................................................................4

                 Consolidated Statements of Cash Flows for the thirteen weeks and
                 thirty-nine weeks ended November 1, 2003 and November 2, 2002.......................5

                 Notes to Consolidated Financial Statements..........................................7

      Item 2.    Management's Discussion and Analysis of
                 Financial Condition and Results of Operations......................................16

      Item 3.    Quantitative and Qualitative Disclosures about Market Risk.........................26

      Item 4.    Controls and Procedures............................................................26


PART II - OTHER INFORMATION

      Item 6.    Exhibits and Reports on Form 8-K...................................................27

SIGNATURES..........................................................................................29
</TABLE>



<PAGE>


PART I - FINANCIAL INFORMATION
  ITEM 1. CONSOLIDATED FINANCIAL STATEMENTS


                            FINLAY ENTERPRISES, INC.
                      CONSOLIDATED STATEMENTS OF OPERATIONS
                 (IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)
                                   (UNAUDITED)


<TABLE>
<CAPTION>
                                                                                      THIRTEEN WEEKS ENDED
                                                                               ----------------------------------
                                                                                                     NOVEMBER 2,
                                                                                NOVEMBER 1,              2002
                                                                                    2003            (AS RESTATED)
                                                                               ------------         -------------
<S>                                                                            <C>                  <C>
Sales....................................................................      $    174,933         $     168,359
Cost of sales............................................................            85,467                80,462
                                                                               ------------         -------------
    Gross margin.........................................................            89,466                87,897
Selling, general and administrative expenses.............................            84,863                82,997
Depreciation and amortization............................................             4,991                 4,387
                                                                               ------------         -------------
    Income (loss) from operations........................................              (388)                  513
Interest expense, net....................................................             5,968                 6,358
                                                                               ------------         -------------
    Loss before income taxes ............................................            (6,356)               (5,845)
Benefit for income taxes.................................................            (2,480)               (2,504)
                                                                               ------------         -------------
    Net loss.............................................................      $     (3,876)        $      (3,341)
                                                                               ============         =============
Net loss per share applicable to common shares:
         Basic net loss per share.......................................       $      (0.43)        $       (0.36)
                                                                               ============         =============
         Diluted net loss per share.....................................       $      (0.43)        $       (0.36)
                                                                               ============         =============
Weighted average shares outstanding -
         basic and diluted...............................................         8,989,586             9,348,990
                                                                               ============         =============
</TABLE>






        The accompanying notes are an integral part of these consolidated
                             financial statements.



                                        1

<PAGE>




                            FINLAY ENTERPRISES, INC.
                      CONSOLIDATED STATEMENTS OF OPERATIONS
                 (IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)
                                   (UNAUDITED)

<TABLE>
<CAPTION>
                                                                        THIRTY-NINE WEEKS ENDED
                                                                      ---------------------------
                                                                                      NOVEMBER 2,
                                                                      NOVEMBER 1,        2002
                                                                          2003      (AS RESTATED)
                                                                      -----------   -------------
<S>                                                                   <C>           <C>
Sales .............................................................   $   553,913    $   542,854
Cost of sales .....................................................       269,929        260,839
                                                                      -----------    -----------
  Gross margin ....................................................       283,984        282,015
Selling, general and administrative expenses ......................       262,161        257,770
Depreciation and amortization .....................................        13,710         13,181
                                                                      -----------    -----------
  Income from operations ..........................................         8,113         11,064
Interest expense, net .............................................        17,770         18,673
                                                                      -----------    -----------
  Loss before income taxes and cumulative effect of accounting
    change ........................................................        (9,657)        (7,609)
Benefit for income taxes ..........................................        (3,766)        (3,491)
                                                                      -----------    -----------
  Loss before cumulative effect of accounting change ..............        (5,891)        (4,118)
Cumulative effect of accounting change, net of tax ................          --          (17,209)
                                                                      -----------    -----------
  Net loss ........................................................   $    (5,891)   $   (21,327)
                                                                      ===========    ===========
Net loss per share applicable to common shares - basic and diluted:
    Loss per share before cumulative effect of accounting change ..   $     (0.65)   $     (0.43)
    Cumulative effect of accounting change, net of tax ............          --            (1.82)
                                                                      -----------    -----------
    Net loss per share ............................................   $     (0.65)   $     (2.25)
                                                                      ===========    ===========
Weighted average shares outstanding -
    basic and diluted .............................................     9,049,247      9,473,080
                                                                      ===========    ===========
</TABLE>






        The accompanying notes are an integral part of these consolidated
                             financial statements.




                                       2
<PAGE>


                            FINLAY ENTERPRISES, INC.
                           CONSOLIDATED BALANCE SHEETS
                 (IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)
                                   (UNAUDITED)

<TABLE>
<CAPTION>
                                                                               NOVEMBER 1,   FEBRUARY 1,
                                                                                  2003          2003
                                                                               -----------   -----------
                                      ASSETS
<S>                                                                            <C>           <C>
Current assets:
  Cash and cash equivalents ..................................................   $   2,281    $  69,331
  Accounts receivable - department stores ....................................      36,411       19,985
  Other receivables ..........................................................      43,816       30,880
  Merchandise inventories ....................................................     300,221      263,544
  Prepaid expenses and other .................................................       5,834        3,236
  Deferred income taxes ......................................................       9,475        9,858
                                                                                 ---------    ---------
     Total current assets ....................................................     398,038      396,834
                                                                                 ---------    ---------
Fixed assets:
  Building, equipment, fixtures and leasehold improvements ...................     128,801      120,946
  Less - accumulated depreciation and amortization ...........................      60,875       50,575
                                                                                 ---------    ---------
     Fixed assets, net .......................................................      67,926       70,371
                                                                                 ---------    ---------
Deferred charges and other assets, net .......................................      19,350       22,234
Goodwill .....................................................................      91,046       91,046
                                                                                 ---------    ---------
     Total assets ............................................................   $ 576,360    $ 580,485
                                                                                 =========    =========

                       LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
  Short-term borrowings ......................................................   $  54,546    $    --
  Accounts payable - trade ...................................................      69,027      113,277
  Accrued liabilities:
     Accrued salaries and benefits ...........................................      18,155       17,734
     Accrued miscellaneous taxes .............................................       5,562        6,842
     Accrued interest ........................................................      10,284        5,421
     Deferred income .........................................................       7,217       10,493
     Other ...................................................................      16,373       14,814
  Income taxes payable .......................................................       9,124       19,263
                                                                                 ---------    ---------
     Total current liabilities ...............................................     190,288      187,844
Long-term debt ...............................................................     225,000      225,000
Deferred income taxes ........................................................      21,057       18,400
Other non-current liabilities ................................................          85          205
                                                                                 ---------    ---------
     Total liabilities .......................................................     436,430      431,449
                                                                                 ---------    ---------
Stockholders' equity:
  Common Stock, par value $.01 per share; authorized 25,000,000 shares;
     issued and outstanding 9,056,367 and 9,300,638 shares, at
     November 1, 2003 and February 1, 2003, respectively .....................         107          106
  Additional paid-in capital .................................................      81,833       79,680
  Retained earnings ..........................................................      77,706       83,597
  Unamortized restricted stock compensation ..................................      (1,581)        (609)
  Accumulated other comprehensive income .....................................         676           55
  Less treasury stock, at cost ...............................................     (18,811)     (13,793)
                                                                                 ---------    ---------
     Total stockholders' equity ..............................................     139,930      149,036
                                                                                 ---------    ---------
     Total liabilities and stockholders' equity ..............................   $ 576,360    $ 580,485
                                                                                 =========    =========
</TABLE>



        The accompanying notes are an integral part of these consolidated
                             financial statements.



                                       3
<PAGE>

                            FINLAY ENTERPRISES, INC.
           CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
                        (IN THOUSANDS, EXCEPT SHARE DATA)
                                   (UNAUDITED)


<TABLE>
<CAPTION>
                                      COMMON STOCK                            UNAMORTIZED    ACCUMULATED
                                    ------------------  ADDITIONAL             RESTRICTED      OTHER                      TOTAL
                                      NUMBER              PAID-IN   RETAINED     STOCK      COMPREHENSIVE  TREASURY   STOCKHOLDERS'
                                    OF SHARES   AMOUNT    CAPITAL   EARNINGS  COMPENSATION     INCOME        STOCK       EQUITY
                                    ---------   ------  ----------  --------  ------------  -------------  ---------  -------------
<S>                                 <C>         <C>     <C>         <C>       <C>           <C>            <C>        <C>
Balance, February 2, 2002 ........  9,946,623   $  105   $ 78,728   $ 76,558    $  (913)       $  96       $ (5,367)   $ 149,207
    Net income ...................         --       --         --      7,039         --           --             --        7,039
    Change in fair value of
      gold forward contracts,
      net of tax .................         --       --         --         --         --          (41)            --          (41)
    Exercise of stock options ....     87,627        1        952         --         --           --             --          953
    Amortization of restricted
      stock compensation .........         --       --         --         --        304           --             --          304
    Purchase of treasury stock ...   (733,612)      --         --         --         --           --         (8,426)      (8,426)
                                    ---------   ------  ---------   --------    -------     --------       --------    ---------
Balance, February 1, 2003 ........  9,300,638   $  106   $ 79,680   $ 83,597    $  (609)       $  55       $(13,793)   $ 149,036
    Net loss .....................         --       --         --     (5,891)        --           --             --       (5,891)
    Change in fair value of
      gold forward contracts,
      net of tax .................         --       --         --         --         --          621             --          621
    Exercise of stock options ....     75,967       --        827         --         --           --             --          827
    Issuance of restricted stock
      and restricted stock units .     50,000        1      1,326         --     (1,287)          --             --           40
    Amortization of restricted
      stock compensation and
      restricted stock units .....         --       --         --         --        315           --             --          315
    Purchase of treasury stock ...   (370,238)      --         --         --         --           --         (5,018)      (5,018)
                                    ---------   ------  ---------   --------    -------     --------       --------    ---------
Balance, November 1, 2003 ........  9,056,367   $  107   $ 81,833   $ 77,706    $(1,581)       $ 676       $(18,811)   $ 139,930
                                    =========   ======   ========   ========    =======     ========       ========    =========
</TABLE>




        The accompanying notes are an integral part of these consolidated
                             financial statements.




                                       4
<PAGE>


                            FINLAY ENTERPRISES, INC.
                      CONSOLIDATED STATEMENTS OF CASH FLOWS
                                 (IN THOUSANDS)
                                   (UNAUDITED)

<TABLE>
<CAPTION>
                                                                  THIRTEEN WEEKS ENDED
                                                                -------------------------
                                                                             NOVEMBER 2,
                                                                NOVEMBER 1,     2002
                                                                   2003     (AS RESTATED)
                                                                ----------- -------------
<S>                                                             <C>         <C>
CASH FLOWS FROM OPERATING ACTIVITIES
  Net loss ..................................................   $  (3,876)   $  (3,341)
  Adjustments to reconcile net loss to net cash used in
     operating activities:
  Depreciation and amortization .............................       4,991        4,387
  Amortization of deferred financing costs ..................         258          294
  Amortization of restricted stock compensation and
    restricted stock units ..................................         163           76
  Non-current deferred income tax liabilities ...............       1,114        1,348
  Other, net ................................................         170          269
  Changes in operating assets and liabilities:
    Increase in accounts and other receivables ..............      (9,872)      (5,025)
    Increase in merchandise inventories .....................     (35,430)     (30,211)
    Increase in prepaid expenses and other ..................        (248)        (457)
    Increase in deferred income tax assets ..................         (11)        --
    Increase in accounts payable and accrued liabilities ....      26,648        9,031
    Increase in deferred tax liabilities ....................        --            192
                                                                ---------    ---------
      NET CASH USED IN OPERATING ACTIVITIES ................     (16,093)     (23,437)
                                                                ---------    ---------
CASH FLOWS FROM INVESTING ACTIVITIES
  Purchases of equipment, fixtures and leasehold improvements      (2,971)      (2,684)
  Deferred charges and other, net ...........................         (23)           1
                                                                ---------    ---------
      NET CASH USED IN INVESTING ACTIVITIES .................      (2,994)      (2,683)
                                                                ---------    ---------
CASH FLOWS FROM FINANCING ACTIVITIES
  Proceeds from revolving credit facility ...................     155,925      156,645
  Principal payments on revolving credit facility ...........    (135,151)    (131,127)
  Capitalized financing costs ...............................        --           (187)
  Purchase of treasury stock ................................      (2,170)        (229)
  Stock options exercised ...................................         397           86
                                                                ---------    ---------
      NET CASH PROVIDED FROM FINANCING ACTIVITIES ...........      19,001       25,188
                                                                ---------    ---------
      DECREASE IN CASH AND CASH EQUIVALENTS .................         (86)        (932)
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD ..............       2,367        3,440
                                                                ---------    ---------
CASH AND CASH EQUIVALENTS, END OF PERIOD ....................   $   2,281    $   2,508
                                                                =========    =========
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION
  Interest paid .............................................   $     737    $  10,804
                                                                =========    =========
  Income taxes paid .........................................   $   2,876    $   2,610
                                                                =========    =========
</TABLE>


        The accompanying notes are an integral part of these consolidated
                             financial statements.



                                       5
<PAGE>


                            FINLAY ENTERPRISES, INC.
                      CONSOLIDATED STATEMENTS OF CASH FLOWS
                                 (IN THOUSANDS)
                                   (UNAUDITED)

<TABLE>
<CAPTION>
                                                                 THIRTY-NINE WEEKS ENDED
                                                                -------------------------
                                                                             NOVEMBER 2,
                                                                NOVEMBER 1,     2002
                                                                   2003     (AS RESTATED)
                                                                ----------  -------------
<S>                                                             <C>         <C>
CASH FLOWS FROM OPERATING ACTIVITIES
  Net loss ..................................................   $  (5,891)   $ (21,327)
  Adjustments to reconcile net loss to net cash used in
    operating activities:
  Cumulative effect of accounting change, net of tax ........        --         17,209
  Depreciation and amortization .............................      13,710       13,181
  Amortization of deferred financing costs ..................         775          882
  Amortization of restricted stock compensation
    and restricted stock units ..............................         315          229
  Non-current deferred income tax liabilities ...............       2,657        2,259
  Other, net ................................................         583          232
  Changes in operating assets and liabilities:
    Increase in accounts and other receivables ..............     (29,362)     (33,979)
    Increase in merchandise inventories .....................     (36,677)     (17,739)
    Increase in prepaid expenses and other ..................      (2,712)      (1,674)
    Decrease in deferred income tax assets ..................         383         --
    Decrease in accounts payable and accrued liabilities ....     (52,570)     (71,268)
    Increase in deferred tax liabilities ....................        --            681
                                                                ---------    ---------
      NET CASH USED IN OPERATING ACTIVITIES .................    (108,789)    (111,314)
                                                                ---------    ---------
CASH FLOWS FROM INVESTING ACTIVITIES
  Purchases of equipment, fixtures and leasehold improvements      (8,001)      (8,200)
  Deferred charges and other, net ...........................        --         (3,272)
                                                                ---------    ---------
      NET CASH USED IN INVESTING ACTIVITIES .................      (8,001)     (11,472)
                                                                ---------    ---------
CASH FLOWS FROM FINANCING ACTIVITIES
  Proceeds from revolving credit facility ...................     462,409      444,624
  Principal payments on revolving credit facility ...........    (407,863)    (362,472)
  Capitalized financing costs ...............................        (431)        (187)
  Purchase of treasury stock ................................      (5,018)      (6,744)
  Stock options exercised ...................................         643          704
                                                                ---------    ---------
      NET CASH PROVIDED FROM FINANCING ACTIVITIES ...........      49,740       75,925
                                                                ---------    ---------
      DECREASE IN CASH AND CASH EQUIVALENTS .................     (67,050)     (46,861)
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD ..............      69,331       49,369
                                                                ---------    ---------
CASH AND CASH EQUIVALENTS, END OF PERIOD ....................   $   2,281    $   2,508
                                                                =========    =========
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION
  Interest paid .............................................   $  12,132    $  22,396
                                                                =========    =========
  Income taxes paid .........................................   $  10,561    $   8,536
                                                                =========    =========
</TABLE>


        The accompanying notes are an integral part of these consolidated
                             financial statements.




                                       6
<PAGE>

                            FINLAY ENTERPRISES, INC.
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


NOTE 1 - BASIS OF ACCOUNTING AND PRESENTATION

     The accompanying unaudited consolidated financial statements of Finlay
Enterprises, Inc. (the "Company" or the "Registrant"), and its wholly owned
subsidiary, Finlay Fine Jewelry Corporation and its wholly owned subsidiaries
("Finlay Jewelry"), have been prepared in accordance with accounting principles
generally accepted in the United States of America for interim financial
information. References to "Finlay" mean collectively, the Company and Finlay
Jewelry. In the opinion of management, the accompanying unaudited consolidated
financial statements contain all adjustments necessary to present fairly the
financial position of the Company as of November 1, 2003, and the results of
operations and cash flows for the thirteen weeks and thirty-nine weeks ended
November 1, 2003 and November 2, 2002. Due to the seasonal nature of the
business, results for interim periods are not indicative of annual results. The
unaudited consolidated financial statements have been prepared on a basis
consistent with that of the audited consolidated financial statements as of
February 1, 2003 referred to below. Certain information and footnote disclosures
normally included in financial statements prepared in accordance with accounting
principles generally accepted in the United States of America have been
condensed or omitted pursuant to the rules and regulations of the Securities and
Exchange Commission (the "Commission").

     These consolidated financial statements should be read in conjunction with
the audited consolidated financial statements and notes thereto included in the
Company's Annual Report on Form 10-K for the fiscal year ended February 1, 2003
("Form 10-K") previously filed with the Commission.

     The consolidated financial statements for the thirteen weeks and
thirty-nine weeks ended November 2, 2002 have been restated to reflect the
retroactive adoption in the fiscal year ended February 1, 2003 of Emerging
Issues Task Force ("EITF") Issue No. 02-16 ("EITF 02-16"), "Accounting by a
Customer (Including a Reseller) for Cash Consideration Received from a Vendor."
See Note 2 herein and Form 10-K. Additionally, certain prior period balances
have been reclassified to conform to the current period presentation.

     The Company's fiscal year ends on the Saturday closest to January 31.
References to 2003, 2002, 2001 and 2000 relate to the fiscal years ending
January 31, 2004, February 1, 2003, February 2, 2002 and February 3, 2001,
respectively. Each of the fiscal years includes 52 weeks, except 2000 includes
53 weeks.

NOTE 2 - SIGNIFICANT ACCOUNTING POLICIES

     MERCHANDISE INVENTORIES: Consolidated inventories are stated at the lower
of cost or market determined by the last-in, first-out ("LIFO") method.
Inventory is reduced for estimated obsolescence or unmarketable inventory equal
to the difference between the cost of inventory and the estimated market value
based upon assumptions about future demand and market conditions.

     The cost to Finlay of gold merchandise sold on consignment, which typically
varies with the price of gold, is not fixed until the merchandise is sold.
Finlay, at times, enters into forward contracts based upon the anticipated sales
of gold product in order to hedge against the risk of gold price fluctuations.
Such contracts typically have durations ranging from one to nine months. At
November 1, 2003 and February 1, 2003, the Company had several open positions in
gold forward contracts totaling 30,000


                                       7
<PAGE>


                            FINLAY ENTERPRISES, INC.
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


NOTE 2 - SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

fine troy ounces and 4,000 fine troy ounces, respectively, to purchase gold for
$10.5 million and $1.4 million, respectively.

     VENDOR ALLOWANCES: The Company receives allowances from its vendors through
a variety of programs and arrangements, including cooperative advertising.
Vendor allowances are recognized as a reduction of cost of sales upon the sale
of merchandise or selling, general and administrative expenses ("SG&A") when the
purpose for which the vendor funds were intended to be used has been fulfilled.
Accordingly, a reduction or increase in vendor allowances has an inverse impact
on cost of sales and/or SG&A.

     Effective February 3, 2002, the Company adopted EITF 02-16. EITF 02-16
addresses the accounting treatment for vendor allowances and provides that cash
consideration received from a vendor should be presumed to be a reduction of the
prices of the vendors' product and should therefore be shown as a reduction in
the purchase price of the merchandise. Further, these allowances should be
recognized as a reduction in cost of sales when the related product is sold. To
the extent that the cash consideration represents a reimbursement of a specific,
incremental and identifiable cost, then those vendor allowances should be used
to offset such costs.

     In accordance with EITF 02-16, the Company recorded a cumulative effect of
accounting change as of February 3, 2002, the date of adoption, that increased
the net loss for the thirty-nine weeks ended November 2, 2002 by $17.2 million,
net of tax of $11.7 million, or $1.82 per share. As of November 1, 2003 and
February 1, 2003, deferred vendor allowances totaled (i) $16.4 million and $18.5
million, respectively, for owned merchandise, which allowances are included as
an offset to merchandise inventories on the Company's Consolidated Balance
Sheet, and (ii) $7.2 million and $10.5 million, respectively, for merchandise
received on consignment, which allowances are included as deferred income on the
Company's Consolidated Balance Sheet. The consolidated financial statements for
the thirteen weeks and thirty-nine weeks ended November 2, 2002 have been
restated to reflect this change in accordance with Statement of Financial
Accounting Standards ("SFAS") No. 3, "Reporting Accounting Changes in Interim
Financial Statements" as follows (in thousands):

<TABLE>
<CAPTION>
                                                               THIRTEEN WEEKS ENDED   THIRTY-NINE WEEKS ENDED
                                                                 NOVEMBER 2, 2002           NOVEMBER 2, 2002
                                                                -------------------    ---------------------
<S>                                                             <C>                    <C>
Net loss, as previously reported............................    $          (3,185)     $           (4,041)
Less: Cumulative effect of accounting change, net of tax....                  -                   (17,209)
Add: Impact on operating income, net of tax.................                 (156)                    (77)
                                                                -------------------    ---------------------
Net loss, as restated.......................................    $          (3,341)      $         (21,327)
                                                                ===================    =====================
</TABLE>


     HEDGING: SFAS No. 133, "Accounting for Derivative Instruments and Hedging
Activities", as amended, establishes accounting and reporting standards for
derivative instruments, including certain derivative instruments embedded in
other contracts, and for hedging activities. Under SFAS No. 133, all
derivatives, whether designated in hedging relationships or not, are required to
be recorded on the balance sheet at fair value. SFAS No. 133 defines
requirements for designation and documentation of hedging relationships, as well
as ongoing effectiveness assessments, which must be met in order to qualify for
hedge accounting. For a derivative that does not qualify as a hedge, changes in
fair value


                                       8
<PAGE>

                            FINLAY ENTERPRISES, INC.
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


NOTE 2 - SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

would be recorded in earnings immediately. The Company has designated its
existing derivative instruments, consisting of gold forward contracts, as cash
flow hedges. For derivative instruments designated as cash flow hedges, the
effective portion of the change in the fair value of the derivative is recorded
in accumulated other comprehensive income, a separate component of stockholders'
equity, and is reclassified into cost of sales when the offsetting effects of
the hedged transaction affects earnings. Changes in the fair value of the
derivative attributable to hedge ineffectiveness are recorded in earnings
immediately. At November 1, 2003 and February 1, 2003, the fair value of the
gold forward contracts resulted in the recognition of an asset of $1.1 million
and $94,000, respectively. The amount recorded in accumulated other
comprehensive income at November 1, 2003 of $676,000, net of tax, is expected to
be reclassified into earnings during the remainder of 2003. The amount recorded
in accumulated other comprehensive income at February 1, 2003 of $55,000, net of
tax, was reclassified into earnings in the first quarter of 2003.

     In April 2003, the Financial Accounting Standards Board ("FASB") issued
SFAS No. 149, "Amendment of Statement No. 133 on Derivative Instruments and
Hedging Activities". SFAS No. 149 amends and clarifies the accounting for
derivative instruments, including certain derivative instruments embedded in
other contracts, and for hedging activities under SFAS No. 133. This Statement
is effective for contracts entered into or modified after June 30, 2003 and for
hedging relationships designated after June 30, 2003. The adoption of SFAS No.
149 did not have a material impact on the financial position or results of
operations of the Company.

     The Company has documented all relationships between hedging instruments
and hedged items, as well as its risk management objectives and strategy for
undertaking various hedge transactions. The Company also assesses, both at the
hedge's inception and on an ongoing basis, whether the derivatives that are used
in hedging transactions are highly effective in offsetting changes in cash flows
of hedged items. The Company believes that the designated hedges will be highly
effective.

     NET INCOME (LOSS) PER SHARE: Net loss per share has been computed in
accordance with SFAS No. 128, "Earnings per Share". Basic and diluted net loss
per share were calculated using the weighted average number of shares
outstanding during each period, with options to purchase Common Stock and
restricted stock included in diluted net loss per share, using the treasury
stock method, to the extent that such options and restricted stock were
dilutive. As the Company had a net loss for the thirteen weeks and thirty-nine
weeks ended November 1, 2003 and November 2, 2002, the stock options and
restricted stock are not considered in the calculation of diluted net loss per
share due to their anti-dilutive effect. As a result, the weighted average
number of shares outstanding used for both the basic and diluted net loss per
share calculations was the same. Total stock options outstanding were 1,504,901
and 1,586,335 at November 1, 2003 and November 2, 2002, respectively, at prices
ranging from $7.05 to $24.31 per share in each period. As of November 1, 2003,
150,000 shares of restricted stock and 5,292 restricted stock units were
excluded from the computation of diluted earnings per share. As of November 2,
2002, 100,000 shares of restricted stock were excluded from the computation of
diluted earning per share. See Note 8.



                                       9
<PAGE>

                            FINLAY ENTERPRISES, INC.
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


NOTE 2 - SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

     STOCK-BASED COMPENSATION: In December 2002, the FASB issued SFAS No. 148,
"Accounting for Stock-Based Compensation - Transition and Disclosure" which
became effective in 2002. This Statement amends SFAS No. 123 "Accounting for
Stock-Based Compensation", to provide alternative methods of transition for an
entity that voluntarily changes to the fair value method of accounting for stock
options. As permitted by SFAS No. 123, the Company has elected to continue to
recognize stock-based compensation for its stock option plans using the
intrinsic value method. Accordingly, no compensation expense has been recognized
for its stock option plans. Had the fair value method of accounting been applied
to the Company's stock option plans, which requires recognition of compensation
costs ratably over the vesting period of the stock options, net loss and net
loss per share would be as follows:

<TABLE>
<CAPTION>
                                                             THIRTEEN WEEKS ENDED           THIRTY-NINE WEEKS ENDED
                                                          --------------------------      ---------------------------
                                                          NOVEMBER 1,    NOVEMBER 2,      NOVEMBER 1,    NOVEMBER 2,
                                                              2003           2002             2003          2002
                                                          -----------    -----------      -----------    ------------
                                                                               (IN THOUSANDS)
<S>                                                       <C>            <C>              <C>            <C>
Reported net loss ....................................    $   (3,876)    $   (3,341)      $   (5,891)    $  (21,327)
Add: Stock-based compensation determined
      under the fair value method, net of tax ........          (188)          (196)            (579)          (592)
Deduct: Stock-based employee compensation
      expense included in reported net loss,
      net of tax......................................            94             46              187            140
                                                          -----------    ------------     -----------    ------------
Pro forma net loss....................................    $   (3,970)    $   (3,491)      $   (6,283)    $  (21,779)
                                                          ===========    ============     ===========    ============
Basic and diluted net loss per share:
Reported net loss per share..........................     $    (0.43)    $    (0.36)      $    (0.65)    $    (2.25)
                                                          ===========    ============     ===========    ============
Pro forma net loss per share ........................     $    (0.44)    $    (0.37)      $    (0.69)    $    (2.30)
                                                          ===========    ============     ===========    ============
</TABLE>

     COMPREHENSIVE INCOME: SFAS No. 130, "Reporting Comprehensive Income"
requires disclosure of comprehensive income, defined as the total of net income
and all other non-owner changes in equity, which under generally accepted
accounting principles, are recorded directly to the stockholders' equity section
of the consolidated balance sheet and, therefore, bypass net income. For 2003
and 2002, the only non-owner change in equity related to the change in fair
value of the Company's outstanding gold forward contracts. For the thirteen
weeks ended November 1, 2003 and November 2, 2002, the comprehensive loss,
calculated as the total of the net loss plus the change in fair value of the
Company's outstanding gold forward contracts, was $3.8 million and $3.1 million,
respectively. For the thirty-nine weeks ended November 1, 2003 and November 2,
2002, the comprehensive loss was $5.3 million and $21.4 million, respectively.

     NEW ACCOUNTING PRONOUNCEMENT: In May 2003, the FASB issued SFAS No. 150,
"Accounting for Certain Financial Instruments with Characteristics of Both
Liabilities and Equity". This Statement establishes standards for how a company
classifies and measures certain financial instruments with characteristics of
both liabilities and equity. This Statement is effective for financial
instruments entered into or modified after May 31, 2003 and otherwise is
effective at the beginning of the first interim period beginning after June 15,
2003. The adoption of SFAS No. 150 did not have a material impact on the
Company's results of operations, financial position or cash flows.


                                       10
<PAGE>

                            FINLAY ENTERPRISES, INC.
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


NOTE 3 - DESCRIPTION OF BUSINESS

     The Company conducts business through its wholly owned subsidiary, Finlay
Jewelry. Finlay is a retailer of fine jewelry products and operates leased fine
jewelry departments in department stores throughout the United States. Over the
past three fiscal years, the fourth quarter accounted for an average of 41% of
Finlay's sales and approximately 79% of its income from operations, due to the
seasonality of the retail jewelry industry. Approximately 49% of Finlay's sales
in 2002 were from operations in The May Department Stores Company ("May") and
22% in departments operated in store groups owned by Federated Department Stores
("Federated").

NOTE 4 - SHORT AND LONG-TERM DEBT

     On January 22, 2003, Finlay Jewelry's revolving credit agreement with
General Electric Capital Corporation and certain other lenders was amended and
restated (the "Revolving Credit Agreement"). The Revolving Credit Agreement,
which matures in January 2008, provides Finlay Jewelry with a senior secured
revolving line of credit up to $225.0 million (the "Revolving Credit Facility").
At November 1, 2003, $54.5 million was outstanding under this facility. The
average amounts outstanding under the Revolving Credit Agreement were $42.3
million and $63.9 million for the thirty-nine weeks ended November 1, 2003 and
November 2, 2002, respectively. The maximum amount outstanding for the
thirty-nine weeks ended November 1, 2003 was $73.5 million, at which point the
unused excess availability was $142.3 million.

     The Company has outstanding 9% Senior Debentures, due May 1, 2008, having
an aggregate principal amount of $75.0 million (the "Senior Debentures") and
Finlay Jewelry has outstanding 83/8% Senior Notes, due May 1, 2008, having an
aggregate principal amount of $150.0 million (the "Senior Notes"). The
indentures relating to the Senior Debentures and Senior Notes are collectively
referred to as the "Senior Indentures".

NOTE  5 - MERCHANDISE INVENTORIES

     Merchandise inventories consisted of the following:

<TABLE>
<CAPTION>
                                                                  NOVEMBER 1,         FEBRUARY 1,
                                                                     2003                2003
                                                                -------------       ---------------
                                                                         (IN THOUSANDS)
<S>                                                             <C>                 <C>
Jewelry goods - rings, watches and other fine jewelry
    (first-in, first-out ("FIFO")  basis)...................    $     314,326       $     275,339
Less:  Excess of FIFO cost over LIFO inventory value........           14,105              11,795
                                                                -------------       ---------------
                                                                $     300,221       $     263,544
                                                                =============       ===============
</TABLE>

     In accordance with EITF 02-16, merchandise inventories have been reduced by
$16.4 million and $18.5 million at November 1, 2003 and February 1, 2003,
respectively, to reflect the vendor allowances as a reduction in the cost of
merchandise. The LIFO method had the effect of increasing the loss before taxes
for the thirteen weeks ended November 1, 2003 and November 2, 2002 by $0.8
million and $0.6 million, respectively. The LIFO method had the effect of
increasing the loss before taxes for the thirty-nine weeks ended November 1,
2003 and November 2, 2002 by $2.3 million and $1.4 million, respectively. Finlay
determines its LIFO inventory value by utilizing selected producer price indices
published for jewelry and watches by the Bureau of Labor Statistics.


                                       11
<PAGE>

                            FINLAY ENTERPRISES, INC.
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


NOTE  5 - MERCHANDISE INVENTORIES (CONTINUED)

     Approximately $381,760,000 and $359,676,000 at November 1, 2003 and
February 1, 2003, respectively, of merchandise received on consignment is not
included in merchandise inventories and accounts payable-trade in the
accompanying Consolidated Balance Sheets. Finlay Jewelry is party to an amended
and restated gold consignment agreement (as amended, the "Gold Consignment
Agreement"), which enables Finlay Jewelry to receive consignment merchandise by
providing gold, or otherwise making payment, to certain vendors. While the
merchandise involved remains consigned, title to the gold content of the
merchandise transfers from the vendors to the gold consignor.

     Finlay Jewelry's Gold Consignment Agreement matures on July 31, 2005, and
permits Finlay Jewelry to consign up to the lesser of (i) 165,000 fine troy
ounces or (ii) $50.0 million worth of gold, subject to a formula as prescribed
by the Gold Consignment Agreement. In the event this agreement is terminated,
Finlay Jewelry will be required to return the gold or purchase the outstanding
gold at the prevailing gold rate in effect on that date. At November 1, 2003 and
February 1, 2003, amounts outstanding under the Gold Consignment Agreement
totaled 127,921 and 134,785 fine troy ounces, respectively, valued at
approximately $49.4 million and $49.5 million, respectively. For financial
statement purposes, the consigned gold is not included in merchandise
inventories on the Company's Consolidated Balance Sheets and, therefore, no
related liability has been recorded.

NOTE 6 - LEASE AGREEMENTS

     Finlay conducts all of its operations as leased departments in department
stores. All of these leases, as well as rentals for office space and equipment,
are accounted for as operating leases. A substantial number of such operating
leases expire on various dates through 2008. All references herein to leased
departments refer to departments operated pursuant to license agreements or
other arrangements with host department stores.

     Substantially all of the department store leases provide that the title to
certain fixed assets of Finlay transfers upon termination of the leases, and
that Finlay will receive the undepreciated value of such fixed assets from the
host store in the event such transfers occur. The values of such fixed assets
are recorded at cost at the inception of the lease arrangement and are reflected
in the accompanying Consolidated Balance Sheets.

     In several cases, Finlay is subject to limitations under its lease
agreements with host department stores which prohibit Finlay from operating
departments for other store groups within a certain geographical radius of the
host store.



                                       12
<PAGE>


                            FINLAY ENTERPRISES, INC.
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


NOTE 6 - LEASE AGREEMENTS (CONTINUED)

     The store leases provide for the payment of fees based on sales, plus, in
some instances, installment payments for fixed assets. Only minimum fees, as
represented in the table below, are guaranteed by the lease agreements with host
department stores. Lease expense, included in Selling, general and
administrative expenses, is as follows:

<TABLE>
<CAPTION>
                                    THIRTEEN WEEKS ENDED                THIRTY-NINE WEEKS ENDED
                              ---------------------------------     ---------------------------------
                                NOVEMBER 1,        NOVEMBER 2,        NOVEMBER 1,       NOVEMBER 2,
                                    2003              2002               2003               2002
                              ---------------    --------------     --------------    ---------------
                                                          (IN THOUSANDS)
<S>                           <C>                 <C>                <C>              <C>
Minimum fees..............    $        355        $       603        $      1,137       $      1,876
Contingent fees...........          28,669             27,354              90,595             88,013
                              ---------------    --------------     --------------    ---------------
  Total...................    $     29,024        $    27,957        $     91,732       $     89,889
                              ===============    ==============     ==============    ===============
</TABLE>

NOTE 7 - SALE AND CLOSURE OF SONAB

     In January 2000, Societe Nouvelle d' Achat de Bijouterie - S.O.N.A.B.
("Sonab"), the Company's European leased jewelry department subsidiary, sold the
majority of its assets for approximately $9.9 million. After the sale, the buyer
operated more than 80 locations previously included in Sonab's 130-location base
in France. The remaining departments were closed.

     The Company recorded a pre-tax charge in the fourth quarter of 1999 of
$28.6 million, or $1.62 per share on a diluted basis after-tax, for the
write-down of assets for disposition and related closure expenses. All of
Sonab's employees, excluding those that were hired by the buyer, were
involuntarily terminated, including sales associates, supervisors and corporate
personnel. As of November 1, 2003, the Company's exit plan has been completed
with the exception of certain employee litigation and other legal matters. To
date, the Company has charged a total of $26.4 million against its estimate of
$27.2 million. The Company does not believe future results will be materially
impacted by any remaining payments. No changes have occurred during the
thirty-nine weeks ended November 1, 2003.

NOTE 8 - STOCK REPURCHASE PROGRAM AND RESTRICTED STOCK AWARDS

     On December 1, 2000, the Company announced that its Board of Directors had
approved a stock repurchase program to acquire up to $20 million of outstanding
Common Stock. The stock repurchase program has been extended from time to time
and, on June 19, 2003, the Company's Board of Directors approved the repurchase
of an additional $20 million of outstanding Common Stock. The Company may, at
the discretion of management, purchase its Common Stock, from time to time
through September 29, 2004. The extent and timing of repurchases will depend
upon general business and market conditions, stock prices, availability under
the Revolving Credit Facility, compliance with certain restrictive covenants and
Finlay's cash position and requirements going forward. The repurchase program
may be modified, extended or terminated by the Board of Directors at any time.
Through fiscal 2002, the Company repurchased a total of 1,332,942 shares for
approximately $13,793,000. For the thirty-nine weeks ended November 1, 2003 and
November 2, 2002, the Company repurchased 370,238 shares and 595,962 shares for
$5,018,000 and $6,744,000, respectively.


                                       13
<PAGE>


                            FINLAY ENTERPRISES, INC.
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


NOTE 8 - STOCK REPURCHASE PROGRAM AND RESTRICTED STOCK AWARDS (CONTINUED)

     On February 4, 2001, an executive officer of the Company was issued 100,000
shares of Common Stock, subject to restrictions ("Restricted Stock"), pursuant
to a restricted stock agreement. The Restricted Stock becomes fully vested after
four years of continuous employment by the Company and is accounted for as a
component of stockholders' equity. Compensation expense of approximately $1.2
million is being amortized over four years. Amortization for the thirteen week
periods ended November 1, 2003 and November 2, 2002, totaled $76,000.
Amortization for the thirty-nine week periods ended November 1, 2003 and
November 2, 2002 totaled $229,000.

     On August 14, 2003, an executive officer of the Company was issued an
additional 50,000 shares of Restricted Stock pursuant to a restricted stock
agreement. The Restricted Stock vests fifty percent on January 31, 2005, with
the remaining fifty percent vesting on June 30, 2007, subject to the provisions
of the restricted stock agreement and is accounted for as a component of
stockholders' equity. Compensation expense of approximately $774,000 is being
amortized over the respective vesting periods. Amortization for the thirteen
week and thirty-nine week periods ended November 1, 2003 totaled $78,000.

     On October 31, 2003, certain executives of the Company were awarded a total
of 31,250 shares of Restricted Stock, pursuant to restricted stock agreements.
The Restricted Stock becomes fully vested after four years of continuous
employment by the Company and is accounted for as a component of stockholders'
equity with respect to unamortized restricted stock compensation. However, such
shares are not considered outstanding. Compensation expense of approximately
$473,000 is being amortized over four years.

NOTE 9 - EXECUTIVE AND DIRECTOR DEFERRED COMPENSATION AND STOCK PURCHASE PLANS

     On April 16, 2003, the Board of Directors adopted the Executive Deferred
Compensation and Stock Purchase Plan and the Director Deferred Compensation and
Stock Purchase Plan, which was approved by the Company's stockholders on June
19, 2003 (the "New Plans"). Under the New Plans, key executives of Finlay and
the Company's non-employee directors as directed by the Company's Compensation
Committee, will be eligible to acquire restricted stock units ("RSUs"). An RSU
is a unit of measurement equivalent to one share of common stock, but with none
of the attendant rights of a stockholder of a share of common stock. Two types
of RSUs will be awarded under the New Plans: (i) participant RSUs, where a plan
participant may elect to defer, in the case of an executive employee, a portion
of his or her actual or target bonus, and in the case of a non-employee
director, his or her retainer fees and Committee chairmanship fees, and receive
RSUs in lieu thereof and (ii) matching RSUs, where the Company will credit a
participant's plan account with one matching RSU for each participant RSU that a
participant elects to purchase. While participant RSUs are fully vested at all
times, matching RSUs will be subject to vesting and forfeiture as set forth in
the New Plans. At the time of distribution under the New Plans, RSUs will be
converted into actual shares of Common Stock of the Company. Purchases and
awards of RSUs under the New Plans will not further dilute any stockholder's
ownership percentage beyond the dilution already permitted under the existing
long term incentive plans because the shares of Common Stock to be issued or
used under the New Plans will be funded solely from shares of Common Stock
already available for issuance under the existing long term incentive plans. As
of November 1, 2003, 5,292 restricted stock units have been awarded under the
New Plans.


                                       14
<PAGE>

                            FINLAY ENTERPRISES, INC.
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


NOTE 9 - EXECUTIVE AND DIRECTOR DEFERRED COMPENSATION AND STOCK PURCHASE PLANS
         (CONTINUED)

Amortization for the thirteen weeks and thirty-nine weeks ended November 1, 2003
totaled approximately $10,000.

NOTE 10 - STORE GROUP AND DEPARTMENT CLOSINGS

     On August 26, 2003, the Company announced that Federated will not renew
Finlay's lease in the Burdine's department store division due to the planned
consolidation of the Burdine's and Macy's fine jewelry departments in 2004. The
termination of the lease, which expires January 31, 2004, will result in the
closure of 46 Finlay departments in the Burdine's division. In fiscal 2002,
Finlay generated approximately $50 million in sales from the Burdine's
departments. In 2003, Finlay estimates recording charges amounting to
approximately $1.5 million for closing costs associated with the accelerated
depreciation of fixed assets and severance, excluding the non-cash charge for
the write-down of goodwill resulting from the department closings. During the
third quarter of 2003, Finlay recorded charges of approximately $690,000
relating to the accelerated depreciation of fixed assets and severance.

     On July 30, 2003, May announced its intention to divest 32 Lord & Taylor
stores, as well as two other stores in its Famous-Barr division. Finlay
currently operates the jewelry departments in each of these locations, with the
exception of one department which closed during the third quarter of 2003 and
two departments which closed during the fourth quarter of 2003. In fiscal 2002,
Finlay generated approximately $17 million in sales from these 34 departments.
At this time, May has not announced a specific timeline for when these stores
will close. However, Finlay estimates recording charges during 2003 and 2004
amounting to approximately $1.5 million for closing costs associated with the
accelerated depreciation of fixed assets and severance from the date of the
announcement through the estimated dates of the store closings, excluding the
non-cash charge for the write-down of goodwill resulting from the department
closings. During the third quarter of 2003, Finlay recorded charges of
approximately $264,000 relating to the accelerated depreciation of fixed assets
and severance.

NOTE 11 - COMMITMENTS AND CONTINGENCIES

     From time to time, Finlay is involved in litigation relating to claims
arising out of its operations in the normal course of business. As of December
10, 2003, Finlay is not a party to any legal proceedings that, individually or
in the aggregate, are reasonably expected to have a material adverse effect on
Finlay's business, results of operations, financial condition or cash flows.
However, the results of these matters cannot be predicted with certainty, and an
unfavorable resolution of one or more of these matters could have a material
adverse effect on Finlay's business, results of operations, financial condition
or cash flows.

     The Company has not provided any third-party financial guarantees as of
November 1, 2003.



                                       15
<PAGE>


PART I - FINANCIAL INFORMATION
  ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
          FINANCIAL CONDITION AND RESULTS OF OPERATIONS

CRITICAL ACCOUNTING POLICIES AND ESTIMATES

     The Company's Consolidated Financial Statements have been prepared in
accordance with accounting principles generally accepted in the United States of
America. These generally accepted accounting principles require management to
make estimates and assumptions that affect certain financial statement accounts
reported and disclosed at the date of the financial statements. Actual results
may differ from those estimates.

      Certain of the Company's significant accounting policies are described in
Note 2 of Notes to the Consolidated Financial Statements in the Company's Form
10-K for the fiscal year ended February 1, 2003. The Company believes that the
following discussion addresses the critical accounting policies, which are those
that are most important to the portrayal of the Company's financial condition
and results of operations and require management's most difficult, subjective or
complex judgments. The Company is not aware of any likely events or
circumstances which would result in different amounts being reported that would
materially affect its financial condition or results of operations.

     MERCHANDISE INVENTORIES

     The Company values its inventories at the lower of cost or market. The cost
is determined by the last-in, first-out method utilizing selected producer price
indices published for jewelry and watches by the Bureau of Labor Statistics.
Factors related to inventories such as future consumer demand and the economy's
impact on consumer discretionary spending, inventory aging, ability to return
merchandise to vendors, merchandise condition and anticipated markdowns are
analyzed to determine estimated net realizable values. An adjustment is recorded
to reduce the LIFO cost of inventories, if required. Any significant
unanticipated changes in the factors above could have a significant impact on
the value of the inventories and the Company's reported operating results.

     DERIVATIVE INSTRUMENTS

     The Company is exposed to market risk related to changes in the price of
gold and at times enters into forward contracts to hedge against the risk of
gold price fluctuations. In 2001, the Company adopted SFAS No. 133 "Accounting
for Derivative Instruments and Hedging Activities", which requires that all
derivative instruments be recorded on the balance sheet as either an asset or a
liability measured at its fair value. Accounting for derivative instruments
under this pronouncement did not have a material impact on the Company's
financial condition, results of operations and cash flows for the thirteen weeks
and thirty-nine weeks ended November 1, 2003.

     VENDOR ALLOWANCES

     The Company receives allowances from its vendors through a variety of
programs and arrangements, including cooperative advertising. Vendor allowances
are recognized as a reduction of cost of sales upon the sale of merchandise or
SG&A when the purpose for which the vendor funds were intended to be used has
been fulfilled. Accordingly, a reduction or increase in vendor allowances has an
inverse impact on cost of sales and/or SG&A.

     Effective in 2002, the Company adopted Emerging Issues Task Force Issue No.
02-16, "Accounting by a Customer (Including a Reseller) for Cash Consideration
Received from a Vendor" ("EITF 02-16"). EITF 02-16 addresses the accounting
treatment for vendor allowances and provides that cash


                                       16
<PAGE>


consideration received from a vendor should be presumed to be a reduction of the
prices of the vendors' product and should therefore be shown as a reduction in
the purchase price of the merchandise. Further, these allowances should be
recognized as a reduction in cost of sales when the related product is sold. To
the extent that the cash consideration represents a reimbursement of a specific,
incremental and identifiable cost, then those vendor allowances should be used
to offset such costs.

     In accordance with EITF 02-16, the Company recorded a cumulative effect of
accounting change as of February 3, 2002, the date of adoption, that increased
the net loss for the thirty-nine weeks ended November 2, 2002 by $17.2 million,
net of tax of $11.7 million, or $1.82 per share. As of November 1, 2003 and
February 1, 2003, deferred vendor allowances totaled (i) $16,353,000 and
$18,452,000, respectively, for owned merchandise, which allowances are included
as an offset to merchandise inventories on the Company's Consolidated Balance
Sheet, and (ii) $7,217,000 and $10,493,000, respectively, for merchandise
received on consignment, which allowances are included as deferred income on the
Company's Consolidated Balance Sheet. The adoption of EITF 02-16 did not have a
material impact on the financial position or results of operations of the
Company for the thirteen weeks and thirty-nine weeks ended November 1, 2003.
Previously reported results for the thirteen weeks and thirty-nine weeks ended
November 2, 2002 have been restated as a result of the retroactive adoption of
EITF 02-16.

     LONG-LIVED ASSETS

     Long-lived assets are reviewed for impairment whenever events or changes in
circumstances indicate that the carrying amount of the assets may not be
recoverable. If the undiscounted future cash flows from the long-lived assets
are less than the carrying value, the Company recognizes a loss equal to the
difference between the carrying value and the discounted future cash flows of
the assets. Factors used in the valuation of long-lived assets include, but are
not limited to, management's plans for future operations, recent operating
results and projected cash flows.

     GOODWILL

     The Company evaluates goodwill for impairment annually or whenever events
and changes in circumstances suggest that the carrying amount may not be
recoverable from its estimated future cash flows. To the extent these future
projections or the Company's strategies change, the conclusion regarding
impairment may differ from current estimates.

     REVENUE RECOGNITION

     The Company recognizes revenue upon the sale of merchandise, either owned
or consigned, to its customers, net of anticipated returns. The provision for
sales returns is based on the Company's historical return rate.

     COVENANT REQUIREMENTS

     The Company's agreements covering the Revolving Credit Agreement, the
Senior Debentures and the Senior Notes each require that Finlay comply with
certain restrictive and financial covenants. In addition, Finlay Jewelry is
party to the Gold Consignment Agreement, which also contains certain covenants.
As of and for the thirty-nine weeks ended November 1, 2003, the Company was in
compliance with all of its covenants. Management expects to be in compliance
with all of its covenants through 2003. Because compliance is based, in part, on
management estimates and actual results can differ from those estimates, there
can be no assurance that the Company will be in compliance with the covenants in
the future or that the lenders will waive or amend any of the covenants should
the


                                       17
<PAGE>

Company be in violation of any such covenants. The Company believes the
assumptions used are appropriate.

     The Revolving Credit Agreement contains customary covenants, including
limitations on, or relating to capital expenditures, liens, indebtedness,
investments, mergers, acquisitions, affiliate transactions, management
compensation and the payment of dividends and other restricted payments. The
Revolving Credit Agreement also contains various financial covenants, including
minimum earnings and fixed charge coverage ratio requirements and certain
maximum debt limitations.

     The Senior Indentures contain restrictions relating to, among other things,
the payment of dividends, the making of certain investments or other restricted
payments, the incurrence of additional indebtedness, the creation of certain
liens, entering into transactions with affiliates, the disposition of certain
assets and engaging in mergers and consolidations.

     The Gold Consignment Agreement requires Finlay Jewelry to comply with
certain covenants, including restrictions on the incurrence of certain
indebtedness, the creation of liens, engaging in transactions with affiliates
and limitations on the payment of dividends. In addition, the Gold Consignment
Agreement also contains various financial covenants, including minimum earnings
and fixed charge coverage ratio requirements and certain maximum debt
limitations.

     SELF-INSURANCE RESERVES

     The Company is self-insured for worker's compensation claims up to a
certain maximum liability amount. Although the amount accrued is actuarially
determined based on analysis of historical trends of losses, settlements,
litigation costs and other factors, the amount the Company will ultimately
disburse could differ materially from the accrued amount.

RECENT ACCOUNTING PRONOUNCEMENTS

     In April 2003, the FASB issued SFAS No. 149, "Amendment of Statement No.
133 on Derivative Instruments and Hedging Activities". SFAS No. 149 amends and
clarifies the accounting for derivative instruments, including certain
derivative instruments embedded in other contracts, and for hedging activities
under SFAS No. 133, "Accounting for Derivative Instruments and Hedging
Activities". This Statement is effective for contracts entered into or modified
after June 30, 2003 and for hedging relationships designated after June 30,
2003. The adoption of SFAS No. 149 did not have a material impact on the
financial position or results of operations of the Company.

     In May 2003, the FASB issued SFAS No. 150, "Accounting for Certain
Financial Instruments with Characteristics of Both Liabilities and Equity". This
Statement establishes standards for how a company classifies and measures
certain financial instruments with characteristics of both liabilities and
equity. This Statement is effective for financial instruments entered into or
modified after May 31, 2003 and otherwise is effective at the beginning of the
first interim period beginning after June 15, 2003. The adoption of SFAS No. 150
did not have a material impact on the Company's results of operations, financial
position or cash flows.




                                       18
<PAGE>


RESULTS OF OPERATIONS

The following table sets forth operating results as a percentage of sales for
the periods indicated:

STATEMENTS OF OPERATIONS DATA
(UNAUDITED)

<TABLE>
<CAPTION>
                                                                    THIRTEEN WEEKS ENDED            THIRTY-NINE WEEKS ENDED
                                                                 ----------------------------     -----------------------------
                                                                                  NOVEMBER 2,                       NOVEMBER 2,
                                                                 NOVEMBER 1,         2002         NOVEMBER 1,         2002
                                                                    2003         (AS RESTATED)       2003         (AS RESTATED)
                                                                 -----------      -----------     -----------     -------------
<S>                                                              <C>              <C>             <C>             <C>
Sales......................................................        100.0%           100.0%          100.0%            100.0%
Cost of sales..............................................         48.9             47.8            48.7              48.1
                                                                 -----------      -----------     -----------       -----------
    Gross margin...........................................         51.1             52.2            51.3              51.9
Selling, general and administrative expenses...............         48.5             49.3            47.3              47.5
Depreciation and amortization..............................          2.8              2.6             2.5               2.4
                                                                 -----------      -----------     -----------       -----------
    Income (loss) from operations..........................         (0.2)             0.3             1.5               2.0
Interest expense, net......................................          3.4              3.8             3.2               3.4
                                                                 -----------      -----------     -----------       -----------
    Loss before income taxes and cumulative effect of
      accounting change....................................         (3.6)            (3.5)           (1.7)             (1.4)
Benefit for income taxes...................................         (1.4)            (1.5)           (0.7)             (0.6)
                                                                 -----------      -----------     -----------       -----------
    Loss before cumulative effect of accounting change.....         (2.2)            (2.0)           (1.0)             (0.8)
Cumulative effect of accounting change, net of tax.........          -                -               -                (3.2)
                                                                 -----------      -----------     -----------       -----------
    Net loss...............................................         (2.2)%           (2.0)%          (1.0)%            (4.0)%
                                                                 ===========      ===========     ===========       ===========
</TABLE>

THIRTEEN WEEKS ENDED NOVEMBER 1, 2003 COMPARED WITH THIRTEEN WEEKS ENDED
NOVEMBER 2, 2002

     SALES. Sales for the thirteen weeks ended November 1, 2003, increased $6.6
million, or 3.9%, over the comparable period in 2002. Comparable department
sales (departments open for the same months during comparable periods) increased
3.1%. Management attributes this increase in sales primarily to emphasizing its
"Key Item" and "Best Value" merchandising programs, which provide a targeted
assortment of items at competitive prices.

     During the thirteen weeks ended November 1, 2003, Finlay opened 22
departments and closed one department. The openings and closing were all within
existing store groups.

     GROSS MARGIN. Gross margin for the period increased by $1.6 million in 2003
compared to 2002, and as a percentage of sales, gross margin decreased by 1.1%.
Gross margin was impacted by successful promotional events in the quarter which
positively affected sales, but negatively affected margin. The decrease also
reflected a higher LIFO provision coupled with an increase in gold prices.

     SELLING, GENERAL AND ADMINISTRATIVE EXPENSES. SG&A increased $1.9 million,
or 2.2% due primarily to payroll expense and lease fees associated with the
increase in the Company's sales. As a percentage of sales, SG&A decreased 0.8%
due to the favorable leveraging of payroll and other expenses.

     DEPRECIATION AND AMORTIZATION. Depreciation and amortization increased $0.6
million reflecting additional depreciation and amortization as a result of
capital expenditures for the most recent twelve months, offset by the effect of
certain assets becoming fully depreciated. In addition, accelerated depreciation
costs associated with the Burdine's and Lord & Taylor store closings totaling
approximately $0.7 million were recorded in the period.


                                       19
<PAGE>

     INTEREST EXPENSE, NET. Interest expense decreased by $0.4 million primarily
due to a decrease in average borrowings ($278.5 million for the period in 2003
compared to $305.9 million for the comparable period in 2002). The weighted
average interest rate was approximately 7.5% for the 2003 period compared to
7.3% for the comparable period in 2002.

     BENEFIT FOR INCOME TAXES. The income tax benefit for the 2003 and 2002
periods reflects effective tax rates of 39% and 40.5%, respectively, adjusted in
2002 for certain income tax provisions which were no longer required.

     NET LOSS. Net loss of $3.9 million for the 2003 period represents an
increase of $0.5 million as compared to the net loss in the prior period as a
result of the factors discussed above.

THIRTY-NINE WEEKS ENDED NOVEMBER 1, 2003 COMPARED WITH THIRTY-NINE WEEKS ENDED
NOVEMBER 2, 2002

     SALES. Sales for the thirty-nine weeks ended November 1, 2003 increased
$11.1 million, or 2.0%, over the comparable period in 2002. Comparable
department sales increased 1.6%. Management attributes this increase in sales
primarily to emphasizing its "Key Item" and "Best Value" merchandising programs,
which provide a targeted assortment of items at competitive prices.

     During the thirty-nine weeks ended November 1, 2003, Finlay opened 31
departments and closed 18 departments. The openings and closings were all within
existing store groups.

     GROSS MARGIN. Gross margin for the period increased by $2.0 million in 2003
compared to 2002, and as a percentage of sales, gross margin decreased by 0.6%.
The decrease primarily reflected a higher LIFO provision coupled with an
increase in gold prices and a continued promotional environment.

     SELLING, GENERAL AND ADMINISTRATIVE EXPENSES. SG&A increased $4.4 million,
or 1.7% due primarily to payroll expense and lease fees associated with the
increase in the Company's sales. SG&A as a percentage of sales decreased by
0.2%.

     DEPRECIATION AND AMORTIZATION. Depreciation and amortization increased by
$0.5 million due to additional depreciation and amortization as a result of
capital expenditures for the most recent twelve months, offset by the effect of
certain assets becoming fully depreciated. In addition, accelerated depreciation
costs associated with the Burdine's and Lord & Taylor store closings totaling
approximately $0.7 million were recorded in the period.

     INTEREST EXPENSE, NET. Interest expense decreased by $0.9 million primarily
due to a decrease in average borrowings ($267.3 million for the period in 2003
compared to $288.9 million for the comparable period in 2002). The weighted
average interest rate was approximately 7.7% for the 2003 period compared to
7.6% for the comparable period in 2002.

     BENEFIT FOR INCOME TAXES. The income tax benefit for the 2003 and 2002
periods reflects an effective tax rate of 39% and 40.5%, respectively, adjusted
in 2002 for certain income tax provisions which were no longer required.

     CUMULATIVE EFFECT OF ACCOUNTING CHANGE, NET OF TAXES. The Company adopted
EITF 02-16 as of the beginning of 2002 and recorded a cumulative effect
after-tax reduction to earnings of $17.2 million. The charge relates to the
deferral of a portion of the Company's previously collected vendor allowances
relating to both owned merchandise and merchandise received on consignment.


                                       20
<PAGE>

     NET LOSS. The net loss of $5.9 million for the 2003 period represents a
decrease of $15.4 million as compared to the net loss in the prior period as a
result of the factors discussed above.

LIQUIDITY AND CAPITAL RESOURCES

     Finlay's primary capital requirements are for funding working capital for
new departments and for working capital growth of existing departments and, to a
lesser extent, capital expenditures for opening new departments, renovating
existing departments and information technology investments. For the thirty-nine
weeks ended November 1, 2003 and November 2, 2002, capital expenditures totaled
$8.0 million and $8.2 million, respectively. For 2002, capital expenditures
totaled $12.5 million and for 2003 are estimated to be approximately $12.0
million. Although capital expenditures are limited by the terms of the Revolving
Credit Agreement, to date this limitation has not precluded the Company from
satisfying its capital expenditure requirements.

     Finlay's operations substantially preclude customer receivables as Finlay's
lease agreements require host stores to remit sales proceeds for each month
(without regard to whether such sales were cash, store credit or national credit
card) to Finlay approximately three weeks after the end of such month. However,
Finlay cannot ensure the collection of sales proceeds from its host stores.
Additionally, on average, approximately 50% of Finlay's merchandise has been
carried on consignment. The Company's working capital balance was $207.8 million
at November 1, 2003, a decrease of $1.2 million from February 1, 2003, resulting
primarily from the impact of the interim net loss (exclusive of depreciation and
amortization), capital expenditures and the purchase of treasury stock.

     The seasonality of Finlay's business causes working capital requirements,
and therefore borrowings under the Revolving Credit Agreement, to reach their
highest level in the months of October, November and December in anticipation of
the year-end holiday season. Accordingly, Finlay experiences seasonal cash needs
as inventory levels peak. Additionally, substantially all of Finlay's lease
agreements provide for accelerated payments during the months of November and
December, which require the host store groups to remit to Finlay 75% of the
estimated months' sales prior to or shortly following the end of that month.
These proceeds result in a significant increase in the Company's cash, which is
used to reduce the Company's borrowings under the Revolving Credit Agreement.
Inventory levels decreased by $5.4 million, or 1.8%, as compared to November 2,
2002, as a result of the continued monitoring of inventory levels. During 2003,
the reduced inventory levels favorably impacted the Company's outstanding
borrowings under the Revolving Credit Agreement.

     In January 2003, Finlay entered into the Revolving Credit Agreement, which
expires in January 2008. The Revolving Credit Agreement provides Finlay Jewelry
with a line of credit of up to $225.0 million to finance working capital needs.
Amounts outstanding under the Revolving Credit Agreement bear interest at a rate
equal to, at Finlay's option, (i) the prime rate plus a margin ranging from zero
to 1.0% or (ii) adjusted Eurodollar rate plus a margin ranging from 1.0% to
2.0%, in each case depending on the financial performance of the Company. The
weighted average interest rate was 3.3% and 3.9% for the thirty-nine weeks ended
November 1, 2003 and November 2, 2002, respectively.

     In each year, Finlay is required to reduce the outstanding revolving credit
balance and letter of credit balance under the Revolving Credit Agreement to
$50.0 million or less and $20.0 million or less, respectively, for a 30
consecutive day period (the "Balance Reduction Requirement"). Borrowings under
the Revolving Credit Agreement at November 1, 2003 were $54.5 million, compared
to a zero balance at February 1, 2003 and $82.2 million at November 2, 2002. The
average amounts outstanding under the Revolving Credit Agreement were $42.3
million and $63.9 million for the thirty-nine weeks ended November 1, 2003 and
November 2, 2002, respectively. The maximum amount outstanding for the
thirty-nine weeks ended November 1, 2003 was $73.5 million, at which point the
unused excess


                                       21
<PAGE>

availability was $139.1 million. At November 1, 2003, the Company was in
compliance with all of its covenants under the Revolving Credit Agreement.

     Finlay's long-term needs for external financing will depend on its rate of
growth, the level of internally generated funds and the ability to continue
obtaining substantial amounts of merchandise on advantageous terms, including
consignment arrangements with its vendors. For 2002, Finlay had an average
balance of consignment merchandise of $360.5 million as compared to an average
balance of $377.4 million in 2001. As of November 1, 2003, $381.8 million of
consignment merchandise from approximately 300 vendors was on hand as compared
to $381.2 million at November 2, 2002.

     A significant amount of Finlay's operating cash flow has been used or will
be required to pay interest, directly or indirectly, with respect to the Senior
Debentures, the Senior Notes and amounts due under the Revolving Credit
Agreement, including the payments required pursuant to the Balance Reduction
Requirement. As of November 1, 2003, Finlay's outstanding borrowings were $279.5
million, which included a $75.0 million balance under the Senior Debentures, a
$150.0 million balance under the Senior Notes and a $54.5 million balance under
the Revolving Credit Agreement. At November 1, 2003, the Company was in
compliance with all of its covenants under the Senior Indentures.

     The Company may, at the discretion of management, purchase Senior
Debentures and/or Senior Notes from time to time in the open market.
Additionally, beginning on May 1, 2003, the Senior Debentures and Senior Notes
became redeemable, in whole or in part, at the option of Finlay, at specified
redemption prices plus accrued and unpaid interest, if any, to the date of the
redemption. The extent and timing of any bond repurchases will depend upon
general business and market conditions, bond prices, availability under the
Revolving Credit Facility, compliance with certain restrictive covenants and
Finlay's cash position and requirements going forward.

     Finlay Jewelry's Gold Consignment Agreement matures on July 31, 2005 and
permits Finlay to consign up to the lesser of (i) 165,000 fine troy ounces or
(ii) $50.0 million worth of gold, subject to a formula as prescribed by the Gold
Consignment Agreement. At November 1, 2003, amounts outstanding under the Gold
Consignment Agreement totaled 127,921 fine troy ounces, valued at approximately
$49.4 million. The average amount outstanding under the Gold Consignment
Agreement was $39.1 million in 2002. In the event this agreement is terminated,
Finlay Jewelry will be required to return the gold or purchase the outstanding
gold at the prevailing gold rate in effect on that date. For financial statement
purposes, the consigned gold is not included in merchandise inventories on the
Company's Consolidated Balance Sheets and, therefore, no related liability has
been recorded. At November 1, 2003, Finlay Jewelry was in compliance with all of
its covenants under the Gold Consignment Agreement.

     The following tables summarize the Company's contractual and commercial
obligations, which may have an impact on future liquidity and the availability
of capital resources, as of November 1, 2003 (dollars in thousands):

<TABLE>
<CAPTION>
                                                             PAYMENTS DUE BY PERIOD
                                 ----------------------------------------------------------------------------
  CONTRACTUAL OBLIGATIONS          TOTAL       LESS THAN 1 YEAR    1 - 3 YEARS   4 - 5 YEARS    AFTER 5 YEARS
------------------------------   ---------     ----------------    -----------   -----------    -------------
<S>                              <C>              <C>                <C>          <C>             <C>
Senior Notes (due 2008).......   $ 150,000        $       -          $     -      $      -        $ 150,000
Senior Debentures (due 2008)..      75,000                -                -             -           75,000
Operating leases (1)..........      11,011            1,974             3,925        3,834            1,278
                                 ---------        ---------          --------     --------        ---------
Total.........................   $ 236,011        $   1,974          $  3,925     $  3,834        $ 226,278
                                 =========        =========          ========     ========        =========
</TABLE>

----------------
(1) Represents future minimum payments under noncancellable operating leases as
    of February 1, 2003.


                                       22
<PAGE>

<TABLE>
<CAPTION>
                                                AMOUNT OF COMMITMENT EXPIRATION PER PERIOD
                                 ----------------------------------------------------------------------------
 OTHER COMMERCIAL COMMITMENTS      TOTAL       LESS THAN 1 YEAR    1 - 3 YEARS   4 - 5 YEARS    AFTER 5 YEARS
------------------------------   ---------     ----------------    -----------   -----------    -------------
<S>                              <C>              <C>                <C>          <C>             <C>
Revolving Credit Agreement
  (due 2008) (1)..............   $ 54,546         $     4,546       $       -     $ 50,000         $     -
Gold Consignment Agreement
  (due 2005)..................     49,409                   -          49,409            -               -
Letters of credit.............      8,950               8,700               -            -              250
                                 --------        ------------       ---------     --------         --------
Total.........................   $112,905         $    13,246       $  49,409     $ 50,000         $    250
                                 ========        ============       =========     ========         ========
</TABLE>

---------------------
(1) The outstanding balance on the Revolving Credit Agreement at December 1,
    2003 was $86.6 million.

     The Company has not created, and is not party to, any off-balance sheet
entities for the purpose of raising capital, incurring debt or operating the
Company's business. The Company does not have any arrangements or relationships
with entities that are not consolidated into the financial statements that are
reasonably likely to materially affect the Company's liquidity or the
availability of capital resources.

     Finlay believes that, based upon current operations, anticipated growth,
and continued availability under the Revolving Credit Agreement, Finlay Jewelry
will, for the foreseeable future, be able to meet its debt service and
anticipated working capital obligations, and to make distributions to the
Company sufficient to permit the Company to meet its debt service obligations
and to pay certain other expenses as they come due. No assurances, however, can
be given that Finlay Jewelry's current level of operating results will continue
or improve or that Finlay Jewelry's income from operations will continue to be
sufficient to permit Finlay Jewelry and the Company to meet their debt service
and other obligations. Currently, Finlay Jewelry's principal financing
arrangements restrict annual distributions from Finlay Jewelry to the Company to
0.25% of Finlay Jewelry's net sales for the preceding fiscal year and also allow
distributions to the Company to enable it to make interest payments on the
Senior Debentures. Other dividends and distributions, including those required
to fund stock or bond repurchases, are subject to Finlay's satisfaction of
certain restrictive covenants. The amounts required to satisfy the aggregate of
Finlay Jewelry's interest expense totaled $8.8 million and $17.0 million for the
thirty-nine week periods ended November 1, 2003 and November 2, 2002,
respectively. As a result of the retail calendar closing date for the third
quarter of 2003, the semi-annual interest payment with respect to the Senior
Debentures and the Senior Notes totaling $9.7 million was paid in the fourth
quarter of 2003, whereas the third quarter of 2002 included such payment.

     The Company has an employment agreement with one senior executive which
provides for a minimum salary level as well as incentive compensation based on
meeting specific financial goals. The agreement has a remaining term of
approximately fourteen months and has a remaining aggregate minimum value of
$1,244,000 as of November 1, 2003.

     In December 2000, the Company announced that its Board of Directors had
approved a stock repurchase program to acquire up to $20 million of outstanding
Common Stock. The stock repurchase program has been extended from time to time
and, on June 19, 2003, the Company's Board of Directors approved the repurchase
of an additional $20 million of outstanding Common Stock. The Company may, at
the discretion of management, purchase its Common Stock, from time to time
through September 29, 2004 under the stock repurchase program. The extent and
timing of repurchases will depend upon general business and market conditions,
stock prices, availability under the Revolving Credit Facility, compliance with
certain restrictive covenants and Finlay's cash position and requirements going
forward. As of November 1, 2003, the Company has repurchased 1,703,000 shares
for $18.8 million.


                                       23
<PAGE>

     From time to time, Finlay enters into forward contracts based upon the
anticipated sales of gold product in order to hedge against the risk arising
from its payment arrangements. At November 1, 2003 and February 1, 2003, the
Company had various open positions in forward contracts for gold totaling 30,000
and 4,000 fine troy ounces of gold, to purchase gold for $10.5 million and $1.4
million, respectively. There can be no assurance that these hedging techniques
will be successful or that hedging transactions will not adversely affect the
Company's results of operations or financial position.

       In January 2000, Sonab, the Company's European leased jewelry department
subsidiary, sold the majority of its assets for approximately $9.9 million.
After the sale, the buyer operated more than 80 locations previously included in
Sonab's 130-location base in France. The remaining departments were closed. All
of Sonab's employees, excluding those that were hired by the buyer, were
involuntary terminated, including sales associates, supervisors and corporate
personnel. The Company recorded a pre-tax charge in the fourth quarter of 1999
of $28.6 million, or $1.62 per share on a diluted basis after-tax. The charge
included the write down of inventory and fixed assets, employee payroll and
severance costs, realization of foreign exchange losses and other close-down
costs. As of November 1, 2003, the Company's exit plan has been completed with
the exception of certain employee litigation and other legal matters. To date,
the Company has charged a total of $26.4 million against its estimate of $27.2
million. The Company does not believe future operating results or liquidity will
be materially impacted by any remaining payments. No changes have occurred
during the thirty-nine weeks ended November 1, 2003.

     On August 26, 2003, the Company announced that Federated will not renew
Finlay's lease in the Burdine's department store division due to the planned
consolidation of the Burdine's and Macy's fine jewelry departments in 2004. The
termination of the lease, which expires January 31, 2004, will result in the
closure of 46 Finlay departments in the Burdine's division. In fiscal 2002,
Finlay generated approximately $50 million in sales from the Burdine's
departments. In 2003, Finlay estimates recording charges amounting to
approximately $1.5 million for closing costs associated with the accelerated
depreciation of fixed assets and severance, excluding the non-cash charge for
the write-down of goodwill resulting from the department closings. During the
third quarter of 2003, Finlay recorded charges of approximately $690,000
relating to the accelerated depreciation of fixed assets and severance.

     On July 30, 2003, May announced its intention to divest 32 Lord & Taylor
stores, as well as two other stores in its Famous-Barr division. Finlay
currently operates the jewelry departments in each of these locations, with the
exception of one department which closed during the third quarter of 2003 and
two departments which closed during the fourth quarter of 2003. In fiscal 2002,
Finlay generated approximately $17 million in sales from these 34 departments.
At this time, May has not announced a specific timeline for when these stores
will close. However, Finlay estimates recording charges during 2003 and 2004
amounting to approximately $1.5 million for closing costs associated with the
accelerated depreciation of fixed assets and severance from the date of the
announcement through the estimated dates of the store closings, excluding the
non-cash charge for the write-down of goodwill resulting from the department
closings. During the third quarter of 2003, Finlay recorded charges of
approximately $264,000 relating to the accelerated depreciation of fixed assets
and severance.

SEASONALITY

     Finlay's business is highly seasonal, with a significant portion of its
sales and income from operations generated during the fourth quarter of each
year, which includes the year-end holiday season. The fourth quarter accounted
for an average of 41% of Finlay's sales and 79% of its income from operations
for 2002, 2001 and 2000. Finlay has typically experienced net losses in the
first three quarters of its fiscal year. During these periods, working capital
requirements have been funded by borrowings


                                       24
<PAGE>

under the Revolving Credit Agreement. Accordingly, the results for any of the
first three quarters of any given fiscal year, taken individually or in the
aggregate, are not indicative of annual results.

INFLATION

     The effect of inflation on Finlay's results of operations has not been
material in the periods discussed.

SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS

     This Form 10-Q includes "forward-looking statements" within the meaning of
Section 27A of the Securities Act of 1933 and Section 21E of the Securities
Exchange Act of 1934 (the "Exchange Act"). All statements other than statements
of historical information provided herein are forward-looking statements and may
contain information about financial results, economic conditions, trends and
known uncertainties. The forward-looking statements contained herein are subject
to certain risks and uncertainties that could cause actual results, performances
or achievements to differ materially from those reflected in, or implied by, the
forward-looking statements. Factors that might cause such a difference include,
but are not limited to, those discussed under "Management's Discussion and
Analysis of Financial Condition and Results of Operations", as well as trends in
the general economy in the United States, low or negative growth in the economy
or in the financial markets which reduce discretionary spending on goods
perceived to be luxury items, attacks or threats of attacks by terrorists or war
which may negatively impact the economy and/or the financial markets and reduce
discretionary spending on such goods, competition in the retail jewelry
business, the seasonality of the retail jewelry business, the Company's ability
to increase comparable department sales and to open new departments, the
Company's dependence on or loss of certain host store relationships,
particularly with respect to May and Federated, due to the concentration of
sales generated by such host stores, the impact of any host store bankruptcy,
the impact of declining mall traffic levels, the availability to the Company of
alternate sources of merchandise supply in the case of an abrupt loss of any
significant supplier, the Company's ability to continue to obtain substantial
amounts of merchandise on consignment, the impact of fluctuations in gold and
diamond prices, Finlay Jewelry's continuation of its Gold Consignment Agreement,
the Company's compliance with applicable contractual covenants, the impact of
future claims and legal actions arising in the ordinary course of business, the
impact of recent accounting developments, the Company's dependence on key
officers, the Company's ability to integrate future acquisitions into its
existing business, the Company's high degree of leverage and the availability to
the Company of financing and credit on favorable terms and changes in regulatory
requirements which are applicable to the Company's business. Other such factors
include the ability of the Company to complete the repurchases contemplated
under its stock repurchase program, the adequacy of Finlay's working capital to
complete the repurchases, the availability and liquidity of the Company's Common
Stock, and overall market conditions for the Company's Common Stock.

     Readers are cautioned not to rely on these forward-looking statements,
which reflect management's analysis, judgment, belief or expectation only as of
the date hereof. The Company undertakes no obligation to publicly revise these
forward-looking statements to reflect events or circumstances that arise after
the date hereof or to reflect the occurrence of unanticipated events. In
addition to the disclosure contained herein, readers should carefully review any
disclosure of risks and uncertainties contained in other documents the Company
files or has filed from time to time with the Commission pursuant to the
Exchange Act.


                                       25
<PAGE>


ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
        ----------------------------------------------------------

     The Company is exposed to market risk through the interest rate on its
borrowings under the Revolving Credit Agreement, which has a variable interest
rate. Based on the average amounts outstanding under the Revolving Credit
Agreement for 2002, a 100 basis point change in interest rates would have
resulted in an increase in interest expense of approximately $600,000 in 2002.
In seeking to minimize the risks from interest rate fluctuations, the Company
manages exposures through its regular operating and financing activities. In
addition, the majority of the Company's borrowings are under fixed rate
arrangements, as described in Note 4 of Notes to Consolidated Financial
Statements.

     The jewelry industry in general is affected by fluctuations in the prices
of precious metals and precious and semi-precious stones. The availability and
prices of gold, diamonds and other precious metals and precious and
semi-precious stones may be influenced by cartels, political instability in
exporting countries and inflation. Shortages of these materials or sharp changes
in their prices could have a material adverse effect on the Company's results of
operations or financial condition. The Company enters into forward contracts for
the purchase of gold to hedge the risk of gold price fluctuations for future
sales of gold consignment merchandise. The Company does not enter into forward
contracts or other financial instruments for speculation or trading purposes.
The fair value of gold under the forward contracts was $11.6 million at November
1, 2003.


ITEM 4. CONTROLS AND PROCEDURES
        -----------------------

DISCLOSURE CONTROLS AND PROCEDURES

     As of the end of the Company's most recently completed fiscal quarter
covered by this report, the Company carried out an evaluation with the
participation of the Company's management, including the Company's Chief
Executive Officer ("CEO") and Chief Financial Officer ("CFO"), of the
effectiveness of the Company's disclosure controls and procedures pursuant to
Securities Exchange Act Rule 13a-15. Based upon that evaluation, the Company's
CEO and CFO concluded that the Company's disclosure controls and procedures are
effective in ensuring that material financial and non-financial information
required to be disclosed by the Company in reports that it files or submits
under the Exchange Act is recorded, processed, summarized and reported within
the time periods specified in the Commission's rules and forms.

CHANGES IN INTERNAL CONTROLS OVER FINANCIAL REPORTING

         There have been no changes in the Company's internal controls over
financial reporting that occurred during the Company's last fiscal quarter to
which this report relates that have materially affected, or are reasonably
likely to materially affect, the Company's internal controls over financial
reporting.





                                       26
<PAGE>


ITEM 6.  EXHIBITS AND REPORTS ON FORM 8-K

     A.    EXHIBITS

        2       Not applicable.

      3.2       Second Amendment, dated as of September 10, 2003, to the Amended
                and Restated By-Laws of the Company.

        4       Not applicable.

     10.1       Fourth Amendment, dated as of July 6, 2003, among Sovereign
                Bank, as agent and a bank, Sovereign Precious Metals, LLC,
                Finlay Jewelry and eFinlay, Inc., to the Amended and Restated
                Gold Consignment Agreement dated as of March 30, 2001, as
                amended.

     10.2       Restricted Stock Agreement, dated as of August 14, 2003, between
                Finlay Enterprises, Inc. and Arthur E. Reiner.

     10.3       Form of Restricted Stock Agreement entered into by Finlay
                Enterprises, Inc. in connection with October 2003 awards of
                restricted stock.

     10.4       Form of 2003 Deferral Agreement under Finlay Enterprises, Inc.
                Director Deferred Compensation and Stock Purchase Plan.

     10.5       Form of 2003 Deferral Agreement under Finlay Enterprises, Inc.
                Executive Deferred Compensation and Stock Purchase Plan.

       11       Statement re: Computation of earnings per share (not required
                because the relevant computation can be clearly determined from
                material contained in the financial statements).

       15       Not applicable.

       18       Not applicable.

       19       Not applicable.

       22       Not applicable.

       23       Not applicable.

       24       Not applicable.

     31.1       Certification of principal executive officer pursuant to the
                Sarbanes-Oxley Act of 2002, Section 302.

     31.2       Certification of principal financial officer pursuant to the
                Sarbanes-Oxley Act of 2002, Section 302.

     32.1       Certification of principal executive officer pursuant to the
                Sarbanes-Oxley Act of 2002, Section 906.


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<PAGE>


     32.2       Certification of principal financial officer pursuant to the
                Sarbanes-Oxley  Act of  2002, Section 906.

     B.    REPORTS ON FORM 8-K

     On November 6, 2003, the Company filed a Current Report on Form 8-K
furnishing information under Item 12 relating to the Company's press release
announcing the Company's sales for the third quarter and the nine months ended
November 1, 2003.

     On November 20, 2003, the Company filed a Current Report on Form 8-K
furnishing information under Item 12 relating to the Company's press release
reporting the Company's financial results for the third quarter and the nine
months ended November 1, 2003.




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<PAGE>


                                   SIGNATURES


     Pursuant to the requirement of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.



Date: December 10, 2003                FINLAY ENTERPRISES, INC.

                                       By: /s/ Bruce E. Zurlnick
                                           -------------------------------------
                                           Bruce E. Zurlnick
                                           Senior Vice President, Treasurer
                                           and Chief Financial Officer
                                           (As both a duly authorized officer of
                                           Registrant and as principal financial
                                           officer of Registrant)




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