<PAGE>

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

                       SECURITIES AND EXCHANGE COMMISSION
                              WASHINGTON, DC 20549
                                ----------------
                                    FORM 10-K

[X] Annual Report pursuant to Section 13 or 15(d) of the Securities
    Exchange Act of 1934 For the fiscal year ended October 31, 2000
                                       or
[ ] Transition Report Pursuant to Section 13 or 15(d) of the Securities
    Exchange Act of 1934 For the transition period from ___________________ to
    _______________________

                         Commission File Number 0-24026
                            MAXWELL SHOE COMPANY INC.

             (Exact name of registrant as specified in its charter)

            Delaware                                            04-2599205
 (State or other jurisdiction of                               (IRS Employer
 incorporation or organization)                           Identification Number)

           101 Sprague Street
               P.O. Box 37
         Readville (Boston), MA                                          02137
(Address of principal executive offices)                              (Zip code)

                                 (617) 364-5090
              (Registrant's telephone number, including area code)

           Securities Registered Pursuant to Section 12(b) of the Act:

                                                        Name of Each Exchange
Title of Each Class:                                     on Which Registered:
-------------------                                    ----------------------
      None                                                       None


           Securities Registered Pursuant to Section 12(g) of the Act:
                              Class A Common Stock,
                            par value $.01 per share
                                (Title of class)

         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 [ ] No [X]

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

         The aggregate market value of the Class A Common Stock of the
registrant held by non-affiliates of the registrant on January 24, 2001 based on
the closing price of the Class A Common Stock on the NASDAQ National Market
System on such date was $108,985,375.

         The number of shares of the registrant's Class A Common Stock
outstanding at January 24, 2001 was 8,806,899 shares.

                       DOCUMENTS INCORPORATED BY REFERENCE

         Portions of the proxy statement for the registrant's 2001 Annual
Stockholders Meeting are incorporated by reference into Part III herein.

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

                            MAXWELL SHOE COMPANY INC.
                       INDEX TO ANNUAL REPORT ON FORM 10-K

                   For The Fiscal Year Ended October 31, 2000


Caption                                                                     Page
                                                                            ----
PART I
------

Item 1.       Business.....................................................    2

Item 2.       Properties...................................................   14

Item 3.       Legal Proceedings............................................   14

Item 4.       Submission of Matters to a Vote of Security Holders..........   14


PART II
-------

Item 5.       Market for Registrant's Common Equity and Related
               Stockholder Matters.........................................   15

Item 6.       Selected Financial Data......................................   16

Item 7.       Management's Discussion and Analysis of Financial Condition
               and Results of Operations...................................   17

Item 8.       Consolidated Financial Statements and Supplementary Data.....   19

Item 9.       Changes in and Disagreements with Accountants on Accounting
               and Financial Disclosure....................................   38


PART III
--------

Item 10.      Directors and Executive Officers of the Registrant...........   38

Item 11.      Executive Compensation.......................................   38

Item 12.      Security Ownership of Certain Beneficial Owners and
               Management..................................................   38

Item 13.      Certain Relationships and Related Transactions...............   38


PART IV
-------

Item 14.      Exhibits, Financial Statement Schedules, and Reports on
               Form 8-K....................................................   39

                                       1
<PAGE>

                                     PART I
                                     ------

Item I.    Business

General
         All references herein to the "Company" mean Maxwell Shoe Company Inc.,
a Delaware corporation, and its predecessors and its consolidated subsidiaries,
unless the context otherwise requires. The Company's fiscal year ends on October
31; all references herein to a fiscal year mean the twelve-month period ended on
October 31 of the particular year.

         The Company designs, develops and markets casual and dress footwear for
women and children under multiple brand names, each of which is targeted to a
distinct segment of the footwear market. The Company offers casual and dress
footwear for women in the moderately priced market segment under the Mootsies
Tootsies brand name, in the upper moderately priced market segment under the Sam
& Libby and Dockers(R) Khakis Footwear For Women brand names and in the better
market segment under the Anne Klein 2 and A Line Anne Klein brand names. The
Company also sells moderately priced and upper moderately priced children's
footwear under both the Mootsies Tootsies and Sam & Libby brand names. The
Company designs and develops private label footwear for selected retailers under
the retailers' own brand names. The Company has licensed the J.G. Hook trademark
to source and develop private label products for retailers who require brand
identification. In October 2000, the Company acquired all the trademarks of joan
and david helpern, incorporated and JOAN HELPERN DESIGNS, INC. (Joan & David).
In addition, the Company sold footwear closeouts that it had purchased at
discounts from other manufacturers. This footwear closeout business was
terminated in fiscal 1999.

         Since 1987, when the Company first focused on its branded footwear
strategy and, except for fiscal 1999 as noted below, the Company has increased
net sales every year and consistently maintained profitability. In fiscal 1999,
the Company's net sales decreased 9.4% as compared to fiscal 1998 while net
income increased 42.1%. This was largely a result of the sale of the Jones New
York license to the Jones Apparel Group, Inc. and Jones Investment Co.
(hereinafter collectively "Jones"). The Company's financial success has been
largely a result of its ability to design, develop and market footwear with
contemporary styles at affordable prices. Retail prices for the Company's
footwear generally range from $20 to $70 for the Mootsies Tootsies, Dockers(R)
Khakis Footwear For Women and Sam & Libby brand offerings and from $45 to $95
for the A Line Anne Klein and Anne Klein 2 product lines. The Joan & David
footwear retail prices are expected to range from $180 and higher. The Company
expects to begin shipping Joan & David footwear in the fourth quarter of fiscal
2001. Substantially all of the Company's products are manufactured overseas by
independent factories selected by the Company and its overseas agents. The
Company sells its footwear primarily to department stores and specialty stores
in the United States as well as through national catalog retailers and cable
television consumer shopping channels.

         In July 1993, the Company entered into a license agreement (the "Jones
License Agreement") with Jones under which the Company had the exclusive right
to use the Jones New York and Jones New York Sport names in connection with the
development, manufacturing and marketing of women's footwear (other than
performance athletic shoes and bedroom slippers). The Jones License Agreement
covered the United States (including its territories) and Canada. The Company
had a number of options to extend the Jones License Agreement through December
2017, subject to the Company meeting certain minimum net sales amounts. On July
9, 1999 the Company sold and assigned its rights, title and interest as licensee
to manufacture and sell footwear and open sales orders and purchase orders
bearing Jones New York and Jones New York Sport trademarks under the Jones
License Agreement to Jones for $25 million cash. The Company shipped the last of
its Jones New York footwear in January 2000.

         The Company's strategy is to leverage its existing competitive
strengths, including but not limited to its strong manufacturing relationships
and focused brand management and to increase profitably its share of the women's
and children's footwear markets by further strengthening its existing footwear
brands and its private label business and expanding its brand portfolio through
a combination of acquisition, licensing and development of additional brands in
the future.

                                       2
<PAGE>

         Through advertising, promotion and packaging, the Company has built
consumer and retail recognition for the Mootsies Tootsies and Mootsies Kids
brand names, and management believes that Mootsies Tootsies is currently one of
the largest selling brands in the moderately priced segment of the women's
casual and dress footwear industry. The Company continued its brand expansion
through the acquisition of the Sam & Libby worldwide trademarks and tradenames
in 1996. The Company has re-positioned the Sam & Libby brand from its prior
focus on the junior women's market segment to the updated, career-oriented women
market segment, and sales under the Sam & Libby lines have increased
significantly since this brand re-positioning and introduction of additional
products under such brand name. In late 1998, the Company licensed the
Dockers(R) Khakis Footwear For Women footwear brand name for women, in order to
increase its brand offerings in the upper moderate and better industry segments.
In 1999, the Company sold its Jones New York footwear license to Jones which had
served the better footwear retail segment. In 1999, in order to service the
better women's footwear segment at retail, the Company licensed the Anne Klein 2
and A Line Anne Klein footwear brands. The Company acquired the Joan & David
worldwide trademarks and tradenames in October 2000. The Joan & David brand has
served the bridge/designer zone for more than 25 years. The Company plans to
ship first Joan & David footwear for the Fall 2001 footwear season. The Company
is reviewing candidates for license agreements for apparel, handbags and
accessories. The Company believes that there is a growing demand among retailers
for footwear to market on a first cost basis with brand names. The Company
licensed the J.G. Hook name in 1997 to sell as a first cost product for
retailers who require brand identification.

         Maxwell Shoe Company competes primarily in the women's casual and dress
footwear market, which emphasizes contemporary fashion, quality and value. The
Company believes that there has been a shift in the "moderate" segment of the
women's casual and dress footwear market toward value priced footwear. The
Company has positioned its Mootsies Tootsies line to take advantage of this
shift by offering value priced footwear that reflects current fashion trends.
The Sam & Libby brand is directed to appeal to the fashion forward customers in
the upper moderate price range that has been less affected by this shift. The
Company's Dockers(R) Khakis Footwear For Women competes in the upper moderate
and better industry segments. The Company believes that the better and bridge
segments of this market has not been as affected by this shift due to a
continuing interest in higher quality and brand name products, such as the
Company's Anne Klein 2, A Line Anne Klein and Joan & David brands.

         The Company, originally a closeout footwear business founded in 1949,
was incorporated as Maxwell Shoe Company Inc. in Massachusetts in 1976. During
the late 1980s, the Company shifted its focus to designing, developing and
marketing full lines of branded women's footwear. In order to implement this new
strategy, the Company hired experienced senior management to strengthen its
organizational infrastructure, developed cost-efficient product sourcing,
implemented an advertising program and improved internal systems. In March 1994,
Maxwell Shoe Company Inc. became a Delaware incorporated company.


Business Strategy

         The Company's strategy is to leverage its existing competitive
strengths, to increase profitably its share of the women's and children's
footwear markets by further developing its existing footwear brands and its
private label business and expanding its brand portfolio through a combination
of acquisition, licensing and development of additional brands in the future.

         Competitive Strengths. The Company has developed certain core operating
strengths which have been significant sources of growth to date and which
management believes will help the Company achieve further growth in the future.
Such operating strengths include:

         o  Portfolio of Established Brands. Through advertising and promotion,
            the Company has built consumer and retail recognition for its
            Mootsies Tootsies and Mootsies Kids brand names and has established
            Mootsies Tootsies as one of the largest selling brands in the
            moderately priced segment of the women's casual and dress footwear
            industry. The Company continued its brand expansion through the
            acquisition of the Sam & Libby worldwide trademarks and tradenames
            in 1996. For several years, the Company offered its Jones New York
            and Jones New York Sport footwear lines in

                                       3
<PAGE>

            the better priced segments. This license was sold in July 1999 to
            Jones. Effective July 1999, the Company licensed the Anne Klein 2
            and A Line Anne Klein brands for women's footwear to compete in the
            better retail segment. The Company licensed the Dockers(R) Khakis
            Footwear For Women brand in order to increase its brand offering in
            the upper moderate and better price segments. The Company has also
            licensed the J. G. Hook name to sell as a first cost product for
            those first cost retailers that require brand identification. The
            acquisition of the Joan & David trademarks allows the Company to
            compete in the bridge retail segment. The Company continues to seek
            licensing or acquisition opportunities in order to expand its
            current portfolio of brands.

         o  Strong Manufacturing Relationships. The Company believes that one of
            the contributing elements of its growth has been its strong
            relationships with overseas buying agents and manufacturers capable
            of meeting the Company's requirements for quality and price in a
            timely fashion. The Company's increased use of China-based
            manufacturing facilities has resulted in lower manufacturing costs
            while continuing to meet the Company's high quality standards.
            Universal Max Trading, the Company's principal buying agent in The
            Peoples Republic of China ("China"), has agreed to exclusively
            source and monitor product manufacturing for the Company in China.
            Universal Max Trading has a dedicated manufacturing facility and a
            recently opened tanning facility in China which will further improve
            the Company's product development and sourcing capabilities. The
            Company continues to seek to develop other exclusive relationships
            with buying agents whose access to numerous manufacturing facilities
            will enable the Company to maximize its sourcing flexibility.

         o  Emphasis on High Volume Moderate Through Better Segments of the
            Footwear Market. The Company believes that its strategy of focusing
            on the high volume moderate through better segments of the women's
            and children's footwear markets and of providing value-priced
            products reduces the risks associated with changing fashion trends.
            The Company also attempts to reduce the risks of changing fashion
            trends and product acceptance through reducing manufacturing lead
            times and increasing inventory turns at its distribution center. The
            Company believes that this approach mitigates the risks of carrying
            obsolete inventory and poor retail sell-through.

         o  Comprehensive Customer Relationships. The Company supports its
            customers by maintaining an in-stock inventory position for selected
            styles in order to minimize the time necessary to fill customers'
            orders. In addition, the Company provides its customers with
            electronic data interchange (EDI) capability (see "--Distribution"),
            co-op advertising, point of sale displays and assistance in
            evaluating which products are likely to appeal to their retail
            customers. Management believes that the Company has earned a strong
            reputation among its customers by consistently providing quality
            products at attractive prices. In return, the Company's customers
            provide certain information to the Company on current retail selling
            trends, which helps the Company identify and interpret fashion
            trends.

         Growth Strategy. By leveraging the above competitive strengths, the
Company has pursued and will continue to pursue growth through various
initiatives, including, but not limited to, the following:

         o  Growing the Company's Existing Brands. Management seeks to increase
            sales of the Company's products under each of the Company's existing
            brands by: (i) offering a broader assortment of products and styles
            under such brand names, (ii) further penetrating the Company's
            existing retail channels through increased display area and
            additional stores, (iii) developing new retail channel relationships
            appropriate to the Company's product offerings and (iv) increasing
            the use of advertising to strengthen brand awareness among retailers
            and consumers.

         o  Increasing the Company's Private Label Business. The Company entered
            the private label footwear market in order to leverage its offshore
            manufacturing experience and existing infrastructure by providing
            selected retailers with private label products for sale under their
            own house brands. This business enables the Company to sell products
            to new customers as well as strengthen the Company's relationship
            with certain of its existing customers. The Company believes that
            there is a growing demand among retailers for footwear to market
            under their own brand names, and the Company

                                       4
<PAGE>

            licensed the J. G. Hook name to sell as a first cost product for
            retailers who require brand identification.

         o  Adding Brands to the Company's Portfolio. Management believes that
            the footwear industry segments in which the Company operates remain
            highly fragmented, although consolidation has been accelerating
            recently as fewer companies control more brands and retailers
            generally purchase footwear merchandise from a reduced number of
            manufacturers. The Company intends to continue capitalizing on this
            ongoing consolidation by expanding its existing brand portfolio
            which will appeal to different market segments of the footwear
            industry. Management believes that creating, acquiring or licensing
            additional brands will enable the Company to increase its sales by
            satisfying the needs of a broader range of customers. The Company
            intends to sell these new brands through the Company's existing
            customers as well as new customers, which the Company seeks to
            develop. The acquisition of the Sam & Libby and Joan & David brands
            and the licensing of the Anne Klein 2 and A Line Anne Klein and
            Dockers(R)Khakis Footwear For Women brands represent the Company's
            most recent efforts to expand into new market segments. The Company
            intends to continue to explore entering other market segments
            through acquisition or licensing of additional brands. The Company
            believes that it is well positioned to continue pursuing this
            strategy due to its relatively strong and unencumbered balance
            sheet.


Product Lines

         The Company's products consist of nine lines of brand name footwear as
well as private label footwear for selected retailers for sale under their own
house brands. Each of the branded product lines is targeted to appeal to a
different market segment of the footwear industry. The characteristics of the
product lines sold by the Company are summarized in the following table:

<TABLE>
<CAPTION>
                                                                     General Retail
                                                                      Price Range
                                                                   ------------------
                                 Style      Industry Segment       Shoes        Boots
                                 -----      ----------------       -----        -----
<S>                         <C>            <C>                    <C>          <C>
Mootsies Tootsies........... Contemporary       Moderate          $25-$40      $35-$55
Mootsies Kids............... Contemporary       Moderate          $20-$25      $30-$40
Sam & Libby and Just Libby..    Updated      Upper Moderate       $35-$50      $45-$70
Sam & Libby Kids............    Updated      Upper Moderate       $25-$45      $35-$55
Dockers(R)Khaki.............     Casual   Upper Moderate-Better   $40-$65         -
A Line Anne Klein........... Contemporary        Better           $45-$79      $79-$95
Anne Klein 2................ Contemporary        Better           $45-$79      $79-$95
Joan & David................ Contemporary        Bridge           $180 +      $250-$300
J.G. Hook Private Label.....      All        Budget-Moderate      $12-$20      $25-$30
</TABLE>

     Mootsies Tootsies

         The Mootsies Tootsies brand line provides consumers with a wide
selection of footwear with contemporary styles and quality at affordable prices
primarily targeted at women ages 18 to 34. The line includes approximately 30
new styles each spring and fall season, as well as a number of core styles that
are updated periodically based on fashion trends. The line principally consists
of casual shoes, dress shoes, boots and sandals. Styles are available in a wide
variety of colors and materials, including leather, sueded leather and fabric.
All footwear in the line is designed to have soft construction for comfort.


     Mootsies Kids

         The Mootsies Kids brand line is targeted at girls in the misses market
(ages 8 to 12) who desire contemporary footwear. The line consists of
approximately 20 new styles each spring and fall that, in many cases,

                                       5
<PAGE>

represent a miniature version of the Mootsies Tootsies line. The children's line
is focused on casual shoes, party shoes, boots and sandals.


     Sam & Libby and Just Libby

         The Sam & Libby line is updated casual and dress footwear targeted at
female fashion customers, ages 21 to 35, and contains approximately 30 styles
per season, consisting of casual shoes, dress shoes, boots and sandals. The
acquisition of the Sam & Libby brand with its trademarks registered in over 20
countries will bolster the Company's efforts to develop and grow
internationally, although the Company's expansion to overseas markets will be a
long-term effort. A wholly owned subsidiary of the Company has granted to SLJ
Retail LLC ("SLJ Retail") a license to sell Sam & Libby and Just Libby women's
footwear products. See "--License Agreements--SLJ Retail."

     Sam & Libby Kids

         The Sam & Libby Kids line is geared toward girls ages 8 to 14 and is
targeted towards the updated and more fashion-conscious girl. The line will have
approximately 20 styles each season often similar to the Sam & Libby women's
styles. The children's line is focused on dress shoes, casual shoes, casual
athletic shoes, boots and sandals.


     Dockers(R) Khaki Footwear For Women

         The Dockers(R) Khakis Footwear For Women line targets women between the
ages of 25-34 and has been designed to provide women with a new choice in
stylish, comfortable casual footwear. The footwear line will compliment the
Dockers(R) Khakis Footwear For Women apparel products and are specifically
designed to be worn with Khakis, complimenting a wide variety of versatile
looks.


     Anne Klein 2 and A Line Anne Klein

         The Anne Klein 2 and A Line Anne Klein footwear lines focus on
contemporary, quality footwear targeted at career-oriented women 30 years and
older. The lines capitalize on the name recognition and reputation enjoyed by
the Anne Klein apparel line produced by the Company's licensor and the footwear
is designed to complement the Anne Klein apparel. The Company's Anne Klein 2 and
A Line Anne Klein footwear lines consist of approximately 25 styles per season
with all leather uppers and soles.


     Joan & David

         The Joan & David footwear collection for the last 25 years has focused
on selling the high-end "designer" footwear segment. The new Joan & David line
will focus on the much larger bridge market, one that the Company believes is
significantly larger than the designer market. The line will attempt to
capitalize on the esteem, recognition and reputation of the brand developed over
the past 25 years. The product line will target young women (median age in upper
30s) with high family income well above the national median. The line will
consist of 30 styles that are contemporary, stylish and tasteful.

     J. G. Hook and Private Label Products

         In response to the growing demand among retailers for footwear to
market under their own brand names, the Company designs and sources private
label women's and children's footwear for selected retailers. The Company's
private label business has minimal overhead and capital requirements primarily
because the Company utilizes its existing branded product styles (thereby
incurring no additional product development costs) and because the Company does
not incur any costs related to purchasing, importing, shipping or warehousing of
inventory, all

                                       6
<PAGE>

of which costs are borne by the retailer. The Company has licensed the J. G.
Hook name to sell as a first cost product for retailers who require brand
identification.

         The following table sets forth the percentage of the Company's net
sales generated by each of its major product categories for the periods
indicated:

                                                Year Ended October 31
                                           -------------------------------
         Category                           1998         1999         2000
         --------                          -----        -----        -----
         Women's.....................       86.5%        87.6%        90.5%
         Children's..................       13.3         12.3          9.5
         Other.......................        0.2          0.1          0.0
                                           -----        -----        -----
         Total.......................      100.0%       100.0%       100.0%
                                           ======       =====        =====

Closeout Business

         The Company sold certain product styles that it purchased at volume
discounts from other footwear manufacturers. These products, which were
typically either slow moving or factory seconds, were sold to discount
retailers. At times, the Company held closeout products in inventory until the
next fashion season. The Company terminated this business in fiscal 1999.


Retail Joint Venture

         In April 1997, the Company completed a transaction to operate Sam &
Libby women's footwear stores through SLJ Retail. Initially, the Company and the
Butler Group LLC, a wholly owned subsidiary of General Electric Capital
Corporation, owned 49% and 51% of SLJ Retail, respectively. However, currently,
the Company and the Butler Group LLC own less than 1% and more than 99% of SLJ
Retail, respectively. Under certain circumstances until April 2002, the Company
may be obligated to acquire the ownership interest of the Butler Group at a
value based upon the operating results of SLJ Retail. Effective January 19,
1999, the Company was no longer the managing member of SLJ Retail.


Design and Product Development

         The Company seeks to identify fashion trends and to translate such
trends into contemporary footwear that appeal to its target market segments'
requirements for style, quality, fit and price. Management believes that its
philosophy of marketing contemporary styles to a broad audience rather than
"fashion forward" styles reduces the risks associated with changing fashion
trends.

         Each branded product line has its own design team, including design
staff, sales staff and a brand manager in an effort to design footwear that
appeals to the characteristics of that line's market segment. The designers
research and confirm market trends by: (i) traveling extensively to fashion
markets in the United States and Europe, (ii) attending trade shows, (iii)
subscribing to fashion and color information services and (iv) commissioning
market studies. In addition, product development efforts benefit from
interaction with retailers, who provide information on current retail selling
trends, and the Company's buying agents, who provide information on industry
trends. The designers for the Anne Klein 2 and A Line Anne Klein footwear lines
also meet regularly with The Anne Klein Company to exchange product and fashion
concepts. The designer for Dockers(R) Khakis Footwear For Women line meets
regularly with the Dockers Company to exchange product and fashion concepts. See
"--License Agreements-- Anne Klein 2 and A Line Anne Klein." Each line initially
consists of between 100 and 200 prototypes each season from which the design
team selects the styles that it believes will satisfy the target market
segment's requirements for style, quality, fit and price. Each line is further
refined following presentations at industry shows.

                                       7
<PAGE>

Marketing and Customer Support

         Each branded product line has its own sales organization, including a
divisional executive who oversees all aspects of selling the line and works with
a network of independent sales representatives located throughout the United
States. Certain of the independent sales representatives sell only the Company's
brands, and the rest of the independent sales representatives sell brands that
do not compete directly with the Company's brands. The Company develops spring
and fall product lines for each of its brands. Each line is first introduced at
industry trade shows prior to on-site sales visits by the independent sales
representatives and the Company's divisional head responsible for the line. In
addition, the Company maintains showrooms in New York and Boston where buyers
view products and place orders. While the Company's products are distributed
primarily in the United States, the Company also sells to independent wholesale
distributors in Canada.

         In fiscal 2000, the Company sold products to approximately 1,500
accounts with over 7,000 retail locations. The Mootsies Tootsies retailers,
which market moderately priced apparel merchandise, include Shoe Carnival,
Kohl's and Belks. The A Line Anne Klein and Anne Klein 2 footwear is distributed
to those retailers who typically market merchandise at higher retail price
points, including Federated (Macy's), May Co., (Lord & Taylor) and Saks' Stores
(Parisian). The Sam & Libby footwear lines are distributed to retailers such as
Federated, May Co., Bon Ton and Nordstrom. Dockers(R) Khakis Footwear For Women
distributes footwear to Sears and department stores such as Kohl's. The retail
industry has periodically experienced consolidation, and any future
consolidation may result in loss of customers of the Company and lower profit
margins on the Company's footwear. The Company also markets its branded products
through national catalog retailers such as Spiegel, Nordstrom and Chadwicks of
Boston and through home shopping clubs such as QVC.

         The Company's largest customer, The TJX Companies ("TJX"), the
successor entity from the combination of Marshall's and T. J. Maxx, accounted
for 13% and 9% of the Company's net sales in fiscal 1999 and fiscal 2000,
respectively. The Company's top three customers (TJX, Federated and May Co.)
accounted for 25% of net sales for both fiscal 1999 and fiscal 2000. While the
Company seeks to build long-term customer relationships, revenues from any
particular customer can fluctuate from period to period due to such customer's
purchasing patterns. In addition, the Company believes that although purchasing
decisions have generally been made independently by each department store
customer, there is a trend among department store customers toward more
centralized purchasing decisions. The retail industry has also periodically
experienced consolidation, and any future consolidation may result in loss of
customers of the Company and lower profit margins on the Company's footwear. In
the future, the Company's wholesale customers may consolidate, undergo
restructuring or reorganizations, or realign their affiliations, any of which
could decrease the number of stores that carry the Company's products or
increase the ownership concentration within the retail industry. Any termination
or significant disruption of the Company's relationships with one or more of the
Company's major customers could have a material adverse effect on the Company's
financial condition or results of operations. See Note 1 of "Notes to
Consolidated Financial Statements."

         The Company believes that its reputation for quality products and
relationships with retailers will also be useful during the introduction of new
brands that it may develop or acquire to fill other niches in the women's
footwear market.

         The Company supports its customers through a variety of programs,
including its in-stock inventory position for selected styles, the availability
of EDI, co-op advertising and point of sale displays. In addition, the Company
assists its customers in evaluating which products are more likely to appeal to
their retail customers. Customers may return defective products in quantities of
more than six pairs for full credit. Customer allowances are based on the
Company's ability to meet the particular customer's objectives and
specifications.


Advertising and Promotion

         The Company works closely with its retailers in promoting its brands
through its own and cooperative national consumer print advertising, in-store
merchandising, point of sale promotions, in-store events, distinctive packaging
and active solicitation of fashion editorial space.

                                       8
<PAGE>

         Print advertisements for Mootsies Tootsies are designed to build brand
awareness, rather than market a particular footwear product, by linking the
brand to a consumer's lifestyle. The advertisements run in fashion/lifestyle
publications such as Glamour and Cosmopolitan as well as in general interest
publications such as Oprah. Utilizing the print media, the Company seeks to
reach a large percentage of its target audience, women ages 18 to 34, with a
number of advertisements each selling season. Advertising for Anne Klein 2 and A
Line Anne Klein is largely executed through department store co-op programs.
Additionally, the Company participates in image advertising through The Anne
Klein Company. Major campaigns by The Anne Klein Company are planned via direct
consumer media such as Vogue, Elle and W magazines to support the Anne Klein
brands.

         Print advertisements for Sam & Libby and Dockers(R) Khakis Footwear For
Women are designed to build brand awareness by creating a lifestyle viewpoint
that appeals to the modern consumer. The advertisements will appear in fashion
publications such as Glamour, Cosmopolitan and InStyle.

         The print advertising program for the Joan & David collection will
commence in late Fall 2001. The upscale national advertising will consist of
consumer ads focused on upscale publications.

         The Company also participates with its retail customers in cooperative
advertising programs intended to take the brand awareness created by the
national print advertising and channel it to local retailers where consumers can
buy the Company's brands. This includes local advertising on radio, television,
and newspaper as well as Company participation in major catalogs for retailers
such as Spiegel. The Company's co-op efforts are intended to maximize
advertising resources by having its retailers share in the cost of promoting the
Company's brands. Also the Company believes that co-op advertising encourages
the retailer to merchandise the brands properly and sell them aggressively on
the sales floor.

         The Company uses brand point-of-sale advertising to further promote its
products in the store. Point-of-sale techniques used by the Company include
point-of-sale displays, counter cards, banners and other visual in store
merchandising displays. These materials mirror the look and feel of the national
print advertising in order to reinforce brand image at the point-of-sale.
Management believes these efforts stimulate impulse sales and repeat purchases.


Manufacturing

         Mootsies Tootsies, Mootsies Kids, Sam & Libby and Dockers(R) Khakis
Footwear For Women are manufactured primarily in China and Brazil because of the
ability of the suppliers in these countries to manufacture quality products at
affordable prices. The A Line Anne Klein and Anne Klein 2 footwear brand is
primarily manufactured in China and also manufactured in Spain and Italy because
Spanish and Italian suppliers can meet the Company's quality requirements and
their reputation for quality footwear is consistent with the A Line Anne Klein
and Anne Klein 2 image. The Joan & David collection will be primarily
manufactured in Italy where fine craftsmanship and innovative footwear is best
sourced.

         The Company does not have long-term contracts with any of the factories
that produce its footwear. The Company relies on its relationships with buying
agents who are responsible for securing raw materials, selecting manufacturers,
monitoring the manufacturing process, inspecting finished goods and coordinating
shipments to the Company. These agents work regularly with numerous factories
with the capacity to meet the Company's product specifications for quality, fit,
volume and price. By using buying agents rather than manufacturing products
itself, the Company is able to maximize production flexibility while avoiding
significant capital expenditures, materials and work-in-process inventory and
costs of managing a production work force. To date, the Company has not
encountered significant delivery or quality problems. The Company works with
buying agents with access to numerous manufacturing facilities in order to
maximize the Company's sourcing flexibility. The Company believes it has built
strong relationships with its agents and manufacturing facilities over time and
through volume of business. Management believes that its buying agents do not
represent other direct competitor branded footwear lines, and Universal Max
Trading, the Company's principal buying agent in China, has agreed to act
exclusively for the Company in China. The Company pays its buying agents a
percentage of the order price of products

                                       9
<PAGE>

shipped to the Company. The Company manufactures none of its products and does
not own any manufacturing facilities or equipment.

         Prior to the start of production, the Company submits specifications
for products to the buying agent, who then provides a confirmation sample of
each style for inspection by the Company. During production, the Company makes
periodic reviews of products at the factory in addition to inspections conducted
by the buying agent. The Company also inspects products upon receipt at its
warehouse.

         The Company maintains an in-stock position for selected styles of its
footwear in order to minimize purchasing costs and the time necessary to fill
customer orders. In order to maintain an in-stock position, the Company places
orders for selected footwear with its manufacturers prior to the time the
Company has received customers' orders for such footwear. In order to reduce the
risk of overstocking, the Company assesses demand for its products by soliciting
input from its customers and monitoring retail sell-through throughout the
selling season.

         The Company believes that its ability to satisfy customer order demands
is enhanced by designing its products to use common elements in raw materials,
lasts and dyes. Whenever possible, the Company seeks to use factories that have
previously produced the Company's footwear because the Company believes that
this enhances continuity and quality while holding down production costs.

         The Company protects itself against currency fluctuations by purchasing
products in U.S. dollars from China and Brazil. In order to minimize volatility
in the price of products from Spain, the Company generally buys forward exchange
contracts for Spanish pesetas in connection with the placement of orders for
products.


Distribution

         Following manufacture, the Company's products are packaged in retail
boxes bearing bar codes and shipped to the Company's warehouse facility in
Brockton, Massachusetts. When an order is received, it is filled in the
warehouse and shipped to the customer by whatever means the customer requests,
which is usually by common carrier.

         The Company has an electronic data interchange system to which some of
the Company's larger customers are linked. This system allows these customers to
automatically place orders with the Company, thereby eliminating the time
involved in transmitting and inputting orders. The Company is working to add
more of its customers to the system and to expand system capability to include
direct billing, payment and shipping information.


Restrictions on Imports

         The Company's operations are subject to compliance with relevant laws
and regulations enforced by the United States Customs Service and to the
customary risks of doing business abroad, including fluctuation in the value of
currencies, increases in customs duties and related fees resulting from position
changes by the United States Customs Service, import controls and trade barriers
(including the unilateral imposition of import quotas), restrictions on the
transfer of funds, work stoppages and, in certain parts of the world, political
instability causing disruption of trade. These factors have not had a material
adverse impact upon the Company's operations to date. Imports into the United
States are also affected by the cost of transportation, the imposition of import
duties and increased competition from greater production demands abroad. The
United States or the countries in which the Company's products are manufactured
may, from time to time, impose new quotas, duties, tariffs or other
restrictions, or adjust presently prevailing quotas, duty or tariff levels,
which could affect the Company's operations and its ability to import products
at current or increased levels. The Company cannot predict the likelihood or
frequency of any such events occurring.

                                       10
<PAGE>

         The Company's use of common elements in raw materials, lasts and dyes
give the Company the flexibility to duplicate sourcing in various countries in
order to reduce the risk that the Company may not be able to obtain products
from a particular country.

         The Company's imported products are subject to United States customs
duties and, in the ordinary course of its business, the Company may, from time
to time, be subject to claims for duties and other charges. United States
customs duties currently range from 6% to 37.5% on the principal products
currently imported by the Company. Because the Company has had no disputes with
the United States Customs Service in the past, the Company is allowed to and
does submit its footwear products to United States customs officials for
pre-classification and customs duties rates determination prior to importation
of such footwear products from abroad.

         For fiscal 2000, approximately 92% of the Company's footwear was
imported from China. After a serious dispute with the United States Trade
Representative ("USTR") over the protection of intellectual property rights in
China, including the threat by USTR to impose trade sanctions, the Chinese
government agreed to meet its enforcement obligations. That agreement is now
being monitored by USTR and the failure of China to comply with its obligations
could result in trade sanctions in the future, including the imposition of
retaliatory tariffs that might affect the Company's imports of footwear from
China. From time to time there have been other trade disputes with China,
involving such things as market access, textile quotas, automotive industry
policies and agricultural products. These and other such matters could also
present problems in the future that might lead to trade sanctions affecting the
Company's imports of footwear.


Backlog

         At October 31, 1998, 1999 and 2000, the Company had unfilled customer
orders of $68.0 million, $60.1 million and $72.3 million, respectively. This is
an increase of 20.3% for fiscal year end 2000 over fiscal year end 1999. The
backlog at a particular time is affected by a number of factors, including
seasonality and the scheduling of manufacturing and shipment of products. Orders
generally may be canceled by customers without financial penalty. Accordingly, a
comparison of backlog from period to period is not necessarily meaningful and
may not be indicative of eventual actual shipments to customers. The Company
expects that substantially all of its backlog as of October 31, 2000 will be
filled during the first six months of fiscal 2001.


License Agreements

     Anne Klein 2 and A Line Anne Klein

         Effective in July 1999, the Company entered into a license agreement
(the "Anne Klein Agreement") with Kasper A.S.L., Ltd., B.D.S., Inc. and Lion
Licensing, Ltd. under which the Company has the exclusive right to use the Anne
Klein 2 and A Line Anne Klein names in connection with the manufacture,
advertising, promotion, distribution and sale of footwear for women. The Anne
Klein agreement covers the United States, Canada and Puerto Rico and expires on
December 31, 2002. The Company may extend the term of the license for two (2)
additional five (5) year terms ending December 31, 2007 and 2012, upon meeting
certain terms and conditions. The Company will pay Kasper A.S.L., Ltd. a royalty
on all net sales and is responsible for a guaranteed minimum royalty payment
during each year of the agreement. The licensor can terminate the agreement for
a variety of reasons, including but not limited to default in performing any of
the terms of the agreement and bankruptcy of the licensee.


     Dockers(R) Khakis Footwear For Women

         In November 1998, the Company entered into a license agreement (the
"Dockers(R) Khakis Footwear For Women Agreement") with Levi Strauss Co. under
which the Company has the exclusive right to use the Dockers(R) Khakis Footwear
For Women name in connection the development, manufacturing and marketing of
footwear for women. The Dockers(R) Khakis Footwear For Women License Agreement
covers the United States (including its

                                       11
<PAGE>

territories and possessions) and expires on December 31, 2001. The Company may
renew the license for one (1) additional four (4) year term ending December 31,
2005, upon meeting certain terms and conditions. The Company will pay Levi
Strauss Co. a royalty on all net sales and is responsible for a guaranteed
minimum royalty payment during each year of the agreement. The licensor can
terminate the agreement for a variety of reasons, including but not limited to
default in performing any of the terms of the agreement and bankruptcy of the
licensee.


     Jones New York

         In July 1993, the Company entered into the Jones License Agreement with
Jones under which the Company had the exclusive right to use the Jones New York
and Jones New York Sport names in connection with the development, manufacturing
and marketing of women's footwear (other than performance athletic shoes and
bedroom slippers). The Jones License Agreement covered the United States
(including its territories) and Canada. The Company had three, five-year options
to extend the Jones License Agreement options through December 2017, subject to
the Company meeting certain minimum net sales amounts. On July 9, 1999 the
Company sold and assigned its rights, title and interest as licensee to
manufacture and sell women's footwear bearing Jones New York and Jones New York
Sport trademarks under the Jones License Agreement to Jones for $25 million
cash.


     J.G. Hook

         In April 1997, the Company entered into a license agreement (the "J.G.
Hook License Agreement") with J.G. Hook, Inc. pursuant to which the Company
received the right to design, develop and market women's and children's shoes
under the J.G. Hook and Hook Sport brand names in exchange for payment of
royalties based on net sales of products marketed under such brand names. The
J.G. Hook License Agreement was for an initial 18-month period ending September
30, 1998, with two one-year extension options. In September 1998, the Company
exercised its first one-year option and renewed the agreement through September
1999. The Company later exercised its second one-year option and renewed the
agreement through September 2000. In May 2000 the Company extended the license
until December 2003. The J.G. Hook License Agreement is subject to early
termination for various specified reasons, including any failure by the Company
to meet its royalty obligations thereunder. The Company plans to use the J.G.
Hook label to sell footwear on a first cost basis.


     SLJ Retail

         In April 1997, the Company entered into a retail license agreement (the
"SLJ Retail Sam & Libby License Agreement") with SLJ Retail pursuant to which
the Company granted to SLJ Retail a license, throughout the United States and
such other locations outside the United States in which the Company or its
affiliates may from time to time sell Sam & Libby and Just Libby women's
footwear products, to use the Sam & Libby and Just Libby trademarks in
connection with the manufacturing, advertising, merchandising, promotion and
retail sale of women's footwear merchandise bearing such trademarks in enclosed
regional mall store locations; provided however, that such license does not
extend to products to which Inter-Pacific Corporation ("IPC") has the exclusive
rights. Under the SLJ Retail Sam & Libby License Agreement, SLJ Retail does not
have to pay any royalty to the Company in consideration of the license granted
and the services to be performed by the Company under such agreement. The
initial term of the SLJ Retail Sam & Libby License Agreement expires on January
31, 2047, subject to earlier termination upon the occurrence of certain
specified events.


     Inter-Pacific Corporation

         In January 1997, the Company entered into a license agreement with IPC,
a 40-year-old California-based seller and distributor of men's, women's and
children's footwear. IPC has the exclusive rights to design, manufacture and
distribute Sam & Libby beachwear type footwear (E.V.A. sandals, jellies, aqua
socks and injected molded slides) for men, women and children for an initial
period from January 1997 to May 2000. IPC may also design and manufacture
women's slippers bearing the Sam & Libby trademark. For the use of the Sam &
Libby

                                       12
<PAGE>

trademark, IPC will pay the Company royalties at a rate based on sales volume,
subject to payment of minimum royalties of $396,000 over the initial term of the
agreement. IPC has exercised its option to extend the license agreement until
May 2003. Minimum royalties for this period, June 2000 until May 2003, are
$651,000.


Trademarks

         Mootsies Tootsies and Mootsies Kids are registered trademarks of
Maxwell Footwear of California, Inc., a 100% owned subsidiary of the Company, in
the United States. In addition, these trademarks have been registered in Canada,
Japan and Taiwan and trademark registration applications are pending in several
other countries. The Company's United States trademark registration for Mootsies
Tootsies expires in 2010 and the registration for Mootsies Kids expires in 2003,
although both are renewable.

         Sam & Libby, Just Libby, New Nineties and Jeff & Kristi are registered
trademarks of Maxwell Footwear of California, Inc., a 100% owned subsidiary of
the Company. These trademarks were acquired by the Company in August 1996 from
Sam & Libby, Inc. and are registered trademarks in the United States (see Note 1
of "Notes to Consolidated Financial Statements"). In addition, the Sam & Libby
and Just Libby trademarks are registered in over 20 countries worldwide. Maxwell
Footwear of California, Inc.'s United States trademark registration of Sam &
Libby expires in 2001 and the registration of Just Libby expires in 2005,
although both are renewable. In January 1997, the Company entered into a license
agreement with IPC to license the Sam & Libby trademarks for slippers and E.V.A.
sandals, pursuant to which the Company will receive certain royalties and other
revenues.

         Dockers(R)Khakis Footwear For Women is a registered trademark of the
Levi Strauss Co. in the United States. Under the Dockers(R)Khakis Footwear For
Women Agreement, Levi Strauss Co. has the sole right to defend against any
infringement of this trademark.

         Anne Klein 2 and A Line Anne Klein are registered trademarks of Kasper
A.S.L., Ltd., or its wholly owned affiliates, in the United States. Under the
Anne Klein License Agreement, Kasper A.S.L., Ltd. has the sole right to defend
against any infringement of these trademarks.

         Joan & David, David & Joan, Joan Helpern Signature, JD Device and Joan
& David Too are registered trademarks of Maxwell Footwear of California, Inc., a
100% owned subsidiary of the Company. These trademarks were acquired in October
2000 from JOAN HELPERN DESIGNS, INC. and are registered trademarks in the United
States and over 30 countries worldwide. Maxwell Footwear of California, Inc.'s
United States trademarks for David & Joan, Joan Helpern Signature, JD Device and
Joan & David Too registration expire between 2002 and 2009.


Competition

         The women's and kids' fashion footwear markets are highly competitive.
In fact, due to the consolidation of the industry as a result of the recent
Jones New York acquisition of Nine West, the Company is in an industry with a
dominant competitor in Jones New York. The Company's products compete against
other branded footwear and, in the case of Mootsies Tootsies, against private
label footwear sold by many large retailers, including some of the Company's
customers. Many of the Company's competitors have substantially greater
financial, distribution and marketing resources, as well as greater brand
awareness than the Company. In addition, the general availability of offshore
manufacturing capacity allows easy access by new market entrants. The Company
believes its ability to compete successfully is based on its ability to design,
develop and market value priced footwear that reflects current fashion trends.

                                       13
<PAGE>

Employees

         At October 31, 2000, the Company employed 133 people, including
officers, administrative, selling and warehouse personnel. None of the Company's
employees are represented by a union. The Company considers its relationship
with its employees to be good.


Item 2.  Properties

         The Company's headquarters, which includes approximately 20,000 square
feet of office space and 120,000 square feet of warehouse space, is located in
Boston, Massachusetts, approximately 49,000 square feet of which is leased to an
unaffiliated third party. This facility is leased by the Company under a lease
that expires in 2001. The Company also leases a 215,000 square feet warehouse in
Brockton, Massachusetts. This lease expires in 2007, subject to two five-year
options. The Company also leases a 4,000 square feet showroom in New York City
under a lease that expires in 2001 and as a result of the Joan & David
acquisition, now leases a 7,000 square foot showroom in New York City under a
lease that expires in 2003. The Company believes that these facilities are
adequate for its current needs and that it will be able to obtain additional
space at a reasonable cost if required in the future.


Item 3.  Legal Proceedings

         The Company is, from time to time, a party to litigation that arises in
the normal course of its business operations. The Company does not believe it is
presently a party to litigation that will have a material adverse effect on its
business operations.


Item 4.  Submission of Matters to a Vote of Security Holders

         None.

                                       14
<PAGE>

                                     PART II
                                     -------

Item 5.    Market for Registrant's Common Equity and Related Stockholder Matters

         The Class A Common Stock is traded on the Nasdaq National Market System
("Nasdaq") under the symbol MAXS. The following table sets forth for the fiscal
periods indicated the range of high and low sale prices of the Class A Common
Stock as reported by Nasdaq:


                  1999    January 31,   April 30,   July 31,   October 31,
                  ----    -----------   ---------   --------   -----------
           Low...........     9 1/2       6 1/2        7         7 12/16
           High..........    13 5/8      14 1/8      9 3/8       8 15/16

                  2000    January 31,   April 30,   July 31,   October 31,
                  ----    -----------   ---------   --------   -----------
           Low...........   7 13/16      7 13/16     7 3/8       10 3/8
           High..........      9          9 3/4      11 1/8      12 1/2


         The number of stockholders of record of the Class A Common Stock on
October 31, 2000 was 31. However, based on available information, the Company
believes that the total number of Class A Common stockholders, including
beneficial stockholders, is approximately 1,600.


Dividend Policy

         The Company has not paid cash dividends on the Common Stock to date
since the payment of certain distributions in connection with the termination of
the S Corporation status of the Company prior to the consummation of the
Company's initial public offering. In addition, because the Company currently
intends to retain any earnings for development of its business, the Company does
not intend to pay cash dividends on its Common Stock in the foreseeable future.
Any determination to pay cash dividends on the Common Stock in the future will
be at the sole discretion of the Company's Board of Directors and will depend
upon, among other things, future earnings, operations, capital requirements, the
general financial condition of the Company and general business conditions.

                                       15
<PAGE>

Item 6.  Selected Financial Data

         The following selected financial data are derived from audited
financial statements of the Company. The following data should be read in
conjunction with "Management's Discussion and Analysis of Financial Conditions
and Results of Operations."

<TABLE>
<CAPTION>
                                                           Year Ended October 31,
                                           ----------------------------------------------------------
                                             1996        1997        1998        1999         2000
                                           ----------------------------------------------------------
                                                        (In thousands, except per share data)
<S>                                         <C>         <C>         <C>           <C>        <C>
Statement of Income Data:
Net sales.................................. $104,337    $134,211    $165,921      $150,320   $158,205
Cost of sales..............................   79,915      98,230     121,032       113,820    116,991
                                            --------    --------    --------      --------   --------

Gross profit ..............................   24,422      35,981      44,889        36,500     41,214
Selling, general and administrative
   expenses                                   15,413      20,982      25,122        25,745     27,725
                                            --------    --------    --------      --------   --------

Operating income...........................    9,009      14,999      19,767        10,755     13,489
Interest income, net.......................     (270)        (22)       (413)      (1,447)     (3,039)
Amortization of trademark..................         0        367         367           367        367
Other income, net(1).......................     (271)        (90)        (76)     (19,588)       (310)
                                            --------    --------    --------      --------   --------

Income before income taxes.................    9,550      14,564      19,889        31,423     16,471
Income taxes                                   3,629       5,534       6,624        12,569      6,589
                                            --------    --------    --------      --------   --------

Net income   ..............................  $ 5,921     $ 9,030    $ 13,265       $18,854     $9,882
                                            ========    ========    ========      ========   ========
Earnings per share
   Basic................................... $   0.78      $ 1.19    $   1.61        $ 2.14     $ 1.12
                                            ========    ========    ========      ========   ========
   Diluted................................. $   0.72      $ 1.06    $   1.44        $ 1.99     $ 1.04
                                            ========    ========    ========      ========   ========

Shares used to compute earnings per share
   Basic...................................    7,588       7,588       8,222         8,796      8,796
                                            ========    ========    ========      ========   ========

   Diluted.................................    8,261       8,537       9,226         9,466      9,468
                                            ========    ========    ========      ========   ========
</TABLE>


<TABLE>
<CAPTION>
                                                                 October 31,
                                           -----------------------------------------------------------
                                             1996        1997        1998         1999        2000
                                           ---------------------------------- ------------------------
<S>                                           <C>         <C>         <C>        <C>         <C>
Balance Sheet Data:
Working capital............................   $35,523     $44,441     $69,802    $  87,220   $  87,468
Total assets...............................    46,920      60,179      91,005      108,764     119,435
Total debt (including current maturities)..       611         469         345          219         102
Total stockholders' equity.................   $41,605     $50,635     $79,309    $  98,326    $108,197
</TABLE>

    (1) Fiscal 1999 includes a gain of $19,500 from the sale of the Jones New
    York license in July 1999.

                                       16
<PAGE>

Item 7. Management's Discussion and Analysis of Financial Condition and Results
of Operations

         Certain statements contained in this Form 10-K regard matters that are
not historical facts and are forward looking statements (as such term is defined
in the rules promulgated pursuant to the Securities Act of 1933, as amended (the
"Securities Act"). Because such forward-looking statements include risks and
uncertainties, actual results may differ materially from those expressed in or
implied by such forward-looking statements. Factors that could cause actual
results to differ materially include, but are not limited to: changing consumer
preferences, competition from other footwear manufacturers, loss of key
employees, general economic conditions and adverse factors impacting the retail
footwear industry, and the inability by the Company to source its products due
to political or economic factors or the imposition of trade or duty
restrictions. The Company undertakes no obligation to release publicly the
results of any revisions to these forward looking statements that may be made to
reflect events or circumstances after the date hereof or to reflect the
occurrence of unanticipated events.


Results of Operations

         The following table sets forth net sales by product line or category of
business:

<TABLE>
<CAPTION>
                                                                   Year Ended October 31,
                                         ------------------------------------------------------------------------
                                                  1998                      1999                      2000
                                         ----------------------    ---------------------     --------------------
                                                              (In millions--except percentages)
<S>                                      <C>              <C>      <C>              <C>      <C>             <C>
Mootsies Tootsies......................  $   79.7         48.0%    $   68.8         45.8%    $   72.6        45.9%
A Line Anne Klein/Anne Klein 2.........       -            -            -            -           26.8        16.9
Sam & Libby............................      17.2         10.3         21.0         14.0         25.5        16.1
Dockers(R)Khakis Footwear For Women....       -            -            2.4          1.6         10.3         6.5
Jones New York Footwear................      42.2         25.5         33.5         22.2          1.0          .6
Private Label Footwear.................      22.2         13.4         21.9         14.6         22.0        13.9
Closeout...............................       4.6          2.8          2.7          1.8          0.0         0.0
                                         --------        -----     --------        -----     --------       -----
                                         $  165.9        100.0%    $  150.3        100.0%    $  158.2       100.0%
                                         ========        =====     ========        =====     ========       =====
</TABLE>

     Fiscal 2000 Compared to Fiscal 1999

         Net sales were $158.2 million in fiscal 2000 compared to $150.3 million
in fiscal 1999, an increase of 5.2%. This increase was due primarily to net
sales improvement in all lines of footwear in fiscal 2000. These increases more
than offset the reduced Jones New York footwear net sales and the Company's
terminating its closeout segment of footwear sales. In July 1999, the Company
sold the Jones New York footwear license to Jones Apparel, Inc. The Jones New
York footwear net sales in fiscal 2000 were the final inventory liquidation
transactions.

         Gross profit was $41.2 million in fiscal 2000 compared to $36.5 million
in fiscal 1999, an increase of 12.9%. The gross profit improvement was a result
of the increased net sales as well as an increase in gross profit as a
percentage of net sales, 26.1% in fiscal 2000 as compared to 24.3% in 1999.
Gross profit in fiscal 1999 was affected by a significant portion of Jones New
York net sales shipped at liquidation prices, which generally approximated cost.

         Selling, general and administrative expenses were $27.7 million in
fiscal 2000 as compared to $25.7 million in fiscal 1999, an increase of 7.7%. As
a percentage of net sales, selling, general and administrative expenses
increased to 17.5% in fiscal 2000 as compared to 17.1% in fiscal 1999. This
increase was due to higher depreciation expense, advertising expense and
commission expense which was attributable to the increased volume.

         Other income was $3.0 million for fiscal 2000 compared to other income
of $20.7 million for fiscal 1999. In fiscal 2000, other income primarily
consisted of interest income from cash equivalents. In fiscal 1999, other

                                       17
<PAGE>

income included $19.5 million from the sale of the Jones New York license ($25.0
million less expenses of $5.5 million), interest income from cash equivalents of
$1.5 million and royalty income of $.3 million was offset by amortization
expense relating to the acquisition of the Sam & Libby trademark of $.4 million
and donations of footwear of $.2 million. Interest expense in fiscal 2000 was
incurred for capital leases. The Company had no short-term borrowings in fiscal
2000.

         The provision for income taxes was 40% of pre-tax income in both fiscal
1999 and 2000.


     Fiscal 1999 Compared to Fiscal 1998

         Net sales were $150.3 million in fiscal 1999 compared to $165.9 million
in fiscal 1998, a decrease of 9.4%. This decrease was due primarily to the sale
of the Jones New York footwear license in July 1999 and reduction of Mootsies
Tootsies net sales in fiscal 1999. Subsequent sales of Jones New York footwear
by the Company were comprised of either liquidating inventory on hand at the
date of the sale or the sale, at cost, of previously ordered inventory to the
Jones Apparel Group, Inc. This resulted in a decrease in the Company's Jones New
York footwear net sales in fiscal 1999 by $8.7 million or 20.6%, as compared to
fiscal year 1998 net sales. The decrease in net sales was also due to a
reduction in Mootsies Tootsies net sales in fiscal 1999. Mootsies Tootsies net
sales decreased $10.9 million or 13.7% in fiscal 1999 as compared to fiscal
1998. This was due to the continued consolidation of retailers and bankruptcy of
significant retail customers. Offsetting the decreases of Mootsies Tootsies and
the loss of the Jones New York footwear brand was an increase of $3.8 million or
22.1% in net sales of Sam & Libby footwear in fiscal 1999 as compared to 1998
and the incremental net sales of Dockers(R) Khakis Footwear For Women in fiscal
1999 of $2.4 million. Dockers(R) Khakis Footwear For Women was introduced by the
Company in fiscal 1999.

         Gross profit was $36.5 million in fiscal 1999 compared to $44.9 million
in fiscal 1998, a decrease of 18.7%. The decrease in gross margins in fiscal
1999 was directly attributable to the decrease in net sales of Jones New York
footwear and the significant portion of Jones New York net sales shipped at
liquidation prices, which generally approximated cost. Selling, general and
administrative expenses were relatively flat during fiscal 1999. As a percentage
of net sales, selling, general and administrative expenses increased to 17.1% in
fiscal 1999 as compared to 15.1% in fiscal 1998. This increase was due to bad
debt expense relating to the bankruptcy of two significant retail customers,
higher depreciation expense, computer infrastructure improvements, as well as
expenses attributable to the introduction of the new Anne Klein 2 and A Line
Anne Klein footwear lines.

         Other income was $20.7 million for fiscal 1999 compared to other income
of $122,000 for fiscal 1998. In fiscal 1999, other income included $19.5 million
from the sale of the Jones New York license ($25.0 million less expenses of $5.5
million), interest income from cash equivalents of $1.5 million and royalty
income of $.3 million was offset by amortization expense relating to the
acquisition of the Sam & Libby trademark of $.4 million and donations of
footwear of $.2 million. In fiscal 1998, management fees from the SLJ Retail LLC
joint venture ($500,000), interest income from cash equivalents ($447,000), and
royalty income ($176,000) were offset by expenses related to a public stock
offering ($503,000), and amortization of expenses relating to the acquisition of
the Sam & Libby trademark ($367,000). Interest expense in fiscal 1999 was
incurred for capital leases. The Company had no short-term borrowings in fiscal
1999.

         The provision for income taxes increased from 33% of pre-tax income in
fiscal 1998 to 40% in fiscal 1999, principally as a result of deductions for
stock option compensation in fiscal 1998, which did not occur in fiscal 1999.


Liquidity and Capital Resources

         The Company has relied primarily upon internally generated cash flows
from operations and borrowings under its credit facility to finance its
operations and expansion. Cash provided by operating activities totaled
approximately $6.9 million in fiscal 1998, $13.6 million in fiscal 1999 and $8.9
million in fiscal 2000. At October 31, 2000, working capital was $87.5 million
as compared to $87.2 million at October 31, 1999. Working

                                       18
<PAGE>

capital may vary from time to time as a result of seasonal requirements, the
timing of early factory shipments and the Company's in-stock position, which
requires increased inventories, and the timing of accounts receivable
collections. Capital expenditures were $.8 million for the year ended October
31, 2000.

         In fiscal 2000, cash provided by operations was $8.9 million as
compared to cash provided by operations in fiscal 1999 of $13.6 million. The
decrease in cash provided in fiscal 2000 was due to the increase of accounts
receivable. This increase was due to net sales increases during the latter part
of fiscal 2000 as well as $2.3 million receivable for Joan & David inventory
sold to liquidators as part of the purchase of the Joan & David trademarks in
October 2000. As of October 31, 1999, the proceeds of $25 million from the sale
of the Jones New York license were held for the account of the Company by an
independent intermediary pending future utilization for acquisitions and were
classified as restricted cash. On January 5, 2000, the funds became unrestricted
to the Company.

         The Company currently has a $35.0 million discretionary demand credit
facility bearing interest at either the FleetBoston's base rate or Adjusted
Eurodollar Rate plus one percent (1.0%), renewable annually under certain
conditions. This demand line of credit will cover the aggregate amount of demand
loans outstanding plus the letter of credit exposure amount. As of October 31,
2000, there were no outstanding borrowings, $18.6 million was outstanding under
letters of credit and $16.4 million was available for future borrowings.

         The Company from time to time enters into forward exchange contracts in
anticipation of future purchases of inventory denominated in foreign currency,
principally the Spanish peseta. At October 31, 2000, forward exchange contracts
totaling $1.0 million were outstanding with settlement dates ranging from
November 2000 through March 2001. As of the date of this report, future
inventory purchases required sufficient foreign currency to meet these
commitments.

         The Company anticipates that it will be able to satisfy its cash
requirements for fiscal 2001 primarily with cash flow from operations,
supplemented, if needed, by borrowings under its demand credit facility.


Effects Of Inflation

         The Company believes that the relatively moderate rate of inflation
over the past few years has not had a significant impact on the Company's
revenues or profitability.


Item 7A. Quantitative and Qualitative Disclosures About Market Risk

         The Company does not believe that there is any material market risk
exposure with respect to derivative or other financial instruments that would
require disclosure under this item. The Company's cash is held in checking
accounts or highly liquid investments with original maturities of three months
or less.


Item 8.  Consolidated Financial Statements and Supplementary Data

         The Consolidated Financial Statements required in response to this
section are submitted as part of Item 14(a) of this Report.

                                       19
<PAGE>

                           REPORT OF ERNST & YOUNG LLP

                              INDEPENDENT AUDITORS


The Board of Directors and Stockholders
Maxwell Shoe Company Inc.


We have audited the accompanying consolidated balance sheets of Maxwell Shoe
Company Inc. as of October 31, 1999 and 2000, and the related consolidated
statements of income, changes in stockholders' equity and cash flows for each of
the three years in the period ended October 31, 2000. Our audits also included
the financial statement schedule listed in the Index at Item 14(a). These
financial statements and schedule are the responsibility of the Company's
management. Our responsibility is to express an opinion on these financial
statements and schedule based on our audits.

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

In our opinion, the financial statements referred to above present fairly, in
all material respects, the consolidated financial position of Maxwell Shoe
Company Inc. at October 31, 1999 and 2000, and the consolidated results of its
operations and its cash flows for each of the three years in the period ended
October 31, 2000 in conformity with accounting principles generally accepted in
the United States. Also, in our opinion, the related financial statement
schedule, when considered in relation to the basic financial statements taken
as a whole, presents fairly in all material respects the information set forth
therein.
                                                           ERNST & YOUNG LLP



Boston, Massachusetts
December 19, 2000

                                       20
<PAGE>

                            MAXWELL SHOE COMPANY INC.

                           CONSOLIDATED BALANCE SHEETS
                   (In Thousands -- except per share amounts)

<TABLE>
<CAPTION>
                                                                                            October 31,
                                                                                 -----------------------------------
                                     ASSETS                                          1999                 2000
                                                                                 --------------       --------------
<S>                                                                              <C>                  <C>
Current assets:
    Cash and cash equivalents................................................    $     28,901         $     48,074
    Restricted cash..........................................................          25,000                    -
    Accounts receivable, trade (net of allowance for doubtful accounts and
       discounts of  $785 in 1999 and $625 in 2000)..........................          29,753               34,244
    Inventory, net...........................................................          11,327               12,036
    Prepaid expenses.........................................................             735                  536
    Prepaid income taxes.....................................................               -                1,478
    Deferred income taxes....................................................             739                  798
                                                                                 --------------       --------------
Total current assets.........................................................          96,455               97,166
Property and equipment, net..................................................           7,897                6,605
Trademarks, net..............................................................           4,400               15,479
Other assets.................................................................              12                  185
                                                                                 --------------       --------------
                                                                                 $    108,764         $    119,435
                                                                                 ==============       ==============

                      LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
    Accounts payable.........................................................    $      3,179         $      1,863
    Accrued expenses.........................................................           5,346                7,254
    Deferred income taxes....................................................             593                  479
    Current portion of capital lease obligations.............................             117                  102
                                                                                 --------------       --------------
Total current liabilities....................................................           9,235                9,698
Long-term deferred income taxes..............................................           1,191                1,540
Capital lease obligations....................................................             102                    -
Stockholders' equity:
    Class A common stock, par value $.01, 20,000 shares authorized,
       8,796 shares outstanding in 1999, 8,797 shares outstanding in 2000....              88                   88
    Additional paid-in capital...............................................          43,026               43,112
    Deferred compensation....................................................            (244)                (251)
    Retained earnings........................................................          55,366               65,248
                                                                                 --------------       --------------
Total stockholders' equity...................................................          98,236              108,197
                                                                                 --------------       --------------
                                                                                 $    108,764         $    119,435
                                                                                 ==============       ==============
</TABLE>

                            See accompanying notes.

                                       21
<PAGE>

                            MAXWELL SHOE COMPANY INC.

                        CONSOLIDATED STATEMENTS OF INCOME
                   (In Thousands -- except per share amounts)

<TABLE>
<CAPTION>
                                                                               Year Ended October 31,
                                                                  ------------------------------------------------
                                                                      1998             1999              2000
                                                                  -------------     ------------     -------------
<S>                                                               <C>               <C>              <C>
Net sales......................................................   $   165,921       $  150,320       $   158,205
Cost of sales..................................................       121,032          113,820           116,991
                                                                  -------------     ------------     -------------
Gross profit...................................................        44,889           36,500            41,214
Operating expenses:
     Selling...................................................        10,241            9,905            11,584
     General and administrative................................        14,881           15,840            16,141
                                                                  -------------     ------------     -------------
                                                                       25,122           25,745            27,725
                                                                  -------------     ------------     -------------
Operating income...............................................        19,767           10,755            13,489
Other expenses (income)
     Interest income, net......................................          (413)          (1,447)           (3,039)
     Amortization of trademarks................................           367              367               367
     Other, net................................................           (76)         (19,588)             (310)
                                                                  -------------     ------------     -------------
                                                                         (122)         (20,668)           (2,982)
                                                                  -------------     ------------     -------------
Income before income taxes.....................................        19,889           31,423            16,471
Income taxes...................................................         6,624           12,569             6,589
                                                                  -------------     ------------     -------------
Net income.....................................................   $    13,265       $   18,854       $     9,882
                                                                  =============     ============     =============
Earnings per share
     Basic.....................................................         $1.61            $2.14             $1.12
     Diluted...................................................         $1.44            $1.99             $1.04
Shares used to compute earnings per share:
     Basic.....................................................         8,222            8,796             8,796
     Diluted...................................................         9,226            9,466             9,468
</TABLE>

                            See accompanying notes.

                                       22
<PAGE>

                            MAXWELL SHOE COMPANY INC.

                      CONSOLIDATED STATEMENTS OF CASH FLOWS
                                 (In Thousands)

<TABLE>
<CAPTION>
                                                                                 Year Ended October 31,
                                                                       -------------------------------------------
                                                                           1998           1999           2000
                                                                       -------------  -------------  -------------
<S>                                                                    <C>            <C>            <C>
Operating activities:
Net income........................................................     $    13,265    $    18,854    $     9,882
Adjustments to reconcile net income to net cash
   provided by operating activities:
     Depreciation and amortization................................           1,214          2,017          2,496
     Deferred income taxes........................................           1,930            530            176
     Doubtful accounts provision..................................             125          1,496            150
     Gain on sale of Jones license................................               -        (19,500)             -
     Deferred compensation........................................               -             62             70
     Changes in operating assets and liabilities:
          Accounts receivable.....................................          (7,186)         2,906         (2,341)
          Inventory...............................................          (2,787)        10,101           (709)
          Prepaid expenses........................................            (487)          (305)           199
          Income taxes ...........................................               -          1,177         (2,173)
          Other assets............................................               -              -           (173)
          Accounts payable........................................           1,627           (645)        (1,316)
          Accrued expenses........................................            (829)        (3,092)         2,603
                                                                       -------------  -------------  -------------
Net cash provided by operating activities.........................           6,872         13,601          8,864

Investing activities:

Release of restricted cash........................................               -              -         25,000
Purchases of property and equipment...............................          (5,686)        (3,316)          (837)
Purchase of Joan & David trademark and inventory..................               -              -        (17,421)
Proceeds from sale of Joan & David inventory......................               -              -          3,675
                                                                       -------------  -------------  -------------
Net cash provided (used) by investing activities..................          (5,686)        (3,316)        10,417

Financing activities:
Proceeds from sale of common stock................................          13,246              -              -
Proceeds from exercise of stock option............................           1,294             11              9
Payments on capital lease obligation..............................            (124)          (126)          (117)
                                                                       -------------  -------------  -------------
Net cash (used) provided by financing activities..................          14,416           (115)          (108)
                                                                       -------------  -------------  -------------
Net increase in cash and cash equivalents.........................          15,602         10,170         19,173
Cash and cash equivalents at beginning of year....................           3,129         18,731         28,901
                                                                       -------------  -------------  -------------

Cash and cash equivalents at end of year..........................     $    18,731    $    28,901    $    48,074
                                                                       =============  =============  =============

Supplemental Disclosure of Cash Flow Information:

Proceeds from sale of Jones New York license
   (classified as restricted cash)................................     $         -    $    25,000    $         -
                                                                       =============  =============  =============

Interest paid.....................................................     $        34    $        26    $        25
                                                                       =============  =============  =============

Income taxes paid.................................................     $     4,847    $    10,697    $     8,652
                                                                       =============  =============  =============
</TABLE>

                            See accompanying notes.

                                       23
<PAGE>

                            MAXWELL SHOE COMPANY INC.

           CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
                                 (In Thousands)

<TABLE>
<CAPTION>
                                          Class A           Class B
                                       Common Stock       Common Stock
                                    ----------------   ------------------
                                     Number             Number              Additional   Deferred
                                       of                 of                  Paid-In     Compen-    Retained
                                     Shares   Amount    Shares     Amount     Capital     sation     Earnings     Total
                                     ------   ------    ------     ------     -------     ------     --------     -----
<S>                                   <C>    <C>          <C>     <C>           <C>      <C>        <C>        <C>
Balance at October 31, 1997..         2,525  $     25     5,063    $   51     $27,312                 $23,247    $50,635
   Net income for 1998.......                                                                          13,265     13,265
   Shares converted..........         5,063        51    (5,063)      (51)                                             -
   Sale of common stock......           802         8                          13,238                             13,246
   Options exercised.........           404         4                           1,290                              1,294
   Tax benefit from options
     exercised...............                                                     869                                869
   Options granted...........                                                     306    $  (306)                      -
                                      -----  --------     -----    ------     -------    -------      -------    -------
Balance at October 31, 1998..         8,794        88         -         -      43,015      (306)       36,512     79,309
   Options exercised.........             2         -                              11                                 11
   Net income for 1999.......                                                                          18,854     18,854
   Amortization of deferred
     compensation............                                                                 62                      62
                                      -----  --------     -----    ------     -------    -------      -------    -------
Balance at October 31, 1999..         8,796        88         -         -      43,026       (244)      55,366     98,236
   Options exercised.........             1         -                               9                                  9
   Net income for 2000.......                                                                           9,882      9,882
   Options granted...........                                                      77        (77)                      -
   Amortization of deferred
     compensation............                                                                 70                      70
                                      -----  --------     -----    ------     -------    -------     --------   --------
Balance at October 31, 2000..         8,797   $    88         -    $    -     $43,112    $  (251)    $ 65,248   $108,197
                                      =====  ========     =====    ======     =======    =======     ========   ========
</TABLE>

                            See accompanying notes.

                                       24
<PAGE>

                            MAXWELL SHOE COMPANY INC.

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                (Dollars in Thousands--except per share amounts)

                                October 31, 2000

1.       Summary of Significant Accounting Policies

     Principles of Consolidation

         The consolidated financial statements include the accounts of the
Company and its wholly owned subsidiaries. All intercompany accounts and
transactions have been eliminated in consolidation.


     Concentration of Credit Risk

         The Company sells footwear for women and children to retailers located
throughout the United States and Canada. The Company performs periodic credit
evaluations of its customers' financial condition and generally does not require
collateral. Credit losses in previous years have generally been within or below
management's expectations, although during fiscal 1999 credit losses exceeded
management expectations as a large and several medium sized retailers declared
bankruptcy. In fiscal 1998 and 1999, one customer accounted for approximately
18% and 13%, respectively, of net sales. In 2000, no customers represented more
than 10% of the Company's net sales. At October 31, 2000, one customer accounted
for 14% of trade receivables outstanding.


     Use of Estimates

         The preparation of the consolidated financial statements in conformity
with generally accepted accounting principles requires management to make
estimates and assumptions that affect the amounts reported in the consolidated
financial statements and accompanying notes. Actual results could differ from
those estimates.


     Recognition of Revenue

         Sales are recognized upon shipment of products.


     Cash and Cash Equivalents

         Cash, checking accounts and all highly liquid investments with original
maturities of three months or less are deemed to be cash and cash equivalents.


     Inventory

         Inventory is valued at the lower of cost or market, using the first-in,
first-out method.

                                       25
<PAGE>

                            MAXWELL SHOE COMPANY INC.

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
                (Dollars in Thousands--except per share amounts)


     Long Term Assets

         Property and equipment are stated at cost. Depreciation is provided
using both straight line and accelerated methods over the estimated useful lives
of these assets or the lease term, if shorter. The estimated useful lives of
these assets are as follows:

         Asset                                                 Useful Life
         -----                                                 -----------
         Furniture and fixtures.............................     5 Years
         Warehouse equipment................................     7 Years
         Leasehold improvements.............................     7 Years
         Computer equipment.................................     5 Years

         In August 1996, the Company acquired the rights to the Sam & Libby and
certain related trademarks and tradenames for $5.5 million cash. The trademarks
and tradenames are being amortized on a straight-line basis over 15 years, their
estimated useful lives. Amortization began in 1997 when sale of product with the
trademark names commenced. Accumulated amortization at October 31, 1998, 1999
and 2000 was $733, $1,100 and $1,467, respectively.

         In October 2000, the Company completed its acquisition of certain
assets of joan and david incorporated and JOAN HELPERN DESIGNS, INC. The Company
acquired all the rights to the Joan & David trademark and trade names and all
related inventory for $16.8 million cash. Upon acquisition of the inventory, the
Company immediately sold all of it to a liquidator. The sale of the inventory
has not been included in the operating results of the Company for 2000 because
it was an asset acquired and immediately sold at no profit. At October 31, 2000,
the Company had received some payments for the inventory sold and had recorded
$2.3 million in receivables for the balance.

         The total acquisition price less proceeds from the sale of the
inventory was approximately $11.4 million and has been recorded as the value of
the trademarks and trade names. The Company will begin to amortize the trademark
and trade names over a 30-year period in the second half of 2001 when sales
under the Joan & David brand are expected to start.


   Operating Expenses

         General and administrative expenses include the cost of warehousing and
shipping operations.


   Advertising Expenses

         Advertising costs are expensed as incurred. Advertising expense
(including cooperative advertising with retailers) amounted to $3,852, $3,095
and $4,063 for the years ended October 31, 1998, 1999 and 2000, respectively.

                                       26
<PAGE>

                            MAXWELL SHOE COMPANY INC.

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
                (Dollars in Thousands--except per share amounts)

     Income Taxes

         The Company utilizes the liability method for accounting for income
taxes. Deferred tax assets and liabilities are determined based on differences
between the financial reporting and income tax bases of assets and liabilities
and are measured using the enacted tax rates and laws that will be in effect
when the differences are expected to reverse. Deferred tax assets may be reduced
by a valuation allowance to reflect the uncertainty associated with their
ultimate realization.


     Earnings Per Share


         Basic earnings per share are computed based on the weighted average
number of common shares outstanding during the period. Diluted earnings per
share is computed based on basic shares outstanding increased by incremental
shares assumed issued for dilutive common stock equivalents in the form of stock
options.


     Forward Exchange Contracts

         The Company uses forward exchange contracts to manage its foreign
currency exposure. Realized and unrealized gains and losses on contracts that
hedge anticipated cash flows are determined by comparison of contract values to
current market values upon execution of a contract (realized) and at each
balance sheet date for open contracts (unrealized). Resulting gains and losses
are recognized in other income and expense. Gains and losses were insignificant
for all periods presented.


     Stock Based Compensation

         The Company grants stock options for a fixed number of shares to
employees, generally with an exercise price equal to the fair value of the
shares at the date of grant. The Company accounts for stock option grants in
accordance with Accounting Principles Board Opinion No. 25, "Accounting for
Stock Issued to Employees" (APB 25) and, accordingly, recognizes no compensation
expense for the stock option grants when the exercise price equals the fair
value of the shares at the date of grant.

     The Company has adopted the disclosure-only provisions of Statement of
Financial Accounting Standards (SFAS) No. 123, "Accounting for Stock-Based
Compensation." These provisions require the Company to disclose pro forma net
income and earnings per share amounts as if compensation related to grants of
stock options were recognized based on the fair value of such options (see Note
5).


     Segment Reporting

         Effective November 1, 1998, the Company adopted SFAS No. 131,
"Disclosures about Segments of an enterprise and Related Information." SFAS No.
131 establishes standards for public companies to report information about
operating segments in financial statements and requires that those companies
report selected information about operating segments in interim financial
reports. SFAS No. 131 also establishes standards for related disclosures about
products and services, geographic areas, and major customers.

                                       27
<PAGE>

                            MAXWELL SHOE COMPANY INC.

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
                (Dollars in Thousands--except per share amounts)


         All of the Company's efforts are devoted to selling footwear that are
managed and reported in one segment. The Company is located in the U.S. and
derives substantially all of its revenues from sales in the U.S.


     Recent Accounting Pronouncements

         In June 1998, the Financial Accounting Standards Board (FASB) issued
Statement of Financial Accounting Standards No. 133, "Accounting for Derivative
Instruments and Hedging Activities" (FAS 133) which provides for the recognition
and measurement of derivatives and hedging activities. In May 1999, the FASB
delayed the required implementation date by one year, making it effective for
all fiscal quarters of fiscal years beginning after June 15, 2000. Management of
the Company does not expect the adoption of this Statement to have a material
impact on the Company's financial statements.

         In December 1999, the Securities and Exchange Commission (SEC) issued
Staff accounting Bulletin (SAB) 101, Revenue Recognition in Financial
Statements. SAB 101 clarifies the SEC staff's views on applying generally
accepted accounting principles to revenue recognition in financial statements.
In June 2000, the SEC issued an amendment, SAB 101B, which deferred the
effective date of SAB 101. The Company will adopt SAB 101 in the fourth quarter
of fiscal 2001 in accordance with the amendment. The adoption of this SAB is not
expected to have a significant impact on the Company's financial statements.

2.   Property and Equipment

         Property and equipment consists of the following:
                                                              1999       2000
                                                            -------     -------
         Warehouse equipment..............................   $4,382      $4,434
         Furniture and fixtures...........................      845         876
         Leasehold improvements...........................      985         985
         Computer equipment...............................    5,828       6,586
                                                            -------     -------
                                                             12,044      12,881
         Less accumulated depreciation....................    4,147       6,276
                                                            -------     -------
         Property and equipment, net......................   $7,897      $6,605
                                                            =======     =======

         At October 31, 1999 and 2000, property and equipment included assets
recorded under capital leases of $1,047. Accumulated amortization of such assets
was $887 and $996 at October 31, 1999 and 2000, respectively. Depreciation
expense, including amortization of assets recorded under capital leases, for the
years ended October 31, 1998, 1999 and 2000 amounted to $847, $1,650 and $2,129,
respectively.


3.   Bank Borrowings

         The Company currently has a $35.0 million discretionary demand credit
facility bearing interest at either the FleetBoston's base rate or Adjusted
Eurodollar Rate plus one percent (1.0%), renewable annually under certain
conditions. The credit agreement provides that the bank will both advance funds
directly to the Company and issue letters of credit on behalf of the Company. As
of October 31, 2000, there were no outstanding borrowings, $18.6 million was
outstanding under letters of credit and $16.4 million was available for future
borrowings.

                                       28
<PAGE>

                            MAXWELL SHOE COMPANY INC.

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
                (Dollars in Thousands--except per share amounts)

4.   Accrued Expenses

         Accrued expenses consist of the following at October 31:

                                                            1999        2000
                                                           ------      ------
         Inventory purchases............................   $1,941      $1,803
         Compensation...................................    1,417       1,960
         Income taxes payable...........................      695           -
         Employee benefit plan contribution.............      402         486
         Advertising....................................      193         865
         Other..........................................      698       2,140
                                                           ------      ------
                                                           $5,346      $7,254
                                                           ======      ======

5.       Stockholders' Equity

     Preferred Stock

         The Company's Charter authorizes the issuance of 1,000,000 shares of
preferred stock. The Company's Charter provides that the Board of Directors of
the Company may authorize the issuance of one or more series of preferred stock
having such rights, including voting, conversion and redemption rights, and such
preferences, including dividend and liquidation preferences, as the Board may
determine without any further action by the stockholders of the Company. There
are no shares of preferred stock currently outstanding.

     Common Stock

         On April 27, 1998, the Company completed a public stock offering of an
aggregate of 6,145,792 shares of Class A Common Stock at $17.50 per share. Of
the shares sold, 5,044,167 Class A shares were sold by members of the founder's
family and a trust for their benefit upon conversion of a like number of Class B
shares and exercise of stock options, and 300,000 Class A shares were sold by
the Company Chairman and CEO pursuant to the exercise of stock options. The
Company did not receive any proceeds from the sale of shares by the selling
stockholders. In addition, the Company sold 801,625 shares of Class A Common
Stock pursuant to the full exercise of an over-allotment option granted by the
Company to the underwriters. The Company received $13.2 million from the
exercise of the over-allotment option and $1.3 million from the exercise of
stock options. The Company no longer has any Class B shares outstanding. The
Company expensed $.5 million of costs related to the sale of shares by the
selling stockholders pursuant to prior contractual obligations of the Company.

         At the April 8, 1999 Annual Meeting, the shareholders approved an
amendment to the Company's Certificate of Incorporation to eliminate the
authorization for the issuance of Class B Common Stock.

     Stock Options

         Under the 1994 Stock Incentive Plan (the Plan), the Board of Directors
has reserved 750,000 shares of Class A Common Stock for issuance upon exercise
of options or grants of other awards under the Plan. On June 1, 1998, the Plan
was amended to increase the number of shares by 300,000 of Class A Common Stock
for issuance upon exercise of options or grants of other awards under the Plan.
Except for options granted to non-employee directors, which vest immediately,
options generally vest annually over a four-year period.

                                       29
<PAGE>

                            MAXWELL SHOE COMPANY INC.

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
                (Dollars in Thousands--except per share amounts)

         In September 1998, the Company granted 30,000 options to certain
employees to purchase stock at $1.00 per share. Based on the market price of the
Company's stock on the date of grant, the Company recorded deferred compensation
expense of $306, which will be recognized ratably over the vesting period of
five years.

         In April 2000, the Company granted 10,000 options to a certain employee
to purchase stock at $1.00 per share. Based on the market price of the Company
stock on the date of grant, the Company recorded deferred compensation expense
of $77, which will be recognized ratably over the vesting period of five years.

         In August 2000, the Company's Board of Directors approved an amendment
to the Company's 1994 Stock Incentive Plan, which included an increase in the
maximum common shares issuable under the plan from 1,050,000 shares to 1,650,000
shares. The Board of Directors also approved grants of options to certain
employees of the Company. Options were granted for the purchase of 302,107
shares of the Company's common stock at $10.50 per share. The increase in shares
issuable under the Plan and the option granted are subject to the approval of
the shareholders at the next annual meeting. Consequently, the options are not
included in the options outstanding as of October 31, 2000, disclosed in these
financial statements, and they have not been included in the diluted earnings
per share calculation for the year then ended.

                                       30
<PAGE>

                            MAXWELL SHOE COMPANY INC.

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
                (Dollars in Thousands--except per share amounts)


         Presented below is a summary of the status of the stock option plan and
related transactions:

<TABLE>
<CAPTION>
                                                                    Year ended October 31,
                                            ----------------------------------------------------------------------
                                                     1998                    1999                    2000
                                            -----------------------  ---------------------  ----------------------
                                                         Weighted                Weighted               Weighted
                                                          Average                 Average                Average
                                              Shares       Price       Shares      Price     Shares       Price
                                            ----------  -----------  ----------  ---------  ---------  -----------
<S>                                           <C>         <C>          <C>        <C>         <C>        <C>
Options outstanding at beginning of year      735,850     $ 7.15       682,300    $8.46       866,400    $ 8.58
Granted.................................      145,000     $14.03       200,000    $8.80        77,893    $ 8.82
Exercised...............................     (104,257)    $ 8.17        (1,700)   $6.50        (1,500)   $ 5.00
Canceled................................      (94,293)    $ 7.13       (14,200)   $6.08          (250)   $10.38
                                             --------                 --------               --------
Options outstanding at end of year......      682,300     $ 8.46       866,400    $8.58       942,543    $ 8.60
                                              =======                  =======                =======
Options exercisable at end of year......      437,696                  516,531                609,251
                                              =======                  =======                =======
</TABLE>

         The following table summarizes information about stock options
outstanding under the stock option plan at October 31, 1999:

<TABLE>
<CAPTION>
                                              Options Outstanding            Options Exercisable
                                       ---------------------------------     --------------------
                                                  Weighted-
                                                   Average     Weighted-                Weighted-
                                                  Remaining     Average                  Average
                                                 Contractual    Exercise                 Exercise
         Range of Exercise Price       Shares    Life (Years)    Price       Shares       Price
         -----------------------       ------    ------------  ---------     ------     ---------
<S>                                      <C>         <C>         <C>         <C>        <C>
              $1.00...................   40,000      8.4         $ 1.00             0       -
              $5.00 - $  6.50.........  377,500      5.7         $ 6.01       360,835     $ 5.99
              $7.75 - $10.50..........  410,043      6.8         $ 9.26       199,416     $ 9.27
              $17.00 - $17.50.........  115,000      7.5         $17.43        49,000     $17.35
                                        -------                              --------
                                        942,543      6.5         $ 8.60       609,251     $ 7.97
                                        =======                               =======
</TABLE>

         At October 31, 1999, there were 77,643 shares available for future
grants under stock option plans. All remaining available shares were granted
during 2000 and none were available for future grants as of October 31, 2000.

         In 1994, in consideration for the termination of a deferred
compensation agreement, the Board of Directors approved a non-transferable stock
option grant to the CEO for the purchase of 888,412 shares of Class A Common
Stock at an exercise price of $1.50 per share. The grant was outside of the
Company's stock option plan, and the stock options were immediately exercisable.
In connection with the April 1998 public stock offering, the CEO exercised a
portion of these options to purchase 300,000 shares of common stock. At October
31, 2000, 588,412 shares remained outstanding.

         Statement of Financial Accounting Standards No. 123, "Accounting for
Stock-Based Compensation" (SFAS 123) utilizes the fair value method of
accounting for employee stock options. Under this method, compensation expense
for stock-based compensation plans is measured at the grant date based on the
fair value of the award and is recognized over the service period. In accordance
with SFAS 123, the Company has elected to continue to follow Accounting
Principles Board Opinion No. 25, "Accounting for Stock Issued to Employees,"
(APB 25) and related interpretations in accounting for its employee stock
options. Under APB 25, no compensation

                                       31
<PAGE>

                            MAXWELL SHOE COMPANY INC.

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
                (Dollars in Thousands--except per share amounts)


expense is recognized as long as the exercise price equals the market price of
the underlying stock on the date of grant.

          Pro forma information regarding net income and earnings per share is
required by SFAS 123, which also requires that the information be determined as
if the Company had accounted for its employee stock options and other
stock-based compensation granted subsequent to October 31, 1995 under the fair
value method of that Statement. The fair value for these options was estimated
at the date of grant using a Black-Scholes option pricing model with the
following weighted-average assumptions: risk-free interest rates ranging from
4.83% to 6.89%; dividend yield of 0%; volatility factor of the expected market
price of the Company's common stock of 61.2%, 55.8% and 48.0% for 1998, 1999 and
2000; and a weighted average expected life of 5.0 years for options granted in
1998, 1999 and 2000. For purposes of pro forma disclosures, the estimated fair
value of the options is amortized to expense over the options' vesting period.

<TABLE>
<CAPTION>
                                                                      Year ended October 31,
                                                                   ---------------------------
                                                                    1998       1999      2000
                                                                   -------    -------   ------
<S>                                                                <C>        <C>       <C>
          Pro forma:
             Net income........................................... $12,662    $18,268   $9,415
             Earnings per share:
               Basic..............................................   $1.54      $2.08    $1.07
               Diluted............................................   $1.37      $1.93    $0.99

          Options granted whose exercise price equals
             market price on grant date
               Weighted average fair value of options granted.....   $9.99      $4.81    $4.77
               Weighted average exercise price....................  $17.44      $8.80    $9.97

          Options granted whose exercise price is less than
             market price on grant date
               Weighted average fair value of options granted.....  $10.52          -    $7.91
               Weighted average exercise price....................   $1.00          -    $1.00
</TABLE>

         During the initial phase-in period, the effects of applying SFAS 123
for recognizing pro forma compensation expense may not be representative of the
effects on pro forma net income or loss for future years because the options
granted by the Company vest over several years and additional awards may be made
in future years.

         Stockholder Rights Plan

         In November 1998, the Company adopted a Stockholder Rights Plan, under
which each outstanding share of the Company's Class A common stock carries one
Common Stock Purchase Right. The rights may only become exercisable under
certain circumstances involving acquisition of the Company's common stock by a
person or group of persons without the prior written consent of the Company's
board. Depending on the circumstances, if the rights become exercisable, the
holder of rights may be entitled to purchase shares of the Company's Class A
common stock or shares of common stock of the acquiring person at discounted
prices. The rights will expire on November 2, 2008 unless they are earlier
exercised, redeemed or exchanged.

                                       32
<PAGE>

                            MAXWELL SHOE COMPANY INC.

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
                (Dollars in Thousands--except per share amounts)

6.       Income Taxes

         Deferred income taxes reflect the net tax effects of temporary
differences between the carrying amounts of assets and liabilities for financial
reporting purposes and the amounts used for income tax purposes. Significant
components of the Company's deferred tax liabilities and assets as of October 31
were as follows:

                                                             1999        2000
                                                           -------     -------
         Deferred tax assets
              Stock option compensation..................   $1,854      $1,854
              Inventory reserve..........................      217         324
              Allowance for doubtful accounts............      314         250
              Inventory capitalization...................      208         224
                                                           -------     -------
                                                             2,593       2,652
         Valuation allowances for deferred tax assets....   (1,854)     (1,854)
                                                           -------     -------
         Total deferred tax assets.......................      739         798
         Deferred tax liabilities:
              Trademark..................................    1,191       1,540
              Property and equipment.....................      593         479
                                                           -------     -------
         Total deferred tax liabilities..................    1,784       2,019
                                                           -------     -------
         Net deferred tax liabilities....................  $(1,045)    $(1,221)
                                                           =======     =======

         SFAS 109 requires a Company to recognize a valuation allowance if it is
more likely than not that some portion or all of the deferred tax asset will not
be realized. In connection with the stock option compensation discussed in Note
5, the Company recorded a valuation allowance in 1994 for the related deferred
tax asset. The stock option compensation is deductible for tax purposes upon
exercise of the option. During 1998, a portion of the options were exercised and
a proportionate share of the valuation allowance was reduced resulting in a tax
benefit of $946, which is included in the income tax provision. Furthermore, for
tax purposes, the Company recognized additional compensation expense for the
difference between the market price at the date of grant and the market price at
the date of exercise. This additional tax benefit of $869 for 1998 has been
recorded as a reduction of current taxes payable and an increase in additional
paid-in-capital. In 1999 and 2000, no such options were exercised.

     Significant components of the provision for income taxes are as follows:

                                        1998           1999          2000
                                    -----------    -----------    ----------
         Current:
                 Federal...........  $   3,844      $   9,720      $  5,180
                 State.............        850          2,319         1,233
                                    -----------    -----------    ----------
         Total current.............      4,694         12,039         6,413
         Deferred:
                 Federal...........      1,559            418           142
                 State.............        371            112            34
                                    -----------    -----------    ----------
         Total deferred............      1,930            530           176
                                    -----------    -----------    ----------
                                     $   6,624      $  12,569      $  6,589
                                    ===========    ===========    ==========

                                       33
<PAGE>

                            MAXWELL SHOE COMPANY INC.

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
                (Dollars in Thousands--except per share amounts)


         The reconciliation of income tax computed at the U.S. federal statutory
tax rate to the effective income tax rate is as follows:

                                                               1998  1999  2000
                                                               ----  ----  ----
         U.S. statutory rate..................................  35%   35%   35%
              State income taxes, net of federal tax benefit..   5     5     5
              Stock option compensation.......................  (5)    -     -
              Other...........................................  (2)    -     -
                                                               ----  ----  ----
         Effective tax rate...................................  33%   40%   40%
                                                               ====  ====  ====

7.       Profit-Sharing Plan

         The Company has a contributory 401(k) profit-sharing plan covering
substantially all employees. Employees may contribute up to 15% of their pre-tax
salary subject to statutory limitations. The plan requires the Company to match
100% of employee contributions up to 2% of total employee compensation. The plan
also allows for additional discretionary Company contributions. Total plan
expense amounted to $350, $504 and $459 for fiscal years 1998, 1999 and 2000,
respectively.


8.       Commitments

         The Company leases equipment and office and warehouse space under
long-term non-cancelable operating leases which expire at various dates through
January 31, 2007. These leases require the Company to pay the real estate taxes
on the real property. The Company also leases equipment under capital leases.

         At October 31, 2000, future minimum payments under such leases were as
follows:

                                               Capital        Operating
                                               -------        ---------
          2001...............................   $ 123          $ 1,488
          2002...............................       -            1,008
          2003...............................       -              917
          2004...............................       -              650
          2005...............................                      600
          Later years........................       -              750
                                               -------        ---------
          Total minimum lease payments.......     123           $5,413
                                               -------        =========
          Amounts representing interest......     (21)
                                               -------
          Capital lease obligation...........    $102
                                               =======

         Rent expense for the years ended October 31, 1998, 1999 and 2000 was
$981, $859 and $1,024, respectively.

         The Company is a licensee under three agreements which allow for the
manufacture and sale of various items of footwear. The agreements require the
payment of royalties on qualified product sales and generally guarantee minimum
royalty payments regardless of sales volume. In April 1997, the Company entered
into a license agreement with J. G. Hook, Inc. (the Hook agreement). In May
2000, the Company entered into a new license agreement with J. G. Hook with an
initial expiration date of December 2003, under similar terms to the original
agreement, with three one year options. The annual minimum royalty ranges from
$50 to $100 through the term of the agreement.

                                       34
<PAGE>

                            MAXWELL SHOE COMPANY INC.

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
                (Dollars in Thousands--except per share amounts)


         On November 13, 1998, the Company entered into a license agreement with
Levi Strauss Co., which allows for the manufacture and sale of a full range of
women's casual footwear under the Dockers(R) Khakis Footwear For Women brand
name. The agreement requires the payment of royalties on qualified sales and
guarantees minimum royalty payments. The annual minimum royalty ranges from $144
to $864 through the initial term ending December 31, 2001. There is one
four-year option to renew through December 31, 2005, subject to satisfying
certain conditions.

         Effective July 1999, the Company entered into a license agreement with
Kasper A.S.L., Ltd., which allows for the manufacture and sale of women's
footwear under the Anne Klein 2 and A Line Anne Klein brands. The agreement
requires the payment of royalties. In addition, the agreement requires payments
into an advertising fund. The minimum payment for 2001 is $300, and thereafter,
the minimum is calculated as a percentage of royalties paid. The initial term of
the license agreement expires December 31, 2002. The Company has two five-year
options, subject to satisfying certain conditions.

         On July 9, 1999, the Company completed a transaction under which the
Company sold its license to manufacture and distribute Jones New York footwear.
In consideration of the sale of the license and certain other assets, the
Company received a cash payment of $25.0 million. In connection with the license
sale, the Company recorded $5.5 million for expenses related to the transaction,
including inventory liquidation. On January 5, 2000, the Company received the
$25 million in proceeds from the sale of the Jones License on an unrestricted
basis, together with approximately $660 in net interest on the funds.

         In January 1997, the Company entered into a license agreement with
Inter-Pacific Corporation (IPC), which provides IPC with the exclusive rights to
design, manufacture and distribute Sam & Libby beachwear type footwear for an
initial term of January 1997 to May 2000. For the use of the Sam & Libby
trademark, IPC will pay the Company royalties based on qualified product sales
subject to payment of minimum royalties of $396 over the initial term of the
agreement. IPC has exercised its option to extend the license agreement until
May 2003. Minimum royalties for this period, June 2000 until May 2003, are $651.

                                       35
<PAGE>

                            MAXWELL SHOE COMPANY INC.

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
                (Dollars in Thousands--except per share amounts)


9.       Earnings Per Share

         The following table sets forth the computation of basic and diluted
earnings per share:

<TABLE>
<CAPTION>
                                                                  1998      1999      2000
                                                                 -------   -------   ------
<S>                                                              <C>       <C>       <C>
         Numerator:
               Net income........................................$13,265   $18,854   $9,882
                                                                 =======   =======   ======
         Denominator (shares in thousands):
              Denominator for basic earnings per share
                 Weighted average shares.........................  8,222     8,796    8,796
              Denominator for diluted earnings per share
                 Dilutive stock options..........................  1,004       670      672
                                                                 -------   -------   ------
                   Adjusted weighted average shares and assumed
                      Conversions................................  9,226     9,466    9,468
                                                                 =======   =======   ======
         Earnings per share
               Basic.............................................  $1.61     $2.14    $1.12
                                                                 =======   =======   ======
               Diluted...........................................  $1.44     $1.99    $1.04
                                                                 =======   =======   ======
</TABLE>

         Options for 34,471, 147,133 and 69,758 shares for the years 1998, 1999
and 2000, respectively, were excluded from the calculation of diluted earnings
per share as the effect would have been anti-dilutive.

                                       36
<PAGE>

                            MAXWELL SHOE COMPANY INC.

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
                (Dollars in Thousands--except per share amounts)


10.      Supplementary Quarterly Financial Data (Unaudited)

         The following is a summary of unaudited quarterly results for the
fiscal years ended October 31, 1999 and October 31, 2000.

<TABLE>
<CAPTION>
                                                           Quarter Ended
                                    ----------------------------------------------------------
                                     January 31,      April 30,       July 31,      October 31,
                                    -----------      ---------       --------      -----------
<S>                                    <C>             <C>             <C>             <C>
          Fiscal 1999
               Net sales............   $35,906         $36,247         $39,066         $39,101
               Gross profit.........     9,445          10,538           8,313           8,204
               Net income(1)........     2,168           2,337          13,144           1,205
               Earnings per share
                  Basic.............$      .25       $     .27       $    1.49       $     .14
                                    ==========       =========       =========       =========
                  Diluted...........$      .23       $     .25       $    1.39       $     .13
                                    ==========       =========       =========       =========

          Fiscal 2000
               Net sales............   $29,156         $43,176          39,588         $46,285
               Gross profit.........     7,031          11,797          10,966          11,420
               Net income...........     1,020           2,569           3,152           3,141
               Earnings per share
                  Basic............. $    0.12       $    0.29       $    0.36       $    0.36
                                     =========       =========       =========       =========
                  Diluted........... $    0.11       $    0.27       $    0.33       $    0.33
                                     =========       =========       =========       =========
</TABLE>
         (1)  The quarter ended July 31, 1999 includes a gain of $19,500
              ($11,700 net of income taxes) from the sale of the Jones New York
              license.

                                       37
<PAGE>

                            MAXWELL SHOE COMPANY INC.

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
                (Dollars in Thousands--except per share amounts)


Item 9. Changes in and Disagreements with Accountants on Accounting and
Financial Disclosure.

     None.

                                    PART III

Item 10.    Directors and Executive Officers of the Registrant

     The information required by this item will be contained in the Company's
Proxy Statement for its Annual Stockholders Meeting to be held April 12, 2001.
The Company's proxy statement will be filed with the Securities and Exchange
Commission within 120 days after October 31, 2000 and is incorporated herein by
reference.


Item 11.    Executive Compensation

     The information required by this item will be contained in the Company's
Proxy Statement for its Annual Stockholders Meeting.


Item 12.    Security Ownership of Certain Beneficial Owners and Management

     The information required by this item will be contained in the Company's
Proxy Statement for its Annual Stockholders Meeting.


Item 13.    Certain Relationships and Related Transactions

     The information required by this item will be contained in the Company's
Proxy Statement for its Annual Stockholders Meeting.

                                       38
<PAGE>

                            MAXWELL SHOE COMPANY INC.

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
                (Dollars in Thousands--except per share amounts)


                                     PART IV
                                     -------

Item 14.    Exhibits, Financial Statement Schedules, and Reports on Form 8-K

     (a) (1)  Financial Statements:

     The following financial statements of the Company are included in response
to Item 8 of this report.

<TABLE>
<CAPTION>
                                                                                                   Page Reference
                                                                                                      Form 10-K
                                                                                                   --------------
<S>                                                                                                      <C>
         Report of Ernst & Young, LLP, Independent Auditors......................................        20
         Consolidated Balance Sheets as of October 31, 1999 and 2000.............................        21
         Consolidated Statements of Income for each of the three years in the period ended
              October 31, 2000...................................................................        22
         Consolidated Statements of Cash Flows for each of the three years in the period ended
              October 31, 2000...................................................................        23
         Consolidated Statements of Changes in Stockholders' Equity for each of the three years
              in the period ended October 31, 2000...............................................        24
         Notes to Consolidated Financial Statements..............................................        25

      (a) (2)  Financial Statements:

         Schedule II -- Valuation and qualifying accounts for the years
              ended October 31, 1998, 1999 and 2000..............................................        45

         Schedules other than those listed above have been omitted since they
              are either not required, not applicable, or the information is
              otherwise included.

     (b) Reports on Form 8-K

         There were no reports on Form 8-K filed during the fourth quarter of
               fiscal 2000.

         An 8-K was filed on November 13, 2000  regarding the  acquisition  of a substantial  portion of the assets
              of joan and david helpern, inc. and JOAN HELPERN DESIGNS, INC.

     (c) Exhibits

              3.1     Certificate of Incorporation of Maxwell Shoe Company Inc. (incorporated by reference to exhibit
                      3.1 to the registrant's Form S-1 Registration Statement No. 33-74768)

              3.2     Bylaws of Maxwell Shoe Company Inc., as amended (incorporated by reference to exhibit 3.2 to
                      the registrant's Form S-1 Registration Statement No. 33-74768)

              4.1     Specimen Maxwell Shoe Company Inc. Class A Common Stock Certificate (incorporated by reference
                      to exhibit 4.1 to the registrant's Form 10-K for the fiscal year ended October 31, 1994)

              4.2     Specimen Maxwell Shoe Company Inc. Class B Common Stock Certificate (incorporated by reference
                      to exhibit 4.2 to the registrant's Form 10-K for the fiscal year ended October 31, 1994)
</TABLE>

                                       39
<PAGE>

<TABLE>
<CAPTION>
<S>           <C>     <C>
              4.3     Rights Agreement dated as of November 2, 1998 between Maxwell Shoe Company Inc. and BankBoston,
                      N.A., as Rights Agent (incorporated by reference to Exhibit 99.1 to the registrant's Form 8-K
                      filed on November 12, 1998)

              10.1    Amended 1994 Stock Incentive Plan (incorporated by reference to exhibit 4.1 to the registrant's
                      Form S-8 Registration Statement No. 333-55723)

              10.2.1  Form of Employee Nonqualified Stock Option Agreement pursuant to 1994 Stock Incentive Plan
                      (incorporated by reference to exhibit 10.2.1 to the registrant's Form S-1 Registration
                      Statement No. 33-74768)

              10.2.2  Form of Employee Incentive Stock Option Agreement pursuant to 1994 Stock Incentive Plan
                      (incorporated by reference to exhibit 10.2.2 to the registrant's Form S-1 Registration
                      Statement No 33-74768)

              10.2.3  Form of Nonemployee Director Stock Option Agreement pursuant to 1994 Stock Incentive Plan
                      (incorporated by reference to exhibit 10.2.3 to the registrant's Form S-1 Registration
                      Statement No. 33-74768)

              10.3    Form of Restricted Stock Agreement pursuant to 1994 Stock Incentive Plan (incorporated by
                      reference to exhibit 10.3 to the registrant's Form S-1 Registration Statement No. 33-74768)

              10.4    Form of Indemnity Agreement between Maxwell Shoe Company Inc. and each of its directors and
                      executive officers (incorporated by reference to exhibit 10.4 to the registrant's Form S-1
                      Registration Statement No. 33-74768)

              10.5    Form of Tax Indemnification Agreement between Maxwell Shoe Company Inc. and each of Maxwell V.
                      Blum, Eleanor S. Blum, Betty Ann Blum and Marjorie Blum (incorporated by reference to exhibit
                      10.5 to the registrant's Form S-1 Registration Statement No. 33-74768)

              10.6    Lease dated as of May 15, 1991 by and between George Shapiro, Arthur S. Goldberg and Sidney
                      Shapiro, Trustees of the Shapiro Properties Realty Trust, as lessor, and Maxwell Shoe Company
                      Inc., as lessee (incorporated by reference to exhibit 10.7 to the registrant's Form S-1
                      Registration Statement No. 33-74768)

              10.7    Agreement  of Lease  between  Anon Realty  Associates,  L.P.,  as  successor  lessor to 1414
                      Americas  Company and Maxwell Shoe Company  Inc.,  as lessee  (incorporated  by reference to
                      exhibit 10.9 to the registrant's Form S-1 Registration Statement No. 33-74768)

              10.8    Demand Credit Facility Agreement dated September 2, 1998 between Maxwell Shoe Company Inc. and
                      BankBoston, N.A. (incorporated by reference to exhibit 10.9 to the registrant's Form 10-K for
                      the fiscal year ended October 31, 1998 as filed on January 21, 1999)

              10.9    Form of Registration Rights Agreement between Maxwell Shoe Company Inc. on the one hand and
                      Maxwell V. Blum, Betty A. Blum, Marjorie Blum, Mark J. Cocozza, and Joseph Aborn, as trustee of
                      the Eleanor S. Blum Trust (incorporated by reference to exhibit 10.13 to the registrant's Form
                      S-1 Registration Statement No. 33-74768)

              10.10   Employment Agreement dated as of April 8, 1999 between Maxwell Shoe Company Inc. and Mark J.
                      Cocozza (incorporated by referenced to exhibit 99.1 to registrant's Form 8-K filed on June 14,
                      1999)
</TABLE>

                                       40
<PAGE>

<TABLE>
<CAPTION>
<S>           <C>     <C>
              10.11   Employment Agreement dated as of April 8, 1999 between Maxwell Shoe Company Inc. and James J.
                      Tinagero (incorporated by referenced to exhibit 99.2 to registrant's Form 8-K filed on June 14,
                      1999)

              10.12   Agreement dated as of April 8, 1999 between Maxwell Shoe Company Inc. and Richard J. Bakos
                      (incorporated by referenced to exhibit 99.3 to registrant's Form 8-K filed on June 14, 1999)

              10.13   Stock Option and Registration Rights Agreement dated as of January 26, 1994 between Maxwell
                      Shoe Company Inc. and Mark J. Cocozza (incorporated by reference to exhibit 10.15 to the
                      registrant's Form S-1 Registration Statement No. 33-74768)

              10.14   Master Lease Agreement dated as of July 18, 1994 between Maxwell Shoe Company Inc. and
                      BancBoston Leasing Inc. (incorporated by reference to exhibit 10.23 to the registrant's Form
                      10-K for the fiscal year ended October 31, 1994)

              10.15   Assumption Agreement dated July 7, 1995 between BancBoston Leasing Inc. and Maxwell Shoe
                      Company Inc. (incorporated by reference to exhibit 10.24 to the registrant's Form 10-K for the
                      fiscal year ended October 31, 1995)

              10.16   Letter Agreement dated January 25, 1995 between Legas Realty Corp., as successor lessor to S.L.
                      Green Properties Inc., as successor to Anon Realty Associates, L.P., and Maxwell Shoe Company
                      Inc. (incorporated by reference to exhibit 10.25 to the registrant's Form 10-K for the fiscal
                      year ended October 31, 1995)

              10.17   Sublease Agreement dated June 16, 1997 between Macy's East, Inc. and Maxwell Shoe Company Inc.
                      (incorporated by reference to exhibit 10.32 to the registrant's Form 10-K for the fiscal year
                      ended October 31, 1997)

              10.18   Lease Agreement dated June 16, 1997 between John H. Finley, III as trustee of Brockton Oak Real
                      Estate Trust and Maxwell Shoe Company Inc. (incorporated by reference to exhibit 10.33 to the
                      registrant's Form 10-K for the fiscal year ended October 31, 1997

              10.19   Contribution  Agreement  dated as of April 14,  1997,  by and among The Butler  Group Inc.,
                      Maxwell Shoe Company Inc.,  and Maxwell Retail Inc.  (incorporated  by reference to exhibit
                      10.1 to the registrant's Form 8-K filed on May 5, 1997)

              10.20   Operating Agreement of SLJ Retail LLC dated as of April 14, 1997 by and between the Butler
                      Group, Inc. and Maxwell Retail Inc. (incorporated by reference to exhibit 10.2 to the
                      registrant's Form 8-K filed on May 5, 1997)

              10.21   First Amendment to Operating Agreement dated as of June 24, 1998 by and among Butler Group LLC.
                      and Maxwell Retail Inc. (incorporated by reference to exhibit 10.23 to the registrant's Form
                      10-K for the fiscal year ended October 31, 1998 as filed on January 21, 1999)

              10.22   Option Agreement dated as of April 14, 1997 by and among The Butler Group Inc., Maxwell Shoe
                      Company Inc., Maxwell Retail Inc. and SLJ Retail LLC (incorporated by reference to exhibit 10.3
                      to the registrant's Form 8-K filed on May 5, 1997)

              10.23   First Amendment to Option Agreement dated as of June 24, 1998 by and among Maxwell Shoe Company
                      Inc., Maxwell Retail Inc. and SLJ Retail LLC (incorporated by reference to exhibit 10.25 to the
                      registrant's Form 10-K for the fiscal year ended October 31, 1998 as filed on January 21, 1999)
</TABLE>

                                       41
<PAGE>

<TABLE>
<CAPTION>
<S>           <C>     <C>
              10.24   Services Agreement dates as of April 14, 1997 by and between Maxwell Shoe Company Inc. and SLJ
                      Retail LLC (incorporated by reference to exhibit 10.4 to the registrant's Form 8-K filed on May
                      5, 1997)

              10.25   First Amendment to Services Agreement dated as of June 24, 1998 by and among Maxwell Shoe
                      Company Inc. and SLJ Retail LLC (incorporated by reference to exhibit 10.27 to the registrant's
                      Form 10-K for the fiscal year ended October 31, 1998 as filed on January 21, 1999)

              10.26   Non-Compete Agreement dated as of April 14, 1997 by and among SLJ Retail LLC, Maxwell Shoe
                      Company Inc. Maxwell V. Blum, Betty Ann Blum, Marjorie W. Blum, Mark J. Cocozza, David
                      Andelman, as trustee of the Eleanor S. Blum Trust, Maxwell Retail Inc. and Sprague Company
                      (incorporated by reference to exhibit 10.5 to the registrant's Form 8-K filed on May 5, 1997)

              10.27   Retail Opportunity Agreement dates as of April 14, 1997 by and among SLJ Retail LLC, Maxwell
                      Shoe Company Inc., Maxwell V. Blum, Betty Ann Blum, Marjorie W. Blum, David Andelman, as
                      trustee of the Eleanor S. Blum Trust, Maxwell Retail Inc. and Sprague Company (incorporated by
                      reference to exhibit 10.6 to the registrant's Form 8-K filed on May 5, 1997)

              10.28   Registration Rights Amendment dates as of April 14, 1997 by and among Maxwell Shoe Company
                      Inc., The Butler Group Inc., Maxwell V. Blum, Betty Ann Blum, Marjorie W. Blum, Mark J. Cocozza
                      and David Andelman, as trustee of the Eleanor S. Blum Trust (incorporated by reference to
                      exhibit 10.7 to the registrant's Form 8-K filed on May 5, 1997)

              10.29   Trademark Sublicense Agreement dated as of April 14, 1997 by and between Maxwell Shoe Company
                      Inc. and SLJ Retail LLC (incorporated by reference to exhibit 10.9 to the registrant's Form 8-K
                      filed on May 5, 1997)

              10.30   Contribution Agreement dated as of June 24, 1998 by and among The Butler Group LLC, Maxwell
                      Shoe Company Inc, and Maxwell Retail Inc. (incorporated by reference to exhibit 10.34 to the
                      registrant's Form 10-K for the fiscal year ended October 31, 1998 as filed on January 21, 1999)

              10.31   Consulting Agreement dated as of April 27, 1998 between Maxwell Shoe Company Inc. and Maxwell
                      V. Blum (incorporated by reference to exhibit 10.37 to the registrant's Form S-2/A Registration
                      Statement No. 33-48199)

              10.32   Amendment to Consulting Agreement dated as of June 24, 1999 between Maxwell Shoe Company Inc.
                      and Maxwell V. Blum

              10.33   Agreement dated June 10, 1999 regarding the sale of the Jones New York footwear license to
                      Jones Apparel Group, Inc. and certain other matters (incorporated by reference to exhibit 10.1
                      to registrant's Form 8-K filed on June 14, 1999)

              10.34   Asset Purchase Agreement dated as of October 12, 2000 by and among joan and david helpern,
                      incorporated and JOAN HELPERN DESIGNS, INC. (collectively, the sellers) and Maxwell Shoe
                      Company Inc. (incorporated by reference to exhibit 2.1 to registrant's Form 8-K filed on
                      November 13, 2000).

              10.35   Employment Agreement dated as of August 30, 2000 between Maxwell Shoe Company Inc. and Mark J.
                      Cocozza.
</TABLE>

                                       42
<PAGE>

<TABLE>
<CAPTION>
<S>           <C>     <C>
              10.36   Employment Agreement dated as of August 30, 2000 between Maxwell Shoe Company Inc. and James J.
                      Tinagero.

              21      Subsidiaries of Maxwell Shoe Company Inc.

              23      Consent of Ernst & Young LLP, Independent Auditors
</TABLE>


                                       43
<PAGE>

                                   SIGNATURES

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

                                          MAXWELL SHOE COMPANY INC.


                                      By          /s/ Mark J. Cocozza
                                          ------------------------------------
                                                    Mark J. Cocozza,
                                          Chairman and Chief Executive Officer
                                                    January 29, 2001

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

<TABLE>
<CAPTION>
                  Signature                                        Title                               Date
                  ---------                                        -----                               ----
<S>                                             <C>                                             <C>

             /s/ MARK J. COCOZZA                         Chairman of the Board and               January 29, 2001
 ---------------------------------------------             Chief Executive Officer
               Mark J. Cocozza                          (Principal Executive Officer)

            /s/ JAMES J. TINAGERO                Executive Vice President, Chief Operating       January 29, 2001
 ---------------------------------------------              Officer and Director
              James J. Tinagero                         (Principal Operating Officer)

             /s/ RICHARD J. BAKOS                       Vice President Finance and               January 29, 2001
 ---------------------------------------------            Chief Financial Officer
               Richard J. Bakos                        (Principal Financial Officer)

             /s/ KERRY M. PRENTKI                               Controller                       January 29, 2001
 ---------------------------------------------
               Kerry M. Prentki

              /s/MAXWELL V. BLUM                                 Director                        January 29, 2001
----------------------------------------------
               Maxwell V. Blum

             /s/ STEPHEN A. FINE                                 Director                        January 29, 2001
 ---------------------------------------------
               Stephen A. Fine

            /s/MALCOLM L. SHERMAN                                Director                        January 29, 2001
 ---------------------------------------------
              Malcolm L. Sherman

            /s/ ANTHONY J. TIBERII                               Director                        January 29, 2001
 ---------------------------------------------
              Anthony J. Tiberii
</TABLE>

                                       44
<PAGE>

                            MAXWELL SHOE COMPANY INC.

                 SCHEDULE II--VALUATION AND QUALIFYING ACCOUNTS
                                 (In Thousands)

<TABLE>
<CAPTION>
                                          Balance at    Charged to                  Balance at
                                         Beginning of    Costs and                    End of
                Description                 Period       Expenses    Deductions(1)    Period
---------------------------------------- ------------   ----------   -------------  -----------
<S>                                          <C>           <C>           <C>           <C>
Year ended October 31, 1998
        Allowance for doubtful account..     $739          $125          $283          $581
Year ended October 31, 1999
        Allowance for doubtful account..     $581         $1,496        $1,292         $785
Year ended October 31, 2000
     Allowance for doubtful account.....     $785          $150          $310          $625
</TABLE>
--------------
(1) Uncollectible accounts written off, net of recoveries.

                                       45